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Supply
Chain by the Numbers |
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- March 7, 2024
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3PL Revenues See Sharp Drop in 2023; US PMI for February Contracts again; Land Bridge across Panama is Expensive to Use; China Set to Dominate EV Production |
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18.5% |
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| That rather surprisingly was the decline in global 3PL revenue in 2023. That according to the latest annual analysis from the 3PL-focused researchers at Armstrong & Associates, recently completed by the firm. The bad market for logistics service providers (LSPs) was partially offset with the fact that even with the declines last year, the 3PL revenue of $1.2 trillion is 25.3% more than in the pre-pandemic year of 2019. Reasons for the revenue fall in 2023 include: plummeting transportation rates across most modes; shippers focused on right-sizing inventories and reducing logistics costs; waning truckload demand. |
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| That is how many consecutive months that the US Purchasing Managers Index (PMI) from the Institute for Supply Management (ISM) has now been below 50, with the February reading coming in at 47.8, as released from ISM late last week. That’s important because 50 is the line of demarcation. A score above 50 means US manufacturing is expanding, while below 50 signals contraction. What’s more, the New Order Index moved back into contraction territory at 49.2, 3.3 percentage points lower than the 52.5 score recorded in January, in a bad sign for future US manufacturing activity. The PMI has below that key 50 mark since November 2022, and it is now averaging just 47.2 over the past year. |
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30% |
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| That is how much faster Chinese electric vehicle makers are in developing new models, according to a recent article in the Wall Street Journal. How do Chines EV OEMs achieve this huge advantage? “They have upended global practices built around decades of making complex combustion-engine cars. They work on many stages of development at once. They are willing to substitute traditional suppliers for smaller, faster ones. They run more virtual tests instead of time-consuming mechanical ones,” the Journal reports. But there is also this: China’s prowess, combined with its global ambitions, is stoking fears it could flood the world with cheap cars as demand for EVs slows. |
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That is the additional cost to move containers over a so-called land bridge and avoid the current delays in crossing through the Panama Canal – a strategy container giant Maersk is embracing for cargo coming or going from/to Australia and New Zealand. But the extra costs are too much for most ocean carriers, according to a report this week on the LoadStar.com web site. The strategy uses rail transport across Panama after drop offs at ports on either side of the country. A spokesperson for one carrier summed it up this way: the freight rate from Asia to the US east coast is around $5,900 per 40-foot containers. A normal Panama transit will take 37 days, but with the diversion round the Cape of Good Hope, you add five to six days. Using a land option will take around 30 days but add nearly $2,000 to the cost – so it’s a no go for most.
