search

Crowdfunding Best Practices

How Surging Freight Prices Impact Crowdfunding Campaigns

Freight rates are surging since the pandemic. Here's how to get out of the way.
How Surging Freight Prices Impact Crowdfunding Campaigns
Ian Heinig

By Ian Heinig

 

July 23, 2021

Historically, freight shipping is the go-to shipping mode for crowdfunding campaigns due to its low cost. Ocean freighters loaded with shipping containers are slow, but enable campaigns and backers to save money on low-cost shipping.

Freight shipping rates have skyrocketed in 2021, however, due to shortages in container space brought on by the pandemic. Lack of capacity mixed with soaring global demand has forced freight companies to raise prices to record highs.

The global average price to ship a 40-foot container has more than quadrupled in the last year, according to the Wall Street Journal. This 1,000% spike leaves the market price for a full container from Asia to the US at nearly $20000, and climbing.

With prices volatile, it's important for crowdfunding campaigns to explore alternative shipping strategies, but also work to manage backer expectations. Backers can try to be patient until this unprecedented circumstance abates.

Read on to learn why freight costs are climbing and how best backers and campaign managers can ride out these unexpected circumstances.

Supply Chain Snarl Drives Up Prices

The global supply chain is a network of ports and transporters that work in harmony to distribute nearly 80% of the world’s commercial trade by ocean, air or truck freight. This delicate system was derailed, however, by the cascading disruptions of the pandemic.

“It’s multiple different bottlenecks all at the same time...like a train wreck in slow motion,” said Lars Jensen, CEO of the logistics consultancy SeaIntelligence.

Typically, cargo containers are shipped between ports in a highly coordinated flow. Vessels dock, cargo is offloaded, then trucked from port to a nearby warehouse to free up space for incoming ships. Lather, rinse, repeat.

But when fewer ships arrive at US ports, say, fewer containers are available for the return trip to Asia or Europe. This causes goods to pile up in stateside port terminals and surrounding warehouses, which further slows throughput and dampens delivery times.

These bottlenecks at ports have caused a huge dislocation of freight containers, despite all efforts to restore equilibrium. With much-needed empty containers stuck at port or delayed for days, prices are rising.

Multiply this squeeze on capacity across every congested port and it’s a logistical nightmare of epic proportion. Three factors are contributing to the ongoing bottlenecks and volatile prices, including:

1. New lockdowns

Sporadic Covid-19 outbreaks and subsequent port closures make it difficult to rebalance the supply of container space.

As of July 2021, a new outbreak visited the major port city of Yantian, China. Some  84 container vessels were stranded off port with nowhere to dock, significantly denting the availability of container space.

Yantian International Container Terminals are operating at just 30% of capacity in the wake of temporary restrictions on export cargo and the corresponding backlog of cargo.

Until port access stabilizes, freight rates are expected to remain high.

2. Port congestion

Port congestion in Asia and the US is squeezing the capacity of available container space.  Fewer vessels are keeping to their delivery schedules while the average delay length for late vessels is lengthening.

For example, the port of Los Angeles saw 42 ships anchored offshore – yet every warehouse within 60 miles was already full.

Without anywhere to stash cargo, ships are forced to idle offshore until space is available, and indefinite delays are costly.

Clogged ports also slow pickup schedules for freight truckers, which, in turn, dampens schedules for cross-country delivery via rail and truck freight.

3. Tight capacity in trucking

With ocean freight shipping costly and unreliable, retailers are looking to rail and truck freight as alternatives. This has, in turn, begun to cramp capacity for truck and rail freight. This scarcity hampers airport transfers as well as local pickups and deliveries. Large port terminals like Los Angeles and New York are being hit the hardest. Truck freight rates are also increasing due to elevated demand.

Backers May Face Delays, Cost Increases

Volatility in the shipping industry could impact campaign backers in one of three ways:

  • Slower deliveries: If campaigns opt to stick with freight shipping, delivery lead times could drag out.
  • Costlier shipping: Campaigns may choose to ship using costlier services like express couriers, which could carry extra expenses for backers. Typically, this means your shipment would arrive faster than via freight shipping.
  • Custom shipping options: Campaigns that use Easyship Collect allow backers to choose from varied shipping options, and upgrade their shipping to a faster service. This way, you get your order when you want at the price you want.  You can also add shipping insurance and prepay duty and tax, if applicable. Ask your campaign manager if they’re using this free tool.

Campaigns Can Use Alternate Shipping Strategies

Campaign managers should take extra steps to ensure their shipping strategy is affordable and effective.

Consider that delivery schedules for all shipping lines are irregular and subject to change without prior notice. You may find it difficult to secure container space within your target delivery window. Given the mix of unreliability and high cost, freight shipping may not be your best option at present.

Be aware of several complicating factors when it comes to freight shipping, including:

  • Mandatory bookings: many freight companies are requiring you to book a shipment in order to request a rate quote for available space.
  • New restrictions: carriers are declining shipments with restricted components like lithium batteries to accelerate customs clearance.
  • Space limitations: space-strapped carriers are releasing only 1-3 containers per week, meaning large campaigns may see longer delivery lead times due to staggered deliveries.
  • Cancellation fees: in efforts to streamline operations, new fees apply to cancelling a booking for a container.

If you do ship freight, carrier companies recommend taking extra steps to mitigate delays, including:

  • Book in advance: try to book your container space at least 4-6 weeks in advance of the target departure date, or your shipment may be delayed.
  • Encourage flexibility: ask your suppliers if they can support departures from alternative origin ports.
  • Try trucking: campaign managers are encouraged to explore truck freight as a cost-effective option, if their manufacturing location and customer base allows it.

Campaign managers can also add flexibility to their shipping strategy with Easyship Collect. This new post-campaign survey tool lets you offer shipping options to backers, whether freight or express couriers.

Backers can choose to wait for freight or accelerate their delivery by upgrading shipping on their own dime. It’s optional to prepay duty and tax or add shipping insurance. Easyship Collect is free, and the optionality can make a huge difference in both your costs and the customer experience.

Adjusting to Price Hikes

Logistics professionals are working overtime to resolve the imbalance between supply and demand for container space. Both bakers and campaign managers should brace for delays and cost increases in the interim. Being flexible and patient until things normalize will help things run as smoothly as possible.