Tag:

logistics

Shipping Stocks to watch in 2023

by Editorial Team

Companies that transport commodities over waterways and oceans are essential to the world economy. The need for shipping services has surged as a result of the COVID-19 outbreak and supply chain disruptions, making shipping equities an appealing investment opportunity. The following list of the top shipping stocks for Q2 2023 is based on the financial performance, market trends, and development prospects of the individual companies.

Maersk is a Danish integrated maritime corporation that provides services for ports, terminals, logistics, and container transportation. Maersk reported a solid financial performance in 2022, increasing its net profit from $2.7 billion in 2021 to $6.5 billion. Due to strong freight rates and volume increases, the company’s container shipping segment recorded a 41% gain in revenue in 2022. Maersk is dedicated to sustainability as well and has set a challenging target to achieve carbon neutrality by 2050.

Container shipping, dry bulk shipping, and other shipping-related services are all provided by the Chinese shipping behemoth COSCO Shipping Holdings Co., Ltd. (CICOY). COSCO announced a net profit of $2.5 billion in 2022, an increase from $1.3 billion in 2021. Revenue for the company’s container shipping division increased by 49% in 2022 as a result of better freight rates and volume increases. COSCO has strategically acquired businesses and formed alliances to grow its global network.

Hapag-Lloyd AG (HLAG): With a fleet of more than 230 ships, Hapag-Lloyd is a German container shipping corporation. Hapag-Lloyd reported a $1.9 billion net profit in 2022, up from $1.1 billion in 2021. Revenue for the company’s container shipping segment increased by 29% in 2022 as a result of better freight rates and volume expansion. To enhance its operations and customer service, Hapag-Lloyd has also made investments in automation and digitalization.

Maersk A/S, A.P. Moller (AMKBY): Danish integrated maritime firm A.P. Moller-Maersk engages in container shipping, port and terminal services, and logistics and other services. The business reported a net profit of $5.6 billion in 2022, an increase from $1.7 billion in 2021. Due to rising freight rates and volume increases, the company’s container shipping segment recorded a 38% gain in revenue in 2022. A.P. Moller – Maersk is dedicated to sustainability as well and has a goal of having carbon-neutral ships by the year 2030.

Evergreen Marine Corp. (EGRNF): With a fleet of more than 200 ships, Evergreen Marine is a Taiwanese container shipping firm. Evergreen Marine reported a $1.2 billion net profit in 2022, up from $590 million in 2021. Due to rising freight rates and volume increases, the company’s container shipping segment recorded a 31% gain in revenue in 2022. Evergreen Marine has also made investments to increase the effectiveness of its fleet and broaden its global network.

Investors should be aware that shipping stocks might be unstable because of things like geopolitical conflicts, modifications to international trade laws, and changes in freight prices. However, due to the expansion of e-commerce and the global economic recovery, it is anticipated that demand for shipping services will continue to be robust in the upcoming years. These best shipping stocks for Q2 2023 are thus well-positioned to profit from these trends and provide investors with healthy returns.

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The Challenges Facing Freight Forwarders Amid Falling Shipping Rates

by Editorial Team

As a result of continuing declines in transportation rates, freight forwarders all over the world faced a substantial slowdown in business during the second quarter of 2023. Nevertheless, in spite of the difficult circumstances, many people continue to have faith that there would be an increase in demand as the peak season draws closer.

The Existing Circumstances in the World

A recent poll that was carried out by the online container logistics company Container xChange revealed that 65 percent of freight forwarders reported a slowdown in activity during the second quarter of 2023 in comparison to the first quarter of 2023. A concerning upward trend in container prices was uncovered by the survey as well. When compared to June 2022 and June 2021, average box prices in important supply chain markets such as China, Europe, and the United States were at their lowest point in June 2023. This fall in pricing may put more pressure on the profit margins of shipping businesses.

