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Import and new export orders are among the criteria driving the Institute for Supply Management’s U.S. manufacturing index, the PMI, which has been steadily increasing for 18 months. In February, new exports increased by 3 percent to reach 62.8 percent; imports increased by 2.1 percent to reach 60.5. Any number above 50 indicates expansion.
Most international air and ocean freight costs have remained stable in recent weeks, according to Freightos, which gauges costs on a week-to-week basis. “Air freight prices are currently holding steady, which is a big change from recent months,” said Manel Galindo, CEO of Freightos WebCargo. “There are still very few promotions in the market – and none from Europe to the U.S. This will change in April, with larger planes returning to European flights, and more flights scheduled.”
Average freight rates, for general to express services, have remained steady at $3.25 to $5.00 per kilogram. “China to U.S. prices are very low,” said Zvi Schreiber, CEO, Freightos. “For the past 27 straight weeks, prices have come in lower than for the previous year.” From China to the U.S. West Coast, prices were 24 percent lower than 2017 on average. From China to the U.S. East Coast, they were 22 percent lower.
Although this is great for shippers – and customers -- these rates are likely unsustainable for carriers, Schreiber said. However, prices are likely to decline even further. Several ocean carriers recently announced new China-U.S. services, and according to Alphaliner, there’s more waiting in the wings. “So, it’s really not surprising, that ocean freight prices are so low,” Schreiber added.
Businesses of all sizes can save even more on freight costs through improved efficiencies. A 2017 study by KPMG Thomson Reuters found that big companies also face challenges when it comes to global trade. Many global companies, according to the report, still manage trade functions in geographical silos. Although the on-ground expertise of regional trade managers is valuable, centralized trade management is more cost-efficient for multinational companies.
Not surprisingly, the Freightos and KPMG studies conclude that technology can vastly improve trade operations. Small businesses account for one-third of total U.S. imports, and according to Freightos’ findings, 50 percent still rely on spreadsheets to manage shipments.
“Ask any freight forwarder or business owner, and they’ll agree - international freight, particularly for small and midsize businesses, is long overdue for an upgrade,” said Schreiber. “These survey results put real data to the all-too frustrating obsolescence of the technology used to manage international shipments, and provide valuable insight into the motives behind the rapid growth in logistics technology investments.”
Global trade is worth trillions, and U.S. Department of Commerce data reports a 6.7 percent year-on-year increase in U.S. imports in 2017 -- the fastest rate of growth in more than seven years. Yet, according to Freightos, the freight industry remains siloed and outmoded.
Freightos also measured a number of performance metrics around international trade. When asked “What percent of your international freight shipments arrive on-time?” Freightos found:
- Nearly 30 percent of business owners admit that less than half of their shipments arrive on time. Only 34.7 percent report timeliness in the top 25th percentile; 65 percent of small business owners say that only three-quarters of their international freight shipments arrive on time. Ten percent of small business owners only receive 1 in 4 shipments on time.
- Across the board, only 35 percent of importers say that goods arrive on-time 75 percent of the time or more.
- Sixty-five percent of companies that import goods suffer from delays at least 25 percent of the time they ship goods.
- For 30 percent of small (4-50/year) importers report that half or more of their shipments are late.
Slightly more than 42 percent of business owners spend more than two hours managing an individual shipment, Freightos said. Nearly 12 percent spend more than five hours. Among companies that import more than 100 times a year, 37 percent spend more than two hours managing each individual shipment; 12 percent spend over 10 hours.
Small companies aren’t the only businesses that use low-tech trade solutions: freight forwarders themselves are inconsistent when it comes to technology, Freightos found. Larger importers clearly have access to more sophisticated technology -- about 25 percent of large importers (100+ shipments/year) said their forwarders are more advanced than other service providers, while only 7 percent of small importers said the same. Only 11.7 percent of large importers feel their freight providers are technologically advanced. By far, the most common technology solution used to manage shipments is spreadsheets, an option used by 47 percent of all importers and more than half of small importers.
Other findings include:
- For companies that import only 4-10 shipments/year, almost half still spend over $10k/month on international freight.
- Eighteen percent of business owners have no visibility of their shipments.
- Eighty-three percent of importers report that they do not have full visibility into the location of their shipments during the import process.
KPMG Thomson Reuters recommends that some tasks within multinational companies should be automated. Currently, the classification of products—which is necessary to comply with trade regulations—is still conducted manually by more than 90 percent of companies. This increases the risk of noncompliance for corporations.
Some companies outsource this task, KPMG Thomson Reuters said. Leading companies in international trade compliance bring classification processes in-house and then centralize those functions, according to the firm.
Freightos provides weekly cost information and tools that compare freight prices. Some electronics distributors allow customers to determine how they want their orders shipped. Consultancies such as KPMG Thomson Reuters provide tools and services to improve trade efficiency, and there are a variety of online tools and SaaS offerings that can help companies of all sizes manage trade compliance and transit costs, and improve internal efficiency.