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What Are Your Shipping Options?

By: Curt Barry

In the next few weeks, all the carriers will complete their 2008 pricing announcements. As we look at the future, it?s probably a good bet that these carriers? rates aren?t going down any more than the cost of oil. So what?s the impact and action plan for your business? Given the size of the increases that have been announced so far, multichannel companies need to look at all the options open to them and develop short and long-term strategies to reduce the impact.

UPS has announced that they will be increasing Ground rates by 4.9% in 2008, which is equal to last year. (FedEx will most likely match the UPS Ground increase, but that information has not yet been released.) Under new rates, the Ground commercial zone 2, 1-lb. rate has increased 5.0% over last year?overall, a 16% increase over three years, from $3.62 in 2005 to $4.20 in 2008. For 1-70 lb. packages the average increase is 4.8%. However, if the majority of your shipments are in zones 4 or 5 ?like many businesses are- the increase is about 5.16%. Depending on your warehouse location and the predominant zones in which you ship to customers, the impact could be more or less than this average. Meanwhile, the Ground residential minimum charge increased to $6.15, a combination of the base rate for zone 2 and the Ground residential surcharge. In a quick survey of shipping tables of 66 multichannel companies, we found that 71% of the tables were lower than this $6.15 minimum charge.

As AFMS Logistics Management Group?s Managing Director Rick Collins points out, ?The announced rate increases of 4.9% for Ground and 6.9% for Air from FedEx and UPS masks the true impact for many shippers. The base rates may average the announced increases across the board; however higher zone express shippers could experience increases in the 9-10% range. Additionally, surcharges are increasing up to 20% in some cases. Surcharges for irregular and large packages are up 8.3% to 12.5%. Commercial remote add-ons are increasing 7.1% and residential fees are up 5.4% for Ground.?

All is not totally gloom. There was some good news on November 15, when the Postal Service Governors announced that future prices will be adjusted using new regulations issued by the Postal Regulatory Commission (PRC) on October 29. Consistent with the Postal Accountability and Enhancement Act of 2006, future price increases for mailing services will be capped at the rate of inflation. Said Postmaster General John E Potter, ?This delivers one of the main goals of the new law for business mailers?a predictable price schedule.? The new pricing regulations give the Postal Service added flexibility for shipping services. ?We intend to use this new flexibility to grow our competitive business,? said Potter, ?offering volume discounts and contract pricing.?

Looking at the industry as a whole, however, Edward Wolfe, transportation stock analyst for Bear Stearns & Co., had this to say: ?Our sense is FedEx is clearly trying to send a message of pricing strength to both its customers and to competitors UPS and DHL.?

I think we?ve gotten the message. Now we need to do everything we can to reduce freight costs.

With the continual increases in the cost of oil and shipping, we think that companies need to assess both short and longer-term strategies. Here are 15 short- and long-term options to investigate:

1. Renegotiate your contract.

2. Can you use USPS to your advantage?

3. Are you using best-way rate shopping?

4. Consider package weighing, and take out inserts when they push the package into a higher bracket.

5. Can you leverage economies of scale using the same carriers for inbound and outbound freight?

6. Investigate the economics of a second warehouse to reduce the distance and cost to ship to the customer.

7. Reassess your shipping and handling table in light of the changes.

8. If you?re going to use free shipping, re-assess the minimum dollar order value and its effects on your transportation costs. Should the minimum be increased?

9. Review whether you should use by-item shipping charges in your web and catalog copy for heavy and oversize products.

10.Can you make use of package consolidators and zone skipping?

11. Assess your total operation and determine if other costs can be reduced to help offset these increases.

12. Improve your inventory forecasting and systems to improve inventory position and decrease the cost of back orders; keep in mind the $6.15 Ground residential minimum charge.

13. From marketing and merchandising perspectives, how can the average order value be increased so that shipping cost is not such a large percent of the average or small order?

14. Review your policies for giving away free freight to return merchandise.

15. Is it time to use an experienced transportation consulting company to help you get savings? Or are you big enough to hire an internal specialist to continually assess and hopefully lower your costs?

Contract renegotiation is your #1 weapon. How much can be saved will depend on a number of factors: how well prepared you are in terms of knowing your package shipping profile; knowledge of carrier pricing and what can be discounted and negotiated; the 70+ accessorial charges and how they make up your total costs, etc. An increase in the carrier?s list rates does not necessarily translate to higher shipping costs. Bear Stearns? Wolfe says, ?At this point, we continue to expect the market, not announced large rate increases, to determine the direction of pricing.? ?The market? means competitive bidding and your ability to negotiate. Another factor to consider is how important your account is to the depot or hub. We?ve learned that sometimes smaller accounts are much more important than management might realize, given the outbound volume.

The most nimble multichannel companies will determine how to offset these foreboding continual increases. We believe it will take all the weapons?both short-term tactics and longer-term strategies?to keep profitability from eroding.

Article Source:
http://www.articlecity.com/articles/business_and_finance/article_8924.shtml

History Of Gold With Relation To Currencies And Its Outlook

By: Mike Estrey

Much has been written about the current bull market in gold and how it compares to previous moves, in particular during the 1970s when the metal soared to at the time unimaginable heights.

On this basis it is worth looking at the background to the value story on gold, and this may shed some light on why its bull market may have significantly further to go for CFD traders in coming years.

