Delayed or poorly planned shipments of export or import goods can significantly impact the financial health and operational efficiency of companies engaged in international trade.
Below is an analysis of the key consequences a business head must watch for, drawing from global trade data and our experience in the field.
The financial impact of delayed shipments
The most common consequence of shipment delays is, of course, D&D. Detention and demurrage, as we all know, are the most direct penalties we have to pay when there is a delay in customs clearance or goods movement.
An increase of 10% in the median time spent in customs can lead to an average reduction of 1.8% in your export growth rate.
Chronic shipment delays can cause you to incur detention and demurrage penalties as high as 15% of your total shipment value.
However, detention and demurrage are just the tip of the iceberg. Here are some other and equally important costs of shipment delays your company can incur.
- Exchange rate risks: Goods valued at shipment date (not purchase date) expose importers to currency fluctuations, inflating costs unexpectedly. The longer the delay, the greater the risk of losing money due to changes in exchange rates
- Higher insurance premiums: Extended transit times also increase the cargo risk exposure. If you experience frequent delays in shipments, be prepared to see marine insurance premiums rise by 22-35%
- Reduced margins: Persistent delays can force companies to spend more on expedited shipments, rushed production schedules, and discounting to retain customer accounts. All this can compress gross margins by 4-9 percentage points
- Credit rating impacts: 27% of importers with chronic delays in shipments face credit term reductions or interest rate hikes from lenders concerned about their cash flows
The operational costs of shipment delays
Delays in shipment and clearance of your goods also have other implications for your business.
- Production inefficiencies: Delays in receiving essential materials or components can throw off your production schedule. This leads to production line stoppages, missed deadlines, and ultimately, lost revenue or missed sales opportunities
- Repackaging and documentation issues: Any errors in documentation or non-compliant labeling can mean extra time and money spent on repackaging or revised documentation and even regulatory fines
- Inventory mismanagement: Delays in receiving critical input material or finished goods create shortages or stock-outs. To mitigate this, some importers start keeping buffer stocks, but this will further tie up working capital
- Planning concerns: Shipment delays impact your planning since you can’t forecast your production and order fulfillment with certainty. This reduces the efficiency of your operations
- Reputational impact: Too many or lengthy shipment delays can erode your customers’ or partners’ trust in you and hurt your brand reputation.
How to manage & prevent shipment delays
Not every delay in sending and receiving goods is within your control. However, as a business leader, you can take some steps to reduce the uncertainty and prepare your team to manage the impact of shipment delays.
Here are some suggestions:
1. Use modern tools and technologies
AI-powered Exim platforms like Trezix provide visibility through real-time shipment tracking, notifications, and alerts. This can help companies plan better, and automate essential processes to improve efficiency.
Trezix Tip: Trezix also helps you keep track of all your compliance requirements to avoid penalties and late fees.
2. Reduce documentation errors
A centralized online documentation system for all your export and import processes can prevent losses due to human errors and insufficient documentation.
Trezix Tip: The Trezix platform integrates with all the relevant stakeholders, like Customs, DGFT, and even your ERP, to ensure accurate documentation.
3. Diversify your logistics base
Reducing your dependency on single vendors and routes can help you build a safeguard against disruptions and delays.
However, this can be difficult if you manage your supply chain and logistics processes manually, or with basic solutions like Excel.
This is where an automated Exim management solution like Trezix can save you time, effort, and, ultimately, money.
With simplified supplier management, payments, and communication, you can bring all your logistics suppliers into a single view.
4. Leverage data
Study the data from previous years to identify patterns along specific routes, carriers, etc., to plan better. AI and machine learning can be very helpful in this regard. This can also help you make a contingency budget to account for tariffs, expedited shipping, and currency hedging.
Learn more about how Trezix helps enterprises like yours bring greater efficiencies to their Exim operations. Request a demo now.
