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Peak Season Prospects are promising according to LM survey

Despite lack of a steep inventory re-build, a close to normal peak may be on tap
By Jeff Berman, Group News Editor
June 21, 2011

When assessing the possibility of how the 2011 Peak Season will play out, it is important to note that the peak of recent years has been anything but normal for a litany of reasons, ranging from the recession to capacity to demand issues.

Last year, things appeared to be returning to “normal” on the Peak Season front, as activity was buoyed by a significant inventory re-build coming on the heels of so-called end of the Great Recession, which saw steady if not spectacular volume and freight growth. But as it turned out, it was not meant to be lasting as things began to shift into neutral, and the usual suspects of high unemployment, tight credit, a weak housing market, slow GDP growth and high fuel prices again led the headlines and remain serious concerns today.

Against this backdrop, though, many shippers and carriers maintain that things are slowly getting better. And they are also saying that this year’s Peak Season could actually resemble something a bit more typical and familiar than the mixed bag we have seen in recent years.

That is apparent in the findings of a Logistics Management readership survey, which found that 78 percent—or 367 of the 469 respondents expect a Peak Season this year, with another 45 percent—or 195 respondents—expecting it to be more active than a year ago, followed by 20 percent (87 respondents) calling for it to be less active, and 34 percent (147 respondents) expecting it to be the same as last year.

Among the many reasons respondents expect this year’s Peak Season to be more active than a year ago include a slowly improving economy, increased demand, a healthy manufacturing sector, and tight capacity, especially in the trucking sector, among other drivers.

Assuming the economy does not go into another recession, lower inventory levels will drive a more typical peak season, a respondent opined, adding that it depends on the direction consumer demand will go over the next two months.

And unlike 2009 or last year, capacity is again very tight, especially for over-the-road transportation.

“Many shippers are expecting trucking capacity to be an issue as volume will exceed the supply of qualified carriers,” said Sarah Schmitz, logistics manager at Masters Gallery Foods in Plymouth, Wisconsin. “Safety regulations, operating costs, economic issues, and fuel will also play a role, too. We’re positioned to succeed through this capacity crunch during Peak Season with an excellent group of core carriers, however.”

Despite economic conditions moderating in recent months, the feeling of optimism among freight transportation and logistics services providers heading into Peak Season has not abated. And this points to a collective feeling of positivity at a time when the headlines say otherwise.

At the Ports of Los Angeles and Long Beach, the two highest-volume U.S.-based ports, volumes are up 6.6 percent and 6.6 percent year-to-date through May, respectively, and trucking, rail, and air cargo volumes are showing flat to modest growth levels with Peak Season approaching.

Port of Los Angeles Communications Director Philip Sanfield said he expects a more normal Peak Season this year, with throughput at the port expected to be at its highest in late July and early August.

And aside from the domestic trucking and air cargo markets there appears to be enough capacity to meet whatever level of demand Peak Season brings this year.

“Inbound container rates from Asia remain well below last year’s levels, suggesting a more traditional peak shipping season or at least one marked by solid volumes in late summer and fall,” wrote BB&T Capital Markets Analyst Thom Albrecht in a research note.

And Ben Hackett, president of Hackett and Associates, had a similar but slightly different view, saying he expects Peak Season to be normal, as there is no shortage of containers and ocean capacity is not being withheld. He noted that the peak is likely to occur during the July-to-September timeframe, arriving about a month earlier as it did a year ago.

But even though many industry stakeholders remain confident in the prospects for Peak Season, many shippers are skeptical about that, given the warning signs the economy is displaying.

Reasons for this ranged from general economic slowness to fuel prices to decreased order activity.

“The main concern is if there will be enough capacity to hit peak demand,” said Eric Starks, president of freight transportation consultancy FTR Associates. “There may be situations where shippers want to get loads moved and they can’t get it done. The economy is still soft, and we are likely to have a tight environment. Regardless of what happens with peak activity, shippers are likely to face rate pressure through the rest of the year, coupled with a tight capacity environment. Heading into this Peak Season, though, shippers really need to focus on capacity more than rates.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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