Shipping costs are rising.

The supply chain is beginning to contract; it’s time to anticipate the impacts to your operation. It’s a good idea to prepare to mitigate and adapt to these impacts, so your business can weather the storm. So, what should we be anticipating?

• Increased Production Costs: As transportation costs rise, we can expect to see the price of materials increase depending on where they are being sourced. The cost of transporting the finished goods is likely to increase the final cost of the product, and any leg of the supply chain could experience increased shipping costs.

• Tighter Margins: Increased production costs will be compounded by the inability of manufacturers to raise prices, which will constrict margins. Manufacturers in many cases will find themselves hamstrung by their customer contracts, making raising prices to accommodate for increased costs slow, cumbersome, and unpopular. When possible, manufacturers may still increase prices, which would increase the cost of care for the patient.

• Supply Chain Disruptions: Here we go again. Increased shipping costs can often coincide with broader logistical challenges and cause delays throughout the supply chain. Supply chain delays can increase lead times and raise the risk that manufacturers run out of product, leaving the market paralyzed and blocking elective surgeries.

What should you do right now?

• Employ Demand Forecasting Tools: The more you can anticipate demand, the better you can plan for your future needs and strategize your resources appropriately. What is your forecasted demand for the next 6 months to a year? Should you increase your safety stock to reduce your risk of shortage? Would a more targeted sales strategy help to optimize sales, given your limited supply?

• Consolidate shipping: Consider aligning your orders to reduce costs by taking advantage of consolidated shipments. This strategy will reduce the number of small, more costly shipments and allow you to take advantage of bulk shipping rates. Additionally, are there changes you can make to your package size or configuration to reduce shipment size and weight?

• Reassess your production pipeline: Bearing in mind the pressures that are mounting in the supply chain, would it be beneficial to pull some builds forward in the production schedule? Actions like this could help to ensure timely delivery and avoid further cost increases. Would now be a good time to acquire additional raw materials? Stocking up, where possible, could provide insulation against potential supply chain shocks that could cause costs to keep rising or materials to become unavailable. 

• Increase your visibility: Supply chain and field management tools can help you gain increased visibility into how your inventory is being utilized, where bottlenecks exist, and foresee shortages before they occur. Evaluate where your inventory is doing the most good in the field. Look for inventory that is languishing where it is and redeploy it where it is more likely to move. You could also create some cushion by pulling it back to build a safety stock.

While periods of supply chain disruption can be stressful and hurt the bottom line, we can prepare for the lagging impacts. Be sure to evaluate these pressures as you’re laying your plans for 2025.