How to Minimize the Impact of Mideast Tensions on Transportation Costs

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NPI estimates 15 percent cost increase for shippers, shares tips

Rising fuel costs are a grim reality for shippers and consumers. One question is whether companies are doing all they can do to insulate their business and their customers. In most cases, they aren’t.

NPI, a spend management consulting firm that delivers savings in IT, telecom, transportation and utilities for its clients, today revealed several ways that shippers can minimize the impact of Mideast tensions on transportation spending. Political and military unrest in the Mideast is causing fuel costs to rise, which will have a negative impact on corporate profitability as the cost of moving goods to consumers skyrockets.

The tensions in Egypt, Syria, Libya and Yemen have already begun to have a serious impact on supply chain spending. In a white paper entitled “How to Minimize the Impact of Mideast Tensions on Supply Chain Shipping Costs,” NPI estimates that the average shipper will experience a 15 percent increase in transportation costs in Q2 over Q1, with carrier fuel surcharges rising by more than 50 percent over last year's levels. Many companies, including large manufacturers and suppliers, are already passing these cost increases on to customers by implementing “emergency fuel surcharges” of their own.

“Rising fuel costs are a grim reality for shippers and consumers. One question is whether companies are doing all they can do to insulate their business and their customers. In most cases, they aren’t,“ said John Haber, EVP of transportation consulting services for NPI.

While most shippers will be unable to fully negate transportation cost increases, their impact can be minimized through the following actions:

1.    Find out if you’re paying a fair price for fuel. Most shippers overpay for fuel in the best of times. As Mideast tensions continue to deal a blow to shipper spending, it’s imperative that companies understand what they’re paying today and achieve fair market pricing.
2.    Consolidate shipments and switch modes. Exploring different mode alternatives and the cost breaks associated with them, as well as consolidating shipments, can yield substantial savings.
3.    Re-evaluate service selection. Companies often elect to ship a package via next day air when it can get there at the same time via next day ground at half the cost. Shippers should analyze their current service selection for more cost-effective alternatives that don’t impact time-in-transit.
4.    Closely watch carrier capacity. NPI predicts carrier capacity will increase in Q2 as shipping volumes decrease. Be prepared to renegotiate carrier pricing when this happens.
5.    Offset price increases outside of transportation. Companies can offset increases in transportation costs by reducing spend in other complex categories such as telecom, IT and energy. These categories all suffer from low pricing visibility and complicated contracting and billing practices – which makes them prime candidates for cost saving opportunities.

To read a full copy of NPI’s white paper on “How to Minimize the Impact of Mideast Tensions on Supply Chain Shipping Costs,” please visit http://www2.npifinancial.com/Mideast_Whitepaper. For more information on NPI’s transportation spend management services, go to http://www.npifinancial.com.

About NPI
NPI is a spend management consulting firm that protects companies from overspending in specific cost categories – information technology, telecommunications, transportation and energy. The savings we deliver are used to fund other investments and to increase profits. Using a combination of market experts, proprietary methodologies and extensive data, NPI ensures that prices and terms are in line with best-in-class benchmarks. Reviewing more than 14,000 purchases annually, we provide objective oversight for billions of dollars of strategic spend for our clients. NPI’s commitment to seeing recommendations through to execution is reflected in our results-based fee structure. Our services are self-funding, and we guarantee ROI. This combination of expertise, savings and value is why NPI is an advisor to IT, finance, procurement and supply chain executives for some of the world’s most recognized brands. To learn more about how NPI can help your company start saving today, visit us at http://www.npifinancial.com or call 404-591-7500.

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Hannah Bower

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