IMPACT OF INFLATION ON LOGISTICS INDUSTRY

Inflation is driving up transportation costs in the past 2 years, forcing businesses to increase the price of goods to consumers.

The US consumer price index (CPI) in April increased by 8.5%, marking the largest percentage increase since 1981. Before that, from mid-2021, Logistics Management newspaper analyzed the impact of inflation on with supply chain and logistics operations. Accordingly, inflation has hindered this sector in issues: port congestion and backlog of imported containers, excess labor, fuel prices...

Inflation affects logistics in issues: port congestion and backlog of imported containers, excess labor, fuel prices... Photo: CNBC

A Logistics Management reader survey of 100 freight, supply chain and logistics stakeholders confirms inflation continues to affect every step, from an operational and business standpoint. Specifically, 92% of survey respondents are affected by the current inflation situation.

While the US Federal Reserve is setting interest rate hikes to quell or slow the rise in inflation, it remains to be seen whether this measure is enough. Dave Ross, Executive Vice President of Roadrunner Freight, a logistics provider, finds what people are buying is more expensive than it was a year ago, typically with sharp increases in warehouse rents and gas prices.

"The same goes for the cost of goods, partly because the high cost of shipping over the past 1.5 years has left retailers with no choice but to raise the price of their products," said Dave. Ross said. The expert also added, that means people no longer spend heavily and buy as many goods as before. A lot of new logistics companies are established but almost no one realizes it because of the increased demand and the supply chain is too congested. Fuel prices are soaring, which will obviously slow down the economy.

Network Collaboration expert Glenn Koepke found that an important way for businesses to deal with inflation is to revert to a few months of planning to minimize risk in last-minute shipping, regardless of sea. by air or by road. Recently, the cost of fuel has increased by 30%, the same level as when the Russian-Ukrainian conflict began.

"One of the keys to the logistics industry is that consistency makes it so much easier for us to plan. If we know there are five shipments a week from the Port of Los Angeles to the Chicagoland area, the service provider says transportation will be easy in the planning process for each trip," said Mr. Ross.

Predictability is one of the fundamental factors that businesses and professionals are trying to achieve. However, a lot of companies are unable to predict or change consumer and supplier habits...

Inflation is likely to persist in the coming months and clearly affect supply chains on various fronts, as Logistics Management survey data and comments from Mr. Ross and Mr. Koepke also emphasized. The most important thing for businesses right now is to stay calm and have a calculated approach to each situation, and at the same time, they should make adjustments if needed.