Have you ever been on a flight when the plane hits turbulence and the pilot asks everyone to fasten their seatbelts? If you’re preparing your company’s transportation budget for 2027, you may want to follow that advice.
Last week, The Wall Street Journal ran an article about rising transportation costs and the pressures behind them. For executives trying to protect margins and put together next year’s budget, it raised an uncomfortable question: How much more will it cost to get your products to your customers?
That question also came into focus during a panel I moderated at the JOC Inland Distribution Conference. Fuel gets plenty of attention, but carriers are also dealing with insurance expenses, regulatory pressures and other operating costs that can affect the rates shippers pay. Add uncertainty about capacity, ocean shipping and your own customers’ requirements, and preparing a realistic freight budget gets complicated in a hurry.
Simply adding a percentage to this year’s spending could leave your company with a very expensive surprise.
And if there’s one thing I’ve learned from my involvement with YPO and other executive groups, it’s that C-level executives hate surprises—especially the ones that take a bite out of their margins.
So what should you do?
Start with a realistic forecast based on your shipment activity, carrier agreements and expectations for your business. Then challenge the assumptions behind it. Here are three scenarios worth considering:
What if fuel costs remain elevated or move higher? Understand how your carriers’ fuel surcharge formulas would affect your actual shipments. Separate fuel exposure from base transportation rates, then evaluate surcharge provisions, shipment consolidation and opportunities to reduce unnecessary miles. You need to know what another increase would cost and what you can do about it.
What if capacity tightens and carrier pricing increases? Identify the lanes and facilities where you would be most exposed. Review carrier commitments, develop alternatives and address operating practices that make your freight more expensive to handle. Waiting until a carrier cannot cover your shipments is an expensive time to start looking for options.
What if your freight flows change? A new supplier, a major customer’s requirements or an overseas disruption can change shipping distances, delivery schedules and inventory needs. Model those changes before they happen, including the potential cost of expedited freight and additional inventory. And consider a more favorable scenario: If fuel or demand eases, how quickly would your company benefit?
For each scenario, management should understand the potential dollar impact, the conditions that would trigger action and who is responsible for responding. That connects the transportation budget to decisions about pricing, purchasing, inventory and customer commitments.
This is where TranzAct can help.
We can work with your team to develop scenarios around your freight activity, identify where your budget is most vulnerable and evaluate practical responses. Our Supply Chain Edge Rapid Assessment can also help uncover opportunities to improve your transportation operation and reduce costs as you prepare for next year.
You will still need an approved budget. But you’ll have a much stronger basis for explaining the number—and adjusting when conditions change.
Before you finalize your 2027 freight budget, give us a call. Let’s talk about the assumptions behind your numbers, what could change and what your company can do now to prepare.
Because with each and every Two Minute Warning, we’re here to remind you: We are on your team, we’re here to help, and we are passionate about seeing you be successful.
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