How Events in 2021 Influenced Supply Chains for 2022 and Beyond – Part I

This year was a rife with chaos and uncertainty. Some say global supply chains broke. Others say it persevered. Regardless, no one can deny, 2021 was a year of transformation.

Instead of recounting the events that battered global supply chains, our final two blog posts of 2021 will wrap up by shedding light on the transformations that resulted.

We’ll highlight sixteen (16) ways the supply chain landscape has changed. We’ll cover eight (8) of those changes in this blog post. Next week, we’ll highlight the remaining eight (8) changes. You can use these insights to prepare for 2022.

With that in mind, let’s get started with this week’s eight transformations triggered in 2021.

  • Increase in Partnerships. The relentless tempo of volatility and uncertainty gave rise to partnerships in 2021. Government and industry formed partnerships, as west coast ports experienced unprecedented delays. Also, shippers and logistics service providers partnered just to keep goods moving.
  • Increase in IT investments. The Delta variant, cyberattacks, and extreme weather wreaked havoc on supply chains. The convergence of those disruptors led businesses to seek solutions from technology. Also, eCommerce exploded as consumers resorted to online shopping during the pandemic. As a result, IT investment soared in E2E solutions, robotics, WMS, and TMS systems.
  • Increase in sourcing closer to the customer. Near- and on-shoring began gaining steam during the trade wars. That called for a strategic approach to meet rising consumer demand due to eCommerce. Also, rising consumer expectations will sustain this trend, as they demand better, faster, and cheaper service.
  • Increase in mega ship usage. In 2021, we saw mega ship usage increase. Recall the blockage of the Suez Canal by the Ever Given. That served as a warning to the container shipping industry, but it incident didn’t change the shipment of goods. Instead, a trend in the other direction is underway. More mega ships are being built, and more are in use. However, it’s only a matter of time before this trend reverses. Economies of scale make mega ships attractive. But that may change as capsizing’s, lost cargo, and insurance rates increase.
  • The rise of longer-term shipping contracts. The cost of shipping reached highs not seen in 30 years. Container and fuel shortages increased shipping prices. To gain more favorable rates, shippers began inking 2-year contracts to stabilize prices. It also enhanced shipping reliability with access to scarce capacity. We should see more long-term shipping contracts in 2022.
  • Increase in Air Freight Shipping. As ocean shipping prices skyrocketed out of control, shippers turned to air freight. As air freight shipping surged, that put upward pressure on air freight prices. One advantage stands out, however, speed. Shipping strategy changed in 2021 to explore multi-modal solutions to keep cargo flowing. This trend started in response to Covid-19. Beyond 2021, this trend will likely continue because of the rise of eCommerce.
  • Increase of high-skilled jobs. As companies increased their IT investments, that led to a change in the labor dynamic. Before Covid, warehouses relied heavily on human labor. With the onslaught of the pandemic that led to lockdowns, labor became scarcer. To ease the labor shortage, technology solutions began replacing workers in low-skilled jobs. And that led to a need for higher-skilled workers. As companies adopt more technology solutions, the trend for higher-skilled workers will increase. The workforce will shift from lower- to higher-skilled jobs like data science and analytics.
  • The rise of eCommerce. We might call this one a mega trend. That’s because eCommerce is spawning other trends. During the pandemic, amid lockdowns, consumers pivoted in great numbers to shopping online. That trend had been growing, but the pandemic accelerated that significantly. eCommerce growth was exponential. Supply chains became stressed from ports to the last mile delivery. Brands were at risk as customer expectations continued to rise. Consumers demanded more for less and in less time—never mind Covid-19. Businesses responded by stepping up to this challenge and will continue to do so in 2022.

Stepping into 2022 and Beyond

These are the first eight ways events in 2021 changed the supply chain landscape. Next week’s post will feature the remaining eight trends. Don’t miss it as we close out 2021.

Overall, 2021 was a year of chaos and uncertainty. But it also proved to be a catalytic year. Businesses embracing these trends will not only survive but will also profit.

