Date: Thursday, June 22, 2023
Trade has proven time and time again that it can show the health of a country’s economy and the health of logistics.
The movement of trade is influenced by supply and demand, not by the thumping of chests of politicians. You have hand-wringing today about the health of China, but if you follow trade, you would not be shocked by the dismal results: Orders are down.
The logistics pipeline is a tea leaf forecasting China’s economy and the flow of freight also tells investors the bottom line of logistics companies. Logistics CEOs across the country who have seen their future freight orders have a good idea of what peak season will look like.
While the world of armchair logistics experts spew their outlooks on social media or TV, the flow of trade has been consistently broadcasting the truth. Trade is not rocket science, as I always said, it’s common sense. Containers don’t lie.
CNBC recently conducted a survey on peak season for its CNBC Supply Chain Heat Map, which included responses from the National Retail Federation, the American Footwear and Apparel Association, Council of Supply Chain Management Professionals and United National Consumer Suppliers. This group hits on all levels of the consumer. So how much are companies in these associations ordering this holiday season? Hold off popping that champagne.
The timing of the freight arriving will be key in determining logistics companies truly meeting or beating quarterly expectations.
Comparing peak season freight volumes this year will be no apples to apples. Holiday goods for 2022 were front-loaded in the spring of 2022, which was the true peak season. In August 2022, it was flat. So, even if we return to a marginal peak season on a quarterly basis, and while it may look like a beat, is it really true peak season growth?
Now, if you are more of a glass-half-full person and you don’t believe what the country’s largest retail associations are saying, look at the ocean freight bookings from China to the U.S., which show a blip of an increase.
If you want to check out China’s orders to the world, they are pretty much flat.
When it comes to ordering for the holidays, it’s a do-or-die moment for retailers. Some of these companies are still feeling that sting of bloated inventories from the 2022 holiday season. According to the survey, sweaters, boots, dresses and evening bags from last year’s peak season orders are still in warehouses.
Retailers do not want a repeat of last year, so orders will be leaner. Based on when orders were placed this year, you can see the hesitation of retailers of miscalculating the consumer again.
Orders for peak season items are traditionally placed by retailers in the late winter or early spring. But with this consumer pullback, retailers delayed their orders. When you look at the timing of orders placed, you can see it was pretty much even with a variation of orders being placed recently in the last two to three months. The other half were the traditional six months or prior.
In the world of logistics, companies do not care if a product is sold at full price or half price. What they do care about is if they move the product, be it out of a warehouse to the consumer, warehouse to stores or from ports to distribution centers.
Survey respondents said this year they ordered more promotional items for the holidays. Hopefully, retailers got the product mix right and it’s more reflective of today’s economy. This would help in the further drawdown of inventories, which resulted in this freight pullback. Maybe retailing restraint this year will be a gift to the logistics industry for future freight growth and fluidity.