Christmas tree supply chain driven by higher freight rates

The latest shortage blamed on a mixture of supply chain and logistics problems is that of artificial Christmas trees. According to Wall Street Journal, US distributors are facing inbound shipping costs that “will quadruple this year compared with 2020”, leading to importers of items such as artificial Christmas trees raising prices by 20-25% over last year.

Rather than problems sourcing the Christmas trees in production locations such as China, the issue seems to be availability and cost of shipping resources, both from shipping lines and land-side from ports.

Similarly, retailers are having to resort to extraordinary measures in an attempt to solve just the availability problem. In the UK the medium-sized department store, John Lewis, commented around its first-half yearly results that it had collaborated with one of its freight forwarders to charter more container ships in order to ensure delivery during the Christmas driven peak season. Whilst this sort of planning is not new, it appears to have become commonplace amongst larger shippers. Of course, it does beg the question what will smaller shippers who lack purchasing leverage will do? Essentially, they risk being squeezed out of the market. The sorts of solutions being put in place by John Lewis do not create new shipping capacity. Rather they simply enable certain larger shippers to jump over others in the market. The result will be that artificial Christmas tree importers will not be able to find sufficient container shipping space for their products. Rather than more expensive artificial Christmas trees there might be no artificial Christmas trees.

Although the rate of growth in consumer demand in the US has slowed in recent weeks, apparently due to an outbreak of the Delta-variant virus in parts of the country, the increase in economic activity still seems to be unsustainable in terms of the logistics capacity available. How the economy will respond to these problems ought to be a key question for all involved. Transport costs are a fundamental variable in any supply chain and if they increase, production and inventory policy will change. The result may be a lot more proper Christmas trees being sold in American shops.

Source: Transport Intelligence, September 16 2021

Author: Thomas Cullen