Shipping rarely figures in economists’ inflation and GDP calculations, and companies tend to fret more about raw materials and labor costs than transportation. But that might be changing.

The cost of shipping a 40-foot container (FEU) unit has eased some 15% from record highs above $11,000 touched in September, according to the Freightos FBX index. But before the pandemic, the same container cost just $1,300.

With 90% of the world’s merchandise shipped by sea, it risks exacerbating global inflation that is already proving more troublesome than anticipated.

Peter Sand, chief analyst at the freight rate benchmarking platform Xeneta, does not expect container shipping costs to normalize before 2023.

“This means the higher cost of logistics is not a transitory phenomenon,” Sand said. “For inflation, that means trouble … The element of shipping, in overall prices, small as it may be, is much bigger than ever before, and it could be a permanent lift to prices going forward.”

Ocean transport costs initially leapt after a six-day blockage of the Suez Canal in March caused backlogs worldwide. That tightened an already strained vessel-hiring market as uncertainty about future fuel and emissions regulation had driven orders for new ships to record lows.

Then came a surge in demand for goods from consumers in coronavirus lockdowns, while dockyards were struggling with COVID-related labour shortages.

In early November, 11% of the world’s loaded container volume was being held up in logjams, down from August peaks but well above the pre-pandemic 7%, Berenberg analysts estimate.

Backlog until 2023
In late October at Los Angeles/Long Beach, one of the world’s biggest container ports, ships were taking twice as long to turn around as before the pandemic, RBC Capital Markets estimates.

Although the worst may be past, RBC analyst Michael Tran does not see freight prices returning to pre-pandemic levels for another couple of years.

Even if plans to unload an extra 3,500 containers each week are implemented, the Los Angeles/Long Beach backlog is unlikely to clear before 2023, he said.

“The softening in prices we saw at the end of September is a false dawn. What we see from a big-data perspective is that things are not getting materially better.”

A United Nations report said last month that high freight rates were threatening the global recovery, suggesting they could boost global import prices by 11% and consumer prices by 1.5% between now and 2023.

The impact also ripples out; a 10% rise in container freight rates cuts U.S. and European industrial production by more than 1%.

‘Not worth it’
The report noted that cheaper goods will proportionally rise more in price than dearer ones, and that poor nations producing low-value-added items such as furniture and textiles will take the biggest hit to competitiveness.

The retail price of a low-end refrigerator will rise 24% compared with 6.5% for a costlier brand, Ben May, head of macro research at Oxford Economics said, adding: “Companies may just stop shipping very cheap fridges, as it just won’t be worth it.”

The shipping boom was expected to abate as economic reopening allowed people to spend on travel and dining out rather than clothing or appliances.

But that theory is being challenged by new COVID variants, and the huge pandemic-time savings that customers could channel into even more goods.

During the last earnings season, toymaker Hasbro, retailer Dollar Tree and consumer goods giant Nestle were among companies bemoaning freight costs – and flagging price increases.

With the U.S. inventory-sales ratio near record lows, businesses will also need to restock.

“This will support demand for goods through the first half of next year,” Unicredit analysts said.

The problem could get worse if smaller companies are unable to meet their commercial obligations and struggle to stay afloat, said James Gellert, CEO of analytics company RapidRatings.

“These time bombs are riddled through large enterprises’ supply chains and will present many problems for their customers who rely on their goods and services.”

Real relief may come only when more vessels appear.

Ship orders have risen significantly this year. But it takes three years to build and deliver one, and it will be 2024 before sizeable new tonnage hits the water, senior ING economist Rico Luman predicted.

The post Shipping Costs: Another Danger for Inflation-watchers to Navigate appeared first on Cargo News Today.

Implement a Shipping Solution

Carrier rates are always subject to change and can be time-consuming to keep up with. A shipping solution like ShippingEasy will display the most current shipping rates automatically so you can make the best choice for your business without doing hours of research. Importantly, ShippingEasy also provides discounted shipping rates for users. Taking advantage of these exclusive discounted rates is critical for small businesses looking to save on costs.

One Balance

ShippingEasy One Balance offers users discounted shipping rates up to 46% with USPS and UPS. You can control all of your carrier options from one central wallet with One Balance.

One Balance Advantages: 

• Access to USPS Commercial Rates—the lowest rates available
• Up to 62% off UPS Daily Rates
• Discounts on shipping insurance

One Balance also integrates with FedEx, Globelogistics, RR Donnelly, APC, and DHL so you can manage all your shipping options with ease.

The fulfillment process can take up a substantial amount of time and resources. ShippingEasy users are able to better streamline this process through e-commerce integrations that will save your team time on the backend. For example, you can connect your e-commerce platform (such as Shopify or BigCommerce) to your ShippingEasy account so that orders made on your website will automatically populate in ShippingEasy. This ensures that order and customer information will be transferred correctly, ready to fulfill. From here, you can create and print shipping labels easily.

Cheapest Way to Ship Based on Package Specifications

Once you’ve set up a shipping solution, consider the details of what you’re shipping. This includes product weight, size, shape, travel distance, etc. Shipping rates are often categorized by product weight, travel distance, and shipping speed. Depending on the weight and shape of your products, you may choose to utilize flat rate packages (different carriers have different flat rate package options).

Ship by package weight

Package weight has a big impact on shipping rates. It’s also important to consider the dimensions of your package, like cubic feet.

If your package is under 1 pound, USPS First Class Mail is the cheapest way to ship. If your package is between 1 and 5 pounds, USPS Priority Mail will be the most affordable option. For heavier packages (over 5 pounds), FedEx Ground and UPS Ground will likely be the cheapest shipping services.

Ship by shipping speed

You may choose to offer customers different options for delivery speed. If you want to offer express shipping, such as 2-day or overnight shipping, knowing the cheapest options will help bring down costs for you and your customers.

USPS does not offer guaranteed 2-day delivery times. If you’re looking to offer 2-day shipping—check out  FedEx 2 day shipping for second day business delivery and UPS 2nd day air. 

If you need an overnight delivery option, UPS and FedEx offer the most competitive rates and convenient service. Each carrier has multiple overnight service options.

No matter what your shipping specifications are, using a shipping solution like ShippingEasy allows you to compare carrier rates in real time so you can make sure you’re always getting the lowest rates.

Other Considerations: Shipping insurance

Shipping insurance is an often overlooked, but important, cost of the shipping process. Some shipping services include default shipping insurance up to a certain price. If you’re shipping expensive products such as tech, jewelry, or furniture, investing in shipping insurance is likely necessary. There are ways to save to make insurance more affordable.

Carriers offer their own shipping insurance options, but these can be more costly. Using a third party insurance provider like Shipsurance can help you save $.20-.30 per $100 product value. ShippingEasy One Balance also gives you access to discounted shipping insurance options.

The post What is the Cheapest Way to Ship for a Small Business? appeared first on ShippingEasy.

The post What is the Cheapest Way to Ship for a Small Business? appeared first on Cargo News Today.