How is the Global Energy Crisis Affecting Delivery Costs?

Go back 16 Jun 2022
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You’ve probably noticed it with prices for, well, everything going up over the past few months, but what exactly is causing it? This article aims to explain what the current global energy crisis is, what it means for you, and how it is affecting the delivery and fulfilment industry with rising delivery costs in the UK and across the globe.

What is the Energy Crisis? 

The energy crisis deepened in December after the UK’s gas market prices surpassed all-time high pricing set in October to £.4.50 per therm – this is around nine times higher in cost when compared to the same time in 2020. So, what’s causing all of this? 

The December gas price hike was caused by concerns over gas exports to Western Europe from Russia and, due to the ongoing situation with the war between Russia and Ukraine, further pricing hikes are expected throughout the year; well into the coming winter of 2022 if supplies become disrupted or there is an unprecedented increase in demand for gas heating caused by a shock cold snap. 

These new record prices for energy have fuelled concerns that household energy bills will continue to rise even further than they already have – which has already prompted the government to procure a grant of at least £400 for every household in the UK – although this doesn’t help to step the fears creeping in that households are to shoulder the costs of even more energy suppliers going bust; which is nearing over £2bn. 

Touted as the national energy crisis for 2022, these rising costs are also casting the spell of trouble for factories, businesses, and delivery services; which is contributing to the huge rate of inflation seen across the country – which is also expected to affect delivery costs for eCommerce. 

Additionally, energy bills are expected to continue rising until at least 2023 and, with no sign that energy market prices will begin to fall any time soon, the country’s cost of living is expected to rise exponentially. 

Just what does this mean for the eCommerce, logistics, and delivery industries? 

How Will the Energy Crisis Affect Delivery Costs and The Logistics Sector?

man in warehouse

The spiralling costs caused by the energy crisis have made navigating the normal challenges that come alongside logistics far more difficult than ever. Logistics brands across the UK are struggling to contend with unprecedented capacity issues, huge cost spikes, and a scarcity of energy resources. 

Logistics brands won’t simply ignore the developing situation with the spiking energy prices, the rising cost of filling a car, and other variables that work to keep a business running that are going up in price exponentially. Because of this, delivery costs will tend to increase in price to make the money back from these costs and keep their business safe from potential threats in the present and in the future. 

Below, we take a look at some of the key influences behind the logistics trends of today caused by the energy crisis, the coming issues of tomorrow with rising delivery costs, and how they could potentially be overcome. 

Changing Consumer Trends

It is well-known that consumer behaviour will vary depending on the area of the world you are focusing on, however, in more developed areas, more environmentally conscious consumers are displaying a preference for locally produced products in order to cut down on their carbon footprints. 

When this aspect is considered alongside the consumer-driven demand for more control over their delivery options, it can be easier to see how efficient logistics processes could take a hit from the energy crisis as brands can begin to struggle to offer customised delivery options – this could mean that logistics providers will need to become more transparent themselves; displaying their carbon footprint in order to portray how efficient and effective they are for new and returning customers. 

Solutions to the energy crisis within this sector do, thankfully, exist – and they can help to reduce customer and brand small parcel delivery costs. More and more options for deliveries are becoming widely available – such as the option to receive your items at your place of work, collect them from shopping centres and other convenient locations, as well as the expected options to have deliveries to your home address. 

All of these options for consumers can help with reducing their carbon footprint, and therefore reducing a company and customer’s delivery costs, as easy pickup services and home deliveries will help with cutting down on the amount of travel many individuals make. 

Changing Transport Infrastructure

The advances in transport seen in recent years, within automated systems and larger vehicles, have also seen advances in the infrastructure needed to make use of their maximum potential. Because of this, it is highly likely that we will continue to see rapid changes in transport mode in the future – with the infrastructure needed being one step ahead at all times. 

Larger and more automated modes of transport will help to compensate for the rising costs of running multiple smaller machines at once – and with automation comes more efficient and cost-effective logistics solutions that continue to drive success and profits. 

However, bigger doesn’t always mean better in this industry, as consumer desires for more environmentally friendly transport and logistics need to be considered and respected. Rail and water are generally considered better long-term options when offsetting pallet delivery costs, however, road transport offers a greater experience when delivery flexibility is essential. 

Changing Supply Chain Design

Technology has had a huge effect on the design of the supply chain over time. Logistics and fulfilment centres are able to obtain a greater level of visibility into their goings-on, therefore, they are able to make more effective decisions based on real-time data. Because transport and delivery have an ever-increasing level of complexity, greater awareness of supply chain performance can help to identify areas that can be improved upon; driving efficiency and reducing carbon and energy consumption in the process. 

Greater efficiency will also mean identifying whether using new or preexisting smaller regional hubs can be used in order to further reduce travel distances for couriers and offset energy costs. However, these decisions cannot be made without greater visibility into your brand’s supply chain. 

Service providers will need to review how the strategies of other manufacturing companies have changed in recent years, too. This will mean discovering how the location of production sites can help to improve efficiency and reduce costs in order to achieve a more global level of competitiveness in the future. 

With this, one significant issue is made clear: reducing energy consumption and cost is paramount. Logistics service providers will need to balance energy efficiency with speed and agility in order to support supply chains.

Why Choose The Delivery Group?

TDG Truck

As a market leader in the world of eCommerce and fulfilment, The Delivery Group will work with you to ensure you and your customers receive the lowest possible delivery costs amid the energy crisis. Allocating your stock into warehouses across the UK will help to access key demographics in more efficient ways – reducing your carbon footprint, your delivery costs, and the amount of travel your company needs to complete in order to conduct nationwide deliveries. 

For the most cost effective delivery costs across the UK and around the world, choose The Delivery Group. 

Contact us today to get started.