The intersection of Peak Season prospects, managing inventories, and economic indicators were some of the key themes highlighted on a recent media call hosted by Itsaca, Ill.-based third-party logistics (3PL) services provider and global freight forwarder SEKO Logistics.
SEKO President & CEO James Gagne said on the call that should the Federal Reserve move forward with additional interest rate hikes, despite inflation cooling off from very high levels over the last several months, it has the potential to have what he called a real negative impact on demand.
“When interest rates continue to grow, you typically see [freight] volumes disappear,” he said. “It will be interesting to see, depending on where things end up with further interest rate hikes.”
As for Peak Season, a traditionally demand-heavy period, he said that, based on conversations with customers, this year’s activity will be mild, with the potential for increased activity more likely closer to the back end of the year and not in the more typical period of July, August, and September.
SEKO Chief Commercial Officer Brian Bourke noted that it is challenging to predict when the peak of a mild, or muted, Peak Season might be, while noting that most signs indicate that cargo bookings won’t be prevalent in June and July, leaving open the question of when it will happen.
“Later on in the year is something we are paying attention to really closely, because if it is a situation where everyone waits until the last minute to get products on the shelves for the holiday season because they have burned through their inventory, then it can be viewed as a challenge.
But we don’t see that happening yet although it is something we are watching,” he said. “We are getting a lot more questions from customers around getting product closer to customers globally and through multiple channels and getting ready in preparation for selling through as many channels as they can to increase sales and demand.”
Bourke also highlighted how the company has seen increased interest in companies making the decision to move away from logistics insourcing, for the fulfillment component of their supply chains, especially in the United States and throughout North America.
“We're seeing that the need for companies asking us to help them make their inventory more fungible across wholesale, retail, and then direct-to-consumer channels to make their processes more agnostic. It is seriously growing. And when you add where you think midterm industrial, real estate prices are going to be for logistics infrastructure across the country, and the midterm needs and the cycles that those companies that we go through…there is a systemic structural shift I see in outsourcing more of a customer's end consumer experience through fulfillment in the supply chain that we see that is really here to stay…as we think about demand for services.”
That theme was expanded upon by Hans Hickler, SEKO Logistics President of the Americas, in observing that SEKO has seen a much greater willingness by customers inquiring about network optimization.
“Customers come in the fulfillment side and say, ‘I need something in New Jersey, and I need something in Los Angeles,’” he said. “And 3PLs are very often internally incented to find the optimal solution as to where we have capacity. But when you're when you're a provider that literally asks the customer to talk about looking at your network and optimizing your network, and are you open to creative ways of where we might place your facility outside of how you typically thought about that. We're seeing much more interest in helping with the network design if it can be helpful to them and also optimizing the network. Not only are we seeing more readiness by customers on the on the outsourcing side, but I think a really good indicator is when your customers are willing to really look at the network and where they traditionally operated versus what might be optimal for them.”
SEKO’s Gagne explained that with major retailers Target and Walmart recently reporting that they are starting to hold lower levels of inventory, it is viewed as encouraging for other retailers.
But should shippers in certain verticals, like fashion and apparel, for example, release new products ahead of or into the more hectic period of Peak Season, Gagne said that is something that could represent the difference between a nominal Peak Season or something bigger.
“That new product pull-up proliferation, particularly for the U.S. customer and the American market, is important, notwithstanding any further downturn on the back of interest rates.”