Shippers operating in the consumer packaged goods (CPG) industry are facing a number of obstacles brought about by increasing e-commerce sales. You might think more sales is a problem a company would be glad to have. But the truth is it can be a logistical nightmare when you have pending orders that remain unfulfilled for days because online orders are pouring in faster than shippers can locate trucks. The CPG industry thrives on the ability to move a high volume of lower-cost goods as quickly and efficiently as possible. But most wholesalers find that high spot rates, inventory issues, and lack of capacity make it difficult to keep up as the business calendar transitions to the second quarter.
While customer interest in e-commerce isn't anything new, the spike in sales brought about by the pandemic is unprecedented. More people than ever before started to rely on their phones or laptops to buy everyday goods they otherwise might have purchased at the local corner store. Stay-at-home orders and general anxieties about the COVID-19 virus kept the population in their homes. So instead of going out for things like toilet paper, consumers started buying these commodities on apps like GoPuff. All that time spent in residence with a basic need for goods has revolutionized the way consumers purchase items like toiletries, over-the-counter drugs, and food. And as the world is now beginning to open back up, you might think that the e-commerce boom is destined to fall back down to earth. But you will be mistaken.
The U.S. Census Bureau reports that e-commerce sales have increased by nearly 45% year-over-year in the second quarter from 2020 to 2021, accounting for more than 16% of total sales. This surge is telling of a trend that is here to stay for one specific reason. First, Q2 2020 is when executive stay-at-home orders officially began since we were at the forefront of the global pandemic. Consumers had few options other than to buy goods online during this time. To see that figure nearly double in Q2 of 2021, when vaccines started becoming available, indicates a change in buyer behavior. It means e-commerce sales are here to stay. Regardless of whether or not you feel comfortable buying products at brick-and-mortar retail locations, customers have caught on to the convenience of shipping goods directly to their front doors.
But the trend has fundamentally changed the logistics industry at a time when trucking capacity is already constrained due to produce season, which runs from February through July. Shippers and carriers are both schooled in the turbulent nature of produce season. However, the onset of e-commerce sales adds another layer of complexity for CPG shippers who need to move freight. According to McKinsey & Company, capacity issues are at an all-time high for this industry. Yet, distribution facilities and supplier networks are not engineered for the rapid shifts in demand we are seeing today.
Moreover, spot truckload rates for dry van and refrigerated freight hit a new high at the end of the fiscal year in 2021. The blend of limited capacity, high demand, and increasing transportation costs are all coming together at an inopportune time for CPG suppliers who need to move freight quickly and efficiently. It has left a lot of wholesalers scratching their heads, looking for a way through the transportation bottleneck occurring this spring throughout the U.S.
CPG shippers can meet the increasing demand of e-commerce sales despite the obstacles that lay before them so long as they find the right partner. For example, RPM is one of the fastest-growing logistics companies in the country due to its ability to offer efficiency and flexibility to partners who need it the most. Marrying these capabilities with a carrier network of over 30,000 strong means that shippers in the CPG industry have more access to move their freight while only relying on one point of contact to make it happen. RPM also offers a 24/7 shipping portal where users can track the status of a shipment, which is of utmost importance when trying to fill orders generated from e-commerce quickly.
For more information on alleviating the stress of capacity issues in the height of produce season and rising e-commerce sales, please contact Zach Leve at Zleve@cpg.rpmmoves.com or learn more about the services we offer here.