How to Determine If Your International Shipping Partner Is Financially Stable – and Why Stability Is So Important Right Now

Financial Growth GraphYou never want to experience delays. It doesn't matter whether you're shipping domestically or internationally, delays mean missed deadlines, upset clients and lost revenue. However, due to the complex nature of overseas shipping, freight stuck in a port across the globe can prove to be more difficult to get to its final destination than domestic shipments.

One way you can help avoid overseas shipping delays is to find a financially stable international shipping partner.

A financially stable freight forwarder will add consistency and reliability to your international supply chain, which is particularly needed right now as the impacts of COVID-19 continue to be felt throughout the shipping industry.

There's too much uncertainty right now to take chances. And it's more important than ever to be able to determine whether you're selecting an international shipping partner that's financially stable and has the resources available when needed quickly.

How to Determine an International Shipping Partner's Financial Stability

Look at the Company's Credit Terms

Flexible credit terms can indicate financial stability. If a company can extend reasonable credit terms, it means they have the cash flow to pay the numerous vendors required to get your cargo to its final international destination — all before collecting payment from you.

To put it another way, by giving you credit terms, a company is saying it has the financial resources to manage your shipment until well after the delivery of goods — which can be 30–60 days or longer.

If a company requires Cash on Delivery (COD) or even requires payment prior to delivery, that could be a red flag.

Determine Whether the Company Is Investing in Its Future

Investment in the future can look like many different things, but if a company has recently invested in new equipment, purchased new terminals, expanded into new ports and shipping lanes or diversified the ocean carriers it relies on, it's showing signs of fiscal confidence and financial stability.

On the other hand, if a company is selling off assets or closing down terminals and offices, this could be an indicator of financial instability.

Ask a Lot of Questions (and Ask for References)

It's always a best practice to be as transparent and honest as possible. Be direct and ask the questions you need answers to in order to feel confident in your partner carrier of choice.

Reputable international shipping freight forwarders will be transparent about their investments and the ocean carriers they partner with. You can also go to the ocean carriers' websites to see which routes they serve. If they only serve a few, that likely means they're a smaller company. While "smaller" certainly doesn't mean "financially unstable," it could indicate that decision making could be less efficient and/or they're less likely to weather a prolonged economic downturn.

You should also ask a prospective international shipping partner or freight forwarder things like:

  • How long have you been in business?
  • What volume do you ship per year?
  • Who are some of your best clients?
  • What size of company do you typically work with?
  • What's the length of your average client relationship?
  • What services do your clients typically utilize?

Based on the answers to questions like these, you'll be able to determine the level of trust they've established with their customers and understand their areas of specialization. An absence of established customer relationships, services or repeat customers, may indicate unreliability and, in turn, financial instability.

Another best practice is to ask for references. While it's true that reference-based vetting doesn't happen often in international shipping, contacting the customers, carriers and other vendors a shipping company works with can help expose concerns or provide the validation you need to start working with them.

Dig Into the Data

Should you want to add another layer of confidence into your carrier research, there are multiple industry resources you can use to find information on international freight shipping companies, freight forwarders and ocean carriers.

If you want a lot of detail and budget isn't as much of a consideration, you can request a PIERS report to find out how much volume an ocean carrier ships in twenty-foot equivalent units (TEUs), what type of cargo they ship and more.

Another option is to get an overview of a company's financial health by requesting a report from a financial tracking firm such as Dun & Bradstreet. The report will assign a "risk factor" to a company, from low to high, based on its financial health so you can make an informed choice.

Why Financial Stability Is Essential in the Era of COVID-19

You know partnering with financially unstable international shipping companies and freight forwarders can result in shipment delays. You also know the complexity of overseas shipping means there can be a breakdown at any point in the process. A shipping company's poor payment history and reputation, for example, could leave your freight stranded at your manufacturing plant, at the port of destination or somewhere in between.

Unfortunately, the level of uncertainty has been exacerbated by the global pandemic.

International shipping companies that weren't financially stable prior to COVID-19 are facing more dire challenges. This has resulted in furloughs, layoffs, mergers and drastic fleet reductions that are causing shippers to experience additional delays and inconveniences.

COVID-19 has hit ocean carriers the hardest because the amount of cargo being transported on them has been greatly reduced. Declining cargo volumes have resulted in inconsistent reliability for everyone. Some international shipping companies and shippers are seeing blank sailings (scheduled voyage sailings that are ultimately canceled due to a lack of volume) ruin their timelines on a regular basis.

The Key to Finding an International Shipping Partner: Long-Term Stability

The good news is, international shipping companies and freight forwarders that were financially stable at the beginning of 2020 have remained stable.

Why? Diversification.

Many international shipping companies, like ATS International, have diversified shipping lanes and a healthy freight mix. They also tend to have diversified business segments that provide many domestic transportation solutions, from heavy haul to logistics. Having diversified shipping lanes and transportation solutions helps mitigate negative financial impacts disproportionately affecting one part of the business.

Additionally, established companies have the proven, long-term customer, carrier and vendor relationships that help ensure their international shipping services remain unaffected.

If you're looking for stable, reliable and consistent international shipping during these uncertain times, reach out and tell us about your needs today.

Tags: International Shipping, U.S. Domestic Offshore Shipping

Jay Thomassen

Written by Jay Thomassen

Jay is the Vice President of Commercial Services for ATS International. Jay advanced to his current role after more than a decade as Director of ATS International. He has partnered with ATS since 1992 in his various roles with both U.S. domestic and ocean transportation carriers. Jay began his transportation career in 1986 as a commercial over-the-road Driver following his service in the U.S. Navy.

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