Communication and Simplification Keep Cotton Moving
February 9, 2011 It’s an understatement to say that the cotton industry has seen dramatic changes in the past year: consolidation, record high prices in the cotton futures market, export bans, and truly staggering demand for cotton fiber. The problem is that cotton competes globally with other agricultural products for container and vessel space, but no one can predict future rates for cotton. Other agricultural products are usually sold promptly, which allows for flexibility in pricing. In addition, many shipping lines are looking to exit the chassis business, further restraining cotton movement. Inland cotton moves, therefore, will become more expensive and may necessitate that cotton be moved and stored nearer to the ports. Alternate methods of inland transportation need to be reviewed, with an emphasis on warehousing at or near the ports.
Because of these developments, we will need to find alternate ways of moving cotton in the future. Flatbed trucks and rail may alleviate some of the strain, and shipping lines do need cotton loads to balance their vessels.
Perhaps the biggest issue facing cotton logistics is the availability of containers. Industry professionals must promote cotton as a viable and necessary product for shipping lines to carry.
Shipments often are delayed due to logistical issues at interior warehouses. These are caused by a variety of reasons, with congestion and multiple “load out” orders being the main culprits. Electronic Warehouse Receipts have alleviated some delays by allowing cotton to be staged more efficiently, providing accurate storage locations that make the warehouse more efficient.
Communication between channel partners also needs to be improved. This can be achieved by ensuring that warehouse receipts detail the storage location of lots for the warehouseman. Timely reporting of shipping instructions will allow for better picking and staging of the bales, while communication between trucking lines and warehouses to provide accurate pick up times will allow for faster turns and improved efficiency.
Paperwork is a pain in the neck
Documentation issues continue to cause importers problems and are directly affected by transit times: The shorter the transit time, the more difficult it is to ensure all the documents are in hand to satisfy letter of credit (LC) requirements. This is particularly an issue with third-party providers who need phytosanitary certificates, because each importing country has different requirements with regard to the phytosanitary certificate (if it is a governmental import requirement).
Importing countries need to standardize their documentation requirements, and additional efficiencies could be achieved if they would allow some LC requirements to be presented at a later time (but still prior to customs clearance).
Exporting countries face a myriad of issues, as do importing countries. Unfortunately, there is no “quick fix” to improve the efficiency of the storage, handling and movement of cotton. However, by improving communication between channel partners, prompting investment in infrastructure, and aligning governmental import/export documentation requirements, the overall efficiency of the industry will significantly improve–and every cotton professional around the world will benefit from those efforts.
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