How Fuel Prices Affect Supply ChainsJuly 3, 2022 5:08 pm Leave your thoughts
If it feels like fuel costs for your LTL trucking or shipping business have been trending upward, then you’ve also noticed how prices are also trending up across the board. What do fuel costs have to do with the increase in supply chain pricing?
At K-Way Express, we make sure that your logistics company’s needs are met. Here’s what you should know about fuel costs and the supply chain.
How High Fuel Costs Affect LTL Trucking Companies
There’s long-standing wisdom in the LTL trucking and shipping sectors that says high fuel costs mean high prices all around — and it’s true!
High fuel costs either mean that companies need to absorb losses to stay competitive or pass those costs down through the supply chain. That’s right; this is about more than just shipping and end consumers.
These rising costs also impact companies that specialize in raw materials, machinery, and other vital components. This means that the further down the supply chain you go, the more rising fuel costs increase overall prices.
The rising cost of fuel prices means that costs will rise throughout the supply chain, including for the consumer.
The Relationship Between Low Fuel Cost and Logistics Company Costs
Any reputable logistics company will tell you that when fuel is cheap, so are costs. Low fuel costs have a ripple effect that tends to lower prices across the board.
Low fuel costs naturally decrease the cost of shipping. This has the inverse effect of rising fuel costs. Everyone from farmers to last mile logistics lowers their costs to keep up with lowering fuel prices.
Low fuel costs also mean more competition. As fuel costs go down, more companies can enter the arena and existing companies can more easily branch out their services. Companies now have to out-compete each other, which means lowering prices or offering more responsive services.
Low fuel costs mean that companies all along the supply chain will be lowering costs, and this directly makes things more affordable for consumers.
Shipping Companies Are Evolving To Keep Up With the Market
Whether you’re in LTL trucking or another shipping industry, keeping up with changing fuel costs is a must.
The fuel market has become so volatile that companies are now looking for solutions that can withstand these sudden upsets. We’re seeing a marked increase in freight shipping, higher inventory numbers, and more bulk ordering rather than an over-optimized continuous flow.
As fuel costs continue to get more complex and less predictable, companies will continue to look for solutions that keep them competitive.
Stay Ahead of Shipping Costs
The key takeaway that your logistics company needs to know is that high fuel costs mean high costs throughout the supply chain — including for the consumer.
As companies evolve to meet the demands of a volatile fuel economy, K-Way Express will be there to ensure you have adaptive solutions to all your shipping needs.