Be Prepared for Shipping Challenges

Last week, UPS and Fed Ex basically told their customers they are sold out through the end of the year and are essentially putting customers on allocation.  YRC Worldwide, one of the largest LTL (less than truckload) carriers is facing a “liquidity crisis” and is relying on the government to keep it solvent. In a time of tight capacity, any issues with YRC will create tremendous challenges for other carriers that are struggling to meet demand.

For years, business freight has subsidized consumer freight.  That paradigm might be ending.  Business to business shipping has the advantage of route density (think of industrial parks and office buildings when they used to be filled) versus business to consumer shipping where houses are spread out.  As I have written before, consumers have gotten spoiled by free or low shipping rates. 

It does not take an economics major to understand that supply is tight and demand, particularly for direct to consumer deliveries, is accelerating.  This scenario will ultimately lead to higher prices.  My fear is higher prices are the least of our worries.  Shipping delays will wreak havoc on supply chains that are already challenged.  Start making contingency plans.  The holiday shipping season is going to be fun! 

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