Industry News

Should We Expect a Visit from the Ghost of Supply Chain Past this Holiday Season?

 

Whether you like it or not, November is here and the holiday season is right around the corner. There are many opinions floating around whether or not supply chains will experience similar pressures from last year. Ocean spot rates and imports decreased substantially this year and the threat of a potential recession may have consumers thinking twice before going all out when buying gifts this season.

Let’s take a look at the evidence so far. The peak season for ocean containers is July through September, trucking and rail intermodal October through mid-December, and parcel Black Friday through December 24th. If the ocean container slump is any indication of a slowdown, we shouldn’t expect a visit from the ghost of supply chain past over the next few months, right?

During UPS’s earnings call last week, CEO Carol Tomé expects package volumes to peak later in the month of December compared to 2021 mostly due to last year’s unusual supply chain snags. The call to order your gifts early was widely promoted last year and consumers responded accordingly. “Everyone was saying, ‘Shop early, shop early, shop early,’” Tomé said. Upstream congestion is no longer a concern this year allowing shippers to regroup and plan accordingly for a later shipping peak.

While this is great for consumers, shipping executives are worried about weak earnings. Freight Waves compiles a couple of notable quotes from trucking executives about business going into the end of the year: 

CFO Adam Miller [Knight-Swift]: “It’s rare that you go into a fourth quarter and not see some type of seasonal uplift and projects and spot opportunities. Especially with companies of our scale, we typically get some of these large, kind of difficult projects to handle and they typically pay a premium; … none of that stuff materialized.”

CEO John Roberts [Covenant Logistics]: “Further evidence has presented itself over the course of the quarter that requires an increased level of caution and awareness on broader demand trends and economic activity.”

We can’t forget that a weak bottom line isn’t the only problem here. Even though demand is decreasing at the ports, trucking and freight rail struggles are still very real. Logistics experts report that these industries still can’t keep pace with demand for shipments mostly due to the lack of labor.

Retailers are reporting that their warehouses are already stocked for the holiday season, which won’t require as much trucking demand as last year. That said, a slowdown this season may not seem as problematic but this is merely temporary.  

So, perhaps we won’t see the ghost of supply chain past this holiday season but we’re keeping an eye on whether or not this is the calm before a potential economic storm going into the New Year.  With warehouses already being stocked, this may actually be a good thing for consumers as retailers will try to open more space going into 2023 (hint: product discounts and promotions).

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