Before the pandemic, fluctuations in shipping based on the time of year were pretty predictable. Then, COVID-19 sparked higher demand for shipping services, increasing the length and intensity of peak shipping season.
Freight forwarders, traders, and shippers are worried things are about to get worse: The new xChange Industry Pulse Survey from Container xChange reports that 51% expect the peak shipping season to be even more chaotic than last year, and 22% anticipate the same level of chaos. Target Corp. executives, meanwhile, forecast $1 billion of higher-than-expected freight expenses this year, and don’t see supply chain pressures lessening until 2023.
With the war in Ukraine contributing to widespread disruption, port congestion worsening in some locations, and staff shortages at trucking companies and railroads, apprehension is warranted. It’s now expected that the peak season will begin at the end of June this year, rather than July or August.
So, what’s going on, and why? And what’s being done to prevent pandemonium?
When are typical peak shipping seasons?
Freight shipping is typically divided into four transportation seasons: The quiet season, from January to March; the produce season, from April to July; the peak shipping season, from August to October; and the holiday shipping season, from November to December.
Peak season is the busiest every year: Demand spikes and freight volumes are high due to back-to-school time, the flood of seasonal products, prep for the holiday season (and making room for winter inventory), and overlap with the produce season.
Why might peak shipping season start early this year?
This year, freight forwarders, traders, and shippers anticipate that shipping season will begin toward the end of June this year, in large part to avoid the risk of delays.
Although some ports have worked through their backlog, many are still swamped and struggling to keep up with the butterfly effect of delays and other issues from the beginning of the pandemic. East Coast ports, particularly, are experiencing high levels of congestion, while warehouses and container yards are full, and workers and equipment are in short supply at trucking companies and railroads.
Additionally, COVID-19 lockdowns in critical Chinese ports and the Russia-Ukraine conflict have slowed the supply chain worldwide and dashed expectations for recovery, according to Christian Roeloffs, co-founder and CEO of Container xChange.
The xChange Industry Pulse Survey found that 58% of respondents said lockdowns at Shanghai ports have made it difficult to produce or ship as many products as planned. And Roeloffs notes that when lockdown restrictions lift, companies may start “panic shipping” in an effort to be on time for the peak season.
Despite these issues, there are some who believe peak season may not be as bad as the headlines forecast. A recent shift in consumer spending habits from goods to services could ease shipping needs and free up space to more quickly move products to final destinations.
What’s being done to prevent backups?
For better or worse, recent experience has helped prepare the industry to tackle the ongoing mayhem.
To mitigate added challenges in fulfilling customer demand, companies have been stocking up and carrying more inventory on their balance sheets. Kodak, for example, now holds enough inventory for six months, compared with the usual three months. Olaplex, too, increased supply holdings to cover six to seven months of inventory, up from four to five months. This leads to full warehouses but, hopefully, will also reduce reliance on new shipments during peak season.
After the last few years of disruption and uncertainty, port officials say they have overhauled operations to cope with congestion before it gets out of hand. This has involved extending operating hours to handle more containers, setting up pop-up container yards to store overflow, and improving communication throughout the supply chain to better anticipate cargo needs.
And with consumers spending more on services than products, the slowdown in imports could give ports the opportunity to catch up on the backlog and streamline container-ship unloading. Container xChange’s Roeloffs also notes that various GDP forecasts, purchasing managers’ indexes, inflation, and declining consumer confidence indicate there could be a dropoff in spending, helping offset sudden cargo rushes from China.
Be prepared no matter what
We said it last year, and we’ll say it again: Always be prepared for uncertainty.
Everyone is feeling the squeeze from inflation and high gas prices — plan for how this will impact you, and stay flexible as things develop. Find opportunities to optimize performance now before peak season hits. Know your deadlines, anticipate demand and capacity, book in advance when possible, and increase communication with your logistics partners.
No matter what peak season looks like this year, having the right partners on your side can help you mitigate delays and scale up without taking on huge investments in technology and infrastructure.