Your Air Freight Questions Answered – Part 1

Your Air Freight Questions Answered

Loading air freightHere at the Exporting Excellence™ blog we invest a great deal of time in answering questions about international air freight for our clients.  What we find most interesting is the fact that these questions don’t just come from small or mid-sized customers, but even from Fortune 500 sized shippers who have large air freight volumes.  One of the most important ways we at Crescent Air Freight add value to the business of our clients is by eliminating the complexities that come with international logistics.  To that extent, we’ve put together a series of FAQ’s that we have encountered from shippers of all sizes and from across various industries.  Here’s a selection of some of the more frequent questions and our answers:

Q:             Why does air freight cost so much? 

A:              The answer lies in simple economics: there is a scarcity of space on an aircraft.  Long range, wide body passenger aircraft typically carry 15 – 20 tons of cargo on a flight and that’s only if passenger baggage and fuel capacity allow for it.  On top of that, since cargo on a passenger flight goes in the aircraft belly, the maximum allowable height of the freight is only 64 inches.

With freighter aircraft, the maximum payloads are about 100 – 110 tons per flight, and maximum heights can go up to 108 inches (sometimes more depending upon the contour of the aircraft and the cargo).  Contrast this with a 20’ ocean shipping container which can accommodate a payload of more than 20 tons, and you begin to see why space is always at a premium on an aircraft.

Q:             Are there any ways to reduce or offset the costs of air freight, without settling for an ocean freight transit time?

A:              We get this question very often, and there are several ways to answer it.

To begin with, the economics we mentioned above can’t be totally ignored.  Space on an aircraft always comes at a premium.  Typically direct flights and non-stop flights justify a higher price because of the speed of transit and reduced potential for delays.  Hence, one cost saving solution shippers can opt for is an indirect service, which typically involves a slightly longer transit for a slightly lower price.  As an example, cargo flying from New York to Sydney, Australia on a direct flight with QANTAS moves at nearly double the cost per kilogram of the same shipment traveling on Qatar Airways via Doha, using 2 flights.  This may seem odd to the consumer: 1 flight ought to be cheaper to operate and load versus 2 flights and a longer route.  However, the carrier offering direct service justifies their price premium by getting cargo directly to destination in a shorter time frame.  The indirect carrier justifies their discount by pulling in cargo from all their destinations into a single freight hub and profiting from the potentially greater volume (in theory, anyways).

What new shippers typically fail to understand is that the cost cannot be continuously decreased by increasing the transit time.  So this creates a common follow up question such as “Can you give us a really slow service that takes 7-10 days maybe for a really low price?”.  This is something that really doesn’t exist, and if a huge price discount is to be found it’s probably because the airline has no traffic going to a particular destination and hence markets the space more aggressively, rather than pricing the service based on transit times.

There are, however, some scenarios where we are able to get creative with the mode of transport by adopting a multi-modal solution.  For example, cargo being routed to landlocked countries in Central Africa, Central Asia or Central Europe can be sailed to major nearby cargo hubs such as Abidjan, Bremerhaven, Dubai or Sharjah and then flown or trucked a short distance to countries of final destination such as Afghanistan, Mali, Switzerland, etc.  This sharply reduces the total landed cost of product at destination and also improves transit time over a pure ocean service.  We offer similar solutions for our customers in the garment and textile industry by sailing cargo from Bangladesh to Dubai and then flying the goods to the United States, thus taking advantage of low inbound air freight rates and ample capacity that is typically not available in the country of origin of the goods.  Sometimes the opposite works too as cargo can be flown from a landlocked country such as Nepal, into a major nearby port city and then transferred to ocean containers for final transit to Europe or the United States.

The ultimate way to avoid air freight costs, of course, is to not ship via air at all, and for customers who do not ship enough material to fill an ocean container on their own, the option of LCL ocean freight exists.  Of course this is a longer transit time service than even standard containerized ocean freight, but the cost is often justifiable.

