The U.S. retail peak season begins in September with back-to-school shopping and runs through the end-of-year holiday season. Even in the best of times, peak season presents numerous challenges for retailers and their logistics providers—and these are not the best times. The retail and eCommerce supply chain has operated in a peak-like environment since the onset of the pandemic in early 2020. Now, the 2021 peak season feels daunting to already-strained retailers and logistics operators.
The constant state of disruption fueled by the COVID-19 pandemic has impacted the reliability of shipments between U.S. retailers and overseas suppliers. Disruptive elements come in different forms, such as port backlogs and shipping container shortages, airfreight and ocean freight capacity crunches, and production shutdowns caused by the COVID-19 Delta variant in key outsourcing countries such as China, Hong Kong, Taipei, or Vietnam.
COVID-19 and the Ripple Effect
For brick-and-mortar and online retailers, managing peak season primarily involves ordering inventory and securing international cargo capacity early enough to get it to the United States on time. Unfortunately, with one of the most non-traditional peak seasons on record now in its early weeks, many American importers can’t find workable solutions that will allow them to bring inventory over from Asian suppliers and meet upcoming holiday demand.
Efforts to control COVID-19’s Delta variant have severely limited capacity between the United States and Asia. New quarantine events, increased cleaning procedures, and other protective measures have extended the time it takes shipments to leave Asia.
“The Chinese government is really trying to snuff out any potential increases in COVID-19,” said Sean M. Francisco, chief operating officer of the Americas region for third-party logistics (3PL) provider Apex Logistics International, Inc. “We first started to see this on the ocean freight side. Ports like Yantian, followed by Ningbo, had positive cases. So efforts to quarantine laborers were implemented. More recently, at Shanghai Pudong International Airport, they had to place the labor force into quarantine bubble (7 days working, 7 days on-site stay, 7 days at home stay) after some positive cases to help fight the spread, and that resulted in 10,000 tons’ worth of cargo capacity canceled over a week.”
Delays like these at major ports of exit in China and other critical manufacturing countries have created a ripple effect that leads to longer lead times and stockouts for U.S. importers. In addition, ongoing labor shortages across the United States have resulted in strained capacity at U.S. ports of entry, further extending lead times for retail importers.
Moving Cargo When Capacity is Extremely Low
As peak season ramps up, U.S. retailers will find it increasingly difficult to move cargo from Asia to the United States. As a result, importers will need to implement innovative practices and build strong partnerships to ensure they have stock available for 2021’s busiest sales period.
“Shippers need to adjust their supply chain and be more flexible and decisive,” Francisco said. “Agile companies can adjust their supply chain to take advantage of what’s going on in the market, which could come in the form of last-minute capacity availability or pricing changes in certain markets or lanes. For example, shippers that can adjust from a pallet form to individual carton form can move their cargo faster and more economically than a pallet right now.”
Given the continuous state of volatility found across all transportation modes, successful importers will need to quickly develop the ability to pivot where capacity is available. To do this, U.S. buyers will need to develop a blend of capacity options that will allow them to move freight as openings become available. Ideally, this blend will include access to dedicated charter flights that offer additional control over capacity.
“There is not enough capacity in the marketplace right now to service all scenarios,” said Francisco. “But a blend of controlled capacity that includes scheduled charter flights and the ability to work with top commercial airlines to utilize their capacity will provide a good mix. Commercial capacity brings tremendous value to the logistics chain, and so does being able to control your own dedicated charter capacity.”
Charter airlines also have limited capacity right now, so booking those dedicated flights may be easier said than done. U.S. importers seeking to move cargo via scheduled charter flights will need to leverage partnerships with logistics providers or other entities that either had the good fortune or foresight to book out those flights well in advance of COVID-19.
“During unpredictable, volatile times like we’re in right now, a lot of the international air and ocean service providers may elect to cancel the contractual commitments they have in place rather than try to renegotiate the contract terms if they can’t operate that capacity,” Francisco said. “They might do it with a force majeure measure or just cancel it outright. With dedicated charter services, contracts renew
every year with little-to-no disruptions, providing some stability during chaotic times and allowing access to at least some capacity when markets get tight.”
With the 2021 peak season about to enter full swing, importers have little time to implement a diverse and agile international freight strategy. Aside from the transportation itself, importers will also want to ensure they have access to reliable ground handling and deconsolidation services to mitigate delays at ports and airports as imports arrive. Putting these strategies in place now will provide U.S. retailers and distributors with a competitive edge going into the end-of-year holiday season.