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Rate of Inflation, Supply Chain Costs and Our Response in 2022

By Len Batcha, President and CFO

Technical Transportation, Inc

By now, you’re probably aware of the skyrocketing rate of inflation hitting global economies. But who will end up paying for the rise in costs? The bottom line is that it has trickled down to us as individuals and families, so it is the end consumer who will be burdened to pay for these increases throughout 2022 and most likely beyond. Finding a way to navigate these changes with minimal disruption to your personal finances is a challenge in itself.

Inflation is real, and the current increases are more dire than the general consumer is realizing at the moment. It’s truly a perfect storm of circumstances and government policies that have led us to this situation.

One of the leading factors has been the influx of money into the economy through the U.S. Payment Protection Program (PPP), unemployment compensation and other initiatives that flushed money falsely into the economy and gave consumers and businesses an inflated sense of financial security while increasing the U.S. deficit.

As the markets were flooded with this money, it generated greater consumer demand for products and supplies. Many producers and manufacturers, however, haven’t been able to keep up with this demand due to a lack of resources and labor because of persistent pandemic lock downs all over the world.

In the U.S. supply chain industry, the Great Resignation last year further contributed to bottlenecks as workers opted to stay at home and receive their unemployment compensation rather than taking jobs at strategic ports and other supply chain processing facilities.

So now, as the inflation rate is hitting hard, almost everyone is feeling the financial squeeze. That results in employees and job seekers asking for higher compensation to pay for higher fuel costs, and price increases the highest in over 40 years. And it ultimately means that companies in the supply chain industry must raise prices to stay competitive while trying to achieve profitability.

Getting Granular About Price Increases

We understand there is a lot of fear about price increases among manufacturers and shippers. That’s why, rather than doing blanket price increases across the board, at TechTrans we’re looking at individual clients, down to the product level, to determine if services and rates would justify an increase and which customers/services are already performing at an optimum level.

Our goal is to minimize this burden to our clients as much as possible. By using an analysis tool, we can calculate the best way to determine which fee increases will need to be adjusted, or where we might potentially only raise prices on a case-by-case, client-by-client, and even service-by-service basis.

What we evaluate includes (but is not limited to):

  • Fuel costs – What clients are under FSC (Fuel Surcharge) agreements with the standard national rate?
  • Divisions within a company – Down to the client/modalities, we look at the historical data, evaluating shipment history and averaging out the gross profit as a whole versus shipment by shipment.
  • Service charge increases – We will consider passing on to underperforming clients.
  • Clients under contract agreements – Some agreements have built in rates not to exceed a certain % annually. These annual increases are usually maxed at 1-3%.
  • Claiming “force majeure” on contracts – In some cases where contractual agreements limit the amount of increase we can pass along, there is an opportunity to claim “force majeure” from the recent pandemic to override those terms and enable a higher increase based on inflation rates for 2022.
  • Well-performing clients – These may not see an increase if their gross profit margins are good.

At TechTrans, we don’t want to be just a service provider for our customers. We want to be a value-added partner that has our clients’ best interests at heart. That’s why we’re against blanket price increases for our customers. We’re willing to go the extra mile to analyze each account granularly and help ensure that these challenging times have a minimal effect on our clients’ businesses.

We’re always ready to help you with your supply chain and logistics needs. Reach out today if you’d like to learn more.contact us today.

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