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2021 Has Felt Like One Big Peak Season: A Global Shipping Market Update

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2021 Has Felt Like One Big Peak Season: A Global Shipping Market Update

For global freight shippers, managing disruption comes with the job. But the challenges of the last year have truly been out of the ordinary. Supply chain disruptions that consist of port and terminal congestion, shipping delays due to high cargo volumes, lack of labor due to Covid-19 and limited space have caused a myriad of challenges for shippers.

For many, it has felt like one big, never-ending peak season, and they’re all asking when will things get better and what can they do in the interim, especially as we head into pre-holiday shipping.

Unfortunately, disruptions and delays likely won’t be ending soon. But there are best practices that all shippers can follow to navigate the pre-holiday rush. Let’s start with an update on the current air and ocean market situation as we head into fall.

Ocean Shipping

Ocean demand continues to exceed global capacity, with no sign of slowing down. This is compounded by port congestion, largely unreliable and inflexible schedules, and pandemic-driven labor challenges at major ports. But these issues aren’t a product of the pandemic alone.

In 2015, there were roughly 17 global ocean carriers. After mergers and consolidations, only 9 remain in 2021. Those 9 have been further consolidated into three alliances that control over 80% of the global containerized market. As a result, there are limited options for getting space on vessels and lower flexibility across vessel schedules due to the number of ships in rotation and the lack of available containers.

Globally, schedule reliability in ocean shipping is at the lowest we’ve ever seen. Right now, the reliability that a vessel carrying goods will arrive on time is roughly 40%. At this time last year, it was over 80%. While ocean carriers are trying to stay on track to destinations by skipping ports or enabling blank sailings, improving the schedule systematically in time, their methods are negatively impacting customers trying to transport products out of high-traffic areas such as Asia in a timely manner.

Air Shipping

Lower levels of passenger air travel over the past year have created congestion at air cargo terminals worldwide.

Pandemic-induced travel restrictions reduced commercial air capacity dramatically. Instead of having weekly passenger flights that move cargo volume to a wider network of airports in smaller quantities, most freight is now consolidated at larger terminals in bigger quantities via freighters or charter flights.

Terminals are then receiving increasingly large waves of freight, pushing demand to an all-time high over this past summer while also having to navigate labor shortages. Today, some of the larger terminals such as Chicago are seeing up to two-week delays in the recovery of cargo.

In addition, changes in export screening standards in the U.S. are also creating backlogs and congestion at terminals that are exacerbated by a lack of warehouse capacities. Carriers have been tasked with picking up more screening activities than usual because some shippers may not be partnering with the right forwarder who can take care of the screening for them.

This increased screening is also at odds with expedited terminal timelines, which currently give carriers as little as 12 hours to move freight that traditionally would have had a 48-hour takeoff window. If problems are encountered during screening or transportation to the terminal that slow the timeline, congestion will follow.

What Now?

No one solution is going to bring an end to the challenges of today’s market. But there are a few proven best practices shippers can use to better navigate the current challenges:

Maintain a flexible approach and be open to different options

To stay on top of this market, global shippers must commit to maintaining a flexible approach toward moving their freight. Remaining open to new and different options, such as less-than-container-load (LCL) ocean shipping, different routings or air charters when needed, as well as on-the-spot troubleshooting, can significantly improve shipping outcomes.

For example, for one C.H. Robinson customer moving PPE (personal protective equipment), Thomas Scientific, air charters were a fast-shipping option that offered a great deal of flexibility for last-minute demand shifts during the pandemic. The team worked with airlines to charter passenger planes with the seats removed for cargo flights, which offered a creative alternative to crowded cargo flights and other shipping options.

Seek support from providers who can use information to your advantage

When needed, shippers should consider partnering with a logistics provider that can give data-driven market insights to drive smarter solutions for their business. Sometimes shippers aren’t aware of all their options and need quick help figuring out how to circumvent disruptions to keep current and future orders on track. We’ve seen these solutions play out with our global experts and technology platform, Navisphere, by providing shippers with the aggregated data and analysis they need to determine which ports or terminals to avoid and the right tactics to overcome unique challenges.

Closely collaborate and communicate with supply chain partners

In a market as challenging as this one, close collaboration and frequent communication with supply chain experts are critical. For example, we’ve seen shippers overcome a variety of new challenges this year because they allowed daily cross-functional meetings with our team and theirs. To develop robust solutions, both teams need to truly understand all aspects of shipping challenges and what a company is trying to achieve.

Final Thoughts

Shipping disruptions likely won’t be ending soon. It has taken the industry about a year to get to this point, so it’s safe to say that it may take just as long for things to revert to normal levels or to adjust to the higher demand. Shippers have had to become increasingly nimble and informed to create success throughout this past year, and they must commit to staying flexible and seeking alternative solutions to continue overcoming obstacles.

