How is the shipping industry faring this holiday season?
As families across the country break out their multi-colored pumpkins and compile their ever-growing shopping list, exciting preparations have begun for the holidays. Although, with the ongoing supply chain disruptions, port congestion, and driver shortage, the holidays could look quite different this year for the freight industry.
Out of Stock and Short on Time
It’s no secret that we are experiencing a global supply chain disruption brought on by the ongoing COVID-19 pandemic. In the early stages of the pandemic, the automatic assumption was for people to scale back their purchases, but the result was far more unexpected. With travel and entertainment unavailable, US consumers spent their leftover cash on goods instead. The shipping world did not come to a screeching halt but barreled forward at an unprecedented pace, which has resulted in tight capacity and extreme congestion within our ports. According to Bloomberg Businessweek, “About 860,000 inbound containers arrived into the LA and Long Beach ports on average each month this year, 24% more than the typical monthly volume in the five years leading up to the pandemic.” Convenience and comfort are also in short supply when considering the expected shortages, less selection, and higher prices for numerous holiday items like gaming consoles, TVs, toys, and more. Freight companies are feeling the heat this fall as shelves become more and more sparse due to the hiccupping supply chain, rise in e-commerce, and unforgiving expectations to deliver sooner rather than later. How does the truck driver shortage pile on top of this, and how does it impact the industry?
Driver Shortage or Demand Increase?
Though there has been a shortage of truck drivers since the 80s, the freight world is feeling the impact of fewer and fewer available drivers now more than ever, considering the 25% of truck drivers brimming retirement. Could this be a driver shortage, or has the demand for freight surpassed our standard driver supply? Chris Spear, President and CEO of the American Trucking Associations, reports the trucking industry is short 80,000 drivers, believing the answer lies in hiring a much younger generation. The average age for a truck driver is mid-to-late 50s. In comparison, others argue that the trucking profession’s 90% turnover rates caused the shortage. Regardless, the freight industry is experiencing a monumental impact from the supply chain disruptions and lack of drivers, resulting in rising rates and tighter capacity.
Industry Impact and Rising Shipping Rates
Supply and demand determine the current freight rates, and in this current market, the demand is higher than the supply can meet, which has resulted in record-high shipping rates and stalled shipments. To put it into perspective, as of November 11th, the average composite index of the World Container Index, assessed by Drewry for year-to-date, is $7,335 per 40ft container, which is $4,714 higher than the five-year average of $2,621 per 40ft container. Based on anticipated projections, shipping prices will hover in their current range well into 2023.
“As of November 11th, well over 100 container ships sit at anchor or berth in the Southern California Ports, causing a bottleneck of freight that can not reach the mainland. With the new dwell time fees and the holidays looming, congestion rises to critical conditions. At an already busy time of year for the ports and retailers desperate to ship their products before the holidays, inland transportation from Southern California will spike, causing demand and rates to increase like we have not yet seen ever before.” — Chris Olsen, Senior Vice President of Truckload.
Now is as important a time as ever for businesses to prepare for the holiday freight frenzy and utilize an innovative and reliable Transportation Management System (TMS). Priority1 prides itself on providing each of our customers with access to our powerful TMS, equipped with state-of-the-art Application Programming Interface (API), impressive less-than-truckload (LTL) quoting, dispatch, and real-time tracking based on check-in status. With so much uncertainty this holiday season, one thing is clear: your product is always our priority.
Check out Priority1’s previous blog post covering our solutions to the top challenges in shipping in and outside of the holidays.