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Apparel retailers ordering early to avoid trans-Pac delays
Clothing retailers and wholesalers in the U.S. increased their imports sharply last year. They expect demand to remain robust this year. However, persistent port congestion and fears of further disruption during West Coast longshore labor negotiations are forcing shippers to carry more inventory and pull orders from Asian suppliers forward.
Importers worried about stockouts are building inventories well in advance of the typical trans-Pacific peak season. That is making it tougher for retailers to forecast how much of a given product they should order. It is also putting additional pressure on their supply chain. Skyrocketing shipping costs are also a major concern for apparel and footwear companies.
Vessels are lining up outside major U.S. ports, and transit times for containers headed inland are being further stretched by inconsistent international intermodal rail service. Therefore, shippers are forced to choose between potential lengthy delays for boxes moving by rail and the extra costs of transporting cargo by truck.
Some clothing importers are looking to diversify their sourcing to reduce risk and reliance on manufacturing in Asia and a highly disrupted trans-Pacific trade. One company said that purchasing more products from Central America has drastically reduced the company’s port-to-port transit times and overall transportation costs.
Early peak season, mixed signals to test Asia-US rate strength
The coming two months will reveal just how much U.S. importers are pulling back on orders from Asia. Additionally, the next few months will show the degree to which container lines can adjust capacity as easing vessel space on some trades pulls down spot rates.
Forwarders expect a bump in spot rates in the coming weeks when an anticipated early peak season ripples into the trade beginning in late June. But the scale of the rate increase and length of the peak season are unclear.
Some U.S. retailers are pulling back on their purchase orders with Asian factories due to uncertainties over the direction of the economy and how well consumer spending will hold up in an environment of high inflation.
Spot rates have softened this spring, although they have not come crashing down, as would happen if the trade were entering a recession. The decline in West Coast spot rates is largely due to softer import volumes following the Lunar New Year.
However, rate levels should begin to increase in the coming weeks, if we are to see normal seasonality. Forwarders do not expect spot rates in the eastbound trans-Pacific to drop significantly going forward.
About O’Neill Logistics
O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.
