The North American supply chain is always bustling with activity and new Logistics Trends every year.
Despite the consistently low rates experienced in 2023, numerous changes and developments demanded attention. Key industry players exited the market, new capacity solutions were introduced, and seasonal freight patterns transformed in noteworthy ways.
As we move into 2024, which logistics trends should you monitor? How will these trends influence your supply chain strategy? Read on to find out.
7 Key Logistics Trends Shaping Supply Chains in 2024
- A Constrained Truckload Market
- Increase in Spot Freight Activity
- Greater Dependence on Third-Party Logistics (3PLs)
- Emphasis on Service Quality Over Pricing
- Heightened Focus on Cargo Security
- Growth in Cross-Border Shipping
- Innovations in Logistics Driven by AI
1. A Constrained Truckload Market
While 2023 was marked by exceptionally low truckload rates, this trend is unlikely to persist into the next year.
According to the latest update of the Coyote Curve® spot rate index found in our U.S. truckload market guide, the deflation of spot truckload rates has reached its lowest point, and we anticipate a shift toward year-over-year inflation by mid-2024.
The truckload market operates based on supply and demand principles: when carrier capacity exceeds shipper demand, rates remain low; conversely, when demand surpasses supply, rates increase.
We are nearing the end of an oversupply phase, which will likely see some drivers and trucking companies exiting the market. Consequently, the balance between supply and demand is expected to shift from the conditions of 2023, leading to higher rates as securing capacity becomes more challenging. This change signifies a transition from a “shipper’s market” to a “carrier’s market.”
2. Prepare to Ship Spot Freight
Our Coyote Curve visualization reveals that contract rates, which we monitor using the Cass Linehaul Index, often lag behind spot rates by a quarter or more. This results in periods during each market cycle when spot rates are increasing while contract rates remain low.
As a result, you may experience some deterioration in your routing guide, with primary tender acceptance rates for your shipments declining. Consequently, you will likely need to rely more on spot freight.
By midyear, the contracted rates that trucking companies agreed upon at the end of 2023 will likely no longer be competitive with the prevailing spot market rates. Even your most dependable carriers will increasingly shift their focus to the spot market to capitalize on the higher rates reflecting their services’ true value.
3. Growing Dependence on 3PLs Among Shippers
In 2023, we conducted a comprehensive research study involving over 500 shippers to explore their use of third-party logistics providers (3PLs) within their supply chains.
Our inquiry went beyond their current practices; we also asked about their future plans.
The findings revealed that 52% of shippers anticipate increasing their spending on 3PLs in the upcoming year, while 50% expect to expand the number of 3PLs in their network.
Outsourcing has become a standard practice in the supply chain, with 75% of respondents indicating that they rely on third parties for at least part of their operations.
As capacity may become more challenging to secure in 2024, we expect shippers to increasingly turn to brokers for assistance in sourcing transportation.
4. Service is Set to Reemerge as a Key Shipper KPI
In our research study, we asked shippers to rank key performance indicators (KPIs) from most to least important.
At the beginning of 2023, during a relatively soft market, shippers who had previously faced capacity constraints prioritized service as the primary criterion for distinguishing between 3PLs, placing cost at the bottom of their list.
However, as the market improved, ample carrier capacity became available to meet freight demand.
After three years of soaring shipping costs, combined with rising interest rates and overall inflation, businesses seized the chance to aggressively negotiate lower rates within their transportation networks. In a shipper’s market, they began to take service for granted, allowing cost savings to overshadow the importance of supply chain resilience.
Looking ahead to 2024, as an inflationary market looms, expect service to regain significance. While it may not become the top priority for shippers next year, its importance will undoubtedly increase as overall capacity tightens.
5. Cargo Security Remains a Top Concern
A concerning trend that is continuing from 2023 into 2024 is the increase in cargo theft incidents.
Data from freight security organization CargoNet indicates a year-over-year rise in reported cargo thefts throughout 2023, with a notable 101% increase between October-November 2022 and 2023.
In late 2023, we released a guide aimed at helping shippers prevent cargo theft. This resource outlines measures to safeguard both the physical security of your cargo and the cybersecurity of your online accounts with carriers and 3PLs.
As we enter 2024, we recommend refreshing your knowledge of these best practices, as cargo thieves are expected to remain both determined and inventive.
Additionally, ensure that you partner only with providers who prioritize security; preventing fraud and theft is a collaborative endeavor.
6. Increase in Cross-Border Shipping
The trend of nearshoring shows no signs of slowing down. According to a 2023 McKinsey survey, 42% of supply chain leaders indicated they were taking steps to move their operations closer to home, a threefold increase from the previous year.
As we approach 2024, we anticipate continued growth in freight traffic at both the Canadian and Mexican borders. Fortunately, new infrastructure developments, such as the Falcon Premium intermodal service connecting rail transport among Canada, the U.S., and Mexico, set to support this rising volume.
However, partnering with an experienced cross-border provider will be crucial for managing all necessary documentation, coordinating the various carriers involved in these complex operations, and minimizing delays at customs.
7. Cutting-Edge AI-Driven Shipping Solutions
Technology is advancing rapidly, and the latest tools are set to enhance how businesses transport freight this year.
Artificial intelligence (AI) remains a hot topic across various sectors, including the supply chain. At Coyote, we have harnessed this technology to develop My Smart Routes, a dynamic route optimization platform designed to keep drivers loaded and heading towards their preferred weekly destinations.
This tool not only guarantees consistent weekly revenue and enhances the quality of life for participating drivers but also enables us to offer unique, cost-effective capacity solutions for shippers within our network.
We can expect to see more such innovations that will continue to transform the supply chain landscape in 2024.
Summary
As we look ahead to 2024, several key logistics trends are poised to shape the North American supply chain landscape. The transition from a constrained truckload market to increased reliance on spot freight and third-party logistics providers highlights the evolving dynamics in freight transportation. Service quality set to regain prominence amid tightening capacity. While cargo security remains a critical concern as incidents of theft rise.
Furthermore, the continued growth of cross-border shipping, driven by nearshoring and new infrastructure developments. Emphasizes the need for experienced partners to navigate the complexities of international logistics.
Finally, innovations in artificial intelligence promise to enhance operational efficiency and optimize shipping solutions. Adapting to these trends will be essential for businesses aiming to thrive in an increasingly complex supply chain environment.