The National Retail Federation is predicting holiday retail sales to rise almost 3% to $465.6 billion, which represents far slower growth than last year’s 5.2% gain. Based on a shaky economy and high unemployment, many retailers are taking a wait-and-see approach to stocking their shelves this year, which has resulted in a later “peak” season than normal. For many businesses, this phenomenon will result in a rush to get goods on shelves if demand picks up at the last minute, driving the need for more air cargo shipments.
To prepare for a “typical” holiday peak season when economic conditions are favorable, retailers plan holiday inventory far in advance and move merchandise from manufacturing facilities around the world to U.S. storefronts between mid-August and November via ocean freight. But fears of uncertainty are trickling down to the rest of the supply chain. Many retailers are reevaluating the costs of overstocking and storing surplus inventory and have placed ocean shipments on hold.
In 2009, retailers faced similar unpredictable economic conditions and underestimated holiday sales. Many companies took reactionary measures when demand began to improve and expedited merchandise to stores using air freight, restocking their shelves just in time to enjoy increased sales and profits. History has a tendency to repeat itself, and with fluctuating oil prices and a heightened industry demand for the fastest mode of transport, air cargo shipments are as critical now as they were two years ago.
Below are some key tips to help retailers optimize air cargo shipments when faced with a condensed peak season.
• Maximize pallet space. While weight is a factor when it comes to air cargo, space also matters. Optimally package and consolidate goods to maximize pallet space and reduce the chance of incurring dimensional weight fees. In addition to avoiding unnecessary fees, efficient packing will enable retailers to transport more merchandise per pallet and free up space on the aircraft for additional shipments.
• Save time, use technology. Shipments often are delayed due to improper paperwork and incomplete customs documents. Use shipping software to generate air shipment labels and all required paperwork to save costs and reduce errors. Many programs can also be integrated with a company’s information systems to facilitate internal reporting and customer service processes down the road.
• Avoid flying blind. Having full tracking visibility of air freight from the time of shipment to delivery is critical. Visibility enables retailers to identify any potential problems and keep shipments on track, avoiding potential costs and customer service issues. Some third-party logistics providers (3PLs) offer automated proactive notifications to alert companies of any issues with their shipments en route and notify them at the time of final delivery. These automated tools can play a major role in managing unexpected delays.
• Identify the right logistics partner. Retailers don’t have to navigate the challenges of peak season alone. A 3PL can help companies identify the smartest strategies. Many 3PLs have the global infrastructure and resources to help retailers respond to market fluctuations. Many offer guaranteed express air freight and small package services, such as time-definite delivery with one- and two-day transit times for particularly time-sensitive goods.
Using multiple providers can create unnecessary disconnects in the supply chain, reducing efficiency and often resulting in higher rates and mark-ups charged by independent shippers.
• Weigh your costs. Speed and reliability are critical year-round but become especially important during a condensed peak season. When planning for the holiday rush, price shouldn’t be the only criteria that retailers use when selecting a carrier. The repercussions of a shipment arriving after Dec. 25 will likely end up costing more in the long run.
By mastering air cargo operations, retailers can create a framework for optimizing future air cargo shipments, putting them ahead of the game for whatever might be in store for 2012.
Ken Burkeen is marketing director, retail and consumer products division, UPS.