3 Ways Summertime Can Impact Your Supply Chain
As we outlined in our Guide to the U.S. Truckload Market, three main cycles drive market activity: seasonal demand, annual procurement and market capacity.
The first — seasonal demand — is easy to observe and on full display during the summer months.
Memorial Day is the unofficial start of summertime shipping, and a great time for shippers and carriers to start preparing for the unique set of challenges and opportunities that the summer months will bring.
Even though the COVID-19 outbreak is going to dampen some of the shipping surges for the 2020 summer months, as the country starts opening back up and the temperatures rise, so will volume.
Changing vendors and suppliers, inventory concerns, uneven COVID-19 impact and differing regulations by region could all contribute to ongoing volatility in food and beverage supply chains.
Let’s take a look at some of the consistent trends of the summer shipping months, and three ways for shippers to mitigate volatility in any market.
When and Where Food & Beverage Season Occurs
As we get deeper into the summer, food and beverage season will take hold of the U.S. truckload market.
Similar to produce season, peak food and beverage shipping begins in the southern regions of the U.S. and migrates north as the weather heats up.
Hotter weather means more parties, picnics and barbecues, which means more cans of soda, bottles of beer, bags of chips, and jars of dip.
May — June
There are a lot of food and beverage production facilities in Mexico, so U.S. cities along the border are focal points early in the summer as retailers place orders to build up inventory. Major cities include: Laredo, TX; McAllen, TX; Nogales, AZ; Calexico, CA.
Wine shipments out of California and the pacific northwest also pick up in late spring and early summer. Heading into June, as beverage shipments increase, peak produce shipping subsides.
June — July
With summer in full swing, Texas and California will continue to be the driving forces for outbound capacity demand. Beer shipping from the border continues and demand for beef out of northern Texas and the central plains ramps up as the country hits peak BBQ season.
July — August
After the 4 thof July, summertime food and beverage demand winds down while back-to-school and retail begin to pick up.
3 Ways Summer Can Impact Your Supply Chain
Compared to Q1, the average freight volumes from our top 20 food and beverage shippers in Q2 typically increase about 25%.
Increased volume creates opportunities for carriers but can cause capacity disruptions for shippers. Though overall freight demand is softer than last year, we will still experience seasonal surges — this is especially true for refrigerated demand.
Like produce season, freight surges do not occur uniformly across the country, but are staggered at different times across different locations (see graphic).
Regardless of when and where shipping surges occur, they have a trickle-down effect on the entire nation. Carriers, the ultimate source of mobile production, migrate to surge shipping regions to maximize profit, causing capacity disruptions elsewhere.
As carriers migrate to take advantage of opportunities, spot rates will fluctuate accordingly. For instance, when beverage demand spikes in southern Texas, rates on lanes inbound Laredo will drop as carriers try to reposition their fleets.
Simultaneously, rates out of Laredo will shoot up until the shipping surge passes.
We are currently in a deflationary market, and as such, there should be enough excess carrier capacity to dampen significant spot rate increases, at least compared to markets like 2017 and 2018.
That said, we are also experiencing perhaps the most volatile truckload market in history. As the country starts to open back up, there is tremendous uncertainty.
Are my customers still in businesses? What will their needs be like? Are my carriers still in business? What about my vendors? Can I keep my own people safe? Do I have to limit or change production?
If the past two months are any indicator, supply chains are learning that flexibility is the key. When you have surge freight, special projects or rerouted networks this summer that fall outside of your regular commitments, look to providers that can shift with your needs.
3 Ways You Can Limit Summertime Supply Chain Disruptions
1. Optimize Your Routing Guide
Before demand starts to spike, review your routing guide. In the current environment, make sure you’re regularly checking with your providers to see what their current capacity situation is like.
Can they handle a surge in your shipping? If a carrier fails, what are your second and third options? If you have networks shifts that need to go back out to bid, make sure you take a strategic approach with your RFP process.
Don’t lose sight of KPI tracking. How are carriers performing? If any are rejecting tenders or failing to meet your KPIs, can you rely on them during peak food and beverage shipping as the market recovers? Balance cost and service.
This is a great time to implement or improve a continuous improvement program.
2. Maximize Lead Time
Wherever possible, plan ahead. The more notice you can give your carriers, the less likely you are to experience supply chain disruptions.
3. Prioritize Shipments
Competition for capacity in certain regions at certain times may be intense. To ensure your most critical shipments reach their destinations on-time, determine which have flexibility, which are truly time-sensitive and prioritize accordingly.
Don’t Sweat Changing Temperatures or Changing Networks This Summer
Though the current deflationary market environment will likely limit the impact of any seasonal demand dislocations, shippers that understand the trends and take a few simple steps will be in a better position to out-ship their competition this summer.
Need help mitigating risk during the upcoming summer shipping months? Get the flexible capacity you need with instant spot quotes and access to a massive, centralized marketplace of over 70,000 carriers.
Originally published at https://resources.coyote.com.
