With the variability of the past few peak seasons, are you ready to pull the trigger for inventory orders and capacity that you’ll need this year? If you’re waiting until July to get ready, you may get caught in shifting timelines for your manufacturers, carriers and receivers.
This year the peak season is expected to be a little stronger than in recent memory, but consumer shifts are happening in a variety of different sectors. Changes have not only hit our products but they’ve also hit our packaging, especially in plastics. The shifts are creating uncertainty not only for manufacturers but also for ocean carriers.
Normally we look at shifting product cycles for summer at this time, and that’s the planning everyone has going in high gear. However, peak volatility and variability make it essential to already start your supply chain scheduling.
Lower Spikes, More Peaks
Our warehouses tell the story of peak season problems: an overabundance of SKUs.
SKUs are increasing across the board in order to secure sales at either slight increases or flat levels. These are largely new items so manufacturers and carriers have no knowledge of demand trends and curves that apply to these goods.
This variety of goods expands the shipping options that carriers must provide because manufacturers are moving more types of goods in different shipment loads, even if they’re not moving more products overall – if getting everything down to the unit level.
Differing shipments and retail trends for availability – anyone willing to take the bet that Thanksgiving sales will start on Monday this year – are going to set a varied stage for manufacturing schedules.
Peak times are set to lower and spread out as retailers try more products and different sales, stretching demand across a longer period of time. Unfortunately, this doesn’t mean your costs are going to drop even if your peak season is slightly off-peak.
Carrier Rates Likely to Increase
In 2011, the peak seasons never quite arrived and carriers, especially steamships, were consistently operating below capacity. Some carriers even started waiving or dropped surcharges and additional rates, and this reached rail and road in limited areas.
That’s not going to happen in 2014, even if the peak season’s variability is as high.
Carriers are looking at a capacity crunch for truckload because of expected driver shortages, which many expect to still be in effect during the peak season. Carriers are currently on a big hiring push, but much of this grabbing drivers from other services – the Bureau of Labor Statistics still puts the average truck driver at age 55.
To combat the shortages, it’s expected that carriers will need to increase trucker pay, which will get passed on to shippers.
Another cost getting passed on to shippers is a rise in brokerage firm rate increases. C.H. Robinson has announced it is shifting its focus margins instead of direct price competition, and will end up raising its rates. With a decreased focus on cost competition, this opens the door to other brokerages to increase rates.
With costs going up, today is the perfect day to start preparing your peak-season strategy and even look into pre-staging to beat any crunch at the lowest cost.