by Phil Baratz
A year ago, as we were exiting 2021, there was a lot of relief to be finally leaving perhaps the darkest times we have seen in our lives. Leaving that in the rearview mirror was exactly what we needed. We ended 2021 with a sense of relief and a sense of excitement. The world wouldn’t be the same, but great things were ahead in our new reality.
Sure, there were driver shortages and lingering supply-chain issues, but the sun was breaking through the clouds for the first time in almost 2 years.
Politically, the world was pretty calm as countries spent more time looking inwards than outwards.
Then, the unthinkable happened. For the first time in decades, there was a war between two recognized countries in Europe. The lead-up to the Russian invasion of Ukraine almost always had the refrain, “they won’t really attack…”. Yet attack they did!
Much like the beginning of the pandemic, there were knee-jerk reactions across the globe – however, the pundits were unified that this “spat” would be short-lived, and aside from McDonald’s and Starbucks pulling out of Russia, this would just end quickly. And then it didn’t, and we are sitting here almost 10 months later, waiting for this insanity to stop.
As an industry we did as we have always done: We adapted. When the basis started to blow out leaving us with a new set of variables and risks, we looked at hedging the basis.
When prices doubled over the course of a month, we realized that fixed-price offers were much riskier than capped-price offers.
When interest rates climbed steadily over the course of the year, we made the decision to firm up margins instead of bottom-fishing for customers who are only shoppers.
Most importantly, we resisted the inclination to overreact. Our guts and the guts of our parents and grandparents were wonderfully insightful in the past, and perhaps served us all very well. But with the growing number of variables that impact profitability, I am pleased to see that data – both the collection of and the use of – is increasingly factored into decision processes.
Basis swings are not going away. Drivers are not suddenly going to line up at your door looking for jobs. If the last few years have taught us anything, it is that things can change quickly and when they do, they can change dramatically.
The pandemic is behind us and for the moment the supply and prices of our products are somewhat stable. Take a breath, enjoy the holiday season with your families, but do not forget that if you automate your decisions, you will have fewer decisions that you need to make. The rest of the world is there, and our industry is headed there.
Angus has always been there for our clients in times of calm waters and in times of choppy waters. Working together we will navigate whatever storm comes our way.