Nov 27, 2018

Hurricanes & Freight: How Natural Disasters Affect Freight Costs & The Food Industry


Hurricanes & Freight

As the effects of Hurricanes Florence and Michael are still being felt, their reach goes beyond the local area as they leave consequences felt across the country in their wake. While Credit Suisse research analyst Robert Moskow reports natural disasters such as Hurricane Florence tend to have a net positive effect on processed foods companies’ sales trends due to consumers stocking up on supplies, distribution costs tend to increase as food processors must scramble amidst a tight supply environment to get truck drivers. Therefore, Florence and Michael could cause spot prices for freight to spike and could shape contract rates for next year.

These increased rates are due to increased fuel prices, fewer trucks on the road, damaged infrastructures, reallocated resources to respond to the emergency at hand, and an overall low supply and high demand. Just last year we saw these consequences after Hurricane Harvey hit and affected nearly 10% of the entire US trucking industry while also increasing gas prices nationwide by 15%+ due to its destruction of some of the major petroleum production bases. With Hurricane Florence, we saw devastation along the mid-Atlantic coast due to shut down ports, railroads, and interstate highways. And, with Hurricane Michael, we experienced blocked and closed roads along the Florida Panhandle and the shut down of some logistics facilities directly in its path.

So with a hurricane season that can last until November in the United States, causing natural disasters that affect the shipping industry more than any other industry in the country, what can you do when you rely on freight companies to keep your costs down and margins high?

What You Can Do

Unfortunately, as much as we’d like to, we can’t prevent natural disasters from occurring. Fortunately, we do have the power to prevent certain unnecessary expenses and we have the power to understand how our costs affect our bottom line.

Prevent Unnecessary Expenses & Understand Costs

You never know when a natural disaster is going to strike, so it’s important to be prepared at all times for an unexpected rise in costs. To do this, it’s important to know where your money is going, where you can save, and how its affected by all business aspects.

By using an ERP system for food manufacturers, such as NorthScope, you can be the master of your data. With all transactional information in one place, NorthScope works hard at organizing your transactions into meaningful data so you don’t have to. NorthScope helps you understand your data by allowing you to:

  • Track freight costs and trends resulting from logistics transactions to determine the best carriers to work with.
  • Track vendor history from purchasing transactions to determine the vendors costing you too much.
  • Track project costs through project accounting to determine where you’re over or under budget so that you can adjust accordingly.
  • Track commodity procurement costs through grower accounting to determine the most cost-effective harvesters and farmers.
  • Track account balances to determine year-to-date costs and revenues so that you can know what adjustments are needed to maintain your bottom line.
  • And more!

That way, when a natural disaster hits, you can be prepared to cut costs where you know you can afford it while maintaining your bottom line.

Schedule a demo and get prepared for the unexpected today!