Get insights on ocean freight rates and other trends that fast-growing businesses should know about to have a successful 2023 peak season.
Get insights on ocean freight rates and other trends that fast-growing businesses should know about to have a successful 2023 peak season.
As fast-growing businesses turn their attention to upcoming holiday demand, Ware2Go has tapped our internal experts and the latest industry data to create insights around what to expect and how to plan for peak season.
In this article:
The ocean freight industry is one of the most vital aspects of the global economy, providing goods to and from almost every corner of the world. In this age of globalization, using ocean freight to transport goods is increasingly important to emerging brands. The WTO estimates 43 billion tons of goods are shipped each year—due in part to the rising trend of eCommerce.
However, in 2020 the COVID-19 epidemic propelled eCommerce from a growing trend into an all-out boom. Unable to sustain the sudden uptick, retailers and consumers alike found themselves in a “shipagaddon” as the Port of LA came to a near standstill during peak holiday season.
Here are some key stats about the ocean freight industry and the supply chain in the years since 2020:
The ocean freight industry is becoming increasingly sophisticated, with many providers offering door-to-door services that provide the necessary infrastructure for a successful international shipping solution. By understanding and utilizing ocean freight correctly, businesses can ensure that their goods arrive safely, securely and on time.
When it comes to ocean freight decision making, emerging businesses should keep an eye on manufacturing costs, ocean freight rates, and supply chain disruptions. Let’s take a closer look at how these three factors play into ocean freight shipping decisions.
Manufacturing Costs
Manufacturing costs in North America are higher than those in other global areas, such as China. These costs include: labor, energy, and materials. In the long run, this may give companies in North America an advantage, as they are able to provide higher quality and safety standards. However, they are more expensive in the short term. On the other hand, in China and other countries, labor, materials, and energy costs are significantly lower.
Ocean Freight Shipping Rate
The cost of global shipping can fluctuate for any number of reasons, including oil prices and government regulations. Despite the current tepid political relationship with China, ocean freight rates are low. Considering this in combination with low manufacturing costs, emerging brands are still looking abroad for inventory fulfillment.
Supply Chain Disruptions
In today’s competitive market, customers expect 2-day delivery. Fast-growing businesses should stay up-to-date on supply chain disruptions, like ocean freight container shortages. These shortages, based on past history, often happen when businesses wait until the last minute to place orders in time for peak season in hopes that ocean freight rates will drop.
Even after a trade deal was signed with China in 2020 that lifted tariffs, many tariffs still remain in place. Trade relations remain strained as both sides have been negotiating for a broader trade deal, but have yet to come to an agreement. Meanwhile in the political sphere, China is reportedly in open conversation with Cuba to establish a spy base on Cuban soil.
Traditionally, ocean freight shipments can take upwards to 35-40 days from China. If looking for an alternative, decision makers should know that the US recently signed a new trade deal with Taiwan. Likewise, other alternatives include India and Latin America.
While more expensive, there are shipping alternatives in North America, or if interested in international shipping, import/export regulations for every country are available online.
As of late May 2023, shipping rates “cratered” as reported in The Wall Street Journal. According to the Freightos Baltic Index, the average daily freight rates from Asia to the Western US is $1,500 per 40-foot container, compared with more than $14,000 in May 2022.
Even at a 4-year low, ocean freight rates can be volatile- and many emerging brands may be asking Is now the time to ship for peak season?
With holiday peak season just around the bend, the answer to when to ship is now.
Why?
Every minute that a growing business gambles on shipping rates going down is time that inventory is not being shipped. The longer these businesses wait, the more vulnerable they become to threats.
Here is what mid-sized brands should be thinking about when planning for peak season:
Congestion Could Rear Its Ugly Head Again
If SMBs hold out for lower and lower shipping rates- waiting until the last minute- then we’ll have another “shipagaddon” at the port of LA. With last-minute decision making, SMBs could face the threat of delivery delays or stockouts.
Warehouse Storage Rates Are Down
Storage costs will always be a part of the supply chain equation, but good news for SMBs: warehousing is much more affordable than it was even a year or two ago. As the overstock of 2020-2021 corrects for itself, SMBs and big box stores alike are “right-sizing” their inventory optimizing shelf space, driving costs down. Meanwhile, SMBs have also found a cost efficient option in co-warehousing and view it as the future of fulfillment.
Too Much Emphasis On Cost Saving Could Cost You
By overemphasizing cost savings at the top of the supply chain, SMBs might find that they are not optimizing for cost savings throughout the supply chain. For example, a business may choose to cut costs by placing all inventory in one shipping container. However, what if that inventory has several points of final delivery? Now at the port, the container must be broken down and drayage costs alone could skyrocket, along with time in transit (TNT).
Be strategic about ports and warehousing
By keeping a warehouse network in mind when deciding which port or ports to ship into, fast-growing businesses can optimize logistics from day one. With the right strategy- starting with ocean freight- TNT can be optimized to meet customer expectations for 1- to 2-day delivery without relying on costly solutions like next-day air.
Negotiate better freight rates by aggregating inventory with other businesses
Even when ocean freight rates are low, lower rates can be achieved by aggregating inventory with others. By becoming a part of a larger shipment rather than just shipping one container on their own, emerging companies can get even lower freight rates.
Trust an end-to-end solution to optimize the entire supply chain
As the gears of global trade and ocean freight continue to turn, SMBs are looking for a holistic solution. In a recent survey on the future of fulfillment, 45% of SMBs reported that they want to divert their team’s time away from fulfillment and back towards their core capacities. Meanwhile, 36% agree that time spent on fulfillment logistics would be alleviated by the right technology. For B2C ecommerce to truly be optimized, SMBs must develop an end-to-end warehousing strategy. With Ware2Go, emerging brands find a partner that combines technology with warehousing to streamline the moment a customer clicks ‘buy now’ to the product arriving at their doorstep.
Interested in seeing how an end-to-end solution like Ware2Go can turn peak season into a turnkey operation? Reach out to one of our warehousing experts by filling out the form below.