Record-hot summer comes to an end as peak season heats up
Greetings everyone,
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With summer behind us in the Northern Hemisphere, it’s time to focus on peak season strategies. But hang on, how did peak season creep up so fast this year?
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We’ll examine the reasons behind the earlier and shorter peak season that’s whipping logistics into a frenzy this autumn, how the post-covid logistics demand slump is causing a vast reshuffling of e-commerce logistics holding, plus other factors around the world that slowed and growed logistics this past month.
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Let’s dive into August!
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What’s happening in the freight market?
US growth and easing inflation are driving demand, and air and ocean freight volumes have both grown accordingly.?
Relatively speaking, things are going better than expected. Ocean freight demand has been fairly strong, and air freight demand has risen overall in the global market.?
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Record temps in August posed problems for supply chains
What effect do extreme heatwaves have on global supply chains? Mostly, they trigger power outages, damage worker productivity, and ruin crops…. But that’s not the limit to the effects a heat wave can have on manufacturing and shipping.
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It was a huge public health issue, and naturally very disruptive to manufacturing and logistics. Many factories don't have AC, which becomes dangerous and uncomfortable for workers.?
Dangerous working conditions due to unseasonal heatwaves are becoming increasingly common worldwide. The issue is particularly stark in places like India, epicenters of the world textile trade, where factory conditions are often poor.
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Additionally, many cities across Europe and the Americas hit record-high temperatures this summer, leading to drought, wildfires, and crop issues.?
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What’s your peak promotion plan this year?
Peak season has followed the YOY trend of moving earlier and flattening.??
During the pandemic, people were frustrated about not receiving their gifts in time for the holidays. As a result, the trend is now to order much earlier and choose cheaper, slower shipping. The US postal service demand for priority shipping dropped more than 40 percent this quarter, while demand for low-cost shipping options has risen.
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How does this affect e-commerce retailers? The last shipping dates are moving further back. Depending on the type of merchandise, some list the furthest shipping date on which customers can order their goods and get them before Christmas in October.?
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Why are shippers shipping early and going cheap? Probably to take advantage of low freight costs while they can. International carriers ie UPS and FedEx announced mid-July their peak-season surcharges, some of which kick in at the tail end of September.
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Plus, several important global supply factors will make shipping more expensive in the coming months…as you know, Red Sea rerouting continues to be an issue, though other uncontrollable factors like extreme weather events are likely to subside as we move into the fall season in the northern hemisphere.?
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The impending US East Coast strike has shippers reshuffling plans for fall
Another impending event set to make a big splash for global shippers is the predicted October 1 strikes for East Coast port workers.?
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In case you haven’t been keeping up with the news, the port workers are fighting the current contract on automation in East Coast ports. The current documentation states that fully automated terminals will not be put in place- effectively canceling out many labor jobs in the terminals- but those agreements are no longer effective for the workers.?
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Unfortunately, the labor union leaders and the port authorities are still not talking. As the deadline for renewal on the current contract grows nearer(October 1), so does the probability of a strike.?
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Shippers are worried that this strike could be a long, drawn-out affair. And with US elections coming up in November, it seems unlikely that the white house will make any moves to quell any impending work to rule.?
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What’s happening in China?
China’s economic situation is slightly underperforming due to weaker demand than expected.?
Manufacturing demand is low, yet exports out of the nation remained high in August. Imports continued to be low at around 0.5% growth in August, while export growth prevailed at 8.7% YoY.?
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Many are supposing that exports were high in August as exporters deemed it wise to ship out orders in the apprehension of changing tariff laws in the USA and EU. The current situation has policymakers worried that the nation is relying too heavily on exports.?
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Given the global geopolitical environment, namely trade relations with North America and the EU, that might spell trouble down the line.
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Mergers & Acquisitions
Amidst a logistics market where 3PLs are selling off or going bankrupt left and right, we’ve seen plenty of M&A as logistics providers reduce and reform their 3PL services.?
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While some like Pitney Bowes are dropping out of the e-commerce logistics game entirely, others have chosen to rethink their approach and team up with other companies to increase value-add.
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One area where we’ve seen a lot of activity is on the tech side. For instance, digital freight booking platform Freightos just bought freight-tender procurement platform Shipsta. While Freightos previously dealt only with quoting freight as market price, they will now also be able to “tender” procurement — a process through which buyers invite suppliers to bid for the opportunity to haul their freight.?
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From CBIP
We’ve published the following blogs this last month. Give them a read if you have a couple of minutes.
Want daily updates from CBIP? Make sure to follow me via Twitter (@Nbartlett_CBIP) and CBIP (@CBIPLogistics) for thoughts and conversations on the industry every week.
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Until next month,
Nick Bartlett