In response to dynamic shifts in global supply chains, logistics companies are swiftly adjusting their strategies. The driving force? Follow the money.
Manufacturers, faced with years of political and pandemic-related disruptions, are injecting billions into constructing factories closer to consumers or in less risky locations than China. This strategic move, encompassing reshoring, nearshoring, and friendshoring, may pose initial challenges for shippers. However, it promises faster lead times and increased diversity in distribution strategies, according to Brian Bourke, Global Chief Commercial Officer at SEKO Logistics.
To realize these benefits, an ample supply of planes, trains, trucks, and container ships is crucial. Carriers, amid softer volumes and economic uncertainty, are keen to meet this demand. Union Pacific, DHL Express, ZIM, and others are enhancing capabilities and adjusting networks to capitalize on the geographic shift in demand. Examples range from cross-border services connecting Mexico, the U.S., and Canada to new shipping routes out of Latin America.
As logistics offerings improve, an increase in factory groundbreakings is anticipated.
Flexibility Crucial for Ocean Carriers
Ocean carriers have a history of adapting to shifts in global trade demand, but current adjustments are happening more rapidly. ZIM’s expedited e-commerce line connecting South China to the U.S. West Coast is a notable example. Ocean Network Express (ONE) and Hapag-Lloyd are also making proactive adjustments, with ONE downsizing U.S. and Europe services while launching new routes within Asia and from Latin America.
However, not all carriers are rushing to launch new services. Hapag-Lloyd, in response to volatile demand trends, is focusing on adapting existing services to meet current demand.
Navigating Nearshoring Challenges
Shifting a supply chain through nearshoring or friendshoring is a complex endeavor involving adjustments to supplier networks, finding labor, and adapting to new regulations. Air cargo services play a vital role during this transition, allowing shippers to quickly deliver supplier components. While businesses may transition to less expensive modes like trucking or rail after the shift, air freight remains essential for operations close to customers, providing agility to navigate disruptions.
The air cargo industry is poised to benefit from the expected uptick in North American manufacturing, with DHL Express investing $600 million in Mexico to capitalize on the country’s growth. Air freight carriers like WestJet Cargo and Awesome Cargo are also enhancing connectivity to leverage existing trade agreements.
Growing Intermodal Services in Mexico
Railroads and trucking companies are forming partnerships to tap into North American supply chain investments and the U.S.-Mexico-Canada Agreement. Union Pacific, for example, launched the “Falcon Premium” Mexico-to-Canada intermodal service with Canadian National and Grupo Mexico Transportes. This service supports shipments of auto parts, food, and temperature-controlled freight.
Other carriers, like Canadian Pacific Kansas City and its partnership with Schneider National, are also expanding intermodal business in Mexico to capitalize on nearshoring opportunities.
As carriers reshape their networks for a new era in supply chains, a forward-looking mindset prevails across various transportation modes.
