If you work in global supply chains, you must by now be painfully aware of the acute global shortage of space on ocean vessels. At a time when the global idle capacity of ocean vessels is at a record sub 1%, the supply of ocean freight capacity isn’t the problem. Rather, the current market is a result of the unprecedented levels of consumer spending. As record numbers of containers carrying consumer goods are imported, ports have become so congested, that some estimate 25% of the global fleet at any one time is sitting idle at ports waiting to be unloaded (and thereby further compounding the space shortage).
The primary challenge facing most supply chain operators today has been to figure out how to navigate this new shipping environment. One unexpected answer that many shippers have turned to is an area I know intimately - Less than Container Load (or “LCL”) freight.
The CEO of Flexport, Ryan Petersen, recently wrote about why shippers should consider an LCL option right now. Prior to founding SILQ, I founded and built the global LCL program at Flexport. Shipping LCL provides three major advantages in the current market:
- Equipment and Allocation Priority: LCL consolidators have always paid a premium to carriers for prioritization. Furthermore, LCL freight has historically been amongst the most consistent freight that shows up week-over-week (carriers value consistency for better vessel utilization). These historically higher rates and consistency have continued to pay off in this market as carriers continue to load consolidated containers with higher priority.
- Mitigating Dead Space: On average, consolidated containers ship fuller than Full Container Load (FCL) containers. According to research we put together during my time at Flexport, on average, FCL containers ships only ~70% full. This empty 30% creates both massive market inefficiencies and major opportunities. There is very often untapped capacity with the consolidators due to their superior planning and prioritized status.
- Cash Flow Efficiencies: When shipments are broken down and shipped in smaller batches, the cash associated with the inventory carrying cost is spread across several small shipments. Smaller, more numerous shipments can also mitigate the financial and inventory risk of supply chain delays.
However, despite the benefits, breaking up FCL shipments into smaller, more frequent LCL shipments comes with three main challenges:
- Quality Control: Most brands inspect the merchandise thoroughly when it arrives on-shore in the US, prior to distributing it for fulfillment.
- Control at Origin: Trusting suppliers to build the right assortment of merchandise at origin has been difficult for many brands who don’t have an established presence overseas.
- Difficulty Forecasting: The ability to forecast demand for each distribution center 60 days in advance (when the goods are at the factory in India) is far more difficult than predicting demand 30 days out (when the goods are in Los Angeles).
My first experience dealing with these challenges while leading Flexport’s global LCL organization is what led me to build SILQ: An order management solution built for the 21st century.
SILQ provides a vertically integrated order management service, deploying localized teams of domain experts that function as an extension of your brand’s team overseas. These localized teams oversee the manufacturing process from sampling to ship-out and upload all data into a platform that provides you with complete visibility into the factory floor.
SILQ’s solution facilitates brands to more easily and effectively ship multi-modally in three main ways:
- Superior Origin Quality Control: Trained in our proprietary Quality Control processes and equipped with mobile apps, SILQ inspectors reduce the need for performing on-shore inspections in the US with on-site QA from materials to finished goods. Their presence in the factory also allows our partner brands to feel comfortable building more specific assortments of merchandise and knowing it will be adhered to fully upon ship-out.
- Shorter Development Cycles: With our newest “Sampling Simplified” solution, we have enabled our customers to reduce new product development cycles from months to weeks and go to market much quicker. This time savings has resulted in brands being able to forecast demand for their merchandise far more accurately when placing purchase orders and simplifying distribution.
- More Advanced Shipping Notice: With our on-site teams monitoring production, the data we provide allows you to place bookings with your freight forwarders as long as 45 days out from the estimated cargo ready date. Giving shipping providers as much advance notice as possible is one of the largest differentiators for securing space under the current market conditions.
Working with SILQ has allowed our customers to overcome many of the challenges described earlier and thrive during these trying times - transitioning between multi-modal transportation with far more agility and accuracy.
If you or anyone you know could benefit from our services or if you are just curious to hear more, please do not hesitate to check out our website and/or reach out to me directly.