The gold standard

The UK, which at the time was the world?s dominant economic powerhouse, adopted a gold standard in the early 19th century. Other currencies then looked to have gold backing, and towards the end of the century, various European countries joined the standard, though some chose for a time use a joint gold and silver standard.

The emerging strength of the US saw it adopt the standard in 1879, by making “greenbacks” that had been issued during the Civil War period convertible into gold, and the gold standard was formalised by legislation in 1900. On the outbreak of World War One, it was accepted by the whole of the developed world. This called for fixed exchange rates, with parities set for participating currencies in terms of gold, and it provided that any paper currency could on demand be exchanged for gold by its central bank

The system worked well having been designed to make each country adjust in terms of external deficits or surpluses in transactions between countries. Any deficit country would then have to surrender gold to cover its deficit, with the result that the volume of its money would be reduced, leading to lower prices, while the influx of that gold into the surplus economy would expand the volume of that country?s money and lead to higher prices.

This meant that there were effective pegs in the foreign exchange market, so that exchange rates would fluctuate only within very narrow limits determined by the costs of shipping and insuring gold.

US and UK comparisons in terms of gold

Up until 1914, the parity between the U.S. dollar and sterling was approximately $4.87, based on a U.S. official gold price of $20.67 per ounce and a U.K. official gold price of £ 4.24 per ounce, and the exchange rate would not fluctuate beyond about three cents above and below the mint parity, which represented the cost of shipping and insuring gold, since otherwise there would be arbitrage potential.

Although there were some gold transfers under the system, it was easier to adjust monetary policy to attract currencies, which might offset the financial impact of any import excess. Higher interest rates would usually have a deflationary effect in the deficit country aswell.

Under this system, participating countries needed to give an absolute priority to external adjustment over domestic objectives, so if there was a conflict between domestic and external objectives, policy tools might not be available to be used for domestic problems of recession, unemployment, or inflation. This reflected the prevailing economic philosophy that economies would tend naturally toward reasonably high levels of employment and reasonable price stability without such government policy actions.

The effect of the First World War

The four great economic powers, the US, UK, Germany, and France saw unchanged currency values up until the war. There were few barriers to gold shipments or capital controls in the major countries, and capital flows appeared to play a stabilising role.

After the outbreak of the First World War, each country needed to raise cash for the war effort, and at this stage they began to issue more and more bonds, some of which still exist today. These were domestically issued at the time and not backed by gold, but the promise to repay came from the central bank and was seen as rock solid. This was the beginning of what is known as fiat monetary policy, and which is widespread today.

The result of this was that as more and more paper was not backed by the common value of gold, floating exchange rates began. The US, which entered the war later than the others, had maintained gold convertibility, and soon the dollar floated against the other currencies, which were no longer convertible into dollars.

Dollar strength and weakness

Once the war ended there were significant economic problems in Europe, and exchange rates began to change rapidly, with many major currencies devaluing against the dollar.

This helped cement the US dominance of world trade, as the dollar had greatly improved its competitive strength over European currencies during the war.

In a reverse of what is happening today, within much of Europe and certainly in the UK there was a widespread desire to return to the stability of the gold standard, and growing concern over the attractiveness of the dollar, which was still convertible into gold, and of dollar-denominated assets. The pound thus went back on the gold standard, but this coincided with the Wall Street Crash and the beginning of the great depression, which highlighted the weaknesses in existing economic policy.

Following a disastrous five years back on the gold standard, the UK abandoned it in 1931, and others followed over the next few years. There were also problems in the US, and in 1933, President Franklin Roosevelt imposed a ban on US citizens buying, selling, or owning gold in order to kickstart the depressed economy. This was the birth of Keynesian policies which shaped much of economic policy in coming decades.

At the same rime, the Federal Reserve continued to sell gold to foreign central banks and government institutions, but the ban prevented hoarders from profiting after Congress devalued the dollar against gold in 1934.

This action raised the official price of gold by more than 65% to $35 per ounce. Only gold coins and certificates considered collectors? items were exempt from this prohibition, and artistic and industrial users were allowed to deal in gold under a special Treasury license. Once the price rose, there was a mining boom, which saw major growth in gold output.

The 1970s

The licence to print money had been conveniently forgotten, despite the widely remembered problems in Germany?s Weimar republic in the 1920s, and just fifty years later, in 1971, President Nixon ended US dollar convertibility to gold. On the 31st December of that year, gold stood at $43.8 per ounce.

This finally ended the central role of gold in world currency systems and it then began a spectacular bull market as inflation raged and the value of paper currencies fell. Gold enjoyed a nine year bull market, with the price hitting a record of $850 per ounce against a background of an international crisis arising from the Soviet invasion of Afghanistan and the Islamic Revolution in Iran. If this was rebased to today, the all time high would be equivalent to $2,100 per ounce.

Why gold could go a lot, lot higher

Gold?s current bull market has lasted six years, during which it has risen around 200%. In the 1970s, gold peaked with a 2000% rise in just nine years, so this gives some food for thought.

Admittedly inflation art present is not the problem it was at the beginning of that decade, but don?t bet against major changes in the value of gold against paper currencies in the years to come. For long and short term CFD traders this creates a major opportunity to profit from a potential further major revaluation.

Article Source:
http://www.articlecity.com/articles/business_and_finance/article_8931.shtml