Effects of Oil Price Hikes in the Logistics Industry
By Cat Dewinta - November 13, 2021
The recent rise in oil prices has been a catalyst for increased costs across industries in the Philippines. This is especially true of the logistics industry, which is one of the most heavily reliant on fuel and energy sources to operate at any level. As such, we must examine how this sudden change will affect businesses operating within this sphere of activity.
These effects are easy to see when looking at how oil price hikes affect transport costs across various industries, including shipping activities by sea or air and gas prices within individual vehicles used during business operations. The latter often has a stronger effect due to the larger number of transportation methods that rely on oil-powered engines rather than alternative technologies like electricity or steam power. Businesses should be aware that these changes lead to higher operational expenses and make it more challenging to manage their supply chains and efficiently transport goods and services.
Significant Consequences of Oil Price Hikes in the Philippines During the Final Months of 2021
Some of the industries that are forced to increase operational costs are retail and manufacturing. For example, the oil price hikes may compel retailers to raise prices due to higher transportation costs of maintaining and fulfilling deliveries. Likewise, manufacturers might need to adjust pricing strategies as they face increased production expenses. Even if they do not see a direct impact from these price hikes themselves, many merchants will still feel its adverse effects through reduced sales margins and lower purchasing power of the mass.
One of the biggest effects on logistics at this time would have to be its effect on employment rates. It’s no secret that cheap oil has been a significant contributor to job growth within the industry, with many businesses expanding their operations as they take advantage of cheaper energy sources and lower operational costs through greater efficiencies. Now that these benefits are being eroded, some companies may reduce or even cut down workforce numbers if they can no longer manage rising operating expenses. This means fewer jobs available for Filipinos who were previously employed by companies engaged in supply chain management activities across various industries—from manufacturers, retailers, and logistics providers. This is especially true of many smaller businesses growing at a significant rate over the past few years and relying on cheap oil prices to maintain or expand their market share.
How Can Businesses Overcome Challenges Brought By Oil Price Hikes?
The most common way to combat this rise in costs is through third party logistics or outsourcing. Third party logistics providers have the ability and resources needed to tackle these challenges head on, so there is no need for businesses operating in this sphere of activity to worry about being unable to overcome such obstacles. In addition, working with a third party provider can help prevent or at least reduce future business disruptions caused by sudden changes in fuel prices.
By outsourcing, businesses have greater flexibility and control over their supply chain management strategies without investing in capital equipment or additional staff members. In addition, third-party providers already have established relationships with transportation carriers worldwide, which can result in savings due to bulk purchasing rates and access to preferred routes.
In conclusion, working with a third party provider is one of the most efficient ways for any business operating within this industry to stay afloat even with these challenges from external factors like oil price hikes while remaining competitive on both a local and global scale.
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