Bamboo Rose Blog | Retail News

As Retail Demand Rises, Freight Prices Surge Due to Capacity Constraints

Retail demand is bouncing back in a big way after sagging throughout the pandemic. The problem? Securing the shipping capacity to deliver product.

Things are looking up for retailers. After several slow sales quarters during the height of the worldwide COVID-19 lockdown, consumer demand is on the rise. Retail sales spiked 47.1 percent in June 2021 across the clothing and accessories industry compared to the same time last year, according to a recent report from the Census Bureau.

In other industries — including furniture and home furnishing — year-over-year sales have dropped 3.6 percent, signaling that demand has calmed a bit and now resembles pre-pandemic numbers.
Speaking to Forbes in a recent article, analysts say the spike is a result of pent-up demand.

“Consumers are starting to put to work some of the pent-up $2.5 trillion or so in savings accumulated during the pandemic,” Tyler Higgins, head of retail practice at AArete, told Forbes.

While this uptick in demand is representative of a healthy economy, it’s causing other problems for retailers who must quickly accommodate the sudden surge in sales and manage the effects of this strain on each node of the supply chain.

According to a recent client conversation with a sourcing executive, the spike in demand across industries is causing significant carrier capacity issues. The decrease in demand throughout COVID followed by the sudden jump — as well as port congestion, adverse weather events, and freight issues like the one caused by the Evergreen container ship in the Suez Canal — contributed to a bottleneck of available freight forwarders, containers, and vessel space.

For the first time, clients have seen carriers turn down RFPs in May in which they outlined their needs and space requirements. Carriers responded saying they could only accommodate up to 50 percent of the shipping request. As a result, retailers and other shippers are left scrambling to transport large portions of their product in the second half of the year.

Carrier capacity issues have led to an increase in freight prices, further complicating supply chain operations. Costco CFO Richard Galanti told Supply Chain Dive that suppliers have had to pay up to double the normal rate for containers and shipping.

“I’ve done things in negotiating prices that I thought I would never do in my whole career,” Galanti said. “I’ve never negotiated a premium price.”

Ultimately, the persistent problems with shipping capacity and the high freight forwarding rates have contributed to significant delays across the supply chain as retailers struggle to secure the carrier space they need.

The sudden spike in demand combined with recent global logistics issues emphasizes the importance of supply chain agility.
When container space is limited, it’s key to get ahead of demand and give logistics partners as much visibility and notice as possible on space requirements.

Establishing greater transparency with suppliers and production partners helps retailers plan more proactively with freight forwarders and carriers. Having up-to-date information on the availability of raw materials, the start of production runs, and finished goods readiness enables retailers to confidently inform freight partners of capacity requirements early on.

This gives retailers a jumpstart when securing carrier capacity, eliminating the time, cost, and administrative burden associated with playing catch-up.

Bamboo Rose’s Global Trade Management (GTM) solution gives retailers a single, unified view of all financial, logistics, and compliance operations across their supplier, freight, carrier, and customs broker partners to improve supply chain agility and partner collaboration.

The solution enables retailers to reduce time spent manually logging logistics information, accurately estimate the landed cost of goods in real-time, and reduce product lead times by 20 percent.

Logistics capabilities built into Bamboo Rose’s GTM solution also gives organizations end-to-end supply chain visibility from production and port of departure to port of entry and distribution center delivery. Retailers benefit from reduced complexity and intelligent container prioritization to optimize inventory levels and minimize demurrage costs.

Ultimately, a digitized solution connecting all partners throughout the supply chain mitigates supply chain and compliance risk. As freight prices hover high above normal rates and carrier capacity constraints delay shipping, retailers need greater insight into their operations to buffer and resolve supply chain disruption.