Transportation Rates part 2 – Rates Aren’t Everything…

How Can I Best Take Advantage of the Current Transportation Climate?

This is the second of a two-part series focusing on international transportation pricing, namely on ocean containers. (Click here to view part 1 of this part 2 series on international ocean transportation costs)…

The first reaction we often see is to demand the lowest price option when it comes to ocean transportation costs. Making logistics decisions based solely on price does have some merit, quite a lot actually. While always going with the least expensive option may help minimize inbound ocean transportation costs, there are other factors that can make or break a company’s supply chain effectiveness. This can especially be true with smaller or emerging companies.

Here are some affects that, in the bigger picture, significantly outweigh up-front international transportation cost savings:

• vessel delays are common on lower-cost sailings
• increased transit time is almost assured
• vessels reach capacity more frequently, shipments with lower revenue to the carrier are bumped to later sailings

Imagine what the impact of this would be if you are an emerging company trying to break into a new market. Let’s say that your market happens to be served by Wal-Mart or Costco or another big box retailer. Transit time and supply chain execution are your biggest allies when providing products to these giants, missing a deadline may mean the years of work that have been put in to land a deal could be out the window.

There are other factors beyond just pure container costs that should also be considered.

-Has the load configuration been maximized to get as much of your product as possible into each container, while maintaining the integrity of your goods? Container cube maximization is critical to help optimize transportation costs.

-Shipment routing is very critical to the process. When global supply chain efficiency is a requirement to properly serve your customers, it is important to manage the time it takes to get from origin to destination. It is just like booking a flight with an airline; you may pay less but not consider the real outcome of having a couple of extra layovers. In the end, the 2 hour mini-vacation in Dallas-Fort Worth and $12 egg salad sandwich isn’t worth the $31 you saved on airfare. And no, the extra time you get to spend in the airport playing Angry Birds does not make a case against this!

-The sourcing supplier is critical to this as well. Having one that produces your goods on time, with the quality you are looking for is just as important as the rest of this. Delays or quality control issues put you behind and force you to be reactive, which will cost time and money in the end.

We suggest looking at the entire supply chain and each component within it, and then make your decisions. What are the implications of basing logistics decisions solely on who can provide the cheapest container price? How can I put my business in the best position to get my product to market in the right place, in the right time while optimizing transportation costs? Those are critical supply chain and logistics questions that sometimes take precedence over who has the cheapest ocean container prices.

For more information on how you can turn your supply chain into a strength of your business, please visit us at http://legacyscs.wpengine.com/, or call 800.361.5028 ext 5. Also feel free to comment below- we would love to hear your thoughts.