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

Freight forwarders websites and sales processes are dated and unsuited to changing needs of customers

How is that freight forwarders perform so poorly in this area? I have a theory, which is that freight forwarders really want to secure regular business, and one- off spot quotation requests are often seen as a poor return on their time and effort, but it doesn't excuse many of their websites which are dated and often fail to convey a compelling sales message or any real differentiation from their competitors even when they may have a strong USP.

Please read the below article from Loadstar which is a real eye-opener and would make a freight forwarding sales & marketing director hang their head in shame!

http://theloadstar.co.uk/forwarders-poor-online-sales-presence-means-losing-out-on-ad-hoc-freight-sales/

Kind Regards


Andy CliffStraightforward Consultancy Ltd – logistics simplified

Asia-Europe container freight rates bounce by 151% - time for a reality check!

Well, it had to happen, as rates on the Asia-Europe trade had been weakening ever since Chinese New Year, and container lines had been trying (in vain) to implement increases however the timing was poor as the market is traditionally soft between Chinese New Year and the beginning of the next year's Peak Season (say August onwards).

Anyway, rates bounced back in a big way last Friday, climbing USD 518 per TEU (Twenty Foot Equivalent Unit) and so now would be a good time to actually check what you are paying for your ocean freight from Asia....!

Our customers sit within our portfolio so we've already made agreements for the month of May and they can rest easy.

http://www.lloydsloadinglist.com/freight-directory/news/Relief-at-last-for-Asia-north-Europe-carriers/62742.htm?utm_source=Lloyd%27s+Loading+List+Daily+News+Bulletin&utm_campaign=69d4d71dae-Wed_30_July7_30_2014&utm_medium=email&utm_term=0_1a5c244239-69d4d71dae-256747097

Kind Regards


Andy Cliff 

UK haulage crisis deepens with importers and exporters expected to bear the brunt of cost hikes

Good afternoon All

Regular importers and exporters may already be aware of this issue but a perfect storm has been brewing over the past few years (recession - high fuel costs - low margins - low wages - driver training requirements) which is causing a real issue - containers can't be delivered without the human element!

This is meaning that freight forwarders are now imposing some pretty large increases (15-20%) to ensure that they ensure that they can maintain service levels and avoid making a loss on UK pick up or delivery costs.

Most Asia-UK ocean freight arrives into either Felixstowe or Southampton and container deliveries are already expensive, compared to average ocean freight port-port costs. We're being told that forwarders are imposing increases of between £ 100 and £ 150 per 20/40 from say FXT to Manchester. Time to take control of your costs and ensure your service works - at a fair price. Need help, just drop me a line!

Link to article on UK driver crisis

Kind Regards

Andy Cliff
Director

Straightforward Consultancy Ltd
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

Importing from Asia into the UK (which camp are you in?)

Asia importers into the UK, please do read this (this also applies if you import from the US, just to a lesser degree)

If you import from Asia by ocean freight (full container/FCL) you will probably be in one of three camps.

Camp 1. You have 1000+ containers per annum and negotiated a fixed rate deal (probably in December 2014) to cover January-June 2015 - or possibly January-December 2015 (year round rate). You may deal with a forwarder or could have done a deal direct with a shipping line. 

Camp 2. You import over 500 containers per annum but you agreed a short term rate (say quarterly) or possibly a monthly rate agreement. You deal directly with a forwarder and they update the rates when they expire.

Camp 3. You import anything from 50-500 containers per annum and you rely on your freight forwarder to keep the rates competitive, letting you know when the rates change or possibly, you just an understanding that they will be fair.

If you’re in Camp 1, you may now be regretting your decision to go for a fixed rate deal, which in previous years, worked out pretty well in a volatile market. Why? It gave you peace of mind and you knew where you stood. Sometimes the market rates were lower than your rate and sometimes they were higher (for example leading up to Chinese New Year, or in Peak Season (Aug-Nov) but overall it was competitive and low maintenance. However, rates have fallen and become very fluid and fixed rate deals are expensive.

If you’re in Camp 2, you’re probably thinking this is a good place to be, you have rate certainty but you’re not locked in for too long and if the market falls (and you have access to solid market information) you can re-negotiate to reflect that, although this can be time consuming and gathering market information to aid your negotiation can also be tedious and sometimes frustrating in a fast-changing market.

If you’re in Camp 3, well, you may not really understand the freight market, Customs procedures, freight terminology or how markets like Asia work (and why would you want to!) and your company is often very operational, having multiple responsibilities, working to satisfy your customers, and getting that order shipped. 

Many businesses are like that, flat-structured, very operational and having little time to reflect on whether they’re doing it the right way and not having the expertise either. These customers are the most likely to have no formal rate agreement against which they can check their freight costs/invoices or have little knowledge of the freight  market and how, from Asia in particular, rates can vary wildly from week to week, never mind month to month! 

So what does that mean? Well it means that you could be paying hundreds of dollars more for a container than necessary, which when the pound is so weak against the USD, makes even more of a difference to your landed cost. (The pound reached a 5 year low against the USD this month).

We specialize in supporting the customers who sit in Camp 3 and use our influence, buying power and market knowledge to not only achieve much better freight rates (our average cost saving is 30%), we also raise their profile as a customer, ensuring that they receive the sort of service normally reserved for larger corporate clients. 

We also have Customs expertise and help customers classify their goods much more accurately, often creating cost savings in import duty and putting in place a proper Customs compliance process for them as well. As an example, we recovered 

£ 26,000 of import duty from HMRC for one of our large customers who import from the US (Middleby UK) and this related to an apparently minor difference of 0.5% in duty – but these small variances can often make a big difference to landed costs.

And, best of all, we offer free consultations for customers and once engaged, work on a shared savings model, so we effectively provide our service for no cost, leaving the customer with a significant net saving, then able to use that money to invest in product development, sales or another area requiring

investment. All the savings are measured accurately per shipment and supported by detailed monthly reports.

Please do take a look at our website, our blog and the highly complimentary testimonials from our customers, and I should add that many customers have been on board with us since start up in 2010, so we’re clearly adding value year on year. Most customers say that they couldn’t really envisage going back to the way they ‘managed’ their freight and logistics before which really makes us feel valued, and also, a vital part of their business. A great feeling.

Kind Regards

Andy Cliff
Director

Straightforward Consultancy Ltd
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

Containerships see an 8% drop in fuel efficiency in past 25 years - hard to believe but true!

Good afternoon All

I just spotted this article and thought it was worth sharing with you.

It seems that even though container ships are getting larger and larger (circa 20,000 TEU), and the lift costs naturally dropping (sorry, logistics jargon is hard to avoid! - the lift cost is the cost to move each container carried) the vessels themselves are actually 8% less fuel efficient than in 1990.

Seems odd to me, as you'd think that with clean diesel technology in our trucks and cars, that this same technology is being employed in ships and shipping lines are very concerned about fuel costs as you can imagine.

http://theloadstar.co.uk/new-mega-boxships-not-as-fuel-efficient-as-those-delivered-25-years-ago-claim/?utm_source=The+Loadstar+daily+email&utm_campaign=af2027e358-Loadstar_16_April4_16_2015&utm_medium=email&utm_term=0_c4570e43d4-af2027e358-125883633


Have a great weekend, the weather is dry and sunny here in Warrington and Spring is well upon us!

Kind Regards


Andy Cliff
Director
Straightforward Consultancy Ltd (SCL)
logistics simplified