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Q2 2022 Logistics and Supply Chain Update, Trends, and Predictions
Well, Q1 2022 had no shortage of curveballs, from record-high gas and oil prices to the war in Ukraine and supply chain blockades lasting days on end, on top of record-high inflation. With the unpredictability of Q1, our team is taking a look at the trends and events as we dive into the start of Q2.
Key items to note:
Omnicron 2.0: Surprise, a new Covid variant, is making its course throughout the globe. This new BA.2 subvariant of Omicron could account for a surge in cases impacting consumer behavior. According to data published by the Centers for Disease Control and Prevention last week (04/04) BA.2 spreads 80% faster than the earlier Omicron, has more than doubled in the U.S. over two weeks and will become the dominant variant.
Inflation, Inflation, Inflation: Consumer demand remained strong throughout the quarter. But March has been unusually soft in the truckload freight market. Consumers just aren’t spending like they were in 2021. New research reveals that supply chain issues are exacerbating inflation. A recent study found that during 2022 trade is expected to expand further, due to a 16% increase in exports during 2021 and imports by 12%. Production levels have been unable to keep pace with demand leading to supply shortages and will limit import growth in 2022.
Ocean Freight: Container shipping costs are higher than ever and will stay high for the foreseeable future as importers continue to battle for space in the face of record demand for consumer goods from Asia. Covid resurgence in China disrupted productivity and the supply chain in March. Next potential disruption on-deck: West Coast Longshore Union contract expiration and negotiation.
Drivers: making headlines and making late-night television. Last Week Tonight with John Oliver had an entire 24-minute segment on, you guessed it, drivers (aired just last week). Now a 24-minute spot in any programming late night or news is pretty significant, and the transportation and trucking crisis in America is of the utmost importance. 70% of the US cargo is transported by truck; nearly everything you purchase comes to you by truck. That box of Mac & Cheese that’s been sitting in the pantry for a hot second – truck. Headphones – truck. Your dogs squeaky toy that has seen better days – truck. You get the point. 3.5 million truckers supply our goods in this country. But the entire industry is facing a crisis; there’s a lack of drivers, a pretty massive lack of drivers, and it’s only increasing year over year. Not just long-haul drivers but final-mile delivery drivers. Leading to an overall shortage on shelves, congestion, the domino effect.
Domestic Shipping: Consumer goods demand remains high, filling truck capacities on tight routes due to driver and equipment scarcities. Diesel fuel spiked when Russia invaded Ukraine. As a result, unprecedented ground freight cost is the norm across North America.