As many logistics and supply chain processes have been altered, or impacted, to varying degrees for the better part of the last 30-plus months or so, due to the COVID-19 pandemic, there remains a general feeling of uneasiness in supply chain circles, due to various factors.
These factors are things supply chain stakeholders are dealing with on a daily basis, including inflation, labor and employee retention issues, and high fuel prices, among others. Another factor that is top of mind for supply chain stakeholders is what could be in store for the 2022 Peak Season.
The reason for that going back over the past few years it is clear that Peak Season has seen nothing really truly resembling anything that could be viewed as “traditional,” especially when compared to pre-pandemic times. One thing driving that is due to the premise that when the pandemic kicked in there became an all-year Peak Season, of sorts, with people upping their e-commerce activity to procure both basic consumer staples and also more big-ticket items, like appliances and exercise equipment, as they were following shelter-in-place orders.
But, now, with the pandemic still in effect, it has been countered, to a degree, by many consumers getting vaccinated and subsequently boosted. That has led to more people getting out on a more consistent basis to do more services-oriented things like go on family vacations, out to dinner, movies, concerts, and sporting events, among other activities.
While things are different now than they were at this time in 2020 and 2021, what it means for Peak Season still remains a valid question. A Logistics Management reader survey of more than 100 freight transportation, logistics, and supply chain stakeholders found that the 2022 Peak Season is expected to be more active than it was a year ago, albeit by not a huge margin.
The survey showed that 45% of respondents expect a more active Peak Season, with 35% expecting it to be about the same as 2021, and 20% maintain it will be less active.
Even though a slight majority of respondents are expecting a more active Peak Season in 2022, collective feedback hinted at various issues that could result in things remaining uncertain, including mixed economic conditions, inflation holding down retail spending expectations, and declining sales, among others. On a more positive note, those respondents that expect a more active Peak Season pointed to increased demand.
“Cargo congestion in major international trade routes remains high, so incentives to ship early (and resupply items that prove popular) also remain high,” observed a respondent.
Another respondent noted that excess inventory from late arriving freight in 2021 has reduced the overall buying needs for 2022.
Looking at the impact of Peak Season on day-to-day operations, 71% of survey respondents said it has an impact on day-to-day operations, with 27% saying it does not.
In what could be viewed as a wildcard, in terms of impacting Peak Season operations, the reopening of China’s economy—following a monthslong pandemic-driven shutdown expected to result in increased cargo volumes arriving at U.S. ports, in tandem with Peak Season, 60% of respondents are preparing for that to have a significant impact, with the remaining 40% saying it will not be the case. What’s more, the expiration of the labor contract between the Pacific Maritime Association and the International Longshore Warehouse Union, which expired at the end of June, looms large, as the two groups work on a new deal.
One challenge stemming from China’s reopening cited by a respondents noted how “chassis for containers still are not quite in the right positions to handle the increase in the tsunami of containers, which causes a ripple effect to other ports.” Another noted that “as factories are reopening in China, volumes that have been stagnant will climb quickly, and congestion on the West Coast will multiply as the ILWU negotiates with the PMA.
Respondents also pointed to other factors like: ocean vessel capacity; port and warehouse congestion; an increase in safety stocks, due to longer lead times, causing unsteady or costly freight.
Larry Gross, president of Gross Transportation Consulting, said that what is happening now is what he called a pull-forward of Peak Season.
“It makes complete sense from an individual shipper standpoint,” he said. “The reason for that is everybody got kind of skunked last year, with goods not making it in on time and are making sure this year goods are going to get here on time. The problem is there is nowhere to place to put it [freight] when it arrives. You saw some of that with Target’s recent announcement. Target said ‘we have too much inventory, and it is the wrong kind of inventory…we are cancelling orders and are going to take penalties for doing that or we are going to discount stuff to move it out.’ I suspect that is symptomatic of a broader issue that retailers are going to have to deal with, because they have been trying to work with much longer than normal lead times, and now things are kind of clogging up. I think it is going to be quite a muted Peak Season this year.”
And Ben Hackett, president of maritime consultancy Hackett Associates, noted that congestion of ships waiting to berth at ports on the West Coast has eased.
“We expect to see the same on the East Coast as carriers begin to return to their normal patterns of port calls,” he said. “We continue to model that labor negotiations on the West Coast will conclude with a new contract and without any disruptions in the intervening period.”