Exporters and importers are attempting to innovate and discover solutions to reduce the business and potential costs of such delays as congestion and vessel and cargo delays become more frequent at all ports around the world.
We will learn about the many strategies and plans in this post that can assist lessen the effects of poor schedule accuracy and supply chain disruptions.
1) Plan well in advance
Planning is the foundation of a sustainable supply chain and is possibly the simplest preventative measure because it helps reduce or eliminate the risks provided by the known and most controllable components.
This includes inter alia:
- Better forecasting to procure timely space and equipment availability
- Ensuring that all regulatory requirements are complied with and requisite documents and paperwork kept ready well in time
- Special approvals and documentation with regard to hazardous or reefer cargo are in place
- Planning the shipment such that the latest market conditions are taken into consideration (such as peak season delays, equipment and space availability at locations etc)
- Hinterland connections are booked in advance and in accordance with planned vessel arrival and departure times etc.
2) Moving away from JIT (Just In Time) inventory management and adding buffer inventory and lead times to their supply chains
The Just In Time (JIT) idea was one inventory management concept that gained popularity as companies worked to reduce costs and maximise supply networks.
Companies could rely on quick and dependable transport connections to assure on-time delivery of raw materials and completed goods to their factories and warehouses thanks to improvements in global connectivity during the past three to four decades. This substantially reduced the need to have extra inventory on hand, boosting cash flows and lowering the amount tied to inventory, storage, and other related expenditures.
The interconnectedness of the global Supply Chain, which amplifies the negative effects of localised events (such as earthquakes, floods, labour issues, etc.), has increased the risk of stock-outs for businesses, which can have an adverse effect on both production and sales. However, global congestion and service delays are becoming more frequent.
As a result, businesses are no longer holding inventories and supplies at the barest minimum. Instead, they are keeping a spare inventory that is sufficient to satisfy production needs in the case of a temporary disruption in transport chains.
Additionally, businesses have started placing orders early rather than waiting until inventory reaches the bare minimum allowable level in order to combat delays brought on by schedule interruptions.
The addition of this buffer does raise the cost of carrying inventory and the amount of money invested in it, but these expenses are more than offset by the potential advantages in terms of a cushion against cargo and vessel delays and insurance against the risk of inventory stockouts.
3) Use a combination of transport modes / innovative solutions – China-Europe rail / Sea-Rail route from Asia to Europe/ routing shipments to Canadian ports and then rail to USA hinterlands
To assist customers in overcoming the obstacles caused by transit and berthing delays, Carriers and Forwarders have started introducing new, creative products in recent years.
Offering rail services between China and Western Europe, Sea-Rail alternatives connecting sources in Far East Asia with markets in Europe, Sea-Air options providing a good balance between speed and pricing, etc., were some examples of this. Recently, cargo has been transported to Canadian ports before being transported by rail to US consumption centres to bypass the congestion afflicting US West Coast ports.
In extraordinary cases, cargo owners may use these options to avoid clogged ports and shipping lanes, shorten travel times, and achieve the best price-to-delivery ratio.
4) Invest in technology for better planning and visibility at all stages of the transport chain
It gets harder to plan effectively and maintain track of the movement of inventory as the supply chain becomes more complicated with more locations and stakeholders.
In addition to providing insight into each stage of the supply chain and the movement of goods in international trade, investing in reliable and high-quality technical solutions will ensure that planning is much simpler and more scientific.
As a result, it is easier to plan EXIM cargo movements, restock inventories, avoid busy trade routes and areas, and other important decisions.
Businesses are investigating the use of BI and Advanced Analytics technologies more frequently to forecast trade flows and demand more accurately, resulting in better forecasting and planning.
5) Spread risks by working with different Container Carriers, CTOs (Inland Container Train Operators) and Inland Hauliers:
It is well known that inland transport companies and ocean carriers provide better prices to customers with higher quantities. This frequently persuades exporters to contract with a single container carrier for all of their goods in exchange for cheaper shipping costs. This method is also used to choose train operators and truck drivers.
While using this strategy might allow the exporter to benefit from lower rates, it also significantly raises the counter-party risk of the Carrier failing to fulfil their contractual obligations (due to operational problems, labour issues, financial difficulties, overbookings, capacity limitations, or other factors), which would prevent the exporter from being able to transport his goods.
