What Expect For Shipping Costs over the Course of the Year
Anyone in the shipping, manufacturing, or retail business knows that shipping costs fluctuate over the course of a year. Even though inconsistent shipping rates are expected, that doesn’t make them any easier to understand. For example, why does it cost $25 to ship an item today, when it cost $19 to ship the same item 3 months ago? Why is it cheaper to ship something overseas today that it was 6 weeks ago? At Taylored Services, we’re shipping and fulfillment experts and wanted to give you 5 reasons why shipping costs fluctuate over the course of a year.
The capacity available in ships, trains, and trucks is a major factor that affects pricing. This is due to supply and demand; when there is little demand for shipping, rates will drop. When the demand for shipping is higher (for example, during holiday rushes), shipping costs can be expected to rise. But it’s also important to remember that carriers make decisions about hiring drivers and buying new trucks based on profit margins. When demand (and prices) start to slump, carriers will stop buying new equipment and hiring new drivers. This also limits the available capacity and can potentially bring costs back up.
- Driver Availability
Finding enough available, qualified truck drivers can be a challenge in some parts of the country. One reason is because when older truck drivers retire, there typically aren’t enough younger people to take their place. Plus, even with states handing out hundreds of thousands of licenses per year, the turnover rate in the industry is high. These factors have led some trucking companies to try and attract new drivers by increasing pay and benefits—costs they may try to recoup by increasing shipping costs. Self-driving vehicles may influence this scenario in the not-too-distant future, but for now it takes humans to haul freight.
- Fuel Prices vs. Business Costs
When fuel prices are high, increased shipping costs are expected. However, when fuel prices drop, shippers tend to find that rates don’t drop as much as expected. That’s primarily due to General Rate Increases (GRI) of about 5% industry-wide over the past few years. These higher base costs come as a result of the rising costs carriers have been faced with—increased wages for truck drivers, compliance costs, and equipment maintenance, to name a few. The bottom line is that while the lower cost of diesel fuel may not reduce the cost of shipping by much, it does offset some of the increase in base prices caused by these other factors.
- Seasonal Shipping
Weather has a huge impact on shipping capacity and costs. Hazardous road conditions, high winds, and sub-zero temperatures can prevent employees and independent contractors from getting to work, squeezing capacity and increasing costs. Conversely, during warmer months, more trucking space is available and prices tend to drop.
- Industry Regulation
While some of the Obama administration’s safety and emissions regulations have been rolled back, there are still some regulations in place that have made it a bit tougher for truck fleets to stay in compliance. The switch to Electronic Logging Devices (ELDs) and revisions to the Hours of Service (HOS) requirements in particular are expected to temporarily raise costs for truck fleets due to the added cost of hardware, software, and training.
Carriers are also focused on maintaining or improving their CSA safety ratings, which reflect on a fleet’s reputation and can provide a competitive advantage. Both new regulations and the improvements carriers make to their services have required more investment which also leads to increases in shipping costs.
If you are concerned about the rising costs of shipping, then you may want to consider working with a third-party logistics (3PL) partner like Taylored Services to help you navigate the shipping process and keep your costs in check.
Taylored Fulfillment Services is a fully integrated third-party logistics provider specializing in wholesale, retail, and direct-to-consumer unit fulfillment. Established in 1992 and headquartered in Iselin, New Jersey, they operate 1.5 million square feet of warehouse and distribution space strategically located near the nation’s busiest ports, including Los Angeles, Long Beach, and New York. Since its humble beginnings in 1992, Taylored Fulfillment Services has grown to become a national leader in distribution, fulfillment and warehousing.