Global shipping costs have re-entered the policy and business conversation, prompting renewed concern among procurement and supply chain leaders. While the current situation is not identical to the extreme disruption seen during the pandemic, the underlying conditions that enable volatility remain firmly in place.
For procurement teams, this matters because freight costs are rarely contained within logistics budgets. They act as a multiplier across landed cost, inventory decisions, supplier behaviour, and ultimately customer pricing. Historically, procurement functions have been among the first to observe these pressures, as they sit closest to supplier quotations, contract renegotiations, and operational escalation when lead times slip.
Why shipping costs remain structurally volatile
Shipping markets are inherently sensitive to disruption because capacity and demand are finely balanced. Even relatively small changes in vessel availability, routing, or port efficiency can translate quickly into higher rates. This sensitivity has been repeatedly documented by industry analysts and international organisations such as UNCTAD (UN Trade and Development), which describes maritime transport as increasingly exposed to geopolitical, environmental, and operational shocks.
One key driver of volatility is capacity management by carriers. When shipping lines reduce sailings or redeploy vessels, effective capacity tightens and rates can rise even if global demand remains stable. This behaviour is regularly tracked in industry benchmarks such as Drewry’s World Container Index, which illustrates how pricing can shift week by week in response to capacity decisions rather than fundamental demand surges.
Geopolitical developments also play a significant role. Conflict, sanctions, trade restrictions, or security risks along major routes can force vessels to reroute, increasing transit times and reducing the number of voyages that ships can complete in a given period. UNCTAD and other multilateral bodies have repeatedly warned that such disruptions raise costs not only through fuel and insurance, but through system-wide inefficiency.
Environmental regulation adds a further layer. The shipping sector is gradually being brought into emissions and sustainability frameworks, particularly in Europe. While these measures are necessary from a policy perspective, compliance costs can be reflected in freight rates and surcharges, especially on routes serving regulated markets.
How shipping cost increases transmit into procurement risk
The most immediate effect of higher freight rates is an increase in landed cost. Even when unit prices remain unchanged, the total cost of getting goods to the point of use rises, eroding margins and breaking category cost assumptions that were built on stable logistics pricing. This effect is particularly pronounced for bulky or low value-density goods, where transport represents a meaningful share of total cost. Beyond cost, variability becomes a central issue. Procurement teams often report that the most damaging impact is not longer average lead times, but greater inconsistency. When transit times become unpredictable, forecast accuracy deteriorates, safety stock requirements increase, and service performance becomes harder to guarantee. These operational consequences often outweigh the headline freight increase itself.
Supplier behaviour also changes in response to logistics uncertainty. Suppliers may shorten quote validity periods, increase minimum order quantities, or embed risk premiums into pricing. In some cases, they seek to shift responsibility for freight and insurance through stricter Incoterms, reducing buyer control over carrier selection and routing.
Working capital pressure is another common knock-on effect. To protect service levels, organisations may bring inventory forward or hold higher buffer stocks, tying up cash and increasing warehousing costs. For many businesses, the financial impact of this inventory response exceeds the direct increase in freight expenditure.
What disciplined procurement response looks like
An effective procurement response does not rely on panic buying or blanket stockpiling. Instead, it starts with rebuilding a clear view of landed cost. Separating product price movements from logistics exposure allows procurement and finance teams to understand what is actually driving cost increases and to agree on objective triggers for reforecasting or renegotiation.
Regular monitoring of established freight indicators helps provide context. Indices such as Drewry’s World Container Index or market commentary from providers like Freightos are widely used to track directional trends. While these benchmarks should not be treated as precise predictors, they offer valuable signals that can inform internal discussions and supplier negotiations. Contractual assumptions also deserve scrutiny. Incoterms define not only who pays for transport, but who controls it and where risk transfers. In periods of volatility, procurement teams benefit from reassessing whether existing terms still align with their operational and risk appetite, particularly for critical categories.
Category segmentation is another essential tool. Not all spend is equally exposed to freight volatility. By distinguishing between categories that are highly logistics-sensitive and those that are not, procurement teams can focus mitigation efforts where they deliver real value, rather than spreading resources thinly across the entire portfolio. Dual sourcing, often cited as a resilience strategy, must be applied carefully. It only reduces risk when alternative suppliers are genuinely independent in terms of geography, logistics routes, and capacity constraints. Otherwise, it may add complexity without meaningfully improving resilience.
Governance reduces long-term exposure
Contract clauses and contingency language are most effective when they are practical rather than symbolic. Clear rules around surcharges, index-linked adjustments, transparency obligations, and escalation processes tend to provide more value than broad force majeure wording that offers little operational guidance. Equally important is internal alignment. Procurement teams that can clearly explain to senior leadership why shipping costs matter, how they are being monitored, and what actions are being taken are better positioned to avoid reactive decision-making. Disruption is obviously not inevitable, but volatility is a structural feature of global trade that must be managed deliberately.
Warnings about rising shipping costs are not predictions of imminent crisis, but they are credible signals that supply chains remain exposed to renewed pressure. For procurement, the challenge is less about forecasting the exact path of freight rates and more about building resilience into category strategies, contracts, and decision-making processes.
Organisations that treat logistics volatility as a recurring risk, rather than just a one-off shock, they are better equipped to protect cost, service, and credibility when the next disruption arrives.
Background Reading and Additional Sources:
Review of Maritime Transport https://unctad.org/topic/transport-and-trade-logistics/review-of-maritime-transport
UN Trade & Development https://unctad.org/ https://unctad.org/news
Supply Chain Advisors https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry
Reducing emissions from the shipping sector https://climate.ec.europa.eu/eu-action/transport-decarbonisation/reducing-emissions-shipping-sector_en
OECD https://www.oecd.org/en.html
Freight Industry Updates https://www.freightos.com/freight-industry-updates
