Handling peak seasons in logistics: what is the formula for success?

While logistics is an industry that literally never stops moving no matter what happens, the movement doubles as the various sectors that rely on the movement of cargo enter their peak seasons. Subsequently, road freight transport also enters its peak season, as stereotypically, the last quarter of the year can make it or break it for a logistics company – going as far as writing off a bad calendar year, or if worst comes to worst, annulling a good year in a change of fortune.

Such peak seasons can vary in terms of their time, length, and intensity. While the aforementioned last quarter of the year encompasses such promotional events as Halloween and Black Friday, as well as Christmas and New Year, there are smaller peak seasons in select industries and countries. The fruit harvesting season in Europe’s South, namely countries such as Italy, Spain, and Portugal, to a certain extent France is another example. While on different months, due to the peculiarity of each fruit or vegetable, they still have a small footprint, as demand for capacity grows in the aforementioned regions. Then there are smaller events when consumers are stocking up on school supplies just before their kids go back to the classroom, which in turn, can result in a growth in demand for chocolates and flowers – a small, yet intense enough period for companies to book additional truck capacity.

Demand for truck capacity boom

As food producers, for example, begin harvesting their fresh produce, they naturally need to move those products to consumers at supermarkets, or at least to distribution centers. And since the harvesting and distribution are done within a fairly short timespan, it creates a situation whereupon truck capacity is highly concentrated not only in the geographical location but also on lanes to that particular spot on the map.

As such, this is the possible development that occurs in certain regions during their peak seasons:

• Carriers have either sold out their capacity or have priced it at unprecedented levels, as there is a lack of supply;
• Shippers have either secured their required capacity or are looking to acquire it via SPOT loads, playing a high risk-high reward game;

At the same time, it can be a very stressful period for both the carrier and the shipper. From a road freight transport company‘s perspective, if too many of your trucks are suddenly concentrated in a certain region either due to poor near-term planning or overly concentrated procurement activity to companies located within that zip code, you can end up looking to sell your capacity at a break-even point or even a loss. Trucks not only have direct costs (such as fuel, drivers’ salaries, etc.) but also indirect costs, such as maintenance or leasing costs, if they are new. Thus, the pressure is on to generate continuous revenue in order to not only be as efficient as one can be with your fleet but also to ensure a company’s financial well-being.

As a company that is looking to move out its goods, predicting the exact amount of fresh produce, or the demand for your products can be hard. Especially since the pandemic has thrown a spanner in the work in certain industries, such as fashion or automotive manufacturing. Carmakers have suffered heavily over the past few months due to that fact, especially in terms of their orders for semiconductor chips that are now in high demand, forcing manufacturers to even stop production in certain factories altogether due to that shortage. Nevertheless, booking too few trucks for your peak season can result in a company paying extra for capacity, due to reasons mentioned before, potentially resulting in a company’s profit margins being reduced to a bare minimum or even a complete loss. On the other side of the coin, booking too many trucks can result in overpaying for capacity that you would not need, and once again potentially risking your profit margins.

Digital tools to predict consumer demand will make a company’s life much easier, in turn, making it easier to estimate how much truck capacity is needed.

Furthermore, since peak seasons rarely shift in terms of their dates, that also makes the process less complicated as there is one less variable to factor in. The preparations for a peak season still should not be left to be done on the last day, as carriers also prepare for a peak season beforehand.

Helping a customer navigate peak seasons

Navigating peak seasons can be a complex venture, as the benefits of a peak season are reaped far later than the foundation for the season is set.

One of the most important foundations to ensure a successful peak season is to make sure that, as a shipper, you have made the work to prepare for it beforehand. As mentioned before, getting capacity during a moment in time when demand for truck and trailer capacity is high can be not only difficult but also very costly.

Working with your carrier partners to explore the history of your partnership to predict how much capacity you actually need can be very beneficial and guarantee that you do not overspend, or book too few trucks, during a very busy period.

Having a long-term partnership with a carrier could help a shipper fine-tune the small details, making the latter more competitive, which is crucial during a season of peak revenue. Fine-tuning the small details from a carrier’s point of view is as helpful as it is crucial, as re-arranging your truck deployment during such a period is no easy task. After all, getting the trucks to, for example, Southern Europe to meet customers’ demand for capacity is a task on its own, requiring pro-active sale activities so that those trucks do not travel to their loading sites empty-handed and inefficiently. That is why employing digital tools, such as a transport management system (TMS) that encompasses the transport management and commercial procurement activities, utilized by Girteka Logistics, allows a company to do that even more efficiently. It also allows the company to provide tailored solutions, going the extra mile for our customers with ease.

Furthermore, Girteka Logistics provides another advantage as a Full Truck Load (FTL) operator. Since a peak season is typically a time-sensitive and high-production time, an FTL delivery allows a shipper to, for one, ship more goods and secondly, do it more quickly. On the other side of the coin, less-than-truckloads have the advantage that a shipper can carry as much as he needs to with partial loads on a trailer, a peak season could very well nullify that advantage with companies reaching their peak production levels, and as a result, peak capacity needs. Some industries, e-commerce or fresh food manufacturers have their punctuality requirements; while the former’s customers are ever-growing in demand for next-day delivery, the latter’s products typically have a limited shelf life. Loads that do not fill up a truck are typically done more slowly, sometimes even going through a hub of the logistics provider, resulting in a longer transit time.

The future of peak seasons

While the dates of peak seasons are hardly flexible, whether it would be related to the dates of specific holidays (such as Christmas or the weekend after Thanksgiving, namely Black Friday/Cyber Monday), or gathering of produce, their intensity can wary.

Weather can have a lot of influence, as a bad winter can spell trouble for a wide variety of crops, including fresh fruit and vegetables, reducing the potential amount of harvest collected within a farm. There are other risks that can potentially reduce the output of a company, including the recently added risk of pandemic-related stoppages, as well as the continuously looming threat of an economic downturn, impacting consumers across the globe.

Still, as the global economy continues to grow annually, and consumption of goods will continue to drive the economy, peak seasons should only intensify. At the same time, there is a reason to have a conservative approach towards the future of consumption, as consumers have begun to favor a more sustainable and a more service-like approach. According to the World Economic Forum’s (WEF) report on the future of consumption, dated October 2020, 60% of surveyed consumers “are buying more sustainable or ethical products.”

At the same time, e-commerce has continued to boom and will continue to do so following the pandemic. Even more so, perhaps, as consumers were even more inclined to stay home following lockdowns.

While brick and mortar shops will not lose their relevance perhaps anytime soon, “e-commerce growth has skyrocketed; in the US, e-commerce saw more growth in the first four months of 2020 than in the past 10 years,” continued the WEF’s report.

Per NielsenIQ, a retail and consumer data platform, the pace of growth of e-commerce versus offline retail’s growth is astonishing, as in France, the growth is “at its lowest, 7 times higher than the offline growth rate—and up to 16 times higher in Italy.”

Since e-commerce sites have not shied away from playing around the usual sale periods typically associated with offline retail spaces, even “establishing” its own sale event, namely Cyber Monday. As online shopping volumes continue to grow, ensuring a smooth supply chain in the context of next-day delivery-incline consumers will be demanding even faster delivery times.

“The expectation for convenience and fast delivery is growing steeper. It is no longer about what is feasible but how to meet and feed the appetite for faster delivery services,” commented NielsenIQ’s analysis.

Ensuring next-day deliveries and smooth supply chains between distribution centers will, undoubtedly, challenge road freight transport companies, especially during the peak seasons, when other industries are also looking to move their goods to retail spaces.