A More In-Depth Examining of the Figures

According to the findings of a study conducted by Container xChange on the shipping sector and container movements in the first half of 2023, there was a huge surplus of containers as well as high market uncertainty, which led to severe rate erosion. As we go closer and closer to the time of year when the shipping sector sees the most activity, the average container costs have been plummeting, and there are no indicators that this trend will reverse itself.

In the second quarter of 2023, prices for new and cargo-worthy standard containers decreased in most locations or increased slightly in others. For ordinary containers, the pricing trends in every other region went in the opposite direction, with the exception of Northern Europe, the Middle East, and the Indian subcontinent, which all showed a slight increase.

The Prognosis for the Years to Come

64% of freight forwarders questioned are optimistic about future business improvements, compared to 15% who are doubtful and 21% who are pessimistic. This is in spite of the current problems that are being faced. 64% of respondents anticipate an increase in business as the peak season draws closer, while 21% do not anticipate an upswing in sales. Around 15% of respondents have indicated that they do not know due to the various disturbances that have obscured their perspective.

Concluding Remarks

As China escaped from COVID lockdowns at the beginning of the year 2023, the maritime industry had high hopes that everything would return to normal. The persistent fall in shipping rates as a result of sluggish demand, an upcoming global recession, and inflation that is preventing consumers from purchasing has, however, prolonged the rate slump and shattered hopes of a rebound. As we move forward, it will be necessary for the industry to manage these turbulent seas and discover strategies to remain afloat despite the hurdles.

What are your thoughts on the state that the shipping industry finds itself in at the moment? What do you think the most effective way is for freight forwarders to adjust to these challenges? Leave a comment below with your ideas and observations to share with others.

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Key Trends Shaping the Future of Global Trade

by Editorial Team

Over the past few years, there has been a significant evolution in global trade, and this tendency is expected to continue. Businesses must adjust to new realities in the wake of the COVID-19 epidemic, supply chain disruptions, and geopolitical concerns. Here are a few of the major trends influencing future international trade.

Increase in E-Commerce

In recent years, e-commerce has expanded quickly, and the pandemic has only increased this tendency. Businesses are expanding their e-commerce operations in response to the growing number of online shoppers. This has important ramifications for international trade since companies now have to deal with complicated cross-border e-commerce legislation and make investments in supply chain and logistics infrastructure that can cope with the demands of online sales.

Developing New Trade Blocs

There are now other players in the global trade game in addition to the conventional trading blocs of North America, Europe, and Asia. There are a growing number of new trade agreements, like the Regional Comprehensive Economic Partnership and the African Continental Free Trade Area. For companies who are prepared to investigate them, these new blocs are opening up new markets and opportunities.

How Sustainability Affects

Global trade is beginning to give greater weight to sustainability. Businesses are being pushed to cut waste, lower their carbon footprint, and implement more ecologically friendly procedures. This has an impact on supply chain management because companies need to discover strategies to lessen the environmental impact of their operations while preserving effectiveness and profitability.

The Function of Technology

Every facet of international trade is changing due to technology, from compliance and customs to logistics and supply chain management. Processes are being streamlined, visibility is being increased, and expenses are being cut using artificial intelligence, blockchain, and the Internet of Things. Slow adopters of these technologies run the danger of falling behind their rivals.

The Value of Resistance

Recent occurrences have illustrated the value of resilience in international trade. Regardless of the situation, whether it is a pandemic, a natural disaster, or a geopolitical crisis, businesses must be prepared to quickly adjust. This calls for an adaptable supply chain that can manage hiccups and a willingness to spend money on backup plans.

Conclusion

The landscape of international trade is continuously changing, and businesses need to be ready to adjust to the new conditions. Businesses can set themselves up for future success by embracing e-commerce, investigating new trade blocs, prioritizing sustainability, implementing technology, and developing resilience.

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How Formula 1 Travels the World: An Intricate Dance of Logistics

by Editorial Team

The Formula 1 (F1) world is a display of speed, accuracy, and glitz. But behind the scenes, the logistics of transporting the full F1 circus across the world take place, and they are just as astounding. The procedure is evidence of careful planning, arranging, and carrying out, all with the goal of making sure that the show goes on, no matter where in the globe the next race is.

