This peak season is set to be characterized by supply chain
disruption. In this QAD Precision Report we look at how parcel
shippers can mitigate delays and high costs.
The global supply chain is facing more pressure than ever before.
Over the past year and a half, Covid-19 has caused shipping problems
throughout the world. Today, supply constraints and port congestion
continue to affect shippers globally. This turmoil is resulting in
consumer product shortages, delays and increasing shipping costs for
companies and is particularly alarming as peak season begins.
Shipping costs are continuing to climb for global shippers. According
to data provider Freightos, shipping
costs have surged to approximately $15,800 to transfer a
40-foot container from China to the US west coast. This is a tenfold
increase on levels before the pandemic.
An analysis of shipping, port and manufacturing data at IHS Markit
reveals the delays will extend into 2022. Furthermore, some shipping
executives have a more pessimistic outlook and expect the disruption
to continue into 2023.
Due to the disruptions, larger manufacturers and retailers are
considering strengthening their supply chains by holding
more stock, double sourcing or even reshoring production.
However, this is costly.
Disruptions in Apparel and Footwear
In Vietnam, one of the busiest manufacturing centers for apparel and
footwear in the world, factories have been forced
to cease operations in recent weeks due to Covid-19
related restrictions. Over 30 percent of the nation’s garment and
textile factories were closed, according to the Vietnam Textile and
Apparel Association. This is alarming for retailers and shippers
around the globe. In the US, approximately 40 percent of the volume of
goods imported by sea over the past 12 months to July came from
Vietnam, according to data
from S&P Global Panjiva.
Moreover, two large footwear suppliers — Taiwan’s Pou Chen, which
manufactures shoes for Adidas and Nike, and South Korea’s Changshin,
which also supplies Nike — suspended operations last month.
Adidas CEO Kasper Rorsted said the sportswear company will not
be able to fully meet demand for its products in the
second half of this year — citing factory shutdowns as the issue,
despite switching production to other regions.
Similarly, shoemaker Steve Madden says they're already missing out on
sales because they do not have enough stock.
As a result of these shutdowns, brands are scrambling to outsource
manufacturing elsewhere to avoid delays as peak season begins. Women’s
retailer Chico’s revealed that it has moved
90 percent of its overall production out of Vietnam into
alternative countries. Likewise, golf-club maker Calloway has shifted
some production capacity to suppliers outside Vietnam to mitigate
supply chain disruption in the third quarter.
In the UK, the chief executive of the British Retail Consortium Helen
Dickinson has warned that consumers may see reduced
choice and surging prices for products and presents as peak season
approaches. Additionally, toy retailer The Entertainer said
prices could rise by 10 percent over 18 months due to supply chain
disruption, labour shortages and higher transport costs.
Peak Season Surcharges
In addition to increasing inbound, ocean shipping costs, many
outbound shippers will be subject to peak season shipping surcharges.
have outlined peak season shipping surcharges for shippers, with high
volume shippers and shippers with large packages the most affected.
The spike in volumes shows no signs of subsiding. Post-peak season,
from January 17th 2022, FedEx will add a $0.60 per-package surcharges
for Express and Ground home deliveries in the US. At present, there is
no end date listed.
These new delivery surcharges will add pressure to shippers and
retailers as they determine whether to absorb the price rises or
transfer them on to consumers by increasing product costs.
Optimising Last-Mile Delivery
It is crucial for shippers to optimize last-mile delivery to minimise
customer delays. This peak season, there are expected to be 5
million more parcels seeking delivery each day than providers able
to handle that demand, according to UPS Chief Executive
Officer Carol Tomé.
The latest PMI survey from IHS Markit’s of global manufacturing
revealed that the delays in delivery times are the most severe on
record, causing prices to surge at one of the quickest rates in a decade.
recently announced that it is launching a new delivery service for
merchants throughout the United States as shippers hurry to secure
deliveries ahead of peak season.
To avoid delays and meet customer expectations, enterprises should
harness a multi
carrier shipping software solution that includes global,
national and regional carriers. With multi carrier shipping, companies
can compare carriers to secure the best rates, transit times and
arrival dates while leveraging small and regional carriers. During
peak season, organisations can diminish the risk of delays by
rerouting packages to carriers that are the least affected by the
Although shippers may not be able to control macro economic forces,
they can ensure their parcel shipping operations are flexible and
robust enough to weather the storms of supply chain disruption. With
multi carrier shipping software, companies can reduce delays and
improve customer satisfaction.
BENEFITS OF INTEGRATING COMPLIANCE AND MULTI CARRIER SHIPPING SOLUTIONS
MINUTE EXPLAINER: WHAT IS MULTI CARRIER SHIPPING SOFTWARE
BENEFITS OF MULTI CARRIER SHIPPING SOFTWARE