This post is the second in a series exploring the dynamics of the 2020 retail peak season. To learn more, please read the other entries in this series:
- 2020 Peak Season: What Retailers Can Expect
- 2020 Peak Season: How to Prevent Cargo Theft During Peak Shipping Season
- 2020 Peak Season: Tips For Shippers
- 2020 Peak Season: Guide To Peak Season Shipping Success
How the 2020 peak season will turn out is a guessing game right now, but it’s safe to say that COVID-19 will continue its trail of disruption. It’s clear consumer spending habits have shifted to e-commerce in response to the retail upheaval, with e-commerce sales expanding more than 30% between the first and second quarter of 2020. That’s 44.5% above the second quarter of 2019, according to the U.S. Department of Commerce. While overall retail sales are expected to decline 10.5% this year, e-commerce sales will rise 18%, claiming a larger share of sales than ever before, Modern Retail reported.
The timing and curve of the peak season are still shaping up. With many families spending more time at home, they may have already invested in big-ticket items like video game consoles and bicycles that would usually be reserved for holiday gift-giving. Experts speculate that this year’s peak may be spread out for more months, but overall may still equal or exceed previous years.
With so much uncertainty in play, shippers must understand and prepare for the challenges ahead.
Peak Season Challenges Will Stress E-commerce and Retail Supply Chains
For 2020, agility will be the name of the game for retailers adapting to COVID-19 and changing consumer demand.
First, shippers must secure capacity, which could lead to upward rate pressures. Overall, daily truck trips have briefly bounced back to pre-pandemic levels, according to DAT.com. Carriers seem to be honoring volume commitments, but surge capacity hasn’t re-entered the market. Carriers are more conscious than ever about dwell time and lost productivity, so arranging dock and yard operations for maximum speed could help you become a shipper of choice.
Securing capacity will help support on-time inventory replenishment and avoid stock-outs. In 2020, stock-outs could lead to long-term brand erosion as consumers seek products from other sources. Manufacturers are still recovering from shutdowns earlier in the year, and employee health precautions such as separating employees on production lines are slowing the recovery. Typically, demand planning is based on historical data, but for 2020 those numbers won’t be as useful.
Network Realignment & Visibility
Many retailers are bulking up their e-commerce capabilities, shifting retail stores to become fulfillment hubs closer to major markets. That will change the mode mix between truckload, less than truckload and parcel. Many shippers will shift to smaller, more frequent shipments between manufacturers/importers, regional distribution centers and the forward-deployed e-commerce fulfillment centers. Just-in-time replenishment for store shelves and buy-online-pickup-in-store (BOPIS) purchases will lead to a heavier reliance on parcel, LTL and final mile networks.
To support the transformation, visibility for inbound freight and e-commerce orders will be more critical than ever to provide the level of service that customers have come to expect. Of course, in-depth, real-time insights into inventory levels and locations will help reduce unnecessary stock build-ups.
Surcharges & Accessorial Charges
One caveat for shippers is to understand your carriers’ surcharges and accessorial charges to manage your spend. UPS, FedEx, and the USPS have announced surcharges for the holiday peak season to overcome the extra cost of increased residential deliveries. Fuel surcharges could be a factor again, as well as accessorial charges on freight bills.
Accessorial charges allow carriers to charge shippers who use special services, such as heavy loads, liftgate use, inside deliveries, or trailer repositioning. Be aware of accessorials for oversize shipments, for example. Parcel carriers add extra fees to incentivize shippers to move large packages through the LTL network instead of the parcel channel. Controlling final mile costs will be a key challenge for shippers this peak season.
Last year, 73% of retailers surveyed by the National Retail Federation said they were victims of cargo theft. The most common target for thieves is shipments en route from the distribution center to the store. Today’s shippers can select from a myriad of service providers and technologies to secure their cargo. In the next post in this series, we will address cargo security in detail.
2020 Peak Season Solutions
To prepare for a peak season like no other, retailers must understand the available strategies to transform their transportation networks and enhance their e-commerce capabilities. Agility and the ability to adapt and embrace rapidly changing requirements will be key to success. Transportation consultants like GlobalTranz can advise you on using some of the latest techniques such as:
Pop-Up Fleets (dedicated capacity)
A pop-up fleet supplements shippers with high volumes and/or private fleets with additional short-term, easy-to-engage capacity at a pre-determined rate. Shippers can avoid paying high spot-market rates when capacity is tight while ensuring service standards are met.
Drop Trailer Programs
Carriers hook up to trailers that are ready to roll with less waiting time, which reduces detention charges. Also, shippers can meet strict must-arrive-by deadlines and avoid penalties.
Final Mile Delivery
It’s important to make commitments for reliable final-mile delivery services for larger shipments and parcels to fulfillment centers and direct-to-consumer deliveries. Retailers without the capability can partner with a service provider for the visibility required to manage final-mile movements.
The growth in e-commerce means a boom in returns as well, and shippers must have a system to handle goods moving back to fulfillment centers. Retailers must consider reverse logistics for all channels, not just in-store transactions.
Develop Your Peak Season Plan with a Strategic Consultation
For the 2020 peak season, retailers must look beyond last year’s strategy to leverage technology, multi-modal networks, and innovative services. It’ ‘s not too late to get control of your peak season shipping plans. Consult with GlobalTranz to learn more about transforming your supply chain strategy to succeed in this new retail environment.