The Logistics of Formula One

It is a massive endeavor to move the F1 infrastructure from one nation to another. Each of the 10 Formula One teams spends over $100 million a year while traveling 75,000 miles (three times around the Earth!) and moving 1,500 tons of gear. To avoid any glitches, planning for this logistical miracle starts 18 months in advance.

The Function of DHL

In this procedure, DHL, F1’s logistics partner, is essential. They help all ten teams transport their vehicles, motors, computers, and other equipment to and from their various headquarters. In order to guarantee prompt delivery, a combination of trucks, boats, and planes is used.

The challenge posed by RVs

The movement of team RVs is one of the distinctive features of F1 logistics. These buildings are built at each race site, disassembled, and then transported to the next destination. They serve as a base for each team throughout a race weekend. For instance, it takes 25 staff members 32 hours to assemble and one day to disassemble Red Bull’s campervan, a three-story, 13,000 square foot construction.

The Container Shipping Solution

Teams use shipping containers to organize the massive amount of equipment needed for each race. All non-critical equipment for race weekends is contained in these containers, which were packed before the season. They are transported by boat from one flyaway location to the next, which is far less expensive for each team than flying.

The Fly-Away Racings

Teams must relocate swiftly from one race spot to another during fly-away races, which present a unique challenge. For instance, following the race in Las Vegas, teams will need to pack up and fly to Abu Dhabi, covering 82 miles in 20 hours while adjusting to an 11-hour time change. To ensure fair competition, a crucial regulation in these circumstances is that no team can touch their equipment until every team’s equipment has fully arrived.

Conclusion

The F1 schedule is a monument to the extraordinary organization and planning that go into making each race feasible. No matter where in the world the race is held, spectators should never forget the enormous amount of work that goes into making the show come to life.

What do you think of F1’s logistics? What additional optimizations do you believe these operations could use? Post your ideas and remarks below.

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2023 Logistics Supply Chain Risk Report

by Editorial Team

Without logistics most supply chains would grind to a halt, as the world discovered during the pandemic.

As we emerge into more normal trading conditions, businesses across industry are looking to logistics providers to help them improve and optimize how they move and store goods between their supply chain nodes.

Meanwhile, logistics companies face their own supply chain challenges, including workforce issues, rising wage demands, global geopolitical and trade tensions and pressure to decarbonize transportation.

How are logistics businesses adapting?

To find out how the sector is navigating this changing landscape, we surveyed 100 risk and supply chain leaders, from freight forwarders to shipping lines, airfreight operators and trucking companies.

How do they see the supply chain landscape? How are they building resilience? What are the main challenges and risks they face? And what will the supply chains of the future look like?

About our survey

When: November – December 2022

Who: 100 senior decision makers, including risk managers, supply chain and logistics managers and CEOs.

Where: Countries across Europe, North America, Asia-Pacific and Latin America.

Size: All companies surveyed had annual revenue over $250 million.

Ripple effect increases risk burden for logistics

Logistics is at the core of every industry’s supply chain. That means the sector’s risks are multiplied.

From cyber-attacks to extreme weather, firms need to worry not only about their own operations, but also the knock-on impact on their customers and how that might rebound on them.

Cyber risks

In our survey, cyber risks were believed to have the most profound impact on supply chains, rated by 58% as medium and 31% high impact.

58% believe cyber risks to have medium impact on supply chains and 31% said it would have high impact.

Freight companies are sharing more data with partners and customers than ever before, while the number of parties in logistics chains, often using linked systems, means there are more potential weak links for cyber criminals to exploit.

Because delays are costly for logistics companies and their customers, criminals may think they are more likely to pay to end a ransomware attack, making the industry a more attractive target.

Climate and environment

Almost half (47%) of respondents placed climate change and environment among the top global trends affecting supply chain risks.

Logistics firms are under a lot of pressure to help their clients meet their carbon reduction targets.

But there’s also pressure from governments to reduce emissions from transport more generally.

