In late 2019, Flexport published a white paper entitled Supply Chain Lessons from 2019. In it, we talked about the lessons learned from that year stemming from the tariff wars, Brexit, IMO 2020, and other disruptions. We couldn’t have predicted then that 2020 would turn out to be even more challenging, largely due to a global pandemic. As the world has faced the full force of COVID-19, businesses have had to rethink their supply chains and trade strategies to navigate the challenges.
Now, midway through the year, it seems like a fitting time to revisit the insights from our white paper. Are our takeaways still applicable in the current climate? A look back—and ahead—suggests they are. Read on to learn how lessons from last year can be adapted to the challenges of today.
#1 - Global Trade Faces Unprecedented Challenges and Opportunities
Even though commercial demand globally is slowly trending upward as economies and business emerge from lock-downs, uncertainty, unpredictability and added complexity remain. This continues to bring both challenges and opportunities across domestic and global supply chains. This high level of uncertainty is leading global organisations to consider how resilient their supply chains really are and prompting contingency measures.
Recommendation: To successfully adapt as new issues arise, focus on finding solutions that allow you to access supply chain transparency, actionable data analytics, and strategic expertise to protect your business health.
#2 – Trade War Tariffs, Regulations, and Crunched Capacity Lead to Increased Costs
As Covid-19 impacted trade lanes and forced businesses to find alternative shipping methods, capacity became limited and air freight rates soared. Adding to that, most passenger fleets were grounded, with PPE dominating existing capacity. As a result, logistics managers suddenly faced hugely inflated rates. IMO 2020 also helped drive up costs at the start of the year; the regulation forced nearly 10% of the global container fleet to be retrofitted for scrubbers and increased carrier costs by 15-10 percent.
Recommendation: To help rein in costs, look for experts who understand market fluctuations in cost and capacity. Make sure they are familiar with transport strategies that map to business objectives and mitigate tariff impacts.
#3 - Agility and Speed Become Critical Business Factors as Competition Intensifies
The world of ecommerce has completely altered customers’ expectations around service and delivery. Consumers want faster delivery and have much lower tolerance for stock-outs. To be competitive, organizations need to accelerate the business cycle from factory to customers’ hands as fast as possible. And, as the economy continues to revive, ecommerce will be becoming more central than ever.
Recommendation: To adapt your supply chains to a new paradigm, concentrate on how you can effectively and accurately manage your inventory. This will be key to business growth and customer satisfaction in an increasingly competitive market.
#4 – Rising Concern Around Climate Change and Sustainability
Despite economic uncertainty, many companies doubled down on their sustainability initiatives during the pandemic, looking to make operations more sustainable.
Recommendation: To keep pace with industry leaders who are enacting positive climate change, learn how carbon-neutral freight forwarding can contribute towards improving your emission levels. Flexport.org can help you calculate carbon emissions for your shipments and make data available to track progress over time. Working in partnership with Carbonfund.org we can help you directly offset up to 100% of your emissions.
#5 - Digital Transformation Is Even More Critical Now than Before
With the global health crisis, the impact of changing customer expectations, government regulations, and tighter competition has become even more ratcheted up. With that, many companies have moved to accelerate digital transformation initiatives, using technology to improve supply chain visibility.
Recommendation: Look for solutions that can improve upstream visibility to inventory that is in production or in transit and enhance communication with suppliers to enable faster and more accurate purchasing decisions. As COVID-19 continues to roil the economy, businesses will continue to operate in a mixed landscape.
Those that seek to future-proof their supply chains now, will be best positioned to accelerate out of the downturn. While Covid-19 might be unprecedented, supply chains will always face a certain level of volatility. Investing in the right technology is critical to navigate this uncertainty, allowing for total visibility, and the ability to track and manage shipments (even at the SKU-level) as they cross the globe.
To dig deeper into the lessons learned and how to navigate global trade challenges, download the white paper.
Sign Up for the Freight Market Update newsletter for the latest market trends you need to know about - delivered right to your inbox.