by Denys Hobson. The answer is a complex one. The last two years have been nothing, if challenging. As we put the port strikes behind us, we are starting to feel the effects of the easing of freight rates as well as the Rand gaining strength against the US dollar; and there is no doubt that despite another possible rate hike, things from a supply chain perspective are starting to look more positive and stable.
Freight rates have somewhat stabilised across the trades with further reductions expected on the Far East trade from mid-November. There has been an increase in blank sailings globally on most trades, given the slowdown in volume demand. With the improvement in global port congestion, equipment availability, is, in general, stable too, which bodes well for importers. However, retail trade sales have declined by 0.6% in the year to September after growing by 0.1% on a monthly basis. A 1.9% fall in the three months to the end of September, mean that according to Stats SA, this is the second straight quarterly decline on the retail front. So, with improved supply chain conditions, focus must turn to what lies ahead to improve broader retail conditions.
While retailers battle the challenges brought about by loadshedding, this year, low consumer spending will add further pressure as higher interest rates eat away at their disposable income. However, retailers should still be prepared for increased foot traffic during this time.
As a result, given that many businesses close over the festive period and transporters operate with reduced fleet capacity, it is still important to understand your supply chain cycle when planning shipments and try to mitigate the risk of additional storage costs. Remember, transporters are also under pressure to prioritise deliveries at the start of the year and therefore demand tends to spike – plan accordingly.
Chinese New Year
Annually, the Chinese New Year has an impact on the global freight market and next year it falls on 22 January. As a result, factories will close for up to two weeks before and after the Chinese New Year. Therefore, we already know that demand on manufacturing, logistics services, trucking and carrier capacity will likely increase as we approach this period. It is essential to plan around these dates to ensure your orders move timeously. Furthermore, shipping lines are likely to implement blank sailings around the Chinese New Year period and feeder capacity will also be reduced leading up to this.
The end of the year is a busy season for retailers and with improved trade conditions, if planned and managed correctly, it certainly is a good time for retailers to recoup some of the losses they have had this year, and find confidence is driving the next chapter forward.
Main image credit: Pexels.com.
Denys Hobson is Head of Logistics, Investec for Business
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