Order Volumes for Holiday Freight

While uncertainty has clouded the economy and consumer spending habits this year, shippers appear to agree on what they expect regarding revenue, inventory levels and order volumes headed into the holiday season.

Glenn Taylor | Sourcing Journal
November 02, 2023

In an improving sign for the retail supply chain, the majority of shippers surveyed by third-party logistics (3PL) provider BlueGrace Logistics—64.4 percent—are optimistic about revenue growth in the fourth quarter. This is a slight jump from 61.7 percent ahead of the third quarter, but still down significantly from the 83 percent that were optimistic before the year-ago holiday period.

We’re officially done with the big surge that we got from post-pandemic consumer spending

“We’re officially done with the big surge that we got from post-pandemic consumer spending,” said Jason Lockard, senior vice president of managed logistics at BlueGrace Logistics. “We’re getting back into normal cycles of seasonality. There’s less discretionary spending that’s happening, but I do think we’re still going to have somewhat of a normal Q4 from a retail standpoint.”

These survey results make up the quarterly BlueGrace Logistics Confidence Index, which measures anticipated logistics industry expansion or contraction based on revenue forecasts, inventory levels and order volumes. The index correlates growth or shrinkage to overall industry volume of freight shipments and product prices.

“We chose revenue, we chose inventory levels and orders because we felt like those were three primary metrics that can help us indicate what’s going to happen from a trucking standpoint,” Lockard said.

The benchmarks assessed from the index are designed to provide shippers predictive insight into what could be expected in future market cycles, according to Lockard. Ultimately, the index is built to provide shippers with relevant data that they can use to improve customer experience, logistics capacity management and budgeting.

Any potential shifts in revenue could impact inventory levels, which have been a major area of concern for retailers as they destocked their merchandise throughout the year.

Although more shippers anticipate revenue fluctuations negatively affecting inventory in Q4 (16.4 percent compared to Q3’s 13.3 percent), most foresee a positive impact. More than 45 percent of respondents said they have a positive sentiment related to their inventory levels, an improvement on the 33.3 percent that expressed this in the prior quarter.

This mix of perspectives suggests a dynamic marketplace where adaptability will be a significant factor in effectively managing inventory going forward, Lockard noted.

“Based on the sentiment for inventory, there’s going to be some inventory replenishment, but most likely, shippers are going to be shifting to a more conservative inventory management strategy,” Lockard told Sourcing Journal. “Rather than ‘get it in at all costs,’ it’s going to be ‘get only what we need, try to get it just in time and let’s not sit. Let’s keep those cycle counts as low as possible.’”

Lockard called the excess inventory levels closing 2022 a “big driver” of the current freight recession.

“Most of our clients, they all already had inventory bursting at the seams, and they had already positioned it where they needed it to be, in terms of the proximity of where that point of sale was going to happen,” said Lockard. “When there’s no movement of that inventory, there’s less freight. There’s lots of transportation that occurs and so that’s why the truckload market took such a tremendous drop in Q1 of 2023.”

65.8 percent of respondents had a “neutral” sentiment on order volume this holiday season, up from the 43.3 percent that said the same in the third quarter.

Where the BlueGrace data gets interesting is that while shippers mostly agree that they expect higher revenue, they are largely unsure what the impact of sales will be on new orders. In fact, 65.8 percent of respondents had a “neutral” sentiment on order volume this holiday season, up from the 43.3 percent that said the same in the third quarter.

Positive sentiment was expressed by 30.1 percent of shippers, down from 45 percent three months before.

In essence, any expected revenue increases will be accompanied by a probable decrease in order volume, Lockard observed.

“That typically indicates that they’re still going to get orders from their consistent customer base. It’s going to be larger order sizes, not more order volume for more customers,” Lockard said. “More stuff on fewer orders, generating higher revenues. To me that just screams that we’re building for a peak retail season and then we’re going to get conservative again after that.”

Based in Tampa, Fla., BlueGrace has been in expansion mode this year, establishing a Mexico office as the nation took its spot as the U.S.’s top trading partner and more American brands rely on nearshoring.

The location will support an existing portfolio of shippers moving freight inter- and intra-Mexico starting in late 2023. Roughly 88 percent of U.S.-based small and medium-sized businesses (SMBs) will reshuffle their supply chains to use suppliers in the U.S. or Mexico in 2023, according to a recent survey from software technology vendor Capterra.