Key words: #freight cost; # ignored #settledinUSD #sourcingexperts #localcurrency #sizeofcompany #organizationstructure #importsissues #internationalsourcing
Freight cost, as a part of international sourcing is always ignored especially in some developed countries according to my experience. The main reasons are as follows from my perspective:
1. The freight cost is always be settled in USD with the shipping company. To sourcing experts, from western countries, several thousand dollars is common comparing with their daily consumption. However, if it is in developing countries, several thousand dollars means a large sum of money when it exchanges to local currency.
2. Due to the size of company or different organization structure of a company, not every company has appointed the full time staff to deal with the imports issues, let alone the optimization of freight cost or others related.
3. Company habit. I learn from some customers that they get use to depending on their shipping forwarders, who has been serving their company for many years to help solve their imports. In addition, some companies even do not co-operate with shipping forwarders. Thus, when they source overseas, they will add all of shipping cost to the product and ask for a DDP delivery terms instead. If they meet a good supplier, they will take the normal freight cost so as to have its goods back to their plant; if not, they would surely pay higher cost.
4. It takes much time to deal with shipping issues in deed. In order to get a reasonable freight cost, the staff of company who is dealing with freight issues, should ask several shipping forwarders for quotation and make comparison and also takes its reputation, service into consideration before finalizing the right shipping forwarder for each transaction. The staff needs to provide different information according to the forwarders’ requirement among this process. Sounds complex ? Sorry, it is only the first step.The coordination between packaging time, loading time of warehouse, customs declaration, the accuracy information for B/L and etc., all should be attached great important to and takes time.
All of reasons above exist during international sourcing.
Several thousand USD might be regarded as normal for one transaction, if you have many transaction like this? Ten, twenty, one hundred transactions per year? Several thousand USD will become ten thousand USD, a hundred thousand USD...
This is the fact. Generally speaking, the reason sourcing from overseas is simply for cost reduction of product. We admit that there is an exception, for instance, some special instrument, or high technology equipment, which requires special requirement and only some suppliers could provide. Since we make efforts in negotiating with suppliers to get the goods with comparatively cheaper price, why should we put premium on the freight cost also?
That’s why we always suggest the clients to separate the international shipping into two parts: 1. supplier takes care of the goods from its plant to the port of destination of clients; 2. The client clears customs and have the goods transported with local forwarder. The reason is that both supplier and client are familiar with the rate of local, which makes it possible for them to get the reasonable freight. Then the cost of freight can be controlled.
You might ask if you could cooperate with reputed shipping forwarders to organize the goods from supplier and ship it back to your warehouse. It is OK. But my suggestions is that DO make sure to ask them to separate the freight into 2 parts, overseas and domestic. And you could ask your supplier to help double check if the overseas part is reasonable.
Of course, we, Pintuu provides one-stop transportation services also, from supplier’s warehouse to customer’s plant by cooperating with our long term cooperating shipping forwarders with competitive freight cost and service.
We do according to our clients’ needs!
Any suggestion or question is welcome!