Shipping woes that plagued retailers earlier in the year have eased somewhat, as gas prices have fallen and more drivers have been hired.
Current USA, a Colorado Springs-based retailer that specializes in wrapping paper and greeting cards, is entering into the busiest time of its fiscal year: the Christmas season. The retailer, which focuses on online and catalog sales, has kept its costs down by responding quickly to the changing energy market.
“We’re in much better shape than we were in October,” said LeeAnn Morey, director of distribution at the national catalog center. “We’re extremely busy, but that’s a good thing. Most of our shipping issues have subsided for now, but we’re keeping a close eye out for any problems.”
Morey said the company solved its shipping problems by adding to its inventory and by diversifying the way it ships its goods. Instead of focusing on a single carrier, Current USA is using all available options.
“The way we can get it there the quickest and the cheapest, that’s what we do,” Morey said. “We use them all: independent truck drivers, Fed Ex, UPS, the yellow carriers. We keep a very close eye on the cost of shipping.”
The company also has changed the way it ships its products, Morey said. Instead of boxing everything into one shipment with one carrier, it separates shipments and uses more than one carrier to get products to customers without delays, which have the potential to cost the business thousands of dollars.
A shortage of truck drivers and high fuel prices led many shipping companies to add surcharges to their prices. Current USA has not yet passed those costs to its customers, and Morey said the company has no plans to increase prices because of shipping costs.
“We’re seeing the problem decrease,” she said. “As long as we keep enough inventory in stock – that was a problem, getting products from a supplier that was difficult to get to – we should be fine.”
Independent trucking companies are feeling the pinch of high diesel prices, according to the America’s Independent Trucking Association. Higher fuel prices mean that independent owner/operators must increase fuel surcharges when they ship goods.
“The surcharges that are in place now, were placed when gas was $1.10 a gallon, meaning the surcharge is about 20 cents a mile,” said Larry Daniel, a spokesman for the nonprofit association based in Clinton, Miss., that focuses on providing information to independent truck drivers via its Web site (www.aitaonline.com). “Now, gas is so high that the surcharge – in order for the trucker to make up the difference – should be about 55 cents a mile.”
Shippers are resisting paying the extra costs, meaning smaller profits for independent truck drivers, Daniel said.
“Basically, the trucker is supplementing the costs of those goods,” Daniel said. “The cost of shipping products around the country is just another cost of making the product, but the shipper doesn’t want to pay it. It leaves the trucker in a bad situation.”
Because of high fuel prices, independent truck drivers will see their income fall by about $30,000 this year, Daniel said.
Larger carriers are protected from fluctuations in the fuel market by their buying practices. United Parcel Service buys fuel in bulk, having drivers gas up at their facilities.
“We don’t feel higher gas prices immediately,” said UPS spokeswoman Ronna Branch. “We buy fuel a month or two out. By the time we need more, the prices have usually settled. We also can protect ourselves from higher gas prices by entering into contracts if we need more fuel than we originally thought. The agreement is that we can get gas in the future at current prices.”
Federal Express charges a fuel surcharge based on the national average price of diesel fuel. The surcharge is adjusted monthly, based on Department of Energy estimates, spokeswoman Darcie Goodwin said.
Driver shortages aren’t a problem for the two major carriers. At both companies, drivers are hired from within, after an employee has spent time working as a loader.
“It’s an honored position at UPS,” Branch said. “People work hard to get there. We can also hire temporary, seasonal help for peak times.”
According to the Fed Ex Web site, the company will handle about 8.5 million packages on its busiest day of the holiday season, about 400,000 more than last year. Online sales are a big part of the company’s business, said Fed Ex economist Gene Huang.
Online sales are up 22 percent compared to this time last year, analysts say.
“We always hire seasonal workers,” Goodwin said. “But the company also has volunteers from other parts of Fed Ex. I’m volunteering one night this week. We all pitch in, wherever we can.”
UPS, the largest carrier in the United States, is expected to deliver more than 20 million packages on its busiest day, forecast this year to be Dec. 22.