Moving Beyond Traditional Shipping Decisions to Strategic Business Choices

As CEO of Cubic, I have this conversation almost daily: "Should I ship by air or ocean?" It's one of the most common questions we get from clients, and while it seems straightforward, the answer is rarely as simple as comparing rates and transit times.

Let me share something that might surprise you. Last month, one of our clients chose air freight for a shipment that would have been significantly cheaper by ocean. Why? Because they asked the right strategic questions and realized that faster shipping time would help them capture a crucial sales and land a deal with a national supplier leading up to the holiday rush. Their decision wasn't about shipping costs – it was about business strategy.

Moving Beyond Basic Questions

Sure, we could start with the usual metrics. Ocean freight typically costs less but takes longer. Air freight is faster but more expensive. These are important factors, but they're just the beginning. In today's complex business environment, making the right choice requires a deeper understanding of how your shipping decisions impact your overall business strategy.

At Cubic our thinking is that businesses that align their shipping strategies with their overall business goals will see higher profitability and internal efficiencies compared to those who made decisions based solely on cost. This isn't just about moving goods – it's about moving your business forward.

Five Essential Questions That Will Transform Your Shipping Decisions

Let's explore the questions that will help you make better-informed choices for your business, with real examples from our clients' experiences:

How Does Shipping Align With Your Business Strategy?

Think about your company's positioning in the market. Are you competing on price or speed? A fashion retailer needing to stay ahead of trends might benefit from air freight's speed, while a bulk commodity supplier might find ocean freight's cost savings more valuable.

One of our clients, a premium electronics manufacturer, uses air freight exclusively for their high-end products. Why? Because their brand promise is built on having the best tech (which can be difficult to keep in stock). The additional shipping cost of air freight is offset by the premium pricing and the sales they capture rather than stocking out.

Consider:

• Your brand promise to customers

• Market positioning relative to competitors

• Inventory management strategy

• Customer willingness to pay for speed

• Impact on your competitive advantage

What's Your True Time-to-Market Requirement?

This goes beyond simple transit times. I've seen companies choose ocean freight only to lose more in missed sales than they saved in shipping costs. One client saved $15,000 on ocean freight but missed their product launch window and lost an estimated $100,000 in potential sales.

Ask yourself:

• How predictable is your demand?

• What are your seasonal considerations?

• How much buffer do you have in your supply chain?

• What's the cost of missing your market window?

• How do your competitors deliver?

A real-world example: A toy manufacturer we work with uses a hybrid approach. They ship 70% of their inventory via ocean freight but maintain a 30% air freight strategy for mid-season replenishment of hot-selling items. This flexibility has helped them capture additional sales during peak seasons.

Have You Considered Your Working Capital Impact?

This is often overlooked, but it's crucial. Ocean freight ties up your capital longer, while air freight might help you maintain better cash flow despite higher upfront costs.

Let's break down the numbers:

• Ocean freight: 30-45 days transit time = 30-45 days of inventory value tied up

• Air freight: 5-7 days transit time = 5-7 days of inventory value tied up

Think about:

• Payment terms with suppliers and customers

• Inventory carrying costs

• Cash flow patterns in your business

• Seasonal capital requirements

• Impact on your ability to respond to market changes

  
  

What's Your Risk Tolerance?

In 2024, this question has taken on new significance. Ocean routes face potential disruptions from geopolitical tensions, while air freight offers more routing flexibility. Recent events in the Red Sea have shown how quickly shipping routes can be disrupted.

Consider:

• Your ability to handle delays

• Impact of lost or damaged goods

• Alternative routing options

• Insurance costs and coverage

• Business continuity plans

We recently helped a medical supplies company develop a dual-mode shipping strategy that includes both air and ocean freight options, ensuring they always have a backup plan for critical shipments.

How Does This Affect Your Scalability?

Your shipping choices today can impact your growth tomorrow. We've seen clients struggle to scale because their shipping strategy couldn't grow with their business. One e-commerce client had to completely revamp their shipping strategy when they expanded from domestic to international markets.

Evaluate:

• Future market expansion plans

• Seasonal volume fluctuations

• Flexibility needs

• Technology integration requirements

• Warehouse and distribution center locations

Making the Strategic Choice

The right choice emerges when you view shipping as a strategic business decision rather than just a logistics one. Here's a framework we use with our clients:

1. Start with your business goals

2. Assess your market requirements

3. Calculate total cost of ownership

4. Consider risk factors

5. Plan for growth and scalability

   
   

Looking Ahead

The future of freight will continue to evolve, but one thing remains constant: successful businesses align their shipping decisions with their overall strategy. At Cubic, we're seeing emerging trends that will impact shipping decisions:

• Increased focus on sustainability

• Growing importance of supply chain resilience

• Rise of regional manufacturing hubs

• Integration of AI for predictive shipping

• Greater emphasis on flexibility and adaptability

The key is to stay informed and adaptable. Your shipping strategy should evolve as your business grows and market conditions change. At Cubic, we're committed to helping you make these decisions by understanding not just where your shipment needs to go, but where your business needs to go.

Need help thinking through your shipping strategy? Our team at Cubic specializes in helping businesses make shipping decisions that drive growth. Let's talk about your specific needs and develop a strategy that works for your business.