Written by According to the U.S. fourth quarter *Logistics Confidence Index, retailers expect sales this year to increase compared to last year, but are uncertain whether this increase in sales will lead to new demand for restocking. < In response to this, BlueGrace Logistics explains that in response to consumption uncertainty, retailers are switching to a just-in-time (JIT) method and choosing a more flexible inventory management method. As retailers are trying to control new orders and inventory replenishment costs based on more detailed analysis of sales data, it may be difficult for retail sales increases to immediately lead to demand for new inventory replenishment.
It was revealed that large retailers such as Walmart and Target had their inventories reduced significantly, but it was confirmed that most retailers are still continuing their efforts to reduce their inventories. The retail sales-to-inventory ratio in July was 1.30, the same as last May.
Carriers struggle to contain costs
As the increase in shipping companies’ costs far exceeds the increase in market freight rates, a slowdown in shipping companies’ performance is inevitable. Compared to before the pandemic, the current market freight rate* has increased by about 13-16%, while shipping operating costs have risen to 64% compared to before the pandemic as of the third quarter of 2022, and are currently adjusted to 29%.
Based on Hapac, shipping costs include cargo handling costs and transportation costs within the terminal (37%), vessel costs (30%), fuel costs (14%), equipment and equipment relocation costs (10%), and labor costs (7%). Configured. Among them, cargo handling and transportation costs within the terminal, which account for the largest proportion, increased by 11.2% compared to before the pandemic. Fuel costs have also not increased significantly since the peak in early 2020.
On the other hand, shipping costs*, which account for the second largest proportion, are still at a high level. Sea-Intelligence pointed out that shipping companies’ efforts to reduce vessel costs were limited, such as ▲expansion of new orders, and ▲passive temporary cancellation (year-round). If shipping company profitability continues to deteriorate in the future, it is expected that the reduction in shipping costs will be noticeable.
Meanwhile, labor costs, which account for the smallest proportion of costs, soared 51% compared to before the pandemic. Accordingly, Sea-Intelligence analyzes that efforts to reduce labor costs, such as restructuring, may follow in the future.
EXCERPT FROM SEA INTELLIGENCE and LOYD’S LIST