Climate impacts are also being felt in extreme weather events, which are increasing in frequency and pose a growing disruption risk.

Increased product complexity

Increased product complexity topped the list of underlying factors playing the greatest role in supply chain risks, named by 35% as a top concern.

This may reflect the challenges of transporting increasingly specialized and sensitive products and raw materials, for example for in the life science sector, especially as clients demand more contractual indemnities against delay and damage.

Greatest challenge to addressing risks over next 3-5 years

Bar chart with 5 data series.

Question: Which of the following will pose the greatest challenge to addressing your risks over the next 3 to 5 years?

Participants were asked to rank top 3

The chart has 1 X axis displaying categories.

The chart has 1 Y axis displaying Values. Data ranges from 0 to 0.

ValuesLack of access to insurance and risk transfer solutionsLack of data, knowledge and understanding of these risksLack of internal risk management tools and insightLack of budgetLack of board buy-in0WTW

Greatest challenge to addressing risks over next 3-5 years

Question: Which of the following will pose the greatest challenge to addressing your risks over the next 3 to 5 years?

Participants were asked to rank top 3

End of interactive chart.

Economic risks

Economic uncertainty emerged as the second leading factor underlying supply chain risks, ranked by 30% among their top concerns.

The sector is at risk from price and wage rises, volatile fuel and energy costs and falling consumer demand.

If inflation dips back to near normal levels by the end of 2023, it could ease some of these pressures.

Geopolitical risk

Geopolitical risk was among the factors thought to have the greatest impact on supply chain risks, rated by 54% as medium and 29% high impact.

“The Ukraine conflict has disrupted some road and rail routes between Asia and Europe, while simmering tensions in the China Sea could put cause problems for more global routes in the future.” Breda Keating | Director, Global Marine, International Trade & Logistics

The conflict in Ukraine has disrupted some road and rail routes between Asia and Europe, while simmering tensions in the China Sea could put cause problems for more global routes in the future.

We’re also seeing more claims against logistics firms for customs errors as a result of complex documentation requirements post-Brexit.

Onshoring

48% of respondents said onshoring and near-shoring were among the top global trends affecting their supply chain risks.

As more products are sourced and manufactured closer to home, there will be fewer goods being transported around the world, which will impact demand for logistics services.

Pandemics

Though we may be past the acute disruptive impacts of COVID-19, the risk of a new strain of the virus, or a new unforeseen pandemic, seems to be still front of mind, topping the list of global trends with the greatest influence on supply chain risks at 56%.

3 key findings

63% said losses related to the supply chain had been higher or much higher than expected over the last two years.

85% of businesses said they have made at least some improvements in their approach to supply chain management in response to the pandemic.

77% cited a lack of insurance solutions among the greatest challenges to addressing their risks over the next three to five years.

Squaring the logistics circle

Logistics companies see supply chain risk from all angles. They need to manage not only their own risks but those of the companies they work for.

That’s not an easy balance to strike.

These challenges look set to grow as the risk of supply chain disruption stays high and customers demand more, both in terms of service delivery, sustainability and contractual obligations.

“Wider external factors, from geopolitics to cyber security increase the need for careful risk management.” Anthony Monaghan | GB Industry, Transportation Leader

Wider external factors, from geopolitics to cyber security increase the need for careful risk management.

Our survey shows that businesses are working to overcome problems and considering a range of strategies to increase resilience.

But they’re hampered by a lack of appropriate insurance solutions and difficulty getting hold of enough accurate data to manage their risks.

Working more closely with customers and partners can help companies understand their supply chains better and address these risks.

Diagnostic mapping and monitoring tools and analytics can help to visualize, quantify and assess risks across the chain and in specific locations.

See the original post on https://www.lexology.com/library/detail.aspx?g=9843ae71-6497-4d1c-9668-4f5cbdaa8440

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Investors Continue to Support Logistics Tech

by Editorial Team

Investors are continuing to back logistics technology companies, as the industry experiences significant growth and disruption. Logistics technology, or “logtech,” refers to the use of technology to streamline and optimize logistics operations, such as transportation and warehousing.

