3 Strategies that Shippers Need to Note for Logistics Success in 2023
by Stephen Ly, Vice President, Southeast Asia, C.H. Robinson
Sudden changes and market shifts in the past two years have shown us just how unpredictable the logistics industry can be. The recent fight for space on the water and in the air experienced among shippers is a case in point. Almost as quickly as the hunt for capacity began, the market shifted again.
To add on to a fast-changing environment, shippers also face region and market-specific complexities. New and old challenges continue to manifest themselves and this could range from inland congestion and geo-political changes to overflowing warehouses and more.
While the logistics sector is predicted to enter a new phase of recovery, the complexity of the global supply chain remains, and if anything, this appears to be intensifying further. So, what are some global strategies that shippers can implement to help navigate the journey through choppy waters?
Here are three best practices that logistics players can consider to fully optimise their global shipping strategies for the new year.
Not all lanes and markets are created equal
While demand for capacity has lessened in the majority of global trade lanes over the past few months, this is not the case for all markets. For example, the U.S. export market saw an increase in demand, creating a mini-peak this past fall. Certain lanes to and from Oceania did not experience the same drastic demand softening as other large regions such as Asia, thus creating differences in availability and rates.
Varying tariffs, trade regulations, and restrictions will continue to be one of the top reasons why supply chains remain disrupted. Shippers need to keep in mind, and adopt the mindset, that not all freight and shipping lanes are created equal.
A healthy global supply chain strategy is one that is diversified across modes and lanes, with a mix of contractual and spot pricing for the nuances and unique market conditions of each region. Additionally, relying on market insights and expertise from one’s supply chain partner can help logistics players stay up to date on the nuances of each region, mode, and trade lane.
By carefully analysing the unique characteristics of each lane and market, businesses can identify opportunities for cost savings and improve their overall efficiency.
Reducing costs will be a top priority
Supply chain costs will continue to be a top pain point for shippers. According to KPMG’s global supply chains trends survey of November 2022, 71% of global companies highlight raw material costs as their number one supply chain threat for 2023.
To help with cost reductions, there are a variety of strategies to consider, some easier to implement than others. In fact, simple changes to the strategy can result in big savings.
Business leaders can adopt the following tactics to reduce costs:
- Consolidating shipments
- Few companies can fill a container with their own freight. By working with a freight consolidator, companies can obtain better rates and cargo security
- Redefining shipping strategies
- Shipping strategies need to be re-evaluated on a regular basis, so that decision makers can develop a plan to spend more on shipping but less on other costs such as inventory, storage, and returns
- Effectively use Incoterms®
- These rules define the responsibilities of sellers and buyers for the delivery under a sales contract, and they establish where the transfer of risk takes place. Understanding how to use them can help you save money.
These tactics are only the tip of the iceberg when it comes to reducing costs. Other tactics that shippers can consider in their 2023 planning include creating a risk management strategy to determine the appropriate amount of cargo insurance required and working with a customs expert to navigate each country’s compliance requirements.
Prioritising forecasting and visibility in logistics planning
Since the pandemic hit, shippers were mainly focused on keeping their heads above water, by keeping manufacturing running and shelves stocked with their companies product.
Southeast Asia is now expected to register the strongest export performance following the removal of travel restrictions. Challenges such as ensuring business continuity in an increasingly complex supply chain environment faced with potential disruptions, the evolution of the war in Ukraine, and risks of economic instability add a considerable amount of uncertainty to current estimates.
Forecasting and managing inventory based on economic indicators and locating those inventories closer to the end user is going to be paramount, especially in an increasingly complex logistics environment.
If shippers are not sure where to start, the right technology and data can help them identify the economic impacts, inventory to sales ratios, and more.
Meanwhile, KPMG’s global supply chains trends survey also revealed that two-thirds of global business leaders emphasised the need to increase visibility in their supply chains in order to maintain operational stability going forward. This visibility allows them to identify any potential challenges ahead of time, such as rising costs due to inflation or additional storage costs caused by unexpected port congestions.
By tapping on technology to stay attuned to the changing landscape, businesses can stay ahead of the game, have greater control and visibility across their networks, and ultimately manage costs in the long run.
Evolving transportation for 2023
The logistics industry has always shown great resiliency, and the coming year will be no different as the world moves into an uncertain economy. With sophisticated planning capabilities and agility, enabled by improved end-to-end visibility across networks, business leaders can not only manage costs, but also navigate increasingly complex global networks. By proactively getting ahead of trends, 2023 shall be the year when logistics leaders can truly set themselves up for success.
About the Author
With over 20 years of experience in Logistics, Stephen brings with him rich industry expertise in Express, Global Forwarding, Warehousing, and Customs Brokerage. Having worked in leadership positions across Asia Pacific, Stephen has held board, country and regional roles in major logistics and manufacturing companies, accumulating in extensive experience on both sides of the logistics relationship. Over the years, he has successfully led organizational turnarounds and spearheaded initiatives leading to significant growth, and improvements in profitability, operational efficiency, and service quality.