Over a couple of months ago, the freight rate has been increasing vigorously. It has been a challenge to both shippers and traders. Tapping profit out of the emerged new rates is a bit hard. Traders are not responding well enough to the new freight rates.
Containers are in short supply, which affects the global chain across different industries. Around six to eight months ago, shipping freight charges were rising consistently. Consequently, it has triggered significant impacts to logistics function and industries like manufacturing, auto, and many others.
For shippers to overcome such impacts, they need you to investigate the main reasons behind the rise in freight rates across the globe.
Over-Reliance on Split Shipments
There is an over-reliance on split for years now. Ecommerce retailers prefer using split shipments over other models. They have multiple reasons to support their interest in split shipments. One of the reasons is that items are to be picked from investors across various locations.
The second reason is that they break down their orders into sub-orders to enhance speedy delivery to intended destinations. The third cause is that there is no enough room on trucks and planes for a complete shipment. So, traders can sub-divide their orders into individual boxes and transport them separately. Split shipment happens on a large scale during international shipment or even for cross-countries.
Corona Virus Pandemic
Since the COVID-19 hit the world, the shipping industry remains to be the most affected sector. First, nations with the highest oil production have drastically reduced their production levels due to the COVID-19 pandemic. As a result, the demand-supply boomed and hiked freight rates.
Again, there is demand for goods rising. The declining number of empty containers is another key contributor to the slow distributions that cause the freight rates to increase beyond ordinary. The pandemic brought most production processes to a pause in the first half of 2020. It also triggered some restrictions in terms of movements that affected the delivery of goods.
Brexit upsurges the freight charges for foods moving in and out of the UK
In contrary to the pandemic, Brexit has triggered a lot of cross-border movement restrictions. As a result of limitations, the cost of shipping products to and from the UK has surged massively.
Consequently, UK had to give up on several subsidiaries it accepted under the EU umbrella. Since the transfer of items from and to the UK is now assumed as intercontinental shipment, together with the pandemic effects, it has caused many complications to supply models, making freight charges to rise.
How to Adapt and Curb the Changes on Freight Rates
Maintain Transparency
Digitizing the shipping process can help you promote transparency within the shipping and logistics industry. Ensure you have the right and relevant system that will make people trust your company. You need an excellent sense of openness within the fright ecosystem.
Keep reinventing new techniques to improve your efficiency and reduce trading costs. Always strive to find a technology that can help you cut the cost of the operations.