Every year companies of all kinds, sellers, resellers, importers, manufacturers, you name it, await & prepare for the most prosperous and profitable part of the year, a period known as Peak Season, that starts in mid-August and stretches to the end of autumn, usually until Thanksgiving in the US. This phenomenon is usually triggered by consumer behavior as a result of the holiday season we experience each year; people spending their savings on late night store purchases and placing late internet orders are just some of the effects that intensify after this period.
But, how did it all start? How did this phenomenon become so influential in the lives of consumers, businesses, and people around the world? Well, we can trace it back all the way to the 1900s. The 50s was the era when credit cards were first issued and started to gain popularity. Mankind for the first time in history was able to make purchases without having to disburse their cash in advance with the use of a credit card. However, the vibrant middle class would then experience several learning curves throughout the decades that would eventually change the course of the global economy. The use of credit has remained one of the primary factors driving the phenomena known today as peak season, that would continue to evolve and change the life of the consumer forever.
Now as we understand what Peak Season is from its origins, and the consumer perception from a general perspective, what is peak season in logistics? How does this yearly phenomenon affect the daily lives of consumers and operators at the forefront of supply chains?
Peak Season in logistics is the busiest part of the year for logistics and supply chain professionals. It is the increase in demand for capacity due to the prime time of retail season, holiday season, back to school purchases, and the clearance of inventory from the summer period. At this time of the year, freight rates skyrocket and the capacity for loading cargo becomes incredibly tight.
As a result, businesses have a hard time finding transportation capacity due to the heavy increase in demand in the market. Obtaining the service you need becomes a price war, where only the highest bidder wins. This results in other issues such as shipping and receiving constraints at ports, terminals, and various shipping points along the value chain. For the everyday operator, every logistical requirement at that point becomes more challenging, creating a snowball effect caused by the many elements affecting the flow of products within businesses.
However, not all aspects of peak season are influenced by typical consumer factors like online order increases or expedited delivery services. There are other relevant factors among practitioners that do not necessarily get the attention of the mainstream public. However, they are certainly more relevant to how Peak Season takes shape every year. Here are some common examples:
Not every product or industry has its prime time during peak season; other industries, especially the ones that aren't directly related to direct consumers, may have their prime cycle at another time of the year, such as the end of winter or mid-spring when factories ramp-up production. Also, products with longer life cycles could also have their own seasonality. This is imperative because seasonality cycles could get delayed or extended for whatever reason and could spike at peak season period, altering the pattern for the peak period of a specific year at a micro-company level.
Trade regulations are a clear example of how regulatory changes can have a direct impact on supply chains, businesses must undergo challenging adjustment periods in order to become acquainted with and compliant with the latest changes. For example products that were destined to be delivered at the holidays wouldn't make it on time, because they were subject to a rudimentary *AD/CVD regulatory update. As a result, products can get delayed on the delivery or stuck at certain point because companies weren't able to adjust on time. Regulatory changes could alter how periods normally behave, resulting in possible additional constraints due to increased port or warehouse congestion from all the held inventory.
(*AD/CVD: antidumping and countervailing duties; intended to offset the value of dumping and/or subsidization, thereby leveling the playing field for domestic industries injured by unfairly traded imports in a given country.)
The nature of supply chains is full of disruptions, operators are constantly witnessing disruptions, and sometimes they have a predictable pattern, but when we think about unusual disruptions, we consider those that have a massive impact and which are disruptive enough to totally alter consumer behavior, or to cause an economic recession. Examples of uncommon disruptions that could impact or intensify peak season period are pandemics, natural disasters, geopolitical conflicts, etc.
The peak season is important because even award winning supply chain companies may have difficulty finding transportation capacity and their freight spend will increase during a 3-4 month period on average, consumers may experience a price hike or a delay in receiving their orders, and, in the most extreme cases, peak seasons can be the trigger for a recession if gone out of control. Knowing how to effectively navigate through Peak Season every year is crucial to operators in various roles, especially to companies with shipping needs. Here are some recommendations for the shipping peak season:
It’s very critical to never ignore the rule of forecasting, which is, forecasts are always wrong! Always keep this basic rule of thumb in mind. Instead, effectively communicating with your vendors and suppliers about the peak period is so crucial to your overall success during this period and throughout the year. Keep in mind that your suppliers and vendors will themselves pass through this phase, which means making sure you are not just placing orders earlier or adding an additional inventory buffer but you are also communicating your objectives with your suppliers, and as a best practice you should get them engaged in your strategy to make sure they are aligned as well.
