August 31, 2023 • Posted in Market Insights

2023 Logistics Update: Current Events, Labor Drive Re-optimization

In 2021 and 2022, logistics was defined by congestion. Global trade routes were disrupted by the pandemic, and container availability challenges caused backups at ports, creating a domino effect up and down the supply chain. Retailers and manufacturers overordered to mitigate the risk of supply shortages, causing a severe inventory glut as the economy slowed. Meanwhile, threats of strikes loomed large, adding to supply chain disruption.

This year, the plastics industry continues to suffer from a supply chain hangover. Although supply chain security has improved, demand for plastic products and resin continue to be impacted by the inventory drawdown. And labor issues in supply chains remain a threat, as do the risks of unforeseen events, such as the recent bankruptcy of trucking giant Yellow Corp. and uncertainty as we enter hurricane season. Plastics professionals must remain ever vigilant as the industry works its way back to pre-pandemic normalcy.

Read on to discover how recent events and the economy are impacting logistics and how you can ensure supply chain efficiency.

Ocean Freight Benefits from Labor Progress

“What a difference a year makes,” Roland Wilson, Director, Logistics at M. Holland, reflects. “Ocean shipping and U.S. port situations have improved dramatically over the last 12 months.”

At the beginning of the year, that improvement was reflected in decreasing rates for ocean freight, despite efforts by carriers to bolster prices by reducing capacity. “The market for shipping containers has turned 180 degrees, with rates now a fraction of what they were at their peak,” Roland said. “Likewise, detention and storage charges at port terminals have nearly been eliminated as congestion has dissipated.”

But labor disputes have continued to plague port operations. In July, a strike closed ports on Canada’s Pacific Coast. The shutdown ended after 13 days with a new four-year contract between the International Longshore and Warehouse Union (ILWU) and the British Columbia Maritime Employers Association.

The ILWU also has been active on the U.S. West Coast. With the help of Acting U.S. Labor Secretary Julie Su, the ILWU reached an agreement with the Pacific Maritime Association in June following 13 months of negotiations. The new contract, which was ratified at the end of August, covers all 29 port locations on the U.S. West Coast for the next six years, offering relief to shippers that have faced the possibility of shutdown since the previous contract expired over a year ago. Although the agreement was only recently approved by port delegates, this marks an end to a period of uncertainty.

Plastics Industry Consideration: Labor disputes have profound repercussions on the plastics supply chain, compromising the reliability of ports and creating delivery uncertainty for the goods that travel through them. Many shippers diverted business away from West Coast ports during the past year of uncertainty, and it remains unclear whether that business will return.

Recent Events Challenge Ground Transportation

The trucking and rail industries have seen their share of issues during the last year. Long-standing labor shortages remain a challenge, but in recent months, public relations concerns and carrier bankruptcies have occupied providers’ attention and business efforts.

Rail Faces Scrutiny After East Palestine

A rail strike seemed imminent in December 2022 before the National Carriers’ Conference Committee and labor unions representing rail workers finalized a contract. In May 2022, Politico called railroad workers the “supply chain’s weakest link.” The industry continues to suffer from labor shortages.

February’s train derailment in East Palestine, Ohio, compounded the rail industry’s problems. The results of that incident have negatively impacted trust and sentiment toward rail shipping and prompted calls for an investigation into the safety practices of all Class I carriers. As demand decreases due to softness in the economy, rail carriers are left in a precarious position. Service improvements and safety concerns will be priorities for many as the industry competes with trucking for ground transportation market share.

Trucking Addresses Carrier Vacuum Following Yellow’s Exit

The trucking industry is no stranger to capacity shortages. The long-documented driver shortage has been somewhat resurrected by trucking giant Yellow Corp. halting operations in July before declaring bankruptcy.

“Yellow recently closing its doors has disrupted the ground transportation market that has long been undersupplied due to the driver shortage,” Roland says. Though Yellow’s capacity has suddenly disappeared from the freight market, Roland remains hopeful that other carriers will quickly adapt to meet demand. However, trucking customers should expect increased freight rates due to decreased capacity.

Plastics Industry Consideration: As illustrated during the pandemic, current events can make or break supply chain efficiency. While on a much smaller scale, the East Palestine train derailment and Yellow’s bankruptcy have prompted ground transportation carriers to change their approach to service. Plastics producers must consider these and other factors, such as price and performance, while making logistics decisions.

Managing Today’s Supply Chain

Recent events like strikes at ports, Yellow’s bankruptcy, and the train derailment in East Palestine, Ohio, illustrate why logistics management requires a flexible approach. Roland recommends plastics producers continue to collaborate with supply chain partners, optimize inventory and monitor logistics current events to maximize logistics efficiency in 2023.

  1. Collaboration Remains Key: Partnership and communication are essential to logistics success in a shifting market. Collaborate with your supply chain partners to create a plan that aligns with your business — its goals, trajectory and current needs. Set up channels for communication with internal departments, vendors and customers to ensure service levels are met.
  2. Optimize Your Inventory: When cost is top of mind, inventory optimization is crucial. Demand forecasting tools can inform supply decisions while inventory location analysis is vital to optimizing service levels, storage costs and transportation expense.
  3. Monitor Plastics industry and Logistics News: Staying well informed can prevent last-minute pivoting. Keep up to date on industries and transportation methods crucial to your business operations. Read each news article with consideration for how it could impact your business.

“It seems like each month brings another disruption to logistics in the plastics industry — labor issues, natural disasters such as wildfires, and vendor changes in the case of Yellow freight. On top of all that, we are now in a more cost-conscious environment where companies are trying to cope with inflationary pressures,” Roland says. “Solid vendor partnerships can be the difference between surviving and thriving in these unpredictable times.”

M. Holland works with expert third-party logistics partners to minimize the impact of current events and cost increases. We approach cost management by taking a long-term view and leveraging strong vendor relationships to accommodate the rapidly changing logistics industry. For more information on M. Holland’s supply chain network, visit www.mholland.com/about/supply-chain.

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