he pandemic made global supply chain issues a common dinner table conversation. Now, with escalating geopolitical tensions and competing manufacturing hubs in China, India and Mexico, it can be hard for businesses to understand what the best strategy is for moving goods internationally.
Yet, despite the complexities affecting our global supply chains, the opportunity for businesses to engage in international trade has never been better. Advances in technology continue to make it easier to automate logistics. In fact, according to Acumen Research and Consulting, the global logistics automation market is predicted to reach $133 billion USD by 2030.
Not only is technology making supply chain logistics easier for businesses to manage, but in a down market, there can be opportunities to negotiate better deals with overseas suppliers, find new customers and create business models that adapt to future market conditions.
Regardless of your motivation, if you're a business looking to expand abroad, here are three tips that can give you a competitive edge:
1. Understand regulatory requirements in advance
Paperwork may seem tedious, but in the world of global logistics, an incorrect or incomplete form can determine whether or not your shipment gets across the border. As the leader of a customs brokerage and freight forwarding business, I can tell you brokers spend a disproportionate amount of time following up with clients to complete the appropriate paperwork to clear customs.
Understanding simple but important details like what determines your product's country of origin is instrumental for budgeting and planning. For example, if a business purchases materials from China and further develops them in the U.S. before resale, many leaders assume they qualify for reduced duty through North America's free trade agreement (now known as the Canada, U.S., Mexico Agreement) — but this isn't always the case. Products must meet a specific set of criteria to leverage the lower duty rates. Missed details like this can cost businesses a significant amount of money unexpectedly.
It's also important to understand how exchange rates are calculated. Many businesses are surprised when they have to pay more for duty on a shipment when it arrives than they originally estimated. That's because the exchange rate is calculated at the time of direct shipment. Exchange rates fluctuate, so it's important for businesses to bear this in mind when creating budgets.
Factor In geopolitical tensions and changing market conditions
From China's recently passed "retaliation tariff" to attacks on merchant ships in the Red Sea, growing geopolitical tensions are causing businesses to rethink their trade routes.
How a business navigates geopolitical disruptions largely depends on whether it is looking for a short-term or long-term strategy. If a company is looking for a short-term strategy, for example, it can likely adapt more swiftly to trade route disruptions. Businesses focused on long-term logistical planning, however, need to factor in the big-picture implications of geopolitical stability.
Take, for example, the current tensions between the U.S. and China, which have caused more manufacturers to set up operations in Mexico. If the U.S. decides to permanently shift its purchasing from China to Mexico, this change would have significant implications on the trade route's pricing and capacity in the long term.
Subscribe to our newsletter
Lorem ipsum dolor sit amet consectetur adipiscing eli mattis sit phasellus mollis sit aliquam sit nullam neque ultrices.
