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Top 5 Tips to Reduce Shipping and Logistics Costs

 

All around the world, shipping & logistic costs are looking in one direction – up!

 

The global increase in shipping prices sets off a chain reaction. At the end of that spectrum are consumers. When they feel it, it affects profitability.  

 

Shipping price surge sunk countries that depend more on imports than production. It's a similar fate for companies integrated into the global supply chains.

 

The COVID-19 pandemic crippled the shipping industry in 2020. The Ukraine-Russia war could further disrupt supply chains, which could maintain price hikes for longer.

 

According to Bloomberg, contract rates for a 40-foot container have increased by 25-50%. Furthermore, the cost of transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam rose by as much as 547% higher than the seasonal average over a five-year period.

 

Does your company rely on shipping for manufactured products or individual components? If so, no, you don't have to rate your headache from 1-to 10.

 

In this article, you’ll understand why shipping prices are at an all-time high. Read through to find out what you can do to reduce your shipping cost.

 

What’s Driving a Surge in Shipping Costs?

 

Port Delays

No, the effect of a raging global pandemic on logistics wasn’t good enough. In March of 2021, one of the world’s largest shipping vessels, Ever Given, got stuck in the Suez Canal.

 

12% of global trade passes through the  Suez Canal, and Ever Given blocked the waterway for a week. Ships couldn't leave or enter the route. Delays in ports, including accidents like this, and ongoing traffic congestion continue to exert pressure on freight charges.

 

Container and Labor Shortages

Responding to COVID-19, the world went into lockdown. That meant containers already docked were unable to move. 

 

Although China was quick to reopen its economy, containers that the country needed were stuck in the US and Europe. The ones stuck in those ports were empty. This imbalance will go onto exacerbate shipping prices.

 

Though the pandemic-induced labor shortage may be temporary, structural level shifts could further derail the problem. With evolving work preferences, and rising wages, unloading costs at ports have increased. 

 

Yet, labor shortage persists even with salary hikes, which doesn’t bode well with the rising shipping cost.

 

High Demand and Low Capacities for Ocean Freight

The worldwide lockdown brought about an imbalance in demand and supply. People bought less, so industries reduced production. When governments relaxed lockdown restrictions, consumption increased, and businesses couldn’t catch up fast enough.

 

With more demand than supply, freight forwarders have the upper hand in negotiations. As a result, revised contract freight rates saw new heights.

 

Fuel Price Hikes

The usual suspect, the insensitive culprit. Crude oil prices give real cause for concern. Whether it’s transportation by air, land, or sea, the fuel rates dictate the logistic industry.

 

Fuel price hikes affect trucking, ocean freights, and air cargo rates. As a result, profits disappear. As global fuel rates are at a record high, in 2022, businesses must force themselves to rethink their strategy.



Top 5 Tips for Cutting Shipping Costs

 

1. Know Your Options

Never depend on one mode of transport. Be flexible. Have different options so you can choose the most economical one out of the lot.

Ocean shipping costs less, but by air will save time. According to what matters most, compare and conquer.

 

2. Outsource Shipping

Having your own transport will cost you extra. Outsource it to a logistic broker company with a good track record to save money.

 

3. Explore Partnerships

Smaller shipments cost much more than larger shipments. Consolidate your goods by partnering with other companies in your country that import goods from the same destination. 

 

Though it may take longer, you can save money by sharing labor costs. Proper planning can definitely tackle the timing issue anyway.

 

4. Use Efficient Packaging

The concept is simple: Try filling a cup with ice cubes. Then do the same with liquid water. It’s the same stuff, but you can get more in with proper management. That is why you need to plan your packaging carefully. 

 

Efficient packaging means more space. More space means more goods in a single consignment. This leaves no space for paid vacuum.

 

5. Invest in Warehousing

As mentioned earlier, shipping more with less frequency will slash your costs drastically. With an accurate demand forecast, you can stock your inventory with minimum risks. 

 

So, invest in warehouses. Buy more if necessary. Look to rent if it’s cost-effective.

 

At MMI, we have helped leading brands leverage our extensive network and sub-brands to overcome manufacturing and supply chain challenges. Our decades of experience will help you bring products to market on time both domestically and abroad.

 

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