For small and midsize businesses (SMBs), the current climate is extremely tricky. According to recent data from the US Bureau of Labor Statistics, around 20% of small businesses fail within the first year, and 50% fail within five years. 82% of these failed businesses cite cash flow problems as a factor in their failure.
Cash flow management is especially difficult for businesses working with physical goods. There is a good chance that at minimum certain raw materials, and at most the entire product, is made offshore and shipped in for sale; it may then need to be shipped out again to someone on the other side of the world. SMBs do not have the reserves of larger competitors, and any delays in shipping can increase the strain on working capital, tying up cash in goods that can’t yet be sold. In addition, thanks to Amazon and those like it, customers expect all shipping costs to be absorbed by the business, no matter how high. Global, free, expedited shipping is now a consumer expectation.
In this difficult climate, many SMBs are searching for solutions that would allow them to keep shipping costs low and efficiency high. Freight forwarders are an option that offers significant benefits, ensuring businesses fairer treatment and increased visibility into the often obscure shipping process.
SMBs are Looking for Ways to Minimize Loss
In the last several years the entire shipping industry has been affected heavily by global events. Because the global supply chain gets more extensive and interconnected each year, local disturbances create ripples felt everywhere. These ripples are all the more impactful for SMBs, causing already thin margins to erode overnight.
Large, multinational conglomerates ship in bulk, meaning they can set up bulk discounts and ship at a significant competitive advantage over smaller businesses. In addition, this high volume means that blips and disruptions are less likely to affect mega companies in the long run, as losses are spread out and so nearly disappear. This leaves SMBs, already operating at a disadvantage as underdogs, especially vulnerable to shipping cost spikes.
Due to these difficulties, as well as the pressure to deliver even custom goods rapidly, SMBs are working harder than ever to manage their shipping and deliveries. On average, SMBs spend around 500 hours annually managing freight shipments, and nearly half spend over two hours (around $100 in labor) on each individual shipment. For small businesses, this is a major output of resources, and could be the difference between profit and loss.
So what exactly are SMBs looking for to help them manage these shipments? In a word, transparency. Companies want to know exactly where their shipment is, whether it’s on time, and the odds of it being delivered in the window they promised. They also want to make sure that the rates they are paying are fair, and that they won’t change when it comes to customs clearance and insurance.
How Freight Forwarders Stand Up for SMBs
“SMBs have tighter marketing budgets than larger enterprises, and so they acquire fewer new customers, focusing instead on retention,” says Carmit Glik, CEO of SMB-focused digital freight forwarder Ship4wd. “Meeting customer deadlines is of paramount importance, yet extremely difficult as these businesses don’t have large logistics teams to ensure that their cargo arrives on time and clears customs smoothly. If they miss deadlines, their relationships and reputations are on the line. In addition, SMBs’ value chain often starts with receiving international shipments – if this first cargo is delayed, it will jeopardize the rest of their operations.”
Freight forwarders like Ship4wd can be the advocates these SMBs need. A freight forwarder is a company specializing in arranging goods transport by liaising with carriers. Crucially for SMBs, freight forwarders already have partnerships with key carriers, which allows clients to access the preferential rates usually reserved for big businesses. According to Glik, SMBs turn to freight forwarders because they “offer the high-quality service they need, providing one-stop-shop solutions for shipping, customs clearance, and other services that will save smaller businesses a significant amount of time and worry.”
For example, SMBs usually have less-than-container loads of products to ship, but carriers are often reluctant to move products until their containers are full to avoid losing money. Ship4wd, in contrast, guarantees its customers ocean container allocation, regardless of load size. Freight forwarders also have robust support teams to deal with any holdups or problems.
As well as ensuring their clients fair shipping rates and treatment, freight forwarders can take care of the complex admin of the shipping process, such as customs clearance, accurate documentation, and cargo insurance. International shipping is so document-dependent that one journey often requires 50 sheets of paper, sent back and forth between 30 different stakeholders. Smaller businesses do not usually have an internal logistics manager or team to handle the necessary bureaucracy, so the support of their freight forwarding partner is crucial.
For Even Greater Efficiency, SMBs Go Digital
Traditional freight forwarders rely on written agreements and telephone communication. Digital freight forwarders, however, operate comprehensive online platforms where clients can manage their shipping without involving a third party. They can compare detailed quotes, giving them full knowledge into what they’re paying for, and book shipments directly online.
Once shipping is underway, clients can use the platform’s dashboard to keep track of the products, providing much-needed transparency and real-time updates. This visibility allows them to address any issues, such as delays, proactively, mitigating their impact and building resilience. With all this information at their fingertips, the time that SMBs spend arranging each shipment is reduced significantly. Any problems can be dealt with quickly through effective communication between the freight forwarders and carriers.
Kat Chrysostom, founder of small business Benefab, appreciates this clear communication with her freight forwarding partner and how it helps her to get answers to questions concerning shipping dates and duties. “I haven’t had to ask those questions as answers are just coming to me, which is a refreshing thing,” she says. “Providing delivery dates for the stock and ensuring timely communication throughout the process were key when interacting with my clients. From my perspective, having an all-in-one solution to shipping is imperative because there are so many moving pieces when it comes to being an entrepreneur.”
SMBs Have the Potential to Level the Marine Field
SMBs certainly don’t have to employ a freight forwarding company, but those that rely on the recently-sensitive global supply chain would do well to consider it. From negotiating good rates, addressing delays, or taking care of administrative tasks like customs clearance, freight forwarders can significantly streamline these SMBs’ shipping operations.
If you manage logistics for a small or midsize business, try taking an honest inventory of the hours spent on shipping management, and the potential cost spikes that occur when unexpected delays and shipping cost increases hit the company. Freight forwarders can reduce this wasted time and deflect some of these costs – although the cost benefit of avoiding frustration is difficult to monetize! Remember, also, that these fees might increase each year as the global supply chain becomes more complex and interconnected.
Each SMB is different, and there is no one-size-fits-all solution for optimizing operations. However, based on their key features and how they line up with the core issues smaller businesses face, a freight forwarder, and especially a digital one, can be a major benefit for SMB management.
This post was authored by an external contributor and does not represent Biedex Markets Opinions and has not been edited for content. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice. Biedex Markets does not make any recommendation to buy or sell any security or any representation about the financial condition of any company.
