Monday 7 November 2016

UK importers - is the strong dollar giving you a headache?

Since the BREXIT vote, Sterling has fallen against the dollar by around 20%, which is a huge drop, especially if you are one of the 220,000 importers here in the UK. Given that most companies who source from outside the EU are buying from Asia or the USA, their suppliers are most likely selling to them in USD.
Understandably, most importers watch the sterling exchange rate with the USD like a hawk, and some even buy forward, fixing the exchange rate to protect themselves against negative swings which is prudent, although of course it's hard to know how much to buy forward when you don't have a crystal ball...!
Although we monitor exchange rates each day in our business here at SCL, and we saw the rapid fall from circa USD 1.50 pre-referendum to around USD 1.30 shortly afterwards (and recently down to USD 1.20) it seems the public and media have only just realized that the weak pound will have a marked inflationary effect and so almost every day now, we see reports talking about the impact on UK inflation, and we see clear examples, such as petrol prices rising sharply, or talk about Apple jacking up the price of their latest Macbook to compensate for the weak pound.
To be honest, when I see these reports, I wonder whether senior management within these importers also realize that their freight costs, be that air or ocean, are also priced in USD, and so not only are their product prices rising, their freight costs are rising by 20% also. Furthermore, as import duty is based on the "built-up value", consisting of several elements, this includes freight costs and so import duty costs are also increased.
We've been trading since 2009 and we know the freight and logistics marketplace pretty well, and when we review a customers import traffic, we focus on several things.
  • Review the service levels to ensure they match the customers' needs
  • Assess freight costs and whether they are market competitive
  • Is the information flowing to the right stakeholders
  • Are the customers' shipments being correctly declared to Customs (duty could also be over-declared)
  • Is the pricing stable
The telling thing is that over the last 7 years, we have measured an average 35% freight cost saving across all the freight reviews we have carried out, and this is usually a shock (and also a pleasant surprise) for the customer. The reason is two-fold - we know what to look for when reviewing a customers' current logistics model - and we have strong partnerships with logistics providers who are competitive and reliable.
So, before you reach a decision about raising your UK selling prices, do yourself a favour and just make sure that your freight and duty costs are competitive, as you may preserve some margin, retain the customer or even give yourself an edge against your competitors who knee jerked into a large price rise - and still took a hit on their margins! As a consequence, you may also find that you are wasting money on a service which actually doesn't even meet your current needs.
So, just some advice really, business is hard enough as it is so just make sure you look at everything before you do raise prices and you'll not only be a leaner business, you'll also be better prepared if the business environment gets tough in 2017.
If you take a look at our customer testimonials, I am sure you will be impressed, companies large and small rate us highly and our very first client from 2010 is still on board today. I have also been a panel judge at the Lloyds Global Freight Awards for 2 years so we're known as industry and market experts.
Andy Cliff is an industry professional who launched his own logistics consultancy, Straightforward Consultancy Ltd (SCL) after a 30 year career in international logistics, working for companies such as DB Schenker, Kuehne & Nagel and DHL Global Forwarding in operational, sales and management roles. 
Andy was part of the judging panel for the 2016 Global Freight Awards, his second year in this prestigious role. The awards recognize quality, innovation and performance in the field of international logistics.
Andy felt that in an increasingly complex and confusing world of logistics, UK importers and exporters needed a company alongside them which could help them to reduce costs, lessen their workload and provide expert advice and support day-to-day. 

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