Consultant Insight: Just-in-time shifts to just-in-case as inventories build

[caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] An increase in imports is causing a ripple effect on U.S. domestic supply chains resulting in capacity constraints and higher spot rates for domestic transportation modes. Indeed, the U.S. Census Bureau recently reported August imports increased 3.1%, a seven-month high, to $201.3 billion. Consumer goods and autos led the jump in import activity. According to trade data company Panjiva and publication Axios, imports from China rose by 14.3% year-over-year in the first half of August after increasing by only 4.3% in July. As part of this increase, many shippers are shifting from just-in-time inventory replenishments to just-in-case inventory replenishments. Property management firm Colliers International estimates that companies are increasing safety stock by between 5% and 15%. In addition, Colliers recently reported that its net absorption rose by 51% in the first half of this year from the same period in 2019. Core markets including the Inland Empire, Dallas-Fort Worth and Chicago continue to be the destination of choice for many shippers, but emerging markets closer to fast-growing population centers and the most utilized regional logistics hubs are also growing. U.S. manufacturing activity continues to be positive, according to the Institute of Supply Management’s (ISM) September purchasing management index (PMI). Registering at an overall 55.4%, it was, however, down 0.6 percentage points from the August reading of 56%. ISM notes that a PMI above 42.8% generally indicates an expansion of the overall economy. The New Orders Index registered 60.2% in September, a decrease of 7.4% compared to the 67.6% reported in August. Despite the month-to-month slip, the customers’ inventories index is at its lowest point since June 2010, a level considered a positive for future production. The top three industries reporting increases in new orders are wood products, electrical equipment, and appliances and components. However, the delivery performance of suppliers to manufacturing facilities was slower in September. “Suppliers continue to struggle to deliver, with deliveries slowing at a faster rate compared to August,” said Timothy Fiore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. “Transportation challenges and continuing difficulties in supplier labor markets are still constraints to production growth. The Supplier Deliveries Index reflects the difficulties suppliers continue to experience due to COVID-19 impacts. These issues are not expected to diminish soon and, at this time, represent a continuing hurdle to production output and inventories growth.” Even though shippers are building up inventories, speed in delivery continues to be a priority for many shippers, especially for e-commerce providers, and shippers preparing for the upcoming holiday season. Business-to-business shippers also are factoring in speed for deliveries. To address this need, spare parts logistics courier time:matters Americas recently added 11 new airports to its U.S. domestic Same Day Air network, increasing the number of available stations to 100. In addition, it has added Alaska Air to its list of airline partners, which also includes American, Southwest and United airlines. The service focuses on shipments weighing up to 200 pounds for target industries including automotive, high-tech and semiconductor, aviation and aerospace, machinery and components, medtech, life and health, and logistics. Inventory buildups will likely continue through the end of the year and up to the Chinese New Year on Feb. 12. Until then, higher shipping rates and capacity constraints on all modes of transportation are expected.

Consultant Insight: Just-in-time shifts to just-in-case as inventories build

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