All of these scenarios, however, do require planning and that’s really the most important thing for a logistics manager to realize.  Planning with your service provider and sharing information on required transit times, budget constraints, deadlines at origin or destination, etc. will allow your freight forwarder to come up with the right solution for your business and even for your individual shipment.  “Just get it there” doesn’t work and is akin to randomly pulling a suit off a department store rack and telling the tailor to “just make it fit”.

Q:             Do we really need to pay for a premium or time defined/guaranteed service?  Can’t you just use your influence with the airlines to make our cargo move faster? 

A:              Definitely, maybe…

This question comes up a lot and many times the part about using “your influence with the airlines…” can come across as more of a taunt than a request!  The reality is that just like in many other businesses, with air freight (and logistics in general), you get what you pay for.  If your cargo needs to be kept in a cooler between flights and upon arrival at destination, then a freight forwarder will usually get you a service that may be slightly more expensive than general cargo, but far less than the cost of leasing a refrigerated air freight container.  The airline would want you to lease the refrigerated container and maybe even pay them round trip airfare for it, but your forwarder adds tremendous value here by providing you a “product appropriate”, cost effective service option based on their knowledge of your product, temperature requirements and by proposing reasonable alternatives.  However, once again the key here is communication.  If a shipper fails to disclose their true temperature or handling requirements for the sake of saving money and the goods suffer damage as a result, then there’s nothing a forwarder can do, especially after the shipment has been executed.

Temperature controlled goods present a truly special case as do high value goods and a few other select product categories.  Other times shippers have general cargo to ship via air on a very tight deadline.  In such circumstances time definite or guaranteed services are worthwhile.  The cost may be triple that of regular air freight, but if a customer is facing a production shut down, or an inventory problem that must be solved in a short time frame then it’s obviously worthwhile.

Over the past 39 years we have accumulated a lot of questions about the air freight and logistics process in general. In fact we just focused on price issues in this post and next month we’ll focus on air freight service and operational questions that arise on a daily basis.  In order to make the series work for you, we suggest you leave your questions in the comments below, or if you prefer, try sending us your questions by email at cargo@crescent1.com or on Twitter at @CrescentAF.

 

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IoT In the Logistics Space

IoT In the Logistics Space.

IoTEvery once in a while the logistics business gets to be “cool”. We’re not using a tired old pun here about the “cool chain” or perishable transportation solutions. Instead, we’re excited at the moment by the phenomenon known as the “Internet of Things” or IoT. As we’ve shown in some previous posts here at the Exporting Excellence™ blog we really like data and how it can be applied to (or derived from) international business, and IoT is all about the data.  From tracking passenger baggage to initiating preventative maintenance orders on aircraft, IoT is having a profound impact on the field of logistics and there are several ways that your business can benefit from this trend.

As we had mentioned in our post on big data, routine business processes create a great deal of data. This is primarily a byproduct of the increase in digital and online business processes – quite simply, every click we make in a browser, app or other program generates a data point that gets recorded somewhere, somehow. Big Data essentially focuses on how to compile, sort and interpret such data. IoT on the other hand is more concerned with how to “make” more data by bringing devices and gadgets that were previously inanimate and silent to “life” using network and digital communications. The result of compiling all this extra data is to enable businesses to use their resources more efficiently which in turn can increase sales, profitability, or other key business performance attributes.

We were really impressed with this recent report published by Deloitte University (part of accounting and consulting giant Deloitte Touche Homatsu) that offers some great insights into how IoT has been successfully adopted into supply chain and logistics processes as well as the many opportunities that it offers.

