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Pandemic done global supply chain issues a casual conversation at the dinner table. Now, with the escalation of geopolitical tensions and competitive centers of production in China, India and Mexico, it can be difficult for businesses to figure out the best strategy for moving goods internationally.
However, despite the complexity affecting our global supply chains, the opportunity for businesses to engage international trade it has never been better. Advances in technology continue to make it easier to automate logistics. Actually, according to Acumen Research and Consultingthe global logistics automation market is projected to reach $133 billion by 2030.
Not only is technology making supply chain logistics easier for businesses to manage, but in a declining market, there may be opportunities to negotiate better deals with overseas suppliers. 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 makes it across the border. As the owner of a customs brokerage and freight forwarding business, I can tell you that brokers spend a disproportionate amount of time following up with clients to complete the proper paperwork for customs clearance.
Understanding simple but important details, such as what determines where your product originates, is essential for budgeting and planning. For example, if a business buys materials from China and further develops them in the US before resale, many executives assume they qualify for reduced tariffs through the North American Free Trade Agreement (now known as the Agreement of Canada, USA and Mexico) — but this is not always the case. Products must meet a specific set of criteria to benefit from the lowest tariff rates. Missed details like this can cost businesses a significant amount of money unexpectedly.
It is also important to understand how exchange rates are calculated. Many businesses are surprised when they have to pay more for customs on a shipment when it arrives than originally estimated. This is because the duty is calculated based on the exchange rate at the time the goods arrive at their destination. Exchange rates fluctuate, so it's important for businesses to take this into account when creating budgets.
Factor in geopolitical tensions and changing market conditions
From recently passed China”revenge feeto attacks on merchant ships in the red seagrowing geopolitical tensions are causing businesses to rethink their trade routes.
How a business navigates geopolitical disruption depends largely on whether it seeks a short-term or long-term strategy. If a company is looking for a short-term strategy, for example, it is likely to adapt more quickly to disruptions in trade routes. Businesses focused on long-term logistics planning, however, must consider the major implications of geopolitical stability.
Take, for example, the current tensions between the US and China, which have caused more manufacturers to rise operations in Mexico. If the US decides to permanently shift its purchases from China to Mexico, this change would have significant implications for prices and trade route capacity in the long term.
Businesses entering international markets should consider which parts of the supply chain are likely to be disrupted within their target time frame and consider whether or not they are well positioned to move, as needed.
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Build strong relationships with international partners
One of the most overlooked factors in navigating global logistics is the importance of building strong relationships with overseas partners. Businesses seeking strong international partnerships must learn and adapt to the customs and cultures of the regions where they operate.
In my work, I do business with partners in many countries. Every year, when I attend their annual conferences, I notice the difference between leaders who respect local customs and those who act as if they were on their own land. Often, this change in attitude determines who creates long-term collaborative partnerships that lead to better pricing and referrals, and who loses business altogether.
According to the International Labor Union, a staggering 70% of international ventures fail due to cultural differences. Every culture has its own etiquette. Doing a little research on the communication rules and accepted behaviors in the countries you operate in can go a long way toward creating a collaborative partnership.
As a seasoned leader in international logistics, I have seen firsthand the transformative power of adapting to global market dynamics. For businesses entering international territory, understanding regulatory landscapes, geopolitical changes, and cultural nuances not only mitigates the risk of expansion, but can help maximize opportunity.