READ: Industry Volumes Decline, Shopify Exits Logistics Arm and more...

Greetings everyone,

Energy prices have begun to fall, China continues to reopen, and FedEx and UPS are struggling to mitigate the effects that low volume has had on their businesses. Global manufacturing remains low as inventories are high and confidence about future consumer demand is weak.?

However, inflation is starting to show signs of easing, already having peaked in much of the West. Rates are still high in general, although most of Asia has remained at relatively low rates of inflation.

Lots of restructuring and cost-cutting efforts are being made in the industry and logistics players grapple with steadily low volume. We will have to see if these efforts pay off in helping providers stay out of the red. Let’s dive into what happened this past month.

Truck spot rates slipped further this month?as demand remained low.?

Although freight volumes and demand are coming up, truckload services suffered this past month as rates remained low.?

The spread between contract and spot rates remains?historically high in the industry, and experts think that rates are unlikely to stabilize until retailers begin replenishing stocks during the winter holiday season.

Fear over UPS strike has shippers concerned. Both UPS and FedEx are trying new tactics to combat the effect of low shipment volume.

This past week, UPS reported a 5.4% decrease in average daily volume for US domestic shipments.?

Talk of a UPS worker strike brewing for this summer has UPS customers nervously eyeing up alternate services. UPS is working to make sure this doesn’t lose them more business— the company is currently prioritizing keeping major customers from?shifting volume to competitors.

FedEx isn't doing much better with US Ground volume trending 10% down year-over-year in February.?

Despite businesses diversifying carrier mix to save on cost and ship better, these significant drops in volume are unsettling for the two carriers. We will have to see if their downward trend continues throughout 2023, or if they can pick themselves up through the structural changes they’ve made lately.

Logistics isn’t safe? Cyberattacks & Freight fraud

Along with ESG violations and high commodity prices in Europe, cybercrime has been noted as one of the key risks businesses are facing this year— attacks against supply chains have increased?by 742% in the past three years.

During the pandemic, the rise in demand and elevated vulnerability of global supply chains made supply chains a key target for cybercriminals, with manufacturing and retail among the biggest targets.?

Combatting cybercrime in supply chains is all about understanding your weak areas and taking steps to secure what you can. A few areas where supply chains are particularly vulnerable are:

• Fragmented third-party providers
• Outdated legacy software
• Internal leaks of sensitive information

Fortunately, a lot of this risk can be significantly reduced when you use properly updated software systems that are securely integrated throughout your supply chain.?

Freight fraud frets?

The trucking industry has moved a lot of operations online in the past couple of years. This is great for efficiency but has exacerbated a fraud issue that has already plagued the trucking industry for years.

Competition for business in trucking, combined with the movement to conduct business online, has made it easy for operators impersonating middlemen to skim off payments.?

Those fraudulent “skims” can take a major toll— sometimes?thousands of dollars off of one shipment.— and the trucking industry is already struggling at the moment.?

What’s happening in China?

The mainland is seeing a steady economic recovery after relaxing strict covid policies a few months back. Export volumes are increasing, particularly in Latin America.

Tensions remain around the microchip issue, and it's uncertain the effect sanctions on Chinese tech products will have on global supply chains in the coming months. Mexico may step up to become?a key player in the semiconductor game, though it’s unlikely that China will lose its tech manufacturing prevalence any time soon.??

New & Acquisitions

FedEx Consolidates standalone businesses to mitigate low-volume effects.?FedEx has decided to consolidate its different operating companies— FedEx Ground, FedEx Services, FedEx Express, and others. FedEx Freight is destined to remain a standalone company.

Reasons for the consolidation include cutting costs and fully integrating the company’s air and ground networks.

Shopify just sold its logistics wing to Flexport.?The Canadian e-commerce platform has sold its entire logistics unit to freight forwarder Flexport. Shopify has reportedly decided to refocus its energy and funds on “what they do best”.

After investing heavily into the logistics side of their business to support e-commerce customers during pandemic demand heights, the company has recently begun seeing a lot more money going into the fulfillment business with?a lot less return.?

Flexport will now function as the logistics partner for merchants on Shopify, providing both freight forwarding and fulfillment services.?

From CBIP

We’ve published the following blogs this last month. Give them a read if you have a couple of minutes.

• Where to Look for E-Commerce Warehousing in China
• Unpacking the Top Five Causes of Shipping Delays
• How RFID Asset Tracking Helps E-Commerce Businesses Manage Logistics

Want daily updates from CBIP? Make sure to follow me via twitter (@Nbartlett_CBIP) and CBIP (@CBIPLogistics) for thoughts and conversations on the industry every week.

Until next month,

--Nick Bartlett