Small and midsize shippers are absorbing rising costs from four directions at once — tariff exposure, higher fuel, rising last-mile rates and carrier rule changes that arrive with little notice — and the reflex to handle logistics in-house is becoming the sector's most common and most expensive trap, according to FreightWaves.
Most of these shippers absorb those increases without a trade compliance staffer or a dedicated logistics analyst on the payroll, FreightWaves reported. Tom Madine, CEO of ShipStation Global, told FreightWaves that after 30 years in logistics, he sees working the problem in-house as the most expensive mistake small and midsize shippers make.
"What I think they try to do a lot of it on their own," Madine said. "That personality type sometimes says, 'Well, I'm going to go out there and navigate all this on my own because I'll do it better than someone else.' And that's where you can end up in an industry as big as ours, as complex as ours, as ever-changing as ours [getting into trouble]."
The instinct is not irrational — it is how most of these companies were built, Madine said. But it is poorly suited to a cost environment where the variables reset quarterly.
Uncertainty is the new certainty
Businesses want predictability, but they have not had it for a year and a half.
"Businesses want certainty, right? That's what they want and that's what we've been lacking for the last 18 months," Madine said.
Scale changes how a company absorbs that uncertainty. Large shippers have the resources to model scenarios and staff the problem; their only lack is turning speed. Smaller operators are more nimble.
"It takes a lot now. If you're a big company, you're trying to move your supply chain, it takes a long time," Madine said. "I think small businesses, although they may not have the resources in-house to make big sweeping moves, they're a lot more nimble. That's the one thing about most of our smaller business customers. They're still run by entrepreneurs. They're really nimble."
Madine said he has watched that tradeoff play out inside his own company over 30 years.
"I look at us today versus how we were 30 years ago: We were way more nimble 30 years ago, but we're way more prepared to deal with things today," he said. "Any business that's thriving in this environment, they're good at making change, whether they're doing it in a structured way or they're nimble."
Structural vs. transitory cost pressures
Not every cost pressure in the market is temporary, and Madine draws a hard line between the two categories.
"There are some structural changes going on in the world of freight where it's going to be more difficult than it was for new capacity to come online. So that means that we're probably in an environment where the cost of transportation is going to be higher for longer."
Madine said these structural changes are occurring independent of tariffs, the Strait of Hormuz and oil. The distinction matters: transitory shocks call for tactical adjustment, while structural shifts justify rewriting sourcing and network strategy.
"Should you make a change to your long-term strategy because of a six-month or eight-month short-term blip? No," Madine said. "Could you make a change to your strategy because of something longer-term and more structural? That's when you make big strategic changes."
| Dimension | Large shippers | Small and midsize shippers |
|---|---|---|
| In-house resources | Model scenarios, staff the problem | No trade compliance staff, no dedicated logistics analyst |
| Agility | Lack turning speed | Run by entrepreneurs, really nimble |
| Inventory strategy | May afford to hold more inventory | Cash flow is king, lean approach |
| Strategic moves | Big supply chain moves take a long time | Can't make big sweeping moves but can pivot quickly |
The inventory question has no single answer
The decision to buy ahead of the duty and eat the carrying cost, or stay lean and pay the tariff later, splits sharply on the balance sheet, Madine said.
"If you're a large business with a big balance sheet and you can afford to hold more inventory on it, that may be the right answer for you," he said. "But if you're a small business where cash flow is king, that's not the right answer for you."
"Everyone always wants the one-size-fits-all solution, but they don't exist."
ShipStation Global serves more than 3 million customers worldwide, according to FreightWaves.
Watch list
- Tariff exposure and whether SMBs buy ahead of duty changes
- Fuel prices and Strait of Hormuz developments
- Carrier rule changes arriving with little notice
- Structural freight capacity constraints that could keep costs higher for longer
- Quarterly changes in cost variables that complicate SMB planning
Sources:
