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The pandemic has made global supply chain issues a common topic of conversation. With escalating geopolitical tensions and competing manufacturing hubs in China, India and Mexico, it can be difficult for companies to understand the best strategy for moving goods internationally.
But despite the complexity of our global supply chains, the opportunities for companies to participate in international trade have never been better. Advances in technology are making it increasingly easier to automate logistics. The global logistics automation market is expected to reach $133 billion by 2030, according to Acumen Research and Consulting.
Technology not only makes it easier for companies to manage supply chain logistics, but in a declining market it also offers the opportunity to negotiate better deals with foreign suppliers, find new customers and develop business models that adapt to future market conditions.
Regardless of your motivation, if you want to expand your business abroad, here are three tips that can give you a competitive advantage:
1. Understand regulatory requirements in advance
The paperwork may seem tedious, but in the world of global logistics, an incorrect or incomplete form can make the difference between your shipment passing through the border or not. As the head of a customs brokerage and freight forwarding company, I can tell you that brokers spend a disproportionate amount of time contacting clients to complete the appropriate customs clearance paperwork.
Understanding simple but important details, e.g. B. What determines the country of origin of your product is crucial for budgeting and planning. For example, if a company buys materials from China and develops them in the U.S. before reselling them, many executives assume that they are entitled to reduced tariffs through the North American Free Trade Agreement (now known as the Canada-U.S.-Mexico Agreement)—but that is not the case. This is not always the case. In order to take advantage of the lower tariff rates, products must meet certain criteria. Missing out on such details can unexpectedly cost companies a lot of money.
It is also important to understand how exchange rates are calculated. Many companies are surprised when they have to pay more duty when a shipment arrives than originally estimated. This is because the duty is calculated based on the exchange rate at the time the goods arrive at the destination. Exchange rates fluctuate, so it is important that companies take this into account when creating budgets.
Related: Your customers don't care where your e-commerce business is based, so be prepared to ship anywhere in the world
Consider geopolitical tensions and changing market conditions
From China’s recently passed “retaliatory tariff” to attacks on merchant vessels in the Red Sea, growing geopolitical tensions are causing companies to rethink their trade routes.
How a company deals with geopolitical turmoil largely depends on whether it is pursuing a short-term or long-term strategy. For example, if a company looks for a short-term strategy, it is likely to be able to adapt more quickly to trade route disruptions. However, companies focused on long-term logistics planning must consider the overall impact of geopolitical stability.
Take, for example, the current tensions between the US and China, which have led to more manufacturers setting up shop in Mexico. If the US decides to permanently shift its purchases from China to Mexico, this change would have a significant long-term impact on the trade route's pricing and capacity.
Companies moving into international markets should consider which parts of the supply chain are likely to be disrupted within the time frame they are targeting and whether or not they are well positioned to transition if necessary.
Related: How to find international customers and partners while expanding your market
Build strong relationships with international partners
One of the most overlooked factors in managing global logistics is the importance of building strong relationships with partners abroad. Companies seeking strong international partnerships must learn and adapt to the customs and cultures of the regions in which they operate.
In my work I work with partners in several 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 home soil. This difference in attitudes often determines who enters into long-term, collaborative partnerships that lead to better prices and referrals, and who loses their business altogether.
According to the International Labor Union, a staggering 70% of international businesses fail due to cultural differences. Every culture has its own etiquette. A little research into the communication rules and accepted behaviors in the countries where you operate can go a long way in building a collaborative partnership.
As an experienced international logistics leader, I have experienced firsthand the transformative power of adapting to the dynamics of the global marketplace. For companies venturing into international territory, understanding the regulatory landscapes, geopolitical shifts and cultural nuances not only mitigates expansion risk but can also help maximize opportunity.
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