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Table of Contents
- Understanding Peak and Slack Seasons
- Impact on Pricing and Capacity
- Peak Season and Slack Season in Oceania
- Influence on International Trade
- Strategic Planning for Businesses in International Trade
- Best Time to Negotiate Contracts in Freight Forwarding
In the dynamic world of freight forwarding, understanding the ebb and flow of peak and slack seasons is crucial for businesses aiming to navigate the complexities of international trade efficiently. These seasonal fluctuations significantly impact pricing, capacity, and strategic planning, making it essential for companies to stay informed and adaptable. This guide delves into these critical periods, offering insights into their influence on the freight forwarding industry and providing strategic planning advice for businesses engaged in international trade.
Understanding Peak and Slack Seasons
Peak Season: A High-Demand Puzzle
Peak season in international trade is characterized by a significant increase in demand for shipping services, typically influenced by factors like holidays, consumer trends, and global events. During this time, freight rates tend to rise due to heightened competition for limited shipping capacity. Understanding these patterns allows businesses to anticipate changes and adjust their strategies accordingly. Global disruption events, like the COVID-19 Pandemic, and the more recent Red Sea Disruptions, can cause an imbalance in the seasonality of demand thus causing abnormal peak season periods.
Slack Season: An Opportunity for Efficiency
Conversely, the slack season offers a period of reduced demand, presenting opportunities for cost savings and strategic improvements. Freight rates generally decrease, providing a chance for businesses to negotiate better deals and optimize their supply chain operations. Recognizing the potential of the slack season can lead to enhanced efficiency and profitability.
Impact on Pricing and Capacity
The oscillation between peak and slack seasons directly influences freight rates and available capacity. For example, GRI are more common at the beginning and during Peak Season, while due to capacity constraints, cargo rollovers also become more common. If the freight rates don't reach the levels that carriers are comfortable with, we can also experience Blank Sailings during this period, further disrupting supply chain delivery times and available capacity.
Businesses that adeptly navigate these changes can better control costs and ensure the timely delivery of goods, maintaining a competitive edge in the market.
Peak Season and Slack Season in Oceania
The peak season for freight forwarding in Oceania typically aligns with the period leading up to the end-of-year holidays and the Southern Hemisphere's summer season. This usually spans from May to November, with the peak shipping period between September and November. During this time, there is a surge in demand for imported goods, driven by retail stocking up for the Christmas and New Year holidays, as well as increased consumer spending. Additionally, the lead-up to the Chinese New Year can also see increased activity, as businesses stock up before the holiday period slowdown in manufacturing and shipping from Asia.
Pre-Peak Production and Ordering: May Onwards
The peak season for international shipping in Oceania, particularly for imports to Australia and New Zealand, is underpinned by a significant ramp-up in production and ordering activities starting around May. This period marks the beginning of preparations for the end-of-year demand surge, with businesses placing orders well in advance to ensure inventory is ready and available for the peak retail season. This early start is crucial for navigating the longer lead times required for manufacturing, especially for goods produced in Asia, and for accommodating the subsequent shipping schedules.
Shipping Peak: September to November
Following the pre-peak period of production and ordering, the actual shipping peak season for Oceania typically occurs from September to November. This is when the highest volume of goods is transported to meet the increased demand associated with the Southern Hemisphere's summer, the holiday season, and major sales events such as Black Friday and Cyber Monday. The timing is strategic, allowing retailers and businesses to stock up their inventories in preparation for the consumer spending spike.
Conversely, the slack season for Oceania tends to occur after the holiday period and into the early months of the year, around December to March.
Post-Holiday Slowdown: January to March
After the hustle and bustle of the peak season, the slack season in Oceania generally sets in from December to March. This period sees a slowdown in freight activities as the holiday season has concluded, and businesses are often overstocked with unsold goods. The demand for new shipments drops significantly, leading to lower freight rates and a decrease in shipping volume. This slack period is further extended by the impact of the Chinese New Year, during which manufacturing in Asia slows down or halts, affecting the supply chain and shipping schedules.
It's important to note that these periods can vary year to year and be influenced by global economic conditions, trade policies, and unexpected global events such as pandemics or geopolitical tensions. Businesses involved in freight forwarding and international trade should stay informed about these factors and adjust their strategies accordingly to effectively navigate the fluctuating demand and supply dynamics.
