The COVID-19 crisis has shown how vulnerable the world-wide fragmented production chains really are. Companies have been confronted with factory, port and even border closures while simultaneously managing blank ocean sailings and a reduced airfreight network.
Having the ability to react quickly to ensure your customers in the various regions will be delivered against best cost and conditions. Aside from the chemical industry (polymers), those such as traders of raw materials (such as cotton) and low-end technology producers would ffeedstock closer to the customer and/or markets to be able to seek differentiation from local competitors. Of course, this would not be based on product quality and cost alone, but short delivery time and service.
So, how do you avoid investments in physical assets and expensive outsourced logistics solutions (which would place product closer to the customers), while also creating significantly higher cost to market? By deploying solutions that reduces lead-times, without increasing total cost of logistics: close to market solutions.
Two different solutions
There are 2 different type of services which would offer the aforementioned benefits:
1. Delay in Transit (DiT) solution:
The shipper knows where and to whom the goods will be sold to and as such, the final delivery address, but will use a port close to the final destination as a holding point until the final call-off by the customer. By doing so, the customer will meet any OTIF commitments. DiT is more a customer-driven (pull) scenario.
Hub in Transit (HiT) solution:
The shipper does not know the final customer yet, but plans to sell the product in the specific regions/continent and brings the ‘sellable’ stock closer to end market. Product will be available in the ERP (SAP) system as available/sellable stock in and can also make optimum use of the day trade market. HiT is more a shipper-driven (push) scenario.
Both models (virtual warehousing) are based on maximizing the utilization of free-time in trans-shipment points, generally closer to destination and in turn, removes the non-value adding element of expensive physical warehousing.
Differences between DiT and HiT
The graph below shows the difference between DiT and HiT:
Advantages and disadvantages of DiT and HiT
Lower storage charge versus warehousing
No double-handling of product in/out of warehouse storage in the port guarantees improved security of products
Working capital savings
Increased flexibility to scale up /down based on DOW operations
Potential to reduce lead time to serve customers
Sales Premium – Potential increased premium on products sold through stock availability and credit terms (LCs etc.)
An HiT solution requires more time-consuming administrative work than a regular warehouse management (2nd leg B/L)
Agreement from lines and port is required and involves sporadic rounds of negotiation
Congestion in ports represents an increased risk due to the large space requirements of this particular option
Overview of Potential Ports
How BDP International Manages Delay in Transit
BDP is an experienced provider of alternative solutions to warehousing at destination: Offering a product postponement solution which allows inventory to be held closer to customers, across multiple regions, using multiple carriers through a single visibility tool.
1. BDP International’s DiT solution supports our customers’ supply chains through enabling shippers/consignees to plan DiT shipments, gain full visibility of the entire supply chain, manage storage costs and “call off” product seamlessly from DiT locations. Coupled with our visibility tools and control tower solution, we enable our customers to actively anticipate and approach global disruptions through a strengthened supply chain.
2. Booking and space is secured through BDP’s transport management system (TMS), selecting ocean carrier based on carrier or NVO contract details.
3. Containers are discharged at transshipment location serving agreed extended stay. De-consolidation and in-transit warehousing storage may be utilized where applicable.
4. BDP provides visibility and actively reports on container idling time, monitoring against agreed free time & costs (5 days prior to end free-time customer receives an alert notification about status).
5. BDP coordinates booking for final movement to destinations based on your contracted ocean carrier/BDP NVO solution and requested delivery dates (in case of HiT, a second leg B/L will be required).
6. At port of destination, BDP coordinates customs clearance and delivery to end-receiver.
7. End-to-end visibility via BDP Smart, DiT control tower and our advanced analytics provides you with shipment details you need to be firmly in control