At American Global Logistics, we track trends to achieve competitive advantage. It’s how we ensure our customers survive and profit.

Contact us if you’re unsure how to position and prepare your supply chain for success in 2022. We’re standing by to hear from you.

Light at the End of the Tunnel: Supply Chains Emerge Stronger, Smarter, Faster

With peak season almost over, the sky hasn’t fallen. The opposite is true. Sure, disruptions stressed the global supply chain without a break. But it’s withstanding the pressures during one of the most challenging seasons.

That bodes well for a return to normalcy sooner rather than later.

Michael A. Levans, Group Editorial Director, Logistics Management, stated that “… supply chains are emerging stronger, smarter, faster.” That was his observation in LM’s October 2021 issue.

That opinion seems to be holding up. Granted, cargo is moving slowly, and congestion still prevails. Other problems persist, but their impact is waning. That suggests we may be in the early stages of improvement or are we?

The verdict on the effects of the Omicron variant is still undetermined. It is unlikely lockdowns, as experienced in the first round of Covid-19, will reoccur. Lesson learned will ensure governments keep economies open as much as possible. Looking back at the reaction to Covid-19 two years ago, the consensus is that the response was excessive.

Notwithstanding the bumps in the road ahead, the return to normalcy is underway, and it’s not accidental. Instead, it comes from stakeholders working together to combat the barrage of disruptions.

Overwhelm led to joint efforts that are now leading to multiple solutions. Those solutions will release supply chains from the pandemic’s grip. That signals an exponential growth of benefits. As Mr. Leavens puts it, that should lead to stronger, better, and faster supply chains.

This blog post probes what supports this outlook, while featuring changes you can expect as businesses emerge from crisis operations.

Supply Chain Challenges Aplenty

Before getting into how and why supply chains are on the road to normalcy, let’s look at the issues disrupting supply chains.

·        Worldwide port congestion

·        Worldwide container shortages

·        Persistent labor shortages across supply chains

·        Non-integrated, stove-piped legacy systems

·        Lack of diversified sourcing

·        Lack of E2E visibility

·        Lack of cybersecurity

This list includes those issues and disruptors businesses can control or manage. Some of these may seem too hard to solve, but they aren’t insurmountable. But this is only a partial list. There are other disruptors over which business have little or no control.

Some of those are increasing consumer expectations, rising and uncontrollable shipping costs, and extreme weather.

You also have disruptive technologies, decaying infrastructure, government regulation, disjointed global trade, and, of course, pandemics.

How Technology is Boosting A Return to Normalcy Leading to Stronger, Smarter, Faster Supply Chains 

As Covid-19 hit, disruptions occurred all along the supply chain. The pandemic left nothing unscathed. That hastened the drive to seek solutions from technology. It expedited technological development by 3 – 10 years, according to some estimates.

Adopting new technologies had several beneficial effects. First, they offered quick solutions to pressing problems. Their application focused on the easy-to-fix issues. But that also led to addressing persistent issues that had plagued supply chains before the pandemic.

That created a cycle of hyper-innovation and development. That contributed to an ongoing cycle of innovation and change leading to new solutions.

Some of these newly-adopted solutions replaced lower-skilled labor jobs. That helped to keep the labor shortage from worsening. Meanwhile, new technology adoption led to new, higher-skilled jobs. We saw a rise in demand for data scientists, cyber security specialists, and data analytics specialists. In addition, new solutions improved productivity and reduced cycle times.

Challenges continued unabated, spurring demand for quick solutions enabled by technology. Yet, the most vital driver in the return to normalcy may be cooperation and collaboration.

Defeating Disruption with Cooperation and Collaboration

Technology has been credited for making great headway in stabilizing supply chains. But another powerful capability is cooperation and collaboration. You cannot overemphasize the value of this low-tech solution.

The supply chain disruptions over the past 11 months have been relentless. But they also gave rise to increased collaboration. Working together became a coping mechanism. As businesses realized the power of cooperation and collaboration, many formed partnerships.

