We’re all used to peak season surcharges and congestion at this point. We plan accordingly with an understanding that demand is high and supply is low – as long as you book “far enough in advance,” your cargo will make its way to its destination with minimal problems and everything will work out fine.
However, this year is a quite a bit different. Just as you’ve seen with port congestion around the U.S. in the back half of 2020, the struggle is continuing through 2021 and posing a threat to the upcoming peak seasons. At this point, we’re already looking as far as Christmas 2021 for strategic logistics planning since potential delays and increase in demand are demonstrating a potential for major overbookings and delays.
Holiday Season 2021: Preparing your Shipments
If you’re wondering when the right time is to start considering what your shipping plans might be for Christmas 2021 – that time is now. The retail inventory to sales ratio has dropped to a new all-time low, posing threats to shippers hoping for capacity this holiday season. As retailers are struggling to catch up with the market, there’s high potential that imports could be heavily congested/overbooked in the near future by a trans-Pacific shipping network that has already reached its limit.
This news unfortunately implies that the clock is already ticking for importers to find solutions for the holidays. It also implies the potential for higher premium charges and all-around shipping costs for importers this year.
Here are some things to keep in mind as you contemplate the upcoming holiday season as it relates to your shipping plans:
Inventory-to-Sales Ratio
Inventory-to-sales ratios have been incredibly low due to the effects that COVID-19 had on world trade. While everything was relatively healthy and balanced pre-COVID, the back half of 2020 and the beginning months of 2021 have put retailers in a difficult place. Demand has greatly outweighed available inventory, and so the inventory-to-sales ratio remains lower than ever as retailers are struggling to get product on the walls in time for consumers.
What does this mean? In already congested ports, shippers are pushing to restock shelves quicker and import more products, putting further pressure on manufacturers/producers abroad, increasing shipping delays, and creating more bottlenecks for U.S.-based importers attempting to order products internationally to restock their inventory. Which ties in with the next point…
Retailers Are Running on All Cylinders
They can’t catch a breath, and any retailer will probably tell you a similar story. 2020 has been incredibly difficult from a supply-demand perspective, and most retailers are struggling to get enough products to feed the demand of consumers. This is only going to be multiplied come peak season as orders increase greatly for the upcoming Holidays.
Due to the detrimental impact that COVID had on inventory (both the first and last half of 2020), retailers are faced with a nearly insurmountable task to grow their inventory by nearly 86% more than they did in the same period of 2019. In other words, demand in a low-supply market has created the need to nearly double the inventory needs that retailers need to achieve to meet pre-COVID market conditions.
Shipment Forecast Data Predicts a Surge
While everything in the realm of “forecasts” is hypothetical, the events of 2020 and early 2021 have given pretty concrete evidence for shipping technology to predict the end half of the year – and it doesn’t look to pretty. Given the state of the market – both in the U.S. and globally – many carriers and shippers are predicting significant surges in capacity demand met with a low supply, which is certain to create unprecedented congestion at ports and delays as we get closer to peak season.
Where to Go From Here
The conclusion on all of this data? Start planning. Now.
That sounds pretty forward, but it’s the truth. If shippers want any guarantee at vessel space, it’s time to start planning immediately for inventory restocking for the holidays. Consumer demand will only increase from here, and carriers aren’t creating enough equipment or capacity to handle the increase in demand. In essence, it’s a ticking time bomb; and those who wait to line up their shipments are going to draw the short straw on this one.
If you have questions about how to plan your logistics for the upcoming peak season/holiday season, please don’t hesitate to reach out to one of our team members! We would love the chance to answer any and all of your questions and help you and your team get closer to a viable solution for handling the upcoming season!