The overall downward rate trend that has characterized the ocean transportation market for some time is continuing in 2016. The Shanghai Containerized Freight Index, which tracks spot rates for container shipments from major ports in China, is down year-on-year, even accounting for both the general rate increases (GRIs) imposed by carriers in January, May, June, and July of this year and the announced peak-season surcharges. Moreover, volume growth continues to fall behind capacity. The industry added just 1.7 percent to its total 20-foot equivalent units (TEUs) in the three biggest U.S. ports (Los Angeles, Long Beach, and New York/New Jersey) in May 2016 against what the research firm Alphaliner projects to be an 8.5 percent net growth in carrier capacity this year.
Another trend the industry has grappled with is the idling of vessels to constrain capacity. The maritime research firm Drewry Shipping Consultants reported a significant increase in idle capacity in July 2016. The timing seems to coincide with peak season, and some shippers, particularly in South China, are feeling localized capacity pinches. Idle ships are expensive, and it remains to be seen whether the carriers have developed enough discipline to manage capacity if rates begin to rise.
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[Figure 1] Shipments scheduled to transit the Panama Canal, July-September 2016Enlarge this image
While some ocean transportation trends have stayed the course, there are many new dynamics in the marketplace. These include the expansion of the Panama Canal and a wave of mergers that has upended vessel-sharing agreements (VSAs), the fallout of which is not yet fully understood. The cost structures underlying all of these factors, which will determine the profitability and price-competitiveness of the industry, also face uncertainty.
This summer, carriers belonging to the 2M, CKYHE, and G6 vessel-sharing agreements have upgraded at least six service strings containing Panamax vessels with post-Panamax or New Panamax ships. This has added substantial capacity to the market, but it has also brought newer, more efficient ships to relatively long length-of-haul service rotations. This should help carriers improve profitability on those strings—provided rates hold with all this new capacity.
It's not just vessels that are being realigned in today's market; the carriers are shuffling, too. With the mergers of CMA CGM and APL, UASC and Hapag-Lloyd, and China Shipping and COSCO serving as a catalyst, carriers have viewed VSA membership as a strategic counterbalance to the economies of scale that past growth and consolidation has provided to industry leaders. Others are joining VSAs to remain viable in a time when bigger is seen as economically better.
By April 2017, the alliance landscape will have changed considerably. As shown in Figure 2, in the current network there are 16 carriers spread across four alliances. Next year, they will be reformulated as 13 carriers grouped in three alliances.
Currently, the 2M is almost 50 percent larger (in terms of capacity) than the next-largest grouping of carriers. Through the consolidation of carriers and a reduction in the number of alliances, the gap in total capacity between the 2M and Ocean alliances will be down to 17 percent, and the smallest alliance will have roughly the same capacity as the former second-largest alliance.
This rationalization of alliances should enable the smaller carriers to continue to compete with the larger carriers on service offerings and economies of scale. And it could pave the way for further consolidation in the industry. For instance, if efficiency is the strategy, will it be sustainable for six independent carriers (and their corresponding overhead) to compete for customers to feed into the THE Alliance network, the smallest VSA in the industry?
The underlying cost structure of ocean transportation is also a potential source of uncertainty. Bunker fuel prices were down by more than US$100 per metric ton in July compared to the same time last year, and charter rates for New Panamax containerships declined by more than 30 percent, according to the U.K.-based shipping conglomerate Clarksons. In fact, containerships of most classes are trading at or very near historical lows.
Some carriers are taking advantage of today's low vessel-chartering costs. For example, South Korea's Hyundai Merchant Marine restructured its charter rates in an effort to gain access to state support for the purchase of mega-ships, which could set Hyundai up for long-term profitability and provide the 2M vessel-sharing agreement with additional capacity. It's unclear, however, how long this era of low underlying costs will last.
ReposiTrak, a global food traceability network operator, will partner with Upshop, a provider of store operations technology for food retailers, to create an end-to-end grocery traceability solution that reaches from the supply chain to the retail store, the firms said today.
The partnership creates a data connection between suppliers and the retail store. It works by integrating Salt Lake City-based ReposiTrak’s network of thousands of suppliers and their traceability shipment data with Austin, Texas-based Upshop’s network of more than 450 retailers and their retail stores.
That accomplishment is important because it will allow food sector trading partners to meet the U.S. FDA’s Food Safety Modernization Act Section 204d (FSMA 204) requirements that they must create and store complete traceability records for certain foods.
And according to ReposiTrak and Upshop, the traceability solution may also unlock potential business benefits. It could do that by creating margin and growth opportunities in stores by connecting supply chain data with store data, thus allowing users to optimize inventory, labor, and customer experience management automation.
"Traceability requires data from the supply chain and – importantly – confirmation at the retail store that the proper and accurate lot code data from each shipment has been captured when the product is received. The missing piece for us has been the supply chain data. ReposiTrak is the leader in capturing and managing supply chain data, starting at the suppliers. Together, we can deliver a single, comprehensive traceability solution," Mark Hawthorne, chief innovation and strategy officer at Upshop, said in a release.
"Once the data is flowing the benefits are compounding. Traceability data can be used to improve food safety, reduce invoice discrepancies, and identify ways to reduce waste and improve efficiencies throughout the store,” Hawthorne said.
