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The pandemic has made global supply chain issues a common topic of dinner table conversation. Now, in the face of accelerating geopolitical tensions and competitive production centers in China, India and Mexico, it could actually be difficult for businesses to know what the best strategy is when transporting goods internationally.
However, despite the complexities affecting our global supply chains, opportunities for businesses to interact in international trade have never been higher. Technological advances proceed to facilitate logistics automation. In fact, based on Acumen Research and ConsultingThe global logistics automation market is expected to succeed in $133 billion by 2030.
Not only is technology making it easier for corporations to administer supply chain logistics, but in a market that is struggling, there could also be opportunities to barter higher deals with overseas suppliers, find recent customers and create business models that adapt to future market conditions.
Whatever your motivation, if you run a company that desires to expand abroad, here are three suggestions that may provide you with a competitive advantage:
1. Know the regulatory requirements ahead of time
Paperwork could seem tedious, but in the world of global logistics, an incorrect or incomplete form can mean the difference between whether your shipment arrives across the border. As the leader of a customs brokerage and freight forwarding firm, I can inform you that brokers spend a disproportionate period of time contacting clients to finish the appropriate paperwork for customs clearance.
Understanding easy but essential details, similar to determining a product’s country of origin, is crucial when budgeting and planning. For example, if a company buys materials from China and further refines them in the U.S. before resale, many leaders assume they qualify for reduced tariffs under the North American Free Trade Agreement (now generally known as Canada, USA, Mexico Agreement) – but this is not at all times the case. To profit from lower tariff rates, products must meet a specific set of criteria. Omitting such details can unexpectedly cost corporations a significant sum of money.
It is also essential to know how exchange rates are calculated. Many corporations are surprised to seek out themselves having to pay more in customs duty on their shipment once it arrives than originally estimated. This is because the exchange rate is calculated at the time of direct shipment. Currency exchange rates fluctuate, so it is important for businesses to maintain this in mind when creating budgets.
Factor: Geopolitical tensions and changing market conditions
From recently passed in China “retaliatory tariff“to attack merchant ships in Red Searising geopolitical tensions are forcing corporations to rethink their trade routes.
How a company deals with geopolitical disruptions depends largely on whether it seeks a short-term or long-term strategy. For example, if a company is looking for a short-term strategy, it should likely have the option to adapt more quickly to disruptions on trade routes. However, corporations focusing on long-term logistics planning must consider the broader implications of geopolitical stability.
Take, for example, the current tensions between the United States and China, which have resulted in more manufacturers starting operations operations in Mexico. If the United States decides to permanently shift its purchases from China to Mexico, this modification will have a significant impact on prices and capability of the trade route in the future.
Businesses entering international markets should consider which parts of the supply chain could also be disrupted inside the goal timeframe and consider whether or not they are well-prepared to pivot if essential.
Build strong relationships with international partners
One of the most ignored aspects in navigating global logistics is the importance of building strong relationships with partners abroad. Companies looking for strong international partnerships must learn and adapt to the customs and cultures of the regions in which they operate.
In my work, I do business with partners in many countries. Every yr when I attend their annual conferences, I see the difference between leaders who respect local customs and those that act as if they were on home soil. Often, this difference in approach determines who establishes long-term, collaborative partnerships that lead to raised prices and referrals and who loses business altogether.
According to the International Labor Union, an astonishing 70% of multinational corporations fail as a result of cultural differences. Every culture has its own etiquette. Conducting a transient survey of communication rules and accepted behavior in the countries where you use can go a great distance in establishing a collaborative partnership.
As an experienced international logistics leader, I have seen firsthand the transformative power of adapting to global market dynamics. For corporations venturing internationally, understanding the regulatory landscape, geopolitical changes and cultural nuances not only reduces the risk of expansion but can assist maximize opportunities.