Inflation Affecting Freight Rates

Posted by Land Link Traffic Systems on Oct 21, 2021 7:34:17 AM

Inflation is painfully obvious literally everywhere. Transportation costs are not immune. Energy and labor shortages are fueling inflation concerns over freight costs.  Concerns have been further fueled by two contributing factors: tariffs and trade turbulence stemming from the Trump administration’s protectionist policies and supply chain bottlenecks as a result of rising transportation costs and ongoing truck-driver shortages. The US inflation rate for the 12 months ending in July was 2.9 percent—the highest since February 2012.  The cost of transporting goods is a component in every step in a company’s supply chain. Everything from iron ore, steel, parts and finished products has to move as raw materials are processed in global manufacturing. The cost of shipping containers across the ocean is higher, truck drivers are in short supply, and gasoline is more expensive than many expected earlier this year. Spot container shipping rates from Asia to the U.S. West Coast were five times higher last week compared with the same time last year, according to the Freightos Baltic Index. Those rates are more than 14 times higher than during the same time in 2019.

Outsourcing Supply Chain Management is a Cost
Saving Option

Often, cost-cutting and optimization initiatives tend to come with diminished service. This is not necessarily the case. If a company has already been trimming the fat a little more each year, it may find itself striking bone at a time when it needs to cut costs the most.

This is where outsourced supply chain management can make all the difference. An experienced partner can help uncover more opportunities to cut costs, like finding optimal routes and reducing transportation spend. This will often involve leveraging established relationships with carriers to give companies access to rates they couldn’t get on their own.

Outsourcing parts or all of the supply chain also reduces the burden on staff, particularly for companies that don’t have a dedicated logistics officer. That puts hours back in the day for team members, allowing them to focus their energies on other critical business areas that support the bottom line.  Inflation can force companies to tighten their belts, but it doesn’t have to leave them gasping.

Planning Ahead

Industry experts are generally in agreement that it may take another year to see any measurable improvement in the current supply chain challenges we’re facing. Inflation could further impact supply and the economy creating a recession. A recession typically lasts 12-18 months. So things can be challenging for the next few years. If not now,  when is the right time to formulate a solid supply chain plan. Contact Land Link Traffic Services today for a complimentary supply chain review. We can help formulate a cost efficient and effective supply chain plan to help your organization successfully navigate the turbulent logistics condition now and in the future.

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Michael Gaughan
Technology Officer
Land Link Traffic Systems


Topics: Third Party Logistics, Logistics News