3 Global Supply Chain Issues Affecting Your Bottom Line


Large and even medium-sized, companies that are strictly domestic are becoming increasingly less common. Today, the clear majority of enterprise-class companies are global because the benefits of low-cost sourcing into other countries and selling into new foreign markets cannot be passed up.

However, despite overcoming the challenge of becoming global, many companies are still operating under sub-standard global processes and technologies adapted from domestic operations. Two examples of this are global transportation and supply chain visibility. (Read more: 5 Secrets to Master Supply Chain Visibility)

Companies are learning that it’s not enough to track goods at home; supply chain managers must monitor their global shipments and compensate for the added challenges of moving goods internationally.

To avoid losing money because of the wrong international shipping processes, ask yourself these questions:

Do we over-rely on expedited shipping?

For some shippers with time-sensitive and perishable products, expedited shipping is an absolute must. Other organizations, however, use expedited shipping to do damage control when another area of the supply chain has failed.

Overusing expedited transportation can quickly result in profit loss, especially when it’s used as a compensation tool for supply chain failure.

Instead, supply chain managers should adjust their supply chains to allow for extra transport hours while still meeting customer demand. This way, shippers can reduce unsustainable shipping costs without sacrificing customer service.

Better planning and supply chain visibility can reduce expedited freight use by 15-20% annually. This change will translate into significant monetary savings for global companies.

Are we incurring demurrage and detention fines often?

Demurrage refers to transportation delays caused by the late pickup of cargo, and detention relates to the late return of equipment, such as empty containers. Demurrage and detention fees are charged by the transportation asset provider for the time that its equipment is unavailable or idle. These fees are only charged when the unavailability is not the provider’s own fault.

Although there is normally a grace period for demurrage and detention fees, depending on location, these fees can reach hundreds of dollars per container, per day. Needless to say, they add up quickly.

Demurrage and detention charges normally occur for a few reasons: planning schedules are out of balance, communication and notification are poor, and/or there are delays in clearing Customs.

If your company incurs these fees, you’re likely not monitoring cargo arrival carefully, or you don’t have a clear understanding of accurate in-transit cycle times.

Real-time visibility and asset management can accelerate and compress the supply chain, providing companies with reduced trailer assets, inventory, and associated carrying costs. An AberdeenGroup study reported that companies that pre-clear their entries with Customs can save 1–3 days, where cargo would otherwise sit at the terminal, and real-time visibility and coordination can help reduce demurrage and detention fees by 25–50%.

Do we have weak communication with trading partners?

Just as customer service reps’ time would be better spent providing real customer service that builds relationships and cultivates repeat business rather than answering trivial questions, purchasing specialists would work more efficiently by utilizing two-way communication with both vendors and shippers.

A small feat, such as the ability to enter information into a system one time and share it across multiple parties, drastically reduces errors and speeds up order fulfillment. According to the AberdeenGroup report, a US-based consumer packaged goods company used a similar SCV solution and reduced their days of inventory in hand by 24% while reducing lead times by 28% and improving on-time customer delivery by as much as 74%.

Moving away from closed systems that require re-keying of data and multiple calls and emails to place orders should be a no-brainer, considering that today’s technology can help facilitate and streamline communication like never before. Customer and supplier portals may free your staff, allowing them to address more strategic initiatives and increase productivity.

What now?

To wrap up your analysis, answer these questions:

  • What is our ratio of standard shipping to expedited shipping?
  • What percentage of our cargo incurs demurrage and detention fees?
  • How many inquiries that we receive per day relate to order status?

From here, you can begin implementing processes that improve efficiency in the areas stated above and decide if improved supply chain visibility and global transportation will produce tangible results for your company.

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