The companies in the world today run with a goal to satisfy their customers by all means at the same time as being sustainable. With more and more companies adopting the Just-In-Time (JIT) technique in order to reduce the response time between the suppliers and their customers, it is necessary for their partners in the expedition to be in time as well. However, the cargo world is complex and containers don’t always arrived at the expected time.
Before tackling this subjet, there are a few key aspects that need to be understood while dealing with expeditions overseas.
JIT is a concept where materials are delivered immediately before they are required in order to minimize storage costs. The companies have accustomed to using this concept to reduce the operational costs and storage costs by minimizing the safety stock in their inventory.
As the name suggests, port charges are the fees involved to use a particular port or harbor.
There are certain costs charged by the port administration which have to be paid to use the port viz, terminal handling charge, restow, lift on/lift off; while these charges cannot be levied, there are some which are in control of the shipping line viz, early arrival charges, late arrival charges, demurrage, detention charge.
There can be many reasons to a longer-than-usual waiting time for shipping containers but the most frequent reason is the berth allocation. Sometimes, when the ship arrives too early in the port, it does not find a berth to deboard the containers so it has to wait longer. This also happens if the ship arrives late at the port and causes the shipping line to miss the line free days, in turn, having to pay the demurrage as the in-port time is extended…
When the goods are being awaited in the port for longer than expected, the importer is forced to use his safety stock (which is very low in quantity following JIT) making his investment on safety stock escalate which also impacts their ROI.
Besides, during this extra wait time, the shipping line imposes demurrage on the importer which is a superfluous cost for the importer. In this scenario, there are also other risks involved for the importer.
In a production unit, the company pays the workers for every minute of the production. Without the goods on time, the company has to pay the staff, even for a non-productive hour.
Because the goods being transported are stuck in the sea and do not reach the pre-defined ETA, it is challenging for the Supply Chain Managers to have visibility and reliability on the delivery of their goods. If there are FMCGs* in the containers and wait time is too long, the products may not be viable at all.
Every company, be it automotive, fresh vegetable sellers, etc., possesses their own sales slot for achieving the best sales and increasing their profit. There is a high probability of missing this if they don’t have their goods at the right of time.
These are a few impacts that hit the importer when his important stocks turn into transit stocks. For any importer, the visibility of their shipments is the utmost priority and it is therefore necessary to keep track of the expedition.
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*Fast-Moving Consumer Goods