Longer planning horizons, diversified transport, and stronger collaboration will be the hallmarks of the floral industry’s “new normal,” according to speakers at an Aug. 5 PMA® webinar, New Demand Creates Floral Transportation Crisis.
More than 100 floral professionals throughout the supply chain heard how booming consumer demand for floral has put increased pressure on the supply chain, including transportation and logistics.
The following speakers addressed how companies must change to cope with ongoing issues (timing notation is start of presentation in video playback):
Becky Roberts of PMA (0:00)
Felipe Sanchez of DSV Air & Sea (3:01)
Sam Raymond of Sealand – A Maersk Company (9:08)
Eric Holt of Holt Logistics (18:30)
Noah Hoffman of C.H. Robinson (31:43)
Deb Zoellick of Walmart (41:57)
Key takeaways cover planning horizons, port and transportation options, and deeper supply chain collaboration. For more details from the experts, listen to the full webinar below.
Speakers stressed that 2021 will be like 2020, and 2022 and 2023 will have similar issues spurred by rising floral demand. Although the pandemic is at the heart of the changes, other factors (e.g. weather problems, holiday demand spikes) affect sales, costs and capacity. The supply chain must adapt to the new normal because it is not an anomaly. The industry is never going back to the 2019 (or before) status quo, so solutions must be appropriate for the long-haul, not quick fixes. And they must work for the whole supply chain.
Longer Planning Horizons
Everyday and holiday floral sales soared during the second half of 2020, and growth in the first two quarters of 2021 topped 25% compared to 2019/20, according to IRI data. Consumer demand is expected to stay high (2022 is expected to mirror 2021), and the transportation crunch is expected to last for some time. This means retail planning horizons must expand to at least a year in advance, especially for holidays.
Suppliers need to know what retailers want well in advance so they can grow or obtain product, and so they can plan for transportation. They also need to have purchase orders farther out than has been common in the industry.
Look at Ports Beyond Miami
Miami will remain a key hub for floral imports into the United States, but other ports (Philadelphia, Long Beach, and others) can diversify delivery options, reduce port and trucking congestion, and bring product into the country closer to end consumers. Using multiple ports also spreads risk (e.g. weather) and offers greater access to scarce trucking resources. Choose ports that have experience with perishable loads (speed and refrigeration) and ag imports (inspections, fumigation if needed).
Explore Transportation Options
Growth in consumer demand for floral comes as demand and rates for all transport modes is up for consumer goods of all types.
Air has been the primary transport choice for the industry. Floral often moved on passenger flights (up to 65%), which took a huge hit when the pandemic curtailed passenger flights.
Cargo flights were a limited option as they were more often used to move pandemic-related items (PPE, medicines, oxygen). No one expects additional air capacity in 2022, and rates are expected to rise. Charter flights are another option, but prices are very high, especially around holidays.
Though air freight will always be an important transport mode for floral, ocean freight is increasingly seen as a reliable option. Many carriers have experience with perishable. In addition, some carriers have extensive experience moving perishable goods from the same regions that are exporting flowers.
Once the product arrives by air or sea, floral transport shifts to trucks, with their own set of challenges. The driver shortage may catch up, but not until the end of 2022. There is also serious demand for trailers with long delays on new builds (14-16 months) as demand is increasing.
Speakers also talked about new transportation options:
Consolidation centers – trucking companies bring full loads and then breaking them down for local/regional deliveries.
Having multiple companies’ products in sea containers could offer efficiencies and help shift some shipments from planes to sea.
They noted the pallet shortage is improving as lumber costs come down and the Canadian border opens. When wood prices spiked, manufacturing stopped, but that has now normalized.
Understand Labor Squeeze
Ports have seen a 15-20% cut in labor (skilled and unskilled). As they work to get people back to work, flexibility and adaptability are key. Ports look at expanding operations times, including Saturdays and nights, that maximize equipment use and take advantage of low-traffic hours.
Looking ahead, COVID challenges remain, like warehouse labor shortages causing congestion and delays, driver shortages (which are expected to continue), and record-setting floral holiday demand.
Deeper Collaboration Among Supply Chain Partners
As the industry adapts to the changing business environment – especially changes in transportation and logistics – greater communication and collaboration is essential. Suppliers need to know their customers’ strategies and operations so they can better support retailers. And retailers need to understand suppliers’ operations – the amount of time needed for breeding, growing, harvesting, and delivering.
Retailers might look at one of two vendor strategies:
Concentrating vendor relationships, where fewer vendors could better facilitate management, scale of purchase, etc.
Expand the list of vendors to guard against supply interruptions. Some new vendors might be in different locations. Agility is key.
Other changes suggested include:
Is delivered pricing still the best option, or does the industry need to move to FOB pricing?
Standardized box sizes could make floral transportation more efficient. A single dry boxes size and a single wet pack size would improve efficiency. As one speaker said: “Cardboard isn’t getting cheaper. Multiple sizes of boxes is insane. Everything has to fit on a pallet.”
PMA will continue to monitor this situation for floral members.