Under FSMA 204, retailers are required by law to track Key Data Elements (KDEs) to the store-level for every shipment containing high-risk food items from the Food Traceability List (FTL). ReposiTrak and Upshop say that major industry retailers have made public commitments to traceability, announcing programs that require more traceability data for all food product on a faster timeline. The efforts of those retailers have activated the industry, motivating others to institute traceability programs now, ahead of the FDA’s enforcement deadline of January 20, 2026.
Inclusive procurement practices can fuel economic growth and create jobs worldwide through increased partnerships with small and diverse suppliers, according to a study from the Illinois firm Supplier.io.
The firm’s “2024 Supplier Diversity Economic Impact Report” found that $168 billion spent directly with those suppliers generated a total economic impact of $303 billion. That analysis can help supplier diversity managers and chief procurement officers implement programs that grow diversity spend, improve supply chain competitiveness, and increase brand value, the firm said.
The companies featured in Supplier.io’s report collectively supported more than 710,000 direct jobs and contributed $60 billion in direct wages through their investments in small and diverse suppliers. According to the analysis, those purchases created a ripple effect, supporting over 1.4 million jobs and driving $105 billion in total income when factoring in direct, indirect, and induced economic impacts.
“At Supplier.io, we believe that empowering businesses with advanced supplier intelligence not only enhances their operational resilience but also significantly mitigates risks,” Aylin Basom, CEO of Supplier.io, said in a release. “Our platform provides critical insights that drive efficiency and innovation, enabling companies to find and invest in small and diverse suppliers. This approach helps build stronger, more reliable supply chains.”
Logistics industry growth slowed in December due to a seasonal wind-down of inventory and following one of the busiest holiday shopping seasons on record, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The monthly LMI was 57.3 in December, down more than a percentage point from November’s reading of 58.4. Despite the slowdown, economic activity across the industry continued to expand, as an LMI reading above 50 indicates growth and a reading below 50 indicates contraction.
The LMI researchers said the monthly conditions were largely due to seasonal drawdowns in inventory levels—and the associated costs of holding them—at the retail level. The LMI’s Inventory Levels index registered 50, falling from 56.1 in November. That reduction also affected warehousing capacity, which slowed but remained in expansion mode: The LMI’s warehousing capacity index fell 7 points to a reading of 61.6.
December’s results reflect a continued trend toward more typical industry growth patterns following recent years of volatility—and they point to a successful peak holiday season as well.
“Retailers were clearly correct in their bet to stock [up] on goods ahead of the holiday season,” the LMI researchers wrote in their monthly report. “Holiday sales from November until Christmas Eve were up 3.8% year-over-year according to Mastercard. This was largely driven by a 6.7% increase in e-commerce sales, although in-person spending was up 2.9% as well.”
And those results came during a compressed peak shopping cycle.
“The increase in spending came despite the shorter holiday season due to the late Thanksgiving,” the researchers also wrote, citing National Retail Federation (NRF) estimates that U.S. shoppers spent just short of a trillion dollars in November and December, making it the busiest holiday season of all time.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As U.S. small and medium-sized enterprises (SMEs) face an uncertain business landscape in 2025, a substantial majority (67%) expect positive growth in the new year compared to 2024, according to a survey from DHL.
However, the survey also showed that businesses could face a rocky road to reach that goal, as they navigate a complex environment of regulatory/policy shifts and global market volatility. Both those issues were cited as top challenges by 36% of respondents, followed by staffing/talent retention (11%) and digital threats and cyber attacks (2%).
Against that backdrop, SMEs said that the biggest opportunity for growth in 2025 lies in expanding into new markets (40%), followed by economic improvements (31%) and implementing new technologies (14%).
As the U.S. prepares for a broad shift in political leadership in Washington after a contentious election, the SMEs in DHL’s survey were likely split evenly on their opinion about the impact of regulatory and policy changes. A plurality of 40% were on the fence (uncertain, still evaluating), followed by 24% who believe regulatory changes could negatively impact growth, 20% who see these changes as having a positive impact, and 16% predicting no impact on growth at all.
That uncertainty also triggered a split when respondents were asked how they planned to adjust their strategy in 2025 in response to changes in the policy or regulatory landscape. The largest portion (38%) of SMEs said they remained uncertain or still evaluating, followed by 30% who will make minor adjustments, 19% will maintain their current approach, and 13% who were willing to significantly adjust their approach.
Specifically, the two sides remain at odds over provisions related to the deployment of semi-automated technologies like rail-mounted gantry cranes, according to an analysis by the Kansas-based 3PL Noatum Logistics. The ILA has strongly opposed further automation, arguing it threatens dockworker protections, while the USMX contends that automation enhances productivity and can create long-term opportunities for labor.
In fact, U.S. importers are already taking action to prevent the impact of such a strike, “pulling forward” their container shipments by rushing imports to earlier dates on the calendar, according to analysis by supply chain visibility provider Project44. That strategy can help companies to build enough safety stock to dampen the damage of events like the strike and like the steep tariffs being threatened by the incoming Trump administration.
Likewise, some ocean carriers have already instituted January surcharges in pre-emption of possible labor action, which could support inbound ocean rates if a strike occurs, according to freight market analysts with TD Cowen. In the meantime, the outcome of the new negotiations are seen with “significant uncertainty,” due to the contentious history of the discussion and to the timing of the talks that overlap with a transition between two White House regimes, analysts said.