Working with a pool of Carriers, distributing overall volumes across a select group of reputable and dependable Carriers, and frequently using floating tenders can all help to reduce this risk (RFQ – Request for Quotation).
Exporters must balance working with a sufficient number of Carriers to spread out risks while also making sure that the quantities assigned to each carrier are significant enough to be eligible for favourable terms and freight rates.
6) Identify alternate ports, CFS/ ICDs
Manufacturers and exporters often design their supply chains to centre on specific ports and employ specific CFS/ICDs. These ports, CFS, and ICDs are chosen based on a variety of criteria, including proximity to the exporter’s premises, the availability of frequent and quick hinterland transport connections, the port’s connectivity to a wide range of services offering global coverage, and occasionally being the default option because no other port is available.
Because it would be expensive and time-consuming to reconfigure the entire supply chain, once a supply chain has been established around a specific port, ICD, or CFS, the exporter is typically not willing to even consider making modifications thereto.
Although this strategy provides provide stability, exporters are exposed to excessively high risks in the event that port, CFS, or ICD operations are hindered (reasons for which might range from weather-related, labour issues, congestion, poor infrastructure and outdated equipment, breakdown in inland connectivity, civil unrest etc).
Therefore, it is wise to include alternative ports, CFSs, and ICDs in the supply chain to ensure that the exporter has other viable choices from which he can continue to move goods and raw materials and that the closure of one port won’t completely interrupt the supply chain.
7) Spread volumes across different modes (Rail, Road, Barges etc)
Overreliance on one mode of transportation is another risk that needs to be diversified to lessen the negative effects of low schedule reliability. In order to maintain supply chains even under difficult conditions, a well-planned mix of modes, such as road, rail, and barges, can assist the exporter or importer find the correct balance between dependability and flexibility.
If an importer, for instance, depends on the rail for interior cargo movement, he will miss the train connection if the vessel is excessively delayed (unless it is an en bloc train movement, where the whole waggon is for his goods).
If he employs a combination of road and rail to address these issues, the cargo intended for inland rail transportation will still be delivered on time even if the inland link is missed (as the truck will not leave without picking up the cargo).
If the premises or end destination is reachable along the shore, exploring the barge or inland waterways option may also provide the advantages of cheap and bulk delivery. The fact that the water mode is environmentally beneficial and relieves pressure on the road and rail networks are two additional reasons why different governments support this model by offering lower charges.
8) Spread shipments across vessels and over a period of time
A better approach would be to split the cargo and book separately so that the cargo is transported on several vessels sailing on different days rather than sending all containers together as part of one shipment (which will be loaded on one vessel).
This guarantees that the shipper has cargo arriving on another vessel and had avoided a situation where all of their cargo was detained on one vessel even if one vessel is delayed for a specific issue (vessel malfunction, mishaps or incidents on board, Covid cases amongst personnel, etc.).
It also makes sense to space out shipments across a few weeks, pending stock levels.
9) Always communicate with carriers and hauliers for the latest news and updates on transport movement
For the most recent information on the flow of cargo, vessel arrival dates, cut-off dates, etc., be in continual contact with the transport operator. By doing this, planning around crucial turning points in the freight delivery process will be ensured.
Additionally, the exporter and importer are informed of any potential delays and can schedule their subsequent movements accordingly.
10) Keep abreast of the latest news from major souring locations and key markets
In order to be aware of potentially disruptive events and how they can affect their business, exporters and importers need to keep themselves informed about the most recent developments in their key sourcing regions and primary markets.
For instance, delays in cargo handling could occur if annual labour negotiations at a major port are about to begin (as has been observed to occur in 10-year cycles at the ports of Los Angeles and Long Beach involving the labour union ILWU); shippers could prepare for this scenario by sending cargo ahead of time or looking into alternative gateway ports.
Similar to how the flooding in Thailand, a significant sourcing country, will have an influence on manufacturing activity. While it is now difficult to foresee catastrophic weather disasters, it is nevertheless important to stockpile excess inventory supplies throughout the traditional monsoon/typhoon season to prepare for such emergencies.
Conclusion
In conclusion, it is obviously impossible to completely avoid or cater to unforeseen exigencies and supply chain disruptions given that we live and operate in a highly interconnected and unpredictable world where events in one corner of the world have surprising ramifications in other regions and diverse aspects.
As a result, it is unavoidable that dealers and exporters will have to take on some risk while engaging in business on a global scale.
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Source: Marine Insight
