It’s no surprise that one of the hottest topics in the world lately is the pain felt at the pump. Rising fuel prices have been at an all-time high, surpassing the costs since 2008, and these prices will only continue to climb. As a result, businesses are being forced to pay more to operate, causing a ripple effect for everyone.

Wait, How Did This Even Start? 

You may be wondering how fuel prices even got to this all-time high. Well, they can’t be blamed on any specific event or occurrence as many different factors caused fuel prices to surge. 

World Conflict

World conflict is one issue affecting fuel prices, specifically those in Western Europe. The Russia-Ukraine war has been brewing for some time now, and due to attacks, the United States among others has stopped imports, like oil, coming from Russia.

Russia is one of the world’s largest oil exporters, exporting nearly eight million barrels in one month. The drastic change in accepting oil imports from Russia has caused the price of fuel to rise because it’s not as available as it once was.  

The Dreaded “C” Word

Another catalyst for the spike in fuel prices is the continual effect of Covid-19. I’m sure you’re tired of hearing it, but the world is still feeling the pains of the virus while we aim to return to life. Recently, Covid forced Chinese ports to close for a brief period and now that the ports are opening back up, supply cannot keep up with demand. 

As people try to live alongside Covid-19, office workers are going back to in-person work and people are returning to travel after two years of staying put. With more people leaving their homes, it’s causing a greater demand for fuel while our supply is limited. 

The Effects of These Issues

Fuel prices are affecting everyone, including consumers, and businesses, but those in the logistics industry are seeing greater challenges. That’s because the logistics sector has seen disruption after disruption. First, with the issues started by the pandemic, then the port congestion once businesses began to reopen, and so on to now with increased fuel prices. This industry has barely had a moment to catch its breath. 

Logistics is at a crossroads; with the United States economy looking at a recession, and world conflicts yet to improve, it’s going to be hard for fuel prices to drop back to normal levels until everything balances out.

How Bad is it Actually?

Even though everyone has been hearing and seeing the high fuel prices, how bad are these prices? Well, in June, the U.S. national average price per gallon topped $5, which is 50 percent higher than it was this time last year. Even pre-pandemic prices were at $2.55 average for that month, showing the direct impact that covid and other issues have caused.  

These prices only continue to rise when we talk about the cost of diesel fuel. This type is often more expensive than regular gas, and this is what truck drivers use to fill up their tanks. In June, diesel fuel averaged $5.50 per gallon in the U.S., which is a .50-cent increase from regular fuel. While this increase seems small, when truckers are driving over 500 miles per day, the extra cost can add up quickly.  

President Joe Biden has tried to take steps to lower fuel prices in the United States. He has called on Congress to do a Federal Gas Tax Holiday, releasing the charges that the federal government has on fuel. Typically, the government charges an 18-cent tax per gallon on gasoline and a 24-cent tax per gallon on diesel, but President Biden has called for the Tax Holiday to give Americans breathing room as they battle other economic issues like inflation.

High fuel prices are not an issue solely faced by the United States. In fact, gas prices in the United States are on the lower end of the spectrum compared to other countries. For example, while the average in June for the United States was $5 per gallon, in Germany, it averaged $8.26 per liter, while one of the highest fuel prices was in Hong Kong, where gas was $10.71 per liter in June.

How Do High Fuel Prices Impact You?

So, how do the rising fuel prices affect those in the logistics industry? Well, let’s take a look.

Shippers

Increased fuel prices mean higher logistics costs because it’s now more expensive to move their products from point A to point B.

Consumers

Consumers see a direct cost increase on products due to fuel prices. Because it now costs more for shippers to move their products to their destinations, they must also raise the price of their products to continue to make a profit. 

Carriers

The biggest issue carriers are seeing with the high fuel prices is the impact on their income. Their operating costs have increased due to the rising fuel and product prices. And with rates lower than they’ve been throughout the pandemic, many carriers have decided to put a pause on driving until the market return to normal. This could cause added chaos to the market. Should more carriers halt their work, there could be an imbalance in the industry, causing more backlogs and shipping delays as a result.

Trinity is Here to Help

As an experienced third-party logistics company with over 40 years in business, we’ve worked with many shippers and motor carriers through the ups and downs faced in this industry, including this one. We’ve seen it all and are here to help you through these troubling times.

Whether you’re a shipper looking for better logistics management or a motor carrier looking for dedicated freight to keep you consistently moving, you can find all the solutions you need with our People-Centric approach.

Get connected with us today so you can start having Trinity Logistics, a Burris Logistics Company, by your side, no matter the state of the market. 

All industries are currently facing challenges with their logistics and the supply chain. Challenges that include overwhelming demand, tight capacity, rising freight rates, and shortages in materials, products, labor, and drivers. However, industries facing high flatbed demand, like construction and manufacturing, are seeing more difficulty than others. 

