Opinion: Cost of shipping may be approaching a tipping point
GENE KEY | THE DAILY MEMPHIAN
Are we reaching a tipping point?
Since the global pandemic’s outbreak and seemingly recurring black swan events starting March 2020, our logistics industry has been under increasing pressure in a period with more and more barriers.
One of those barriers continues to be the state of pricing in logistics and transportation. As Ocean Freight Pricing manager for Dunavant, I serve as the lead pricing liaison to sales and business development teams around the world on behalf of Dunavant’s ocean pricing shared service. While the role introduces daily, if not hourly, challenges due to our current climate, we work tirelessly to navigate and find solutions for our customers.
As a third-party logistics provider, known in the industry as a 3PL, our primary task is to get products from point A to point B and manage our customers’ expectations of that process, including routing and pricing.
Today, the transportation cost of a single container from China to Los Angeles is more than 10 times the price of what it has been historically, and to move it inland to a market like Memphis adds thousands more in shipping costs.
Prices should fall in the future, but we haven’t seen any decrease or leveling of shipping prices in six months. In fact, prices continue to increase almost daily.
However, just as our role at Dunavant is to deliver product despite the roadblocks, our importers are in the same boat: they’re currently accepting inflated prices to ensure products make it to consumers.
Until importers can no longer pay the astronomical rates of our industry, rates will unfortunately continue to rise.
When importing a high-value product, a few thousand dollars more in transportation costs is not as great of a factor for the deal. However, when importing $1/unit products, the transportation cost can equal the value of the product. Eventually, our customers will either need to double the shelf price of a product or refuse to ship the product at all.
As these impacts reach the consumer level, I believe we are approaching a tipping point. Until we do, and when we do, it’s our job to manage expectations and deliver for our customers.