Peak Season is a term that is thrown around the shipping industry and generally refers to one of 4 major shipping events during a calendar year: Lunar (Chinese) New Year, which ranges from January to February, Back-to-School, which ranges from June to August, “Peak Season”, the pre-holiday peak (from August to October), and Golden Week, the holiday that takes place from Oct. 1-7 and results in a complete manufacturing shut down.
These four times per year are typically when shipping demand is significantly higher than usual, leading to a decrease in capacity, and the new normal – additional freight charges. Peak Season surcharges have become a standard additional fee imposed by logistics companies, and cargo carriers during times of high demand and are charged to cover the increased operational costs associated with handling the increased volume of freight.
In this blog post, we will review what is in store for 2024’s peak season shipping challenges.
Specific Challenges of Peak Season
On top of the normal challenges all companies face at the end of the year, 2024 is offering her own unique set of hurdles. The first is that this is an election year, and the results will change the international trade landscape. Additionally, in 2024 we are looking at an early peak season, some saying started as far back as July. There are several contributing factors to the earlier peak season: Thanksgiving is late this year, only 3 weeks before Christmas, which will change the traditional holiday shopping model. There is uncertainty in the Red Sea, which is forcing many manufacturers to pull shipments in to adjust transit times.
Longshoremen Labor Talks
Most concerning is the East Coast longshoremen labor talks. As of midnight on Oct. 1, 2024, dockworkers at all ports from Maine to Texas went on strike. The 45,000+ individuals of the International Longshoremen’s Union couldn’t get their new contract approved before Sept. 30, 2024. While the ILUA is pushing for significant wage increases, they are also looking for a total automation ban on cranes, gates, and containers that are used in loading or unloading of freight.
Shipping port on the east coast.
The strike threat is currently at 36 U.S. ports. There hasn’t been an East Coast port strike since 1977. A prolonged strike would not only impact consumer goods but the economy as a whole. It is projected that every day of a port strike will take 5-6 work to clear back out.
Air Freight Surge Fees
While all of the U.S. supply chain/logistics managers are watching the ports, and seeing ocean freight lead time, costs, and bookings all go up as we reach the end of the month, the air carriers have done what would be expected. FedEx, DHL, and UPS have all announced new “Surge Fees” effective anywhere from Aug. 15, 2024, to Sept. 15, 2024. As of this writing, UPS has already more than doubled their “Surge Fee” from the initial $0.50/lb. to $1.09/lb. This significant increase so quickly would indicate that the air carriers are trying to get themselves ready to handle extra product moving from LCL ocean to air freight and even small packages. As the air freight capacity post-COVID still isn’t at the volume it was before, there are going to be capacity challenges heading into the new year.
Manufacturing Cycle Calendar Woes
As if this wasn’t enough of a maze to try and find our way through, the calendar isn’t helping the manufacturing cycle. Thanksgiving falls on the fourth Thursday of November. This year, that makes the holiday Nov. 28, 2024, which is almost a full week later than normal. This will impact some of the typical Black Friday shopping, as most consumers will not want to wait or risk waiting until so close to Christmas. As most manufacturing will be shut down Nov. 28-29, when we come back to work on Dec. 2, 2024, that leaves less than three weeks between the holiday shutdowns. By the time we come out of the U.S. holiday schedule on Jan. 2, 2025, there are less than 20 working days from the start of the Lunar (Chinese) New Year. If the normal shutdown pattern is to be followed, most manufacturing will start to run out production the week of Jan. 13, 2025, if not even sooner. Material shortages will be starting right after the New Year, as most production facilities are trying to run out of inventory prior to shutting down.
Strategies for Mitigation
Taking out all the unknowns due to the geopolitics surrounding international shipping right now, this is still a year that would present unique challenges. The calendar really doesn’t leave much margin for error when it comes to planning out your first quarter. The time to put your Lunar New Year plan in place is now.
The best way to manage these challenges is to have open communication with your suppliers on what their plans are to navigate these challenges. While the potential Longshoremen strike will “only” impact ocean ports, and therefore ocean shipments, it would be easy to write that off if you don’t ship via that mode. But the reality is regardless of a strike or not, all freight has already been impacted by the potential for the strike as we have seen in the flurry of surcharges from air carriers.
If the strike happens, the costs and lead times will just continue to be extended. So now is the time you need to be asking your supplier what their plan is with their freight forwarders:
- What are their backup plans?
- Do they have the ability to manage your inventory for the upcoming 3-6 months to manage your delivery?
- Do they have the right relationships to make sure your production keeps moving, AT THE SAME COST, regardless of the changes happening outside of the manufacturing process?
- Do they have extra QC plans to make sure they are ahead of any quality issues that may come up either due to rushed production, or transit damage?
- Do they have options for if a shipment gets lost in transit?
- Do they have alternate production solutions outside of mainland China if there are problems ramping production up after the CNY holiday?
Every year I find myself surprised that the U.S./Asia holiday season continues to bring new challenges, however, I find that every year, we continue to learn and strengthen our supply chains through those challenges.
This year will be no different, as peak season is here, and will probably be here through February of 2025. Regardless of what challenges, charges, lead time changes, or capacity issues, we get hit with, we will continue to adapt to support our customer’s needs.
Summary
As we navigate the tumultuous waters of 2024's peak season, it's clear that proactive planning and adaptability are essential for businesses to weather the storm. The combination of geopolitical uncertainties, labor disputes, and calendar-related challenges presents a unique set of obstacles.
However, by fostering open communication with suppliers, diversifying supply chains, and staying informed about industry trends, businesses can mitigate risks and ensure a smoother journey through this challenging period. While the road ahead may be uncertain, with careful preparation and strategic thinking, it's possible to emerge from peak season stronger than ever.