These industries have been dealing with capacity challenges throughout the pandemic as they have remained in high-demand. As it continues to rise, the needs for their supplies have increased, creating a surge of flatbed demand that’s weighing on the supply chain. Let’s take a deeper look into these challenges and present some considerations for how those in the industry can overcome them. 

FLATBED DEMAND VS. VAN AND REEFER

Finding truck capacity of any type is proving to be difficult. Flatbed capacity seems even more challenging because of the continued demand in construction and manufacturing. As a result, flatbed spot rates are reaching new highs and convincing more shippers to look for solutions. 

According to DAT, the flatbed load-to-truck ratio is up 169.3 percent year-over-year (YOY) from June 2020 to June 2021. In comparison, reefer’s load-to-truck ratio is up 111.7 percent YOY. Van load-to-truck ratio is up 57.8 percent YOY. 

The monthly national average flatbed spot rates have risen for eight consecutive months, reaching $3.15 per mile in June. There’s not looking to be any fall soon, as the industries pushing the flatbed demand are cranking it into the next gear. 

FACING DISRUPTION AFTER DISRUPTION

The return to normal may be farther away than you think. With demand, there are still projects waiting in the wings until materials can be properly sourced and shipped. And demand already has construction projects beyond their pre-pandemic heights. Just look at the Associated Builders and Contractors’ Confidence Index, which is now positive for sales, profit, and staffing level expectations for the next six months. 

Covid-19 Hit First..

When the pandemic hit, people had found they had nothing to do while staying home. And so, we saw a rapid uptick in those wanting to buy a new house or remodel. Demand quickly exceeded supply. Supply shortages and delays have put pressure on contractors as the demand rose despite a lack of supply.

..Then There was the Texas Freeze..

In February and March 2021, Texas saw their lowest temperatures in years and were not prepared for the intense weather conditions that they experienced. Many manufacturing plants in the area had to shut down, which created more disruption in the supply chain. 

..Then the Suez Canal Blockage..

The ship that blocked the Suez Canal for several days caused severe delays in the imports of many products needed. This created many shipping bottlenecks that we’re still experiencing the aftermath of today. 

..Now the Wildfires.

Currently, the raging wildfires on the west coast are causing further disruption and delays to an already stressed supply chain.

Issues such as these are causing supply chain disruption after disruption, resulting in increased costs and delays. Many companies rely on materials that come from delayed or now-unavailable, global manufacturers. This has shifted companies to search for regionally based suppliers, creating higher demand on smaller supply chains. After over a year of continuous supply chain disruptions, there’s been an industry-wide realization that building resilience into supply chains is vital. 

RISING FUEL PRICES

One of the areas affecting logistics cost are the continuing rise in the costs of fuel. The latest Energy Information Administration data shows the national average diesel price is at $3.34 per gallon, a $.05 increase from one month ago. Regional diesel prices range from $3.08 in the gulf coast states to $3.48 in the central Atlantic region. California diesel prices are averaging $4.19 per gallon.

SHORTAGES AND DELAYS

Lumber shortages continue to be a significant problem nationwide. Both steel and electrical supplies have faced steep price increases in the past year. According to the U.S. Census Bureau’s Small Business Pulse Survey, 59.7 percent of respondents reported domestic supplier delays which is a huge jump over the national average of 36.3 percent. These aren’t domestic only issues as 19.1 percent of respondents are also dealing with foreign supplier delays. 

MATERIALS THAT HAVE BEEN EXPERIENCING SHORTAGES

• Timber
• Steel
• Roof tiles
• Cement
• Electrical components
• Paints and sealants
• Plaster and plasterboard
• Concrete
• PIR insulation
• Bricks and blocks
• Aggregates
• PE and PP plastics
• Screws
• Plumbing items

THE RAW MATERIAL SHORTAGE

There is currently a global shortage of raw materials. This comes from factory slowdowns and, in some instances, factory closures due to many reasons. The shortage of raw materials continues to put a strain on the production of products, like insulation, paints and adhesives, and packaging.

THE LABOR & DRIVER SHORTAGE

Another cause of rising costs and delays is the shortage of labor and drivers. Labor rates have skyrocketed in recent months. This is due to the high labor demand and trades raising their rates because of the overwhelming amount of work. The big challenge these industries face is finding qualified labor to perform work, whether that be driving a truck to deliver materials and products, painting a house, or installing plumbing. In logistics, driving a flatbed truck, especially one hauling an oversized load, requires a different skill set than your typical van trailer trucking.

