Earlier this year, with the COVID-19 pandemic still largely playing a major role in the global economy seeing conditions further deteriorate and being driven by the steady drumbeat of heightened e-commerce activity, there was a consensus that conditions would be getting worse before they get better.
That was the sentiment from Brian Bourke, Chief Growth Officer for Chicago-based 3PL and freight forwarder SEKO Logistics, on a media conference call hosted by SEKO this week.
“E-commerce was driving a lot of this, with people buying things and not experiences like going on trips,” he said. “A lot of that still holds true today. We said it was going to be a perpetual Peak Season, and that has been borne out even more so than we knew, obviously with the Suez Canal issue and now with what is happening in Yantian, China, with congestion really everywhere, from upstream to the factory level and raw materials. There is a lot more of this capacity uncertainty and volatility, and all of those metrics continue to go up as the inventory-to-sales ratio continues to go down. It is a continual challenge we are working through in this environment, and we are advising clients to pull the trigger on bookings and POs [purchase orders] when they can. The idea of waiting this out is not really going to hold true this year into the 2022 Lunar New Year and really potentially beyond that, regardless of mode or geography, except for maybe domestic U.S. airfreight.”
Bourke added that a lot of this is being driven by the ongoing surge in e-commerce demand and the overall appetite for people to purchase large bulky goods and other things like apparel, electronics, and other goods. But this has trickle-down effects, in the form of capacity for infrastructure and commercial real estate, to meet needs on the building side, and also labor.
Addressing Peak Season from a port perspective, Brian Baskin, SEKO Logistics Managing Director, explained that, as a point of compassion, two-to-three months ago, there were around 30 vessels backlogged outside the Port of Los Angeles, with what remains to be seen is if the pendulum is coming back, as things get closer to Peak Season.
“I think the logic would hold that if the port has staff back up and more labor returning from the COVID situation that we are seeing vessels turn quicker,” he said. “We are still seeing a lot of delays getting cans [containers] off the port, so the average time to get a can after a berthing is around four-to-seven days right now, depending on the terminal. I think the other thing we are expecting is as the ships clear in Asia and start heading back this way, it remains to be seen whether we can keep pace with that wave of volume coming back all at once. It is that rare time in that we have concentration of a lot of containers that have been stacking up that are going to the same place. Carriers have consolidated stops to keep schedules going, and we have seen more drops, which puts a big strain on port infrastructure, when vessels come into the port.”
As the calendar shifts to the natural Peak Season, Baskin said the feedback from SEKO’s customers at POLA is that Pos are being pushed out, with things scheduled for earlier in the summer being pushed out to August. While he expects the summer season cargo coming in as they would for a normal Peak Season, there is likely to be what he called a collision in the August-September timeframe for POLA, at which point things are expected to be very congested.
The driver shortage, he said, has contributed to that problem, as it had before the pandemic, with the pandemic making things a little bit worse.
“It is still hard to get trucks and tractors,” he said. “The last number I heard on some lanes was $5 per mile getting out of LA on the long haul, and we are seeing a short dray market…with most dray men putting in port congestion surcharges.”
Looking ahead, Baskin noted that as the pendulum, regarding capacity and congestion slows down, it is likely port efficiency will improve, with the caveat that it will take around 18 months for that to occur, due to the back-and-forth nature of cycles.
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June 25, 2021 at 01:47AM
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SEKO Logistics execs discuss the (perpetual) Peak Season outlook - Logistics Management
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