Putzger perspective: The times, they are a-changin’
03 / 11 / 2023
Photo: Travel mania/ Shutterstock
The logistics landscape is changing with significant shifts in trade flows, while the structure of e-commerce business is evolving, but this doesn’t mean air cargo will be left out in the cold…
As Bob Dylan sang a few decades ago, ‘the times, they are a-changin’.
Take cargo flows into the US market. For the eighth consecutive month, Laredo on the US-Mexico border was the biggest gateway for imports in August, ahead of the Port of Los Angeles, which used to be on top.
The change at the summit reflects significant shifts in trade flows. Mexico has emerged as the top source of US imports, and its lead looks set to increase as more companies (including Chinese firms) are setting up production plants there to be closer to the US market.
The Institute for Supply Management pointed out that nearshoring entails changes in supply chain and logistics infrastructure and functions, away from ports and customs clearance to surface modes.
This does not mean that transpacific container trade and airfreight flows will wither away, but they do not offer the growth potential of yesteryear.
Concerns about geopolitical risk and the potential fragmentation of global trade into several blocs have become a significant factor in boardroom strategy sessions.
Concerns about severe weather impacts are also on the rise. According to a recent study, extreme heat and flooding could wipe out $65bn in apparel export earnings from four Asian countries by 2030. Fashion firms are moving to set up production in Latin American countries.
As this column noted a few months ago, e-commerce players have also moved closer to consumers.
Amazon’s push for same- or next-day service is carried out chiefly through fulfillment centres close to major markets, while the e-commerce giant has cut back on its freighter fleet.
This does not mean that airfreight and e-commerce are on divergent paths. On the contrary.
As Ram Menen, one of the great visionaries of this industry noted, “when Amazon has to compete with the likes of Alibaba internationally, where they are talking about delivery within 96 hours to anywhere in the world, they cannot afford to rely on ships for e-commerce movement at retail level.”
He is equally sanguine about the long-term prospects with regard to industrial logistics.
“Manufacturing and procurement activities will be more demand-based and speed of reacting to market will be key to success,” he reflected, adding that this tilts the scales in favour of airfreight vis-à-vis ocean carriers.
That said, the shifting landscape requires everybody in the air cargo industry to be nimble. The volatility will not go away and change is a constant.
