Diesel Prices Keep Climbing, Ocean Shipping Reform Act (OSRA) Passes with Attempt to Lower Shipping Costs

The freight market is continually evolving and reflective of the changes in global trade. Meanwhile, today's shippers are starting to double-down on their peak season plans and develop more strategic means of tracking costs. Let's take a look at a few of the current factors affecting the market and how shippers get prepared and proactive around this forthcoming peak season.

Parcel Shippers Hindered By Growth in Early-Termination Agreements

Amidst an ever-challenging market, parcel shippers feel pressure from early termination agreements. These agreements have gone from usage as an occasional clause to a contract staple. Parcel giant UPS has been a leader in this supply chain change, making it nearly impossible to utilize an escape clause without significant financial repercussions. FreightWaves reported that early termination for UPS can involve a "2% penalty on a shipper's net spend over the prior 52 weeks", or a "2.5% fee based on a portion of a shipper's net spend over a more time-defined period, generally the most recent quarter." Both options complicate the parcel auditing and accounting process.

Lower Ocean Cost Initiatives Starting at the White House

On Thursday, June 9, 2022, the White House released a video of President Joe Biden discussing with retailers and farmers on speaker phone about the current costs of shipping products across the Pacific ocean. While port congestion and supply chain dysfunction have added to the causes of inflation, AP News quoted Biden as saying, "There are only nine shipping companies, nine, N-I-N-E, major ocean line shipping companies who ship from Asia to the United States. These companies have raised their prices by as much as 1,000%." With the Senate's approval of the Ocean Shipping Reform Act of 22 and the house, the bill is headed to President Biden's desk for signing and is another forthcoming change to the market for professionals to watch.

What is the Future of Final Mile Delivery?

This year's Gartner Supply Chain Symposium conference showcased a stellar presentation, "Last Mile is So Last Year — Here's How to Reach the Future Retail Consumer," from Gartner's Vice President and Analyst, Tom Enright. As time and tech have evolved, the supply chain, the last mile, (aka the final mile), has moved beyond simply the stretch between a distribution center and its retail location and on to any way that a company can get its products into a customer's hands. This involves "alternative options for consumers such as locker pickup, alternative delivery locations and buy online pick up in-store (BOPIS) models," according to the Modern Shipper's article on Gartner's talk.

Google Sees Window of Opportunity in the Final Mile Market

As crowdsourcing and other approaches have jumped in to fill gaps within the final mile market, Spring 2022 saw Google entering the scene. With its Maps platform already in place, the tech giants launched a last-mile execution tool called the Last Mile Fleet Solution and the Cloud Fleet Routing API, which is a route-planning tool. These tools assist home carriers in reaching maximum efficiency, eradicating areas of confusion and opportunities to get lost. "One failure on that package means that it's unprofitable for the fleet operator," according to Shalon Mantri, group product manager at Google Maps Platform, who spoke with Supply Chain Dive.

USDA Incentivizes Farmers Withholding From West Coast Export

As ocean transportation costs astronomically increase, the U.S. Department of Agriculture has decided to step in to promote more exports. Supply Chain Dive reported that through the end of the year, "Agricultural shippers will receive $200 for every container of farm goods exported out of the ports. Exporters using refrigerated containers will get $400, and shippers in Oakland can receive an extra $125 for each pickup of an empty container." The USDA is hopeful that this incentive to utilize the Port of Oakland and Northwest Seaport Alliance will result in rising export volumes after a season of declining numbers.

Record-Breaking Gas Prices Continue

Personal and commercial drivers across the globe have been devastated as diesel prices remain high. Yet the prices have continued to rise. A June 6, 2022, post by FreightWaves revealed record national prices at $5.703 per gallon, yet since that post, the record has been broken again with new data from the EIA that declared on June 13, 2022, the national on-highway diesel is $5.718. The rise in diesel costs has been an added pressure to diminishing corporate and personal profit margins that inspire burnout in logistics.

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