05/20/2024
How Customs Brokers Improve Supply Chains—GEODIS Insights
Exploring the value that a reliable third-party customs brokerage and freight forwarder provides to companies managing complex global supply chains.
Managing increasingly global supply chains hasn’t gotten any easier over the last few years. The globalization of trade has created significant supply challenges that range across countries and continents. Difficult to manage and control, these networks are prone to unforeseen challenges like geopolitical uncertainty, natural disasters, cybersecurity breaches, and other unexpected transportation and production disruptions.
These and other realities are pushing organizations to rethink their supply chain setups, focus harder on resilience and work to drive volatility out of critical networks. Even with the global pandemic in the rearview mirror, predicting conditions has become exceptionally difficult because recent historical data and current conditions are too volatile to forecast demand.
Key takeaways
- Restructuring supply chains is difficult, and integrating customs brokerage services helps businesses to make smarter foreign trade decisions
- A lack of supply chain visibility, high inflation, and unpredictable demand are still causing increased volatility
- Reshoring and near-shoring are challenging and slow to implement
- Customs brokers help companies to understand total landed costs and regulatory requirements across complex supply chains
Welcome to GEODIS Insights. These longer pieces provide you with deep dives, research, and industry authority for logistics and the supply chain. Use our findings and expertise to help decide what's right for your business. In this article we're sharing research originally published on Supply Chain Dive in 2023, lightly edited and republished here with their kind permission. Visit Supply Chain Dive to download a PDF of this content.
Want to find out how GEODIS Customs Brokerage can help you optimize your supply chain and reduce costs? Talk to us to learn more.
Businesses are examining how to restructure their supply chains
As companies work to fortify their supply chains to address the “now” while also preparing for the future, many are considering regionalization or reshoring of those critical networks. Though an attractive move for some, reshoring isn’t always a viable option for companies that have long relied on overseas partners to supply their raw materials, finished goods, and other products.
For example, U.S. imports of fruit grew by 10% in 2022. Or, to look at another industry, more than 1,100 Tier 1 automotive manufacturers have stamping, assembly, and auto manufacturing plants in Mexico, which is the largest supplier of auto parts to the U.S.
By leveraging the power of a customs brokerage/freight forwarder, companies that can’t readily relocate their operations to the U.S. can successfully navigate the complexities of global trade, reduce costs, expedite shipments, and gain peace of mind knowing that goods are being handled by a professional who understands—and can successfully navigate—the cross-border shipping process.
"Consumer demand isn’t the only metric that matters. Inventory decisions should also be made based on the parts a product contains and where those parts are sourced.”
- Dennis Unkovic, Business Advisor, Author, and International Attorney at Meyer, Unkovic & Scott LLP
Supply chain volatility remains high
A slowing economy and recessionary signals put consumers on edge in 2023. Inflation, rising interest rates, and geopolitical issues still impact the business environment and force companies to pivot quickly in the post-pandemic world.
“Companies’ stock on hand is increasing, and their costs are going up,” said James Miller, senior supply chain consultant at Sikich, a global firm specializing in technology-enabled special services. “And companies can’t just raise prices to offset these challenges in an environment where customers are cutting back.”
Even though the rampant supply chain disruptions that took hold during the pandemic have mostly faded, there’s still high demand and low supply in the electronics and automotive industries, among others. This continued volatility has become more difficult to manage in an era where customers have come to expect their orders delivered within days. Meeting these requirements has become extremely difficult due to a lack of supply chain visibility. “Right now, importers are really struggling with the lack of accurate information on both estimated times of arrival and landed cost data,” said Miller.
Reshoring and near-shoring aren't often a realistic solution
Robert Chin Quee, senior vice president of customs brokerage at GEODIS, said the transportation issues that took hold in 2020 and 2021 led many companies to stock up on goods that were difficult to obtain during the pandemic. Now, many of those organizations are stuck with overflowing warehouses and distribution centers.
The current international environment is also causing a nightmarish situation for many importers. “The geopolitical landscape is certainly affecting the stability of supply, with the scenario in China creating high levels of uncertainty and volatility,” Chin Quee said. “Reshoring and near-shoring have become a hot topic of conversation, but from a quality perspective, there’s not much companies can do to change where the majority of the production takes place quickly. It’s still in China.”
While reshoring and near-shoring may sound viable in theory, they’re just not feasible for all companies. “This is a reality that many global importers are facing right now,” said Chin Quee. If it was so easy to bring production and sourcing closer to home, why didn’t companies already make the move a long time ago? The fact that they didn’t pretty much answers that question.”
Cost leakage remains a major concern due to estimation and lack of visibility
As a former supply chain executive, Miller said one of his biggest issues was poor visibility into profit margins on specific products. As a current supply chain expert, Miller sees many companies struggling with similar issues. For example, a company may know that it paid out a certain amount in duties and how much it paid for the imported items, but it will often rely on a general percentage to come up with its freight and duty costs.
“Companies will set their margins based on those estimated ‘general’ averages, but in reality, this is a terrible approach because there are probably areas where they’re bleeding money without their knowledge, and mainly because they used an estimate,” said Miller, who sees data as a solution to this ongoing problem, which can result in major financial losses over time.
Want to find out how GEODIS Customs Brokerage can help you optimize your supply chain and reduce costs? Talk to us to learn more.
Customs brokers help companies understand their total landed costs and regulatory requirements
A customs broker or freight forwarder can add tremendous value by providing the true landed cost data on every shipped item. That way, the importer knows whether it’s making or losing money on those shipments and can pivot accordingly by raising prices, discontinuing certain products, or even intentionally shrinking margins to undercut competitors.
