Store Excess Inventory, Avoid High Shipping Cost

The only way around paying high shipping costs for most manufacturers is through inventory management. Only manufacturers that were able to store excess inventories over the past year and have a little fat in their supply chain planning will sail through the period of high shipping costs without incurring a lot of debt.

The cost of shipping goods worldwide has more than quadrupled in the past eight weeks, hitting record highs. A shortage of empty containers caused by the drop in business due to the pandemic has disrupted global trade.

It’s a bottleneck problem. The high rates are being driven by customers fighting over limited resources – containers. Thousands of empty containers were left stranded in Europe and the US in the first half of 2020 when shipping lines canceled hundreds of trips as coronavirus lockdowns caused a sudden slow-down in global trade.

When Western demand for Asian-made goods rebounded in the second half of 2020, competition among shippers for available containers sent freight rates soaring. In other words, we’ve gone from a tremendous drop in container demand to getting whipsawed into historically high cargo volumes.

Terminals are having difficulty efficiently handling the demand, and congestion at ports, longer wait times, and restrictions on port workers contribute to higher shipping prices. As the world economy returns to a more “normal” level, shipping costs should level out, but in the meantime, the end user and consumer will pay a lot more for durable goods.