Leading up to 2022, freight forwarders must stay vigilant of the various freight and shipping concerns carrying over from the current year. There continues to be a strain on the market with consumer demand, limited production, and difficulty with driver availability. The need for a reliable freight forwarding system only continues to grow.
Due to these persistent issues, freight forwarders must find a solution to gain visibility and combat the volatile markets. According to S&P Global, “Higher freight rates had contributed to DHL’s strong financial performance for the quarter, with EBIT for the company’s freight forwarding division more than doubled to EUR 372 million ($430 million).” Similar above-average profit trends have been seen for other major forwarders, and it all amounts to an increased strain on forwarders going into 2022. As companies experience issues and face disruptions throughout the market, they should expect to see such issues carry into the new year. However, an answer to the issues stemming from the pandemic and following peak season pressures can be found.
What’s Causing Turbulence in the Freight Forwarding Market?
As the freight market continues to face difficult obstacles and such challenges are expected to remain well into the new year. Freight forwarding businesses must prepare to ensure they have the proper efficiencies and protocols needed for the ongoing issues that affect the freight forwarding market.
Increased Peak Season Activity
Shippers and forwarders should get used to seeing more activity during this year’s peak season and the years to follow. More and more people have been spending their time shopping online and relying on delivery methods during the holiday season. Especially due to the pandemic, the market has seen an increase in online shopping compared to a decrease in physical stores. This can cause issues for companies that have not properly prepared for this spike and the freight forwarding market must also plan for more tension on the already strained network.
A Longer-Than-Usual Peak Season
As demonstrated throughout the supply chain and freight industry, the peak season surge has been longer and more exhausting than in years past. Companies have continued to face issues with capacity, driver availability, and freight increasing freight rates. For many throughout the industry, peak season has been a constant state as tight capacity, spot market pricing increases, decreases in service levels, and issues with transportation modes continue to plague the industry. Regarding expected trends for freight in 2022, the industry has an opportunity to rebalance the market with the help of finding more drivers and capacity.
Limited Capacity Due to Continued Driver Shortage.
Driver capacity still remains an issue as many companies throughout the industry lack the number of drivers needed for such a busy season. The driver shortage has existed for some time now and is especially disruptive during the end of the year, as this can cause increased issues with delivery and capacity. Without enough drivers, some companies will have to combine smallerd shipments to leverage available capacity. This can slow down the delivery process and cause issues for the industry as peak season.
Uncertainty Regarding Economic Policies
While shippers, carriers, forwarders, and brokers all struggle with the backlash of the pandemic and the continuing stress of peak season, financial pressures loom large. Current economic policies and standings on a local and national level are not guaranteed to be positive. Companies should expect to see continued product shortages and price surges into 2022 and even beyond. This is due to no immediate and all-encompassing solution being identified as of yet for the underlying supply-demand imbalance within the e-commerce supply chain..
Uncertainty Over Spread of Potential COVID Variants.
With freight forwarding companies and service providers continuing to face the difficulties of the pandemic, the risk of new COVID variants remains. . Despite the vaccine providing some certainty for the public, there continues to be the risk of new variants being found and causing issues. New variants can and will likely affect freight in 2022 and cause continued issues with the market from goods shortages, lack of drivers, and more. The rise of new variants also increases the chances of another worldwide lockdown, which can cause a whole new ripple effect to take hold of the supply chain network even more so than the first time.
Increased E-commerce Activity in Tandem With Increased Brick-And-Mortar Activity
Due to the pandemic and ongoing difficulties with masking regulations, capacity constraints, and vaccination concerns, many businesses have had to limit customers in the building or some have faced permanent shut down. E-commerce shipper activity has continued to increase and become the new normal for shopping. This trend is expected to continue for the freight forwarding market in 2022 and well beyond.
Global Container Shortages
From the pandemic and the continuing issues with new variants and quarantine, drastic inflation in shipping and container prices, and increased delay times will also make things more difficult to manage. When the pandemic began, some forwarders reduced how many cargo ships that were being sent out. This move further hindered the flow of imported goods. As customer spending shifted from services to goods, container shortages increased, resulting in many companies not having the ability to secureadewuate capacity. As global container shortages become more and more common and continue to cause issues navigating volatility without the proper technology, freight forwarders are needed.
Delays and Blanked Sailings in China
A blank sailing, also called void sailing at times, occurs when the ocean line service operator decides to cancel a call or skip a particular port, region, or even an entire leg on the scheduled route. This can occur due to inclement weather, port congestion, or issues with the port or vessels. Such problems can cause issues in collaboration in freight networks, shipments, and more. And the risk of new variants of COVID-19 may lead to additional blanked sailings in China too.
What’s on the Horizon for the Freight Forwarding Market in 2022
As the supply chain network continues to face issues from the pandemic and peak season demands, the market is expected to continue facing issues throughout the new year as well. Issues such as shortages, supply-demand, and increased freight rates have the expectancy to last. In order to be a successful freight broker in the upcoming year and have the best for companies, it is important to understand the upcoming trends and expectations.
Trucking Tonnage Will Rise
In the year to come, more companies hope to seek out more visibility for trucking. According to Road Scholar, “The primary insight in this report predicts that the U.S. will see a 24 percent increase in freight tonnage in 2022, producing a 66 percent increase in revenue for the industry. The bulk of that increase for next year, and the next decade, is occurring in the trucking segment.” As the true importance of trucking and shipping services gains visibility, it has been projected to have an impact on the demand for proper infrastructures like roads and bridges. It is also expected to bring added pressure for companies to increase compensation for commercial truckers.
Intermodal Transport Will Increase as Forwarders Look to Clear Backlogs
As companies and those in the supply chain try to find a solution to all the backlog and reoccurring issues, freight forwarders can help. Road Scholar mentions again, “While sea transport is projected at a more modest growth rate of 7 percent, the overall intermodal market is expected to reach more than $30 billion in 2022, up from $11 billion in 2016. This also drives the demand for more reliance on commercial trucking for the final distribution-to-the-end-user solution.” Thanks to the modern technological advancements provided by freight forwarders and the industry, freight forwarding market providers can finally start to return to their normal loads and capacity.
Market Conditions Will Still Favor Carriers for Q1 of 2022
Due to the supply and demand within the market, carriers and e-commerce 3PLs still provide the best option for means of fast and reliable delivery. With the constant stress of shortages and poor visibility in the supply chain, trucking companies continue to meet the growing need for on-time delivery and transportation services. Companies expect trucking to continue to support spot rates in the market throughout 2022. Researchers expect this due to outside forces including steady demand due to restocking, structural shifts in e-commerce, peak season preparation and shipping, and pent-up demand from port congestion. Preparing an appropriate freight shipping tech stack will make preparations for 2022 and beyond easier and more practical.
Success in Freight Forwarding in 2022 Will Depend on the Right Technology and Partnerships
Peak season stress and issues remaining from the pandemic will last well into 2022. Companies should expect to see the remaining issues with driver shortages, goods shortages, decreased visibility, and more. As the market continues to experience issues throughout the supply chain in different areas, having the proper software and other benefits from freight forwarders can help. With trucking and carriers continuing to provide the best mode of transportation for the upcoming year, companies will need assistance keeping up with high rates and shipment quantities. To get the help needed to address your company’s needs with freight forwarding and freight in 2022, contact Cargologik today to get started.