Consultant Insight: Preparing for the unexpected

[caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Retailers are replenishing inventory ahead of what is expected to be a long holiday season, and one focused on e-commerce. U.S. imports jumped 5.9%, a record in August, good for the first year-over-year rise since September 2019, according to Panjiva, the supply chain research unit of S&P Global Market Intelligence. Holiday season sales are expected to rise by 1.0% to 1.5% from 2019 levels, with e-commerce sales projected to jump by 25.0% to 35.0%, according to consulting firm Deloitte. By comparison, the U.S. Census Bureau noted that retail sales between November 2019 and January 2020 grew 4.1% YoY, and e-commerce sales increased 14.7%. Even before the build-up of holiday inventories, e-commerce sales of goods have been strong — up 19.6% year-to-date through August, according to the U.S. Census Bureau. However, sales of experiences, such as trips, concerts and events, have not been strong. Connected to a decline in those industries, domestic flight prices within the United States are 41% lower on average due to the COVID-19 pandemic, according to Dollar Flight Club, a flight alert subscription service. International flights from the United States are 35% cheaper than last year. In terms of tickets for concerts and other events, the concert industry could lose almost $9 billion this year. "People stopped buying experiences (trips, concerts, events) and started buying more things (remodels, recreation, consumer goods),” Brian Bourke, Chief Growth Officer of SEKO Logistics, recently commented on Twitter. “The global supply chain is experiencing a significant capacity crisis that is going to be unprecedented in the next 12 to 14 weeks.” Indeed, all modes of transportation — air, ocean, trucking, rail and small parcel — have experienced capacity issues this year as e-commerce goods are brought into the country in high volumes. Delays have occurred, particularly from the ports of Long Beach and Los Angeles. As a result, rail providers have added additional surcharges to offset the increased costs to transport goods. For example, Union Pacific Railroad (UP) announced a $500 surcharge on certain shipments. BNSF Railway imposed gate restrictions at a Los Angeles terminal due to increased volume driven by e-commerce retailers. Meanwhile, spot rates have increased by more than 100% for truckload and less-than-truckload units due to high demand. The trickle-down impact has been observed within the last mile as well. Sporadic delays across the country have been noted while temporary, COVID-19 surcharges on ground deliveries were implemented by UPS and FedEx in May and June, respectively. These surcharges will expire in October, however peak season surcharges will replace them. Last-mile providers and retailers hope to mitigate their capacity concerns by encouraging consumers not to wait until the last minute to purchase goods. Capacity concerns will last throughout the holiday season and could be “unprecedented,” as Bourke noted in his tweet. Not only are retailers preparing for the holiday season, but many have also been replenishing inventory that would have typically been filled earlier in the year. However, due to COVID-19, manufacturing facilities were closed or retailers delayed shipments of goods due to financial concerns. Upcoming e-commerce events such as Amazon’s Prime Day and Alibaba’s 11.11 have also led to an additional build-up in inventory requirements and most retailers plan to participate in either or both events. There are also a number of retailers and other businesses that are building up inventories in preparation for another potential wave of COVID-19 infections, while others are already planning ahead in anticipation of China’s Lunar New Year on Feb. 12. Regardless of transportation mode, capacity will likely remain a concern at least through the end of the year. Rates will remain high while transportation providers implement surcharges to help offset costs.

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Consultant Insight: Preparing for the unexpected

SEKO’s Bourke added to Cargo Airport Growth Summit speaker faculty

New Democratic relief bill would extend airline aid to March

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