When Charles Dickens penned his famous line, “It was the best of times, it was the worst of times,” he might have been talking about the past few years for import-export supply chains.
On the one hand, we’ve faced a barrage of health, environmental and labor contingencies that have challenged even the best-run of businesses.
On the other, we’ve been treated to a masterclass on how to persevere and keep goods flowing in spite of these challenges.
Many of the things we learned in that class still apply today, especially for global shippers, which is why we’d like to use this month’s column to talk about how to build a more resilient supply chain – all with the help of this handy acrostic.
Risk assessment
Let’s start with the obvious: International sourcing adds numerous variables like more hand-offs, extra regulatory requirements, and various geopolitical disruptions to a supply chain – and all of them are fraught with added risk. And when we say risk assessment, we are referring to a company being aware of the potential disruptions such as natural disasters, suppliers going bankrupt, regulatory changes, and internal failures among other possibilities.
There’s not much you can do to eliminate these risks; they go with the territory. However, by identifying as many of them as you can, both up front and frequently, you’ll have the foundation you need to create a more comprehensive set of contingency plans to help mitigate them. You’ll also be able to do a better job of weighing the pros and cons of using the many different global sourcing locations, carriers and suppliers that are usually at your disposal, create a diverse supplier base and quite possibly avoid some especially risky options right out of the gate.
Extra contingency planning
If you want to see a great example of contingency planning in action, look no further than military and commercial aviation. Each time a new pilot climbs into the cockpit, he or she is taught not only how to do the basics like taking off and landing but also what do to if an engine fails, visibility is limited, or the plane goes into a tailspin.
In order to be truly resilient, your import-export supply chain has to adopt a similar mindset and embed a “what happens if things go wrong” mentality into the fabric of your international operations. Among other things, this means not only creating detailed contingency plans for a wide variety of scenarios (like the ones we mentioned earlier) but also proactively building more agility and flex points into your day-to-day workflow - and making sure that the people who are responsible for using those flex points are well versed on how to exercise them
Supplier diversification
There’s a lot to be said for working with a small but trusted universe of suppliers and transportation providers. But if the past few years have taught us anything it’s that it is definitely possible for that group to be too small, especially when a Black Swan event occurs.
If, for example, you had built up a great relationship with a supplier in Ukraine that supplied almost 100% of one of your key parts, you surely found yourself scrambling to find alternatives. You may have also experienced disruptions far more often during 2022 than you would have if you had an additional supplier (or better yet, more than one) who was based in another country.
The more variety you can build into your supplier base now, the more likely your company is to be able to pivot quickly and avoid significant transportation or manufacturing delays later, even if one of your primary suppliers goes out of business, gets hit by an earthquake or flood, or winds up experiencing a major interference of its own.
Increased technology investment
We’re not one of those companies that believe systems are a panacea (as we’ve stated in several previous viewpoints and newsletters). However, we are huge fans of the value that properly applied technology can bring to many aspects of transportation and logistics.
A good demand forecasting tool, for example, can go a long way toward helping a business strike a more effective balance between the extremes of just-in-time and inventory glut (something we’ve witnessed all too often in recent years). And certain visibility tools can really help with enabling the kind of supplier and provider collaboration that will permit you to spot potential issues and start executing a Plan B sooner. Being aware of what your company needs to manage will allow you to prioritize your technology spend on tools that will provide you with the necessary metrics.
Your systems don’t necessarily need to be cutting-edge in order to be effective for import-export agility. However, they do need to be up-to-speed and connected to as many significant stakeholders as possible, which probably means increasing your technology spend.
Legislative and regulatory fluency
International sourcing comes complete with numerous must-know but often difficult-to-decipher trade regulations, and the price for non-compliance can be steep. But you probably knew that already, didn’t you?
To help avoid incurring unnecessary penalty costs or having your inventory detained, it’s imperative for your company to be fluent in the legal ins and outs of shipping to and from every country where you have a supplier or customer – and to be vigilant about ensuring that your international suppliers and carriers are fully compliant with the same. (A word to the wise: Don’t just assume that they are.) In the absence of in-house expertise, you’d be wise to align yourself with an experienced freight forwarder or international 3PL that can help navigate these complexities for you and your suppliers.
Insurance
Most of us would never dream of driving a car or owning a home without making sure they’re properly insured. Yet too often global shippers or their suppliers will skip this key step when it comes to protecting their inventory in transit, despite being fully aware that even the best-handled cargo will occasionally get lost, damaged, or delayed – and that it’s far more likely to do so if it’s crossing an ocean and/or international borders.
When it comes to international shipping, a watertight cargo insurance policy can be worth its weight in gold and financial resilience. In addition to preventing you from taking a hit for the value of your cargo, many of these policies also provide full reimbursement for the costs of your shipping and even throw in a little extra for the added costs that go hand-in-hand with addressing shipping contingencies.
Extensive, multi-tiered supplier visibility
No doubt, you’re familiar with how your global tier one suppliers operate. But can you say the same about the tier two, tier three and other suppliers who support them?
Like it or not, each of these seemingly peripheral suppliers could have a profound effect on your logistics network or image, which is why it behooves you to do your homework and find out how they really roll: Do they engage in humane business practices? What percentage of your tier one suppliers’ needs do they handle? What would the consequences be if this supplier went out of business? And what other vulnerabilities do you see?
The answers you uncover might require you to revisit or revise one or more of your contingency plans. But your supply chain will be better and more agile because of it.
No-holds-barred communication
When different companies and carriers work together, it’s tempting to play things close to the chest, especially if there’s a delay or issue that might make one player look less-than-perfect. And such reticence has no place in a global supply chain.
As soon as a glitch, damage or delay occurs, the best thing that the party who caused it or noticed it can do is specify the technical problems via formal communications. And the best thing you as a company can do is not shoot the messenger.
This prompt heads up will usually increase the solutions at your disposal, including diverting freight from other incoming shipments, arranging for an alternate shipment from a closer supplier or deciding to pay for premium (read: faster) shipping for one or more legs of the impacted products’ remaining journey.
Transparency
When it comes to this last attribute, it’s easy to assume that we’re talking about visibility. And to an extent we are.
But we’re also talking about something more: The open-book nature of visibility and communication that characterizes the world’s best-run global supply chains.
While your company may not necessarily want to know exactly how the sausage is being made for each and every aspect of your international shipments, it’s imperative that you have the option to do so at any time – and that you and other key stakeholders can quickly and easily access any granular details about your production and shipments that you want to see.
Whether this comes in the form of regular meetings, e-mails with reports and online scorecards or tracking-and-tracing tools, transparency will go a long way towards keeping you in the loop and far more tuned into the various interdependencies that can make or break your success.
Thanks for reading. For more details about your import-export supply chain, including protecting the integrity of your ocean transportation spend, drop our experts a line.
