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Partnerships and redundancy critical to surviving supply chain chaos

After problems securing reliable transport in 2020, shippers are entering this year’s contract negotiations seeking better service

Carriers have struggled to keep up with demand in recent months, and reliability and service levels have collapsed. Shippers are advised to shop around and build redundancy in to their contracts, but to also look to long-term commitments

SHIPPERS and beneficial cargo owners should look to long-term relationships with their carriers and forwarders if they are to avoid the pitfalls of the current supply chain crisis happening again.

“The last 14 months have been really dependent on the equity built with our partners across the supply chain,” said Mary McNelly, global logistics director at footwear brand Crocs. “Riding through the challenges and ambiguity of 2020 would not have been possible without the key strategic partners.”

Crocs entered 2020 concerned about service levels and the introduction of new sulphur rules in shipping fuel, she told the Journal of Commerce’s TPM conference. Then the pandemic hit.

“We reacted just like everybody,” Ms McNelly said. “The global economic outlook was confusing, and many supply chains paused and held inventory at origin to wait and see what happened.”

Crocs’ strategy on ocean freight at the time was based on the fact that there were too many unknowns at the time of last year’s contract season, so they just extended the ones they had in place.

“We had good partnerships that understood there was variability out there,” she said.

But the disruption is far from over and the question now was how to stabilise ocean transport in the midst of a very disruptive period.

For Ms McNelly, the key is to build in redundancy in freight arrangements.

“For me that’s always looked like having multiple forwarding partners and multiple direct partners,” she said. “Gone are the days of having one global forwarder or even one direct carrier supporting 100% of their business. It is not a fair position to put your carrier in but it also means you don’t have redundancy.”

It was also important to be able to shop around.

“Even if your forwarder or carrier wants the volume, they can’t commit because they don’t have the equipment or they are overextended to those that they have already booked,” Ms McNelly said.

“In some scenarios, we saw that partners were unable to go beyond what we had already loaded prior to the pandemic but they came back and said this is what you moved on an average week so we’ll support that.”

But when the equipment shortage emerged, carriers were not even able to honour historical trends.

“As a shipper we have to be strategic about covering our bases,” she said. “When I go into next year, it is going to be adding diversity and adding redundancy, even at the risk of eroding situations where high volume might have optimised cost.

“It is a balance, but it is my belief that the next 14 months are ones where redundancy and the ability to protect your network is the right place to focus on.”

Partnership and collaboration would benefit the carrier side of the equation, too, she said.

“It is important to think for the long term,” she said. “Last year ocean freight became a commodity. I’m paying to scramble to get loaded, not for a service. Transit times are out the window, delays at destination are predictable, so where are we going as an industry?”

Predictability of service didn’t just mean loading, but meant loading and delivering on time and having some stability behind that supply chain.

“I want to get consistency and the right cost,” Ms McNelly said. “I don’t need to go back to a place where carriers are losing money and are not in a good place. I don’t need the prices we had in 2018 again. But we do need to have consistency in cost to be able to budget and manage and have predictable loading.

“In 2019 we were acknowledging that service levels weren’t good enough, but right now we’re begging to get back to 2019 service levels as a short-term goal.”

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