Parcel Costs Climb as Demand Surpasses Capacity
In this blog post, we’re taking a look at a few of the reasons that parcel shipping rates are currently on the rise, as well as a few things that companies may wish to consider as they look to offset some of the pricing turbulence we are sure to encounter as we move through 2022.
What is Driving the Shipping Rates
Fuel prices are extremely high
Recently, fuel prices have skyrocketed, reaching new all-time highs across the nation.
One of the driving factors of the currently rising fuel prices comes on the heels of the Russian invasion of Ukraine. Sanctions put in place around Russia’s economy have also resulted in the U.S. looking elsewhere for oil. Russia is the second-largest producer of oil in the world so the severing of economic patronage with Russia means gas prices will likely continue to soar higher throughout the year as the U.S. adapts to sourcing from and leaning more heavily on business with other countries.
Additionally, there is a large push for greener energy. The discussion around this topic has continued to influence a lot of major refineries to pivot their focus toward a more environmentally sustainable future. As green energy becomes more popular, others, such as Shell’s refinery in Louisiana, are ceasing operations altogether as they look to implement more eco-friendly processes.
According to many energy companies, this push is a sign that gasoline could soon become a thing of the past or be relegated to a second choice at best.
There is a shortage of truck drivers and workers
While Congress continues to work on lowering the age for operating delivery trucks, we are still experiencing a driver shortage. With the number of currently available drivers, it is impossible to meet the exponentially increasing consumer demands.
Workers are in short supply across the entire economy as a result of “The Great Reshuffle”. This is not a hurdle faced only by the logistics or shipping industry.
On a positive note, January 2022 saw a significant increase in employment numbers. We anticipate that this increase in employment will help to alleviate some of the labor shortage.
What Can be Done to Offset Rising Parcel Shipping Costs?
Leverage Your Automated Solutions
The last mile is often an important consideration for businesses seeking to improve margins. When properly optimized and leveraged, a robust last-mile strategy can prove to be a massively impactful component. In fact, a number of the world’s fastest-growing companies make it a point to focus heavily on continuously improving the final leg of their goods’ journey. For some of them, last-mile delivery is their entire business model.
Companies like DoorDash, Postmates, and InstaCart are just a few of the big names in the on-demand delivery space that recognize hyperfocus on the last mile as a winning strategy. All of the ones listed here also leverage automation technology as the main tool in their bag, so to speak. One prime example of this is the use of auto-dispatch systems. Leveraging auto-dispatch software allows these companies to cut back on staffing a physical workforce to manually handle assigning tasks to available drivers.
Work with Parcel Experts
Due to the reasons we’ve discussed in this blog post, parcel shipping costs are at an all-time high. While there are a variety of steps you can take to affect some amount of change, we highly recommend partnering with experts in the parcel shipping space. With the proper guidance, tools, and team on your side, you are better equipped to make data-driven decisions and even potentially renegotiate your parcel contracts to unlock hidden cost savings.
A team of parcel experts will be able to not only equip you with the tools and knowledge to make these decisions but also employ their experience and expertise to ensure the optimized management of the entire process into the future.
Want to offset some of the rising parcel shipping costs?
Redwood Parcel offers a free, no-obligation parcel check-up for parcel shippers. But what does it include and how can you, the shipper, use this information?
The check-up is in an easy-to-follow format of parcel shipping insights. Each slice provides a distinct view of your parcel shipping, giving you the ability to take control and identify service and savings opportunities. Our 50-point checklist reviews factors including service, zone, weight, and surcharges.
Reach out to us to get started!