Freight chaos... and how to navigate it
The domino chain of global freight has been brought to light - front page news now in fact! Many have, or are now having to replan, redirect, and look at other options. But what are the long term strategies to strengthen sourcing? We brought together a Virtual Boardroom discussion on 30th Sept - with insights and views on nearsourcing, rerouting, easing the customs burden, and network design. We had the pleasure of involving special guest Richard Fattal of digital freight forwarder Zencargo. It's actually the last in a series of sessions we've run with Zencargo - it's not surprising that many have turned to them to give them access to a broader market and to connect them more closely into the freight market and upstream suppliers. It's been great to involve Richard and his team because they are happy to share their honest views and advice - and many in these discussions have left with good new ideas. Below are some of the key observations and suggestions that came up:
Gone from 90%+ carrier reliability in ocean freight to about 30% which, just in terms of lead times, impacts on costs
Many paying double duty post Brexit - driving reconsideration of DCs in mainland Europe.
Many will bring sourcing closer to home due to the expected rapid shift in sourcing landscapes over next 12-18 months
Lack of certainty on future rates and short-term volume variability making it very difficult to plan. Lower value density products like furniture will see quite rapid shifts.
Internal alignment between merchandising and logistics is a key benefit - total cost of product must take this into account. There has been a lot better collaboration between logistics and buying / merchandising teams.
Air freight economics changed by people not flying so reduced capacity has increased prices which should come down as people start flying again.
Ocean freight is different given the large fixed investments and the need to make a return on them.
Has been very difficult to build trust with customers as, in a downturn, volume agreements would not be honoured so it has been a lose-lose for shipping companies.
Importing and exporting companies want connectivity to the market and decision-making support. They want better information on the options available given the cost and profit constraints
It’s key to have a strategic view on where to hold stock. As you get closer to the point of shipping, you might want to change your mind as the plan evolves. That’s hard to do without the technology in place to enable it.
Important not to always think about one order being one container so breaking things up into fewer items can help with finding solutions, including multimodal, when the normal route is disrupted.