The Impact of Mideast Tensions: What to Expect in Q2

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

What began as an uprising in Egypt in February 2011 has prompted a domino effect that will inevitably reshape governments across the entire Middle East. Likewise, the uprisings in Syria, Libya, Yemen and elsewhere are having a far-reaching effect on shipping costs. Here is a snapshot of what shippers can expect in Q2 of this year:

April 2011: Fuel surcharges will be astronomically higher than they were in April 2010 -- as much as 50 percent higher. Those shipping heavier freight via ocean carriers will see an immediate increase, as will those using TL/LTL modes. Yet, due to a lag in small parcel pricing cycles, companies will only just start to feel an increase in this shipping mode as April comes to a close.

May 2011: By the beginning of May, the gap between actual fuel cost increases and the small parcel pricing cycle will have closed and shippers using this mode will feel the full effect of high fuel surcharges. If shippers haven't taken correct measures to lessen or negate this financial blow, it will have a direct impact on profitability and productivity. Simultaneously, new consumer-facing surcharges will crop up across many industries, such as food delivery, landscaping and taxi/ground transport.

June 2011: Fuel surcharges will continue to be 50+ percent higher than last year, and 36 percent higher than they were in March 2011. Companies will start to raise the price of goods/services to compensate for these rising costs. This, in turn, will deliver a ripple effect across the entire supply chain. As a result, end-customer demand levels will decrease as the brute force of higher gas prices erode consumer confidence.

The good news is that today's shippers can take steps to lessen the impact Mideast tensions will have on transportation costs. Stay tuned for next week's post from NPI to learn more.

-- John Haber, EVP of Transportation, NPI

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