Transportation and the supply chain industry witnessed unprecedented challenges in 2023. From market shifts and bankruptcies to labor unrest and global trade partnerships, the year was marked by events that shaped the industry in more ways than one. Take a look at the top 10 news stories that made an impact throughout the year.
10. Taylor Swift’s Eras Tour
You may not think a concert tour would be a big deal in logistics, but The Eras Tour reportedly grossed $556 million just in the United States, with the top cities being Los Angeles, Denver, Kansas City, and Cincinnati. Alongside ticket sales, Taylor Swift gifted the truck drivers on tour $100,000 bonuses each, totaling $55 million in crew appreciation. The drivers navigated a football field-sized stage, massive LED screens, speakers, lights, instruments, and more. During the tour, the crew would split up and operate in different cities where the next tour location would be.
9. Investments in passenger rail
The U.S. Department of Transportation’s Federal Railroad Administration (FRA) in December awarded $8.2 billion for ten passenger rail projects as part of the Bipartisan Infrastructure Law. Several cities, including Chattanooga, have submitted an application to the FRA for a new passenger rail corridor. These proposed corridors would connect Chattanooga with other major cities such as Memphis, Nashville, and Atlanta. The rise of passenger railroads could potentially have a positive impact on freight rail services. This is largely due to the infrastructure improvements that come with the expansion of passenger rail services. The Infrastructure Investment and Jobs Act (IIJA) in the United States allocates $66 billion in funding for corridor developments, rail track modernization, and safety improvements.
8. Rise in cargo thefts
Cargo theft increased 59% year-over-year in 2023, according to CargoNet. The U.S. and Canada counted 692 incidents, with stolen shipments worth over $31.1 million. California, Texas, and Illinois were the most affected states, accounting for 49% of the stolen goods. Many thieves targeted warehouses, distribution centers, and truck stops. Most of the thefts were not random but strategic and planned. Strategic theft, a type of cargo theft where criminals scam businesses into giving them cargo, increased by a staggering 430% year-over-year.
7. The push for electric vehicles
The U.S. National Blueprint for Transportation Decarbonization has presented a framework of strategies and actions to remove all emissions from the transportation sector by 2050. One of the significant changes in the industry this year has been the rollback of drayage trucks. Drayage trucks must be registered in the statewide Drayage Truck Registry prior to entry. Furthermore, all class 7 and 8 diesel-fueled drayage trucks must have 2010 or newer engines to be fully compliant with both the truck and drayage regulations. In California, new regulations have been implemented, requiring all drayage trucks to run on a diesel engine built after 2009. But is it possible to achieve this goal? The transition to EVs presents numerous challenges before electric trucks can be widely adopted. However, the transition to EVs for the logistics industry also presents more sustainable practices for businesses.
6. Ongoing International Conflicts
The supply chain industry has seen worsening trading conditions due to the war between Ukraine and Russia. The conflict in Eastern Europe constrains trade such as fertilizers, metals, and machinery. Additionally, The Red Sea serves as a crucial link between Europe, Asia, and Africa through the Suez Canal and the Bab el-Mandeb Strait. A significant portion of global trade, nearly 12%, flows through this sea, which includes more than 30% of global container traffic and over a million barrels of crude oil each day. Shippers are facing disruptions due to recent attacks on vessels traveling through the Red Sea, leading many to reroute container ships.
5. The Panama Canal drought
For centuries, the Panama Canal has been the most important trade route in the world. It connects nearly 2,000 ports in 170 countries, carrying 6% of all commercial ships. However, in 2023 the canal experienced an out of season drought, forcing restrictions on the amount of vessels passing through the canal and affecting transit times and costs of global trade. According to CNBC, as of November 2023, some wait times have increased 30%. The East Coast has been disrupted by the ongoing drought, as many of its imports and exports depend on the canal.
Due to the drought, canal slots have created a high-demand market for shippers who are willing to pay a premium to cross the canal and skip the line. According to Bloomberg, some shipping lines have paid as much as $1.25 million to secure a reservation, which is 10 times more than the normal rate.
