Just when the global supply chain was starting to recover from the pandemic upheaval, the Ukraine crisis happened. The crisis has disrupted numerous operations, but gas seems to be the most affected. Souring gas prices plus the deployment of emergency reaction plans by carriers and shippers have had a range of impacts on logistics operations. This has disrupted the output in different sectors and adversely affected the delivery of goods to most regions.
So, what does this mean for commercial shippers?
Every business owner aims to maximize their profits and mitigate loss, and this applies to the carries as well. Due to the high gas prices, carriers are forced to increase their shipping prices or take losses. In return, this will impact the logistics company and the shippers.
It is more of an outward domino impact whereby shippers will be charged more to make up for the hiked price if the cost of freight transport is high. Similarly, if the shipper is charged high, the receiver or consumer has to pay more to compensate for the added costs. This means that the products will reach the consumers at higher prices, adversely affecting sales. Also, shipping companies are looking for other fuel-efficient shipping methods.
Even truck drivers want to maximize returns. They cannot afford to engage in drives that only waste their gasoline without profits. Therefore, they are unwilling to deliver a load if there is no return delivery upon reaching the said delivery destination. They want to leverage every opportunity, so they may be forced to wait until there is another load for their return trip.
This means that if you want to ship a product to a particular destination, you may have to wait until your freight transportation service provider gets a scheduled delivery from that destination to avoid deadheading. Again, this will harm your bottom line, especially when your receiver is not patient enough to wait until the said schedule. They are likely to look for alternatives, which translates to reduced sales.
The impact of increased gas prices goes beyond the transportation industry. Other sectors like the environment and technological development are affected. And this could lead to higher costs of shipping time-sensitive products. Furthermore, consumers may be forced to give up on secondary needs like clothes and appliances to avoid high costs. When people are not buying as much as they would if the fuel prices were standardized, retailers end up with tons of unsold goods. Similarly, the high prices affect companies that depend on particular commodities for their businesses. The businesses have to pay more to receive the items and will also be forced to charge more to their consumers, and the cycle continues. Businesses will either have to accept minimal returns and even losses or be stuck with stock that may take a long time to move.
A Shift in Service Area
Businesses whose operations depend on transportation and delivery must think of ways to save on fuel costs. And among the tips to achieve this is to trim their target service areas. For instance, if you initially offered out-of-town deliveries, you may be forced to change your service area to areas that are only a few miles from your central location. Or, you may alter routes and driving practices to suit your transportation budget. Most businesses have already changed their service areas nearly in half to minimize fuel consumption. Others have changed their delivery routines. For instance, food truck operators may concentrate on lunch and dinner deliveries within the neighborhoods while skipping any in-between orders. Again, the idea of trimming service areas and times will harm your company’s bottom line. The frustrations to consumers may prompt them to look for alternatives, thus reducing your sales.
Changes in Service Usage Level
From the arguments above, it is clear that an increase in fuel costs disrupts business delivery routines. Most companies have opted to cut back on the frequency of services. If the price affects usage level, the affected businesses will try to save as much by reducing services. Some may even decide to offer only pickups where they set up central products’ pick-up points, and consumers will have to pick them up by themselves. The idea is inconvenient, especially during the digital era when most individuals prefer shopping online. They expect to have the products delivered right at their doorstep, but this is only becoming a challenge by day.
Unfortunately, the hiked fuel prices affect the employees too. In an attempt to cut down costs and boost profits, businesses that depend on transportation and delivery may lay off some workers or reduce work hours. The idea will harm your productivity, and it may take more time than you think to recover.
The Effects of Gas Disruptions on the Future
Over 80% of cities in the US ship and receive their goods by truck, meaning that you shouldn’t expect the trucking industry to go anywhere any time soon. Still, fuel prices may continue to rise, increasing freight transportation. This has made some businesses keep more products on hand to reduce the number of necessary trips. Others respond to the increased freight transportation costs by shifting from offshoring to near-shoring when sourcing products to reduce the number of miles traveled. While it’s inevitable that the increasing fuel costs will affect the transportation industry, businesses can minimize stress and increase profits by planning ahead. For instance, you can entrust all your transportation needs to a single freight broker. Despite the spiking fuel prices, the idea offers you reliable shipping services at affordable rates.
Haulitforward is your go-to freight broker for all business shipping needs. We offer fast and seamless shipping experiences regardless of the size of your loads and distance. Reach out to us today, and let’s discuss how we can help you achieve your bottom line during these challenging times. Try us today and share your experience.