Apparel brands and retailers are breathing a little easier as the supply chain challenges of the past few years have given way to falling ocean rates and transit times.
“For Xcel Wetsuits, we have ridden through the worst of it; freight rates are nearly back to normal and our supply chain is working well to meet needs,” said Wedge Brands CEO Jarka Duba. “For now, we are focused on supporting our key accounts with sell-through of our seasonal product.”
Wedge, which relies on the ports of Los Angeles and Long Beach, acquired Xcel Wetsuits from Boardriders in 2020.
Costs, Transit Times Fall
Ocean rates for the transpacific trade lane, running from Asia to the U.S. West Coast, held steady last week at the Feb. 1 rate of $1,325 per 40-foot shipping container, according to digital freight booking company Freightos. That’s down about 91% from the same time a year earlier.
Additionally, digital freight forwarder Flexport reported time in transit for goods coming from China to the U.S. at 67 days as of Jan. 29, which is on par with what shippers saw in December 2020. Days in transit peaked in late 2021 with shipment by boat taking in excess of 110 days, according to Flexport.
Wedge isn’t the only company seeing signs of improvement, as noted recently by a number of public companies.
“On logistics, the level of disruption, delays, and corresponding freight costs, relative to the same point in time last year has continued to improve, though they remain elevated versus pre-pandemic levels,” Deckers Brands CFO Steve Fasching told analysts last week.
Columbia Sportswear Co. noted that supply chain disruptions made it difficult for the company to take advantage of full-price selling at the start of the Fall 2022 season. However, the situation is changing, with Chairman, President, and CEO Tim Boyle noting to analysts last week that on-time delivery for Spring 2023 “is greatly improved” and it’s “approaching pre-pandemic service levels.”
Levi Strauss & Co. Chief Financial and Growth Officer Harmit Singh offered a similar view last month, pointing to supply chain pressures on the denim company’s U.S. wholesale business in its fiscal fourth quarter ended Nov. 27, but said the situation is changing.
“As you know, through the year, we’ve had supply chain challenges,” Singh said. “We’ve not been able to fulfill demand. We think that becomes a bit of a tailwind in the second half.”
A pullback in consumer spending seen in the latter part of last year was a drag on imports, allowing the supply chain breathing room as ports, such as Los Angeles and Long Beach, were able to clear their container backlogs.
“As of now, ocean freight is back to normal as far as availability and transit time,” a spokesperson for Sole Tech said. “Congestion at the ports has been cleaned up as well. Dockworker negotiations haven’t affected things too much yet.”
West Coast Talks
Those negotiations do present a wild card for supply chain and logistics executives at apparel companies and retailers.
The union representing more than 22,000 dockworkers across 29 West Coast ports has been in negotiations with employers since May. Workers have now been working without a contract since July 1, when the previous one expired.
“It’s been radio silence,” said Nate Herman, the senior vice president of policy for the Washington D.C.-based American Apparel & Footwear Association. “We haven’t heard anything about negotiations in terms of progress; I’m not sure whether to take that as a good or bad thing. So, we don’t have any timeline. Although, if it goes on for one more month, we’re at the longest time we’ve ever been without a contract. So that makes people nervous.”
Brands and retailers likely shudder thinking about 2014 and 2015, when extended negotiations led to a slowdown in cargo movement and ultimately prompted intervention by the Obama administration.
“I think there’s still a lot of concern because the two sides haven’t reached a deal, so folks are not rushing back to the West Coast (ports),” Herman said. “A few have started to take some of their business back. The numbers reflect that a lot of people have stayed on the East Coast and not rushed back to LA/Long Beach.”
Shifting Business to East Coast Ports
The Port of New York and New Jersey handled 723,069 twenty-foot equivalent units (TEUs) in November, the most recent monthly data available. That was up nearly 21% from November 2019, with the overall total making New York/New Jersey the U.S.’s busiest port for the month.
AAFA declined to cite specific companies diverting cargo away from West Coast ports, but Newell Brands is one that has publicly said it plans to reduce reliance on the West Coast.
Newell Brands, which owns more than 100 brands including outdoor lines such as Coleman and Marmot, said about a year ago it would begin the multi-year process of revamping its supply chains. Essentially, the Newell Service Network consolidates distribution centers across brands, thereby streamlining what the company said are 23 different supply chains into one. The plan also calls for a port diversification strategy that includes more cargo going to places such as the Port of New York/New Jersey.
In other cases, companies made attempts last year to safeguard against any West Coast disruption by shipping earlier.
Dennis Nelson of The Buckle told analysts in November that product was brought in a couple months ahead of schedule to ensure there was inventory for holiday.
“This year, with the threat of the port strikes and just the unknown when you’re planning out six, seven months, we were more comfortable bringing that in early and providing a great selection,” Nelson explained. “All of our stores have a nice selection of product, instead of risking chasing goods.”
Underlying Supply Chain Issues Remain Unsolved
For now, declining imports and freight rates have eased the supply chain tensions of the past few years. However, AAFA’s Herman pointed out that many of the root causes of the congestion seen during the pandemic, such as port infrastructure or carrier service, have not been resolved.
“I think the big concern right now is that none of the fundamental issues that led to the shipping crisis over the last two years have actually been addressed,” Herman said. “The only reason things are getting better now is because demand is way down. So, if demand goes back up, we could see problems return.”
