Rising jet fuel price puts extra pressure on airfreight sector
The rising price of jet fuel this year is further burdening companies with airfreight shipments, and could reduce limited capacity if passenger airlines opt to scrap cargo-only flights temporarily operated since the beginning of the pandemic.
The average price for jet fuel closed last week at $66.90 per barrel or $1.59 per gallon, more than double the cost (70 cents a gallon) to refuel an aircraft 12 months ago and nearly as expensive as before the global crisis. Spot prices for U.S. jet fuel last Friday were $1.68 per gallon, Argus Media’s index showed.
Higher prices for fuel, which accounts for around a quarter of operating costs, will make it more difficult for airlines to return to cash-positive operations. The ripple effects from higher fuel prices are also reaching cargo owners that use airlines to move goods. Many airlines in the past 90 days have added fuel surcharges to their bills and will have to assess how long they can continue to operate repurposed passenger aircraft for dedicated cargo routes.
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Supply chain risks under review after Suez canal blockage
The impacts of the Suez canal blockage have impacted supply chains globally, and assessments are being made, with particular emphasis on resilience. At the end of last month, the Suez canal was blocked after one of the largest container ships in the world – Ever Given – became grounded and blocked the waterway for almost a week.
This had several impacts on society, such as affecting global supply chains as goods stored in other ships were not able to continue their journey. Despite having reopened, the canal is still presenting some issues, as 300 ships have reportedly been delayed. Other ships have been re-routed.
The disruption has in part been created by a large number of full containers, along with hinterland distribution requirements, which is placing strain on yard and throughput capacities, as well as causing cargo to build up. The consequences look set to continue, as a shortage in the number of delivery drivers is expected to increase this year, as found in a recent survey, meaning cargo ships will be relied upon to transport goods.
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Conagra incurs $15 million in supply chain costs to meet demand
Conagra, a packaged foods company, has made adjustments to its distribution network during its Q3 to keep up with demand and reduce out-of-stocks that resulted in $15 million in additional expenses. The company decided to bypass the distribution network it usually relies on and instead shipped directly from the plant or a single distribution center to the customers.
Executives said the investments were necessary to keep inventory on shelves amid high demand. While Conagra’s method was different, its goal was the same: keeping products on the shelf in an attempt to avert missed sales.
The company will work to rebuild its inventory over the next two quarters. The supply chain investment is meant to give the brand better inventory and it allows them to meet customer demand more efficiently and to improve product availability.
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