Businesses search for workarounds to high transportation costs

The U.S. Department of Labor’s latest update on energy prices showed gasoline prices were up 14% in March, according to the producer price index released on Tuesday.

That’s the Department of Labor’s measure of what domestic producers charged for their output. It also found that diesel prices were up more than 40%, which directly affects what companies pay to transport goods.

Over the last few weeks, Cathrine Reynolds, who handles imports for Palmetto Tile Distributors in South Carolina, said she’s been getting a lot of emails from shipping companies about fuel surcharges.

“Whatever the gross bill is, they’ll add 15% to 25% to that,” she said.

Reynolds said she’s been through that before, when energy prices spiked after Russia invaded Ukraine.

But Zac Rogers, associate professor of operations and supply chain management at Colorado State University, said back then companies were holding on to excess inventory they built up during the pandemic, which helped them to rely less on transportation.

“This year, we’ve been running inventories very lean,” he said. “And so even if transportation’s very expensive, there will really still have to be some replenishment.”

Companies could build up their inventories again to avoid having to constantly replenish items. But Rogers said doing that comes with its own costs, since companies still have to pay tariffs on imported goods.

“And so a lot of companies are finding themselves between a rock and a hard place because of these counteracting pressures of tariffs and surging fuel costs,” he said.

Many companies are doing what they can to mitigate those fuel costs.

Ken Giddon, owner of Rothman’s Men’s Clothing in New York City, said he’s also been getting hit with surcharges, even for local shipments.

“So we started investigating alternatives,” he said. “And last week, we rented a truck and drove it out to the warehouse in New Jersey and picked up 22 boxes.”

Meanwhile, Reynolds said she’s trying to consolidate her shipments — for instance, waiting to place one order while having two others on hold.

“Just because I want the three to ship together, if possible, to save everybody money on the back end,” she said.

Still, Reynolds said she’ll have to pass at least some of the costs on to her customers.

“I had a staff meeting this morning and just had to discuss that, and tell them keep your eye peeled for this — we do need to build that into our cost to our client,” she said.

Because the business, she said, can’t afford to absorb the cost.