With the price of fuel rising 30% from January to early June, transportation costs are rising in importance again. According to 80% of the finance chiefs interviewed by the Duke University/ CFO Magazine Global Business Outlook survey, high oil prices are hurting their business.
I quickly learned that my operational cost was largely dependent on oil and gas prices – even though it didn’t appear that it would be at first glance – an article for another day. However, it is becoming urgent to address your transportation function from a strategy standpoint. During the recession, it was a competitive environment with minimal to no profits built in for the carriers. It has been a tough environment for transportation providers – new environmental laws, rising fuel prices, price pressure on freight rates, etc.
Think about your strategy now. Are you treating your transportation suppliers like partners or vendors? I wouldn’t be surprised if the market turns and it becomes tough to find a reliable carrier with a good service record. Will you be in partnership and be able to maintain service levels while your competitors struggle? Don’t be penny wise, pound foolish.