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October 1, 2020 11:45 AM, EDT

Trucking Approaches Holiday Shipping Season ‘Unlike Any Seen Before’

packages at door with wreathTriggerPhoto/Getty Images

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An exceptionally busy holiday shipping season appears to be on the horizon, and with it comes concerns about capacity.

Ware2Go released a survey Sept. 24 showing market shifts brought on by the coronavirus are signaling unprecedented demand. This comes less than a month after FedEx Corp. made the same prediction. Now some experts are warning the industry to prepare.

“There’s no doubt this holiday shopping season will be tricky for merchants and fulfillment providers,” Ware2Go CEO Steve Denton told Transport Topics. “We’re anticipating this year’s shipping volumes to hit a new peak. With most supply chains already working above their 2019 peak shipping volumes, we recognize that this holiday season will be unlike any the industry has seen before.”

Stephen Denton

Denton

Ware2Go’s survey found 74% of merchants expect to see a holiday demand spike this year, with 56% believing that spike will be at or above peak 2019 volumes. The company also is predicting the holiday season will be longer, with retailers announcing earlier Black Friday sales to accommodate social distancing.

“Beyond the anticipated increase in shipping volumes, we also expect to see a longer peak season this year that will require carriers to begin operating at holiday volumes in only a few short weeks,” Denton said. “We also expect peak shipping levels to continue well into January when taking the traditionally higher return rate for e-commerce sales into account.”

Ware2Go is an on-demand fulfillment network and integrated tech platform founded by UPS Inc., which ranks No. 1 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 2 on the Transport Topics Top 50 list of the largest logistics companies.

“That FedEx and UPS have indicated their expectations are for a record-setting exceptionally busy holiday season is consistent with other metrics we have been tracking,” Paul Bingham, director of transportation consulting at IHS Markit Economics, told TT. “Retail sales figures for online purchases of goods have been setting records during the pandemic.”

DHL eCommerce Solutions expects to see 30% to 50% more volume this holiday season compared with last year. DHL Express anticipates receiving around 50% more inbound volume into the U.S. than previous peak season.

“We’ve seen a pretty robust market since Aug. 1,” Todd Tranausky, vice president of rail and intermodal at FTR Transportation Intelligence, told TT. “You not only have the holiday hold-through, but you also have retailers trying to restock their inventories. You have both of these demand levers trying to fill at the same time. Given COVID-19 and given that people can’t really go out this holiday season, we really expect to see less spending on services and more money on goods.”

A potential headwind is the high unemployment because of the pandemic. Tranausky noted that no one knows how it will play out.

“It is the elephant in the room,” Tranausky said. “The longer unemployment stays stubbornly high, the higher that risk gets. Particularly with business investment and spending on the sidelines at the moment. It’s up to the U.S. consumer to drive that demand.”

Tranausky noted one consideration is whether the government will pass another stimulus deal. Nevertheless, he has seen supply chain companies position themselves for a potential rush. But that raises the question of capacity.

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“This is shaping up to be a very difficult season from all aspects, and the problem starts on the other end of the chain,” Lee A. Clair, a managing partner at Transportation and Logistics Advisors, told TT. “That is on the truckload, intermodal, shipping and airfreight. There are significant capacity problems from every aspect.”

Clair pointed to air and ocean freight shippers, both of which have been having trouble finding capacity. The next issue is on the truckload side, which is dealing with greater e-commerce demand.

“The net effect is everything has shifted, and the more you shift the flows, the harder it is to manage and get productivity out of the capacity and the more you’ll also shift the truckload to LTL,” Clair said.

The already rapid growth of e-commerce has accelerated this year because of the coronavirus. Clair noted the pandemic in many areas has subsided, but buying online likely has become the norm for many consumers.

“The implications for freight carriers for the holiday season is a continuation of pandemic retail spending patterns,” Bingham said. “Shoppers now experienced in making e-commerce purchases are extremely likely to continue that pattern of purchasing during this season.”

Logistyx Technologies President Ken Fleming echoed the capacity concerns. He recommends that retailers diversify their carrier network to address shortages in availability and costs by incorporating local last-mile carriers.

“Large, well-known merchants are already being warned by carriers they won’t be able to deliver all of their anticipated holiday parcels,” Fleming told TT. “Challenged with decreased carrier capacity and high shipping costs heading into peak season 2020, utilizing a regional carrier strategy will be critical to meeting increasing e-commerce demand.”

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