03/16/2021
5 Logistics Experts Weigh in on The Freight Crisis
Paper prices are increasing, leading to transportation and freight costs to skyrocket
Costs to make and ship products are going up. In our world, that means that paper prices are increasing. But that is not the only cost that impacts our products.
Transportation costs are going up. Way up.
From 2017 to today it is estimated that freight rates have increased on average over 8-15% in the US. To make matters worse, the number of available truck drivers is down. The combination of these freight rate increases and lack of available drivers has put American companies in a tough position. We wanted to find out exactly how companies are dealing with these issues.
To get these answers, we went right to the logistical managers and even talked to people here at Smith Corona to see how they are handling this.
The companies that we talked to each had a different outlook on how companies should handle this increase and why this increase is happening.
Bill Cassidy
Bill Cassidy is the senior editor at JOC.com. His articles have been hitting this growing issue head-on. He has been to several conferences that have dealt with the increasing transportation costs and have talked to multiple logistics experts that were in attendance. Here is what he as to say.
As you know, freight rates have increased significantly over the past six months. What changes, if any, should a company make to handle these increases? What are trucking companies doing to prepare their customers for these increases?
Answer: Freight rates have increased significantly over the past six months, and as the year goes on they are going to continue to rise. Shippers should look for ways to work more closely with their carriers. This collaboration can help reduce costs to your organization and make the carriers job easier too.
Additionally, companies should start to examine their networks more closely when shipping freight. They should start looking at transit times to plan accordingly, as transit times are now longer than what they used to be. By planning ahead shippers can tell carriers when they are needed, which would help carriers find trucks for the deliveries. Planning ahead is key because truck availability is so low.
Lack of adequate drivers has given freight companies that power to re-price their services. Consequently, shippers now have to accept their price increases because they have nowhere else to go. Before this increase, shippers would have had a variety of lower prices to choose from, but now pricing has increased, and availability has decreased, so there are limited choices.
In addition to price increases, there is a national shortage of available truck drivers. If the shortage impacts a company’s raw material, how can a company manage their raw material inventory? What should be done to combat this?
Answer: Companies should start to explore their sourcing options to help increase their potential raw material suppliers. They should be looking at multiple companies to source their materials from. If a company is sourcing from two or three companies, they should start sourcing from five or six different companies. They can also look at different ways to have raw materials shipped for example shipping LTL (less than truckload) instead of FTL (full truckload).
Should companies pass on the freight price increases to their customers? Or should they eat the increase?
Answer: No one in the industry was prepared for this spike. Budgets have been blown because of how unprepared companies were. The last thing companies want to do is raise prices on their products. So companies have been trying to eat the costs as much as they can. Transportation costs have increased so drastically that they cannot take the repercussions anymore.
Senior Editor at the Journal of Commerce Bill Cassidy weighs in on the freight crisis
