Shed the Dead Freight Weight & Reach Your Peak Season Performance!

Shed the Dead Freight Weight & Reach Your Peak Season Performance!

This is a guest post written by our partner Shapiro.

Back in the day, the forefathers (and foremothers) of our industry coined the term “peak season” to represent the infamous months between August and October, when shipping volumes spiked ahead of the holiday season, thereby creating a Bermuda Triangle-like effect for global supply chains.

In recent years, we have added a second peak season… oh, the joy!   Now, we experience a volume surge right before Chinese New Year, typically in January-February, and the requisite two-week suspension of manufacturing.

Luckily, most of us still are fortunate enough to be enjoying our summer holiday; and we remain blissfully unaware of the upcoming hurdles and utter chaos that may be waiting for us just around the corner.

We hate to be the bearer of bad news, but the dog days of summer are now upon us. Which means now is as good a time as any to check the mirror for any blind spots and to ensure your business is in peak condition for the upcoming season!

So, we encourage you to set down your glass of lemonade for just a moment and refresh your memory on the “Four Horsemen” of the holiday season:

 When do I need to be in “ship-shape condition”?

Typically, shippers target the top shopping days of each holiday and ensure cargo is on the water (or in the air) early enough to account for sailing time, port congestion, domestic drayage, and delivery—which is referred to as the “ship by date.”

Though the specific timeline depends on the commodity, marketplace, trade lane, etc., pre-pandemic cargo was normally shipped at least 6 weeks before the actual holiday. However, shipping windows required 10-12 weeks in 2020 and 2021.

For Chinese New Year (CNY), it’s not so much a “ship by date” as it is making sure your cargo exports before China shuts down for the holiday. Pre-COVID it was for about 10 days and it remained relatively consistent in factory and port schedules, but in 2021 and 2022 we saw longer CNY shutdowns due to the Chinese government’s strict quarantine restrictions which led to prolonged factory closures and trucker shortages as Chinese nationals traveled home.

It’s a little too early to say whether we’ll see a similar pattern in 2023—but if the Shanghai Shutdown is any indication, it’s safe to say that CNY will last a little longer than in the days of yesteryear.

When did things stop “working out”?

Without writing a dissertation—and avoiding any wild speculations or conspiracy theories—the shift to “earlier” peaks was the result of a series of disruptions of epic proportion that occurred over the course of the COVID pandemic:

March 2020 – July 2021: No End to the Madness

As the pandemic ran rampant and vaccines were not fully accessible, global consumers, confined to the walls of their homes, found themselves with a higher percentage of disposable income. Demand for consumable goods spiked to record-breaking levels and orders began to grow larger and came at a higher frequency.

More shipments = more equipment needs and less capacity. The longer it went and the larger the needs grew, the more vulnerable our global supply chain got and the more congested everything seemed.

If that wasn’t complicated enough, add something like the Evergiven blocking the Suez Canal—which 12% of world trade passes through—or the largest port in Mainland China, Yantian, shutting down due to a COVID outbreak into the mix, and you are teetering into an unchartered territory of chaos.

July 2021 – March 2022: Continued Chaos from Congestion

As vaccines were administered, life started to “normalize”. Domestic travel in the US, Canada, UK, and the EU increased as people felt more comfortable being around, well, other people once again.

Instead of spending money in an act of boredom, global consumers—still confounded by the loss of the “holiday” the year before—spared no expense when it came to celebrating their loved ones. Hence, demand did not soften through the 2021 holiday season.

In continuation of complications stated above, congestion was the worst it’s ever been. Remember when LA/LB had 109 vessels waiting to berth? Or the three-week wait for load pickups at Felixstowe and Rotterdam as clogged inland waterways slowed the onward movement of cargo…?

What factors should you “weigh in” ahead of time?

Well, there’s a couple.

Probably the biggest is the recent shift in shopping patterns, as consumers begin to spend less on non-essential goods and instead, on things like gas and groceries due to a 40-year high inflation rate. In fact, it’s gotten so bad that it’s overtaken both the war in Ukraine and accessibility of healthcare as the number 1 concern in all of Europe.

Signs tell us that inflation and consumer behavior will have a severe impact on demand, but we also know it’ll have a delayed effect. At this point, it’s difficult to imagine that global supply chain will feel its impact right away. But this could also mean consumers will be more inclined to purchase products even earlier to avoid the sting of potential future price hikes.

Chart 1: Current Inflation Rate by Country %

Chart 2: Top Concerns of European Consumers Reported by Country (%)

Our second point has to do with the unprecedented number of retailers, globally, who have overstocked inventories. When COVID reared its big, ugly head, the classic inventory strategy of ‘just in time’ shipping became increasingly problematic when coupled with severe congestion and lengthy delays. The idea of ‘just in case’ shipping, or ordering more products than expecting to sell, quickly spread; and it became particularly useful during the 2021 holiday shopping season.

Unfortunately, inventory management actions have a delayed secondary effect—so when the market cools, as it recently has, retailers are stuck with excess inventory of unprecedented levels, which becomes increasingly more expensive to stock.

And finally, let’s talk congestion…domestic delays are still far from being resolved from Savannah to Antwerp. Between chassis shortages in the US and the increasingly strained intermodal schedules across Europe, it appears the world is stuck in an unending and vicious cycle of logistical challenges that are seemingly impervious to slowing import volumes and rapidly worsening economic conditions.

There are multiple factors at play, but the one most crucial in Europe are delays at intermodal terminals, barges and rail in particular.

Intermodal services are vital links to having supply chain efficiency in Europe, as they serve as the means to get containers to inland terminals for distribution-whether by road, rail, or waterway. For example, barge wait times remain far above pre-COVID levels in Rotterdam, Antwerp, and Southampton at 56, 50, and 49 hours, respectively.

WWSD: What Would Shapiro Do?

What’s Shapiro’s advice for dealing with the volatile and absolutely bat-ship crazy world in which we live? Take a chill pill; and find a way to make that summertime lemonade out of bittersweet lemons year-round.

Also, make sure you have the right supply chain partner in your corner that not only survives in times of chaos, but also thrives. Now’s the time to put stock in remaining connected, informed and up to date on the conditions impacting your business, both domestically and internationally.

At the end of the day, the truth is that no one can predict the future. But with a little “buff”-er time and the right motivation, you’ll be in peak performance no matter the season!

Chart 2 – Reference Data: