The fourth quarter in logistics is a mix of exciting, worrying and most interesting times. Traditionally, the three months encompass the busiest period in terms of deployed capacity, as consumers commence the most hectic shopping period of the year, fuelled by such promotion events as Black Friday and Cyber Monday. Behind the scenes in the winter holiday business lie all the logistical challenges. And the recent shift from stores to e-commerce only increased the levels of complexity for those working in the logistics sector.
The challenges of the holiday season
More products are sold in preparation for the holiday season than at any other time of the year. In fact, some of the sales businesses generate their half-year profit in just these two last months. Larger order volumes mean that free capacities of the freight providers steadily decrease, forcing logistics companies to play the capacity balance game.
For instance, the last quarter of the year is when food producers in Southern Europe, countries such as Spain, Italy, begin picking their fresh fruits and vegetables. Since the harvesting and distribution need to be done within a fairly short time span to keep the goods fresh, it creates a situation where truck capacity is highly concentrated not only in a particular geographical region but also in lanes on that particular spot on the map.
Meanwhile, with the increased demand for capacity and flexibility and a disproportion in loaded/unloaded tonnage the price for transportation goes up due to the relationship between the supply and demand of trucks and trailers in the country.
The equation, although complex, comes to one simple conclusion: shippers are looking to move as many goods as possible, while carriers look to balance their cargo flows to not have too many of their trucks in one region, resulting in unnecessary “empty kilometers” of driving, and potentially ending up looking to sell your capacity at a break-even point or even at a loss. Thus, there is a pressure to generate continuous revenue in order to be as efficient as possible.
There are other particular developments that occur in certain regions during their peak seasons, such as the winter holidays. Carriers have either sold out their capacity or have priced it at unprecedented levels, as there is a lack of supply. And shippers have either secured their required capacity or are looking to acquire it via spot loads, which is a high-risk and high-reward game.
The peak season can be a stressful period for both the carrier and the shipper. As a company looking to move out its cargo, predicting the demand for your goods can be hard. Booking too few trucks for your peak season can result in a company paying extra for capacity, potentially resulting in a company’s profit margins being significantly reduced or even ending up at a loss. On the other hand, booking too many trucks can result in overpaying for capacity that you would not need, and once again potentially risking your profit margins.
Predicting consumer behaviour
In e-commerce, especially during the peak winter holiday period, all companies that want to succeed, whether logistics or retail, must focus on the most important key performance indicator (KPI): customer satisfaction. If a delivery is not on time or if it is obvious in advance that the delivery will not arrive as scheduled, customers are likely to switch to other competitors. Expectation of convenience and speedy delivery are key when it comes to the e-commerce business. And the more goods are purchased, the more are returned after the holiday peak, this is particularly noticeable in January, a trend that is known as “reverse logistics”.
This holiday season, just as those that came before and were marked by the pandemic, will be one of a kind. As rising inflation and an anticipated recession loom over the skies of Europe at the end of 2022, there are signs of falling consumption and production across the continent, particularly in Europe’s biggest economies such as the UK, France, and Germany.
According to the European Commission’s (EC) business and consumer survey results for October 2022, the Economic Sentiment Indicator (ESI) decreased in October, resulting from deteriorations in services and manufacturing confidence, which were only partly offset by slight improvements in retail trade and consumer confidence.
“Industry confidence decreased for the eight-month running as managers’ assessments of the current level of overall order books worsened markedly and the stocks of finished products picked up. By contrast, managers’ production expectations for the next three months improved somewhat,” the survey describes.
“Services confidence declined due to a marked deterioration of all three components (i.e., views on the past business situation, past demand, and demand expectations).” Meanwhile, consumer confidence, the survey notes, “picked up slightly from its record low of September. Consumers were more optimistic about their outlook on their household’s future financial situation and the general economic situation, while assessments of their household’s past financial situation deteriorated slightly and intentions to make major purchases remained broadly stable.”
This may have been the situation in October, but the last two months of the year may still present a challenge. A recent industry report by Ti, Upply and IRU explains: “Low order books, high energy prices and gas supply uncertainty are deterring production expansion in the coming months. Falling consumption and production is accompanied by high inventory levels across Europe, with warehouses already full and prepared for the peak period we can expect demand for imported retail goods to be low in Q4.”
The last quarter of the year can make it or break it for a logistics company. Those who prepare themselves for the year-end season early, can keep their supply chains stable and customer satisfaction high. If the decisions taken in preparation for the peak are wrong, it might result in a business overpaying for cargo or, in the worst-case scenario, not being able to ship their goods completely due to a lack of capacity. Having a long-term partnership with a trusted carrier could help a shipper fine-tune the details, making the latter more competitive, which is crucial during a season of peak revenue.
As a Responsible Logistics provider and the largest asset-based logistics company in the continent, Girteka can offer the much-needed capacity for clients during the last two months of the year. The company transports more than 880,000 loads yearly, providing the advantage as a Full Truck Load (FTL) operator. Since a peak season, such as the winter holiday period, is a time-sensitive and high-production time, an FTL delivery allows a shipper to ship more goods and do it more quickly.
Another aspect to consider is flexibility, which is and will continue to remain an important part of the demand and supply capacity of transportation. With a large and innovative fleet of more than 9,000 trucks, Girteka can offer the correct solution at the right time for its customers, whether on contract or spot basis. In addition, it is beneficial to have a carrier that can take it into the next level and offer tailored solutions to carry goods, for instance, on two-driver trucks, or provide secure and Good Distribution Practice (GDP) – certified delivery services.
“We always want to offer our trucks to customers who give us stable shipments, and to those customers who cannot guarantee stability or do not comply with their contractual obligations, to offer trucks according to the market situation of the day, by way of spot freight exchange,” says Andrejs Petrovs, Director of Sales and Business Development at Girteka, on the possibilities of providing for customers’ needs.
Another important aspect that can make supply chain management during an intense peak period easier are digital solutions. Employing digital tools, such as SAP transport management system (TMS) that encompasses the transport management and commercial procurements activities, like at Girteka, allows a company to meet customers’ demand for capacity even more efficiently.
The customer can benefit from Real Time Visibility (RTV) solution, which allows to log and monitor information as goods move through all stages of the supply chain. All of this also enables the company to provide tailored solutions, going the extra mile for our partners with ease.
By utilizing digital solutions, Girteka can intelligently manage and analyse data in real time throughout the business chain, including the transportation fleet, warehouse management, logistics operations and customer service, ensuring a stable flow of deliveries despite any potential disruptions.
Early and adequate planning, right decision making, facilitated by intelligent operational systems and digital solutions allows to deliver goods correctly and not lose customers to the competition, or maybe, even attract them. As challenging as the peak holiday season can be, it is easily manageable when you choose a trusted and reliable logistics partner.