May 9, 2022
How to Turn Supply Chain Uncertainty Into a Competitive Advantage
(This is our second post in a series about navigating the current uncertainty in ocean and air freight. For context, please read our first blog "How Air And Ocean Shipping Cycles Will Impact Your Business in 2022." In this follow-up post, we’re highlighting ways that ecommerce and retail businesses can start asking the right questions–and use the answers to use the current freight market disruptions to your advantage)
Anyone who imports or exports finished products, supplies, or raw materials is facing especially market conditions with no end in sight. It can feel like you're in between a rock and a hard place. The rock is the rising freight costs and volatile transit times forcing brands to choose between paying more for services like air freight or premium ocean services, leading to potential margin loss on your products. And the hard place of course is defaulting to standard services that have become less reliable and elevating your risk of stockouts even as demand is at an all-time high.
Since neither one of these situations is ideal, we’re sharing some timely advice on taking back control of your supply chain, and how best to avoid both losses in margins and lost sales.
So how can brands win in the face of so much disruption and uncertainty? Start by focusing on the small wins you can actually control.
Small Wins Offer a Better Way Forward
Small wins add up and can have a huge impact on your business. Here are some things we recommend:
1. Advanced Planning Can Equal Faster Shipping Times
First, make sure that you're working with your suppliers and your freight forwarder to align on a plan that’s looking ahead. You should be booking at least four weeks ahead of your cargo ready date for ocean shipments and at least two weeks ahead of your cargo ready date for air shipments. Any partner that’s procuring this space for you is dealing with a supply-constrained market and the more visibility and lead time you can give your partners to plan for that cargo to be moved, the faster they're going to be able to get it on a ship or plane and on its way to your warehouses and stores.
This is a clear example of where planning can manifest in faster transit times. And specifically, it helps you minimize the time between the cargo ready date and the actual time of departure. So, if you are not booking early, it is one of the easiest things for you to do as an importer to change this dynamic in your favor.
2. Diversification Of Risk Levels The Playing Field
In the second half of 2021 only 85% of sailing schedules actually held–the rest were canceled or blanked.
Let's consider an example:
Say you had one booking and you put five containers into that booking. That means there’s a 15% chance that whatever vessel that was booked on won’t actually leave. Now you’re looking for a new sailing date, potentially weeks later, to load that cargo. Alternatively, if you had split those five containers over three, four, maybe even five bookings you could have diversified your risk. Placing them across multiple vessels increases the chances that four out of the five would have departed. For retail businesses in particular, the difference between getting 80% of your inventory on time versus potentially not getting any of your inventory on time could make or break you.
Pre-planning, diversification of risk, booking early, and spreading out your volume across multiple bookings, are all highly recommended strategies to ensure you're getting your inventory when you need it.
3. Destination Flexibility Can Yield Further Gains
The next small win to want to focus on is flexibility in your destination, especially in the United States. It would be easier to deal with delays if congestion was always at the same node. But it's not. Congestion moves around, sometimes it’s at the rail yard, most often it’s at the ports or terminals. This uncertainty means you need to be in constant conversations with your freight forwarding partner and warehouses. And you need to be adaptable and iterative on how you manage the destination side of your shipment.
Whether you’re leveraging rail, trans loads, or other options, you really need to think shipment-to-shipment and work with your freight forwarder to avoid nodes of congestion and steer your shipments towards better inter-modal options.
4. Consolidate To Prioritize SKUs
The last small win that we’re going to focus on here is to focus on consolidating your shipments to prioritize the high-demand SKUs you need most. Let’s consider the example of Flow Direct, a unique consolidation service that Flexport offers in partnership with 3PLs like ShipBob. Flexport created Flow Direct to allow ShipBob’s customers to bypass the regular, time-consuming, deconsolidation stage. With Flow Direct, Shipbob receives these shipments directly at their dock door, where they take over getting the goods to their customers via their last-mile network.
We did this by creating a dedicated container for ShipBob’s merchants which we loaded on a faster boat that called on a less congested terminal in LA. ShipBob as one of our 3PL partners, prioritized the receipt of that container and their clients were able to hit their Black Friday sales in Q4 of 2021).
When we talk about consolidations, what we’re talking about is less than container load (LCL) ocean shipments. And this can work really well for companies that can prioritize their SKUs. Maybe you have certain SKUs that are selling faster or are at higher risk of going out of stock. Or they're just more important to your customers or for a particular season. If you can differentiate amongst those SKUs, you can start to get creative with how you book them out by leveraging consolidation services that can provide faster transit times and lower costs, etc.
We hope these suggestions have given you a starting point on your own journey toward stabilizing your supply chain to deliver better outcomes you and your customers are looking for. It’s time to take back control of your supply chain and turn the current market uncertainties into a competitive advantage for your business.
If you work for a fast-growth ecommerce or retail brand, creating demand is just the start. You’ll need to eliminate backorders, waitlists, and stockouts to deliver on that demand. Learn more about how Flexport can help you keep your shelves stocked and customers happy with end-to-end supply chain tracking, agility, and resilience.