Craig Fuller, Founder and CEO of FreightWaves, discusses the impact of recent attacks by Yemen-based Houthi rebels on commercial vessels in the Red Sea. He also talks about the broader logistics landscape, including the rise and fall of digital freight brokerages, and the 2023 'bloodbath' for trucking firms.
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Quick takeaways
Recent attacks by Yemen rebels in the Red Sea have disrupted global supply chains and impacted trade and shipping lanes.
Concerns arise regarding the capacity of the US Navy to protect trade routes amidst geopolitical tensions and increasing protectionism.
Freight tech companies faced challenges in disrupting the trucking industry due to its cyclical nature and price sensitivity, relying on managing desirable freight and human involvement in handling exceptions.
Deep dives
Supply chain disruptions due to Yemen rebels in Red Sea
Supply chain disruptions have reemerged due to attacks by Yemen rebels in the Red Sea, impacting trade and shipping lanes. Container rates have started to increase, causing concerns and impacting the availability of shipping routes. The attacks involve the use of missiles and military-grade technology, posing a new challenge to global trade. The disruptions primarily affect container flows, with products from Asia, specifically China, being shipped to Europe. Alternative routes such as going around South Africa increase costs and lead times.
The historical role of the US Navy in securing trade routes
The US Navy historically played a crucial role in protecting trade routes and ensuring global trade. With the largest navy in the world, the US Navy could reach any place on the planet to safeguard commerce. It protected the sea from pirates and state sponsors that threatened global trade. However, due to geopolitical tensions and increasing protectionism, there are concerns about the resources available for the US Navy to protect all aspects of trade. The changing global trade landscape raises questions about the effectiveness and capacity of the US Navy in maintaining safe trade routes.
The challenges faced by freight tech companies in the trucking industry
Freight tech companies aimed to disrupt the trucking industry by leveraging technology and software solutions to optimize efficiency. However, the trucking industry proved challenging to disrupt due to its cyclical nature and the fungibility of capacity. The companies underestimated the boom and bust cycles inherent in the industry, leading to financial struggles. The capacity in the trucking market is highly flexible and price-sensitive, making it difficult for tech companies to compete solely on the basis of lower prices. Ultimately, the success of freight tech companies relied on acquiring and managing desirable freight that could be electronically managed, while human involvement remained crucial in handling exceptions and undesirable freight.
The cyclical nature of the trucking industry and the outlook for 2024
The trucking industry experienced a challenging period in 2023, with an excess of capacity and intense competition leading to lower rates and financial strain. However, the outlook for 2024 suggests that the industry may have reached the bottom. While individual players may still face difficulties due to their balance sheets, the industry as a whole is expected to improve. As excess capacity bleeds off and manufacturing and reshoring efforts drive increased freight demand, improving economic conditions and tightening credit standards will contribute to a recovery in the industry. While challenges and cycles persist, there is potential for growth and improved conditions for carriers in the coming years.
The prevalence and role of private airports in the United States
The United States is home to a significant number of private airports, with over 19,000 in total. Many of these airports are privately owned or community-owned and support various industries such as agriculture and mining. Private airports primarily serve smaller aircraft and often play a role in supporting farming and extraction activities. While the majority of airports are unassuming grass fields or smaller runways, their importance in facilitating transportation and trade should not be underestimated. Private airports outnumber established businesses like McDonald's, highlighting their prevalence and significance in the US aviation landscape.
A string of recent attacks by Yemen-based Houthi rebels on commercial vessels transiting the Red Sea to the Suez Canal have forced global shippers to once again shift how they transport goods. It's just the latest in a multi-year string of disruptions to global supply chains. It also comes just as pandemic-era supply chain stress seemed to be in the rearview mirror. So what is the geopolitical and economic impact of this latest disruption? In this episode, we speak with Craig Fuller, founder and CEO of FreightWaves, about the impact of the attacks. We also talk about the broader logistics landscape, including the rise and fall of digital freight brokerages, and the 2023 "bloodbath" for trucking firms.
