If you’re in manufacturing, you are probably all too aware of how the Covid pandemic turned the industry upside down. Who can forget the photos of container ships stacked up at ports while your customers complained about incredibly long shipping delays? Fortunately, supply chains are largely back to normal, though ongoing global conflicts are threatening them in some regions. But what is less talked about is the effect of shipping rates. What are they doing these days, and how can you hedge against wild shifts in these rates? Let’s take a look.
Shipping Rates and Supply Chains in Manufacturing
Fluctuations Remain Normal
The biggest thing for manufacturers to understand is that rate fluctuations appear to be the new normal. Overall, shippers have applied the lessons learned from the pandemic, and shipping costs have levelled off in many markets. But global unrest continues to create challenges, with rates predictably rising when conflicts break out. Air freight appears to be somewhat more stable than ocean freight, but relying on this to continue could be a mistake.
Strategies for Dealing with Fluctuations
Since shipping rates are not predicted to stabilize anytime soon, smart companies will need to find ways to adapt. To buffer your organization, try these strategies:
- Get quotes from multiple shippers, and be sure to read the fine print.
- Add at least 10-20% to your budget and transit time forecasts. This will help you weather sudden delays or capacity issues that can cause unforeseen price increases.
- Rethink your warehousing solutions. “Just in time” delivery sounds great on paper, but everything has to work perfectly for it to succeed. Consider where your warehouses are located and whether you are storing enough raw materials and finished goods to account for shipping concerns. A strong local supply chain and plenty of inventory can help you wait out a sudden surge in pricing.
- Audit the profitability of each of your goods, including freight costs. It may be worth removing lower-performing items from your product lines.
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