Inflation has a lot to do with the cost of basic goods on the shelves. However, inflation isn’t the only factor that will affect the overall price of what consumers pay for their goods. Once you get past inflation, the second largest factor that affects consumer prices is transportation. Transportation is essential in the supply chain. Without transportation, goods aren’t going anywhere. When the price of transport goes up due to any factor, the cost of goods will naturally hike as a result of its effect on the supply chain. When warehouses and retailers pay more for goods transportation, consumers will pay more for their goods.
How Does Transportation Affect the Price of Goods
Fuel prices are never set at a standard rate, and they’re expected to be something that goes up and down at least once every few months. When fuel prices rise, transportation costs go up as well. The entire industry has to compensate for the change in price.
If it costs even 5 percent more to transport goods from a warehouse to the store, the price of the goods they are carrying has to go up to offset the costs.
While it doesn’t have as much of an impact on the price of goods as fuel, road maintenance on regular routes can also increase the price consumers pay for food and other goods. Road maintenance means that transportation companies are a lot more likely to need alternate routes. This means that the distance they travel becomes greater and more expensive for their customers.
As a result, having to pay more to get goods to consumers and warehouses will mean that costs have the potential to rise.
Another way in which transportation can affect the final price of goods is through vehicle maintenance. When suppliers don’t maintain their fleet, breakdowns are more likely. Even though transport service companies would not necessarily like direct consumers to know about this, the costs can affect the price of goods.
A high breakdown rate will increase the time it takes to get goods to consumers and also increase the price consumers will have to pay for their products.
The cost of maintenance and repair parts can also see regular consumer goods marginally rise in price. For example, tires cost more to buy this year, then so will everything else.
Just like fuel, a transport company relies on tires and general vehicle maintenance to keep a healthy fleet on the road. Their goal is to keep consumer prices as low as possible.
Slowdowns and Strikes
Slowdowns and strikes are also on the list of things that can affect what consumers have to pay for goods. When companies have any kind of internal turmoil, this can affect how easy or cheap goods get to consumers and stores. Unfortunately, these delays can shock supply and demand and can cause price increases on final goods.
Transportation companies rely on more than just their vehicles to deliver goods from one place to another. They also rely heavily on their staff and truck drivers.
The longer a slowdown or strike lasts, the larger its impact on the entire logistics and transportation industry as well as how much people will have to pay for their goods.
Competitors in the transportation industry can also have an effect on what people and companies pay for their goods. When suppliers choose another transportation company, this can affect the price of goods by making prices go either higher (when the competitor is more expensive) or cheaper (when they are not).
When companies chase profit, it can very well chip into the prices that consumers have to pay for goods. This is true even if they have nothing to do with the transport business themselves.
What will you pay for goods tomorrow? It all depends on what everyone else is paying for the transport of those goods, as well as a few other factors.
Additional Information: The Economic Costs of Freight Transportation – Federal Highway Administration
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