So what is the opportunity that IoT brings to the freight business? At the moment, most of the attention is focused on tracking cargo. The ability for an importer to determine how far from port their material sits, for example, seems to hold value for major wholesalers and retailers. Some specialized applications such as temperature monitoring for perishables and transit time tracking for pharmaceuticals seem to be gaining traction as well. A recent example of IoT technology hard at work that we came across was in the logistics of beer kegs. Already a high value segment of the logistics business, IoT is now enabling beer distributors to know how much beer actually remains in a keg. This information actually allows a bar to waste less beer (and more importantly increase yield per keg) and at the same time allows distributors to plan deliveries more efficiently. The “pre-IoT” way of measuring the amount of beer in a keg was to physically tilt it and see how heavy or light the keg was. New kegs, equipped with sensors and IoT technology can actually report the accurate quantity thereby enabling a more efficient supply and utilization process. It’s a product called iKeg from SteadyServe and you can learn more about the concept from this Wall Street Journal blog post or the company’s website. 

All of us in the logistics industry need to embrace our moment of “cool.” There is no need to expound on the many, many ways the internet has changed the world around us … we feel it everywhere. The logistics industry has lagged a bit in technological advancement because we are still a hands on, deliverable operation. It’s easy to leave the “cool” internet technology to those businesses that don’t have so many moving, physical parts. With IoT we are getting a chance to pull the technology available everywhere else, into our business. If IoT can make us operate smoother, track shipments easier, regulate temps better on perishable cargo….. what isn’t “cool” about that? And really, is anything “cooler” than increased profitability and efficiency derived from your supply chain?

 

 

Importing & Exporting with Indonesia

MINT (Mexico, Indonesia, Nigeria & Turkey) – Drivers of Future Growth for U.S. BusinessesScreen Shot 2015-01-21 at 7.20.50 PM

Continuing our focus on the global markets that offer the brightest prospects for U.S. exports and imports, we now turn our attention to Indonesia. Our previous reports had focused on the BRIC countries, namely Brazil, Russia, India and China. Subsequently, a new crop of countries known as MINT (Mexico, Indonesia, Nigeria & Turkey) has arisen as drivers of future growth for U.S. businesses. MINT is an acronym originally coined by Fidelity Investments, a Boston-based asset management firm and was popularized by Jim O’Neill of Goldman Sachs, who had created the term BRIC. The term is primarily used in the economic and financial spheres as well as in academia. Its usage has grown especially in the investment sector, where it is used to refer to the bonds issued by these governments. These four countries are also part of the “Next Eleven”. We recently profiled Mexico and identified it as a source of excellent two way trade with the United States. This month we turn our attention to the Indonesian part of MINT

Based on key metrics such as market size, growth potential and accessibility, Indonesia has emerged as a country offering strong economic growth potential. According to World Trade Organization statistics, Indonesia is the world’s 27th largest exporting country. Indonesia is also the world’s fourth most populous country after China, India, and the United States and the world’s third most populous democratic country after India and the United States. In 2009, BRIC and Indonesia represented about 42 and 3 percent of the world’s population respectively and about 15 percent of global GDP altogether. All of them are G20 countries. By 2015, Internet users in BRIC and Indonesia will double to 1.2 billion. In 2009, Indonesia was the only member of the G20 to lower its public debt-to-GDP ratio – a positive economic management indicator. U.S. companies exporting industrial machinery and equipment, chemicals and food products can benefit from opportunities in Indonesia.

From a logistics perspective, Indonesia does have some significant limitations that can adversely affect your export business. The primary issue the country faces in this regard is a weak transportation infrastructure. While Indonesia has been steadily investing in its ocean ports and diversifying traffic away from the main port of Jakarta, there is still a great deal of work to be done. Airport infrastructure in the major cities of Jakarta and Surabaya also are strong and well suited to international trade. However, poor road infrastructure can create significant challenges for U.S. exporters who are selling goods on a DDU or DDP basis. Delays in delivery times and increased costs associated with locating suitable trucks for local delivery can inflate costs thus eroding profit margins on export sales.

