We get it. There’s so much going on right now, so much information to get through, digest and then determine: if, what, how and when to implement for your own unique business. How are you going to find time to do all of that?
Six steps to successfully navigate this year’s contract season
Focus on the following six essentials to cut through the noise and implement a foundation for a successful 2021.
1. Adjust Your Mindset: Your competitive advantage as an importer in 2021 will be your ability to move freight when you need it, rebuilding inventories and delivering to your customers the quantities needed when they are needed. Saving $200 per container is pointless if you miss your delivery because you can’t get on a vessel. Mindsets built on “best or lowest cost” won’t work this year. 2021 will be all about capacity and accessing it when you need it. Change your mindset internally at your company to reflect that. Be aware that an “auction” mentality is seeping into carriers’ strategic thinking and this may last through 2021. As you are reading this your freight is being out-bid by someone else on the same carrier!
2. Make your Ecosystem Failsafe: Do you have the visibility ecosystem to provide you the right amount of control and flexibility in your supply chain? Define your ecosystem, who are the partners, their roles, what are the expectations and does each stakeholder understand their role in your ecosystem, where are you obtaining specific allocations, what’s the escalation process, do you have the right tools to pivot quickly to option B, C, or D when things go wrong which they will. How do you balance service options on a booking-by-booking basis (express, premium, fixed, market) and do you have the right process internally to make those decisions quickly? Shoring up that ecosystem that supports your goals will be more critical than ever in 2021.
3. Build a Flex Strategy: Decide on your strategy now to help you flex up and down through the year. Use forecasts to help guide this. Your capacity need in September may be very different from your need in November – so make sure you and your stakeholders understand that early in the process and that a strategy is created to allow you to flex up and then down when necessary.
4. Be a Shipper of Choice: Monthly forecasts are gold, but more importantly is honoring those forecasts. Don’t cancel bookings! If you need to cancel bookings, cancel well in advance. Make decisions quickly. Green light in advance decision-making processes and align on that process with your key stakeholders (like demurrage and pre-pull guarantees, carrier selection, etc). Return empty containers quickly to the terminal or rail ramp before your free time expires. Stay current with payments and within your terms to all your vendors.
5. Shrink Your Fixed: If you decide to sign a long term fixed agreement (NSAs), understand that those allocations may be smaller than you are used to and will not be the same week to week due to blank sailings, skipped rotations and carrier policy. These long term fixed agreements will still be an important hedge but budget for a larger portion of your volume to be shipped at market or premium in 2021. Stay consistent and precise with your fixed allocations; they should be priority. Carriers are restricting long term fixed contracts unless they are the right size, consistent volume flows, and fit into their deployment strategy – but even with these limitations long term fixed agreements (NSAs) can serve a purpose and should be considered.
6. Formal Review Program: Get this on the calendar NOW. Every month. Formally review your TPEB supply chain with your stakeholder team. Establish KPIs and measure them. Review transit time trends, capacity trends, congestion issues, challenges and opportunities. Conditions are changing daily so your strategy will have to evolve. Make sure there is a formal process to evaluate and change course if needed. Blank sailings, congestion, COVID, skipped ports, rail car shortages, equipment shortages, capacity constraints are all here to stay through 2021 and you will have to be nimble to stay resilient.
While these six steps will position you towards implementing a successful import program this year, we realize you may still have additional questions. We are here to help! We’ve been successfully helping importers navigate challenging waters for years. Check out the following additional resources to assist you on this year’s contract journey:
IS A LONG TERM FIXED CONTRACT (NSA) RIGHT FOR YOU?
DISRUPTIVE FORCES ARE DRIVING NEW THINKING IN INTERNATIONAL LOGISTICS: A 14-POINT GUIDE TO HELP YOU PREPARE
If you have questions on how to implement any of these six points or any other challenges you wish to discuss, please contact Michael Van Hagen, VP, Sales and Marketing.