Above the Fold: Supply Chain Logistics News (March 15, 2024)

Blessed and grateful.

That’s how I feel today, thanks to the many messages of love and support I have received from friends and colleagues in the industry following my surgery. Those messages have been a source of strength and inspiration for me during my recovery. Thank you for thinking of me and reaching out.

I will be easing back to work next week, back to keeping a pulse on what’s happening in the world of supply chain and logistics. I did spend a little time this week catching up with some news and here are the items that caught my attention:

What Goes Up Must Come Down

Let’s go back to July 2021. As highlighted in an Artex Nam An post titled “Ocean Freight Rates Continue to Skyrocket in 2021”:

From the data of FBX Freightos, as of July 2021, transpacific rates continued to set new record highs on most trade lanes.

  • Asia-US West Coast rates shot up to $18,346/FEU, more than 6x its level a year ago.
  • Asia-US East Coast costs climbed to $19,620/FEU, 487% higher than last July.
  • Asia-North Europe prices rocketed to $13,706/FEU, which also rose by more than 250% in the comparable period last year.
  • Europe to North America East Coast prices were up by 6% to $6,013/FEU, triple their level a year ago.
  • Europe to South America East Coast rates increased 56% to $3,311/FEU, nearly four times their level last year.

But as the saying goes, what goes up must come down. 

“Freight rates have fallen significantly since the good years of 2021 and 2022, and have fallen actually to an unsustainable level,” said Maersk CEO Vincent Clerc at the company’s shareholder meeting this week, as reported by Reuters. Here’s more from the article:

An influx of new container ships last year added 9% to the industry’s global capacity, which is expected to increase by another 11% this year and a further 7% in 2025, Maersk said. In contrast, Maersk’s fleet has remained constant in size in the same period.

“Demand growth, slow-steaming, ship recycling will have to offset over time this overcapacity so that we can get back to a healthy earnings level,” Clerc said.

What goes down must come up? Not in the physical world where gravity only works in one direction. But another quote usually applies in the business world, which has been proven true time and again in the transportation industry: When you hit rock bottom, the only way to go is up. It’s just a question of time or some external force playing a role.

Walmart, the Route Optimization Software Vendor

Walmart is one of the most coveted customers for supply chain and logistics software vendors. Now the retailer will be a competitor too.

Walmart announced this week that it is making its “AI-powered logistics technology — Route Optimization — available to all businesses as a Software as a Service (SaaS) solution through Walmart Commerce Technologies.” Here are some excerpts from the press release:

Walmart is offering Route Optimization to other businesses to boost their own performance and make sure their customers can find what they are looking for by:

  • Better planning for a truck’s multi-stop journey — AI-driven automated route mapping considers factors such as time, location, and store delivery windows.
  • Packing trailers in the most efficient way possible — not only maximizing space but also helping to ensure temperature-controlled items stay fresh.
  • Ensuring stores receive deliveries on time, regardless of external variables, by leveraging weather and traffic patterns and quickly pivoting as needed.
  • Strategically planning inventory pickup (backhauls) on return trips from deliveries to ensure trailers are never empty, ensuring efficiency and a greener footprint.
  • Providing at-a-glance insights such as trailer usage, trip time and distance traveled without cargo to help operations management teams make faster, more informed decisions.

“We have invested significant time, resources and operational knowhow into building solutions like Route Optimization, but that can be a barrier for many businesses,” said Anshu Bhardwaj, senior vice president and chief operating officer, Walmart Global Tech and Walmart Commerce Technologies. “By adopting our at-scale, AI-powered tech, businesses can eliminate the need and expense of developing their own technology, and instead focus on what they do best – serve their customers.”

Ms. Bhardwaj overlooks the fact that most companies have already eliminated “the need and expense of developing their own technology” by implementing route optimization solutions from a variety of well-established third-party software vendors. So, that can’t be the primary value proposition they pitch. To compete, Walmart will have to demonstrate superior functionality, ease of use, configurability, system uptime and reliability, commitment to ongoing innovation, and cost (among other factors). Even then, I suspect many retailers (and others) will be wary of working with Walmart as a software provider — that is, having their orders and shipment data on Walmart-controlled servers. But what do I know?

And with that, have a meaningful weekend!

Song of the Week: “Gratitude” by Danny Elfman