If the past few years have taught us anything, it’s to expect the unexpected. In a prime example, the shipping platform Freightos initially forecasted an 87% growth in revenue in 2023 compared to 2022. They have since changed their expectations to a substantially lower 15 to 21%. There are certainly numerous uncontrollable factors inside and outside the freight market that all those in this industry try to keep an eye on. That makes it important to establish the foundation—technology and processes—for agility.
While we can dive into the predictions for the second half of 2023, no matter how it plays out, it’s overall proactivity that means the difference between a freight professional recovering quickly to stay competitive in unexpected circumstances or being carried along for the ride.
What Does the Second Half of 2023 Hold for the Freight Market?
The current freight market is said to be in its worst condition since the Great Financial Crisis of 2008. Truckload spot rates have significantly dropped while operating costs for trucking companies haven’t followed suit. Tender rejections have fallen below COVID-19 levels and are at an all-time low, indicating that carriers are struggling to find loads and negotiate rates. The market's softness can be attributed to increased capacity in recent years. Potential challenges loom ahead, including government debt ceiling debates and the end of student loan forbearance, which may put additional financial pressure on consumers. These factors suggest that the freight market may worsen in the coming months.
Executives and analysts initially expected a rebound in the second half of 2023, including for containerized U.S. import volumes. However, more recent data shows weak U.S. import demand, with no clear signs of improvement. Weakening consumer demand, inventory levels, and labor market add to the concerns. The likelihood of a second-half rebound in U.S. import volumes is decreasing, and it’s even possible it will end in a further decline.
What this Means for Freight Forwarders
Freight forwarders are now experiencing why it’s important to prioritize agility in their operations, proactively seek opportunities to increase efficiency and find ways to provide additional value for their customers.
- Lower rates – With low rates, freight forwarders may need to adjust their pricing strategies to remain competitive. They face pressure to offer more competitive rates to customers while also managing their operational costs.
- Limited pricing power – The low tender rejection rates mean that carriers are accepting loads at lower rates without much negotiation. With limited pricing power for carriers, shippers can find low rates anywhere, which in turn means that freight forwarders must find other ways to differentiate their services and provide additional value to customers beyond just pricing.
- Uncertainty and volatility – The current state of the freight market is uncertain and volatile, with potential risks and challenges on the horizon. Freight forwarders should be prepared to adapt to changing market conditions, anticipate potential disruptions, and have contingency plans in place to mitigate any negative impacts on their operations and customer satisfaction.
In a Struggling Market, Three Trends Stand Out
Despite the challenges, the freight market doesn’t spell doom and gloom. There are still opportunities for adaptation and progress, and three trends, in particular, are standing out.
1. Freight Forwarders Realize the Black Swan is Here to Stay
Freight forwarders have come to the realization that the concept of a black swan event, an unpredictable and disruptive occurrence, is no longer a distant possibility but a constant presence in their industry. With its global reach, the transportation industry is particularly vulnerable to unpredictable crises ranging from international conflicts to volatile weather patterns. As a result, more freight forwarders understand that resilience in their operations is defined by their ability to adapt and respond effectively to these unforeseen challenges.
2. End-to-End Visibility Becomes a Must-Have
The current state of the freight market has increased the need for a complete view and understanding of the entire supply chain journey. End-to-end visibility lets forwarders proactively identify and address any issues as they arise. With the many stakeholders involved in the supply chain, end-to-end visibility has become a must-have resource for freight forwarders to ensure timely delivery and minimize the impact of unexpected events, as well as to support efforts for increased efficiency.
3. A Digital Supply Chain Demands Digital Freight Forwarders
As supply chains undergo a digital transformation, it’s unavoidable that the role of freight forwarders will evolve to a degree. With the digital supply chain becoming the new norm, freight forwarders are now expected to adopt digital technologies and tools to gain the benefit of optimization. Traditionally manual processes are being replaced by automated systems, data analytics, and machine learning, enabling faster and more efficient decision-making. To be competitive, freight forwarders must embrace digitalization and leverage innovative technologies to meet the evolving needs of their customers and ensure seamless, data-driven operations.
Stay Proactive and Agile with Visibility Data from VIZION API
Proactive supply chains run on end-to-end data visibility and analytics. VIZION provides the easy-to-integrate API that allows freight forwarders and shippers a detailed look into their transportation operations, even across multiple modes of transport. With access to a level of container tracking not provided by carriers, freight forwarders can set their business apart for their customers while uncovering new ways to increase efficiency and reduce costs.
Schedule a demo with VIZION API today, and stay agile in any freight market.