Partnerships led to closer collaboration that improved information flows. That helped businesses endure disruptions more easily. Examples of partnerships included government and private industry, 3PLs and shippers, and port authorities and truckers. Expect partnerships to rise between shippers and 3PLs. Port authorities and truckers will also see a need to cooperate more closely.

When you combat supply chain disruptions by yourself that puts you at a disadvantage. Partnering can bring more resources and a clear focus to bear on a problem.

Light at the End of the Tunnel: Returning to Normalcy

These are challenging, yet exciting times. Supply chain issues have made headline news like never before because of the constant barrage of disruptions. These disruptions, meanwhile, triggered a rapid response from government and industry alike.

That response has accelerated the rise of technical solutions and partnerships. Call it a survival instinct. The need for self-preservation sparked the need to address problems differently. New circumstances demanded fresh approaches and new solutions.

Industry stakeholders have risen to the challenges. They responded tactically with immediate solutions to address urgent needs. More importantly, stakeholders also addressed persistent issues strategically. Together, these responses influenced future supply chain operations.

In the short-term, many challenges still promise to disrupt supply chains. In the long-term, supply chains will emerge more agile and more resilient.

At American Global Logistics, we know the supply chain challenges you face. To overcome them, your supply chain must be agile and resilient. We work in partnership with our clients to achieve agility and resilience.

Contact us to learn more about how we can help you get through today’s disruptions. When you partner with us, you’ll not only survive, you’ll also thrive and profit.

AGL named one of Georgia’s Fastest Growing Companies by the Association for Corporate Growth

AGL is proud to announce we have been named one of Georgia’s Fastest-Growing Companies in the ACG Fast 40’s Inaugural Division, Higher Middle Market! The Atlanta National Chapter of the Association for Corporate Growth (ACG), a global professional organization with the mission of Driving Middle Market Growth, honors the top 40 fastest growing Georgia-based companies each year. 

“The companies being honored this year demonstrate the strength and significance of the middle market sector in Georgia,” said Melanie Brandt CEO of the Association for Corporate Growth’s South Region and ACG Atlanta President and CEO.

Applications required the submission of 3 years verifiable revenue and employee growth records, interviews, and verification of said revenue and employee records by accounting firm, Cherry Bekeart LLP

“These companies represent more than 6,600 new jobs and nearly 2.4 billion dollars in revenue growth over the last three years,” said Michelle Galvani, chairperson of the Georgia Fast 40 Awards and Executive Managing Director with Wildmor Advisors. “In speaking with many of the CEO’s, the supportive business environment and accessibility of capital are contributors to growth. By far the biggest challenge is tightness of the labor market. We are proud to honor these companies and look forward to learning more insights online and at the celebration”

Every year ACG Atlanta hosts a celebratory event honoring those 40 companies selected. This year, the event will be held at the Atlanta History Center on June 24th, from 4:30 PM- 8:30 PM. 

We are honored to be recognized in the Georgia Fast 40, and look forward to attending the celebration!

Technology Trends to Watch in 2019

Technology is driving tremendous change for supply chains across the spectrum. From gaining visibility into purchase orders to connecting end-to-end processes, shippers have a growing number of tools at their disposal to optimize operations. But are they making the most of them?

In a recent customer survey, AGL uncovered several key technology trends that are shaping supply chains in 2019.

