Uncertain US Shippers Shifting Freight, Altering Inventory Strategies

Author PhotoBlueGrace Logistics - October 9, 2023

Shippers are largely positive about fourth-quarter revenue, but not about orders, and are trying toslow their supply chains as a result, BlueGrace Logistics says.

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William B. Cassidy | JOC.com
September 25, 2023

US shippers uncertain about sales and order volumes this holiday season are likely to increase less-than-truckload (LTL) shipments despite lower truckload rates, data from an industry survey suggests.

Retailers and wholesalers are trying to put the brakes on that shift, changing inventory and transportation strategies to minimize costs and slow down rather than speed up supply chains, according to BlueGrace Logistics, which produces a quarterly LogisticsConfidence Index (LCI).

The fourth-quarter LCI shows shippers are expecting higher revenue from product sales at the end of 2023, but are neutral or uncertain about the impact of those sales on new orders. That typically means smaller orders and smaller shipments, with more freight moving to LTL providers, said Jason Lockard, senior vice president of managed logistics at BlueGrace.

While 64% of shippers surveyed by the logistics service provider expected additional revenue from sales, 66% were neutral or uncertain about new orders.

They’re not going to get the massive spike in orders needed to consume truckload capacity

“They’re not going to get the massive spike in orders needed to consume truckload capacity,” Lockard told the Journal of Commerce.

The index also indicates shippers are still overstocked and that their suppliers are overstocked as well, despite several rounds of destocking this year. Holiday retail goods that typically would be shipped in September and October are already on hand, and in many cases in stores.

They’ve changed their tactics and their strategy on inventory management in terms of how much they’ll keep on hand and what they’ll order going forward.

“Everyone is sitting on a tremendous amount of inventory,” Lockard said. “They’ve changed their tactics and their strategy on inventory management in terms of how much they’ll keep on hand and what they’ll order going forward.” He expects more shipper cost-control measures.

We’re seeing more attempts to slow down the supply chain

“We’re seeing more attempts to slow down the supply chain,” Lockard said. “Shippers are still trying to move as close to just-in-time as possible, but they’re slowing down inbound transit.”

Shippers are also using more granular data to control the flow of inventory, moving items more likely to sell early and quickly to shelves ahead of traditional marketing schedules.

“It’s all about buying better at the end of the day, making sure we’ve got the right inventory in the right location at the right time,” Kenneth Bull, COO of retailer FiveBelow, said during an Aug. 31 earnings call.

The long drawdown

The quarterly BlueGrace LCI index is a forward-looking measure of shipper sentiment based on surveys and discussions with the logistics firm’s clients, but it supports broader data-based market indicators.

Although big box retailers, such as Walmart and Target, have made progress in right-sizing inventories, industry-level data suggests stock drawdowns are far from finished.

US inventory-to-sales ratios indicate retailers and wholesalers are not clearing goods from shelves that quickly.

The seasonally adjusted retail inventory-to-sales ratio was 1.30 in July, the same ratio since May. That indicates it takes 1.3 months to clear inventory. Seasonally adjusted data for merchant wholesalers showed a 1.39 inventory-to-sales ratio, down slightly from June but up from 1.33 a year ago.

US inventory-to-sales ratios flattening in 2023

Ratio of end-of-month US retail, manufacturing, and wholesale inventories to monthly sales. A ratio of 2.5 indicates enough stock to cover 2.5 months of sales.

Market conditions pushing more freight to LTL carriers would exacerbate LTL price increases. LTL carriers are already handling a surge of freight following the collapse ofYellow, the third-largest US LTL provider, on July 30. LTL carriers say their freight volumes are up by low single- to double-digit percentages.

However, shippers are also looking for ways to consolidate freight and avoid higher-priced LTL where possible, Lockard said.

“Minimum orders and order frequencies are changing,” he said. “They’re selectingtransportation modes that aren’t as fast, and they’re coming to us for more help withload planning.”


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