Sign of Inflation Easing?

 Container ship freight costs across the Pacific have dropped 75% in the last year. Container traffic has dropped 13% as inventories grow. This also may ease over-the-road truck demand, and demand for drivers.

When inventories are high, price reductions abound to try to move “stuff.” Also, with logistics costs easing, that lowers the burden rate on that inventory bringing the cost down—and may lead to lower prices as wholesalers and retailers can bid lower for that “stuff.”

Early in my career, I was at a company where freight costs made up a greater portion of the total cost by four times (4x) compared to labor content. If we had done more outsourcing of manufacturing and assembly, the proportion would have been worse and killed the company in 2020-2021 as freight costs increased.

Strategically, we would have looked at more “on-shoring” as many companies have done since the COVID pandemic figuratively “sunk ships” and “derailed trains” and “flat tires of semis” abounded. The supply chains became less robust and made cost/price pressure increase.

Update 8/7/22: Of course, this week OPEC (including Russia) decided to reduce production that will keep upward inflationary pressure worldwide through energy costs!

If Political Strategies Infect Businesses…

 “Judge, I don’t have any evidence that my competitors committed fraud, but I want you to fine them and give us the money. There’s no way Crappy Smartphone doesn’t have more sales than Apple’s iPhone (tm). The sales online and in brick-and-mortar stores are rigged. Everyone claims they bought a Crappy Smartphone and not an iPhone, when we ask. Fraud has to be involved. Or the government is rigging incentives to promote Apple’s product. Or…”

You might think that’s a crappy strategy (yes, pun intended) to go to court with no evidence but it’s what has been going on for political campaign strategy these days. If a person gets 3% of the vote and the winner gets 70% of the vote, this loser says the winner committed fraud, or somebody did on their behalf.

Imagine your marketing exec comes to you with this complaint. The reason he/she is not meeting their market share goal is because the competitors are cheating. Imagine trying to hire a professional who claims they got fired because someone else cheated. Would you give them another shot or hire them? Probably not. (I do see CEOs who blame their crappy results on the government, regulations, etc. and I’m not impressed there either.)

Whatever you do, do not let political strategies of losers infect your business strategies. “Data is life,” a friend would chime whenever we needed to make decisions. Look at the evidence. Don’t go by gut and wishful thinking or bluster. The axiom “If you can’t beat ‘em with brilliance, baffle ‘em with bulls**t” shouldn’t work in business.