  1. Supply chains are falling short of expectations for many shippers.
    In a supply chain environment that keeps getting more complex and unpredictable, it’s no surprise the majority of shippers see room for improvement. In the survey, 71% say there are areas of deficiency in their supply chains and making the appropriate corrections is a struggle.
  2. Many shippers say it’s time to overhaul their processes.
    All the technology in the world won’t make a difference if you’re trying to enhance broken processes. Nearly two-thirds (65%) of the businesses surveyed said that some of their business units could use process engineering. For shippers, mapping the supply chain can be a helpful first step toward optimization. By understanding all the modes, touchpoints and potential bottlenecks across your logistics, your business can find efficiencies and identify the right tools to keep things running smoothly.
  3. Purchase order management is the top reason shippers are turning to technology.
    Understanding what happens between the time an order is placed and when it’s shipped is critical for planning delivery timelines and managing customer expectations. With many production processes involving multiple steps and dependencies, technology can help provide real-time visibility at the product level. More than half (56%) of shippers said they turned to technology for purchase order management, followed by booking management (30%) and contract management (16%). Another 27% say they’re leveraging technology to improve end-to-end visibility – which starts with a clear view into production.
  4. Cost and time are the two biggest barriers to a connected supply chain.
    Among the half of shippers who have integrated their supply chain systems, cost is the main challenge in building a holistic, technology-enabled operation. Nearly one in five (19%) cited expenses as a major barrier to integration, followed by the time required (14%) and software incompatibilities (11%).
  5. Reporting is at the top of many shippers’ wishlists.
    You can’t improve what you don’t measure, and many tech providers are taking the initiative by building reporting tools directly into their platforms. Those capabilities are highly desired by shippers, with 68% saying they would benefit from detailed business analytics and forward-looking recommendations.

Technology is indispensable for the modern supply chain, but technology alone won’t give businesses the advantage they need. By combining technology with well-designed processes and logistics expertise, shippers can prepare for whatever comes next.

The Tariff Takeaway: It’s Time to Stress-Test Your Supply Chain

After announcing earlier this month that 10% tariffs would go into effect Sept. 1 on $300 billion in Chinese imports, the U.S. reversed course this week and said duties would be delayed until December on certain products. The excluded items include cell phones, laptops, footwear and toys. In addition, other items will be excluded altogether because of health, safety, national security or “other” factors. While the latest news gives some businesses a reprieve, the continued uncertainty – and ongoing tariffs on many Chinese products – have left businesses struggling to mitigate the impact to their operations and their bottom lines.

To deal with the continued fallout, many shippers are exploring ways to reshore goods to other countries. In a recent fashion industry survey, 80% of respondents said they planned to cut back on production in China. But moving manufacturing operations comes with its own disruptions, putting added pressure on already stressed supply chains.

The road to optimization

Whether it’s blanked sailings during peak season, West Coast port strikes or the ongoing drumbeat of tariffs, anything that can go wrong in logistics likely will. Staying competitive in this complex environment requires not just addressing issues as they occur, but also anticipating and planning for whatever may lie ahead.

“It’s been very reactive,” AGL CEO Jon Slangerup recently said of the shipper response to tariffs during the Journal of Commerce Gulf Shipping Conference. “I think everyone is just coming to grips with how they are going to deal with this long-term.”

So how can shippers build supply chains that are more responsive – and predictive – in the face of disruptions? It starts with analyzing your processes, tools and people to find vulnerabilities and opportunities for improvement. Here are three steps to help your supply chain stay strong when disruptions strike.

  • Map out your processes. While many businesses are looking to technology to improve supply chain performance, new solutions are destined to fall short if you don’t understand your problem first. Take the time to map every mode, carrier and handoff point across your supply chain. Many businesses skip this step, but it’s the best way to uncover bottlenecks, find new efficiencies and tailor your technology around your processes.
  • Adopt the right technology. If you’re still running your supply chain on spreadsheets, you’re not alone: 13% of firms still rely exclusively on Excel for supply chain management, according to American Shipper. But to stay resilient amid supply chain stressors, businesses need a more sophisticated approach. A centralized platform can help you gain end-to-end visibility across all shipments, allowing you to pivot quickly when needed and spot trends that can impact performance.
  • Build a high-functioning team. The logistics industry is built on relationships, which is why it pays to cultivate strong ones. A supply chain partner with a deep network can help you navigate hiccups more easily, whether you need spot capacity fast or want to explore alternative production sites.

Supply chain disruptions are inevitable, but they don’t always have to turn into supply chain crises. A proactive approach is the first step toward supply chain optimization, helping businesses handle whatever comes next.

