How Will IMO 2020 Impact My Budget?

Nov 27, 2019

On January 1, 2020, ocean carriers will be subject to the low sulfur emitting requirements mandated under the IMO 2020 regulation. And if the experts' predictions are accurate, this could have a significant impact on your transportation budget and, potentially, your inventory models.

Is your company ready for the ramifications of IMO 2020? Chances are the answer is no. A recent survey in a Logistics Management report found that, "More than 90% of the respondents have little or no awareness or knowledge of IMO and the impending regulations, and 80% have done no analysis or forecasting relating to impact on their domestic transportation cost."

That figure is shocking when you consider how big of an impact this change could have on the transportation market.

"Goldman Sachs estimates that the overall impact on consumers in 2020 could be as much as $240 billion, as the added costs cascade across global supply chains, adding approximately $40 billion in increased shipping costs." according to the report.

Even if you don't have many ocean shipments, there's a good chance you'll still be impacted by the IMO 2020 mandate. Why? Because as ocean carriers have to blend their bunker fuel stock with the diesel fuel used by truckers, the increased demand could result in higher prices for diesel fuel and higher fuel surcharges.

One alternative that shippers are looking at is having containers shipped on vessels that are "slow steamed" – the ocean carriers basically slow the ship down so that it saves on the consumption of fuel. The problem with that is it could take 7-10 days longer for you to get your containers and that could impact your inventory sourcing strategies.

That's why we're cautioning shippers to watch out for transportation cost increases and look into alternative options, if you haven't already! If you're looking for some practical advice, why not contact the experts at Supply Chain Edge.


Mark Your Calendar for a New Webinar

On December 5 at 11am CST we’ll be hosting another Breaking Down the Silos webinar with our friends from CSCMP and NASSTRAC. The first webinar was focused on what’s happening with the logistics and the finance team, and this time we’re focusing on how transportation can work better with the procurement teams to improve outcomes for both.

Save your seat to attend the webinar or get the recording.