Crisis in Venezuela: Preparing your Supply Chain for Regional Instability

Nelson CabreraOcean Freight, Shipping GuideLeave a Comment

With any supply chain, there are many points in the chain of command where there might be issues with getting the cargo to the consignee, namely regional instability, shrinkage, or even weather. Sometimes, due to unforeseen circumstances, ships and airplanes have to be diverted to an alternate course and goods cannot immediately reach their intended destination. Although rare, it can happen, and it is important to be prepared.

Venezuela is a topical case study for this issue due to the political unrest in the country. This instability is having a serious impact on shippers because they cannot be sure if and when their products will make it to their end users. Sometimes carriers cannot make it into the country at all due to safety concerns or abrupt changes in regulations.

Ocean shipping

Do you have a contingency plan?

The best piece of advice we can give our customers is to have a contingency plan. The most successful exporters and importers are those who can respond readily to unstable countries like Venezuela by implementing emergency backup strategies. Exporters should work to establish strong relationships with carriers so that, in the case of unforeseen issues, the carriers can divert the shipments to a stable third location. Products often stay in theses alternate locations for anywhere between two weeks and six months.

Consider shifting the distribution of your inventory.

Another important recommendation we have is to consider shifting the distribution of your inventory. In the case of Venezuela, many shippers have made adjustments so that only 25% of their inventory actually stays in the country. The rest can easily be relocated to a safer region – Colombia and Panama are both popular choices because they are only two days and three days away from Venezuela by boat, respectively. They’re ideal for shipping to other countries in Central and South America, as well. As an added bonus, Panama has the Colon Free Zone, which makes it an incredibly easy place to do business. You can keep your goods in the United States if you want, but many shippers opt for a Central American country like Panama because transportation costs are less, there are no duties if the products are staying in the free zone, and there are more shipment options from this natural hub.

Prepare your supply chain for unforeseen setbacks.

It is vital to work with a knowledgeable legal team when dealing with unpredictable shipping routes, such as those to Venezuela, because the regulations can change at a moment’s notice (sometimes even in the time between when the goods leave the warehouse and when they arrive at their destination). It is important to work with a company that can adeptly navigate the political and regulatory landscape in the destination country.

LILLY + Associates meets this description on all fronts. Due to our strong presence and wealth of experience in South America, we feel no need to shy away from countries just because there is political instability or some other type of turmoil. We have a dedicated team to deal with regulatory issues and we have great relationships with the carriers.

Despite the immediate potential impact on your supply chain and profit margins, it is important to note that in many cases these situations are temporary. Armed with an experienced partner and the promise of long-term gains, you can navigate these shipping crises with ease.

Nelson Cabrera
Nelson leads global business development efforts within ShipLilly and has been featured as a logistics expert in numerous publications, including SupplyChainBrain, The Bulletin Panama, Logistics Management, and the Miami Herald.

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