2024 Supply Chain Outlook: Industry Experts Weigh in on Opportunities and Challenges
Bob Costello, chief economist for American Trucking Associations
Bob Costello
Q: What shifts do you expect to see in supply and demand for trucking in 2024?
A: I’m expecting continued incremental reductions in supply as we head into next year. I don’t expect much change in demand, perhaps slightly better. But overall, supply and demand should move closer to balance as supply, mainly from some smallish fleets exiting or failing.
Q: How will the three big drivers of truck freight — consumer spending, new construction and factory/industrial output — change?
A: The consumer won’t boost spending significantly, but retail inventories have fallen which means that they are no longer bloated. That will help a little on the demand side, especially if retailers overshoot their reductions and they have to build inventories up. New construction will be flattish compared with 2023 as will factory production.
Q: What potential headwinds do you anticipate?
A: We will see consumers with less spending power as wages moderate and excess savings are gone.
Tim Denoyer, vice president and senior analyst, ACT Research
Tim Denoyer
Q: What do you expect to see happen with capacity in 2024?
A: Exiting the 2023 peak season at a very low load/truck ratio sets up a loose market continuing into the soft winter months, but by mid-year, we expect lower new equipment supply to allow capacity tightening. Along with a modest pickup in freight demand, this should press the load/truck ratio higher.
Q: What will happen to both contract and spot rates in 2024?
A: Spot rates closely follow the load/truck ratio pattern, starting the year soft and still down considerably against the year-ago period. But gradual improvement in demand and tightening of supply should turn the trajectory higher as seasonality picks up through Q2, and an uptrend is likely to continue in the second half. Spot rates have stabilized for six months now, and we think a widespread between spot and contract will persist. Contract rates should be nearly done declining and start to rise in the second half of 2024, but that adds up to our forecast for a 4% drop for the year.
Q: What is the commercial vehicle forecast for 2024, particularly for Class 8 tractors, dry van and refrigerated trailers?
A: There are pockets of strength in the commercial vehicle markets, including vocational, Mexico and exports, but demand for tractors and trailers will decline considerably in 2024. The Class 8 tractor forecast calls for about 30% lower sales than 2023’s record level. Fleet profitability fundamentally argues for even lower demand, but looming regulations are an increasingly important consideration.
Q: What can shippers and carriers expect to see throughout the year?
The shipper’s market will continue to be a grind for fleets for a while, but 2024 will also be a transition year from deflation back to inflationary freight rates. The main risk to that forecast is if the significant private fleet expansion of 2023 persists, but that should only last a few more months. Class 8 orders in early 2024 will be key to watch.
We also expect global ocean disruptions in the Panama Canal and Red Sea to shift imports from East to West, adding to freight demand from the West Coast ports. In late 2023, there were over 100 cargo ships rerouted around the Cape of Good Hope en route to the U.S. East Coast to avoid the Suez Canal. The effects of the Middle East conflict will make East Coast imports choppy for a while as freight is now likely to shift to the transpacific trade lane because of the time and risks involved with going around Africa. With major constraints at the Panama Canal as well, the transcontinental intermodal network will be busy in 2024.
John Langley, founder of the Annual Third-Party Logistics Study and professor at Penn State University
John Langley
Q: What supply chain opportunities will 2024 bring?
A: I see increased opportunities for suppliers of supply chain services to provide a broader range of services and to develop more strategic relationships with customers. This also is supported by findings from our 2024 3PL Study that customers are reducing the number of lead service providers and generally favoring longer contracts.
Q: What challenges will remain?
A: We have seen significant stability return to some sectors post-COVID-19, but volatility still exists in some of the supply markets. Causal factors may include ups- and downs of global politics and conflict; expanding footprints of supply networks; dealing with increasingly invasive governmental policies, laws and regulations that impact the supply chain sector; deteriorating infrastructure; and misplaced governmental investment in low- or no-payoff improvements. We need to look holistically at supply chain investment opportunities, look beyond the shiny objects and try to direct attention and investments to areas where true improvement may be achieved.
Q: What should shippers be thinking of as they create 2024 supply chain plans?
A: I see four key areas shippers should consider:
- 1. Better alignment of supply chains with organizational objectives
- 2. Development and refinement of ability to manage change via flexibility, adaptability, etc.
- 3. Focus on core competencies to help guide plans and operations for supply chains
- 4. Develop stronger and longer relationships with customers and suppliers, including logistics service providers, embrace technologies that can enhance the financial and operational excellence of supply chains and focus on technologies relating to mobility, automation, and digitalization and analytics.
