What Shippers and Retailers Need to Know for Peak Season Planning 2022
WRITTEN BY STEFANY MARTIN / POSTED ON
When asked what peak season is, it’s easy to assume the holidays are the only peak shipping season. However, four shipping seasons occur throughout the year and are often regular and expected. That was the case until the ongoing disruptions of the past few years changed the shipping game. Today, the shipping peak season is still a march toward the holidays, but that march is now at a breakneck pace and subject to massive volatility.
Bottlenecks from future COVID-19 variants are possible. We’ve seen how the lockdowns in Shanghai snarled global supply chains. Weather events might also be factors. In addition, retailers are struggling to move inventory initially ordered in the first quarter of 2022 to make way for back-to-school and holiday merchandise.
There’s a massive amount of uncertainty still at play in the market. For shippers and retailers to understand the true peak season meaning, they will need a firm grasp on the realities of inflation, expectations, and the use of technology to get through it.
When and What Is Peak Season?
The peak season definition is a continued evolution of the seasons in transportation. They’re usually broken into four seasons:
- Q1: The Quiet Season
- Q2: The Produce Shipping Season
- Q3: The Peak Shipping Season
- Q4: The Holiday Shipping Season
In the age of disruption, none of these seasons have been regular. Above-average holiday shipping seasons in 2020 and 2021 led to an above-average returns rate in the usual Quiet Season. Continued lockdowns over the emergence of new COVID variants left the Produce Shipping Season of 2021 in a panic. Even once a vaccine was available, additional breakouts of new variants in Shanghai put the brakes on transportation expectations for the Produce Shipping Season in 2022. These factors have made managing last-mile delivery in retail ever more complex.
Now, it’s also important to realize that produce grown in North America may not be subject to lockdowns in Shanghai, but there’s another factor at play. The ongoing Ukraine–Russia conflict has caused turmoil in significant parts of the global food chain, and in fact, Ukraine is a major exporter of barley (30% of global totals), wheat (25%), and sunflower oil (60%).
Further, Ukraine supplies more than one-half of the world’s neon gas necessary for printing circuits on computer chips. With Russia exporting many critical commodities, Deloitte explained, there are insufficient raw materials for supply and manufacturing use. Therefore, produce ready for shipping may be stalled due to a limited supply of equipment and trucks (hindering capacity procurement), fewer drivers, and the pressure everywhere to move things faster, save money, and get it done without impacting the customer experience.
Given all this information, it’s not surprising that more shippers and retailers are looking to a much earlier start to peak season planning. Shippers that do not yet have a plan in place are more likely to find most of their freight moving through the spot market in Q3 and Q4. As a result, shipping costs will undermine any potential gains.
The risk for higher peak season shipping surcharges is a certainty. Yes, all parties have metrics and KPIs that help them know when to switch carriers or where to throttle ordering, but that’s not acceptable to customers. They’ll simply abandon ship and go to Amazon. Worse still, drivers feel the impact as service demand declines in the target markets. And there’s the fact that even if the customer goes to Amazon, it may still be routed through a third-party seller on Amazon itself.
Would it not be simpler to access capacity that can scale while keeping tabs on the total costs more easily?
But back to the overarching point. Even if fuel costs were to decline, the peak season shipping surcharges would always reflect an average over the recent weeks. And with little to no end to the ongoing Ukraine-Russia conflict, continued pressure to move more freight, and a limited supply of workers, as well as possible compounding effects from global boycotts of Russian goods, including petroleum, the best bet is to plan for even higher fuel costs in the latter part of 2022. Thus, shippers have plenty to worry about as peak season draws near.
What Does Peak Season Mean With Inflation’s Growth?
Understanding the needs of the 2022 peak season starts with understanding where the cost of transportation sits today and how that will impact peak shipping season demands and costs.
According to the U.S. Energy Information Agency (EIA), the on-highway diesel fuel cost has risen to $5.703 per gallon as of June 6, 2022. That’s a staggering jump of more than $2.40 for the same period in 2021. Depending on the region, the total jump in fuel prices is more than $3.00 over the 2021 cost, such as in the New England region.
Driver pay is also a contributing factor to the uncertainty of peak season. In April, a USA TODAY report stated that Walmart increased annual driver starting wages by $7,500 to $25,000. But in the gig economy, where courier networks reign, the increased pay primarily reflects the growing fuel cost.
While on-highway diesel rates play into the readiness and concern over the future of peak season 2022, couriers must be concerned with the cost of regular gasoline, which is also sitting at $1.841 higher per gallon than in 2021 on average. And statistically, courier drivers see a salary increase every seven months, Salary Explorer reported.
Yet, the range for pay is mainly dependent on the overhead of many drivers who fall into the realm of the gig economy, where rates can range from mid-$20,000s to nearing $100,000 or more annually for high-volume, high-value goods transit in urban areas. So the next question is, “what’s expected to happen in peak season for 2022?”
Let’s take a look.
What’s Expected for the Peak Shipping Season in 2022?
The most significant expectations for the 2022 peak shipping season come from the growth of e-commerce and its impact on global supply chains. As explained by Forbes, e-commerce will account for 20.4% of global retail sales by the end of 2022. However, with that growth comes the expectation for more disruption.
As noted by DC Velocity, “most freight forwarders, traders, and shippers expect more disruption in the 2022 third-quarter peak season than they felt last year. The survey also found that although many companies have arranged international shipments early this year, most continue to rely on the spot freight market to move goods.”
The survey detailed by DC Velocity further found that up to “51% of industry professionals expect 2022 peak season to be worse than 2021, while 26% say it will be “less chaotic,” and 22% expect about the same level of “chaos” as last year.”
That report also is several months old, and the story of the second half of 2022 is still in the works. But fortunately, today’s shippers are creating a new approach to managing the demands of peak season well before it arrives: “The industry is employing a number of strategies to deal with the potential shipping problems ahead, including growing their networks (56%), forming long-term contracts (38%), and following a ‘multi-tender strategy.’
According to the data, nearly 38% of respondents said they were ensuring clients received enough inventory by shipping early in 2022; 25% were using alternative shipment routes; and almost 19% were contracting long-term slot agreements with carriers.”
Those changes in how shippers tender individual loads significantly differ from the traditional standards of using a full-blown TMS for every movement and delivery. Even more importantly, using an app and integrated systems like OneRail has transformed last-mile delivery experiences into something akin to using a favored residential takeout app. Similarly, retailers are enjoying the ability to control their delivery networks. The app also helps handle the mounting pressure for more middle-mile moves when a distribution center or warehouse needs to get goods to a store for customer pickup.
There are additional massive opportunities to use data analytics to understand the performance of all networked drivers, including couriers to sprinter vans drivers, that will be vital to maximizing capacity as peak season unfurls.
Be Disruption-Ready and Shipping Peak Season-Ready With OneRail at Your Fingertips
Nothing but uncertainty is certain in freight management, and no mode has a higher risk or cost than the final mile. So today’s shippers need to know what they’re up against and put the right partnerships in place to allow them to focus on sales, not transportation. OneRail provides the solution to have shippers concentrate on building the company by offering an “open-app, get last-mile capacity” means of handling the sudden demands and rising peak season costs.
Request a OneRail demo to learn more about how your team can be better equipped to handle surges in demand through all shipping seasons, not just peak season, and scale effortlessly through technology.