Shipping Costs in 2022: How Shippers Will Account for Congestion and Stay Strategic

Shipping Costs in 2022: How Shippers Will Account for Congestion and Stay Strategic

shipping_costs_in_2022

The global pandemic has changed the transportation and shipping industry in many ways, some of which will linger for years to come. Issues with logistics and shipping capacity continue to haunt supply chain management as experts predict that the shipping bottlenecks and backlogs at big U.S. ports will continue well into 2022. General rate increases are expected to be higher than in the past as shippers and carriers attempt to balance costs and expenses during ongoing recovery as we saw just last week with Central Freight Lines going bankrupt after 96 years and laying off over 2,100 employees. Many business leaders and supply chain logistics managers are preparing for continued disruptions along the major ocean, truck, and air routes. 

As of the end of October, and according to CNBC, “some 77 ships are waiting outside docks in Los Angeles and Long Beach, California, carrying $24 billion worth of goods looking to find their way into the American ecosystem, according to Goldman Sachs.” In 2022, shipping trends are likely to reflect the unprecedented level of disruption and change the supply chain has seen over the past few years. The pressures felt throughout the supply chain network are now feeding into local and global economies, putting constraints on everything from grocery stores to major warehouses and suppliers. 

The Causes of Supply Chain Congestion 

Prices for consumer and wholesale goods have gone up significantly and continue to do so at a rapid pace. The trends will likely create an even tighter supply-and-demand balance as the potential for fewer goods on the shelves may mean fewer presents under Christmas trees. As a result,  shipping costs in 2022 will likely be even higher than they are right now. Shippers must find ways to remain strategic and maintain the maximum potential for growth in the coming years. 

To mitigate this shipping rate increase, shippers must understand why congestion and backlogs occur in the first place and why cost management is so vital to the supply chain today.

  • Driver shortages in multiple areas
  • Increased fees and rates for shipping
  • Fewer ships and trucks on the go
  • Issues with equipment availability
  • Higher demands with e-commerce
  • More competition with prominent brands
  • Fewer workers at docks, ports, and warehouses
  • Delay in restocking and delivery
  • Less availability of inventory and products
  • Increased focus on local suppliers
  • Better freight auditing insights
  • Increased demands for fast and free services

These factors are just the tip of the iceberg when considering everything that influences the modern supply chain network.  Both on a local and national level, and even a global level to a certain extent, the chain reaction of supply and demand imbalance continues to create bottlenecks and delays. As we look toward the 2022 shipping trends, it is important to remember that shipping capacity and driver availability directly feed into these trends. Shippers must begin preparing for next year’s added pressures and disruptions now.

Shippers Need Data-Driven Decision Making to Align Their Brands to Top Trends in the Industry

According to professional industry insight and market tracking, the outlook for shippers did improve slightly in mid-2021. Still, that improvement came on the heels of some of the lowest rates and numbers in recent memory. Conditions are still tough for most shippers and will likely remain problematic for some time to come, even as many companies begin looking to 2022. Strong capacity utilization will continue to be critical for supply chain growth as will planning for the likely higher shipping costs in 2022. As problematic as the issues at hand appear for truckload shipments, maritime shipping conditions are even worse. Port delays continue to worsen, container shipping costs rise, and carriers are charging higher rates than ever before to try and compensate for the unpredicted bottleneck mess.

The combination of a lack of capacity and the far-reaching pandemic conditions leads to carriers passing along additional fees and rate increases to shippers. In turn, this leads to shippers increasing their rates to reduce the impact it had on their overall budgets and profits ahead of the peak season rush and holiday shipping deadlines. And all of these seem to be leading to a potential scenario where customers who are still willing to pay more for shipping service this season may be faced with even higher rate inflation to compensate for shipping capacity issues.

Ways Shippers Can Overcome Congestion and Stay Strategic 

Anticipation over 2022 shipping trends and associated costs continue to plague shippers even before the year officially gets underway.  Planning for these expected issues of congestion and delays requires strategic planning and thinking. There are many ways shipping managers can overcome and remain adaptable, from overcoming shipping capacity issues to preparing for expenses associated with shipping processes. Here are some things shippers should know:

