Year 2021 brings continued supply chain challenges for FBA/Ecomm Sellers as well as importers in general.
- OCEAN RATES are through the roof and are close to being AT ALL TIMES HIGH
- NO/LACK OF Container space at the origin in China.
- All sorts of delays, port congestions, and in addition to all that the odd Suez canal blockade that has taken place.
- Ever changing AMZ stock limits policies causing a rush, lack of capacity in a warehousing market.
As a top-level Supply Chain manager currently involved in actively managing supply chains for 17 different importers, I’d like to use this opportunity to share the experience and tips to help you manage supply chain disruptions in a smoother and more optimized way.
Dealing with Ocean Freight Market Issues
So YES, there are some big problems with ocean shipping, especially since container space is really hard to get.
Ocean freight market issues are caused by shortages in container supply and huge demand from the growing Ecomm Industry and overall from the world economy recovering from the initial COVID-related shock.
So we hear that some importers are getting desperate as their cargo does not get container space and/or gets rolled for 3-4-5 weeks straight before it even leaves the origin. This ultimately means either an out-of-stock situation for your business in the worst case, or placing additional purchase orders to cover for the delays, which would tie up extra amounts of cash.
In search of a solution, one must realize that there is always container space, it is a matter of who it’s given to. If you are not the one getting it, someone else is.
The Importance of Hiring a Supply Chain Manager
With that in mind, hire a Supply Chain management team that will put the right set of contractors in place, and further push for the bookings and vessel space confirmations as hard as possible. It is crucial to request rates from a handful of TRUSTED forwarders with a successful track record.
Generally in the normal market, the obvious choice is to go with a most competitive rate, again from trusted contractors only. But in a situation where there is a lack of supply at the origin in China, it becomes important to ask for container space confirmations instead of just asking for rate quotes.
Tips in Resolving Origin-Related Issues
Talking directly with Chinese freight agents
Going with your favorite domestic, US-based forwarder may cause delays in communication with the Chinese counterparties and lost space allocations. Note that whoever is managing must also be available during China daytime to be able to give quick answers and booking confirmations to the contractor in charge.
Do Expect to Pay Premium Rates
But still price-compare and NEGOTIATE on the spot in a timely manner. In crazy markets, rate spreads tend to get very wide, so you have to be really fluent to avoid being overcharged.
Strategies to Consider Applying to Your Internal Supply Chain Organization
So all of the above was related to resolving External market issues, taking place outside of your organization. Now let’s take a look inside and see what changes can we apply to our supply chain organization Internally in order to optimize costs, transit times and with that improve the CASH FLOW.
Based on auditing the Supply Chain of numerous organizations, there are two areas I’d like to highlight.
So first of all, think about your routing options (rather let your top-notch supply chain manager do it for you).
Generally speaking, for most products Ocean shipping will sure be the best mode to choose from the cost-efficiency standpoint, you know. But further you have to decide on the details of the routings. Look for the shortest transit times, even if you have to pay a little more.
Shorter transit means less inventory to order, which means leaner business and better cash flow.
With that in mind, look at the world map and find the shortest way from your supplier’s origin location to your domestic market. For instance, if you are importing from South East Asia to US, then shipping to the West Coast will be the best option in most cases. If you are shipping from Europe to the US, then choose East Coast ports as your destination. This may seem obvious to some, but in fact many importers’ problems can be solved by simply choosing a better routing.
3PL Warehouse Choice
Secondly, find a warehouse as close to the port of entry into the domestic market as possible! Avoid having to pay for long-haul trucking or rail shipping.
In many cases, warehouses in close proximity to the ports will charge higher rates. But again, you will get more benefits from working with a 3pl in close proximity to the port, which will offset the slightly higher warehousing costs. Benefits include: shorter transit times, lower shipping costs hence ordering less inventory and ultimately better Cash Flow for your business!
Finding a right 3PL can be hard due to saturated market, complexity of the 3pl pricing and term.
Make an inquiry with Sellerplex, if you need help with 3pl warehouse procurement, market research, contractor options. We have our existing network of trusted contactors and are always happy to search for new options for the best fit for your business.
I genuinely hope that this is helpful. If you have experienced similar supply chain disruptions please share and let me know if the above tips sound helpful for your particular business?
Cheers and wishing you continued success with your business projects!
Ivan Torlopov, Head of Supply Chain @ Sellerplex.com