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How fuel increases will affect the logistics industry

9/23/2022

How fuel increases will affect the logistics industry

We've recently seen massive spikes in the price of fuel, both in America and globally. As Apps explains, these increases have had either a direct impact or knock-on effect on all industries but the logistics sector is perhaps the most significantly affected.

It's well-established that supply chains everywhere are already under incredible strain due to the growing popularity of online shopping and e-commerce. Warehouses are filled to the brim and business owners are struggling with a labor shortage that's making meeting consumer demand particularly difficult.

The compounding effect of fuel increases with a miscellany of other pressures has wide-reaching implications for commerce everywhere. Here are a few expected outcomes:

A search for transport alternatives

Obviously, freight trucking forms a large part of the logistics sector. As noted by American advisory firm EisenRamper, trucking constitutes over 70% of America's goods transportation. Automobiles big enough to transport considerable amounts of goods require fossil fuels, of which petroleum is the only current viable option. Accordingly, trucking is becoming less appealing.

Air freight is also becoming unsustainable. While it's the quickest way to transport goods, it's also the most expensive. Further, the reduction in passenger air travel has meant that fewer goods can be transported by air, even if the price of jet fuel wasn't a consideration.

Consequently, logistics companies might potentially look to other forms of transportation that use energy sources other than petrol or diesel such as coal and biomass. Many competitors will also turn their attention to train shipping for cheaper, more reliable and more sustainable transportation.

Surging fuel sub-charges

In an attempt to cushion the blow of increased fuel prices, many logistics and transportation businesses are increasing their standard fuel sub-charges to cover overhead expenses and turn a profit. This is true for trucking, ocean freight and air cargo. Industry experts don't envisage this trend coming to a halt until such a time that global fossil fuel prices decrease.

Decreased turnaround times

Unlike air freight, logistics businesses can save costs associated with fuel expenditure by slowing down ships and trucks. It's forecast that many companies will resort to reducing the top speed at which their cargo carriers are allowed to travel in order to reduce fuel. This will result in slower goods transportation, which will undoubtedly creep into the rest of the logistics process.

Improved digital systems

Shipping giant Maersk foresees rising numbers of organizations in the logistics industry relying more heavily on automated systems to enhance the efficiency of logistics operations before goods even leave warehouses. In a bid to reduce costs to mitigate the repercussions of increased fuel prices, logistics companies worldwide will have to devise and implement computerized controls and networks. By making use of automation, organizations can save on labor expenses.