Freight imbalance in North America: what can we expect?
Freight imbalance has been a problem in the last few years, and it has become a critical challenge for all 3PL in the area. What can we expect in the next couple of months?
Background: it is not a new situation
For almost a decade, freight imbalance in North America has been a reality, and all along the first quarter of 2021, in the middle of the Covid-19 pandemic, the import/export gap between Mexico, the U.S., and Canada has become wider.
As an example: the total amount of goods imported to Mexico from the U.S. in the first months of 2021 was reduced by over 6% from the previous year, while exports from this country increased by 2%. The situation gets clearer if you consider that 60% of the business transactions between both countries are addressed northbound, but only 40% are southbound.
This ratio has only had small changes in the last couple of years, and even in some industrial Mexican cities, such as Monterrey, NL, there is a 6:1 export/import ratio. That is why the market should adapt as quickly as possible and find a solution for this situation.
Covid-19 impact on freight
You can think that the freight industry has outgrown the Covid-19 crisis, but if you look a little closer, its impact has not faded away, since the driver shortage and high spot rates are still over the roof. When the vaccine is available at a larger scale in all of North America, it could be easier to recruit new drivers and convince the ones that went to the “last mile” industry to come back.
Also, we can expect that merchandise flow will return to its usual rhythm, which could solve the container bottlenecks in the ports and therefore the container shortage. This should happen along the third quarter of 2021, so we could hope that 2022 will be a year with even better results.
Freight imbalance is the new normal
All supply chains are stressed out: there aren’t containers available to ship any merchandise, the ports are crowded, there aren’t any trucks in place to put the cargo in motion and the ships can’t dock. This inefficient environment makes speculative and final rates go way up high.
The first step is to understand this imbalance as something that will be normal and long-lasting and not as a temporary situation. We should keep in mind that nearshoring is the tendency in the region as well as prioritizing the agreements contained in the United States–Mexico–Canada Agreement (USMCA), which makes it unlikely to see a change in the following years.
Once we understand this, we should focus on developing flexible and resilient supply chains, something that can be easily done with the help of dedicated 3PL, such as Mexicom Logistics, and searching for multimodal transportation.
MEXICOM LOGISTICS IS A 3PL DEDICATED TO OFFERING RELIABLE TERRESTRIAL FREIGHT TRANSPORTATION AT AFFORDABLE PRICES THROUGH NORTH AMERICA. FIND OUT MORE ABOUT OUR SERVICES HERE.
ADVANTAGES OF WORKING WITH A 3PL LIKE MEXICOM LOGISTICS:
- Time and personnel administration. When you have a logistics supplier, you can focus on other things, like sales or product development.
- Cost reduction. We have better deals with suppliers, therefore, they can offer you better pricing adapted to your load’s volume and flow.
- Adaptability. They can easily adjust to changes in flow and volume of loads.
- Speed and coverage. Since you are using the supplier’s carrier network, you can enjoy faster deliveries within their territory.
- Mitigate risks. Delays can happen for several reasons. When this happens, your 3PL can adjust the route to deliver the load as soon as possible.
- International support. If you have a business in more than one country, your 3PL can take charge of procedures and paperwork needed in each one of them.
Sources:
http://www.citamericas.org/arquivos/a320b9aa4fc8b42706317da7a83794a6.pdf
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