Navigating the Challenges of Shipping During COVID-19: Insights and Solutions for SMBs

Introduction: The Impact of COVID-19 on Global Shipping

The COVID-19 pandemic has dramatically reshaped the landscape of international freight and e-commerce. As a leading Digital Logistics Platform, we at FreightAmigo have been closely monitoring the situation and gathering insights from our users to better understand the challenges faced by small and medium-sized businesses (SMBs) in the current market.

Our comprehensive surveys and interviews conducted from December 2020 through June 2021, involving over 1,800 respondents, have revealed critical insights into the state of e-commerce and ocean freight during these unprecedented times. In this article, we'll explore the main challenges facing importers and exporters, including supply chain disruptions, escalating freight costs, and unpredictable transit times. We'll also share strategies that SMBs are employing to navigate these choppy waters and offer actionable advice to help your business adapt and thrive.

The E-commerce Boom and Its Impact on Supply Chains

The pandemic has accelerated the growth of e-commerce at an unprecedented rate. According to McKinsey, the COVID-19 crisis has propelled e-commerce penetration by up to a decade in just a few months. This rapid shift has had far-reaching implications for supply chains worldwide:

• E-commerce penetration in the US increased by 49% from May to July 2020 (Federal Reserve Bank of St. Louis)
• The number of new small businesses opened in 2020 increased by 83% (US Census Bureau)
• 60% of our survey respondents source their products overseas and rely on international freight

This surge in online shopping and new business creation has placed unprecedented pressure on global supply chains, leading to a series of challenges that we'll explore in depth.

Supply Chain Disruptions: A Multi-Faceted Challenge

The pandemic's impact on supply chains has been profound and far-reaching. Our surveys reveal that 94% of SMB importers and exporters have experienced challenges in their supply chain. These disruptions stem from various factors:

1. Capacity Crunch

The initial shutdown of factories and ports in China, followed by a rapid reopening and surge in consumer demand, created a severe capacity crunch in the shipping industry. This imbalance between supply and demand has been a primary driver of many of the challenges we're seeing today.

2. High Costs

The most significant challenge reported by our respondents was the dramatic increase in freight costs. We'll delve deeper into this issue in the next section.

3. Delays

Shipment delays have become commonplace, causing significant disruptions to supply chains and inventory management.

4. Customs and Tariffs

Navigating customs procedures and changing tariff landscapes has added another layer of complexity for importers and exporters.

5. Inventory Management

The unpredictability of supply chains has made inventory management more challenging than ever, forcing businesses to rethink their strategies.

The Rising Tide of Freight Costs

One of the most pressing issues facing SMBs in the current shipping landscape is the dramatic increase in freight costs. Our data paints a stark picture of this challenge:

• Rates have more than tripled over the past year
• Over half of our surveyed users cited higher costs as having the most significant impact on their business
• Regular peak season cycles have been disrupted, with rates increasing continuously
• Premiums are often required on top of already high rates to secure space on vessels
• Air freight rates have also surged, increasing by 50% between February and April 2021 alone

This sustained increase in costs is forcing SMBs to adapt their strategies. Our surveys in January and June 2021 revealed a growing trend of businesses raising product prices and reducing margins to cope with higher shipping costs:

• In January 2021, 34% of respondents had raised product prices, and 26% had reduced their margins
• By June 2021, these numbers had increased to 46% raising prices and 32% reducing margins

FreightAmigo's Tip: Pad Your Total Landed Cost

With the current volatility in freight rates and the potential for unexpected charges, we recommend including a buffer in your total landed cost calculations. This approach can help protect your business from sudden spikes in transportation costs and ensure more accurate pricing for your products.

Transit Time Troubles: Dealing with Delays and Uncertainty

While rising costs are a major concern, the unreliability of transit times is equally disruptive for many businesses. Our research shows that 53% of respondents have been significantly affected by increased delivery times. Some key points to consider:

• Factory-to-door delivery times have nearly doubled on major Asian to US lanes
• Ports are experiencing severe congestion, with tens of ships waiting to unload cargo
• Equipment shortages, particularly containers, are exacerbating delays

These delays are forcing importers and exporters to adopt new strategies, such as splitting up shipments and changing ports of entry. For instance, our data shows a shift away from the popular West Coast ports of Los Angeles and Long Beach:

• From April to November 2020, 60% of searches on our platform were for these ports
• By January 2021, this had dropped to 48% as shippers sought alternatives

FreightAmigo's Tip: Book Early and Plan for Flexibility

To combat delays, we advise booking your shipments as early as possible. Additionally, building flexibility into your supply chain by considering alternative ports or shipping routes can help mitigate the impact of unexpected delays.

