12 Nov Why Supply Chain Costs Continue to Rise
If you are in the business of shipping goods, you’ve noticed that associated costs continue to escalate. This is affecting players across the supply chain industry, from freight forwarders and last mile providers to OTR truckload carriers, LTL carriers, and freight brokers. Logistics and warehouse managers, as well as, the manufacturing and distributing c-suite are feeling the numbers crunch as cost pressures continue to impact the supply chain which leads to higher service costs.
Factors involved in cost surge.
Economic volatility due to the continuing pandemic combined with fluctuating demand, insurance costs, and employee payroll expenses all contribute to the freight cost escalation. Let’s take a look at some of the major factors.
- Surges in demand are causing supply and demand strains which impacts carriers’ ability to serve customers. The pandemic has contributed to an already burgeoning driver shortage. And as the deadline for reporting to the Drug and Alcohol Clearinghouse looms, we can expect the shortage of drivers to increase. At the same time, warehouse facilities and transportation companies continue to struggle with personnel shortages due to fear of the virus or necessary quarantines.
- Service requirements are more demanding than ever. This is increasing the need for talented service providers, drivers, and delivery personnel to operate in this new environment which translates to a renewed investment in costly training.
- Right now, we are experiencing the need for quicker time which has increased the need for better communication. These new requirements add complexity to old processes while custom delivery services are simply more expensive to provide.
- The insurance and legal industry promote a self-serving and dysfunctional environment compounded by nuclear verdicts. These two industries are exponentially feeding cost escalations by paying frivolous claims. This is a frustrating situation as these claims are paid because it’s cheaper than fighting for what is right and just. Take for example the $411 million dollar nuclear verdict against a single trucking company in Florida. According to Freightwaves, this is possibly the largest nuclear verdict ever against a company that now appears to have no authority.
What can shippers do in this environment?
With the logistics industry seeing these large cost escalations in freight rates in both the contract and the spot market, what can a shipper do to navigate the constantly evolving landscape?
- Talk to your logistics providers. During a recession it’s important to know exactly why freight costs are increasing.
- Ask questions. Your provider should be willing to discuss with you long-term plans to mitigate ever-rising costs.
- Keep the lines of communication open. Find a logistics provider who can act as a trusted advisor during both good times and bad.
Working with Blue Eagle Logistics
Back in March, when the COVID-19 pandemic created a desperate need for essential goods and supplies, Blue Eagle Logistics began to implement safety precautions for the continued health of the customers we serve and our own team members: including enhanced sanitation practices, signature-at-a distance policies and remote work capabilities.
Whether you are in the need for first or last mile services, warehousing or cross docking, or a combination thereof, we are determined to provide our customers with a superior logistics experience. Our knowledge of the transportation industry and our advanced capabilities make us both an excellent service provider and a trusted advisor. If you are interested in working with a logistics company committed to your satisfaction, call Blue Eagle Logistics today.