As Peak Season Looms, Here’s How to Prepare

Halfway through 2019, ocean shipping costs have already inched up for businesses, with many carriers locking in rates $200 to $300 higher per TEU than the 2018 contract season. While those rate increases have left businesses less than thrilled, they could actually benefit organizations as the season ramps up by stabilizing schedules and reducing blank sailings that wreak havoc on shipping schedules.

The question of how much shipping will actually ramp up is still unanswered, however. Imports have leveled off compared with last year as businesses rein in restocking, while a number of factors could prompt demand and rates to rise or fall in the coming months:

  • Ongoing tariffs: After last year’s huge spike in shipping to beat impending U.S.-Chinese tariffs, some businesses are taking a conservative approach to shipping to avoid additional increases.
  • Reshoring: With many businesses moving operations to Malaysia or Vietnam, Chinese import volumes have dropped 5% – and rates could be the next to follow.
  • Fuel sulphur cap: Vessels are already coming out of service to prepare for the International Maritime Organization’s 2020 rule capping fuel sulphur levels. Depending on how import levels play out this summer and fall, those capacity cutbacks could boost spot rates.

 3 ways to prepare for the peak

 For businesses with large global supply chains, preparing for uncertainty all year round is essential – and particularly important during the busy peak season. Combining the right tools, people and processes can help organizations navigate fast-changing conditions, operate more efficiently and ensure they’re meeting customer expectations. Here are three areas of focus to keep in mind:

  • Gaining end-to-end visibility. Purchase orders are notoriously difficult for businesses to track, creating ripple effects down the supply chain when milestones are missed. By adopting technology that offers insight into each step of the production process, businesses can plan effectively during the busy months and seize opportunities for efficiencies, like opting for a less expensive but longer route when products are ahead of schedule.
  • Delivering as promised. If a business books 10 containers but only delivers three, the carrier might not be willing to book 10 again next time. Respecting advance notice polices and forecasting accurately can help businesses build stronger carrier relationships – and avoid having to scramble for more expensive alternatives.
  • Make exceptions the rule. Seventy percent of businesses have experienced a supply chain disruption in the past year, and the peak season makes organizations even more vulnerable. When exceptions arise, a centralized technology platform can help businesses identify the issue quickly and make the carrier or mode adjustments needed to keep things running smoothly in the future.

With the state of ocean freight still uncertain in 2019, businesses that invest in the right supply chain technology and expertise will be well-positioned for whatever peak season brings.

Competing in a Consumer-Focused Age with an Agile Supply Chain

From a new couch to a week’s worth of groceries, shoppers can summon nearly anything to their doorstep, local store or delivery locker with just a few clicks. Some of the most significant consumer changes impacting supply chains include:

  • Shifting demographics. While in-store purchases still dominate among shoppers of all ages, younger consumers are continuing to migrate to e-commerce, underscoring the importance of a strong omnichannel supply chain.
  • Shifting buying patterns. Emerging trends, including subscription boxes and purchasing large-scale items like furniture online, are creating complexity and forcing businesses to reexamine their last-mile strategies.
  • Shifting technology. In a role reversal from the last few decades, consumers are pulling ahead of businesses when it comes to technologies like artificial intelligence. These tech-savvy customers expect connected yet frictionless experiences from their brands – forcing many businesses to play catch-up.

Increasing agility through technology

Faced with these pressures, business leaders recognize that agility will be the key to success in the coming years. A KPMG survey found that 68% of CEOs believe that being slow to adapt to change will lead to obsolescence, while Gartner revealed that 82% of CEOs intend to change their business models by 2020 to stay relevant.

For supply chains, a technology-enabled approach is essential to drive agility and keep up with consumer demands. According to a World Economic Forum analysis, digital transformation will generate $1.5 trillion in value for the logistics industry over the next five years. Among businesses that adopt digital supply chains, executives report a 3.2% average increase in annual earnings – the highest ROI of any business function.

