Cost of cross-border shipping overwhelmingly expected to rise
82% of logistics service providers expect the cost of moving goods across borders to rise in 2019
A new report by eyefortransport has found that 82.3% of Logistics Service Providers (LSPs) are planning for the costs if moving goods across borders to rise in 2019. The Supply Chain Hot Trends 2019 report notes that just 5% felt that costs would fall and the remaining 12.8% thought that it would remain roughly the same.
This marks a change in recent trends, where liberalisation and globalisation have long been the order of the day, with trade deals being signed and tariffs being removed for the most part. The rise of populist governments has knocked that post-Cold War order off-course, with the Trump administration being the most prominent example of a de-liberalisation of trade. The administration has brought in tariffs across a huge range of trade between itself and China and even taken unprecedented steps to add tariffs against close allies and renegotiate NAFTA. Naturally, China, Canada and the EU have taken retaliatory steps of their own.
This matters as more and more of the goods, components and raw materials needed across the supply chain travel internationally. This has been thrown into light by the discussions surrounding Brexit, with the fragility of many of the production lines in the UK becoming more obvious as the deadline approaches. Toyota revealed that is has just four hours’ worth of parts in its factory to supply the production line and even the humble sandwich could be imperilled by difficulties in sourcing ingredients. According to CLEPA, the European Association of Automotive Suppliers, the average car component will pass through 15 countries throughout its production and assembly. Similarly, for a smartphone, raw materials can be sourced in Africa, shipped to Europe for refining, passed to Asia for manufacturing and then assembled elsewhere. An airliner is likely to have between four and six million parts. International trade, and the potential barriers that crop up along the way, therefore are potentially huge gamechangers for supply chains and the expectation of strongly rising costs should be of major concern.
Leaving aside production lines that cross countries, a lot of final sales are also conducted internationally. This total is also rising strongly in the context of more purchases being made in an online environment, with consumers increasingly able to ignore the country of origin for their order and simply expect the shipping to be handled in a matter of days, or weeks at most. In eyefortransport’s survey we found that nearly a quarter of e-commerce sales are now made cross-border, placing a major burden onto supply chains. Although most of these likely occur within relatively harmonised trade blocs, our respondents reported a wide range of challenges nonetheless.
Principally the challenges encountered when conducting cross border e-commerce are organising logistics effectively between partners so that goods can be sent and returned effectively whilst remaining compliant with customs procedures. Complying with customs regimes was reported as challenge by 39.5% of retailers, brands and manufacturers and by a very similar 39% of Logistic Service Provers (LSPs), marking it out as a major challenge. Both sides also reported that it was challenging managing delivery expectations (34.2% & 35.5%) and creating a seamless experience for international customers (32.9% & 36.9%), indicating that keeping visibility for cross-border e-commerce is even more challenging than it is in home markets and pointing to the intense demands customers are making on supplier and shippers, no matter where goods originated.
The explosive growth of international e-commerce but a lack of reduction in the complexities of doing so is being responded to within the industry. LSPs are making efforts to offer more support to their customers who conduct business internationally.
The report finds a major leap between 2018 and 2019 when it comes to LSPs offering cross-border e-commerce support to their retail customers. Whereas in the 2018 results the majority of LSPs did not offer support for international e-commerce, that has now switched around and in 2019 68% reported that they have expertise on hand to improve the experience for retail customers. This is positive news, particularly in light of what could be increasing regulatory and financial barriers to trade in 2019 and may help to mitigate these, alongside the frustrations noted above.
Click here to read the full report now.
This report gathers together the top trends across the industry from the opinions of more than 750 industry thought leaders. In it you can find:
- The key technology trends set to disrupt the supply chain.
- Economic sentiment analysis.
- The thoughts at the forefront of the industry’s mind.
- The risks and concerns that cloud the horizon in 2019.
- Key strategies to mitigate costs and drive productivity.