4. Norfolk Southern train derailment in Ohio
In February, a freight train carrying hazardous materials derailed in East Palestine, Ohio. The train consisted of 151 cars, 20 of which were carrying hazardous chemicals. Five of the derailed cars were carrying vinyl chloride, while one tank car lost an entire load of butyl acrylate. The incident had several impacts on the environment, which contaminated nearby waterways. The costs associated with the derailment have more than doubled to $803 million. Norfolk Southern was not required to notify officials of the train’s content due to most of the rail cars carrying non-hazardous materials. The incident brought to light what some think are regulatory oversights, pointing out that federal regulators did not test East Palestine for dioxins, which are highly toxic, until weeks after the crash.
3. Mexico becomes the top trade partner of the U.S.
This year, Mexico surpassed China and Canada to become the top trade partner of the U.S., accounting for 15.7% of the total U.S. trade. One of the main reasons why Mexico became a top trade partner of the U.S. was the significant drop in U.S. imports from China. According to the U.S. Census Bureau, U.S. imports from China decreased by 13.3% in 2023, reaching the lowest since 2011. While many businesses are embarking on reshoring initiatives in Mexico, there are other countries, such as India, Vietnam, and Canada, that are increasing their trade ties with the U.S.
2. The summer of labor negotiations
With a potential economic ripple effect reaching 7.5% of the nation’s GDP, the summer of 2023 saw anxious anticipation surrounding contract negotiations between companies and unions. The dispute between UPS and the Teamsters Union, which represents about 250,000 workers in the U.S., was a pivotal story in the transportation industry. On July 31st, the contract between UPS and the Teamsters expired, the employees threatened to strike if working conditions did not improve. The strike would have been the largest single-employer strike in U.S. history. However, after three weeks of negotiations, UPS and Teamsters reached a tentative agreement on a five-year contract.
Another major labor dispute this year was between the West Coast and Canadian port workers. The International Longshore and Warehouse Union (ILWU) of Canada, which represents about 6,000 port workers in Canada, went on strike in July after failing to reach an agreement with the British Columbia Maritime Employers Association. The strike lasted for over a month and affected the ports of Vancouver and Prince Rupert, which handles about 25% of Canada’s total trade. After the workers voted to ratify a second agreement with the employers, the strike ended on August 5.
The strike started by the United Auto Workers (UAW) union against three automakers began on September 14, 2023. This was the first time the UAW staged a simultaneous strike against the automakers, representing about 150,000 workers in the U.S. The strike was motivated by the worker’s demand for a fair share of profits that the automakers had received from the government during the 2008 financial crisis. The strike ended in October after the UAW reached agreements with the Big 3.
1. Market shift takes toll on the transportation industry
The closure of thousands of small and medium-sized carriers and brokerages showcased the disruptions within the industry. According to the Federal Motor Carriers Association, more than 1,500 freight brokers closed in 2023. The closures were due to the pressure of low margins, fluctuations in demand and supply, and technological advancements.
One of the most newsworthy events in the trucking industry this year was the closure of Convoy, a digital freight network that was a leader in technological innovation. Convoy’s business model relied heavily on funding and lacked long-term foresight and adaptability to a volatile industry. As a result, Convoy was unable to sustain its growth and profitability, which ultimately led to the business closing.
Another major story in the trucking industry was the bankruptcy of Yellow Corporation, a less-than-truckload (LTL) company that was one of the largest carriers in the United States. The company faced significant challenges, ultimately leading to its financial downfall. In February 2023, Yellow Corp. declared bankruptcy, citing a debt load of $1.4 billion and a pension liability of $1.2 billion.
The acquisition of U.S. Xpress Enterprises and Knight-Swift Transportation was announced in March 2023 and completed in July 2023, the valuation was approximately $808 million. By acquiring U.S Xpress, Knight-Swift added one of the largest companies in the industry. Knight-Swift gained access to 14 facilities and U.S. Xpress’s customer base. Before its acquisition, U.S. Xpress Enterprises was a significant player, generating $2.2 billion in total operating revenue in 2022. However, the company had approximately $96 million in outstanding borrowings and $388 million in other long-term debt.
Listen to our recent Shifting Gears podcast episode, Top 10 Supply Chain and Logistics Stories of 2023, where we discuss these stories in more detail and share our insights and opinions. Curious about what’s next for 2024? Don’t miss our 2024 Outlook, where we share our predictions for the future of logistics!