30 days is a long time in logistics!

If you import from Asia, and if you're concerned about keeping a lid on your landed freight costs, then now would be a good time to take a close look at what rates you are actually paying, as we've seem some historic lows in rate terms over the last few weeks in the freight indexes from Asia (USD 205 per 20 foot container from Shanghai to UK).

That sounds like an amazingly low freight cost, especially as your after arrival costs would probably be in the region of GBP 600-700 (depending on your location in the UK. However these low rates are now a distant memory, hence the title of this post, and rates are climbing sharply. 

As we approach the start of the Peak Season as it's called in logistics (typically August-November) when retailers in particular need their Christmas stock on the shelves from September onwards, volumes increase and in turn, so do freight rates.

Despite their investment in huge container ships which reduce their cost per container, the shipping lines can't make money at rates as low as USD 205 so they've instigated General Rate Increases (GRIs) from 1-July and they have had a dramatic effect, with rates bouncing by over 300 percent in 2 weeks (from USD 205 to USD 879!).

Last Friday they eased back a little, but this is the calm before the storm in my opinion as the shipping lines have announced further massive increases from August 1st of USD 1000/TEU/20 foot so even though some commentators are saying the rate increases won't stick, I'm not so sure as lines are also withdrawing capacity by either reducing the number of vessels in service or just cutting back their sailing schedules. Just take a look at the below report from Mike Wackett at Loadstar.

http://theloadstar.co.uk/ckyhe-follows-asia-europe-peak-season-capacity-cut-trend-but-2m-remains-firm/

Some customers, particularly large ones with +1000 TEU of volume may have done fixed term deals (say 6 months, 12 months) however the index was USD 1085/TEU on 2-Jan-15 so they may have regretted the decision to fix their rates especially as the rates have been generally weak since Chinese New Year. Other customers may be on a monthly rate update and many just pay whatever rate they're charged as they have no time to spare and have no way of knowing what the market is doing, quite understandable and very common.

Just in case you're unsure what a TEU is, it's a Twenty Foot Equivalent Unit, so a 20 foot container is 1 TEU and a 40 foot is 2 TEU so it's really a measure of volume in ocean freight terms used by lines, forwarders and customers.

Just imagine having a fixed rate of say USD 900-1000/TEU/20 foot and hearing that the market rates have fallen down as low as USD 205! I suppose that's a risk you take but maybe what I'd really suggest you do is to seek out some independent expert advice so that you can put some controls in place , keep your landed costs as low as possible and preserve your margins in these testing times.

Until the next time.

Andy Cliff
http://www.straightforwardconsultancy.co.uk/about-us.php

Importing from Asia to the UK? On top of your freight costs?

If you import from Asia, and if you're concerned about keeping a lid on your landed freight costs, then now would be a good time to take a close look at what rates you are actually paying as we've seem some historic lows in rate terms over the last few weeks in the freight indexes from Asia (USD 205 per 20 foot container from Shanghai to UK).

That sounds like an amazingly low freight cost, especially as your after arrival costs would probably be in the region of GBP 600-700 (depending on your location in the UK. However these rates are now a distant memory (30 days is a long time in logistics and freight forwarding) and as we approach the start of the Peak Season as it's called (say August-November) when retailers need their Christmas stock on the shelves from September onwards, volumes increase and in turn, freight rates.

The shipping lines can't make money at rates as low as USD 205 so they instigated General Rate Increases (GRIs) from 1-July and they had a dramatic effect, with rates bouncing by over 300 percent in 2 weeks (from USD 205 to USD 879!).

Last Friday they eased back a little, but this is the calm before the storm in my opinion as the lines have announced further massive increases from August 1st of USD 1000/TEU/20 foot so even though some commentators are saying the rate increases will fail, I am not so sure as lines are also withdrawing capacity by reducing the number of vessels in service or just reducing the sailing schedules.

Some customers, particularly large ones with +1000 TEU of volume may have done fixed term deals (say 6 months, 12 months) however the index was USD 1085/TEU on 2-Jan-15 so they may have regretted the decision to fix their rates especially as the rates have been generally weak since Chinese New Year.

Just imagine having a fixed rate of say USD 900-1000/TEU/20 foot and hearing that the market rates have fallen down as low as USD 205! I suppose that's a risk you take but maybe what you really need is to seek some independent expert advice so that you can keep your landed costs as low as possible and preserve your margins in these testing times.

At Straightforward Consultancy (SCL), we're managing the freight portfolios of many customers and securing better deals and service than they could on their own which is why we're so highly rated by our customers. Just check out our website testimonials or case studies to see why we would be a real asset to your team.

