Top 3 Supply Chain Check-ups Provide Cost Savings
At the onset of overseas procurement, logistics professionals focus on supply chain strategy. Finding the right supplier, defining sales terms, determining the best transportation solution and speed to market mean sourcing start-up can be time intensive. When the goods finally arrive at the consignee, many supply chain professionals relax a little knowing that leg of the supply chain is established. But is "set it and forget it" a cost effective strategy?
When cargo consists of hundreds of SKUs or thousands of shipments moving via 10, 20, or 50 trade lanes, the complexity of cargo management can be challenging. In the age of Big Data, information is plentiful—but useless when not consistently reviewed and acted upon.
Paring the information to a few key points can bring cost clarity to the big picture, and make the task a little less daunting. A few quick supply chain check-ups pull together the right data to make it actionable (download this tip sheet to learn the top five cargo transportation tactics at bit.ly/2msczWR).
1. Container Utilization
For goods shipping via ocean carrier, how much of the container does the cargo occupy? When the container weight isn't maxed, available space equals money left on the table.
Assess the loss by calculating the useable, available space and the cost per cubic foot/meter. Periodically reviewing container loads and adjusting for maximum utilization will result in cost savings. Some best practices for ensuring container loads are maximized include:
- Revising packaging or pallet usage to gain space efficiencies, including possibly floor loading the container to fit more product (e.g., being sure to calculate the additional costs associated with offloading a floor loaded container at destination).
- Using container load calculators to determine optimal positioning within the container, as well as space utilization by cargo type.
- Utilizing consolidations such as shipping cargo together with goods from other suppliers at origin (i.e., a buyer's consolidation) or co-mingling cargo with other importers' goods (i.e., less than container load (LCL) consolidation).
2. Routing Review
Whether locking in carrier contracts or making use of spot rates, re-evaluating routing options should be a regular component of a supply chain check-up. Shifting market conditions or an expanding list of consignees has a big impact on the bottom line—and even more so if routing isn't routinely evaluated.
Market conditions are myriad. Anticipating contract re-negotiations at the ports, impacts of weather phenomenon, or chassis shortages are considerations for how goods are routed. As important, distribution strategies may require realignment when customers or consignees are added. Additional consignees may necessitate more shipments or bi-coastal warehousing, triggering a routing review.
Each leg of the trade lane should be evaluated to ensure a streamlined supply chain. For example, is there construction at the origin port? Is the port of unlading still logical given the consignees' locations? Are there chassis shortages that make an alternative port of lading more favorable? Is all-water routing a sound alternative over mini land bridge?
3. Discourage Demurrage & Detention
Without the right coordination and planning, daily storage fees at the airport or container yard (i.e., demurrage) can rack up quickly. Alongside those fees, detention can simultaneously be incurred when equipment, such as containers, are kept beyond the allotted free time. Avoiding these charges is the best tactic to achieving cost savings, and quantifying this expense provides an additional diagnostic measurement in supply chain health.
Experienced Customs brokers will ensure all of the required paperwork is prepared accurately in advance of the cargo's arrival—without the right documents, US Customs and Border Protection may delay cargo release, which can quickly devour available storage or per diem free time. Additionally, cargo and shipment delivery instructions should be shared with the carrier, vendor, and all third parties well in advance to avoid delays.
Proactively avoiding demurrage and detention becomes easier with the right tools or partnerships. Monitoring container movement through online tools and reporting or directly through a freight forwarder helps ensure these charges are avoided. Moreover, larger shippers have the buying power to negotiate extended free time.
During a supply chain check-up, focusing on a few of the right diagnostics results in healthy cost savings.