Order Volumes for Holiday Freight Amid Economic Uncertainty
In the midst of this year’s economic uncertainty and fluctuating consumer spending habits, shippers are aligning their expectations for revenue, inventory levels, and order volumes as the holiday season approaches.
A survey conducted by third-party logistics (3PL) provider LHP Transportation Services indicates a cautiously optimistic sentiment among shippers regarding their revenue growth in the fourth quarter. Approximately 62% of those surveyed express optimism, a slight increase from the 53% percent before the third quarter, but notably lower than the 83 percent optimistic before last year’s holiday period.
Shannon Michael, LTL Manager at LHP Transportation Services, notes that the surge in consumer spending post-pandemic has waned, leading to a reversion to more traditional seasonal patterns. Despite a downturn in discretionary spending, Michael anticipates a reasonably normal fourth quarter in the retail sector.
The findings from this survey are part of the LHP Transportation Services Confidence Index, which is a quarterly gauge predicting the expansion or contraction of the logistics industry. This index assesses revenue forecasts, inventory levels, and order volumes to anticipate shifts in freight shipment volumes and product pricing.
Michael underscores the significance of revenue, inventory levels, and order volumes as critical indicators for projecting trucking industry trends. The index is designed to provide shippers with valuable insights for enhancing customer experiences, managing logistics capacity, and formulating budgets.
One of the major points of concern has been inventory levels, especially how shifts in revenue might affect them. While a greater number of shippers (24%) expect negative impacts on inventory due to revenue fluctuations in Q4 (an increase from 11% in Q3), the majority maintain a positive outlook. Over 55% of respondents feel positive about their inventory levels, a notable improvement from the previous quarter’s 33.3 percent.
Michael observes a dynamic marketplace where adaptability is key to effective inventory management. He predicts a shift towards more conservative inventory strategies, emphasizing the need for essential stock and timely delivery to minimize surplus.
Michael also highlights that excessive inventory levels at the end of 2022 were a major factor in the ongoing freight recession. With clients already stocked to capacity, the lack of inventory movement led to a downturn in freight activities and a substantial decline in the truckload market in the early months of 2023.
Regarding order volumes, 2/3rds of survey respondents report a “neutral” sentiment for this holiday season, an increase from the previous quarter’s 40%. While there is a general expectation of higher revenues, the impact on new orders remains uncertain.
Michael points out that anticipated increases in revenue may not correspond to an increase in order volume. He suggests that shippers are likely to receive larger orders from their established customer base rather than an increase in the number of orders from new customers. This pattern suggests preparation for a robust retail peak season, followed by a return to conservative strategies post-holiday.
LHP Transportation Services, headquartered in Springfield, MO, has been expanding its operations, including the establishment of an office in Mexico as the country becomes a crucial trading partner for the U.S. This new location is set to support shippers transporting freight within and between Mexico and the U.S., reflecting a trend where U.S. small and medium-sized businesses are increasingly turning to suppliers within the U.S. or Mexico. LHP Transportation Services has actually become the leader of Intra-Mexico LTL shipping per Michael thanks to strategic partnerships at several of the key locations in Mexico. This has expanded LHP’s footprint thanks to its Minority Owned business partners.