North American retailers turn to air freight as sales skyrocket
The North American retail industry has increased its use of air freight to meet growing demand and supply chain bottlenecks as sales are expected to continue to increase.
In Q1 earnings calls, a series of companies described the supply chain issues they have faced so far this year and how they have turned to air freight to ease delays and take advantage of growing demand.
Mike Shaffer, director of operations and finance at clothing company PVH Corp, which owns brands such as Tommy Hilfiger and Calvin Klein, said he was monitor supply chain headwinds and envisages some inventory times of four to six weeks on average.
He said in order to maintain his sales plan for the second half of the year, he is using additional air freight as well as “other costs”.
In addition to delays in transport operations, factories cutting production due to Covid lockdowns were also forcing the company to switch to faster modes of transport.
“On the supply side, we see some uncertainty,” Shaffer said in May. “There are delays, but there is also some uncertainty about the supply.
“So as we take a look at some of the countries where we do significant business, India for knits and Sri Lanka for underwear, those countries are on lockdown.”
He added, “We have many different modes of expedited freight. So we can use faster ships, believe it or not, our air freight. We found that air freight was limited. There weren’t a lot of thefts.
Levi Strauss & Co executive vice president and chief financial officer Harmit Singh said the company was closely monitoring bottlenecks in the supply chain and added that it had experienced delays.
“We were able to compensate for the impact of the delay in the first quarter and we believe we can compensate for that in the second quarter.
“In terms of costs, as I mentioned, in the last quarter we negotiated the capacity and that allowed us to offset some of the increases that we can see.
“We had to increase our air freight, but given the high gross margin we had overall, I think this is compensated again, at least in the short term.”
Sportswear retailer Lululemon said it has strategically used air cargo to offset supply chain issues, although even air cargo capacity has been limited.
Chief Financial Officer Meghan Frank said: “While we continue to see delays in receiving inventory due to issues at ports, our team is strategically using air cargo and we are comfortable with the level and timing. our inventory mix as we move into the second quarter.
She added, “Inventories was definitely an area we have positioned ourselves in to drive growth, both throughout 2020 as we moved through the pandemic, and then into 2021.
“The team has been very proactive in strategically leveraging air cargo to meet demand and we have the ability to research categories and keep a close eye on what’s going on with the supply chain, but we feel really well placed to sail this year. “
Meanwhile, the US National Retail Federation expects demand to continue to soar, putting pressure on supply chains.
“Immunization rates are rising, shoppers are back in stores and retail supply chains are working overtime,” said Jonathan Gold, NRF vice president for supply chain and customs policy.
“There is no shortage of consumer demand, but there are always shortages of labor, equipment and shipping capacity to meet this demand. Supply chain disruptions, port congestion and rising shipping costs could continue to be challenges until the end of the year.
In addition to the production of factories affected by closures, container equipment shortages, congestion in ports, the blockade of the Suez Canal also affected the ocean freight sector in the first half of the year.
Meanwhile, air cargo capacity continues to be limited. Statistics from Accenture’s Seabury Consulting show that at the start of May, global air cargo capacity was down about 9% compared to the same month in 2019.