Professional freight forwarding and logistics are invaluable in times of economic change

The international economy went through rough and unexpected changes in 2020, but smooth logistics and professional freight forwarding helped ease the situation. CHS Group’s Chairman of the Board Heikki Halmetoja writes about what to expect of the economy in 2021.
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Since the 1980s, globalization and international trade have been a great success story for Finland, and smoothly run logistics is naturally an integral part of it. On a global scale, everyone has already grown accustomed to logistics that works well and is mainly problem-free.

In the last few decades, there has been overcapacity in sea and air freight and road transport. Especially sea freight, which is by far the largest in volume, has had major overcapacity and its price level has been low. 2020 was the first time in decades when we saw huge issues in the availability of capacity.

This was mainly due to the coronavirus pandemic closing down harbors and other functions around the world at different times.

The containers used in sea transportation were not circulating normally and this has caused an unprecedented container shortage in China. Capacity shortage lengthens the delivery times and raises prices. Normally, most air freight is transported in the holds of passenger planes. Due to the coronavirus pandemic, air traffic volumes have decreased to a fraction of what they were. Thus, the available air freight capacity has also decreased. In road transport, traveling limitations, and quarantine rules for drivers are constantly changing. This inevitably influences road transportation.

Through the years, we have grown accustomed to the logistic system working smoothly, and production chains are dependent on it. The covid-19 pandemic brought unforeseen disturbances to the logistic chains and thus the whole operations of many companies.

Luckily, there is a blessing in disguise: we have splendid freight forwarders that can thrive in exceptional situations. Even though there is a shortage of capacity, professionals will find solutions. There is quite good capacity available for specialized logistic services, such as temperature-controlled vaccine transportations. Professionalism is valued especially now that the pandemic has strongly affected the price levels: I have not seen sea freight prices this high in my entire career. A skilled freight forwarder finds a logistic solution even in a tight price situation.

The only constant is the change

Besides my own companies, I am also active in various associations. I worry about Finland’s ability to thrive and I want to take part in working towards it. At the moment I am a member of the Board of the Confederation of Finnish Industries, Vice Chairman of the Board of Service Sector Employers Palta, and Chairman of the Board of the Finnish Freight Forwarding and Logistics Association. In these roles, I find it to be important to promote Finland’s best interest so that Finland would be an even better place to work, succeed, and be an entrepreneur.

In these organizations, decision-making and forming opinions are based on data that economists produce for us. According to current views, different kinds of interferences in demand are to be expected in the future: when people start to travel and consume, and companies start to invest after the virus situation has calmed down, we will see a spike in demand like never before. In business, there should be a plan if this happens.

A concern behind the rapid growth and eruption of bottled-up demand is that the economy does not usually take disturbances or quick changes well. Vast indebtedness and money inflow to the market is problematic. Loose money collects to the wrong places and creates bubbles. Transferring from loose finance policies to tight ones is painful and difficult to time correctly. I hope this is done successfully. Predictability would always be the best fuel for the economy in any situation.

The time of disturbances is not over. In the long run, there may be other kinds of instabilities ahead, such as trade wars and punitive duties. Competition between the USA and China could take an aggressive turn, and the consequences could be dire. There has been good development in the right direction with the EU and China’s investment deal, but there is still a long way to go toward a modern free trade deal.

A lot has moved forward when it comes to creating ground rules, and this is always valuable. Creating ground rules is slow, yet breaking them can be extremely fast. Finland has always benefited from new free trade deals, no matter where they are made.

It is always beneficial to trust the help of a freight forwarder

I recommend to every logistic service purchaser to plan and analyze their logistic chains with their own freight forwarder. A good tool is to draw a map of logistic solutions and go through it with your freight forwarder: what things you should develop in your own business, what are the possible risks, and what plans should be made in case the risks come to be.

This year we have both old and familiar and new interesting customers, with whom we do exactly that: map out and anticipate risks. This way of working is clearly becoming more common in importing and exporting companies, which delights me. Preparing never brings problems closer, quite the contrary.

Despite the hard and unprecedented year of 2020, I am delighted that we at CHS have this kind of team of professionals, who help and take care of customers’ problems in difficult situations. The market imbalances and sudden changes have shown the value of freight forwarding in a completely new way.

Heikki Halmetoja CHS hallituksen puheenjohtaja

Heikki Halmetoja

Chairman of the Board, Partner, CHS Group

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