Transportation Turmoil
Just when you thought things couldn’t get any worse, shipping packages becomes a little more uncertain. Certain events are adding confusion to an already unsettling situation. With outbound freight costs representing 6 – 8 % of sales and inbound another 2 – 4 % for domestic and 6 -12 % for imported product, changes to the cost of receiving and delivering product can be a critical factor in determining whether you make a profit this year.
Among the potential issues to be faced are:
- The potential elimination of Saturday deliveries by the USPS. The effect on customer behavior is unknown at this point but could affect your operation to meet this change.
- A potential strike by UPS aircraft mechanics. Many in the industry today do not remember the chaos of past work stoppages. The requirement to scramble to stay in business when carrier service is interrupted is no small matter and could be a life or death issue for some.
- Moving FedEx from under the umbrella of the 1926 Railway Labor Act. If this results in the unionization of FedEx, can rate increases be far behind? Some sources are speculating that the increase could be as high as 30% over current costs.
- Wildly fluctuating fuel costs are causing planning difficulties for everyone. Those that charge for deliveries constantly have to revise charges to stay current.
- The “Employee Free Choice Act” affecting the degree of difficulty in establishing unions in companies could alter the landscape for some carriers.
- Confusing combinations of package carriers that cloud rates and service level options. With all of the changes in carriers over the past few years and the increasing level of complexity required to make carrier decisions, a certain level of uncertainty surrounds carrier decisions.
- Accessorial charges that may take a lawyer to accurately interpret. With over 90 different charges that can represent a significant percentage of the total cost of delivering product, a lot of time has to be spent understanding all of the potential charges that might affect your business.
With all of these issues and uncertainties facing us in the very future, we have to devote time to understanding our true freight costs and develop a strategy to control them to the point that they will not drive us out of business.
Contact us to talk about our FREE inbound and outbound freight rate analysis and contract review.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in warehouse and distribution, warehouse management systems, order management systems, call center, inventory management, and benchmarking; Learn more online at: http://www.fcbco.com
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