Supply Chain Logistics Risks in 2024

Risk is sparing no mode of transportation in 2024 as geopolitics, labor talks, freight demand and capacity fluctuations will continue. Building in agility and developing contingency plans is really where we recommend logistics managers to remain flexible and reevaluate your supply chain strategies.

1. Red Sea crisis threatens rates

The ongoing situation in the Red Sea poses a challenge for ocean freight — with shipper concerns centering on rates and changes in vessel schedules.

Since the vessel attacks along the Red Sea began, ocean shipping rates have gone up significantly and several carriers have implemented additional surcharges. Some shippers like Ikea?have already reported delays as they face constraints for certain products.?

The Red Sea crisis has led ocean carriers to divert or delay shipments, causing longer lead times and elevated rates.?

2. Panama Canal restrictions add complexity

While drought restrictions at the Panama Canal continue, cargo diversions are happening and increasing the chances of delays.

Vessels traveling through the major waterway have been limited to 24 slots per day. The allotment is down from the pre-drought capacity of more than 30 ship transits per day. Authorities expect transit capacity will fall to 18 slots per day.

Shippers’ options have been complicated by the crisis in the Red Sea. Companies looking to import cargo from Asia to the U.S. East Coast may have looked to the Suez Canal as an alternative to the Panama Canal. But now that alternative is risky, too, after attacks on vessels traveling to the shipping channel through the Red Sea led major carriers to reroute ships or halt transit.?

“Without access to the canals, customers face 30%-40% longer sailing times and higher costs to trade with Asia,”.

3. East Coast port labor talks loom large

Labor negotiations also continue to pose a risk for ocean shipping due to the pending East and Gulf Coast port labor talks.

If a strike does occur, it could result in port congestion. It could also cause East and Gulf Coast ports to lose volume gained during the West Coast labor negotiations.

“So I think [labor actions are] going to continue to be high on the list of things that will impact not only ocean shippers, but other modes as well.

4. West Coast ports may experience heightened traffic

Drought-related restrictions in the Panama Canal, the duration of the Red Sea crisis, and East and Gulf Coast port labor uncertainty are among the reasons U.S. West Coast ports should brace for a surge in volume in 2024 —?and with it, potential congestion.

West Coast ports have already seen some volume gains as shippers reroute cargo. West Coast market share is up 3% compared to East and Gulf Coast ports.

As volumes shift, the intermodal volumes moving through truck and rail also surged. However, heightened container traffic could also lead to some congestion, though capacity among trucking companies is plentiful and chassis have been added in anticipation of growth.

?5. Air forwarders eye growing e-commerce activity

The horizon remains hazy for the air cargo market, even as last year’s rapid decline in volumes leveled out in recent months.

?“The biggest challenge will be capacity and the impact of the e-commerce players. Their appetite for capacity and willingness to pay any price to secure is pushing the traditional air freight shippers to the side. During the last 90 days of peak, e-commerce demand was peaking at a sustained 10,000 tons per day.”

E-commerce has a growth forecast of 20% to 30%, with these companies absorbing 30% or more of global capacity. Meanwhile, with technology running on a three-to-four year cycle and many upgrading their home offices during the pandemic, consumers may soon be looking to update their tech equipment.

While the air cargo market may lay at the mercy of e-commerce demand, geopolitical risks and other uncontrollable factors, shippers can still position themselves for success.