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Mike Short was named president of global freight forwarding in May 2015. Short started in the global forwarding industry in 1997 and joined C.H. Robinson through the acquisition of Phoenix International in 2012. Prior to being named President, Mike served as Vice President, Global Forwarding – North America. Prior to joining C.H. Robinson, Short held a number of roles at Phoenix International, including Regional Manager, Sales Manager, and General Manager of the St. Louis office. He graduated from the University of Missouri in 1993 with a Bachelor of Arts in Business.

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UPS: “This Holiday Season, We’ve Prepared Like Never Before.”

Today marked the first day of the peak holiday season for 2019 and the beginning of increased holiday shipments and deliveries. UPS confirmed a 5 percent increase in package shipments from 2018 record is expected in addition to an estimated 32 million packages and documents per day during peak season, primarily stemming from UPS’s retailer and B2B-focused customers. This anticipated chaos doesn’t seem to be a problem for UPS, however.

“This holiday season, we’ve prepared like never before,” said UPS Chairman and Chief Executive Officer, David Abney. “UPS has invested billions in our facilities, our air fleet and our workforce.  We have the capacity for, and are committed to, serving the unique needs of all our customers. To our customers, I simply say: We’re ready, Let’s go! You can count on us to help you make the holiday season successful.”

UPS has prepared resources in the form of added space (five million square feet of highly automated facilities, to be precise), automated superhubs, 11 newly added aircraft (increasing payload by 2.5 million pounds), optimization technologies, and a robust employee network close to 100,000 seasonal workers.

“More than ever, the 2019 holiday season proves UPS puts customers’ needs first,” said UPS Chief Marketing Officer Kevin Warren. “That starts with eliminating residential peak season surcharges, and extends into a wide range of new services that complement our industry-leading portfolio of offerings.”

Additional service enhancements have also been added to further support the growing demand, including the fastest ground-service offerings to-date, commercial/residential weekend services for pickup and delivery for customers in the top metro areas, late-night pickups via UPS Extended Hours® to qualifying customers, and more.

“We have the right strategies in place to help our customers make the most of the holiday season, with extensive forecasting, expanded ground and air capacity, effective onboarding to bring an army of seasonal employees up to speed, and the products and services that help all our customers meet high expectations this time of year,” Abney said.  “We look forward to another successful peak season.”

Uncertainty in Today’s Air Market: What it Means for You

Reoccurring annual events, like the holiday season, typically bring predictability to air shipping. But lately, out of the ordinary events have disrupted the seasonality we typically expect. The best way to deal with the ever-changing peaks and valleys in air capacity throughout the year is to know both the historical patterns and potential air market disruptors.

The cyclical nature of air freight

Air freight service predictably follows the law of supply and demand. When shipping volumes spike, space on airlines becomes harder to secure and prices go up. And the opposite is true, too. If shipping volumes diminish, space on airlines becomes readily available and the prices go down.

As you might expect, the holiday peak season is one of the busiest shipping periods of the year around the world—including for air. But there are other seasonal surges to be aware of as well. The graphic below visually represents the seasonality of the air market in years’ past.

New disruptors to the air freight market

We’re just over halfway through 2019, and already it’s quite a different market than we’ve seen in the past. Several disruptors are causing a great deal of uncertainty.

Tariffs on Chinese goods

The ongoing trade war is one of the biggest disruptors to air shipping this year. Earlier tariff changes did not make a huge impact on air shipping. But demand for air freight shifted significantly when enough shippers preemptively repositioned inventory prior to the June 1, 2019, deadline. On May 31, 2019, the United States Trade Representative (USTR) announced the deadline would be extended to June 15, 2019.

Ecommerce and high-tech goods

With the growth of ecommerce and high-tech products flooding our markets, air freight is quickly becoming the go-to mode of transportation for many shippers—any time of year. Combined with the promise of two-day shipping, it’s often the only way to meet customer demands.

Adjust your air freight strategy based on the market

With air freight volumes lower than we’ve seen since the 2008 recession, now may be the ideal time to update your air freight shipping strategy.

Choosing air freight can be a strategic way to lower inventory levels in the United States. Finding a balance between inventory costs without sacrificing customer delivery expectations often requires expertise. The air experts at C.H. Robinson are available in offices around the globe to help manage your air freight and ensure any problems are resolved in real-time.

You may even consider that if air freight rates dip low enough, you could make up the difference (at least in part) of the added tariffs on Chinese goods.

The air freight market is a complex ecosystem that will likely remain uncertain for some time. While this uncertainty lasts, you may want to switch to a quarterly planning strategy to avoid a long-term commitment when you don’t know what’s coming.

What’s going to happen?

While inventories in the United States remain high, it’s likely that air shipping volumes will remain low. The best way to insulate your company and your relationships from today’s air market is to stay flexible. Adapt quickly to ensure you can take advantage of soft markets while still buying appropriately during peak seasons.