As supply chain executives recognize the importance of technology investment, an analysis conducted by AGL and Logistics Trends & Insights found that total logistics IT spending will rise 17% to $87.8 billion between 2017-2022. Yet a data-driven, agile supply chain remains a dream for many businesses, with a significant number of organizations still relying on Excel and email to manage complex supply chain functions. For organizations that master digital transformation in the supply chain, the benefits are big – faster time to market, increased efficiencies and better customer experiences.

Improving Supply Chain ROI in a Tough Tariff Environment

After duties on $200 billion in Chinese goods jumped from 10% to 25% earlier this month, businesses barely had time to blink before receiving news of yet another tranche of tariffs. These duties would cover $325 billion in goods, hitting the price-sensitive apparel sector particularly hard and taking a significant bite out of business’ bottom lines.

While no timelines are available yet for the new tariffs, NRF is expecting “unusually high” import levels in the coming months as shippers scramble to beat the duties. In its latest Port Tracker report, the organization estimated that TEUs would hit 1.9 million in May – the first time ever TEUs have risen to that level before July. That surge in shipments could lead to another chaotic peak season and higher prices for shippers, who are already paying 20% higher ocean contract rates than last year.

Some businesses may also turn to more expensive airfreight to get high-profit merchandise like electronics into the country faster. And once goods cross the border, tight warehouse capacity on the West Coast could push up prices as well, creating additional supply chain pain. For businesses grappling with these issues, a focus on optimization is increasingly critical. Here’s how combining a technology-enabled supply chain with the right logistics expertise can help deliver ROI that carries you through whatever comes next.

  • Find cost-effective capacity. With ocean spot rates already 40% higher than they were a year ago, sourcing affordable spot capacity to beat impending tariffs is likely to be a challenge once again during peak season. A centralized supply chain platform makes it easier to compare carriers and routes to find the most cost-effective solution, while an experienced supply chain partner with a deep logistics network can give you extra leverage in negotiations.
  • Shift your sourcing. As the cost of doing business in China continues to climb, many of AGL’s own customers are weighing the pros and cons of moving to neighboring countries. A supply chain platform that offers an end-to-end view, from production to final destination, lets your business compare suppliers and make the right choice based on production and logistics costs, vendor reliability, and more.
  • Check your classifications. For businesses that haven’t reviewed their classifications recently, the latest round of tariffs is a good reminder to keep current. A centralized platform makes it easier to review classifications in one spot to avoid penalties and identify opportunities to substitute products not subject to duties, if possible. A partner with customs expertise can help find additional ways to save time and resources, such as improving auditing procedures.
  • Automate routine activities. A more efficient supply chain starts with understanding all the touchpoints across your operations and seeing where there’s room for improvement. By managing every shipment in a single platform, you can uncover those efficiencies more easily. Technology that enables management by exception, rather than reviewing every single shipment, can also free up significant time for large global importers.
  • React faster to disruptions. Supply chain disruptions are inevitable, but being able to make adjustments on the fly can help keep issues from ballooning into disasters. For example, when faced with fast-approaching tariffs, a technology-driven supply chain can help you decide whether shipping via airfreight or paying additional duties will ultimately be less costly.

As shippers prepare for more tariffs and a potentially wild peak season, investing in effective tools, people and processes can help offset the impact to their operations and their bottom lines.

Winning the Tariff Waiting Game

The last few months have forced many global importers into a holding pattern as they wait for the latest round of tariff headlines. The March deadline has come and gone for 25% tariffs on $250 billion in Chinese goods, and the U.S. administration has said that talks are going well with China, putting additional increases on hold indefinitely. The 10% increases imposed last year are still in effect, however, and the U.S. has hinted they may stay in place, even if the two countries make a deal. Meanwhile, trade tensions continue to flare around the world, with news of $11 billion in potential tariffs on European Union products surfacing earlier this month.

