Supply Chain & Logistics Rewind 2024 ⏪

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The year 2024 once again put the resilience of supply chains to the test, both globally and within the United States. From natural disasters to man-made disruptions, the interconnected systems that keep goods moving encountered unprecedented challenges. Sudden strikes, infrastructure failures, shifting trade dynamics, a hotly contested election, and an end-of-year policy shocker — 2024 had it all, pushing supply chains to adapt in the face of relentless pressure.

In this round-up, we delve into the key moments that shaped supply chains and logistics in 2024.

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1. The US Port Strike 

In October 2024, the International Longshoremen's Association (ILA) took to the picket lines for the first time in nearly 50 years, halting operations at 36 major ports along the East and Gulf coasts. 

Over 46,000 longshoremen walked off the job, disrupting supply chains and triggering significant economic fallout. Usually, it’s the West Coast’s International Longshore and Warehouse Union (ILWU) that dominates strike headlines, but this time, the ILA made its move.

The strike focused on two key issues: wages and automation. The ILA demanded a $5-an-hour annual raise over six years, amounting to a 77% wage increase. Workers earning up to $39 an hour argued that their pandemic-era contributions justified the increase. However, their concerns went beyond paychecks.

The union also stood firm against port automation, seeking contractual guarantees to block automated systems they feared would replace human jobs.

The strike began on October 1, 2024, and ended three days later, on October 3, 2024, when the ILA and the U.S. Maritime Alliance (USMX) reached a tentative agreement. The deal secured a 62% wage increase over six years—less than the union’s original demand but far exceeding earlier USMX offers. While the wage issue was resolved, automation remains a flashpoint. Both sides agreed to extend the Master Contract until January 15, 2025, to allow more time for negotiations.

Analysts estimated that a prolonged strike could have cost the U.S. economy $2.1 billion in its first week alone. The strike's timing, just before the holiday season, heightened concerns about supply chain disruptions. Many retailers, however, had anticipated potential labor unrest and brought in their holiday inventory months earlier to avoid delays.

2. Baltimore bridge collapse 

On March 26, 2024, tragedy struck in Baltimore when the Francis Scott Key Bridge collapsed after the container ship Dali collided with one of its support piers. The accident claimed six lives and caused widespread disruptions to logistics networks on the East Coast, including the temporary closure of the Port of Baltimore.

The Port of Baltimore is a critical hub for handling automobiles in the United States. For 13 consecutive years, it has been the nation’s leader in processing automobiles and light trucks, managing 847,158 vehicles in 2023 alone. Automakers like Stellantis, GM, and Toyota depend heavily on the port for efficient import and export operations. The bridge collapse forced these companies to reroute shipments to ports like Norfolk and Charleston, resulting in weeks-long delays for vehicle deliveries and increasing costs in already strained supply chains.

While the port handles only about 3% of the container volume on the East and Gulf Coasts, its importance goes far beyond containers. It is the second-largest hub for U.S. coal exports, managing 28 million tons in 2023, which accounted for 28% of the nation’s total coal exports. The collapse caused Baltimore Harbor’s coal export market share to drop sharply, from 24% in April 2023 to just 0.7% in the same month this year.

3. Fissures emerged in China’s manufacturing sector

For decades, the “Made in China” label has epitomized global manufacturing dominance, but recent developments indicate cracks forming in its stronghold. In the first half of 2024, Chinese exports to the US dropped by nearly 12%, signaling growing challenges for the world’s largest manufacturing hub.

The pressures on China’s manufacturing sector are multifaceted. Over the past decade, wages have risen by an average of 8% annually, eroding the cost advantage that made China a preferred destination for production. Energy shortages in 2024 disrupted operations in key industrial regions such as Guangdong, while U.S. tariffs — imposed in 2018 and averaging 20% on Chinese goods — have further reduced competitiveness, encouraging businesses to look elsewhere for manufacturing solutions.

This slowdown has significant implications for global supply chains. Industries heavily reliant on Chinese production, including electronics, automotive, and industrial machinery, are grappling with delays and increased costs. Semiconductor shortages tied to production bottlenecks in China have created ripple effects across sectors, delaying the delivery of critical products such as smartphones and automobiles.

In response, alternative manufacturing hubs are emerging. Vietnam’s manufacturing exports increased by 16% in 2024, driven by investments from major corporations like Samsung and Apple. India, supported by government incentives such as the Production-Linked Incentive (PLI) scheme, grew its share of global manufacturing to 3.5%. Similarly, Mexico, capitalizing on nearshoring trends and proximity to the United States, saw an 18% rise in manufacturing exports, particularly in the automotive and electronics sectors.

4. DSV to become the largest Logistics firm with DB Schenker acquisition

This year, DSV continued its shopping spree by acquiring DB Schenker, the logistics arm of Deutsche Bahn, for €14.3 billion ($15.9 billion). Pending regulatory approval, the acquisition, which is expected to close in mid-2025, will make DSV the largest logistics company globally, surpassing competitors like DHL and Kuehne+Nagel.

This all-cash deal will nearly double DSV's annual revenue to €39 billion, significantly expanding its market share in the highly fragmented global logistics industry. With the integration of DB Schenker's operations, DSV's workforce will grow to 147,000 employees, up from its current 75,000, strengthening its capabilities across air, sea, and road freight, as well as warehousing and supply chain management services.

DB Schenker brings a strong global presence, particularly in Europe, where it has been a dominant player. This acquisition also increased DSV's estimated global market share by 6-7%, a notable jump in an industry where no single firm has commanded over 10%.

This deal continues DSV’s strategy of growth through acquisitions, following its $4.6 billion purchase of Panalpina in 2019 and the $4.2 billion acquisition of Agility’s Global Integrated Logistics in 2021.

5. Hurricane Helene and Milton’s dual attack 

Natural disasters disrupting supply chains are nothing new. But what’s unheard of is back-to-back calamities wreaking havoc on human life, manufacturing, and global logistics. Unfortunately, this is exactly what happened in 2024, as Hurricanes Helene and Milton tore through critical regions, leaving supply chains broken. 

Hurricane Helene, a Category 4 hurricane, struck the southeastern U.S. in September with winds of 140 mph and catastrophic flooding. Georgia’s agriculture sector suffered over $6.88 billion in losses, with cotton farmers losing up to half their crops and poultry operations incurring $683 million in damages.

In North Carolina, flooding forced the closure of Baxter International’s plant, which produces 60% of the nation’s IV fluids. This triggered a nationwide shortage that delayed surgeries and strained healthcare systems.

The storm’s impact rippled into the technology sector, with flooding in Spruce Pine, North Carolina—home to 90% of the world’s ultra-pure quartz—halting production. This disruption threatened further delays in semiconductor manufacturing, a cornerstone for industries like electronics and automotive. Port closures at Tampa Bay and Canaveral, lasting up to six days, exacerbated delays in shipments of critical goods.

Hurricane Milton, which struck the Gulf Coast in October, compounded these challenges. Offshore oil production dropped by 1.4 million barrels per day as rigs and refineries shut down, spiking fuel prices. The Port of Houston’s four-day closure caused logistical bottlenecks, particularly for petrochemicals and freight.

6. Trump’s tariffs

President-elect Donald Trump loves tariffs, a love affair he has had qualms about publicly announcing it. In fact, he says it is his favorite word in the English language. Thanks to constant mentions, Google searches for "Trump’s tariff plan" have surged by over 1,650%, and queries about "who pays tariffs" have increased by 350%, reflecting widespread curiosity about the implications of Trump's trade policies.

In his previous term, Trump initiated a trade war with China by imposing a 25% tariff on $50 billion worth of Chinese goods. The tariffs, which started at 10%, targeted sectors such as technology and machinery to address trade imbalances and intellectual property concerns. The tariffs eventually covered $360 billion in imports. 

In his current campaign, Trump had proposed even more aggressive measures. He plans to implement an additional 10% tariff on all existing tariffs for imports from China, aiming to reduce dependence on Chinese goods and bolster domestic manufacturing. 

Additionally, he has announced a 25% tariff on imports from Canada and Mexico, citing issues like illegal immigration and the need to protect American industries. The European Union is also in its sights; Trump has warned that unless the EU reduces its trade deficit with the U.S. and increases purchases of American oil and gas, European goods could be expected 10% and 20% tariffs. 

7. The crisis in the Red Sea continues 

The Red Sea crisis, which erupted in October 2023, has continued to disrupt global supply chains well into 2024. Houthi rebel attacks on cargo ships turned one of the world’s most critical maritime trade routes into a conflict zone, forcing shipping companies to reroute vessels and significantly increasing costs for industries worldwide.

As attacks intensified, over 350 container ships bypassed the Suez Canal between December 2023 and January 2024, opting instead for the longer and costlier route around the Cape of Good Hope. This detour added approximately 4,000 miles and up to 12 days to each journey, inflating shipping costs by 20-30%. The International Monetary Fund reported a 50% drop in trade through the Suez Canal during the crisis's peak, disrupting supply chains across sectors.