HIGH PRICES KEEP HEADING HIGHER

The Associated General Contractors of America (AGC) released a survey recently showing 93 percent of more than 1,400 respondents reported higher costs for materials, parts, and supplies. Construction material prices have increased so much in 2021 that the AGC issued a rare Construction Inflation Alert. This hasn’t taken since place 2008, citing a 12.8 percent jump of input costs for projects since the pandemic began. While that number is notable, some materials have risen even more. Lumber and plywood jumped 62 percent and steel recorded a 20 percent rise since April 2020. Diesel fuel, the lifeblood of the heavy equipment and transportation haulers needed to build major projects, has surged 114 percent. Even when materials are ready to be shipped, the transportation market is trying to play catch up. As mentioned earlier, there is currently more demand than there are trucks available. 

Rising costs and supply chain disruptions have pushed more hardships on the construction and manufacturing industries, slowing down their projects and business progress. Data found that more than three-fourths of construction firms have indicated projects are being postponed or canceled due to unavailable materials or cost overruns. 

POSSIBLE SOLUTIONS

Experts are estimating that the high demand in these industries and flatbed demand may continue through 2022. Not to mention, who knows what other possible disruptions we may see soon. Hurricane season is upon us and could cause some more delays. 

It’s never too late to find ways to improve your supply chain and keep costs budgeted. Here are some suggested solutions to facing this difficult time we’re in.

LOOK FOR ALTERNATIVE ITEMS

It might be worth checking into other materials to offer your customers. Many other companies are doing what they can to keep their projects moving forward and communicating this with their customers. For example, with rising lumber costs, you may find redwood or cedar to be more affordable alternatives. They may also be much easier to get your hands on. 

INTEGRATE TECHNOLOGY

Integrating technology has become a necessity for all stakeholders to maintain real-time communication and visibility. Gain total visibility and trust from your stakeholders with logistics technology like a transportation management system (TMS). A TMS can help you with routing decisions by matching your freight with the best carriers, lanes, rates, and transit service. 

Having a best-in-class TMS also provides you with data-driven insight to better manage disruptions and budget your logistics spend. By using data analytics, you’ll be able to recognize which carriers are most likely to have capacity and have a full view of your transportation management and what’s happening across all markets. 

CONSIDER NEW OPTIONS

When possible, see if you can use van options for your transportation, considering the load-to-truck ratio shows less demand and lower freight rates. You may also be able to consider other modes, if possible, but any oversized freight must be hauledwith a flatbed trailer. 

PLAN IN ADVANCE

Many other companies are stocking up on available supplies or finding other ways to look far ahead. Consider doing the same. Stock up on what materials you use most often for your projects. Do keep in mind that the more you stock up on, reduces the overall supply, increases demand, and thus pushes prices higher. Don’t go overboard and hoard ALL of it but do try to keep some stock in supply. Try planning your projects far enough out, correlating with the longer lead times we’re experiencing. If the material you need says it will take nine to ten months, then plan your project around that time frame.

BUILD A STRONG NETWORK OF CARRIER RELATIONSHIPS

Due to the over-demand of freight, load boards don’t move shipments the way they once did. Strong relationships will get you the coverage you need, better pricing options, and often better service. If building a large enough network for you seems daunting, you can always partner with a third-party logistics company (3PL), whose main role is their relationships among shippers and carriers. Here at Trinity Logistics, we have over 70,000 qualified carrier relationships to help haul your freight. 

BUILD A RESILIENT SUPPLY CHAIN

At a time when your costs are a critical issue, reimagining your supply chain could be a way to build resilience and reduce costly disruptions before they happen. Now is the perfect time for companies to build resilience into their operations to be better prepared for future disruption we may see.

Opportunities to do so range from reevaluating your business models and building efficient industrial supply chains, to building new and more regional manufacturing and distribution facilities to help with the vulnerabilities the pandemic brought to light. You could put in place more flexible sourcing and distribution strategies, including shifting your suppliers closer to home.

WORK WITH A QUALITY 3PL, LIKE TRINITY

We do more than arrange your freight. Consider us your logistics consultants. As logistics experts, we keep a close eye on the market, keeping you educated so we can help you plan and forecast. 

No matter the market, you can use your Trinity relationship and discuss your current and upcoming projects, even if they are in the planning stages. This helps us give you things to look out for to keep your transportation aspect of business more stable and reliable. When markets fluctuate, having a solid relationship with experts such as Trinity will prove to be your largest asset. 

Should issues arise, we at Trinity, work until they are resolved through and communicated. In the logistics industry, things will happen, and bad news doesn’t get better with time. We stay upfront with any challenges, and we bring solutions. When given the chance to prove our communication and service, we make sure to set the bar high. 

If you’re ready for a reliable provider to help you with your shipping needs and logistics management through People-Centric Freight Solutions®, then request your first quote to get started.

Author: Paul Nelson