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Shipping Costs Going Up...

July 28, 2010

Container shipments are running late and expensive as we enter the busy holiday season. Although this should be an indicator of an economic recovery, it is more directly tied to the amount of ships taken out of service by major shipping lines.

According to today's Wall Street Journal, national retailers struggled amongst late shipments at Father's Day and ship capacity has run tighter since then. Home Décor importers are now shipping products they sold in January when rates were still low. In the last 12 months the container spot rate from Hong Kong to LA has risen from $871 per container to $2,624.

National retailers who want to get their products on time are now paying additional surcharges to secure placement on ships. Who are they bumping? Probably small importers like the ones who make up most of our industry.

I know of a few Home Décor companies who (congratulations) have made it through the worst of the recession but are now missing sales because they simply do not have the cashflow to bring in new products. They're booking orders but can't promise retailers when they'll get delivery. The national retailers who can afford it have learned their lessons and are bringing products in early. This costs them in inventory carrying costs but they bargain that it's one more way to have what the independent retailers might not.

My take; this again proves the validity of US Manufacturing. We all know about growing Chinese labor costs and dissent. That's not going away and neither is the continuing exchange rate adjustments away from US consumer advantage. Now shipping costs are back to their 2007 highs and likely to only go higher.

US manufacturers, and there still are many in our industry, can avoid most of these troubles and they're the ones to call when the other orders don't show up as planned.

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Jeff Sands is a Director with Dorset Partners LLC (www.DorsetPartners.com) which helps companies Revitalize in the face of serious economic challenges. Dorset Partners has recently published its Business Health Test which is a diagnostic that several CEOs have used to spot trouble early and make changes to avoid serious problems. The Business Health Test is available as a free download on their website.