In response to the evolving dynamics of global supply chains, logistics companies are swiftly adapting to cater to the changing demands. The key driving force behind these changes is none other than capital investment.
Manufacturers are pouring billions into the establishment of factories closer to consumers or in regions deemed less vulnerable than China. This strategic move is motivated by the desire to enhance supply chain resilience after enduring years of disruptions brought on by political upheavals and the pandemic.
These trends, known as reshoring, nearshoring, and friendshoring, may initially entail higher costs for shippers. However, they promise substantial benefits in the form of shorter lead times and diversified distribution strategies. Brian Bourke, Global Chief Commercial Officer at SEKO Logistics, highlighted these advantages during an October media event.
The success of this shift in supply chain strategy depends on the availability of efficient transportation modes, including planes, trains, trucks, and container ships, to transport products from newly established plants to consumers. Logistics providers are eager to step in, especially in a period marked by subdued volumes and economic uncertainty.
Various industry players, such as Union Pacific, DHL Express, and ZIM, are enhancing their capabilities and modifying their networks to capitalize on this geographic realignment of demand. Examples range from cross-border services connecting Mexico, the United States, and Canada to the introduction of new shipping routes from Latin America.
A report from the U.S. Chamber of Commerce and Ipsos in October underlines the significance of logistics in companies’ decisions regarding sourcing materials and making direct investments.
For ocean carriers, adapting to shifts in global trade demand is not new. However, the current adjustments are occurring more rapidly than in the past. ZIM, for instance, recently relaunched its expedited e-commerce line connecting South China to the U.S. West Coast, showcasing its proactive strategy. Ocean Network Express (ONE) is also staying flexible by resizing services and launching new routes within Asia and from Latin America.
Air cargo services play a pivotal role in the nearshoring transition, as shippers often rely on air freight to quickly deliver supplier components during this period. While many businesses aim to transition to more cost-effective transportation modes like trucking or rail once the shift is complete, air freight remains crucial for operations in proximity to their customers.
According to a forecast by Boeing, supply chain shifts are expected to lead to a resurgence in North American manufacturing, benefiting airlines as they transport high-value components. This presents an opportunity for the air cargo industry to capture more volume, and companies like DHL Express are investing heavily to capitalize on this expected growth.
In the realm of railroads and trucking companies, partnerships are flourishing to cater to the demand resulting from North American supply chain investments and the U.S.-Mexico-Canada Agreement. Union Pacific’s collaboration with Canadian National and Grupo Mexico Transportes, known as the “Falcon Premium” intermodal service, is an example of such efforts. This service connects various networks to support shipments of auto parts, food, and temperature-controlled goods.
Logistics companies are revamping their networks to prepare for a new era in supply chains. As the industry grapples with shifting demand patterns, they are positioning themselves to seize emerging opportunities and meet the evolving needs of global trade.