It'd be great to hear from you and as we say on our website, a consultation costs nothing and you're bound to learn something!

Until the next time.

Andy Cliff
Director

Straightforward Consultancy Ltd – logistics simplified
4, Beckett Drive
Winwick Park
Warrington
Cheshire
WA2 8XJ

Tel : 07934 443492
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Blog : http://straightforwardconsultancy.blogspot.co.uk/
Twitter: @AndyCliffSCL
Linkedin: https://www.linkedin.com/in/andycliffscl

Skype: andy.cliff1@skype.com

Importers - is your freight forwarder / logistics provider behaving like your energy supplier?

Good afternoon All

As you may know, if you import product from overseas, you will employ the services of a freight forwarder / logistics provider and they will transport your product from your supplier in Asia or North America (the most common origins for companies who source product from overseas) all the way to your door, also taking care of Customs procedures on your behalf.

All of the world's freight markets are different and the freight prices which customers pay will vary according to many factors, but one of the primary drivers of freight rates is basic supply and demand. If we take ocean freight as an example (and the vast majority of global freight traffic moves this way) the rates are often driven by the amount of capacity on that shipping lane or route, and the amount of traffic moving. As an example, the North American market (also known as the Transatlantic trade lane) generally has less capacity, due to smaller vessels, and this means that rates are pretty stable, with some minor seasonal variations.

The market which is extremely volatile is the Asia-Europe market, also the world's largest trade lane, where we can see huge swings in freight costs, driven by two main factors.

1. Spikes in activity/demand connected with two main periods, the first of which is Chinese New Year (early Feb) where Chinese factories close for around 1 week and there is a rush to ship products before the big shutdown. The second is a longer period of increased activity linked to our pre-Christmas trading here in Europe and this runs from August until mid-November. With good reason, you may ask "Why does it start in August?" Well, it can take around 6 weeks to get goods from origin in China all the way to the store and we all know how early we see Christmas displays in our stores!

2. The second main factor is capacity, or how much supply/space there is compared to the amount of demand (container volume). Recently shipping lines have been employing larger and larger vessels (also known as ULCVs (Ultra Large Container Vessels) to reduce their lift cost (cost per container) however this has coincided with generally weak volumes on the Asia-Europe trade lane which has in turn led to significant rate volatility.

The reason why I titled my post "Is your logistics provider behaving like your energy provider?" is because here in the UK, there has been a lot of criticism of the Big-6 energy providers who fail to pass on cost reductions to consumers when the market is soft, but are swift to increase prices when costs rise.

In the freight world, you, the customer are at the end of the chain and rely on your freight forwarder to charge you a competitive freight rate, however what often happens is that your rates don't follow the market down - they only seem to go up!

Add to this the fact that it's often difficult and time consuming for you to find out whether you are paying a fair price and with many customers short of logistics expertise in house, they pay whatever they're charged. We've seen this so many times over the last 5 years and we think it's related to the flatter structures within small-medium sized companies and the fact they find this area complicated and confusing (quite understandable!).

And now back to Asia...from early May, ocean freight rates have been falling, from a high of around USD 861 per 20ft container / TEU (Shanghai-UK) to as low as USD 205 per 20ft container on 19-Jun. Rates have been changing on a weekly basis and as we live in this world every day - and we know how the freight markets work - we have been negotiating rates and ensuring that our customers benefit from the market falls.

And where are we today? Well, we've hit the bottom and as a result, the shipping lines have announced eye-watering rate increases (USD 1100 per 20 foot/TEU) from 1-July and as we're now leading into the start of Peak Season 2015, the only way now is up.

Last Friday, a week before the huge increase, rates from Shanghai to Europe more than doubled, reaching USD 548 per 20 foot so regardless of what rates you have been paying, now is the time to take a really close look at this area and find a way to keep a lid on your freight costs as we run to the end of 2015.

If you would like some advice or would like to know more about how we could help you and take away workload and headaches associated with your supply chain, just drop me a line at andy@straightforwardconsultancy.co.uk.

Also please do take a look at our highly complimentary testimonials and case studies, they show how we've helped customers to reduce freight costs by an average of 35%, reduce their Customs duty burden, improve service levels and have the assurance that their freight and Customs areas are being professionally managed in a cost effective way. 

Kind Regards


Andy Cliff
Straightforward Consultancy Ltd – logistics simplified

http://www.straightforwardconsultancy.co.uk/testimonials.php