Peak Season Update in Oceania - Q2 2024Several shipping lines (carriers) announced the implementation of Peak Season Surcharges (PSS) starting in June 2024, with some reaching up to USD 1000 per 20' container. From mid-June, New Zealand will see an average surcharge of USD 300 per 20' container and USD 600 per 40' container. What is PSS?Carriers use PSS to increase revenue during high demand. This early application is unusual as it typically occurs in the third quarter, if at all. We have some articles on Peak Season, GRI, PSS, and other surcharges that you might want to look at. Service LevelsSchedule Integrity: Recent surveys of schedule integrity, or on-time performance, show a “reliability” rate of between 27% and 35%. This means that a significant portion of shipments are not arriving on time. Introducing a peak season surcharge is not expected to address or improve these performance issues. Instead, clients might experience further delays and inconsistencies in shipping schedules, exacerbating existing challenges in supply chain management. Broad Impact: Typically, when one carrier announces a surcharge, others follow, making it an industry standard. This new surcharge follows recent rate increases in New Zealand, affecting contract and spot rates. The cumulative effect means rapidly rising shipping costs, impacting clients’ overall expenses. Impact on CostsOverall, the price of shipping to New Zealand is increasing at a fast pace. Clients need to know how these rising costs will affect their landed costs – the total cost of a product once it has arrived at the buyer’s door, including shipping, customs, and other fees. For instance, the cost of shipping a 20’ container from Shanghai to Auckland has risen by an average of 122% since January, albeit from a low base. This substantial increase in shipping costs could significantly impact the pricing and profitability of imported goods. Future OutlookHistorically, PSS may fade as demand decreases or become part of the freight rate at the end of the peak season. This year, much depends on the Red Sea situation affecting capacity and cargo volumes. A snapshot is below:
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Influence on International Trade
Supply Chain Dynamics
Peak and slack seasons play a pivotal role in shaping supply chain strategies. Effective inventory management and logistics planning become essential during these periods, requiring businesses to adapt to the changing demand and supply landscape.
Global Trade Patterns
Seasonal trends also affect global trade routes and shipping lanes, with certain regions experiencing more pronounced fluctuations. Understanding these patterns is vital for businesses looking to optimize their international trade operations.
Strategic Planning for Businesses in International Trade
Forecasting and Demand Planning
Accurate forecasting and demand planning are critical for mitigating the challenges posed by seasonal fluctuations. By leveraging historical data and market analysis, businesses can develop strategies that align with anticipated trends, ensuring they remain resilient in the face of change.
Capacity Management and Cost Control
Effective capacity management and cost control measures are essential for navigating peak and slack seasons. s on optimizing their operations to maintain profitability, utilizing strategies such as diversifying suppliers and transportation modes to enhance flexibility.
Building Resilient Supply Chains
Creating a resilient supply chain is key to thriving in the freight forwarding industry. This involves not only diversification but also the adoption of technology for better tracking and decision-making, ensuring businesses can quickly respond to market dynamics.
Our solutions at Kerry Logistics Oceania can take the headache away from this process. Our Platform VBO, allows you to make accurate forecasts while maintaining real time visibility down to SKU level.
Best Time to Negotiate Contracts in Freight Forwarding
Negotiating contracts in the freight forwarding industry requires a keen understanding of market dynamics, including the peak and slack seasons. The optimal time for negotiation can significantly impact costs, service levels, and operational efficiency. Here's a closer look at when and why to initiate these discussions.
Leverage the Slack Season: December to March
Advantages of Negotiating During Slack Season
- Lower Demand: With the decrease in shipping volume post-holiday season, carriers and logistics providers may be more inclined to negotiate favorable terms to secure business during these slower months.
- Better Rates: The slack season often sees a softening in freight rates due to reduced demand. This can be an opportune time to lock in lower rates for the upcoming year.
- More Attention: Logistics partners may have more bandwidth to discuss and tailor contracts to your specific needs, ensuring a more personalized service approach.
You might want to read: types of ocean freight contracts
Strategic Pre-Peak Planning: May to July
Why Start Early?
- Forecasting Leverage: By initiating contract negotiations well before the peak season rush, you have the advantage of using your forecasted volumes as leverage. Demonstrating your expected business can incentivize providers to offer competitive rates and services.
- Avoiding the Rush: Negotiating contracts before the peak season ensures that you're not caught in the last-minute rush, where higher demand can lead to less favorable terms.
- Securing Capacity: Early negotiations allow for better planning and securing of necessary capacity ahead of the peak season, reducing the risk of delays and shortages.
Continuous Engagement
While the slack season and the period before the peak season are strategically advantageous for negotiating contracts, maintaining a continuous dialogue with your logistics providers is crucial. Regular reviews and adjustments based on changing business needs and market conditions can help ensure your contracts remain competitive and aligned with your operational requirements.
In the cyclical world of freight forwarding, timing is everything — especially when it comes to contract negotiations. By strategically choosing when to engage with carriers and logistics providers, businesses can achieve more favorable terms, ensuring cost-efficiency and reliability in their supply chain operations. Remember, the goal is not just to negotiate but to build lasting partnerships that can weather the fluctuating demands of global trade.
Kerry Logistics Oceania can help you navigate the complexities of contract negotiation, capacity management and provide visibility while helping you create and maintain more realistic timelines.
Why Partner with Kerry Logistics
Selecting Kerry Logistics as your trusted partner isn't just a choice—it's a strategic move towards ensuring your success. Our commitment to excellence is not just a promise; it's a guarantee. With a global network that's both vast and meticulously managed, we stand head and shoulders above the competition. This means you benefit directly from unparalleled service quality, ensuring your supply chain needs are met with precision, efficiency, and minimal hassle.
Are you ready to elevate your logistics game and experience seamless support tailored to your unique needs? Let's discuss how we can bring unparalleled value to your business.
