Shipping lines have faced criticism for their perceived neglect of customer relationships during the pandemic years. However, a notable shift has occurred, with ocean carriers now finding themselves heavily reliant on shipper loads. This change in circumstances has resulted in a significant shift in the balance of power, favoring carrier customers who now possess a considerable amount of leverage in the industry.
As the economic winds change direction the need for service providers and service buyers to manage these relationships has increased.
That, in turn, creates the need for service providers to differentiate their services and that is where supply chain visibility can show its value, particularly if that value is allied with Supplier Relationship Management (SRM).
Supply chain visibility can offer shippers certainty in the transportation of its goods, it can allow cargo owners to respond to challenges in the shipping process, and it can allow those shippers to improve their relationships with their own customers, ultimately making cost savings for all concerned.
The benefits of visibility can only be realised, however, if key relationships between supply chain stakeholders are fostered and encouraged. SRM is considered a core soft skill that will smooth the passage of your freight through the potential potholes and pitfalls on its path to its delivery point.
Those skills will require the service buyer to assess the capability of the service supplier to meet their contractual obligations, and that capability should be monitored and measured.
Once the data has been accumulated SRM requires the two parties, buyer and supplier, to work together to improve performance with the levels of contact shifted to meet the needs of the supply chain in question.
In effect, by cultivating the relationship between the stakeholders and managing those relationships effectively, operations including from the production process to packaging, storage and inventory management can all be streamlined offering more cost-efficient logistics.
Moreover, as the relationships develop technological and innovative practices can also be developed and the trust that results between the stakeholders in a healthy commercial relationship will see suppliers going the extra mile, prioritising their trusted buyers and offering better services.
Those relationships will take on a significantly greater importance over the coming months as world leaders, looking to fund decarbonisation, will drive up supply chain costs. A recent study, by the Dutch consultancy CE Delft argues that emissions from shipping can be cut by up to 47% by 2030, raising costs by up to 14%, on a business-as-usual basis.
Meanwhile, 40 world leaders meeting in Paris in mid-June 2023 discussed imposing global tax levies, including a levy of up to $100 per tonne on bunker fuel, to raise between $50-60 billion annually in carbon taxes. The EU Emissions Trading System is set to be imposed on shipping from January 2024, while an inland emissions trading system is being developed for trucking too.
Other challenges in service supplier and buyer relationships also matter, such as the difference in business cultures, corporate social responsibility and ethical working practices are an increasingly important factor, while training staff in meeting SRM goals will also be key.
As the cost of logistics increases, the value of mitigating those costs also increases in parallel. Key to cost mitigation will be the technological advances for tracking freight through the supply chain, allowing for the kind of visibility necessary.
Clearly such technology, including IoT trackers that can be fitted to each container, will help, but building the SRM system is a longer-term project which can be facilitated and stimulated by the tracking technology. But ultimately those relationships will be built by people using tech and working together towards a common goal.
Effective communication is a key element of SRM with the benefits of developing those relationships becoming clearer as the relationship between stakeholders develops. For these relationships to work it is important to follow a process, to evaluate risks, be aware of and make allowances for cultural differences, which means also addressing supplier concerns, while also setting achievable goals and monitoring performance levels.
Critical to this whole process is communication, but also the acknowledgement that managing supplier relationships is an ongoing process, even if that process should become easier over time.