Integrating Air and Inland Transportation Solves Unique Challenges

Plenty of challenges can surface in the course of executing global logistics, no matter what industry you’re in. The ability to work with one company to service all your transportation needs – including ocean, air, customs brokerage, trade compliance, vendor management, and surface transportation is vital for having immediate and integrated alternatives to solve problems. This capability may be most valuable when it comes to air cargo solutions—where the clock is always ticking, and time is not on your side. Here’s how some companies have collaborated with C.H. Robinson to develop their integrated air-and-surface-transportation solutions.

Merchandising support for retailers

For retailers, launching a new video game successfully requires more than just the game itself. Merchandising support—in the form of posters, kiosks, and other materials that promote the product—is absolutely essential. So, when one company won a licensing agreement to merchandise a hot new video game to retail centers, they looked for an integrated logistics program that would help them meet the release deadlines.

As is true of any bid for logistics services, the company could only share so much information in their request for proposal (RFP). The RFP had called for air charter lift services, but once they awarded the bid to us, we learned more. While the ship dates for the merchandising were uncertain, delivery deadlines were firm, and the company faced stiff penalties from retailers if they missed delivery deadlines. This information led to a review of cost and available commercial air lift options and recalibration of the initial plan.

The resulting plan was fully integrated and lasted for roughly three months. It included a seven-day air transport, airport to door, from Asia into our warehouses at Los Angeles International Airport or Chicago O’Hare International Airport. The plan had to be flexible, and required extensive coordination. So, C.H. Robinson flew in personnel from our Miami office to the distribution centers in Los Angeles and Chicago to oversee all aspects of the handling and ensure that any last-minute problems could be resolved in real time.

At the warehouses, shipments were broken down, repackaged, and segregated for delivery. Working backward from the in-house delivery date to ship dates, once known, the team selected the best transportation type to deliver to retailers in time.

The challenges that surfaced in these moves required flexibility so that shipments could be moved via a variety of transportation modes. As products arrived at the warehouse and were segregated, faster or slower forms of transportation would be selected to hit the firm delivery dates. If there was sufficient lead time, less than truckload (LTL) shipments might be the best, most cost effective option; if time was tight, the freight might be shipped by the full truckload with team drivers. Wherever possible, LTL shipments would be consolidated and be delivered by multi-stop full truckloads for greater savings.

Overall, the project required coordination of air freight and warehousing, plus full truckload, consolidation, or LTL deliveries from the warehouses to 30 U.S. destinations to meet delivery deadlines. With onsite coordination, the company had an on time delivery percentage of 99% at the retail locations.

Shipping urgent product to bring an automotive plant back online

Automotive production lines have rigorous delivery requirements. Shipments are timed precisely so they arrive just in time for production. If anything goes wrong and materials don’t arrive as expected, entire plants can shut down, putting hundreds of people out of work and costing companies millions.

So, when an automotive plant in the United States went down, they contacted another original equipment manufacturer (OEM) for help. The OEM needed to obtain product from six European suppliers and get them to the plant as soon as possible.

At the time, air capacity was not as accessible. So, our team looked for the next-best alternative: partial charter for several skids of critical materials. The product was flown into Chicago, where a team of drivers was waiting. Due to pre-clearing customs, our team was able to breakdown the aircraft and load the trucks within two hours. Once the trucks were loaded at the warehouse, they headed inland to complete the delivery.

Speed and efficiency were vital in delivering the product to our customer. Our skill is to find and offer different solutions to achieve the client’s goals and get the plant back in operation as quickly as possible.

A solution for urgent heavy-lift shipments in the automotive industry

Sometimes urgent freight comes in big packages. A company in the automotive industry urgently needed to ship machinery from Chicago to Liuzhou, Guangxi, China. Because this was a last-minute request, however, their regular crating company in Michigan was unable to complete the job in time. That’s when the company contacted the C.H. Robinson project logistics team to find alternatives.

Our team not only had a long-time relationship with the company, but also with crating companies in the Chicago area. The team used their knowledge, flexibility, and connections to find outside-the-box solutions, arranging for crating to take place the following day. As the crating was underway, the company also awarded the transport portion to C.H. Robinson.

The urgently needed freight had to be shipped by air. Thirteen crates totaling 166 cubic meters and 44.6 metric tons were transported for the company, with the largest piece weighing 14 metric tons. Cranes were used to load the 13 crates onto the aircraft for transport from O’Hare in Chicago through South Korea to Guangzhou Baiyun International Airport in China. From there, the crates were transported inland to the customer’s door in Liuzhou, Guangxi, China.

The company’s decision to work with one company to service all their transportation needs—including crating, air freight transport, and inland transportation service, provided a solution for their urgent deadline. The cargo was able to be delivered safely and quickly.

What it takes to integrate air and inland transportation solutions

In logistics, there’s simply no substitute for integrated problem-solving. Nowhere is that truer than with urgent freight requirements that require a multi-pronged transportation solution.

When freight absolutely positively has to be there, challenges are sure to arise. Companies can work closely with their logistics provider to select the best, most flexible options to meet their goals. With proper coordination, and by working together, shippers can easily achieve their supply chain objectives—in the long and short term.

Matt Castle is Vice President of global forwarding products & services at C.H. Robinson