Global Trade • September/October 2022 • INDUSTRY EXPERTISE

We should be in the early phases of a typical peak season right now. Steamship line vessels would be gliding toward ports across the U.S., warehouses would aggressively be lining up seasonal staff to accept goods, and consumer spending would increase for the back-to-school season and the holiday rush.

This year, however, has been weighed down by uncertainty. The ports have been operating at “peak capacity” for more than a year, with Los Angeles, Long Beach, Savannah, and New York each surpassing freight records. But the constant barrage of inbound freight for the past 12 months has created several unique challenges for retailers and importers.

The first is storage and warehousing capacity being incredibly tight. Los Angeles warehouses are nearly 99% filled, and this issue has forced many large retailers to liquidate existing inventory to create more storage room.

For example, Target discussed sacrificing their margins and moving goods at near cost to ensure they have room for seasonal merchandise.

Meanwhile, the pandemic-induced shift to 24/7 operations at the ports had mixed results. While it allowed terminals to utilize staging areas and approaches more aggressively, it wasn’t the panacea that opened up capacity and limited congestion as intended.

Disrupting things further are the frequent labor disputes happening across the globe, with ports, terminals and motor carriers experiencing work stoppages and volatility in the U.S., Europe, and Asia. The trucking regulatory environment is also getting more complex, with worker classification, liability and clean trucking laws adding complexity to the broader transportation industry.

In other words, supply chain leaders have a lot to consider as they prepare for this year’s annual peak season. There are many steps they should take right now to ensure this holiday season is successful.

Globalization has been a tremendous benefit to humanity overall, improving living conditions across the globe while giving people more access to goods and services they want. However, it has also added complexity and dependencies where there were none before.

For instance, a shipper may import goods but lack available warehouse space at a particular moment. The shipper has a few choices in this situation. First, they can allow their containers to dwell at the port, accruing late fees for failing to remove their goods. But in doing so, they’re limiting the ability of other shippers to access goods since space at the ports and terminals is finite.

An alternative approach is placing containers on chassis and having truckers move them to a yard for storage. However, unless those containers are grounded, removing a chassis from an already constrained chassis pool makes it harder for other shippers to access their goods.

These are just two common examples of how one shipper’s behavior impacts the efficiency of another, and there are hundreds (or maybe thousands) more opportunities for importers to step on each other’s toes.

Disruption isn’t limited to the issues that shippers inadvertently create for each other, as the lack of transportation availability also creates hurdles. Today, many trucking companies are experiencing significant headwinds, including sky-high fuel and insurance prices, which eat into margins and pressure trucking companies of all sizes.

At the same time, many large trucking fleets experience up to 90% driver turnover year over year. In response, some companies have implemented various hiring perks, such as sign-on bonuses to attract drivers, but these programs are mainly back-filling roles instead of increasing capacity.

There’s also an unwillingness to share data between shippers. While supply chains can be a tremendous competitive differentiator, the reality is that industry fragmentation across shippers decreases access to truckers. This is one place where NEXT has been incredibly successful, batching loads from multiple shippers to help drivers carry loads from different beneficial cargo owners (BCOs) on the same day based on smart routing. The logistics and supply chain industries could take a lesson from other technology sectors that have thrived on open ecosystems for years.

Early in the pandemic, we saw many steamship line (SSL) vessels blank various sailings. In some cases, this was due to the lack of production at the expected port of origin. For instance, when China closed production facilities in Shanghai earlier this year, few vessels moved in or out of the port, especially because there were fewer exports to gather.

We’re at risk of seeing something very similar today. Sporadic production in China limits the number of vessels calling on U.S. ports as well as the ports’ ability to send empty (or street-turned) containers back to be refilled.

Today’s forward-thinking shippers are diversifying their shipping and capacity tools to ensure a strong holiday season performance. In ocean freight, this has meant adding extra capacity from a non-primary SSL; shippers are building redundancy by working with non-vessel owning carriers to increase their range of options.

These same shippers are also looking at increasing the number of ports they’re willing to leverage to import goods. As main ports such as Los Angeles/Long Beach and Savannah become more congested, BCOs can rely on Oakland, California, or Mobile, Alabama, to mitigate their risks.

Many shippers are also looking at freight marketplaces to increase access to transportation capacity, utilizing the aggregate reach of dozens or even hundreds of trucking companies to fill in gaps across their carrier base. This approach is particularly effective when shifting imports to a different port; it can be easy to find trucking capacity through online brokerages.

For years the focus of supply chain professionals has been eliminating waste. This means cutting out extra inventory and storage fees. It means limiting the number of relationships to avoid onboarding challenges.

Unfortunately, the COVID-19 pandemic exposed the need for redundancy in the volume of goods being created and the number of relationships available for moving goods. Safety inventory and backup plans that include multiple geographic and vendor-specific options are critical to overcoming today’s most significant supply chain hurdles and ensuring a successful holiday season.

Mike Bush is the Head of Communications & Brand at NEXT Trucking, a FreightTech pioneer and drayage leader connecting some of the world’s largest shippers with carriers. He has nearly 20 years of experience in supply chain, logistics and transportation. Follow him on Twitter: twitter.com/mikebush.