The battle with inflation and shipping continues into the summer of 2022 compounded by closed Chinese factories and heavy global demand from consumers. How do you as a small business owner dependent on shipment goods best prepare and combat these trends? This blog will guide you into the most relevant news about what is to come and how to get ready. The battle with inflation and shipping continues into the summer of 2022 compounded by closed Chinese factories and heavy global demand from consumers. How do you as a small business owner dependent on shipment goods best prepare and combat these trends? This blog will guide you into the most relevant news about what is to come and how to get ready.The battle with inflation and shipping continues into the summer of 2022 compounded by closed Chinese factories and heavy global demand from consumers. How do you as a small business owner dependent on shipment goods best prepare and combat these trends? This blog will guide you into the most relevant news about what is to come and how to get ready.
Inflation has continued to heavily impact various parts of the worldwide economy, sending prices spiraling on various consumer goods from chocolate to even real estate. Analysts are seeing this not only in the US but in numerous countries with US inflation jumping to 8.5% in recent months. Small businesses are now forced to contend with having to raise prices on their own goods to try and combat their own bottom line in trying to balance out rising shipping and gas costs as well as a number of other areas.
Why are these inflation trends still hitting us in 2022 and how might it impact your small business? We are here to help break down the reasons and give practical solutions to help out.
Why Are We Seeing Summer Inflation Patterns?
There are several reasons for why we are seeing record inflation that the US has not seen since the 1970’s. The supply chain continues to show major weaknesses in this uneven time period – one of the biggest factors in causing these current inflation impact pain points. One recent study looked at data from over 140 countries and saw that if freight rates double, inflation picks up and can last over two years, and these trends are consistent with what we are seeing in the US and other major countries worldwide.
Freight shipments in particular have skyrocketed. The reason for this price discrepancy has changed from a shortage in containers to a lack of room and equipment to handle the heavy demand. Compounding these factors is a shortage in several labor markets related to shipping as well such as a lack of truck drivers as well as port workers. In addition, COVID-19 continues to play a major role in factory shutdowns in major manufacturing hubs like in Shanghai and other areas of China, increasing delays in several important key areas of production and impacting the entire workflow as well as gas inflation being impacted by the current Russian invasion of Ukraine.
The Governmental Response to Inflation
In the US, numerous measures are being taken to combat inflation trends that small businesses need to be cognizant of. This includes the Federal Reserve raising interest rates by half a percentage point, the highest increase in over 20 years, and another half a percentage point interest raise coming in the next month or two. Jerome Powell, Chair of the Federal Reserve, also alluded to a possible three quarters of a percentage point raise on interest if needed as well, saying that his goal was to reduce inflation to 2% while attempting to create a ‘soft landing’ where these rate hikes do not trigger a major recession. Finally, as many economists have noted, these inflation trends are happening globally such as in many Western European countries.
How to Prepare for an Inflation-Heavy Summer
How can your business then best prepare for these high prices and uncertain situations? There are three major steps that you and your team should already be preparing for.
First, your business needs to set aside a portion of your budget for hardships throughout the year. Several major situations from COVID-19 to the Russian invasion of Ukraine are examples of very unpredictable situations that have arisen whether these last six months to over the last few years. Being nimble and staying on top of the news with blogs such as this one will help you stay one step ahead of incoming difficulties in the future.
Second, you will want to make sure that your company or one of your logistics partners are using advanced analytical logistics software. Questions you can ask your partner or yourself include – is your logistics system accurately tracking and reporting all of your orders? Is it creating efficient and automated systems that help keep track of the logistics of your business and any transitions from manual systems to eCommerce? And are you or your partner able to keep a good flow of communication between all relevant team members and customers with quickly changing situations?
Finally, you will want to make sure your company or your logistics partner has relationships and the most up-to-date information on the ports, transportation, and storage containers. Do you or your logistics partner have a good history of being in touch with relevant representatives at the major ports? Is there knowledge about the best pricing for storage and proven hard data as well as qualitative data on transportation? Make sure these questions are answered as you are venturing into the summer.
TRG Fulfillment has all of these factors, from the most up-to-date news to advanced tracking/reporting software and great relationships with local ports and transportation and storage services to be a great partner for all of your needs. If you have any questions or would like to chat about your shipping and logistics needs, please contact us here.