How businesses and consumers can weather peak season

THE ANNUAL shipping peak season, a period of heightened activity on the global trade routes, is fast approaching. Typically spanning from mid-August to late October, this time frame coincides with retailers stocking up for the holiday rush. As businesses scramble to secure inventory for back to school, Black Friday, Cyber Monday, and the December holidays, the global shipping industry experiences a surge in demand. This annual phenomenon creates a ripple effect throughout the entire supply chain, impacting everything from shipping costs to delivery times for consumers.

The crux of the peak season lies in a classic economic principle – supply and demand. As businesses ramp up holiday inventory, demand for container space on cargo ships skyrockets. However, the global fleet size remains relatively constant, creating a bottleneck situation. Unable to significantly increase capacity in the short term, shipping lines respond by raising freight rates to manage demand and ensure profitability. This rise in shipping costs can eat into a business’s profit margins, especially for smaller companies with less negotiating power. Furthermore, with limited container space available, securing bookings becomes more competitive. This can lead to delays in receiving inventory, potentially disrupting production schedules and impacting on-time delivery to customers.

But how does this year’s peak season compare to 2023? Coreen Williams, director of sales and marketing at Seaboard Jamaica, shared her insight. “[The] 2024 peak season by comparison to 2023, so far, is not much different”, Williams said, adding that “2023 was a year the global shipping industry was moving to some form of equilibrium from the extreme low of 2020-2021 to the extreme highs of 2021-2022”.

“This year, 2024, is a continuation of the levelling off to reflect pre-pandemic times. Notwithstanding, all peak seasons come with excess bookings and the need to ration/manage freight tonnage against capacity.”

Williams outlined the challenges likely to be faced by businesses and consumers due to the demand generally associated with the period. “Vessel space and equipment shortage, port congestion due to extra vessel calls, downtime on port equipment which is working more than usual, and pile up of containers on the terminals.”

Added to that, the active hurricane season will also affect the supply chain. “What will throw a spin in 2024 peak season is an early active hurricane season, plus an extraordinarily active hurricane season in terms of frequency and intensity of hurricanes. This will cause more downtimes and delays and congestions, multiplying all the usual peak season problems, and we have seen that with the recent passing of (Hurricane) Beryl at Category 4.

Additionally, Williams said importers may experience delays to cargo arrival; vessels bypassing our port due to weather systems or congestion; peak season surcharges; force majeure clauses invoked for damages caused by weather systems; high demurrage and detention charges when unable to collect goods from terminal and return equipment; and delayed stripping for less-than-container load shipments.

While the peak season presents challenges, businesses can take proactive steps to mitigate their impact. Williams said the key is to “ship early” and have “good warehousing and inventory”.

Consumers also feel the effects of the peak season. The increased costs incurred by businesses may be passed on to them through higher product prices. Additionally, with a strain on shipping capacity, delivery times for online orders could experience delays. Consumers are encouraged to shop early and be open to alternative products or brands if their preferred choice is unavailable due to shipping delays. In addition, when shopping online, buyers should factor in potential peak season delays when calculating arrival times.

The shipping peak season is a complex phenomenon impacting various stakeholders across the global supply chain. By understanding the dynamics at play and implementing the strategies outlined above, businesses can mitigate the challenges and ensure a smooth holiday season for themselves and their customers. Consumers, through early planning and flexible shopping habits, can also lessen the impact of the peak season.