  1. Capture data from all available resources. The more data a company can gather, the more trends and cycles it can identify and analyze in advance. Multiple data streams provide more insight and a greater understanding of the situation.
  2. Analyze data effectively end-to-end. Thanks to accurate and reliable data, the better prepared a company is the better it can predict changes to market trends. End-to-end monitoring and analysis can strengthen the entire supply chain to make it more durable and scalable. 
  3. Gain insight into why things happen in certain ways. Preparing for future trends often involves looking back at the past to determine what causes certain things to succeed and others to fail. Looking ahead is vital, but management must learn from the past to avoid repeating costly mistakes.
  4. Diversify a vetted carrier base. Shippers can prepare for changes in capacity and availability by having a pool of vetted and highly rated carriers to choose from as needed. The more carriers of choice shippers have access to, the faster they can adapt to market fluctuations.
  5. Diversify import locations to improve spending. Another way to offset the anticipated shipping costs in 2022 is to diversify import locations to keep secondary access lanes open and available. Shifting from one importer to another during capacity crunches can help drive improvements in spend management.
  6. Utilize multimodal transport options. Shippers that diversify transport options and services and utilize multimodal shipper opportunities can better prepare for 2022 disruptions. Taking advantage of available options makes it easy to scale and adapt during uncertainty.
  7. Hold carriers account for service performance. Monitoring carriers and comparing rates, performance, and satisfaction levels with data-driven metrics is key to future growth and success. Carriers and shippers must maintain a mutually-beneficial relationship to be successful.
  8. Develop informative guides based on data. Ensuring shippers, carriers, and brokers alike understand the expectations and terms of any contractual agreement must remain a top priority. Up-to-date routing and shipping guides ensure everyone understands expectations and goals.
  9. Plan for limited capacity well in advance. Ahead of any possible capacity crunch or other disruptions, shippers must plan and prepare backup plans and alternative options. Predictive planning enables shippers to work ahead of time to mitigate disruptions.
  10. Extend lead times on supplier shipments. Planning as far out as possible can make it easier to shift scheduled shipments one way or another to accommodate short-term disruptions. Longer lead times offer built-in timeline cushions that make disruptions more manageable.
  11. Re-evaluate current fulfillment models. Dealing with shipping capacity issues and supply chain congestion requires constant adjustments to game plans and shipping models. Adapting to changes rather than stubbornly sticking to the traditional process makes fulfillment easier.
  12. Take advantage of hub injection and upgrades. Adding new distribution hubs, loading locations, warehouses, and other locations into the current transportation hub also helps overcome congestion. Recent trends and new methods are opening doors for better hub and chain management overall.
  13. Closely track cost accruals and secure freight payment. Tight monitoring of costs and expenses can allow shippers to manage cash flow and freight payments more efficiently. Better tracking of expenses, profits, payments, claims, and the like help shippers gain a clearer financial picture in tight markets.
  14. Leverage zone-skipping services  and local deliveries. Streamlining delivery routes and taking advantage of last-mile, local, and zone-skipping options also helps improve network optimization. Adjusting delivery and shipment plans to accommodate modern trends is an absolute must.
  15. Derive actionable insights to keep going. Shippers can prepare for possible disruptions and supply chain issues by analyzing and applying data for actionable insights and predictive planning. Practical steps save time, money, man-hours, and resources across the board.
  16. Verify that changes have worked properly. The ability to embrace technology and innovation is all well and good but can only go so far if it is not applied correctly. All improvements need to be tested and checked so all involved team members can receive training on all new systems.
  17. Anomaly detection: The ability to capture slight inconsistencies in data that would have gone unnoticed to the human eye is a key factor in ensuring there are no ongoing issues.

Looking ahead and planning for possible 2022 shipping trends as well as increases to supply chain disruptions and shipping costs in 2022 and beyond, can help shippers account for these issues more efficiently. The better-prepared shippers are, the more likely they will adapt and adjust to congestion and disruptions to stay strategic and profitable in any market. 

Keep Shipping Costs in 2022 Under Control by Partnering With Intelligent Audit

Despite a slow and steady climb out of lockdowns, the shipping and transportation industry is still strongly feeling the effects of the pandemic. Recovery is picking up, but the going is still challenging for most shippers and, unfortunately, will continue to be that way for some time to come. Many companies across all markets and industries have already started looking to 2022 to prepare for coming supply chain issues, shortages, and congestion. Strong capacity utilization will continue to be critical for supply chain growth, as will planning for the likely higher shipping costs in 2022.  Planning for shipping capacity and transportation issues is easier with the right partnership in place. Contact Intelligent Audit today to be as prepared as possible for whatever 2022 shipping trends have in store.

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