The supply chain revolution
Last week, SmartCompany published an ebook focused on disruptions in the supply chain. Here’s our main takeaways from it.
The main issue
Shipping is currently right at the middle of a huge struggle, particularly when it comes to those who are used to the speed and predictability of the modern global supply chain. According to Dianne Tipping, chair of the Export Council of Australia, ‘Crisis is unfolding in international trade as supply of containerised shipping services fail to meet increased global demand’.
More specifically, an increase in consumer demand in e-channels in a time when air freight has been reduced due to Covid-19 border restrictions, has led to soaring shipping rates, penalty fees as cargo sits at the docks, and significant shortages in available cargo ships.
For Australia in particular, a country with borders shut to the world since March 2020, it means ever-inflating costs and unpredictable timeframes. According to Ms Tipping, Australian businesses are experiencing rates four or five times higher and delays of three or five months on previous delivery estimates.
The number 1 cause
As expected, the COVID-19 pandemic is the one to blame. The restrictions to movement has led to a significant rise in e-shopping, causing a great deal of stress on the supply chain. Australia’s imports of goods and services is equivalent to 21.60% of the GDP.
However, 90% of Australian air freight cargo flies on passenger flights according to Mark Coleman, director of ICAL Logistics. For a country with borders shut and very limited flights to welcome back home citizens who were living elsewhere, it’s been an enormous challenge keeping up with demand if aircrafts are unavailable.
The issue with pricing
When asking suppliers if they were currently able to manage the impact of price volatility in their businesses bottom line, 42% reported that they were passing any increases in cost to customers, 42% were absorbing cost increase and only 14% had developed a revised FX policy & strategy. We know that businesses tend to rely on forward contracts to lock in foreign exchange values at the time of doing trade, but with the timelines in supply chain sagging, many of them are avoiding this strategy. However, the main question businesses must ask themselves is: ‘If I lock in today’s rate, will I still make a good profit and sell it a good price?’.
Mitigating risk, as much as possible, is advantageous in a time of unpredictability. To do so, would be wise to maintain a constant dialogue with financial advisers and suppliers, and planning much further in advance than in previous years.
In conclusion, be adaptable
If you’re changing the way you order, consider it a potential down payment on success. Those that willingly adapt, rather than holding on to old processes, will find opportunities waiting. After all, volatility is embedded into currencies like the Australian dollar and COVID or not, you’re going to see fluctuations.
You can also look at alternatives to reduce internal shipping costs. When Maersk started using Shipeezi, for example, they reported 30% in logistics costs and 60% in time reporting.
Shipeezi is the essential tool for companies of all sizes to consolidate, automate and uncomplicate information and product flow across their supply chains. Book a demo and get started now!