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Control the Controllable - Combating the rising costs of logistics

Jul 05, 2023 - Dan Lubic
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The 2023 State of Logistics Report from CSCMP and Kearny was just released and we’ve seen industry logistics experts such as FreightWaves cover the significant transformations and rising costs in the logistics industry. Here are some areas that were highlighted in these reports and how leveraging a 3PL partner can help offset these costs. 

 

  • Rail: Railroads saw an increase in operating income and total revenue, largely due to price increases. However, rising costs undermined operating ratios, and the sector suffered from service-related issues.
  • Warehousing: During the pandemic, demand for warehouse space heated up considerably due to skyrocketing inventories. However, in 2022, demand waned, resulting in overstock. Low vacancy rates led to higher rents, but this was mitigated by the construction of additional warehousing space.
  • Water/Ports: Major ocean liners made significant profits in 2022 due to high rates. However, these profits are projected to decline by 80% in 2023 as demand weakens and ship availability returns to normal.
  • Motor: Road freight saw little change in overall volume due to concerns about inflation, rising interest rates, and overstocked inventories. Carrier margins were threatened by low rates and high resource costs.
  • Freight Forwarding: The freight forwarding market is expected to grow from $48 billion in 2021 to $90.7 billion by 2031. This growth is due to the expansion of e-commerce and the pressure on shippers to trim costs and increase supply chain efficiency.
  • Inventory Management: Companies are struggling with excess inventory capacity due to overproduction of goods and an inventory glut across many industries. Companies are adopting aggressive inventory management practices to reduce "days on hand".

While fuel prices and inflation have decreased year over year, the findings in this report show that the logistics market is still experiencing inflation, posing challenges for businesses across various industries. Rising transportation costs and increased demands on warehouse space are driving up expenses, making it crucial for companies to find innovative solutions to offset rising costs. A third-party logistics (3PL) provider like Cart.com can help businesses combat inflation and control costs effectively.

 

One effective strategy for companies to reduce their expenses significantly is to offload the burden of warehouse ownership and operations to a specialized partner. A 3PL partner has the expertise and multi-nodal network to position inventory across the country strategically. This allows businesses to optimize their distribution networks, minimize transportation costs, and improve overall operational efficiency.  In addition, leveraging data and technology from a 3PL partner has become vital for identifying cost-saving opportunities, streamlining processes, improving efficiency, and ultimately mitigating these financial pressures.

 

In the face of uncontrollable factors that contribute to logistics inflation, businesses can reclaim control by partnering with a 3PL provider and maintain their focus on core competencies. One significant advantage of this move is the ability to scale warehouse operations based on fluctuating business demands and seasonality. Instead of investing in a new building, which can become a burden if business slows down, working with a 3PL allows businesses to adapt their warehouse space as needed. This flexibility ensures that companies can efficiently manage their inventory, fulfill orders promptly, and keep customers satisfied, even during peak times and rapid growth without being stuck with underutilized space after. This scalable approach empowers companies to navigate the challenges of logistics inflation while maintaining cost-efficiency and adaptability in a rapidly evolving market.

 

There are things out of your hands, but controlling the controllable is key, and Cart.com is a trusted partner to help navigate the challenges of rising logistics costs and inflation in the market.

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