As the holiday shipping season approaches, shippers are planning new strategies to ease freight pain. The on-time delivery of packages is a major issue for retailers and consumers alike. To improve efficiency and get more products out faster, some companies have already begun implementing baggage handlers or sending shipments by air instead of ground transport.
Businesses wracked by high logistics costs and freight constraints are extending the workarounds they used during the epidemic and adopting new techniques in the new year to alleviate supply-chain misery.
Some companies are increasing their use of temporary methods like holding goods in idle truck trailers, while others are putting in more effort to extract more capacity from overburdened distribution networks or save costs by sourcing products and raw materials closer to home.
Retailers, manufacturers, and distributors, particularly small firms striving to compete with well-capitalized rivals, are reacting to a transportation space crunch as enterprises have scrambled to restock pandemic-depleted inventory during the last year. From ocean shipping to trucking and package delivery networks, demand is outstripping capacity, pushing up supply-chain costs and putting pressure on profits.
Warehouses in California’s Inland Empire are an important part of the supply chain in the United States. This Christmas season, low warehouse vacancy rates in the region, along with port delays, are creating a perfect storm of issues. Sam Rosenthal/Getty Images
Despite the fact that the holiday rush is passed, the strategies firms used in 2021 are still relevant since shipping prices are likely to rise even more in 2022 as strong U.S. consumer spending drives continued high freight demand and the supply-chain congestion.
“They’re looking at any method they can to cut their own expenses so they can make the equation work for them in terms of profitability,” said Lisa Ellram, a supply chain management professor at Miami University’s Farmer School of Business in Oxford, Ohio.
Big corporations with vast pockets, such as Home Depot Inc. and Walmart Inc., have taken costly measures like chartering ships, while medium and smaller businesses have less options.
HomeLife Media LLC, based in Anaheim, Calif., owns iHeartCats.com and other e-commerce sites that sell pet-related products. The company used to import most of its goods from China, but started buying jewelry, dog supplements, and other items from U.S. suppliers after its ocean freight costs skyrocketed and its profits were slashed by rising air freight costs.
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In October, a cargo ship leaves the Port of Seattle, Washington. To get past delays, large retail and logistics companies with vast pockets have resorted costly measures such as chartering ships.
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HomeLife’s vice president of information technology, Ivan Rodriguez, said that the company intends to source more items from local U.S. vendors. It has also begun collaborating with a metalworking firm in Mexico that creates pet-themed wall art and distributes certain orders straight to HomeLife clients. Mr. Rodriguez said, “They perform daily deliveries by truck to Texas, and they have a facility where they do their fulfillment.”
Shipping Pilot LLC, a Cleveland-based logistics and fulfillment firm, dodged part of the spike in warehouse rates this year by signing a three-year lease in May, according to Greg Airel, the company’s president. However, that advantage has worn off as e-commerce demand has increased, causing more items to pass through its single facility.
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Shipping Pilot has outgrown its 20,000-square-foot facility and is now looking for semi trailers to store excess inventory at idle truck docks. Because components for repairs are in limited supply, some of the equipment Mr. Airel is eyeing isn’t in good enough condition to be utilized for transportation, so he’s contemplating covering the trailers with tarps.
He estimates that the firm will need 10,000 square feet of extra storage space next year, and that the trailers would let him avoid “paying those insane fees” for new warehouse space. Mr. Airel acknowledged that he would “had to bear that expense one day, when I run out of tractor trailers to purchase or discover.”
Bells of Steel USA Inc., a direct-to-consumer home exercise equipment retailer, is hiking rates for its clients after the cost of shipping a 40-foot container from Asia than doubled from early 2020 to this summer, according to Bryan Chu, the company’s Canadian owner.
He said, “We essentially attempt to divide everything between ourselves and the customer.” “We’ve accepted some reduced profits, but we’ve also raised our pricing,” says the company, which is selling certain equipment for 10% to 12.5 percent more. Some equipment, such as belt squat machines, were out of stock for lengthy periods of time, including those trapped on a cargo ship idling off the coast of Los Angeles from early November until mid-December.
In an email, Julia Tunstall, co-founder of A Bar Above, a Carlsbad, Calif., bartending supplies retailer, stated, “Price rises are absolutely on the table, they just have to be.” Hillside Ventures LLC, the company’s formal name, recently spent around $29,854 for shipping a single ocean container, plus an additional penalty for delays in processing the box. This compares to a pre-pandemic average container cost of $4,804 per container.
“But I believe we need to do it more like quarterly currently,” she added. The firm has historically examined the pricing it charges once a year.
SanMar Corp., an apparel and accessories wholesaler based in Issaquah, Wash., says it will face rate increases across all modes of transportation in 2022 and is focused on “making ourselves a very attractive shipper” to ensure it can move its goods as needed, according to John Janson, senior director of global logistics at the company, which ships upwards of 100,000 parcels per day.
SanMar’s goal is to get truck drivers in and out of its facilities as soon as possible, without holding up carriers’ equipment. According to him, the business preloads trailers for United Parcel Service Inc. in order to reduce wait times and get drivers back on the road in 30 minutes or less.
Mr. Janson said, “Price is crucial, but capacity is much more vital.”
Lydia O’Neal and Jennifer Smith may be reached at [email protected] and [email protected], respectively.
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