These ongoing uncertainties are having a definite impact on the $6.5 billion in goods that come through U.S. ports each day. After breaking import records in a rush to stockpile inventory last year, businesses have slowed their pace so far in 2019. U.S. ports handled 1.62 million TEUs in February, down 14.3% from January and a 4% year-over-year decrease.

While import volumes for April and May are expected to top 2018 levels, much will depend on the ultimate results of U.S.-Chinese negotiations. If tariffs do rise to 25% on some goods, many shippers will need to make major adjustments to their sourcing and transit strategies to stay afloat. No matter where duties land, however, the current environment is making businesses more aware of the power of tariffs to shape the economy – and the importance of customs compliance. Whether you have an in-house brokerage team or rely on external support, these strategies can help your business stay strong amid tariff uncertainty.

Go to the source. If your business has global production facilities, running what-if scenarios now can help you hit the ground running if massive tariff spikes require a shift in sourcing. An experienced supply chain partner can help you assess alternate transit routes and associated costs for moving production from China to Vietnam or Malaysia, for example. In addition, some shippers are turning to their vendors to handle clearance to mitigate the bite of tariffs – whatever those duties might be in six months.

Double-check classifications. While many classifications, like tires, don’t leave much room for interpretation, businesses should still review all their harmonized tariff classifications if they haven’t done so recently. A customs brokerage expert can help confirm all classifications are correct, so you’re not paying tariffs unnecessarily or putting yourself at risk for fines for missing duties. Depending on your goods, there may also be opportunities to adjust your sourcing to items that aren’t eligible for duties.

Stay on top of customs paperwork. Regardless of what the future brings for tariffs, the increased scrutiny on all U.S. imports is likely here to stay. Establishing a thorough auditing system can help your business avoid errors and fines, while cutting back on time-consuming post-summary corrections. Trading paper-based processes for automated systems can also help you improve compliance and overall efficiency.

While only time will tell whether more tariffs are in store, businesses that invest in a strong customs compliance program now will be better positioned to handle whatever comes next.

3 Strategies for a Smoother Ocean Shipping Season

Efforts by ocean carriers to prop up rates by reducing sailings last year came at the exact wrong time for importers, coinciding with President Trump’s announcement of additional tariffs on Chinese imports. As shippers raced to beat the effects to their bottom lines, imports hit a record 21.6 million TEUs in 2018 – and spot rates skyrocketed accordingly.

Just a few months into 2019, several factors are already keeping spot rates at higher-than-normal levels:

  • High import volumes: Demand for cargo space has remained elevated among shippers looking to beat additional tariffs, with January imports rising an estimated 4 percent over the previous year.
  • Trade uncertainty: While the March 1 tariff deadline has come and gone, continued back-and-forth between the U.S. and China make it unlikely that rates will drop anytime soon.
  • Bunker fuel costs: With carriers facing rising fuel costs and an impending 0.5 percent global sulfur cap on fuel content, shippers will undoubtedly see the effects reflected in their rates.
Navigating contract season effectively

As shippers enter contract negotiations, they will need to work with carriers to find a middle ground that balances cost with capacity to keep their supply chains moving. These strategies can help businesses lock in the capacity they need without compromising their budgets.

  1. Focus on total spend, not on rate. Trying to negotiate contract rates at the lowest possible level will ultimately wind up costing you more. Rather than trying to nickel and dime contract rates, focus on choosing a reliable carrier who will keep your shipments on time and on budget.
  2. Map your supply chain. Truly optimizing your ocean freight spend requires taking a critical eye to your supply chain. A centralized technology platform offers insight into every mode, carrier, shipment and more, so you can spot opportunities for improvement and make informed decisions during negotiations.
  3. Be ready for the unexpected. A provider with a deep network of relationships can be invaluable in accessing affordable capacity when disruptions inevitably arise. A little logistics creativity, such as changing the port of discharge, can also help lessen the impact of disruptions.

Want additional tips on managing ocean freight season without sinking your budget? Read our recent article in the Journal of Commerce, “Navigating 2019 ocean contracting.