Much has been written about the challenges manufacturers face because of the U.S. government’s shifting approach to trade. At the same time, businesses are facing heightened consumer expectations and increased price competition and transparency due to the internet.
While I certainly don’t want to minimize any of those impacts, today’s uncertain environment also offers good opportunities for business. Now is a great time to take advantage of the current market’s opportunities and to plan to outcompete in 2020.
Here are our top actions to take now:
Lock in low rates
International shipping volumes are growing at the lowest rate in years, and with increased carrier capacity, the ocean freight market has been extremely soft. If you’ve met your MQC (minimum quantity commitment), check the ocean freight spot market for rates—you may find that current spot rates are lower than your annual contract rates. Similarly, U.S. van trucking volumes are down 16% year-over-year. Brokers or forwarders can help find the best spot rates.
A declining freight market is also the optimal time to begin contract renegotiations with your current providers or to launch domestic and international freight RFQs. In your negotiations, lock in rates for the longest term you can, perhaps offering a provision for cost increases tied to inflation and/or fuel indexes in return.
Because of the market’s softness, first-class shippers may even be able to upgrade carrier quality and service levels while they reduce costs.
Diversify to minimize business risk
When speaking with carriers regarding shipping rates, review your transportation network with an eye toward building in as much flexibility as you can. Does your company have enough carriers to meet demand and the right mix of carrier types? If you have multiple ocean carriers under contract, are they part of different alliances or all shipping on the same vessel? With this year’s spate of cancelled vessel sailings, contracting with carriers in different alliances means your cargo won’t sit on the dock unnecessarily. Diversify your last-mile providers too—over 600 U.S. trucking companies have gone bankrupt this year. By diversifying the supply chain, your company will gain the advantage of dependability.
Improve speed to market
Today’s B2B customer is used to the fast delivery experienced when shopping B2C. To meet these heightened expectations, consider regionalizing your sourcing to improve speed to customers in the U.S., Europe and Asia. Or, use a modular product design and customize and distribute from within the local market. If Europe is a major destination for your products, there are new rail and even truck services from China to Europe that save up to 10 transit days compared to ocean freight. Cross-border parcel delivery has advanced tremendously and can be a cost-effective, time sensitive solution for markets where it isn’t feasible to maintain local warehouse inventory. Any speed-to-market improvements you put in place will make your business more competitive.
Refresh your trade management practices
Trade management used to be a sleepy part of industry—no more. Without going into specific duty mitigation strategies, it makes sense to review your company’s valuation, product classification and special program participation now for benefits that may continue to be fruitful after (or if) the trade wars end.
Invest in efficiency
Over the past few years, venture capital firms have invested heavily in the logistics software industry, spurring development of new digital solutions. Research what’s new and how you can incorporate it to enhance efficiency, flexibility and customer-centricity. Many of the new applications are inexpensive SaaS offerings that can be used to improve a specific part of your supply chain, or to perform a specific activity. Some notable examples worth looking at include:
- NYSHEX and Freightos, freight marketplaces which combine instant international transportation pricing with e-booking capability.
- Uber Freight and Convoy provide digital freight matching services for domestic trucking.
- Project 44 provides advanced end-to-end supply chain visibility incorporating information from all of a company’s providers.
- BidDex software supports spot market sourcing and manages and hosts freight RFPs. It also automates comparisons between spot and contract rates.
Consider your company’s particular needs and customer expectations, then implement the tools that will improve your supply chain performance.
Today’s disrupted market brings with it challenge—but also opportunity. As the end of 2019 approaches, plan now to capitalize on the best opportunities to strengthen your company’s competitive advantage in 2020.
Lauren Pittelli is the founder and principal of Baker Logistics Consulting Services, a firm focused on international trade and transportation issues. Prior to starting Baker, Lauren spent 30 years at leading freight-forwarding companies such as CEVA Logistics, Kuehne + Nagel and Panalpina, managing their international transportation, customs and contract logistics business in the Midwest. Most recently the U.S. CEO for GEFCO Forwarding USA, Lauren also is experienced in the challenges of smaller start-ups. She is a graduate of Harvard College and a licensed U.S. Customs House broker.