Leveraging Logistics Blog

When it comes to just about everyone involved in supply chains and logistics, the holiday freight shipping season is a period circled in bold ink on the calendar. And with good reason, as it's traditionally the biggest shopping time of the year. Last year's holiday freight shipping season hit in the midst of several ongoing supply chain stresses, which that increased volume figured to exacerbate further. But recapping holiday freight shipping season 2021 shows that was not necessarily the case - even though there were still plenty of challenges for shippers, carriers, retailers and customers. As we approach the beginning of peak season this year with holiday merchandise already getting into the channel, it's informative to take a look back at last year to see if there are any valuable lessons to be learned.

If you've followed this blog or our YouTube channel, you'd get a hint at the answer. Yes, peak freight season does still exist, and it's important to be prepared. But there are legitimate reasons to question the previously rather settled definition of what it is. Peak freight season - also known as peak shipping season - is traditionally referred to as the time of the year when retailers push inventory into the channel for back-to-school and holiday season shoppers. Depending on one's perspective, it starts in either July or August, then runs either through October or December. The October or December qualifier is down to whether one separates holiday shipping season into its own beast, or tucks it into the peak box. The thing is though, if one were to look at 2020 and 2021 - the two most recent full-year samples - peak season and its connected elevated freight rates, capacity challenges and service level reductions lasted even longer than the most robust range. These peak conditions arguably started when the world began to reopen in the midst of the pandemic in early summer 2020 and lasted throughout 2021. In fact, many wondered if the extended peak condition would be the new normal thanks to Covid-19. It in essence changed the question from "does peak freight season still exist?" to "do non-peak shipping seasons still exist?" The good news is, a general calming has occurred this year, so the cycle may be returning to normal.

Much like diesel fuel prices are linked to freight costs, inflation and shipping freight have a direct relationship as well. As shipping and supply chain costs are a major component of consumer costs for products, there is a definite correlation. However, the relationship between inflation and shipping freight is not a straight-forward proposition. In some ways, it can be looked at as a chicken or egg type scenario, as higher shipping costs lead to inflation, yet inflation can also theoretically lead to higher shipping costs. On the other hand, studies have shown rising costs to ship freight can be a leading indicator of inflation. So the pressure on freight rates that peaked last year may have been a canary in a coal mine for the inflationary trend currently underway.

InTek Freight and Logistics, Inc. is proud to be listed fourth on the latest FAST 25 list from the Indianapolis Business Journal (IBJ), with 340% growth with $59.9 million in revenue. The annual FAST 25 Listing recognizes the fastest growing privately held companies in the Indianapolis area. This is InTek's second consecutive year on the list, as it came in third in 2021 - with 242% growth.

Freight shipping costs and diesel fuel prices are inextricably linked. While not always directly reflected in actual freight rates, if diesel prices are high, shipping costs will be, too. After all, the three components of freight costs are linehaul, fuel and accessorials. And with diesel prices, just like gas prices overall, rising to new levels for what appears to be awhile, shippers and carriers must change their calculus on what to charge and what to spend to move freight. Why the focus on diesel? Diesel in some form or fashion fuels three of the four major transportation methods - truck, rail and container ship. As of this writing, the U.S. Energy Information Administration records the average diesel price at $5.73 per gallon, up 75% over the same period in 2021. Intermodal spot rates account for fuel costs, and thus these rates are up about 14% year over year, when if diesel was not incorporated, they'd actually be down during that period.  On the other hand, truckload spot rates tend not to incorporate fuel costs, but instead turn to fuel surcharges to make up the difference in gas prices (though contract rates for other modes still use fuel surcharges). Accordingly, truckload spot rates are down year to year. However, many owner-operators are changing their driving patterns, either taking only shorter distance loads or even taking a break from trucking altogether. 

Peak shipping season means capacity - and thus costs - may be at a premium. For shippers, that means it's important to prepare budgets for peak shipping season costs to avoid unwelcome surprises. Let's back up first and define peak shipping season - also known as peak freight season. Peak shipping season refers to the time of year when retailers stock up for back-to-school and then holiday shopping. While perhaps the peak of the peak is more focused on that holiday period from October to December, in reality the season begins in July. That means nearly half the year - under normal conditions - shippers must prepare to pay more to move freight. Those elevated costs come in multiple forms, including: Higher spot rates for truckload and LTL General rate increases (GRI) from ocean carriers Railroad surcharges The impact of these peak costs depends on specific loads, routes and how much exposure a shipper has to spot market rates.

Weekly discussion and analysis on the trends in the intermodal spot rate market. For the week of June 23, 2022, domestic intermodal spot rate index: Down 0.1% from the prior week. Up 13.9% from prior year.

Across the U.S., school is out for students for summer vacation. In fact, here in Indiana, school's been out for a few weeks already. But for shippers, the end of one school year serves as a reminder that the next one will be here before they know it, as they prepare to stock up retailers - both brick and mortar and online - with back to school merchandise. Shopping for back to school merchandise is an important ritual for families, and plenty important for retailers as well, accounting for nearly $110 billion last year when college is factored in. Back to school retail also marks the beginning of a key stretch in freight and logistics that lasts about half the year traditionally - peak shipping season. That means preparing for back to school requires shippers to have the foresight to look beyond the mad rush for apparel and school supplies to what comes next with approaching holiday milestones as well. Otherwise peak shipping season may not go so well.

Among the heaviest volume freight in early summer - and certainly no slouch the rest of the year - is beef. With Americans hitting the grills using hamburgers, steaks, beef franks and more, it can make one wonder just how beef gets from the source to  the plate, as in, the logistics of beef shipping. With 27.6 billion pounds consumed in 2020, beef shippers do have a bit of practice under their belt. Historically, the heaviest day of beef consumption in the U.S. has been Memorial Day - see the note about grilling above - and peak demand tends to run from then through the 4th of July holiday. That means beef shippers take up a bit more freight volume than normal up to and during this period. Since summer is hot and beef needs to stay cold, that also means a cold chain of transportation is a necessity. Let's take a closer look at how beef is shipped.

Forecasting freight demand is an important practice, as it provides shippers and carriers alike a window into what's to come - allowing them to budget funds and resources accordingly. While an inexact science - as no one can perfectly predict the future - the best methods of forecasting freight demand use modeling that takes into account past patterns, current market conditions, potential rising issues that could affect freight movement and more to paint a picture of capacity and cost moving forward. Fortunately the inexact science has become a bit more exact in recent years as data collection and availability is much more prevalent thanks to increased digitization through the use of TMS (transportation management systems) and other technologies. The big thing to remember for both shippers and carriers, is to avoid focusing only on internal data when forecasting freight demand, and consider the bigger picture. How you approach your freight costs and optimize your freight spend may depend on it.