The Rise of Less than Container Load (LCL) Shipping

In response to the challenges of high costs and unreliable transit times, we've observed a significant trend towards Less than Container Load (LCL) shipping. This shift is particularly pronounced among smaller-volume shippers:

• 69% of our survey respondents use LCL shipping
• 47% of those who use LCL consider it their main mode of transport

The growing popularity of LCL shipping can be attributed to several factors:

• Increased flexibility for smaller shipments
• Lower upfront costs compared to Full Container Load (FCL) shipping
• Ability to maintain inventory without over-purchasing

FreightAmigo's Tip: Consider LCL for Smaller Shipments

If you're moving smaller quantities of goods, LCL shipping can offer a cost-effective and flexible solution. Our Digital Logistics Platform can help you compare LCL options and find the best fit for your needs.

Strategies for Mitigating Supply Chain Challenges

Based on our research and the experiences of our users, we've identified several strategies that SMBs are employing to navigate the current shipping landscape:

1. Diversify Modes and Lanes

To hedge against delays and high costs on specific routes, consider diversifying your shipping modes and lanes. Compare quotes on less congested routes and consider air freight for smaller, time-sensitive shipments.

2. Adjust Pricing and Margins

As we've seen, many businesses are adapting to higher shipping costs by raising product prices or adjusting their profit margins. While not ideal, this approach can help absorb some of the increased costs.

3. Optimize Inventory Management

With unpredictable transit times, it's crucial to reassess your inventory management strategies. Consider increasing safety stock levels for critical items or exploring local sourcing options where possible.

4. Leverage Technology

Digital Logistics Platforms like FreightAmigo can provide real-time visibility into shipping options, rates, and transit times. Utilizing these tools can help you make more informed decisions and potentially find cost-saving opportunities.

5. Build Strong Relationships with Freight Forwarders

In times of capacity crunches, having strong relationships with reliable freight forwarders can be invaluable. They can often provide insights into market conditions and help secure space on vessels.

How FreightAmigo Can Help

As a leading Digital Logistics Platform, FreightAmigo is committed to helping SMBs navigate these challenging times. Our comprehensive suite of services is designed to address the key pain points identified in our research:

• Real-time rate comparisons for door-to-door freight quotes across multiple modes, including international courier, airfreight, sea freight, rail freight, and trucking solutions
• 24/7 shipment tracking capabilities, connected to over 1000+ reputable airlines and shipping lines
• Streamlined customs clearance, cargo insurance, and trade finance services
• Automated shipment document generation to reduce paperwork and potential errors
• Round-the-clock support from logistics experts to help you navigate complex shipping scenarios

By leveraging our Digital Logistics Solution, SMBs can gain more control over their shipping processes, potentially mitigate some of the challenges posed by the current market conditions, and make more informed decisions to support their business growth.

Conclusion: Navigating the New Normal in Shipping

The COVID-19 pandemic has undoubtedly created unprecedented challenges for SMBs engaged in international trade. From supply chain disruptions and skyrocketing costs to unreliable transit times, the shipping landscape has become increasingly complex to navigate.

However, our research has shown that SMBs are resilient and adaptable. By embracing new strategies, leveraging technology, and staying informed about market conditions, many businesses are finding ways to overcome these obstacles and continue growing.

At FreightAmigo, we're committed to supporting SMBs through these challenging times. Our Digital Logistics Platform is continually evolving to meet the changing needs of importers and exporters, providing the tools and insights needed to ship smarter and more efficiently.

As we look to the future, it's clear that the global shipping industry will continue to face challenges. However, with the right strategies, partners, and Digital Logistics Solutions, SMBs can not only survive but thrive in this new normal.

Remember, in these uncertain times, knowledge is power. Stay informed, be flexible, and don't hesitate to leverage the expertise and Digital Logistics Solutions offered by FreightAmigo to navigate the complexities of shipping during COVID-19 and beyond.