To ensure your 2022 freight procurement strategy is successful, calculating your costs accurately is vital. However, we’re just a few months into the year, and the market has already experienced some of the biggest shakeups imaginable.
From intensifying port congestions to war in Europe, even the most pessimistic forecasts couldn’t have accounted for the challenges 2022 has presented.
To steer your strategy towards success this year, it’s time to sit back down at the drawing board and figure out what your costs are really going to be. Because relying on the forecasts you made in Q4 2021 just won’t cut it anymore.
So how can you calculate your real costs for 2022?
Reassess the forecasts for your heavy lanes
In a turbulent market, reassessing your most important lanes will help you quickly identify the significant cost hikes that are likely to hit your budget.
Your heaviest lanes make up the bulk of your budget, so starting here will ensure you catch the biggest cost increases quickly. Here are some of the main ways your heavy lanes could increase in costs:
- Increased BAF costs – The cost of oil is skyrocketing, so depending on your BAF agreement, you could expect a big price hike soon.
- Route redirects – The conflict in Ukraine is made some routes impossible for air, sea, road and rail freight. Redirecting your lanes may be costly, but with no signs of the conflict slowing, it’s also necessary for a successful strategy.
- Port congestion charges – Ongoing port congestion across Asia, North America and Europe has been further exacerbated by the Covid-19 lockdown at the port of Shenzhen. Congestion can lead to demurrage and detention charges as well as increased storage fees.
- Increased spot and contract rates – All this disruption is causing both spot and contract rates to remain sky-high or rise even further.
Forecast pessimistically, but strategise with optimism
If the last two years in freight procurement have taught us anything, it’s to be reserved when forecasting. Every time we’ve expected the market to return to normal, new crises have arisen which exacerbated the situation rather than improve it.
As you reassess your budgets for the rest of 2022, using the most pessimistic forecast figures will give you the buffer you'll need later in the year.
But just because forecasts are looking bad, doesn’t mean you need to be negative when it comes to your strategy. If you act now, you can put in place measures that offset the rising costs we’re seeing this year.
For example, increasing the frequency of your tendering by implementing a mini-bid strategy will ensure you can swiftly adjust your strategy when disruptions hit. Getting ahead of the market like this ensures you’re never caught unprepared for market disruptions and can adjust quickly to get the best prices and route options possible.
Learn how Europe’s largest agricultural manufacturer used a multi-tender strategy to keep costs low and avoid disruption. Read the whitepaper: ‘How to Build a Resilient Strategy with Freight Procurement Mini-Bidding’.
Use the Cost Avoidance Calculator
We’ve launched a brand new cost avoidance calculator to help you re-budget for the excess costs of 2022. Utilising the latest market data and forecasts, it can adjust your budget in just a couple of clicks.
Once its calculated your new budget, we’ll send you a bespoke report on how you can offset the rising costs your procurement strategy is facing this year. Try the calculator below for free.
