The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
By Robert Reiter, CEO, DHL Global Forwarding USA
In the 1996 Christmas movie classic, “Jingle All The Way,” Arnold Schwarzenegger’s mattress salesman, Howard Langston, faces off against a rival dad in a desperate race to find a Turbo Man toy that has all but sold out on Christmas Eve.
While many of us could likely relate to the regret of leaving our holiday shopping until the last minute and the panic of trying to secure something suitable for our loved ones, it’s highly unlikely that those working in retail supply chains can relate to this scenario in their professional lives. The peak shopping season – which for most markets takes place in the last three to four months of the calendar year – is often the defining, “make-or-break” period for retailers.
Having the right inventory in place at the right time and in the right quantities has become a meticulous planning exercise that begins months – even a year – in advance. And while the peaks of recent years have varied in length and scale, retailers have typically done a solid job of ensuring that their own “Turbo Men” were ready and available to meet demand.
This year could be the exception.
An important thing to note is that the peak shopping season is always, logically, preceded by a peak shipping season. Or in most cases, two – as the bulk of inventory is shipped by ocean between August and October, and higher-value and more urgent (or unexpectedly popular) stock is shipped by air from mid-September onward.
This year, with retailers in the U.S. already running down their inventory levels and enjoying spare warehousing capacity, looking to capitalize on a (short-lived) drop in freight rates, and bringing their orders forward to avoid potential disruption from U.S. East Coast port labor negotiations and the risk of increased China tariffs after the November elections, we have seen a surge in ocean freight volumes.
All indications are that the ocean freight peak season came two months earlier than usual in 2024. And with ocean rates spiking due to the increased demand and ongoing capacity issues caused by continued threats to carriers transiting the Red Sea and port congestion in Asia, the outlook for those who haven’t yet brought in their inventory for this year’s holiday season is challenging.
The airfreight market, already overbooked with e-commerce volumes out of Asia Pacific, is unlikely to offer much respite.
So for any retailer who was unable to get ahead of the early shipping peak, what are the options?
There is some good news: Since the pandemic, the supply chain industry has become highly adept at navigating unexpected surges and disruptions in trade flows. If you are able to ship today, it is likely that some of the worst-case scenarios for disruption will not transpire – or at least, that your logistics providers will be putting contingencies and creative solutions in place to navigate around them.
Examples of this include routing cargo around ports that may be impacted and combining modes – such as sea and air – to bypass high-risk areas or bottlenecks.
Another positive is that technology has advanced significantly, and more logistics providers can give you visibility on cargo flows and events that allows you to react in real time. Advancements in AI and real-time data analytics are revolutionizing how estimated arrival time is calculated, for example, considering a broader range of variables, from weather conditions to vehicle performance, to provide more accurate predictions that support planning.
This particularly favors retailers who make their own data, including lead times and forecasts, readily available to their suppliers. Working with partners who offer an end-to-end logistics solution – ideally across multiple geographical regions – and have advanced technology in place can allow you to switch, adapt and recalibrate your inventory flows more readily than trying to link individual segments, which is more rigid and makes your supply chain only as strong as the weakest (or most vulnerable to disruption) link.
Alongside the good news, there is also some need for pragmatism: You may have to prioritize inventory and budget for premium freight, when necessary.
For your most important cargo – your most in-demand products and your high-value goods – consider minimizing the risk of stockouts by utilizing the transportation options that offer better access to capacity or shorter transit times. Intermodal services, for example, can offer significant transit time reductions and may in some cases have guaranteed space already booked with air and ocean carriers. Less-than-containerload (LCL) shipping, while more expensive than full container loads, often enjoys priority with ocean carriers.
There are other levers – such as pricing, promotions and even sourcing from alternate manufacturing locations – that retailers themselves control that may allow them to manage the movement of inventory to and off the shelf and to maximize the profits from the holiday season.
Perhaps the most reassuring news of all is that, while peak season has come early in 2024, the supply chain is better positioned than ever to manage the unexpected. There is still an opportunity to act now and to ensure your products are there for your customers, whether they are themselves moving early to complete their holiday shopping or rushing to find your products at the very last minute.