The impact was particularly acute for time-sensitive industries like fashion. For example, Inditex, the parent company of Zara, turned to air freight from India to maintain its fast-fashion operations. While this ensured timely deliveries, the shift increased logistics costs by 40%, squeezing profit margins.

The Shanghai Containerized Freight Index, a key measure of shipping costs, doubled in early 2024, with rates stabilizing later but still 115% above pre-pandemic levels. European ports also struggled, with vessel traffic through the Suez Canal down 49% by September, leading to delays in dock operations and product deliveries.

8. Warehouse vacancy rose to record highs 

The demand for warehouse space, which surged during the pandemic, has cooled off significantly in 2024. Once a coveted asset for businesses racing to meet skyrocketing e-commerce orders, warehouse real estate is now grappling with rising vacancy rates and slowing demand. Vacancy rates reached 6.4% in October 2024, up from just 4.6% a year earlier and marking the highest level since 2014.

During the pandemic, companies like Amazon, Walmart, and Target went on a warehouse shopping spree. Amazon alone added over 100 million square feet of warehouse space in 2021, while Walmart built 11 new facilities between 2020 and 2021. By 2022, the U.S. saw a record 689.4 million square feet of new warehouse construction.

However, the demand that fueled this boom has softened as e-commerce growth normalizes. In 2024, 113.3 million square feet of new warehouse space was completed, but 70% of it remains vacant, according to JLL. In key markets like the Inland Empire and Chicago, vacancy rates have surged to 9% and 6.8%, respectively, as developers struggle to lease newly built facilities.

Adding to the slowdown are rising interest rates, which have made financing new construction more expensive. Total warehouse projects in 2024 dropped 43%, marking the steepest decline since 2008. Meanwhile, companies like Amazon and Home Depot are subleasing millions of square feet, contributing to a record 199 million square feet of available sublease space.

While 2024 presents challenges, experts remain optimistic about the long-term prospects. E-commerce sales grew by 9.1% in Q2 2024, and with demand for strategic warehouse locations expected to rebound, vacancy rates could drop below 4% by mid-2025, signaling a potential market recovery.

9. Lineage’s stellar IPO performance 

Lineage Logistics, the world’s largest temperature-controlled warehouse operator, solidified its dominance with the largest U.S. IPO of 2024, raising $4.4 billion and achieving a valuation of over $18 billion. Starting in 2008 with a single warehouse in Seattle, the company now operates more than 480 facilities across 19 countries, serving 13,000 customers and controlling 8% of the global cold storage market.

So, how did Lineage grow from a small operation to a global powerhouse? The answer lies in its acquisition-driven strategy. Over the past decade, Lineage has completed more than 80 acquisitions, enabling it to rapidly expand its infrastructure and market presence. Recent deals, such as Luik Natie and Eurofrigor, have bolstered its footprint in Europe, solidifying its position in the fragmented cold storage industry.

Lineage’s unmatched network supports critical supply chains for food and pharmaceuticals, ensuring seamless operations for major manufacturers, distributors, and retailers. The company’s ability to anticipate market demands and execute strategic growth initiatives has made it an indispensable player in global logistics, transforming it into the go-to solution for temperature-sensitive storage and distribution.

10. Mexico imposed new textile tariffs

The holiday season is a time for joy, but this year, it brought challenges for many U.S. e-commerce businesses — courtesy of Mexico.

On December 19, 2024, Mexican President Claudia Sheinbaum introduced a policy that could potentially affect many U.S. e-commerce companies. 

These companies imported goods from China into Mexico under the IMMEX program, which allows duty-free temporary imports for processing or assembly. From there, in warehouses near the border, the goods were repackaged as individual items and sent to U.S. customers without any tariff. Thanks to Section 321 of U.S. customs law, individual shipments valued under $800 are permitted to enter the U.S. tariff-free.

The strategic reliance on this process was no accident. By operating out of Mexican warehouses, businesses benefited from Mexico’s lower labor costs, proximity to the U.S., and tariff-free shipping. This combination not only reduced costs but also allowed companies to deliver quickly and efficiently, providing U.S. customers with a seamless shopping experience. 

But all of this could change now. The new decree raises tariffs on 121 apparel items to 35% and excludes finished textiles and clothing (classified under HTS Chapters 61, 62, and 63) from IMMEX eligibility. Effective immediately, it also applies to goods in transit, forcing companies to reevaluate their logistics strategies.

Mexico’s position as the U.S.’s largest trading partner—accounting for $200 billion in trade in Q1 2024—makes this shift even more significant. While the policy aims to boost domestic manufacturing and job creation in Mexico, it creates new challenges for U.S. businesses navigating a shifting trade landscape.

This newsletter was written by Shyam Gowtham

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