TAKEAWAYS TOP 5 SUPPLY CHAIN DISRUPTIONS New data from Resilinc highlights the top drivers of supply chain disruptions for the first half of 2022. From January through June, Resilinc’s EventWatchAI platform alerted its customers to an astounding 7,929 potential supply chain disruptions (a 46% YoY increase) with the life sciences, healthcare, high- tech, and automotive industries being most impacted. The top five reported disruptions include: 1. Factory fires 2. Mergers & acquisitions 3. Business sale 4. Leadership transition 5. Factory disruption Of these disruptions, 54% were impactful enough to trigger the creation of a WarRoom (virtual platforms in the Resilinc dashboard where customers and their suppliers communicate and collaborate to assess and resolve disruptions). Factory fires ranked as the top disruption for the first half of the year, with the number of fires up 131% YoY. This year is on track to have the most factory fires ever reported, a trend driven by regulatory and process execution gaps, as well as a skilled labor shortage in warehouses. The data also reveals that disruptions due to geopolitical events, most notably the Russia-Ukraine war, were up 521% YoY. Sanctions and production shutdowns are creating unprecedented commodity and raw material shortages; these will likely continue through the end of the year. Geographically, North America experienced the most disruptions, accounting for 40%+ of the total alerts issued in the first six months of this year.
Freight Is Fraught
The double-whammy of skyrocketing fuel prices and out-of-control in ation has put a hurt on the freight industry. So have attening modal growth trajectories, seasonal factors, and softening demand. So says the new edition of the Cowen/AFS Freight Index, which provides predictive pricing tools for such sectors as less-than-truckload (LTL), truckload (TL), and parcel shipping (separately focusing on express and ground). In ation is working as a double-edge sword: while pushing prices up, it also is limiting demand by slowing purchasing power, according to Tom Nightingale, CEO of AFS. Compared to a record-breaking Q1 in the previous report, the new report indicates that growth trends are more likely “to subside but not tumble,” with the index remaining elevated in comparison to its 2018 baseline and annually. “Businesses are shifting modes and re-optimizing carrier networks proactively to limit their exposure to higher pricing, but carriers are using fuel surcharges and other accessorials as subtle but effective tools to expand revenue,” Nightingale adds. Other takeaways:
Truckload rates should atten in Q3, from 24.1% in Q2 to 26.5% in Q3, due to historical data and seasonal effects such as the end of produce season and manufacturers and retailers ramping up for the holidays.
Truckload miles per shipment were down 6.7%, from Q2 to Q3, caused by inventory build-up and port congestion, with demand softening. Q2 year-to-date cost-per-shipment was down 4.9%, and linehaul cost-per-shipment down 5.2% in Q2, but up 14.5% annually.
LTL average fuel surcharge jumped from 34% in Q1 to 47.6% in Q2, with fuel representing 20.7% of total cost-per-pound through June, well above the 13.4% rate in 2021.
LTL weight per shipment was down 4.4% sequentially, while cost-per- shipment rose 6.8%. LTL rate per pound will remain high in Q3, with annual growth continuing to slow, and the Q3 LTL index forecast at 54%, down from Q2’s 54.8%.
Express parcel rates increased 7.9% from Q1 to Q2, the result of fuel surcharges, weight, service mix, and 2022 general rate increases. The Q3 express parcel freight index is expected to drop from Q2’s all-time high of 5.5% to 2.2%. The Q3 ground parcel index is forecast at 25.7%, down from Q2’s record of 27.7%.
The better-than-expected pricing trends data in the TL ndings may be related to capacity coming out of the marketplace, which Cowen notes could be at a rate higher than expected. “That said, we are still cautious on TL pricing in Q4 2023 due to the macro-economic backdrop,” says Jason Seidl, a Cowen analyst.
20 Inbound Logistics • August 2022
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