Peak Seasons Gone?

While the transportation industry is one of the more volatile industries, most experts can offer up a detailed 3-month forecast, an approximate 6-month forecast, and a hypothetical 12-month forecast. What many are saying for the remainder of 2021 and even into 2022 is the annual trends we have long witnessed are no longer valid. The question being pondered is, ‘can there be a peak season if the entire industry is already sitting in critical status?” The economy has the throttle set too high in nearly every industry and they all need freight moved. For months we have witnessed a surge in shipping that has remained at the highest level and that surge is expected to remain through all of summer, the fall, and into 2022. If the surge never subsides, how can one measure the peak seasons?

The immediate concern for shippers is there is no relief in sight regarding shipping rates, particularly international. We are seeing an uptick in inflation which is okay for now, as long as it remains short-term. Many experts agree that once inflation gets high enough and the economy begins to slow, relief in shipping rates will follow. However, until that cool down begins, Quarter 1 2022 at the earliest, carriers will continue to not only demand the highest rates in history – we expect them to continue to rise.

The revenues of most international freight companies are tripling, quadrupling, or more. Cosco Shipping Holdings announced their 2021 earnings are likely to come in at 30 times over. The average increase per container is 89.7% from a year ago. Every single indicator points to Q3 rates and delays increasing. The new recommendation is to increase your lead time of ocean cargo by 6 weeks at least through the 3rd Quarter. The prices for 40’ containers have reached such high levels – if the products have a high enough margin, air freight is now a viable option. This has further strained the air freight industry which was already struggling in light of passenger flights being a fraction of 2019 levels. The demand for air cargo in May of 2021 was 9.4% higher than the demand in May 2019. With new COVID variants and spikes, it is still very difficult to predict just how quickly the airline industry can rebound. Most aviation analysts put the airline industries being back to pre-pandemic levels in 2025 or 2026 as the best-case scenario.

International aside, the domestic trucking industry is also experiencing unprecedented challenges that are responsible for extreme load-to-truck ratios, exponential rate increases, new surcharges, and lengthy transit times. A meeting of Federal Officials and the leaders of various Trucking Organizations on July 8, 2021, helped shine a large spotlight on challenges – but the prognosis is still poor and relief is nowhere in sight. The general consensus is the shortage of professional truck drivers is the primary issue facing the industry. The trucking industry is short between 100,000 and 210,000 drivers depending on varying figures from different agencies. While so far in 2021 there is a 14% increase in first-time CDL issuances, it is far below what is needed to fill the skills gap.

Best practices and how to mitigate some of the supply chain woes every shipper is feeling vary among organizations. A Research Survey conducted by the Peerless Research group in June of 2021 asked participating organizations what they plan to do in the next 12 months to assist in their transportation management operations (participants could choose more than one option). Implementing new software such as ERP, TMS, YMS, etc. was the top answer with 58% of respondents. Adding or enhancing supply chain design technology was the number 2 answer with 55% of respondents. Working with a 3rd Party Logistics Provider (3PL) was the 3rd top answer with 42% of respondents.

Transportation has never been a “set it and forget it” option for organizations, but what is happening now further impresses upon companies that working with experts is necessary. The current state of the freight industry is not a blip; it is the new normal for at least the foreseeable future. This is not the time to stay the course and hold on tight, but rather the best time for action.