What do Plummeting Volumes Mean for Parcel Shipping?

During what is typically peak season in customer demand, what we're seeing instead is reduced shipping demand and declining freight rates. The year 2022 saw the challenge of retailers having overstocked inventory created by inventory gluts from COVID demand changing. Of course, we’re also experiencing a tight economy.

Retailers responded to their high inventory with promotions, such as extensive discounts and extended Black Friday sales, to encourage consumer demand. These promotions created a lot of buying earlier in the year, spreading out consumer demand a bit.

These factors contribute to a less noticeable peak season in 2022.

We’re seeing signs of how lower freight volumes are affecting peak season parcel shipping. Lower parcel volumes are already leading 3PLs to cut back on seasonal hiring. For instance, Walmart and FedEx hired fewer seasonal workers than a year ago.

However, low hiring numbers could contribute to chaos at warehouses, especially when you couple this problem with previous shortages of workers at logistics hubs. For an idea of the state of warehouses, an Instawork survey found:

• 75% of light industrial businesses said they weren’t fully prepared for the 2022 peak season.
• 60% struggled to keep pace with increased demand last year.

Furthermore, the State of Warehouse Labor: Staying Flexible in 2022 report showed 58% of businesses saw an increase in fulfillment volume over the past 12 months while another 19% saw the same levels.

Capacity Glut Leads to Drop in Rates

Carriers have been experiencing increased capacity through lower freight volumes to fill that capacity.—which was expected for 2022’s peak season. Any time the Logistics Managers’ Index (LMI) is over 50, it indicates increased capacity. In November 2022, the LMI showed 71.4 as the capacity reading, slightly less than the highest point in October.

These falling freight volumes have led to lower rates and lower transportation costs. In November, the transportation prices subindex showed the lowest reading since the LMI was created.

Faced with falling rates due to plummeting volumes, shippers need to improve allocation and efficiency strategies throughout operations.

Three Strategies to Navigate Falling Freight Volumes

Shippers don't need to wait to respond when diffliculties happen. Instead, they can be proactive and carry out strategies to prepare for challenges like falling freight volumes. These three parcel shipping strategies can help.

• Build and Strengthen Carrier Relationships: Adapt to falling volumes by building strong networks that allow you to turn to different carriers and services to meet each shipment’s needs. By using cloud-based connection methods, parcel shippers and logistics providers can quickly and effectively communicate anytime, from anywhere, which bolsters relationships and helps shippers solve problems.
• Plan Ahead to Secure Capacity: Partner with expert-driven logistics intelligence providers like Intelligent Audit to harness analytics. The insights gleaned from logistics analytics allow parcel shippers to better predict and proactively react to supply chain trends. One benefit is the better ability to secure capacity for shipment loads.
• Leverage Technology to Optimize Operations: Utilize cutting-edge technology like machine learning and real-time parcel visibility to gain a bird’s eye view of operations. For instance, machine learning can automatically catch abnormal patterns in the shipping process. At the same time, real-time visibility shows measures like where a package is located at all times and when it is expected to arrive at its destination. A better view allows parcel shippers to refine their operations to work with proactive visibility rather than reacting as issues arise.

Rely on Expert Support to Improve Parcel Shipping Operations

This year, challenges of overstocked inventory and other factors changed the logistics landscape, which is impacting what is typically peak season. The industry is facing falling freight volumes, which affects parcel shipping.

Parcel shippers can respond by utilizing cloud-based, expert-driven, machine-learning-enabled parcel shipping strategies. Intelligent Audit offers relevant services that help parcel shippers adapt to unexpected situations like this.

These services include real-time parcel shipping visibility and industry-leading freight auditing services. Intelligent Audit brings over 20 years of expert experience to help shippers make complex logistics decisions.

Start a conversation with Intelligent Audit today.