Learn from of those businesses that succeeded and be prepared for the next big challenge.
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2020 taught us much about the global economy in which we now live. During the year 2020, all international carriers faced disruptions due to Covid-19. In response to these disruptions, carriers reacted with varying degrees of success. Some failed completely. Others struggled but survived. A select few even flourished—and enjoyed tremendous growth. What were the specific struggles that these companies faced? What made the difference between success and failure? And most importantly, how should we prepare for the future?
What were the struggles?
1. Customs Brokerage Delays
Many customs brokerages shut down due to Covid-19 restrictions. Once they began to open again, a lack of employees caused significant backlogs and delays.
2. Lack of passenger planes
Many carriers use passenger planes to transport packages. Lack of passenger planes meant rerouting to cargo plans, which increased cost and caused backlogs. Domestic departures declined 71.5 percent in May 2020 as compared to the previous year. The number of domestic U.S. markets declined 32.1 percent as compared to the previous year per Science Direct.
3. Restrictive Import Policies
Countries and carriers implemented policies disallowing the receipt of international shipments. Each country and carriers had different rules, and interruption of the rules varied widely.
4. Limited Ability to Export
Lack of employees and in-country restrictions nullified, or at least limited, the ability of products to be shipped out of specific countries and markets. Between January 2020 and the beginning of April 2021, countries took more than 220 actions banning or limiting the export of certain products for COVID-19-related reasons, according to Global Trade Alert.
5. Demand Shifts
Online orders increased substantially due to consumer preference shifts: Consumers were at home instead of in the office, shopping preference shifted to online versus in-store.
What made the difference for those businesses that succeeded vs. those that failed?
Many companies suffered great costs to their brand and image because their poor supply chain implementation prevented them from fulfilling their products to customers. So, what did the successful companies do to avoid these costs and be prepared for disruptions and demand shifts?
1. They prioritized their supply chain strategies and relationships as a key part of their business prior to the disruptions and changes introduced by COVID.
Most companies spend a lot of money selling and marketing their products; but if those products can’t get to the customer, it’s all in vain. The companies that had good logistic partners were prepared and able to quickly adjust. No matter how good you are at sales and marketing, you can’t make money if customers can’t get your products.
“As a result of our relationships with our carriers and brokers, we were able to quickly get new products approved to international markets, reroute products, or even change carriers quickly to enable our clients to successfully grow their business during a challenging time,” said Tanner Carlson, VP Logistics at Global Access.
2. They had redundancy in their carrier and brokerage solutions.
Ideally, you have a key partner that can quickly move your products to different shipping and brokerage solutions. Companies with a single carrier were stuck with the rules, complications, and restrictions of that partner. Each carrier implemented restrictions and had challenges that were vastly different. Each brokerage (even in the same country) had different challenges and restrictions. Carriers use different clearance methods, and each different clearance method had different rules and restrictions based on country-specific policy and circumstance.
3. They had a strong U.S. shipping solution to international markets.
Companies that had a strong U.S. Not For Resale (NFR) business to international markets were able to quickly shift from challenges (lack of in-country inventory, local employment restrictions, new products not registered in country, and so forth) with on-the-ground (OTG) operations to a successful NFR shipping model. Most on-the-ground international operations struggled more than U.S.-based operations to get products across borders and to get inventory resupply. Registrations of new products in international countries, which normally take 3-6 months, were stopped, backlogged, or substantially delayed.
4. They had an inventory supply of one to two plus their primary source.
Some companies were able to adjust from their primary inventory source for their products. Others were not. If you can’t get your products from more than one location or source, you have a significant failure point for your entire business. Many companies had products or ingredients coming out of China and could not get inventory.
5. They balanced just-in-time (JIT) inventory with planned inventory supply.
Many just-in-time models suffered significantly as a result of one ingredient or portion of the supply chain having a shortage. Those with a reserve supply and inventory on hand survived much better than those that did not. The cost savings of JIT versus the lost sales and brand reputation of not being able to deliver need to be weighed carefully. It is important to plan for disruptions in the supply chain and weigh the costs of not having inventory.
6. They had the capability for product innovation and change.
Companies that had the ability to quickly innovate new products or repackage products did much better. Some examples include hand sanitizers, masks, and health supplements for the immune system. Companies that had products that were generally used at businesses (offices, restaurants, bars, clubs, stores) had to be repackaged or adjusted for home use. Many manufacturers had limitations on switching between products made for business use versus home use (quantity, packaging, and use cases). For example, we had a shortage of home toilet paper, but a surplus of commercial toilet paper.
There were companies that were able to adapt or even optimize pre-COVID demand, while other companies were able to take advantage of new emergent demand. Companies able to innovate and adapt to online international sales had huge gains in 2020.
How do we prepare for the future?
History tends to repeat itself. What will we do COVID, a drought, a lumber shortage, legal changes, or something yet unknown, the solution is the same: it is important to understand your failure points and have a plan in place. It is most effective to utilize the infrastructure that key partners have already put into place, as it can be very costly to build your own. Take the time to visit with your suppliers and partners to find out what their plans are and run them through different future challenges.
The key is to review what the struggles were, what made the difference for those that succeeded and failed, and then take action to cement your place among the successful.
“A wise man learns by the experiences of others; an ordinary man learns by his own experience; a fool learns by nobody’s experiences,” advises an American proverb.
Let us all aspire to be the wise men and women. Learn from the experiences of those businesses that succeeded in the face of a global pandemic and ensure your business is prepared to overcome the next big challenge the future throws at us.
MICHAEL MCCLELLAN is the vice president of sales with Global Access. Global Access customizes solutions for clients that simplify the complexities of cross-border commerce.
From the August 2021 issue of Direct Selling News magazine.