Mark Baxa, president and CEO of the Council of Supply Chain Management
Mark Baxa
Q: What supply chain opportunities will 2024 bring?
A: Our effort on the road ahead is about building value-added protections or redundancies in businesses, thinking about how to respond to challenges before us and going through those responses with supplier networks in the event we become constrained at some level. We’re still facing higher costs out of China due to the Section 232 and 301 tariffs. That presents an opportunity to look at alternatives and take advantage of certain partnerships with our most favored nations or simply to bring manufacturing closer or within the U.S.
Shippers are looking at critical sourcing locations and advancements in planning tools, manufacturing and operations. They need to lean on their procurement individuals more in 2024. Many supplier relationships were broken during COVID-19, and many supply chains are still rebuilding those supplier networks in terms of reliability, trust, quality and cost management.
Q: What challenges remain?
A: We are living in an environment of depressed freight rates and excess capacity. Right now, we’re in more of a cost-constrained supply chain. Investments are occurring but it is with a lot of thought. Economists are telling us that 2024 will start at the pace we’re currently at. We’re hopeful that inflation moderates, but the cost of money is going to impact a number of investments for individuals who are leading the supply chain.
In terms of the transportation sector, everybody wants to know what happens when the economy rebounds, which we think will happen in the second half of 2024. Thousands of carriers have closed their businesses, and that number continues to grow. What does that mean in terms of being able to deliver? Shippers need to keep an eye on their strategic partnerships and develop trusted relationships with carriers and 3PLs so they can meet their freight needs.
Heading into 2024, supply chain leaders need to keep an eye on the geopolitical landscape, and we need to be mindful of opportunities and constraints of public-private partnerships, especially with the Biden Administration’s latest actions intended to strengthen the supply chain.
Q: What should shippers be thinking of as they create 2024 supply chain plans?
A: It is absolutely paramount that supply chains as a whole look to environmental, social and governance and the contribution to social corporate responsibility. The consumer is more interested than they were a year ago and there are increasing demands from a regulatory perspective. Environmental and economic improvements can only be solved through stronger involvement of the supply chain.
Nate Springer, vice president, market development at GNA and author of the State of Sustainable Fleets Report
Nate Springer
Q: What fleet sustainability trends do you expect to see in 2024?
A: There are four:
- 1. A growing “call to action” by fleet customers/shippers for greenhouse gas tracking and reporting by fleets
- 2. Finalization of new regulatory requirements for greenhouse gas tracking and reporting by California and the SEC
- 3.Evermore manufacturer innovation, such as very efficient trucks, combustion of gaseous fuels and engine platforms that support multiple energy types
- 4. First signs of a dramatic national expansion of clean vehicle infrastructure that will last a decade
Q: What regulatory action will we see in 2024 related to ZEV or other transportation-related sustainability initiatives?
A: In the past three years, State of Sustainable Fleets has been tracking the march of states adopting California’s Advanced Clean Trucks rule that mandates minimum sales of ZEVs for OEMs within each state. Rhode Island has become the 10th state to adopt this rule, making it the law of the land in those states even while three states — Maine, North Carolina and Connecticut — have withdrawn it from consideration.
In 2024, Maryland will likely join the adopting states, but I would expect a general pause by states to stock take among those states that adopted ACT and also see how the market reacts as the first compliance requirements of California’s Advanced Clean Fleet ZEV mandate for fleets is rolled out.
Meanwhile, greenhouse emissions reporting requirements on many companies, including transportation, are likely to be finalized by California and the Security and Exchange Commission.
Q: What clean technology funding is available in 2024?
In 2024, fleets can take advantage of up to $40,000 in tax credits for medium- and heavy-duty ZEVs and many of the most significant programs of the Infrastructure Investment and Jobs Act, such as programs for public charging, are now resulting in shovels in the ground. These funding programs will continue to expand infrastructure and support evaluation or full transition by fleets to the cleanest drivetrains.
We’re in the midst of a window of opportunity in which fleets can still take advantage of lucrative funding programs and generous support provided by vehicle and infrastructure partners to better understand and evaluate cleaner technology before it is fully mandated by certain regulators or customers.
Although this is a period of enormous uncertainty, it is also one of incredible opportunity, innovation and experimentation for fleet operators to get ahead of and remain at the forefront of one of the most significant transformations our industry has ever seen.
A new year can bring several unknowns, especially in transportation and logistics, which are navigating increased volatility and operational pressures. To help those within the industry prepare for the year ahead, we sat down with several industry experts to get their thoughts on capacity, operations, sustainability and how to prepare for 2024.
