Costs for companies to ship and store goods rose significantly earlier this year after the U.S. and Israel invaded Iran, and they’ve stayed high, according to the Logistics Managers’ Index. The index, which is out this week, measures prices and capacity across the supply chain.
The index for the combined cost of inventory, warehousing, and transportation has risen 18% this year. Those higher costs for manufacturers and retailers could push up consumer prices, too.
Before the pandemic, tariffs, and now the war in Iran, companies would bring in inventory on a predictable seasonal schedule. For example, they’d stock up for back-to-school in the late spring and for the holidays in the summer, according to Zac Rogers, an associate professor of operations and supply chain management at Colorado State University.
“And we have a system built, a distribution mechanism from the docks to the rail lines to the trucking fleets to warehousing that was built on this regular schedule,” he said.
However, that schedule has gotten out of whack, because as tariffs have gone up and down, companies have sometimes tried to stock up faster or bring things in at the last second.
And Rogers said that unpredictability is driving up the cost of holding inventory and renting warehouse space, “in addition to the cost that’s already there from tariffs.”
Then, there’s the cost of fuel. Prices for jet fuel and diesel fuel have risen fast this year, and they touch pretty much every point in the supply chain, said Meagan Schoenberger, senior economist at KPMG.
“For example, with jet fuel, you have air freight costs, and then with diesel prices, you’ve got long-haul trucking; you’ve got short-haul or that last mile, so whoever’s shipping directly to your house and drops off your box,” she said.
Companies will likely raise consumer prices to make up for those costs, but because consumers are so stretched by years of inflation, some firms, Schoenberger added, may try to find ways to absorb them.
