Trucking Faces Pressure to Prepare for Holidays Early
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Supply chain pressures are forcing trucking to get an early start to the holiday shipping season despite a shift of underlying conditions within the industry.
“You already had last year a practice of attempting to advance orders and advance shipping to get ahead of congestion earlier than would have been the norm seasonally before the pandemic,” Paul Bingham, transportation consulting director at S&P Global Market Intelligence, told Transport Topics. “So that practice is now embedded in the minds of shippers.”
Bingham added congestion and supply chain capacity problems remained an assumption going into this year. Because of that, companies were expected to follow a similar pattern absent some dramatic change in demand.
Bingham
“The risks didn’t seem to go down in the minds of many people managing supply chains,” Bingham said. “One of the ways to try to get a handle on that supply chain risk, where you still feel that you have some time, is to incur the inventory carrying costs of advancing those shipments.”
DHL Express released its annual midyear survey of small and medium-size enterprises May 19. It found that while the coronavirus is no longer a major concern, there still is an expectation of supply chain challenges and delays.
Hewitt
“I think that probably the biggest piece that came out of the survey around the holiday planning period here would be that supply chain challenges just aren’t going away,” DHL Express U.S. CEO Greg Hewitt told TT. “Most people were believing and were planning that there was still going to be significant challenges through the balance of this year, and as such they needed to plan maybe a little bit earlier than they have in the past.”
The DHL survey found 61% of respondents said supply chain delays will be their biggest challenge for the rest of the year, up from the 54% last year. The majority (65%) are planning earlier for the holidays this year because of expected supply chain delays.
Anderson
“We’ve always advised customers to consider their holiday shipping schedule well ahead of time, but it’s especially important now with so many variables impacting the current economy,” Dennis Anderson, chief customer officer at ArcBest, told TT. “We’re working with shippers to plan even earlier this year and help build flexibility into their supply chain by leveraging different modes of transportation — or even different ports of entry — to avoid bottlenecks.
“We stay focused on facilitating better communication and visibility between supply chain participants, too, which is critical to avoiding delays.”
ArcBest ranks No. 14 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
DHL still is in its preparation and discussions phase, and has not yet seen holiday volumes in its network. Hewitt also doesn’t anticipate warehouse or network capacity issues or conflict with school supply shipments when those volumes arrive.
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“When we saw the shutdowns that were COVID-related in Shanghai and Shenzhen bridge, we saw dramatic reduction in volume coming our way,” Hewitt said. “Now with those opening up, it has come back. But I don’t think it’s come back with the same high levels that we anticipated given the length of time of the shutdown.”
Hewitt noted he hasn’t heard that space and capacity is an issue for them, either. He suggested a bigger question may be: Is the overall global economic climate indicating that there won’t be as big a peak this year because there is less demand?
“As we ramp up for the holiday shipping season, one area that’s become essential is the availability of trailers,” Julie Van de Kamp, senior vice president of sales at U.S. Xpress Enterprises, told TT. “These assets have become more valuable in recent months, and better understanding shippers’ trailer needs for peak and then positioning the right equipment in the most efficient manner is vital.
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“In addition to proper asset identification, for the upcoming holiday shipping season, we’re planning early and forecasting demand and supply through the end of the year.”
U.S. Xpress ranks No. 23 on the for-hire TT100.
Bingham points out individual companies have to take into account their own capacity limits. Purchasing in advance could be an early but slow ramp up. He also noted some companies may not have to order as much because they still have holiday supplies in warehouses that were late arriving last year.
“I would say what’s happened now that we’re in July is that conditions have changed for some of those retailers appreciably,” Bingham said. “One of those I’d identify are the fuel costs. So that has changed some of the calculus on the transportation rates themselves.”
He added there also have been reports of some reductions in overall demand. That has been seen in the spot market with truckload rate declines. Bingham indicated another factor is increased interest rates that have driven up the cost of capital.
