Insights

Heard of a diversified rates strategy? Here’s how to build one

Aug 08, 2022

We are all now seasoned professionals when it comes to facing volatility and navigating change. But has the supply chain community considered a new approach?

Inevitably, the continued volatility triggered by a shrinking economy will impact supply chains. We expect to see:

  • Carriers shifting their focus even more on long-term rates to guarantee filling space on ships
  • Further strikes for wage increases as the cost of living rises, adding pressure to already congested ports
  • Consumer spending decreasing, meaning shippers will need to adapt their supply chain to changing demands to avoid tying up capital in safety stock
  • In short, rates have been and will continue to be impacted. It’s hard to ignore

    We have seen rates rise almost endlessly in the past couple of years, but just as things had started to stabilise, uncertainty has begun to erode confidence on both sides of the market. This means that it is more important now than ever to design a diversified rates strategy that suits your business and will create stability in the coming months.

    But how can you build a supply chain rates strategy that tackles these issues to make your supply chain more resilient and agile?

    First, find the data, then build the strategy

    Here at Zencargo, we collaborate with partners, such as Xeneta, a data-driven freight procurement platform that gives real-time analytics on the ocean and air freight market. Along with the proprietary data pulled from the Zencargo platform, Xeneta allows us to provide customers with data that offers insights into the market and the best rates possible for each shipment.

    We spoke with Peter Sands, Chief Analyst at Xeneta, in our latest podcast ‘Freight to the Point’. With over 10 years of experience in procurement, Peter helps customers to make sense of data on the Xeneta platform, answering questions such as ‘what is going on right now?’ and ‘how does that impact my business?’.

    But to answer these questions, you first need to sort out your supply chain data. Here are some tips and insights on how you can get the right data to help develop a rates strategy that works for you:

    Start by getting accurate, real-time data

    When shipping data is late and unreliable, teams can’t confidently make effective decisions. In fact, inaccurate data can lead to:

    • Missed information and opportunities
    • Decision making based on old information
    • Increased costs and delays

    Having live rate information can help teams to make effective decisions that can reduce costs and be more resilient to change. It can also allow teams to share data and insights with stakeholders so that business-level decisions can be made effectively, and the entire supply chain is aligned.

    Data not only shows stakeholders the reality of the market and how the business is performing, but it can also empower teams by helping them to identify what’s going wrong and how to fix the problem.

    So, how do you get good quality data? Here are 3 steps:

    • Work with a natively digital forwarder – digital freight forwarders like Zencargo have a data-driven approach, focusing on providing customers with quality, reliable and real-time data to back freight forwarding services.
    • Improve supply chain visibility with a centralised platform – by pulling all your data onto one platform, you have one source of truth, allowing teams to make decisions by looking at the full picture.
    • Fix the data with business intelligence tools – BI tools, such as those integrated into the Zencargo platform, give teams a view of their historical and present data so that you can self-heal and spot anomalies in your supply chain. This allows teams to understand how things happen and why they happen, so they can fix them before they start or continue to cause problems.
    • Once you have the data, funnel out what you need

      Supply chain movements produce an overwhelm of data, and attempting a view over all of this data can cloud the information that can actually help your team make decisions and spot problems.

      You need to find the data points that are useful for your business, and funnel through the overload of information. Peter says, “if you scrutinise the original sources, that’s where you find the nuggets that you will need to stay on top of and where you also find out which data sources may not be of core interest to you when making decisions going forward”.

      But how do you know which data sources to look at? Here are some things to consider:

      • What are your business KPIs?
        • What information do you need to make sure you hit targets?
        • What’s currently stopping you from reaching your targets? Is it supplier performance? Is it a late response to change?
      • What goals do you have for your supply chain?
        • Is it to reduce costs?
        • Are you aiming to improve container utilisation?
        • Do you want to reduce your carbon footprint?
      • What information do you need to share with stakeholders?
        • Is there a focus on overall supply chain costs?
        • Do teams need information on each shipment including delays, transit times and delivery dates?
        • If, for example, there is a port closure in China, what information will stakeholders need?

      Thinking about these questions will not only help you to find the data points that actually matter, but it can also help to build an effective relationship with your freight forwarder. A digital freight forwarder like Zencargo can pull these data points into a centralised platform and showcase this information through data visualisation. This allows you and your team to find the information you need quickly and easily.

      Turn your data into an effective rates strategy

      Now you have data, and more importantly, the right data, you can use this to start thinking about your rates strategy.

      Every business has different needs, and it’s important to think about these needs to make sure your rate strategy is suitable for your business. This could be guaranteeing space, keeping costs as low as possible, moving goods quickly and regularly or shipping less frequently but with larger volumes. Peter says, “the more you know your own business, the better. Because then you can really get into what is essential for you”.

      Let’s think back to the questions in the section above. Say your focus is on keeping costs as low as possible, but you also want to guarantee space for your shipments. Peter suggests that if your focus is “100% only to save money” then you might find that “you’re riding the wild spot market constantly”.

      However, as we have seen over the past couple of years, the spot market can be unpredictable, with rates reaching unprecedented levels. Spot rates also won’t guarantee space, which could lead to increased costs as you try to get your products onto express airfreight to ensure you get them in time.

      So, what do you do if spot rates can potentially be cheaper if rates go down, but could also be more expensive if rates go up AND you are not guaranteed the space you need?

      The first step is to establish which products are essential and which are nice to have. Peter suggests that “the goods that you need, the goods that are essential for your business success, those you would probably like to bring into, say, more stable flow, more resilient flow, and you will often get that with a long term contract that gives you a guaranteed shipment and a guaranteed equipment on top of that.”

      With the nice to have products, you can play with the spot market to get the cheapest rate and not have to worry about securing space.

      To identify what will work best for you, you need a freight forwarding partner that acts as an extension of your team, providing expertise and a diverse network.

      Here at Zencargo, we have a team of procurement experts with a wide network to offer businesses consultations that can bring the competitive edge to their supply chain. For example, Anne-Sophie Fribourg, our VP of Ocean Procurement, has over 20 years of experience, a global network and is president of the Maritime Commission within the French Freight Forwarding Association. Anne-Sophie brings knowledge and expertise to help our customers find trends and better understand the market.

      Book a rates strategy consultation with Richard Fattal, CCO and Co-founder of Zencargo

      Book your slot

      What’s your next step?

      Do you need to work on getting the right data and having a clear view of this data? Or do you have the data but are not sure how to approach the market?

      The Zencargo platform can improve collaboration, decision making and planning by centralising the data you need. Our expert teams help you to understand this data and use this data to make your supply chain your competitive advantage. You can see our platform in action by joining James Fry, Director of Supply Chain Development, for a product demo!

      For a more personalised rates strategy, book a 30-minute consultation with Zencargo’s CCO and Co-founder, Richard Fattal, to discover what options are available and how you can approach the market.

      Watch the full podcast episode with Peter Sands for further insights!

      Watch now