The market of container handling and container transport developed at a very fast pace in 2020. The impact of COVID-19 is noticeable in almost every sector and this will continue in 2021. Prices fluctuate enormously and also the availability of containers fluctuates greatly. How can you respond effectively to these developments to prevent that your flows of goods are adversely affected? How do we, as your logistics service provider, deal with this exceptional situation in the logistics market? More importantly, what are the expectations of how the situation will develop in the following quarters of the year?
OPTIMISE YOUR PROFITABILITY
The rate that must be paid to the Logistics Service Provider to ship your cargo overseas from A to B is called the “ocean freight rate”. Understanding these rates is very important when you are importing or exporting, as these rates impact your transportation costs. With smart solutions and strategic partners, Broekman Logistics, as your logistics service provider, can influence the continuity of your supply chain and ultimately your profitability.
The main factor causing fluctuating of ocean freight rates is supply and demand. Other factors that impact the ocean freight rates are:
- The type of goods to be shipped: Dangerous goods, oversized goods or perishable goods generally lead to higher rates.
- The popularity of the destination (and the distance to this destination): The shorter the distance (and the more popular the destination is), the lower the rates will be.
- Foreign currency: Ocean freight is often quoted in United States Dollar (USD). Take into account the fluctuations in the currency. The moment of shipping is leading for securing the currency value.
- Bunker: Bunker is the word used for the fuel of the cargo ships. Bunker can have a major impact on ocean freight costs, because costs fluctuate in line with fluctuations in fuel prices.
- Season: Some goods are seasonal and are frequently shipped at certain times of the year, such as fruit and vegetables, agricultural machines and machines for the meat industry. The increase in demand for capacity and equipment in that period do have an effect on the price and the availability of equipment. When demand is high, fewer containers will be available, which puts pressure on prices.
- Reefer Equipment: Goods subject to temperature sensitivity are often shipped in temperature controlled containers. Demand from the market is increasing and is currently undergoing developments. As a result of these developments, this type of containers will have limited availability, with the effect of a price increase.
In addition to all the above factors, the corona crisis also has an impact on the situation in the container market. The current disruption in the market is partly due to the pandemic, although the market always suffers from some annual imbalances, which usually recover within the quarter. The situation is currently such that due to the corona crisis, several production chains have come to a standstill due to lockdowns. The demand for products from Asia, especially China, has increased enormously, but the shipping companies cannot serve this demand for imports. As a direct consequence of the enormous demand and the very limited supply, the prices for import from Asia are historically high. The situation cannot be regulated by the importer or the logistics partner, which leaves us with nothing more than to operate as well as possible to still ship your valuable goods in time. With our worldwide network of agents and partners, we are still able to completely unburden you with as main goal: A smooth progress of your supply chain. In addition to a proactive attitude from your logistics partner, there are a number of other things that can have a positive effect on your profitability.
HOW TO HANDLE?
There are steps that can be taken to reduce costs for your container transport, but some matters that have an effect on the rates are beyond your control.
- Contracts: The more shipments you can guarantee, the better your rates will be. The validity period of the rates can be discussed in accordance with guaranteed amount of shipments.
- Choose the right time: Is it possible to postpone your shipment? Then you can, for example, choose to ship outside peak times when there is an easier market with high availability of equipment.
- Market knowledge: The peaks in the market, developments in the sector and the movement of your competitors can have an influence. When you share your insights into the market with your logistics service provider, we can work with you to determine the best options based on experience, sector and logistics knowledge.
- Filling: You can minimize unit shipping costs by optimising container stuffing. Please pay attention to the legal weight in the country of shipment and destination.
- Forecasting: By providing your logistics partner a planning, you can book ahead based on a forecast. By working together with your logistics partner and when both can offer transparency, this will ensure that you can ship at the desired time with suitable rates.
- Consolidate: If you have partners who also have orders that do not require a full container, you can choose to consolidate and load together in a container. Your logistics partner can collect the shipments and consolidate them in a container in the warehouse.
- Buffer: It may sound obvious, but ocean freight rates will continue to fluctuate. When you maintain a buffer in your inventory, you are able to absorb these fluctuations. In the case of low-value goods there can be a chance that shipping costs will be higher than the product value.
- SPOT: If you have an urgent shipment, but the pressure on the market is so high that you cannot book equipment on your contract or agreement, you can opt for SPOT rates. During busy times on the market, SPOT rates are higher than the regular rates, but this can guarantee availability of equipment and secure departure.
SUPPLY CHAIN MANAGEMENT & DESIGN
Having a logistics partner that provides fast and secure International Freight Forwarding services and additionally proves an excellent track record is important when you are importing, or exporting your goods. However, in the current market situation this is easier said than done. Alternative solutions are needed to make sure your goods make it to their destination on time. Broekman Logistics specializes in complex logistics challenges. The possibilities are endless, but we would like to give you a taste of what could be the possible solution to your logistics challenge.
Whenever a trade-lane or a specific destination is under pressure, we see the balance of supply and demand being disrupted. Resulting in scarce availability, price fluctuations and delays when in transit. Perhaps a different route might be more interesting, even if the distance to be covered to the place of destination is relatively bigger. In the case of unusual events, like a six day blockage of the Suez Canal, rerouting to circumvent these pressured trade-lanes can be the smart thing to do.
- Different modalities
Remember the different modalities in logistics that we distinguished in a different blog? Knowledge of the possible options is a key element to search for in your logistics partner. Maybe the use of a different modality is the answer to your problems. Both unpredictable and predictable situations may occur that ask for an alternative modality to be addressed. For example equipment shortages for conditioned containers, or tide fluctuations for inland shipping are unpredictable events, but are not unlikely to occur sometimes. Furthermore, in case of pre-announced labor union strikes in trucking, or other predictable disruptions, a well-prepared supply chain is our objective. Mitigating the possible effects for your supply chain is our goal.
- Alternative supply chain design
Combining your goods LCL, or FCL instead, alternating the frequency of shipments, creating more efficiency could reduce costs. One of the advantages of working with a well-established freight forwarder is the knowledge and size of the actualities and capacity to move in a different direction smoothly when needed. Designing alternative solutions, or an out of the box supply chain, is what we do best.
At Broekman Logistics we believe in the right balance between quality and price and with our Personal Touch we strive for complete unburdening and optimal service levels. Our team of experts is ready to help you with a transparent approach and to make your supply chain work optimally for you.
Would you like to know more about importing or exporting containers? Or are you looking for a strategic logistics partner? Broekman Logistics has extensive experience in the fluctuating market and is able to be your logistics partner who can make the difference, especially in challenging times.
For more information, please contact Fabienne Struijs.