Market challenges often present significant opportunities disguised as bottlenecks, and that’s the case for eCommerce outbound fulfillment right now. Falling costs in container shipping and truck freight markets are allowing innovative companies to optimize inventory positions closer to consumer targets.
It is possible to move beyond reactionary inventory staging for the first time in almost two years. Price shifts and increased supply chain reliability make right now the time to think about your cost optimization models. Use that newly freed capital to secure efficiency gains by staging outbound inventory in locations that reduce last-mile, outbound shipping costs. Here’s why those opportunities are available and why it’s time to act, especially if you couldn’t afford to take this advice last year.
Container cost reductions in China-to-U.S. lanes
Freight rates from China to the West Coast have dropped more than 33% since the start of 2022 and are down roughly 50% compared to the year before, according to recent Wall Street Journal reporting. Predictions say rates will stay above pre-pandemic levels through the rest of 2022, keeping costs at roughly four times the prices of early and mid-2020.
Despite that, we are seeing container speeds increase at many ports. The 10 largest U.S. ports say their container volumes are down by roughly 25% since May, according to the same WSJ report. Legislation in the U.S., container availability, current rates, and increased investment in port and rail capacity are helping goods move a little more now than during the past year. Excess inventory at major retailers such as Target and Walmart will also reduce container demand, opening availability for some.
For your operations, that shift means more availability to bring your goods into the U.S. and greater availability to move inland easily and quickly. You don’t need to take the most expensive option or settle for lanes and moves. Now that you’ll spend comparatively less on the early legs of an import or have existing inventory, it’s time to shift your budget to staging outbound inventory away from ports and closer to your hungry audience. Trucking pricing makes this an even more opportune time.
Truck freight rate decline expected to continue
Now is the season to plan for peak. Your products need to be ready and in proper distribution locations so that you’re focused on the last mile at year’s end. Experts see significant potential for spot rates to fall and keep falling as the market condenses. Small truckers are competing for any rates they can get to avoid going out of business. We see the dip in the cycle, and it’s time for you to take advantage.
The earlier spot rate boom (see our previous analysis on freight rates here) is on the decline. Smaller companies created to take advantage are now starting to close. Some companies can afford to compete at cost or very close to cost for the coming months, allowing them to stay open until higher rates return. The rest will struggle to optimize equipment, likely selling off assets as spot markets go from roughly 30% to 40% back to the typical 10% to 20% of the overall trucking market.
Declining spot rates plus rising diesel costs will squeeze this market, creating opportunities for eCommerce sellers to negotiate. You’ve got an opportunity to start moving your goods at significantly decreased rates compared to prior months. Take advantage and position your goods before the peak season and its higher rates arrive.
Act on your outbound inventory
Distribute to your warehouses. Find a 3PL with locations that optimize your outbound parcel shipping costs and strong carrier relationships. Plan and start executing now. Peak rates and other surcharges feel like they keep coming earlier and earlier each fall. Now is your time to get ahead of the market.