Order lead times plummet as inventory grows and demand uncertainty soars.

Due to the low number and frequency of items ordered by companies, shipping lead times are reduced by 23%.

This Week’s Chart: Ocean TEU Booking Lead Time – All Ports to the US Sonar: Container atlas

Order lead times (time from order to expected shipment of containerized imports) decreased by 23% from late April as supply chain managers were again forced to change strategies in a transitional economic environment. Did.

Last week, Target reported that it had essentially Too much stock At hand, “Correct size“That inventory. This was unavoidable for many retailers who struggled to accurately predict what consumers would do in a post-pandemic environment.

Many macroeconomic figures, such as unemployment and retail sales, still suggest that the economy is very strong. Difficulties arise when trying to predict when consumption will slow down and how fast it will occur.

Looking at the traditional macroeconomic figures mentioned above, consumers will still think they are doing well.However, if you look at the following near real-time data, Bid volume (OTVI) and monthly report Logistics Manager Index Measuring inventory growth shows that shippers are delaying domestic shipments, partly because they recorded inventory growth that began in January.

Macro data is not inaccurate, it’s just slow. Since the beginning of the pandemic, demand forecasting has become nearly impossible. The most sophisticated algorithms broke because traditional relationships between data points broke in the changing social and personal behavior patterns.

Combining demand-side uncertainty with current production and supply uncertainty Shutdown in ShanghaiAnd you have a sort of supply chain management hell that goes through, especially on a large scale.

The global environment is full of relatively unpredictable “black swan” events, especially in the long run. Even if they can be predicted, their economic impact is even more uncertain. The only real solution is to be more flexible. You can see that this is reflected in the lead time of the import.

Due to the increase in inventory, companies have some buffer to allow them to place smaller and more frequent orders.

Earlier this week, Henry Byers, Head of Ocean Intelligence at Freight Waves, wrote about imports. Fall off a cliff..This is reflected in the Inbound Ocean TEU Index (IOTI).. IOTI shows that the TEU has declined by more than 30% over the past month, indicating that companies are ordering far less quantity of goods.

If you combine that index with the Inbound Ocean Shipments Index (IOSI) When measuring bills of lading, there is only a slight decrease in comparison. This indicates that the shipper has a small order quantity per order.

No one has a crystal ball. Many prediction algorithms capture some data from the pandemic era that is no longer applicable. Until the global environment calms down, the best way many supply chain professionals can expect is to act agilely, monitoring the environment more often, and tackle diverse approaches to supply management.

this week’s Freightonomics episodeDale and Zack Rogers, supply chain experts, predicted that consumers would be resilient this fall and winter and revert to their previous habits, but warned that volatility would stay here. did.Inflation grew at that time Highest rate since 1981 As any economist would say this May, it’s unsustainable. Cloudy, the future remains.

About this week’s chart

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