“I’ve got to admit it’s getting better, better, better… It’s getting better all the time!” ~Paul McCartney
“It can’t get no worse.” ~John Lennon and George Harrison Getting Better, 1967, Sgt. Pepper’s Lonely Hearts Club Band
After a roaring 2020, logistics is having a hangover. Rates are down, fuel is up, and ocean capacity, that elusive mistress we were all in search of just eighteen months ago, is so plentiful that it has driven down rates below 2019 levels.
What happened? Okay, briefly, people sat home shopping online during the pandemic, and the immediately blanked sailings set the required cargo behind schedule. At the same time, demand went crazy, and excess capacity went to PPE, with passenger flights grounded. I’m sure there’s a sports metaphor to help describe it, but unless it involves getting kicked in the knee with cleats, it will fall short of the gravity of what that single poor decision cost the world.
The response was tremendous. Passenger flights were gutted to ship cargo in the cabins. Workers managed social distancing and extended hours to keep cargo moving. It was a miracle. The supply chain’s near collapse drove everyone attached to the industry to shore up their inventory. Regarding retail goods, capacity inventory was a massive endeavor, with ships being ordered, containers being bought years in advance, and warehouse space being snapped up near the ports that were busy to the point of bottlenecking during the pandemic.
As all things do, the world settled from the pandemic. PPE shipments faded from urgency, and some retailers were overstocked with inventory, dampening the pace of orders and shipments. Crisis buying stopped, and eventually, albeit slowly to the point where it felt like we’d be struggling forever, the backlogs cleared, and the balance returned.
Balance lasted exactly four minutes and nine seconds before all that required capacity hit the market, and the reduced demand hit the retailers, and rates fell apart. We all learned how important the logistics industry was during the pandemic. People who didn’t understand or care a bit were suddenly glued to their phones when the Ever Given got stuck. While it was far from a perfect response, logistics was a key player in our global recovery. We would see millions, if not billions, sick and suffering if not for the transportation and trade industries.
And they made billions for it. Saving the world cost a fortune, and as supply was removed from the market just before demand went up, the shipments that could get moved cost exponentially more than usual, even in peak seasons. But forwarders found a way to move cargo, no matter how much it cost or how long it took.
We’re going to bottom out, people will use up their excess resources, and ordering will pick back up because economics is a circle. Fuel will bounce around, but much like the post-Katrina gouging pushed more people to go electric, there isn’t the monopoly that once ensured prices sat higher than ever before. Scarcity is no longer the economic boogeyman. We have enough, and you can pay us handsomely to deliver it to you.
