Look deep into the crystal ball and see your logistical future!
Our Coverings 2014 Speaker Blog Series continues with a guest post from Jeff Knapp, the Regional Director of Commercial Development for Shapiro, a 98-year-old leader in regulatory compliance and global transportation.
Every winter as you prepare your budgets for the upcoming year, I imagine each of you Logistics Managers standing in front of a mirror and saying, “mirror, mirror on the wall, what are my ocean freights going to be next Fall?”
While the image may be slightly comical, the thought highlights a very real problem. You and your management teams are trying to finalize future purchasing decisions, which depend on forecasting intelligence for transportation costs, which average close to 10% of the total cost of your goods (and much higher in many industries). Unfortunately, your “landed cost” estimates are based on rates that often change on a monthly basis. Even with “locked in” service contracts, you’re subject to new surcharges, fluctuating fuel indices, and the painful reality that the first cargo cut from a vessel is almost always the lowest revenue cargo.
When I entered the industry almost twenty years ago, most of us looked to the steamship carriers for insight regarding rates for the coming year. Back then, the rates were much more stable and the base line was set in May, but we now live in the era of monthly General Rate Increases (GRIs) and immediate mitigation. Swings of $600/container in a single month are common in some lanes. So, is there no hope for our sanity?
Well, there is hope, and we call it the “Crystal Ball Approach.” As the name implies, it is not foolproof and does not have a mathematical equation. But what it does possess is a process of gathering key data elements, understanding their relationships and providing a logical estimation in a rate setting process that is highly embedded in the supply and demand curve.
During the “Crystal Ball Look at Future Transportation Issues” presentation, we’ll identify the many factors that should be used for the “Crystal Ball Approach” such as vessel fill, economic projections, new ship building, and several scenarios that could upset your projections. We’ll also provide an early analysis on how the deeper and wider Panama Canal could affect rates to the USA when it opens in 2015. However, we’ll not be providing a lane-by-lane estimate of freight estimates for the next year or we’d be there until next Chinese New Year.
This presentation is all about demonstrating a method for making rate projections that does not rely on dartboards and devices with magical powers, but uses the best information available to provide educated estimates that will allow you to sleep a little better at night.
Jeff Knapp will present “Crystal Ball Look at Future Transportation Issues” on Monday, April 28, 2014 from 2:15 PM – 3:15 PM at Coverings in Las Vegas. Click here for more information on his session and to view the full list of Coverings 2014 conference sessions. Don’t miss this session – register now for free to attend!