With gas prices reaching an all-time high in many locations, you want to know how this change will affect your business. The delivery industry is especially vulnerable to fluctuations in fuel costs. So how do rising gas prices influence business-to-business (B2B) delivery services?
Gas prices impact product delivery services because higher fuel costs drive up shipping expenses. The details are even more complex, and as your company adapts, it’s vital to know how to effectively respond. Keep reading to learn about the impact of fuel costs on the logistics of your business.
Do Gas Prices Impact the Timeline for Delivery?
How do gas prices affect delivery times? The effect of gas on logistics and shipping costs is noticeable, but as far as timelines for shipping estimates go, you have the same options if customers are willing to pay the extra fee for delivery. With the increased costs of fuel, expect more customers to use economical shipping options to save money. Also, expect certain consumers to pay more if they can get products more quickly.
Your company might benefit from extending timelines to save on delivery. The logistics support provided by your partners or carriers is prone to change as gas prices also affect them. If you want to lower your shipping costs, opting for slower delivery methods is one possible solution.
Allowing for slower time estimates has a potential drawback. Some customers pay a premium to receive a product quickly. If they are unable to get your product in the time range they want, they will look elsewhere for a similar product with a faster delivery option.
What Are the Challenges of Rising Gas Prices?
As gas prices rise, you can expect the following factors to create new challenges for your company:
1. Rising Transportation Costs
The cost of transporting freight will continue to increase as fuel prices go up. If carriers increase the price of transportation, they can prevent taking losses. The shipper gets charged more to transport the goods if the freight carrier has to spend more to move the items. This phenomenon means fuel costs affect the entire industry.
Since fuel costs impact every aspect of the transportation industry, expect product prices to rise as well. As the economy fluctuates, you might need to charge slightly more for your product to receive the same profit. Shipping certain items — for example, temperature-sensitive products requiring refrigeration — will cost more than others.
3. Lower Transportation Service Usage Levels
If fuel costs rise significantly over a consistent period, companies across many industries will have to work on maintaining their profits. One way to do this is cutting services or switching to more affordable services. Transportation services that were once popular may see a small decline as companies try to cut back on additional expenses, for example.
4. Shifts in Service Areas
Fuel prices set at a certain level will also cause some carriers to readjust where they are willing to transport products. The optimum service area, or the distance that is most cost effective to transport a product, is prone to change with any kind of economic instability.
As a result, increased fuel prices may act as a barrier to affordable transportation. This issue is especially the case for products that need to be shipped great distances from the manufacturer or business.
How Can a 3PL Company Help You Save Money?
The gas price impact on third-party logistics (3PL) companies varies by industry. Food delivery services work differently from freight delivery, although both types of services must navigate fuel costs.
How does gas impact courier delivery services or similar companies? Rapid increases in the price of fuel are easier to offset with the help of a 3PL company. A 3PL business can assist with customized logistics support, limiting the costs you would pay for your deliveries as gas prices continue to go up.
What Are the Past Trends for Rising Gas Prices?
Price fluctuations for materials, fuel and other components of product sales affect delivery logistics. Any time fuel rapidly increases in price, it starts a domino effect. Fuel is a required resource for transportation, so all industries that rely on the transportation of employees, products or services feel the effects of a price hike.
In the 1990s, low fuel costs allowed for high profits for the freight and transportation industries. These benefits extended into the early 2000s. Sudden changes in fuel costs in the following years were newsworthy events. The increases often resulted from high crude oil costs and wholesale gas margins.
In the last decade, fuel has gone up numerous times, and these rapid increases have strained freight management companies and other delivery services. In the last two years alone, price hikes have continued to break previous records. This could indicate that higher gas prices are here to stay, but in the past, sudden rapid price hikes were followed by a brief period of decreasing prices.
How Are Shipping Carriers Affected by Rising Gas Prices?
Shipping carriers expect fuel costs to change and anticipate how they can seamlessly adapt to these sudden shifts. Their fuel surcharges are based on prices for the previous days or weeks.
When fuel costs suddenly rise, a lag forms between the increased cost of fuel and the current surcharge. A change in the quoted transportation costs can affect carriers and shippers, leading to temporary losses.
Employees vs. Independent Contractors
Employees have the advantage of following the company’s lead. In contrast, independent contractors have to find ways to settle the costs on their own. This issue is why fuel expenses can be even more expensive and challenging for independent contractors or leaders of small businesses.
Regarding how gas affects delivery drivers, it depends on the model they work under. Delivery drivers do pay for gas if they are independent contractors. To save money as fuel costs rise, you can use a third-party service for freight process outsourcing.
Companies such as ExpressIt follow the employee model to allow partners to enjoy deliveries with few restrictions. The employee model is also an investment in workers’ well-being and their costs of living.
Deliver Your Products With ExpressIt
ExpressIt is committed to making efficient, speedy deliveries for all industries, even when delicate materials need to be transported. We specialize in same-day delivery and trucking services using an employee model. We are also willing to accommodate your needs if you prefer the independent contractor model.
Trust ExpressIt for your B2B courier deliveries of all kinds. Contact us about how we can help to start meeting your delivery goals again.