According to a recent report from McKinsey, the global logistics technology market is expected to reach $1.5 trillion by 2025, driven by factors such as rising e-commerce demand and the increasing complexity of global supply chains.

In recent years, many logtech startups have emerged, offering solutions ranging from route optimization to real-time tracking and predictive analytics. These startups have attracted significant investment from venture capitalists and other investors, who see potential for significant growth and disruption in the industry.

For example, Flexport, a San Francisco-based logistics technology company, recently raised $1 billion in funding, valuing the company at $11 billion. The company offers a platform that helps businesses manage their global supply chains, with features such as real-time tracking and customs compliance.

Another logtech startup, Turvo, raised $60 million in a recent funding round. The company offers a cloud-based platform that connects shippers, brokers, and carriers, allowing for real-time collaboration and optimization of logistics operations.

Investors are also showing interest in companies that provide specialized solutions within the logistics industry. For example, Locus Robotics, which provides robotic solutions for warehouse operations, raised $150 million in a recent funding round. The company’s robots can pick and pack items, helping to automate and optimize warehouse operations.

The COVID-19 pandemic has also highlighted the importance of logistics technology, as many businesses have been forced to adapt to new supply chain challenges. For example, e-commerce demand has surged during the pandemic, leading to increased demand for logistics technology solutions that can help businesses manage their online sales and deliveries.

Despite the growth and potential of the logtech industry, there are also challenges to be addressed. One major challenge is the fragmentation of the industry, with many different players offering competing solutions. This can make it difficult for businesses to choose the right solution and for logtech startups to gain market share.

In addition, there are also challenges related to data privacy and security, as logistics operations involve sensitive information such as delivery routes and customer data.

Overall, however, the logtech industry is expected to continue to grow and attract investment in the coming years. As businesses look to optimize their logistics operations and adapt to changing supply chain dynamics, logtech startups will play an increasingly important role in the industry.

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Evify Investment Opportunity

by Editorial Team

Evify was incorporated mid 2021 and is India’s first provider of Carbon Negative, tech-enabled electric last mile delivery Start Up.

The company has grown many folds in a short period and has enlisted prominent clients such as Big Basket (TATA), Swiggy, Flipkart (Walmart), Ecom Express, Blue Dart and Zomato and many more in the pipeline. Started with just 1 Operations staff and 1 Rider/driver, Evify crossed a fleet of 150 EVs in 1st year of operations and is now at 330 EVs at 1.5 years old, aiming at 1000 EVs number by year end.

After countless Pilots with Ecom Giants, EV OEMs and Battery OEMs, EVIFY believes it has cracked its operations for deliveries through Electric Vehciles (EVs). Thus, have started expansion aggressively and are therefore in need of fresh capital injection to continue with very high tenant demand and opportunity across India. Started from a TIer – 2 City, Surat in Gujarat, have recently launched our 1st branch in Ahmedabad and would like to open Vadodara, Rajkot and Vapi in 2 months gap respectively.

They are currently accepting investments to the tune of USD 500,000 of which we have already received about USD 190,000 in the bank.

Visit https://www.evify.co.in/ and read their pitch deck for more information.

For more questions, please contact its Founder & CEO, Devrishi Arora, at dev@evify.co.in

PITCH-DECK-2023-1Download
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Navigating the Future of Transportation: Insights from Descartes’ 2023 Benchmark Survey

by Editorial Team

Unveiling the Strategic Importance of Transportation Management: A Comprehensive Analysis of Descartes’ 2023 Benchmark Survey

Transportation management is no longer a mere operational necessity but a strategic weapon for businesses. This article delves into Descartes’ 2023 Benchmark Survey, revealing the strategies, tactics, and technology-thinking of top-performing organizations in the realm of transportation.

Descartes, the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, security, and sustainability of logistics-intensive businesses, has conducted an annual benchmark survey since 2017. The survey identifies the strategies, tactics, and technology-thinking of top-performing organizations in transportation management. The 2023 survey, titled “Transportation Management in Transition,” offers valuable insights into the current state and future trends of the industry.

The survey reveals a strong correlation between a company’s financial performance and the strategic importance senior management places on transportation. It shows that industry-leading financial performance is more prevalent among companies that view transportation management as a competitive weapon. Conversely, companies that view transportation management as not important tend to have poorer financial performance.

One of the key findings of the survey is the growing participation of the logistics community. Freight brokers are the top business type represented, accounting for 24% of respondents. Almost two-thirds of respondents (66%) work in the logistics community, with manufacturers leading the shipper group.

In terms of transportation modes, truckload usage dominates, with 89% of respondents using this mode and accounting for 56% of the volume. This represents a 9% increase in usage and a 4% increase in volume compared to 2022. Less than truckload (LTL) and ocean ranked second and third in both categories.

The survey also highlights the importance of technical enablers in launching metaverse use cases. These enablers include cloud computing, AI/ML, industrial data collection, and network. For instance, cloud computing enables the storage and processing of the large quantities of data inputs and outputs required to orchestrate metaverse use cases. AI/ML is indispensable for modeling digital twins and creating realistic environments and simulations and interpreting data/making predictions.

However, the deployment of metaverse use cases is not without risks. The primary concerns for metaverse use cases are cyber, information security, and data privacy, with over 60% of respondents citing these as primary risks. Cyber and information security risks are paramount across a range of digital use cases but are amplified by the drastic increase in data, that industrial and enterprise metaverse use cases will produce. Data privacy risks can prove especially complex, particularly as companies expand the scope and scale of use cases to reflect a more interwoven, data-driven virtual ecosystem, incorporating valuable, potentially sensitive, data assets.

Key Trends and Practices

The survey asked respondents several questions related to transportation management regarding the future significance of current market and business drivers, value measurement, where information is used, and concerns about competitive strategies.

Driver shortage (42%) and carrier capacity (40%) remain the overall market drivers, but are down ~8%. Fuel costs continued their rapid rise in importance, moving from #4 in 2022 (25%) to #3 overall in 2023 (40%). Fuel costs were the top response for Not Important respondents (56%)—almost 1.8X more important than for Competitive Weapon respondents (32%).

Technology Implications

The survey also asked participants about how they view the role of technology as well as their strategies and plans for adopting, investing in, and leveraging it to create value for their companies.

In 2023, the survey tied for the most early adopter responses (22%) in the 7-year history of the study. Competitive Weapon (32%) and Top Performers (31%) were 2X and 1.5X respectively more likely to be an early adopter versus Not Important (16%) and Poorer Performer respondents (21%). Not Important (21%) and Poorer Performer (17%) respondents were almost 3X more likely to be a laggard than Competitive Weapon (8%) and Top Performer (6%) respondents.

Takeaways:

  1. Transportation management is a strategic weapon for businesses, with a strong correlation between a company’s financial performance and the strategic importance senior management places on transportation.
  2. The logistics community is increasingly participating in transportation management, with freight brokers leading the way.
  3. Truckload usage dominates the transportation modes, with an increase in usage and volume compared to the previous year.
  4. Technical enablers, including cloud computing and AI/ML, are crucial in launching metaverse use cases.
  5. Cyber, information security, and data privacy are primary concerns for metaverse use cases, amplified by the drastic increase in data that these use cases will produce.

How is your organization addressing the driver shortage and carrier capacity issues? What strategies are you employing to manage fuel costs? How are you leveraging technology in your transportation management? We’d love to hear your thoughts and experiences.

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How e-commerce brands can save money on shipping in 2023

by Editorial Team

One of the biggest expenses in e-commerce logistics is shipping, and it’s not getting cheaper any time soon.

In an industry where profit margins are often pretty tight to begin with, even the tiniest adjustment that yields savings on the shipping of your orders can make a monumental difference in your favor. How can your business mitigate shipping expenses in 2023 by saving money?

You need to rethink your packaging strategy

Think in terms of size and weight. Both the weight and volume of a package add to its final cost. The more space a package takes up, the higher the final cost. There are some carriers that offer discounts for packages that don’t exceed a certain weight threshold. Don’t overdo it with unnecessary inserts or filler materials like kraft paper and bubble wrap.

Your products may come in a variety of different sizes and shapes, so placing them in the wrong size package can result in additional expenses. If an order is packed in a box or bag that’s too large, not only are you overspending or missing out on materials, but your carriers will also charge you for the unnecessary volumetric weight. Additionally, you are more likely to have damaged items, which can increase the cost of return logistics and replacement.

You can avoid this by using size as one of the criteria your fulfillment team uses to organize orders. After all, no one wants to be in the expensive air shipping business.

Variables are removed

Often, businesses prefer flat-rate shipping, in which a package can be any weight up to a certain limit and the rate won’t change; the price is based on box size.

Whether this strategy is effective depends on the number and value of items per order as well as your inventory variety. Similarly to companies shipping items of different shapes and sizes that should have right-sized packaging per order, companies with relatively homogeneous goods could benefit from flat-rate shipping. It’s a bit of a shortcut, but one that can offer excellent value, especially when it comes to domestic delivery.

Carriers should be renegotiated

Think again about your ability to negotiate with carriers. Especially if your company is a new customer, it may not be easy; however, companies with established fulfillment partners are often able to negotiate more favorable terms or pre-negotiated rate discounts because of their longstanding relationships built on consistent high volume business. It is always possible to negotiate your contracts again.

Keeping track of your carrier partner’s performance is vital for successful business operations. By utilizing transportation logistics software, companies are able to assess data and hold carriers responsible in the event that they fail to abide by the terms of their agreements. Not only does this give you a better platform on which to renegotiate contracts, but it also helps you manage your business more efficiently.

There is no one-size-fits-all solution to the sometimes-harsh reality of shipping expenses, but a little bit of trial and error can position your business to be more profitable. Getting to know the options that are available to you and paying attention to what works best for you and your customers will not only lead to savings, but also to growth.

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In-House vs. Third-Party Delivery Services: Choose the Right Approach for Your Business

by Gaurav Bubna

Delivery operations can make or break a business, but organizations face a dilemma when it comes to choosing between handling deliveries internally or outsourcing them. Each approach has its pros and cons, impacting the company’s bottom line, customer experience and more. Let’s explore the key aspects of both models and factors to consider when deciding between them.

THIRD-PARTY DELIVERY SERVICES
Outsourced delivery involves partnering with specialized third-party logistics providers.
Pros:
– Expertise: Providers have dedicated teams and resources, offering you instant access to efficient delivery processes and industry best practices and technology.
– Scalability: They can handle fluctuating volumes and offer broad geographical coverage, enabling easy expansion of your business into new markets.
– Focus: Outsourcing frees your organization to concentrate on core competencies and strategic initiatives.
Cons:
– Control: Outsourcing reduces control over the delivery process, potentially affecting service levels and customer experiences.
– Customer Touchpoint: A direct interaction between your brand and its customers is eliminated, leaving fewer chances for positive impressions.
– Flexibility: Third-party services may lack customization options to accommodate specific delivery requirements and customer requests.

Take the online marketplace Etsy for example. Etsy partners with various third-party carriers to offer its sellers an easy way to get their products into customers’ hands. This gives sellers access to a trusted delivery network and massive customer base that spans across continents, all without the need for any personnel or bandwidth from Etsy itself. However, because Etsy doesn’t handle logistics directly, they can make no guarantees about the delivery process. They have little control over product handling, delivery timelines or the quality of interaction with customers during product delivery.

Etsy is also at the mercy of its partners when it comes to what kinds of shipping options are available to sellers. They circumvent this to some extent by partnering with multiple providers, enabling sellers and customers to choose the most suitable delivery solutions for their unique requirements.

IN-HOUSE DELIVERY LOGISTICS
In-house delivery involves managing deliveries within the organization’s infrastructure — drivers, vehicles, routing software, etc.
Pros:
– Control: You get complete visibility and control over the entire delivery process — especially useful when delivering sensitive or high-value goods.
– Flexibility: Adapt delivery operations in real time to optimize around variable factors, such as traffic flow, customer availability or order priority.
– Customer Interaction: Direct interaction with customers strengthens relationships and drives repeat business.
Cons:
– Initial Investment: Acquiring and maintaining a delivery fleet, hiring and training drivers and building infrastructure require significant upfront investment.
– Scaling Challenges: Scaling operations can be a complex and costly proposition, potentially compromising service quality.
– Resource Allocation: Managing logistics diverts company resources from core business activities and competencies.

Some luxury vehicle manufacturers, like Mercedes-Benz, for example, give customers the option to have newly purchased vehicles delivered to their doorsteps. Customers expect premium experiences from their brand, which is why Mercedes-Benz handles their vehicle deliveries in house. This empowers them with absolute control over the delivery process to ensure that everything is executed to their high standards — safe transportation, cleaning and disinfection of the vehicle before handover, polite and professional customer interactions, etc.

Such control comes with a cost. To make all of this possible, Mercedes-Benz had to buy a fleet of delivery vehicles, invest in last-mile delivery tech, and hire and train employees to plan logistics and execute the deliveries. It also limits their ability to quickly and easily scale. If they were to see a sudden surge in delivery requests, they’d struggle to keep up without operational expansion, which only adds to the mentioned costs. Alternatively, if demand drops, Mercedes-Benz would be left with redundant vehicles and staff draining their finances.

HIDDEN PITFALLS OF THIRD-PARTY DELIVERY SERVICES
Some pitfalls of outsourcing deliveries may not be immediately apparent at a cursory glance.
– Misaligned Incentives: Priorities between businesses and third-party providers may not align, impacting customer satisfaction and incurring additional costs. For instance, speed of delivery vs. handling of packages. Performance-based contracts and clear metrics can help address this issue.
– Data Security: Outsourcing raises concerns about data protection, since you’d be relying on the provider to handle data appropriately. Implement agreements and protocols to ensure the security of sensitive customer information.
– Unpredictable Outcomes: External factors like weather or strikes can disrupt deliveries. Create contingency plans and nurture relationships with multiple providers in order to maintain operational continuity and avoid the risk of reliance on a single provider.
– Infrastructure Requirements: Some third-party services may require investments in new technology that can integrate and interface with their solutions, incurring additional upfront and ongoing costs.

RECURRING COSTS OF IN-HOUSE DELIVERY
Though the bulk of your initial investment for in-house delivery may be one-time expenses, there are a number of recurring costs to be aware of.
– Labor: Managing a large fleet involves significant labor costs, including hiring, training, benefits, overtime, etc.
– Fuel: Implementing fuel management strategies is essential to mitigate the impact of fluctuating oil prices.
– Maintenance: Regular maintenance of vehicles, equipment and software ensures reliable operations and prevents significant breakdowns.
– Packaging Materials: Selecting appropriate packaging materials reduces the risk of damage during transit.
– Warehouse or Storage Space: You’ll incur recurring expenses for rental and maintenance of inventory or storage facilities.
– Insurance: Ongoing insurance premiums to protect against liabilities during transit.

KEY CONSIDERATIONS WHEN CHOOSING A DELIVERY MODE
With all of that covered, here are the key factors to keep in mind when deciding which delivery model is the right fit for your business:
– Cost Implications: Evaluate upfront investments and ongoing fees of in-house versus outsourcing, considering long-term savings and scalability.
– Control Over Operations: Decide on the level of operational control and visibility that aligns with your priorities and requirements.
– Scalability and Flexibility: Assess which delivery model best supports your business growth plans.
– Quality of Service: Choose a model that ensures delivery experiences that meet your service standards.

The right delivery model for you depends on your organization’s size, budget, growth plans, desired level of control and more factors discussed above. Weigh the pros and cons carefully and make an informed decision that aligns with your goals and circumstances.

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