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Christmas Capacity

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With the holiday season well upon us, many individuals are anticipating a hectic few weeks ahead. Fretting over family gatherings, elaborate dinners, and gift-giving. With many shoppers clearing their Christmas gift list in the week following Thanksgiving (and even before then), there are still mountains of shopping left for the less ambitious among us. However, this holiday season is unlike ones of the past. What we have seen from national supply chains in the past in December is ample demand, with capacity from carriers vying to keep up with rising need for their services. However, if you’ve been anywhere on planet Earth for the last 3 years, it’s fair to conclude that things aren’t the way they had been for years. For example- where 5 years ago carriers were chugging along attempting to match incredulous demand from shippers during Christmastime, the roles are vastly different. Given the widespread financial complications of inventory surplus on shippers’ end, we observe an uncharacteristic boom in capacity. What this represents is shippers acknowledging the demand for their product(s) simply is not on par with past holiday season levels of demand. What this causes is carriers outbidding (actually underbidding) on shipments, as shippers are not moving freight at nearly the same numbers and will likely work with the carrier that offers lower rates than the rest. After all, why pay more for the freight when the overwhelming need for it isn’t there anymore? If ten people are applying for the same job and are able to provide comparable results, you’re more inclined to hire the individual who would take less pay. Extrapolate this notion on a much wider scale, and we have precisely the state of the freight industry. What some industry insiders suggest is that in an effort to prove the worth of their service, carriers will do everything to ensure freight is delivered not only for lower rates, but with an emphasis on timeliness. This would be great news for those of us checking off the last item of their shopping list on Christmas Eve, but in the grand scheme is not ideal. While there exists an ever-present pendulum in the freight industry between shippers and carriers, swaying too much to one side always warrants an equal movement to the other party over time. What is ideal for the sake of efficiency and optimization is some semblance of balance between shippers and carriers. At the beginning of the pandemic, we saw carriers in the driver seat in terms of naming their price for freight. This, among many other factors, is what brought us to where we stand in the world of freight today. Shippers having the negotiation power will likely last through the beginning months of 2023, but the process to reach a balance point is a long and arduous road. With this in mind, the industry has begun showing promising efforts of returning to normalcy. Where demand plummeted because of astronomical amounts of inventory, it is now observed that inventory levels are steadying themselves across the board. This suggests that many shippers have found a way to mitigate the damage of inventory bloat, and are slowly returning to regular levels. A principle indicator that this is a step in the right direction will be transportation metrics throughout the early stages of the new year.