“Forecasts are always wrong!, always keep in mind this basic rule of thumb”
Now that you have the right commitment from the suppliers, it’s very imperative to designate the right routing strategy. Two of the most important things to consider are your company's ABC inventory strategy and transit times to final delivery. This is of course if your company is responsible for the transportation. The most effective and anticipated way to navigate peak season later on is to understand whether your current routes are optimized for the coming period. What might be working today might not be the most appropriate option for tomorrow. For example your company might have something that is used to shipping via LTL and, since LTL transit times are longer, it might be worth spending more on FTL or expedited services to allocate inventory faster and in larger volumes.
Shipping dates are also an incredibly crucial part, especially for international modes of transport where there are more barriers in the physical process. You have to define first what is your ideal shipping date, what is your goal and also what could go wrong, keep in mind all the possibilities, rolling vessels, unavailable equipment etc. Once you have your desired shipping date and well defined, communicate that to your consignees. Make sure they are prepared to be over-stacked and to receive materials sooner, so if there is any adjustment to be made, your team is able to respond as soon as possible.
Traditional ports of clearance tend to get very congested. You need to develop an alternative for your shipping routes to avoid congestion. The preferred option is to develop new routes, start by sending non-urgent shipments through a new port, and get accustomed to it quickly, make sure you are practicing these trials at reasonable time of the year, start measuring the timing and the processes you need to consider for the new ports, as well as putting in place internal and external standard level agreements with your team and service providers. Once you have completed the assessment of the new route, you are ready to ship on a regular basis.
Leverage capacity from different service providers might sound like the most logical solution, but it is never necessarily that way. Have the right service providers in place that can give you not just the capacity but also the control you need to keep consistency and operations in control. It's not about over-procuring your routing to optimize for cost; it's about optimizing for capacity to build flexibility while keeping costs under control. Try to avoid depending on the spot market for capacity, at least for your most critical products.
Planning is not always perfect, so have a back-up plan in place for any contingency, learn from previous experiences or start by asking yourself key questions; what were the most challenging/costly delays from the past? was there a lack of receiving capacity at the destination? etc. If you are unable to start from there, gather with your team to discuss solutions, here are some suggestions for the process you can follow with your team: 1) Identify the biggest areas of risk that will impede your team to get products on time, 2) ask what could go wrong? 3) Map out your current process 4) list the most important risk areas, 5) define the potential solutions, 6) shortlist until finding the optimal solution, 7) build and document a plan for everyone to follow.
Once your team’s is fully prepared for peak season, here are some recommendations for effectively navigating this period:
Consider treating peak season as a project, set clear metrics and goals, and start with what needs to be accomplished internally and what needs to be avoided; keep close contact with all your departments and teams involved.
Monitor ports of clearance consistently; delays that will affect your deliveries are those happening at the ports. Consistent monitoring will allow you to respond on time, or at least make it easier to resolve any issues. Always stay alert for potential delays at ports and terminals.
Leverage from a good technology stack to keep your operations under control. Having an internal ERP solution that links your orders and materials from your suppliers is a good start, also partner with a service provider with the right technology that will give you clear visibility for all your shipments' life cycle and provide you the necessary information to take actionable steps.
Peak Season is always unpredictable, doing a forecast does not equal a successful shipping season, ideally preparing a good and fluid distribution plan that everyone aligns to is the most optimal option, with not one but a couple of contingency plans in place to stir away your shipments from potential delays with a backup ready to be executed, and finally is as equally important to leverage from the right partners with the right technology in place to help you succeed at peak season and at any time of the year.
In Camionix we help shippers, importers and exporters, plan better and effectively navigate turbulent peak periods. We provide the right visibility and expertise to build solid plans and make customers supply chains more efficient.
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