When they work with customs brokers and freight forwarders, companies can also successfully navigate the many regulatory requirements that impact importers. Organizations can rest easier knowing that compliance is being taken care of and can spend more time focusing on running their own operations.
“Working with a reliable customs broker who has that knowledge base of what’s happening in a specific country today — and that provides recommendations based on that firsthand knowledge — translates into real benefits for importers and other shippers,” said Chin Quee.
Customs brokers also have legal experts on staff who ensure there are no missing data points and that the import isn’t immediately “flagged” as having missing documentation, permits, or other required documentation. For example, many importers don’t realize they’ll need a fish and wildlife permit if they’re going to be importing products made with feathers.
“If you didn’t know that, you really don’t get a second shot at it,” said Miller. “Customs will just destroy the product.” Companies can avoid this problem by working with a customs broker that’s up to speed on relevant regulations and laws. They address EPA issues in advance, for example, to avoid costly, time-consuming problems like container fumigation upon arrival at a U.S. port. They also ensure that all pallets have been properly marked as “pre-treated” and take other measures to eliminate surprises during transit or upon arrival.
Customs brokers help companies navigate complex international supply chains
Similar to how a company would hire law firms to represent them in court, smart organizations are working with customs brokers who are experts in customs law. “With a customs broker working on your behalf, you have someone who is constantly looking out for you in places where you could potentially make mistakes,” said Miller, who points to the Consolidated Screening List as one compliance area that companies tend to overlook or even ignore.
This is a group of lists encompassing individuals, entities and corporations that have been either denied export privileges or added to a sanctions list. Any dealings with one of these parties that would violate the sanctions or terms of its denial order are prohibited. Even simply accepting a sales order from an organization or individual on these lists can count as a violation.
“Most companies don’t have a solution in place to check their trading partners against the Consolidated Screening List when they’re making agreements to buy products from companies overseas,” Miller said. “Well, guess what? If you sign a contract with one of these companies that’s on the list, you are suddenly open to investigation by the IRS and U.S. Customs.”
To help their customers avoid this problem, customs brokers stay updated with the most recent versions of Consolidated Screening Lists and regularly check on their clients’ behalf. This is an important win for companies that exercise the privilege of being able to import and export goods. “That privilege can be revoked at any time,” Miller pointed out. “If you source a lot of product globally and aren’t paying attention to the most updated lists, you may find yourself out of business.”
Want to find out how GEODIS Customs Brokerage can help you optimize your supply chain and reduce costs? Talk to us to learn more.
Customs brokerage and freight forwarding in action
For companies that can’t fill a 40-foot container of goods to import to the U.S., freight forwarders offer the perfect solution: consolidating the freight of multiple shippers into a single 40- foot container. This is more cost-effective and efficient than using less-than-container load (LCL), and it also maximizes container space and cuts down on the number of half-filled containers on the water at any given time. The cost savings can be significant; an LCL shipment costs about 7.5 times that of a filled 40-foot container.
“A lot of companies may be using LCL to ship from the multiple suppliers they work with, not even realizing how much money they could be saving by enlisting a freight forwarder to consolidate shipments and take advantage of full container rates,” Miller said.
Because freight forwarders and customs brokers work with many different customers and carriers, they consolidate shipments within a certain geographical region, get the most favorable bid from an ocean carrier, and then load the goods into one 40-foot container. Along with lower costs, companies get decreased transit times and the assurance that they have just one importer of record (versus 10 to 15 different entities, as would be the case with LCL).
“This is just one example of how working with a broker consolidates costs, provides more streamlined tracking data, decreases transit time, and helps drive volatility out of global supply chains,” said Miller, who points out that freight forwarders usually operate their own warehouses and storage facilities. Additionally, any company short on space due to expanded inventories can store the goods off-site on either a long-term or temporary basis.
Customs brokerage helps to keep the global supply chain moving
To companies that want to offload the responsibility of customs compliance and freight brokering to a reputable third party, Miller said the best first step is to research potential partners online. Check out their websites and see their locations and areas of the world they cover. Speak to the company’s salespeople and ask them what they know about your specific industry, read through some customer success stories, and make sure the company’s challenges and requirements align with yours.
“Do your research, look at the regulatory requirements, and review what the provider is offering,” said Chin Quee. “Ideally, you’ll want to work with a company that offers a complete package that includes both transportation and customs clearance facilitation.” When exploring your options, remember that customs brokerages with large, global footprints will be best positioned to help you drive volatility out of your supply chain. “A global provider knows the entire spectrum and offices everywhere,” said Miller, who also recommends looking for partners that have multiple contracts with many different ocean and land carriers. “That way, you’ll never have to wait because there are no available openings at the moment.”
How GEODIS can help
GEODIS is one of the biggest customs brokers and freight forwarders in the U.S. and around the world. Here's what you can expect when you work with us:
- Get a full range of customs brokerage services including classification, clearance, and compliance
- Optimize costs and duties with our comprehensive foreign-trade services
- Discover a trusted freight network of carriers to and from the U.S. and around the world
- Leverage our team’s industry knowledge to meet your exact customs and freight needs
- Integrate your freight forwarding and customs with GEODIS drayage, transportation, warehousing, and other logistics services
GEODIS manages millions of shipments a month, and we’re trusted with billions of dollars of freight value every year. Discover how we can help you optimize your international supply chain.