Retail sales and consumer demand are still outpacing attempts to build inventory and despite the massive boom in imports, the inability to create inventory is likely to continue all year for many commodities and finished goods. So, if you want stocked shelves this Christmas, it’s time to start planning your shipping schedule, or you may find your shelves are empty long before the Christmas shopping season starts – which is not a good business model.
This year, you can throw the rule-book out the window, with pandemic driven demand creating a continuous peak and blowing away any notion of the ‘traditional slack’ season. It hasn’t and isn’t going to happen with the global container freight market at a demand never seen before – so what is to come.
Without the lull, ahead of a peak season, pressure on global supply chains is unrelenting, which means congestion and service disruption must be anticipated and the prudent shipper will start planning their Christmas shipping schedule now. That’s without all the other considerations of the impact on delayed carrier schedules, global port congestion, capacity issues and many more dynamics on the end-to-end movement of products globally.
Despite the continuing boom in imports since the Q3 2020, retailers and manufacturers have struggled to improve their inventory-to-sales ratios and as they struggle to catch up – before they even think about Christmas – demand from Asia is forecast to leap further soon, because the real recovery in Europe has not yet begun, with the easing of country specific lockdowns and the opening of the tourist sector.
The UK is currently opening up from COVID-19 enforced restrictions, France is only just coming out, while Germany is still on its way to opening up, so we haven’t seen their economic rebound yet. That’s without the other countries in Europe relaxing and that are being considered as an ongoing process with the vaccine roll out becoming more prevalent.
With billions of Euros in bank accounts ready for consumption, their rebound will start soon and continue through the second half of the year, as demand across Europe accelerates. Putting even more pressure on Asia to North Europe trade lanes and supply chain infrastructure.
Data from Container Trades Statistics show that despite strong year-over-year demand growth on Asia-Europe is up less than 1% (100,000 TEU) compared to the previous 12-month period and just 1.5% compared to the first quarter of 2019.
Contrast this with the US, where imports from Asia over the same period are up 15.4% (2.38 million TEU) and up 27.7 percent (1 million TEU) compared to the first three months of 2019.
That, in turn, implies massive demand, more premium charges and even higher all-in costs for importers racing against the Christmas season clock, which in reality, may be already ticking.
Retailers need to build up their inventories by October to be prepared for the peak holiday shopping period, but economists warn that demand has been so strong in many sectors, that many retailers trying to reach the their 2019 inventory-to-sales ratio would have to grow volumes by as much as 85% more than they did in the same period in 2019.
Even if we slash these forecasts, there will be tremendous demand for inventory replenishment over the coming months, but with air freight capacity effectively capped for the rest of the year and shipping Iines struggling to add capacity, how will all this inventory be built up in time. Planning, visibility and a collaborative approach have NEVER been more high profile than in 2021. Will this change over time – probably…..in fact most definitely – but to ensure that you have the right product in the right place at the right time this year a strategic approach is not an option.
If shippers want to get their product in, in good time for the Christmas season, they need to be aware that every container slot that is available, is going to be taken and they need to plan for that, by speaking to us at the earliest opportunity, so that we can create flexible booking schedules, that will assist in achieving their deadlines.
We focus and advise constantly on the current market which is changing weekly- if not daily – and please contact us to assist in ensuring that you can be as successful as possible in the current market and during the current economic recovery. The situation is global with many forces and effects outside of local regional markets and economies having an impact on supply chains.
For further information and advice please contact Grant Liddell or Elliot Carlie to discuss you requirements in Q3 and Q4 of this year and beyond. We will provide further updates on the shipping and air freight landscape and be delighted to assist you to formulate your supply chain plan now and in the future.