Posted By Administration,
Wednesday, May 14, 2014
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by Tracy D'Silva, Yusen Logistics (Americas) Inc.
Today's challenging shipping environment requires organizations to be nimble and flexible in both pricing and sourcing strategies. The depressed shipping industry of the last 3-4 years has realized the only way to exist is by forming alliances. Hence, we now see the advent of various alliances such as the G6, P3, etc. In the past, carriers had distinguished themselves based on fastest transit and direct services but the current mergers form a more equal footing on a broad scope. No longer are fastest transits and direct ports of call the main criteria – carriers have realized that they only way to distinguish themselves is by customer service, EDI and key unique scopes in certain trades.
Fluctuating fuel costs play a significant part in pricing. Bunker price had remained significantly stable past 2-3 years. A changing environmental or political situation can, however, quickly change this scenario and cause bunker to rise up significantly and add to the costs of goods and freight.
For NVO's the challenge is further increased in selection of the right carrier partners to meet core company criteria. Importance is paid to which carriers can form the right alliance in meeting with a majority of a company's customer portfolios. Customers are becoming savvier in ensuring a tighter supply chain and wanting more visibility to their product while in transit. The shipping industry has a long way to go in this field but has realized the importance of using IT not as an added component but as a critical factor to become the company of choice by customers.
Looking at above scenarios, some of the common key factors that distinguish higher performers in this dynamic market scenario:
- Market focus and position
Due to a mixture of organic growth and strategic acquisitions, high performers not only have a strong presence in emerging markets such as Brazil, Russia, India, China and Mexico, they also exert control over the most profitable trade lanes – Europe to Asia, for example, or North America to both South America and Asia. Moreover, by leveraging dominant positions in domestic freight (both air and road), they have managed to maintain volume growth without compromising their revenues.
- Distinctive capabilities
According to various analysis and scorecards of industry players, three business capabilities stand out in particular.
- Flexible business model. Time to market is critical in this industry – the flexibility to respond with speed and agility to a customer's need for convenience. Establish new ocean freight links to grow geographies such as Africa and identify other countries on the horizon. Open multiple new service links that span the global trade routes over a company's dominating trade routes.
- Deep expertise in key customer industries. Industry knowledge is growing in importance as customers extend their supply chains in response to globalization. High performers have been leaders in developing extensive expertise in the industries they serve, going well beyond traditional transportation and warehousing solutions. Increasingly, logistics companies are strengthening their ability to collaborate and are better aligning themselves with customers' operations, processes, industry know-how and technology.
- Using IT to maintain 360 degree control. The high performers have moved well beyond using IT merely as an enabler of internal process management. Instead, they leverage their proprietary customer-facing technologies to empower their customers, offering them end-to-end visibility across the entire supply chain. Important to ongoing success will be the ability to develop more "intelligent" services, more dynamic planning and increased alignment with customers' operations and processes. Supply chain visibility remains a top operational priority for large customers. Customers generally struggle to achieve a unified picture of their supply chains because of the legacy information systems designed to operate within a single company, not across a network of companies. Thus, the ability to share real-time information with key customers, suppliers and partners has become critical in the freight forwarding industry.
- Performance anatomy
With freight forwarding and contract logistics, performance anatomy relates not only to overall operational excellence but also to such procurement practices as the purchase of transportation capacity and the innovative use of shared services. Focus on productivity improvement forces the need for operational excellence, thus relating to significantly higher gross profit conversion.
Companies that pay greater emphasis on process automation and on finding the right balance between volume commitments and spot buying have discovered a strategy that enables them to achieve competitive rates in the most important trade lanes. They have been enthusiastic adopters of shared services, not just for internal processes but also to improve customer services and supply chain management.
The flexibility and speed to adapt to changing environment is crucial to a company's success. Continuous improvement in processes and adopting innovative technology are the future of growth and ensuring a sustainable and profitable company.
Tracy D'Silva is the Director (Ocean Freight Forwarding) at Yusen Logistics (Americas) Inc. International Division, an NYK Group Company. Commercially responsible for the Ocean Freight Forwarding Product for the Americas based in Secaucus, NJ, she completed her Masters Degree in Marketing from NMIMS in India and has worked in different countries and locations in her various positions in the logistics industry over the past 17 years.
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