Shipping

The ‘Big’ Shipping Problem: Large Household Goods Intensify Supply Chain Delays

During the pandemic, people bought a lot of bird feeders. In fact, one retailer sold out of a year’s worth of bird feeders in just two weeks. Birds did not become more exciting over the last year to prompt such high sales. What changed was people staying at home and a new multi-billion-dollar focus on purchasing household goods to make those homes more comfortable. Bird feeder buys are nothing compared to the increased spend on large items like mattresses and furniture. Now those big purchases have created a big problem for the international supply chain: big delays. From ocean vessels to final mile deliveries, every link in the chain is under pressure to pick up the pace. 

International Shipping Delays

In a February earnings call, La-Z-Boy CEO Kurt Darrow delivered some tough news. New customer orders would take anywhere from five to nine months for delivery. The furniture company is not alone with mattress stores sold out and other home goods retailers out of stock on large items for several weeks to many months. The problem starts in the Asian export market. 

A shortage of nearly 500,000 containers currently exists. These pieces of equipment have become such a hot commodity that the price of using a 40-foot container has increased by 268% year over year. While there are too few containers, demand has increased significantly. Monthly imports to the U.S. from China approached $50 billion in the fourth quarter of 2020, over $10 billion more than before the pandemic began. 

Making the capacity crunch worse is the size of exported items. Furniture sales grew by 20.4% in March 2021 compared to the year prior. Containerized imports of household art, appliances, and mattress supports increased by double digits. Estimates show containers of lawnmowers up by nearly 10 times that of 2019. These large, heavy items require more container space and have a greater impact on the overall tonnage a ship can haul. That makes it a fight for companies to get this less desirable freight on board. Often furniture is literally “missing the boat.” 

Domestic Transportation Demands

On-time ship arrival currently sits at a historic low of 34.9%. Once the ship arrives, there are even more delays. In early May, vessels waited an average of eight days for offload at the Port of Los Angeles. The ripple effect of the week-long Suez Canal blockage in March continues plaguing ports on both U.S. coasts working to clean up the logjam. The timing could not have been worse with manufacturing rapidly increasing while port labor shortages persisted. Even when containers are pulled, there is nowhere for them to go. A lack of trucks, chassis, and limited train capacity have containers sitting even longer.

Bulky cargo changes hands multiple times before reaching the consumer. Less-than-truckload and final mile delivery carriers now are feeling the strain. The heavy bulky market is growing at a rate of 12% annually, impressive compared to 9% growth for parcels. However, four major players control 90% of the parcel space. This allows for the creation of dense lanes and economies of scale to drive profits and efficiencies. By comparison, no single company controls more than 7% of the heavy bulky market. That means rate hikes for oversize and over dimension items that take up LTL space. 

This double-digit growth in the heavy bulky market also is forcing LTL to expand its final mile footprint. These items require different equipment for more residential deliveries. Making those deliveries versus staying exclusively inside dense freight lanes causes further delays. Pair that with a 30% return rate for all items purchased online, including bulky household appliances like refrigerators, and capacity gets even more constrained. 

The Building Boom’s Impact on Future Freight

It would be easy to chalk up the current international shipping delays to the residual effects of the pandemic, but the data indicates this problem is not going away. The U.S. market currently is short about two million homes compared to buyer demand. Builders will need to construct 1.7 to 2.5 million homes for the next several years just to repair the imbalance. Following the purchase of a new house, people usually invest in home furnishings for the next 24 months. 

Furniture store sales rose 20.4% in quarter one of 2021 compared to the year prior. Wayfair saw a jump of nearly 50% in revenue at that same time. During Haverty’s April earnings call, the CEO said, “Even though our undelivered backlog is four times [from this time] last year, our current incoming orders are continuing at the elevated pace we have seen since January.”

Even as the world opens up, people remain focused on staying at home. Expect long waits for that new piece of furniture or appliance. The shipping journey will continue to be a long one in the months—and potentially years—ahead. 

About Langham Logistics

Langham offers the full spectrum of logistics support from international shipping to LTL management and final mile deliveries—plus everything in between. Our customers receive cutting-edge business intelligence to create cost efficiencies, reduce delays, and keep customers happy. Discover why many of the world’s largest retailers trust Langham Logistics to deliver optimal domestic and international shipping solutions even in the toughest markets.  

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