Category: Supply Chain & Logistics

Dive Brief:

• Freight forwarders are working with shippers to strategize how to manage a shifting air cargo market landscape as peak season approaches, Xeneta’s Chief Airfreight Officer Niall van de Wouw said in a Sept. 5 report.
• E-commerce volumes remain a major market indicator, with exported goods from China already up 30% this year, Xeneta reported. In July alone, there were reportedly 37 million downloads of the Temu app.
• Van de Wouw said that shippers should be “nervous” for Q4. “We expect to see a seller’s market out of Asia and across the Atlantic due to the latter’s reduction in winter capacity. We’ve had a hot summer, and we may have an even hotter autumn ahead.”

Dive Insight:

The average air cargo spot rate reached its largest year-over-year growth of 24% to $2.68 per kilogram, Xeneta reported.

On a corridor level, rates on shipments bound for North America saw the largest monthly increase from July — which is typically regarded as the industry’s “slack season.”

Rates from Europe to North America, for instance, were up 7% month over month to $1.77 per kilogram in August, possibly due to the “surging transshipments originating from Asia,” according to the report. Meanwhile, Southeast and Northeast to North America rates were up 6% MoM and 4% MoM to $6.15 per kilogram and $4.68 per kilogram, respectively.

While rates benefited from ongoing balance in supply and demand, global air cargo demand was impacted by the modal shift from ocean to air due to Red Sea disruptions in addition to strong e-commerce growth, per the report. In August, cargo demand was up 11% YoY.

“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season,” said van de Wouw. “This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red hot peak season materialises.”

As preparations for peak season unfold, some companies announced surcharges as shippers and freight forwarders look to secure capacity. DHL Express, for instance, plans to implement surcharges starting Sept. 15, and van de Wouw speculated whether “the peak surcharges some carriers plan to implement will hold.

Other companies are creating more market capacity, including freight forwarder Dimerco Express Group which is launching a new weekly air freight charter service on Sept. 15 between Shanghai and Chicago. CMA CGM Air Cargo, meanwhile, recently launched its first Transpacific connection connecting Hong Kong and Chicago.

Outdoor gear and apparel company Patagonia aims to stop sourcing packaging materials from endangered forests, according to a Sept. 5 press release from environmental nonprofit Canopy.

In partnership with Pack4Good — a sustainable packaging initiative from Canopy — Patagonia will opt for alternative fiber sources for paper and packaging that don’t rely on logging, per the press release. Currently, paper packaging used for delivery boxes, hang tags and shoe boxes are responsible for more than 3 billion trees being logged from endangered climate critical forests, according to Canopy.

Alongside Canopy, Patagonia will take “steps to review and develop new, more-responsible packaging materials,” said Patagonia Packaging and Branding Director Jennifer Patrick. Alternative packaging products use materials like agricultural waste and non-forest alternative fibers.

Patagonia has remained focused on reducing or slashing the environmental impacts from its manufacturing operations. In 2019, the outdoor apparel and gear company vowed to become carbon neutral by 2025 and has since taken several steps to ensure sustainable practices. The year prior, for instance, Patagonia reintroduced wool into its products after implementing a responsible wool standard following an animal cruelty investigation at one of its suppliers.

The retailer has also partnered with Canopy in the past to help shift viscose and rayon textile sourcing practices, according to the press release. In an effort to reduce its carbon footprint, “Patagonia has been using 100% recycled content for all its packaging and catalogues.”

Ending deforestation is a major topic, especially across the apparel supply chain. To date, more than 400 brands have parntered with Pack4Good, according to Canopy’s website. In July, Zara owner Inditex joined the initiative to eliminate materials from endangered forests from its paper packaging. Clothing brand Ganni followed suit a month later.

FedEx is preparing to scale its e-commerce fulfillment offering through a strategic alliance and investment in Nimble, an artificial intelligence robotics and autonomous technology company, according to an announcement Thursday. The investment amount was not disclosed.

Through the alliance, FedEx can use Nimble’s fulfillment centers, Nimble founder and CEO Simon Kalouche said in a news release. This will enable expansion for FedEx Fulfillment, which is geared toward order fulfillment and inventory management for small- and medium-sized businesses.

Nimble has six fulfillment centers already open or planning to launch by next year in the U.S. and Mexico, according to its website. These facilities feature the company’s robotic systems that autonomously pick, pack and handle products for brands selling apparel, footwear, electronics and other products.

“Nimble’s cutting-edge AI robotics and autonomous fulfillment systems will help FedEx streamline operations and unlock new opportunities for our customers,” FedEx Supply Chain President Scott Temple, which FedEx Fulfillment is part of, said in the release.

FedEx Supply Chain currently has more than 130 warehouse and fulfillment operations in North America and processes 475 million returns annually.

The team up with Nimble fits with FedEx’s strategy to strengthen its capabilities that will draw in more e-commerce and SMB customers. The delivery giant announced a new digital platform earlier this year offering end-to-end solutions for online merchants, and it has touted the benefits of its Ground-Express network merger for smaller shippers.

The International Longshoremen’s Association laid out a strike mobilization plan during its wage scale meeting this week, the union said in a Sept. 5 statement.

As the contract expiration date approaches, a little over three weeks from now, the ILA will “most definitely” strike if it doesn’t get the contract it desires, ILA President Harold Daggett said in a video shared on Wednesday.

“We must be prepared if we have to hit the streets at 12:01 am on Tuesday, October 1, 2024,” Daggett said in the statement.

The strike plan would be enacted if an agreement with the United States Maritime Alliance, known as USMX, is not reached by the Sept. 30 expiration of the current six-year agreement. The union did not respond for a request to comment on the plan at the time of publication.

“ILA members are elected Wage Scale delegates from their home locals (Ports from Maine to Texas) and participate in ILA Contract meetings to formulate demands the ILA will make to USMX,” an ILA spokesperson told Supply Chain Dive in an August email.

In response, the USMX said it’s prepared to resume negotiations and hopes the union will share its current contract demands to avoid a strike. Labor talks have been stalled over wage and port automation concerns.

The looming threat of a strike on the East Coast and Gulf Coast is driving shippers to move cargo ahead of potential disruption. Ports in Long Beach, California, and Los Angeles have seen an uptick in cargo volumes processed, with the ports citing those strike concerns as a driver of early cargo movements, along with tariff concerns and peak season activity.

As retailers look to mitigate disruption, the National Retail Federation urged both the ILA and USMX to resume negotiations in order to reach a new deal before the current contract expires.

“The threat of a strike during the peak shipping season has many retailers already implementing costly mitigation strategies,” NRF President and CEO Matthew Shay said.

Several other organizations, including the Agriculture Transportation Coalition, Cotton Growers Warehouse Association and International Dairy Foods Association, jointly sent a letter in June to President Joe Biden to “immediately work with both parties to resume contract negotiations and ensure there is no disruption to port operations and cargo fluidity.”