Boats, planes, trains, trucks – when you start to add up all the global freight transportation options available and factor in constantly changing economic and geopolitical elements, it can be difficult to predict which will be the best mode for your freight. Having access to and knowledge of various options is critical for businesses who want to maintain a dynamic supply chain. Recently, the global air freight market has gained recognition for its benefits of speed and agility in the wake of disruptions.
An excellent example of this happened in 2020 when the demand for global air freight took off out of the necessity to move PPE, medical equipment, and other just-in-time inventory amidst the COVID-19 pandemic. With fewer commercial planes flying passengers and therefore less belly capacity, airlines were able to quickly increase capacity through cargo planes and businesses were able to capitalize on the speed of air freight.
The outlook for air freight, however, hasn’t been so sunny over the last few years. In 2023, as supply chains finally started to iron out following years of expensive delays and disruptions, the demand for air freight dropped as business returned to ocean shipping as consumer behavior shifted and many looked to recoup costs after paying premium transportation costs during the pandemic.
As new disruptions arise in 2023, however, the role of air freight remains an important option for a robust supply chain. For the first time in months, the demand for air freight has grown. Not because air freight is a direct cost-saving option, but because it is largely able to avoid disruptions other transportation options cannot. As businesses work to futureproof their supply chain from major delays and inventory shortages, as well as complex geopolitical factors, this trend towards using air freight to diversify your supply chain is likely to continue into 2024.
Here are 3 factors contributing to the growth of air freight into 2024:
Expanding Nearshoring Opportunities
After a few years of rollercoaster-like supply chain conditions, many businesses are recognizing the benefits of having their manufacturing operations closer to the products’ final destination or customer. Nearshoring, reshoring or friend-shoring has become increasingly popular as businesses are shaking off the damages caused by past and ongoing disruptions including labor issues at ports on the West Coast, mis-forecasted inventory and other supply chain delays.
The transition of nearshoring, however, doesn’t just happen in the blink of an eye – it can often be rocky. As businesses adjust to completely new supply chains, air is used frequently to keep up with inventory as moving supplier components can be more difficult than just relocating manufacturing facilities. While it might not be the most affordable option long term, air freight is a popular mode for supporting businesses who are looking to quickly nearshore their operations.
Congestion at the U.S.-Mexico Border
Several factors, including technology issues at customs, increased border security, and crossing closures created congestion and a backlog of shipments at the U.S.-Mexico border at the start of this fall. For some routes, these disruptions added nearly 15 hours to transit times, causing many to pivot to air freight to avoid delays at the border.
For one industry in particular – automotive manufacturing – these delays plus recent strike activity created the perfect storm of disruption. The automotive industry has historically relied on just-in-time inventory management to drive efficiency, so delays can have detrimental effects on production. Many C.H. Robinson automotive customers looking to transport goods out of Mexico to mitigate further supply chain risks from strike activity, for example, were able to secure air charters in as little as a few hours. Air remains a major player even when strikes end as manufacturers get caught up on production and suppliers need to ship inventory quickly to avoid a line-down situation. Air freight allows businesses to keep goods moving when other modes aren’t working efficiently enough.
While the congestion has waned from the disruptions mentioned above, the growing demand and volume for U.S.-Mexico cross-border shipping through nearshoring and other trade incentives that make the countries an attractive option for many companies, could lead to more consistent congestion or bottlenecks in 2024.
Holidays and Increased Retail Activity
While often more expensive, air freight is also a critical tool for specific industries and during certain times of the year. For example, medical equipment, electronics and trend-driven retail industries leverage air freight as they cannot afford major delays in the supply chain due to their timeliness.
While consumer spending isn’t as high as it was during the beginning of the COVID-19 pandemic, it remains high given the current economic outlook. Many predicted that there wouldn’t be a peak holiday season in 2023, and while it is mellow compared to the last few years, it is forecasting similarly to what we experienced before the pandemic.
Electronics, for example, typically has a few major new product drops throughout the year. With these new devices, consumers typically need additional accessories like cases or chargers. Air is used for these goods to ensure they can arrive on time with the new technology. Additionally, as fashion trends evolve, brands cannot afford delays as the marketability of their goods relies on timely trends or fads. As ocean carriers use blank sailings to adjust to lower demand, air is far more reliable and mitigates the risk of last-minute delays. To keep up with this demand for quick-turn consumer goods, air freight will remain a good option in 2024 for those who can’t afford to miss their window of opportunity.
Building Contingency Plans
Since 2020, supply chain professionals have collectively learned that while air may cost more initially, the potential savings from avoiding delays and inventory shortages make it a worthwhile investment and key element of any contingency planning and diversification strategy. While we can’t predict the future, we know disruptions and unforeseen factors are inevitable. Understanding supply chain solutions like air freight is a critical way to prepare for the unknown and futureproof your business as we move into 2024.
