3 Ways Summertime Can Impact Your Supply Chain

June 10, 2019

As we outlined in our introductory piece to the Coyote Curve, three main cycles drive market activity: seasonal demand, annual procurement and market capacity. The first—seasonal demand—is relatively easy to observe and on full display during the summer months.

With Memorial Day (the unofficial start of summertime shipping) in the rearview, shippers and carriers need to prepare for the unique set of challenges and opportunities that the next few months will bring.

 

When and Where Food & Beverage Season Occurs

As we get deeper into the summer, food and beverage season will take hold of the U.S. truckload market. Similar to produce season, peak food and beverage shipping begins in the southern regions of the U.S. and migrates north as the weather heats up. Hotter weather means more parties, picnics and barbecues, which means more cans of soda, bottles of beer, bags of chips, and jars of dip.

May – June

There are a lot of food and beverage production facilities in Mexico, so U.S. cities along the border are focal points early in the summer as retailers place orders to build up inventory. Major cities include: Laredo, TX; McAllen, TX; Nogales, AZ; Calexico, CA.

Wine shipments out of California and the pacific northwest also pick up in late spring and early summer. Heading into June, as beverage shipments increase, peak produce shipping subsides.

June – July

With summer in full swing, Texas and California will continue to be the driving forces for outbound capacity demand. Beer shipping from the border continues and demand for beef out of northern Texas and the central plains ramps up as the country hits peak BBQ season.

July – August

After the 4th of July, summertime food and beverage demand winds down while back-to-school and retail begin to pick up.

 

Three Ways Summer Can Impact Your Supply Chain

  1. Higher Food & Beverage Volume

In 2018, freight volumes from our top 20 food and beverage shippers increased 24% from *Q1 through end of Q2. Increased volume creates opportunities for carriers but can cause capacity disruptions for shippers. Though overall freight demand is softer than last year, we will still experience seasonal surges—this is especially true for refrigerated demand.

  1. Different Times in Different Places

Like produce season, freight surges do not occur uniformly across the country, but are staggered at different times across different locations (see graphic). Regardless of when and where shipping surges occur, they have a trickle-down effect on the entire nation. Carriers, the ultimate source of mobile production, migrate to surge shipping regions to maximize profit, causing capacity disruptions elsewhere.

  1. Spot Rate Instability

As carriers migrate to take advantage of opportunities, spot rates will fluctuate accordingly. For instance, when beverage demand spikes in southern Texas, rates on lanes inbound Laredo will drop as carriers try to reposition their fleets. Simultaneously, rates out of Laredo will shoot up until the shipping surge passes.

We are currently in a deflationary market, and as such, there should be enough excess carrier capacity to dampen significant spot rate increases. In fact, as opposed to 2017 and 2018, shippers may be able to leverage the spot market as a source of opportunity. If you have surge freight or special projects this summer that fall outside of your regular commitments, look to the spot market as a way to reduce your spend versus your standard routing guide. 

 

Three Ways Shippers Can Limit Supply Chain Disruptions

  1. Optimize Your Routing Guide

Before demand starts to spike, review your routing guide. How are carriers performing? If any are rejecting tenders or failing to meet your KPIs, can you rely on them during peak food and beverage shipping? Balance cost and service. If a carrier fails, what are your second and third options?

  1. Maximize Lead Time

Wherever possible, plan ahead. The more notice you can give your carriers, the less likely you are to experience supply chain disruptions.

  1. Prioritize Shipments

Competition for capacity in certain regions at certain times may be intense. To ensure your most critical shipments reach their destinations on-time, determine which have flexibility, which are truly time-sensitive and prioritize accordingly.

 

Every year, summertime can present challenges to shippers. Though the current deflationary market environment will likely limit the impact of any seasonal demand dislocations, shippers that understand the trends and take a few simple steps will be in a better position to out-ship their competition this summer. 

 

Need help mitigating risk during the busy summer shipping months?

Coyote has the massive centralized marketplace and multi-modal solutions portfolio to help.

Talk to a Specialist

*Coyote TL Food and Beverage Volume Q1-Q2 2018

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