Logistics Tips: Why Are Shipping Costs So High Now?


The record high freight is a new normal in logistics

I swim in a gym pool every weekend. What always irritates me is a notice on the shower-room wall. It says “We stop providing shampoo to avoid infection.” Anybody, tell me how shampoo sharing is causally related to infection. I think it’s a stealth cost-cutting move. Don’t you think the COVID is sometimes used as a good excuse for cost cut or price increase like this?

Having said that, I know the COVID has a huge effect on cost structure. The biggest factor would be logistics costs. Yesterday, one of our freight forwarders came to me to talk about an increase in freight rates. He apologetically told me “Freight rates become more than double from this month.” The forwarder seemed to be no match for shipping companies who are now at the height of their prosperity.

The COVID, a good excuse for price increase

Even if you’re not directly involved in international trade, many of you may have experienced delayed delivery lately, haven’t you? In fact, we’re facing difficulties over the export of our furniture. These days, it’s very difficult to book shipping space and containers. This is said to be because of the COVID, but can you see clear causal relationship between them?

Let me explain. The recession had continued in the shipping industry before the COVID. Shipping companies reduced the number of freight ships and containers to a minimum. When the supply side was in a down turn like this in 2020, transportation demand sharply increased, but transportation infrastructure can’t keep up. Making matters worse, naturally there’s no such incentive for shipping companies who enjoy the hiking freight rates.

We need designs good for logistics as well

Our mainstay product is dining chairs. Their joints are well-designed, and you can’t see how the frame parts are joined. This has good and bad points. Of course, this structure makes our chairs look beautiful. The problem is the assembly requires a certain level of techniques. In other words, the structure of our chairs is not suitable for knock-down kit. In order to survive this harsh shipping conditions, I believe we must satisfy both flat packaging and beautiful design. If it’s possible, we can shorten lead time to delivery by increasing local inventory, and it’s more eco-friendly! I always think it would be great if we had such chairs in our collections.

A dining chair upholstered with black leather. The beautiful line from the backrest to the left arm is focused.

Photo Credit: https://www.bbc.com/news/business-58643717

Shungo Ijima

He is travelling around the world. His passion is to explain Japan to the world, from the unique viewpoint accumulated through his career: overseas posting, MBA holder, former official of the Ministry of Finance.