Prepare for Market Disruptions with Final Mile Services
In the last 12 to 18 months, our Final Mile Services® teams and customers have seen so many different types of factors disrupting the market and last mile delivery. Whether you consider the impacts of the pandemic or the rising costs of labor, fuel and equipment – the constrictions on supply have been noticeable. Now, on top of those factors, we face different – but not totally unknown – disruptions in the form of rising inflation and interest rates.
Things may seem tight now as it is. But there’s a big possibility that strain is only going to increase in the coming months as interest rates rise in an attempt to stave off inflation. This will be especially true for retail businesses that rely so heavily on customers having discretionary spending. Having a plan for a possible economic downturn is as important as it’s ever been. What will a destabilized market and higher cost pressures mean for the future movement of goods and the transportation needs of your business?
Economic Trends Add Stress
As reported by the Wall Street Journal, the Federal Reserve in June raised the federal funds rate by 0.75% – the biggest increase since 1994. New projections based on this increase expect the Fed to raise rates by an additional 3% by the end of 2022. According to Federal Reserve Chairman Jerome Powell, the hope is that slowing the economy enough to bring down inflation could help us avoid a recession. Conversely, the risks of a downturn could rise as fluctuations and spikes in commodity prices adjust to tighter monetary policy – this means that even with the opposing actions of the Fed, an economic downturn is not off the table for the future.
There’s even more cause for concern when examining the current indexed economic trends for the United States:
- Final Demand Producer Price Index (PPI): Moved up 10.8% over the 12 months ending in May 2022 – nearly two-thirds of this rise was due to a 1.4% advance in prices for final demand goods. This marks the fifth consecutive monthly rise for these goods.
- Consumer Price Index (CPI): Consumer prices rose 8.6% from May 2021 to 2022 – this is similar activity to the increases seen in the mid-2000s, preceding the recession that would follow from 2007 to 2009.
- U.S. Manufacturing Purchasing Managers Index (PMI): Fell from 57% in May 2022 to 52.7% by the end of June 2022. For reference, the closer we creep to a value below 50%, the closer we get to a negative economic situation.
These tough conditions can create deep uncertainty for the future and make it hard to invest back into your business. Labor and materials are going to cost more money. Consumer spending and confidence are no longer going to be a guarantee to help offset those costs.
Changes in Consumer Spending
It is true that according to the U.S. Commerce Department, consumer spending in the United States was up in April by 0.6%, but by May that percentage dropped to 0.2%. American consumers are facing record-high inflation without an increase in income to combat higher product pricing. This creates a drag on their overall purchasing power.
Retail sales, which measures spending at stores, online and in restaurants, fell 0.3% in May from the previous month – the first decline in month-over-month retail spending this year. And this might be just the beginning of an emerging trend. Consumers are rebalancing their pandemic-era spending from goods to services, according to a U.S. Census Bureau report that was issued in June.
For retail businesses, this should create a stronger drive to provide consistent, quality service to customers in areas like home deliveries to create a deeper, lasting value. In other words, you must put customer satisfaction as a top priority or risk them taking business elsewhere in an already difficult market.
Are Your Last Mile Delivery Services Prepared?
J.B. Hunt understands that during times of uncertainty it’s more important than ever to maintain strong lines of communication to run a successful logistics program. Through on-site employees collaborating with our Local and Strategic Account Management teams, we can provide both you and your customers with consistent levels of service.
Strong and open communication also aids in giving deeper insight into the market that your business is operating within to help reduce surprises that can arise during times of extreme pressure. Additionally, our logistics professionals’ understanding of your market and last mile delivery needs creates further opportunities for customized solutions to help keep costs in check.
Businesses will feel continued pressure on where and how much they can spend. But one place you don’t want to skimp is on the quality of service you offer to your customers – especially when it comes to home deliveries. Investment into a J.B. Hunt logistics program delivers a return for your brand through top-notch service and stability. Our Final Mile Services offerings provide end-to-end supply chain solutions that can take stress and cost pressures off the last mile delivery process. Connect with us today to start building your program!
finalmile@jbhunt.com | (877) 288-8341