In the cost conscious climate of business today it’s easy to feel that the only way of driving costs down and maintaining margins is to find the lowest price for whatever product or service you need. In the world of shipping, logistics and fulfillment this almost invariably results in a reduction of key service performance indicators such as reliability, fulfillment time, choice and flexibility. These failings have a direct impact on your business and make difficult trading conditions even more challenging. Ultimately such failings can be counter-productive to what you are trying to achieve.
However, there are measures that you can take as part of your sales or purchase process that will have a marked impact on costs without having to lower service expectations.
First, don’t get caught out with charges you haven’t budgeted for. Get to know your Incoterms. These are internationally agreed and recognised terms of sale and purchase which dictate which party is responsible for what charges throughout the supply chain. Is your supplier expecting you to organise and pay for all shipping costs from their factory or warehouse (EXW) or are you promising your purchaser that you’ll deliver to their door, all inclusive (DDP). There are 11 Incoterms, each imposing a different set of responsibilities and hence costs on both the vendor and the purchaser.
By the same token, be wary of ‘special’ offers, especially suppliers who offer free (or incredibly cheap) shipping. There’s no such thing as a free lunch! If shipping costs from, say China, aren’t explicitly shown within the purchase price then they must appear sometime and somewhere. Sometimes this can only become apparent once the goods have arrived on your doorstep, when you’re suddenly faced with a menu of charges that need to be paid before your order can be handed over to you. ‘China Import Service Fees’, ‘Currency Adjustment Factors’ and inflated cargo handling fees are common tools used to compensate for the special freight offer. Insist on knowing who is going to be handling your shipment and contact them to give you a full, inclusive and written quote for getting your goods to your door.
Beware of shipping fresh air! From cartons to pallets to containers, every inch of wasted space can cost. However, there are simple measures you can take to reduce this wastage, beyond simply cramming as much as you can into the smallest possible space. For example, a bigger carton might be more cost efficient. A few extra centimetres can mean a better pack quantity, which in turn might make the most efficient use of a pallet or the loading of a container. Good packing not only drives down costs but can also reduce the risk of goods being damaged in transit.
Perversely however, sometimes when shipping in larger quantities, using a partially full air or sea container can be the most cost efficient method! The freight and handling costs incurred for shipping goods as LCL (Less than Container Load) have a ‘tipping’ point, beyond which it is more economic to send your shipment as FCL (Full Container Load). Good load planning and an analysis of the overall costs will quickly reveal which method of forwarding you should use.
Keep an eye on the clock! Can you be more flexible with the time you’re allowing between order placement and order delivery? There’s a wealth of different service and carrier options that can be used in getting your goods from A to B. All work to different timelines and so to different costs. Courier, Air freight, Sea/Air, Rail, Road and Ocean freight.; each basic transport mode has a multitude of time, route and cost options. If you can cut yourself a little slack, more and more of these options become available to you.
These are just a few of the headline areas that are worth considering when trying to drive down shipping costs. There are many more. Analysis of these and other aspects of your business that impact on final product delivery are assessed by the Seaspace International team as part of our objective to simplify the entire international shipping process. This helps us to provide an individually tailored, quality service that represents real and achievable value for money.
If you’d like to know more and take active steps towards cost effective shipping and fulfillment contact Gordon Humphrey at Gordon@seaspace-int.com or call 01293 554620.
Gordon Humphrey is Managing Director of Seaspace International Forwarders Ltd, providers of strategic, pro-active and innovative freight forwarding and logistic solutions to business for the last 25 years.