The Covid Pandemic has not only cast a black shadow over the lives of people in general but has also affected businesses big time. The trade had almost been negligible during Covid, but now due to things getting back to normalcy and increased demand, the trade scenario has changed drastically.  Another factor that has proved detrimental to the trading sector and small businesses is the Russia-Ukraine war which has raised fuel prices exorbitantly. 

Warehousing and distribution depend entirely on transportation and freight costs and therefore have been hit hard. It’s not just international trade but the national movement of goods that cannot cope with the increasing costs. 

Factors Affecting the Freight Costs

  • Mode Of Transportation –  Bigger the mode of transport, the larger the costs. There are other factors as well in this matter that need due consideration, like the driver’s fee, transit time, etc. 
  • Weight – Heavier the cargo, the larger the costs. Freight costs are directly proportional to the weight of the cargo. 
  • Freight Type – Freight cost is dependent on the freight type and the type of transportation required. Dry freight is easier to deliver than refrigerated freight as it requires temperature-controlled containers that cost more.
  • Density – A freight’s density is determined by dividing the freight’s weight by its volume. More the density, the more the freight.
  • Distance – Longer the distance, the higher the costs. Geographic location and ease of movement are also considered factors.
  • Urgency – Same-day and overnight deliveries affect the freight costs considerably.
  • Fuel costs – With the fast-changing global scenarios, fuel prices are rising with each passing day and adversely affect freight costs.
  • Routes – Trickier the routes,  the higher the freight costs. Strategic planning can help cut down freight costs to a large extent.
  • Seasonal demand – With the festive season, the demand for goods increases, increasing the freight costs. Advanced purchases can help cut down on freight costs.
  • Disturbances – Pandemics, floods, storms, shortages, political instability, strikes, etc., hurt freight costs. 
  • Govt. regulations – Increase in taxes, reduction in subsidies, etc., increase the freight costs. 

Impact on small businesses

The world has suffered a seven-fold increase in freight costs in the past decade. Negative impacts of major setbacks all around the globe, in quick succession, are visible. The worst hit is small businesses, as they have low investments and can't bear the brunt of high freight costs. A part of it is also paid by their customers as well who are indirectly hurt, and these costs are burning a hole in their pockets. 

No respite from this is visible anywhere soon. They need to think creatively to cut down on these costs. 

  • Small businesses are trying to import raw materials and export their manufactured goods to nearby locations rather than to far-off locales. 
  • They try to consolidate with other nearby businesses and plan to order together.
  • Small business owners are trying to order big but not often to reduce transportation costs.
  • Showing loyalty and sticking to one particular company rather than constantly changing every year gives the benefits of priority and cost by the transport company along with other perquisites.
  • They are hiring more and more carriers to reduce the risk of dunnage while cutting down on freight costs.
  • Planning to order transportation on off-peak days when the traffic is less and so is the carrier’s load, giving them the benefit of earning big bucks on their slow days and thus cutting down on freight costs. 
  • Outsourcing transport responsibilities helps a small business cut down on recruitment and managing costs as well as transportation costs. 
  • Research goes a long way and helps business owners to be aware of all the latest changes that can help their skin down freight costs.
  • Planning sensible Warehousing and distribution can help slash freight costs to the bare minimum.

The Bottom Line 

Freight rates will keep changing due to one factor or the other. What would work for small businesses is to plan strategically to keep these costs from affecting their business and clientele. Global impacts can’t be managed, but with smart gameplay, small businesses can cope with high freight costs and also benefit extensively. E-commerce fulfilment services work day in and day out to bring unimaginable benefits to their clients.