Rising Freight Costs Affect All of Us

freight

The shortage of truck drivers in America is not a new issue; it’s just now being magnified because of increased delivery requirements. We live in a period of time when people crave and essentially demand instant gratification in all parts of life. Consumers want what they want, and they want it in the shortest possible amount of time. Conversely, manufacturers, distribution centers and retailers are drastically tightening delivery schedule windows in order to keep up with consumer expectations and demand. With the combination of a massive driver shortage and the always increasing demand, trucking freight rates are skyrocketing and show no signs of leveling out anytime soon.

While consumers love the ability to order an item on Amazon and have it delivered that same day, or have their favorite brand of chips always in stock at the local grocery store, that level of service comes at a price. According to a recent Bloomberg News article, “Tyson Foods Inc. expects to pay $200 million extra for freight this year. Kellogg Co.’s logistics costs will rise nearly 10%. McCormick & Co. blamed increased shipping expenses for its failure to achieve a profit target.” Now, how do you think those costs are going to be offset? If you guessed increased consumer prices, you’re right on the mark. Every company has to protect their bottom line, and increasing consumer prices is the logical move for these massive international companies. We may not like it as consumers, but we are, in a way, somewhat responsible for these price increases.

In an industry that is reported to be about 248,000 drivers short of meeting demand last year, according to Bloomberg News, it’s no surprise that freight costs are increasing by as much as 30% along particular routes.  Additionally, new federal regulations on driver hour limits are putting even more of a chokehold on the already scarce driver population. No longer can drivers log the long consecutive hours on the road that they used to be able to get away with. This is being combated by some companies offering incentives for truckers who agree to drive as teams in order to allow for proper rest, but not losing any time on the road.

In 2018, freight costs will continue to be extremely volatile and that calls for an increased focus on the supply chain for all businesses. When the big boys like Tyson, McCormick and Kellogg’s are hurting, we know that the situation is serious and cannot be ignored. Freight is not going away, so it’s our responsibility to figure out how to effectively manage costs and still be able to meet modern demands. It’s an issue that affects just about every business in America and we have to figure out ways to adjust and adapt.

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