Understanding the state of holiday shipping and learnings for the next peak season means realizing that rates are always going to jump-start near Halloween. There was a time when the peak season was Thanksgiving to Christmas, but that notion is now in the past. And with record-setting rates across all modes, it’s almost impractical to think about what shippers can do to keep costs in check next peak season. However, some lessons are evident within the trendlines of rates and how shippers can overcome such hikes in the future.
Air freight Is Rising.
Air freight rates have been a major story throughout 2021. Following last year’s peak, rates hit an apex of $4.57/kg, according to the Freightos Air Freight Index. While rates dipped over the course of the year, another spike occurred on July 12, 2021 ($4.74kg), and as of the most recent data available, rates are sitting at $4.41/kg. Most importantly, the air freight index runs approximately one week behind, so the real impact of the Christmas Week Showdown—the immediate days leading up to the holiday, is still unavailable. Furthermore, exact rates also depend on a variety of other factors in the U.S., such as expected winter weather that’s stimulated embargoes across the Pacific-Northwest market and uncertainty as carriers rush to deliver packages on time. After all, air freight moves are only a portion of any full shipment lifecycle, and it all comes down to whether the air freight can be recovered quickly and how fast it’s put onto a truck for final mile delivery.
Ocean Freight Shortages Abound.
Any conversation about the state of holiday shipping would be incomplete without discussing ocean freight congestion and shortages. The Ports of Long Beach and Los Angeles have both been in the news on a nearly daily basis concerning the backlog of containers. Fortunately, the San Pedro Bay backlog has declined 50% over the past eight days, reports news station KOIN. However, there’s another story hiding in plain sight.
According to the Journal of Commerce, the New York and New Jersey port backlog is increasing and leading to more instability in terms of product replenishment and inventory management in the weeks after Christmas. Such factors will inevitably lead more shippers to consider air imports, but even such a strategy is subject to delays and higher costs as rates and volumes soar. Therefore, it comes down having the right data and actionable insights to know what’s happening across all markets. But before getting too deep into that, it’s important to also understand the realities of rail, LTL and TL, and parcel transport amid the state of holiday shipping.
Rail Rates Are Increasing
The Wall Street Journal noted that rail rates are up an average of 23% compared to 2020. This trend is occurring in tandem with a tighter labor market and continuing changes within over-the-road trucking rates too. Higher OTR rates mean more shippers begin to consider alternate fulfillment methods, including intermodal and multimodal transport, to lower shipping spend.
TL and LTL Is Still a Bull Market
Carriers have maintained their control over pricing power across all modes of transport, including drayage service providers, TL and LTL. However, this bull market is bound to end. Yet, the rates are not likely to switch back to favoring shippers until well into 2022. Major carriers, including FedEx and UPS, have already announced higher-than-usual GRIs for 2022, and the overall demand for more is growing. According to FreightWaves, the Outbound Tender Volume Index for the U.S. had increased 1.2% as of December 29, 2021. This is despite increases occurring in the days immediately prior to Christmas. Such factors clearly indicate shippers are trying to move even more freight, which will mean carriers will retain their hand at the poker table of freight rates. These changes indicate sudden swings due to the holidays, but they can also help shippers create a more proactive timeline and forecast what may happen next year should the same conditions arise.
Parcel Capacity Is Tight With Nationwide Difficulties
The state of holiday shipping revealed several core trends arise among the major parcel carriers, including:
- Both FedEx and UPS hired thousands of additional seasonal workers.
- UPS parcels heading to Texas had a 10.3% late rate.
- FedEx packages to Illinois had a 15.3% late rate.
- UPS to Houston has experienced the most delays—8.9%, followed closely by New York and Los Angeles.
- FedEx delays have been most prevalent in Miami (13.8%), Chicago (13.6%), and Houston (13.5%).
Create a Future-Ready Supply Chain by Taking Stock of Lessons Learned From Peak Season 2022
Each of the above reference points indicates higher volumes, higher rates, and more instability. However, they all also point to one outcome—the need for accurate data to know which mode is best for every shipment. That also includes considering possible delays and total landed costs when planning similar moves in the future. That’s why partnering with a world-class shipping data platform and analytics solution like Intelligent Audit is invaluable. Intelligent Audit provides actionable insights, aggregate, normalized data, and meaningful metrics, helping shippers to finally make sense of all the noise and focus on what really matters, moving freight strategically. Get started by requesting a consultation with Intelligent Audit today.