Let’s play a game. I’m thinking of a percentage that represents a price increase for ocean container freight. Can you guess the correct number (answer below, but no cheating!)?
It looks like Washington is finally taking supply chain concerns more seriously, which may only be due to the supply chain’s role in inflation. Last week President Biden signed an executive order (which is basically a wishlist) outlining plans to bust up corporations increase competition among businesses. And the plan seeks to correct many areas of the supply chain. In terms of ground transportation, Biden is calling for deconsolidation of the surface carrier market by encouraging “changes” which allow for more competition. Highlighting the fact that most railroads own their tracks and prioritize their own freight, the EO calls for regulation of rail in the form of rights of way for passenger trains and new requirements that ensure the prioritization of shipments outside rail carriers’ networks. Lastly, it seeks to crack down on exorbitant export fees for ocean freight.
But are rising supply chain costs the result of inflation or are they simply the result of supply and demand? The answer is yes. But the shock of such a rapid increase in shipping volumes, which by now have become quite normal, is a lot to take in all at once. Such an increase in volume without the infrastructure or labor power to support it is going to result in some price increase. This is why the Fed continues to insist that inflation will subside.
Simultaneously, smaller shippers are reporting to Congress a 30-75% increase in shipping costs and asking for help. It’s only natural that larger players would be able to weather a supply chain storm of such magnitude with more ease than small to medium shippers. So with costs and volumes skyrocketing, the market awaits a correction. And while federal investigations and fines will eventually impact the cost surge faced by small to medium shippers, that kind of thing can take a while to happen.
In the meantime, technology has a major role to play in both deconsolidating the market and keeping small to medium businesses afloat. For example, using a cloud architected TMS gives you the ability to shop thousands of providers across all modes to find the best option for your shipment. The best provider to take your shipment may very well be one of the smaller players, but without technology you’ll never have that visibility. Additionally, technology helps you insulate from price increases by giving you access to a transportation marketplace that puts you in touch with the lowest cost provider. A rating engine architected for cost savings and efficiency could make the difference between sinking under the weight of surging prices or soaring above the market with total visibility.
As we like to say around here, the clock is ticking. You don’t have time to wait.
Ps. The answer to our question is C.