A Look Back at a Turbulent Year in Logistics

Glenn Taylor
·7 min read

The logistics industry has had no shortage of drama unfolding over the past year, including a freight recession, various strikes and near-strikes, a major trucking bankruptcy, a drought at the Panama Canal, and most recently, concerns at another major global trade gateway, the Suez Canal.

Freight rates maintained their descent

The start of 2023 continued where 2022 left off, as freight rates kept falling from their peak in the fall of 2021. The collapsing prices have been a byproduct of the current freight recession, characterized by weak demand for goods and an overcapacity of vessels and vehicles to haul cargo.

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Ocean spot rates measured by Drewry’s World Container Index (WCI) dipped from $9,408.81 per 40-foot container on Jan. 6, 2022 to $2,135.16 on Jan. 5, 2023—a 77.3 percent collapse in the span of one year. While this year’s declines haven’t been as steep, they have still put plenty of pressure on carriers and freight brokers alike. In the time since, spot rates are down another 22.2 percent to $1,661 per container as of Thursday.

Dry van line-haul rates for trucking also saw rates fall 9.3 percent to $1.65 per mile, down from $1.82 per mile as of Monday, according to DAT Freight & Analytics.

The freight rate declines created a “buyer’s market” for brands and retailers entering a new contract and seeking to lock in a more favorable long-term deal. But for carriers and brokers, lower prices meant less revenue, bringing financial distress to businesses without significant capital on hand.

“It is a time to be a lot more hyper-aware on where the spot rate market is, and the trade lanes that companies leverage for their supply chain,” Brian Bourke, global chief commercial officer at Seko Logistics, told Sourcing Journal in June.

Yellow goes under, Convoy shuts down

Perhaps the biggest shock of the year within logistics was the sudden bankruptcy of less-than-truckload (LTL) company Yellow Corp. in August.

In the month after the trucking firm sued the Teamsters for $137.3 million on allegations that the union prevented it from restructuring amid dwindling cash resources, clients including Walmart and The Home Depot diverted freight from the company. The customer exodus forced Yellow to shut down in late July, before filing for Chapter 11 a week later.

The company is still in the process of liquidating its assets, selling off 130 terminals in an auction for a combined $1.88 billion, with XPO getting 28 terminals for $870 million and Estes Express Lines scooping up 24 locations for $248.7 million.

Yellow is still seeking buyers for its remaining 46 owned and 147 leased terminals, and has yet to set an auction date for its rolling stock of trucks and trailers.

Yellow wasn’t the only casualty within the trucking sector, with digital freight brokerage Convoy ceasing operations in October. The company, which was valued at $3.8 billion in early 2022, served as a marketplace to match shippers with trucking carriers.

The conditions of the freight recession, which included the downturn in freight rates and trucking demand, along with a pullback in investor funding, did Convoy in as sales slumped. The company’s tech was sold to digital freight forwarder Flexport, which itself dealt with many of the same problems Convoy had to endure, like plummeting revenues.

UPS, West Coast port workers score new contracts

Labor negotiations for new contracts were a common theme throughout 2023, most notably as the United Auto Workers (UAW) went on strike for six weeks in the U.S. Luckily, similar negotiations didn’t end up causing much disruption in the apparel supply chain.

Just as 2022 ended with an averted strike in the U.S. rail industry, the #hotunionsummer ended up avoiding multiple potential work stoppages as unionized UPS workers and West Coast port dockworkers in the U.S. both won landmark new contracts.

The latter deal is likely to set the tone for how East Coast port dockworkers expect to approach their ongoing labor negotiations in 2024. The former deal could potentially inspire more organizing efforts at Amazon, according to Kate Bronfenbrenner, director of labor education research at Cornell University’s School of Industrial and Labor Relations.

“Amazon workers can look to this contract and see many things that they could only get with a union,” Bronfenbrenner told Sourcing Journal in August. “Protections for part-timers. Health and safety protections with the air conditioning in the trucks. Getting rid of two-tier wage scales. Those kinds of victories only happen with the power of a large union in a very strategic campaign.”

That’s not to say labor negotiations and strikes were avoided entirely in 2023. The most disruption came out of Canada, where port dockworkers walked off the job for 14 days at British Columbia ports, disrupting approximately $9.9 billion in trade. Another weeklong strike occurred in eastern Canada in October, which cost businesses approximately $25 million per day.

And this month, roughly 1,100 Teamsters-represented DHL workers at the company’s air hub in Northern Kentucky went on strike for 12 days.

Nowhere to run from layoffs

Layoffs hit logistics hard, with the Yellow bankruptcy resulting in the loss of 30,000 jobs. But the job cuts persisted across all areas of logistics, regardless of size and function.

Amazon, UPS, FedEx, DHL and Maersk are among the major logistics companies that saw reductions in headcount throughout 2023.

The layoffs at Maersk, which is cutting 10,000 staff across 2023, are the perhaps the biggest indicator of the state of logistics worldwide. The container shipping giant said global container volume performance for the full year would decline in the range of 2 percent to 0.5 percent—another illustration of the lack of demand that has led to less revenue across the board.

Railroad operator Union Pacific, trucking company U.S. Xpress, contract logistics provider GXO, freight brokerage logistics services company C.H. Robinson and another brokerage, the UPS-owned Coyote Logistics have all shed staff amid the subdued freight market.

Job cuts have been highly prevalent in the freight tech sector which was dominated by players like Flexport and Convoy—both of which saw multiple rounds of layoffs in 2023 prior to the latter shutting down.

Software providers including warehouse-as-a-service company Flexe and supply chain visibility platforms like Project44, Freightos and FourKites all saw significant headcount reductions, while another logistics tech firm, Slync, is shutting down amid an ongoing lawsuit with its former CEO.

Calamity at the canals

Two major chokepoints in global trade have experienced significant disruption in 2023. The Panama Canal has endured a months-long drought that led the gateway to implement restrictions on daily transit reservations, while the Suez Canal is currently seeing less traffic in the wake of Houthi attacks as ocean freight giants reroute their ships away from the Red Sea.

Only 22 daily transits are currently allowed through the Panama Canal, down from around 34 to 36 in normal conditions. To give some respite to shippers, the Panama Canal Authority (PCA) will start allowing 24 vessels per day in January. Bookings are highly coveted, with one company shelling out $4 million to reserve a slot ahead of time.

In a major sigh of relief for the apparel supply chain, the congestion hasn’t made a major impact on container shipping since these vessels have the first crack at booking priority.

The emphasis on bookings appears to have alleviated part of the congestion. As of Thursday, 72 ships are in queue for transit at the Panama Canal, with 44 having booked ahead of time and 28 without a reservation. In comparison, on Aug. 29, 135 vessels awaited passage. At the time, 47 of those ships were booked, while 69 had not made a reservation.

The Suez Canal concerns closed out 2023’s topsy-turvy year, as all the major container shipping companies elected to halt movement into the Red Sea. Ocean freight giants like Maersk, MSC, Hapag-Lloyd and CMA CGM instead opted to direct their vessels around Africa’s Cape of Good Hope.

Such a diversion adds at least 10 days to a ship’s journey and tacks on more than 15 percent to shipping costs, according to Chris Rogers, head of supply chain research, global intelligence and analytics, S&P Global Market Intelligence.

“Consumer goods will face the largest impact, though current disruptions are occurring during the off-peak shipping season,” Rogers said. “In the short-term, ports will need to deal with a dearth of imports followed by a surge as the ‘global fleet’ bunches up as a result of the pauses and onward sailing.”