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What to Look for in Your Supply Chain Partnerships

2018 has been packed with one shakeup after another, leading to one of the most uncertain environments in recent memory for shippers. The biggest headline-grabbers include:

  • Trump’s tariffs. Arguably the biggest supply chain story of the year, the U.S. and China have kept importers on their toes with a barrage of duties. With roughly $250 billion in Chinese goods now subject to tariffs, businesses have been importing record-breaking volumes as they rush to get items in hand before duties take effect. The trade war is poised to escalate further, as Trump threatens to enact tariffs on an additional $267 billion in goods.
  • The ELD mandate. The long-awaited mandate, which required truck drivers to install electronic logging devices (ELDs) that track and cap their total hours in service, has had a ripple effect across modes. The mandate reduced productivity for 83 percent of trucking companies, creating a capacity crunch and rising rates for shippers. Meanwhile, many ocean carriers have been forced to sit at port for trucks, prompting some to impose emergency intermodal fees and restrict door deliveries.
  • Ocean turmoil. The industry’s move to cancel sailings in an effort to improve profitability shocked many shippers this year, and continues to wreak havoc with capacity and rates. Total capacity has shrunk by 7 percent, leading to a 50 percent year-over-year spike in Trans-Pacific ocean rates and a scramble to secure space during peak season – even for shippers under contract. Those hefty prices are slated to continue into 2019, thanks to newly announced bunker adjustment factor surcharges.
  • Disruption from disasters. When Hurricane Florence tore up the East Coast in September, businesses across the country felt its effects. Delivery disruptions rose by 49 percent that week nationwide, despite only a 2 percent drop in shipments. With more than a month to go before hurricane season ends, more disruptions could be looming for shippers.

Dealing with supply chain disruptions

For shippers large and small, the move toward technology-enabled supply chains is helping to improve visibility, control and responsiveness when things go awry. But while a centralized platform is the cornerstone of a high-functioning supply chain, hands-on support is the key to keeping it running day after day.

That’s why more businesses are turning to external providers to help them navigate this disruption-prone environment. Freight forwarders now account for nearly 45 percent of U.S. containerized imports from Asia, a 2 percent year-over-year increase. The right partner can help businesses access scarce capacity, tackle challenges head-on and offer best practices for improving operations. Here are a few areas to consider when choosing yours.

  • Dedicated support. By assigning a single point of contact to your business, your partner can get to know your business goals, rules and requirements better, so they can make more effective recommendations.
  • A deep logistics network. The ongoing struggle to source ocean capacity underscores the importance of a well-connected partner. Look for a partner with a strong network to help find available space at the best possible rates.
  • Customs expertise. As the scope of U.S. tariffs extends to new areas like electronics, food and housewares, more businesses are bracing for the impact to their organizations. A partner with customs brokerage expertise can minimize the pain by ensuring harmonized tariff classifications are correct, helping to apply for exemptions and taking other steps to ensure customs compliance.

For supply chain professionals, dealing with disruptions is a growing part of the job. Finding the right partner can help equip these businesses to face today’s biggest challenges – and whatever comes next.

Prepping for a “Perfect Storm” This Peak Season

Peak season typically begins toward the end of summer, reaching its height during Golden Week in October as businesses work to get their goods in hand before the holidays. But thanks to a perfect storm of factors, shippers have been facing peak-like conditions for months – and the current environment is poised to become even more intense.

Chief among those factors? The significant reduction in ocean capacity this year, a move which has stunned many in the industry. Faced with lackluster financial results and persistent overcapacity, carriers across the board have cancelled lanes in an effort to wrestle back control of rates. Those cutbacks have trimmed capacity by 7 percent so far, the Journal of Commerce reports.

At the same time, businesses working to stay ahead of tariffs have ramped up importing activity, leading to record-breaking volumes at the Ports of New York and New Jersey in July. Add in potential weather disruptions, and you have a recipe for chaos this peak season. As they work to get their goods across the border, shippers are facing:

  • Soaring spot rates. Trans-Pacific spot rates have climbed more than 50 percent year-over-year, putting even more financial pressure on shippers contending with new tariffs.
  • Major service delays. Even a contract isn’t enough to ensure space during this busy season. Some carriers are rolling contracted cargo or enforcing minimum quantity commitments, only allowing shippers one week’s worth of capacity at a time. That capacity crunch promises to intensify during peak season, with ports in China and Thailand already reporting backlogs.
  • Greater need for airfreight. Shippers have already been leaning more heavily on air cargo to meet customers’ “available anytime” expectations. Scarce ocean capacity is forcing even more businesses to use expensive airfreight instead, and that increased demand is prompting China-U.S. air cargo rates to rise further.

Preparing for peak season – and beyond

The factors contributing to the busy peak season appear likely to stick around for a while, so businesses need a plan to navigate the rest of 2018 and beyond. Here are three ways to ease peak season pain.

  • Invest in a centralized supply chain platform. Information is the key to managing this uncertain environment. Supply chain software that provides visibility and control across all shipments and modes can help businesses quickly pinpoint the status of high-priority shipments and adjust allocations or carriers when needed.
  • Communicate clearly, and early, with your supply chain partners. The logistics industry is built on relationships, so a provider with a deep network and knowledge of the space can be valuable for sourcing scarce capacity. Look for providers who take the time to understand your business goals and carrier preferences, and let them know as far in advance as possible when you’ll need bookings.
  • Be open to creative solutions. When things get tight, adjusting your route or timeline can help you meet drop-dead delivery dates without sinking your budget. Talk to your provider to find the best solution, such as changing the port of discharge for cargo traveling inland, or choosing a sailing with a longer transit time to reduce the chance of getting bumped.

With the holidays fast approaching, supply chain professionals need to plan now. The right mix of technology and support can make all the difference in navigating the challenges this peak season will bring.