Another major issue that U.S. exporters must contend with, and one that poses serious obstacles to Indonesia’s growth as a desirable market for foreign goods and investment, is that of customs procedures. The basic documentary requirements for import into Indonesia are rather straightforward. Exporters must provide:

1. Airway Bill or Ocean Bill of Lading that show the actual cost of transport.

2. Commercial Invoices that clearly state the buyer and seller of goods.

3. Certificate of insurance.

4. Certificate of Origin.

Despite these clear and brief requirements, however, the potential for delays and cost overruns resulting from customs compliance issues is significant. For example, the requirement that shipping documents should state the actual cost of transport is significant as Indonesian customs charge import duties on the combined value of merchandise value and cost of transport. Exporters must be aware of this as it has a direct impact on the landed cost of their merchandise. Logistics providers should be aware of this and ensure that their documents reflect accurate charges so as to prevent their clients from unnecessarily facing excessive duties which can result in lost profits and claims from dissatisfied or “overcharged” customers.

Similarly, the accuracy of information stated on commercial invoices is of utmost importance. Discrepancies in the details of the seller, buyer or merchandise stated on invoices can cause Indonesian customs officials to withhold release of goods until corrections or amendments are made thereby resulting in additional costs such as storage, detention charges, courier costs for replacement documentation and fines or penalties for incorrect paperwork.

While the potential of Indonesia as a market for U.S. goods is significant, exporters and logistics companies must be keenly aware of the pitfalls that come with shipping to this market. Knowing these pitfalls is significant to your growth in logistics. Even with pitfalls Indonesia will be ranked seventh in GDP by 2050 according to Jim O’Neill. The country is the largest economy in Southeast Asia and a member of the G-20 major economies. Currently Indonesia has the world’s 9th largest GDP-PPP and 16th largest nominal GDP. Definitely not a market to ignore.

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“Nearshoring” Opportunities on the Rise

“Nearshoring” Opportunities on the Rise

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While there can be no denying that China has established itself as the world’s “manufacturing floor” over the past two decades, there are many reasons to suggest that U.S. companies are starting to see benefits from bringing their production back to North America. Factors such as labor productivity, transportation costs and energy prices are playing a significant role in eroding the benefits companies have enjoyed in sourcing from China. Also, as U.S. firms are becoming increasingly concerned about protecting their intellectual property, “nearshoring”—or bringing production closer to the point of use—becomes attractive as the risk of having important intellectual capital stolen is decreased. Having the capability to manufacture close to where ones customers are located can also increase customer responsiveness and decrease turnaround times, making the supply chain more predictable.

The United States is in the midst of narrowing its gap with China in overall manufacturing costs. Some have estimated that by as soon as 2015 the US could be in a cost parity situation with Chinese manufacturers. Many individual states now offer significant incentives such as state income tax rebates which reduce the aggregate cost of production thereby offsetting the lower wage benefits that come from China based manufacturing. As a recent example, the state of Nevada awarded electric automobile manufacturer Tesla a package of $1.25 billion in tax incentives to build a battery manufacturing facility in their state. Tesla will be able to operate in the state essentially tax free for the next 10 years. This is notable not only for the size of the package, but for the nature of the commodity.

China is a leading source of battery supply to the world, however the case for manufacturing in the United States is compelling. U.S. labor productivity remains substantially higher than that of many countries. In the case of China, a recent study by Boston Consulting Group suggests that adjustments for labor productivity make Chinese wages only 30% cheaper than U.S. wages. As wages are generally estimated to be 20%-30% of product cost, it becomes apparent then that U.S. manufactured goods are roughly 15% more expensive than Chinese made product and that is before accounting for transportation and logistics costs. Hence, true cost advantages to manufacturing in China may only be 10% or less.

Energy prices in the United States have contributed to the drop in production costs thanks to the countrys’ boom in natural gas and oil production. As a result, the energy costs of a U.S. based factory are amongst the lowest of any industrially developed country in the world.

In recent years, Mexico has also established itself as a source of cost effective production, especially for the North American market. Eighty percent of the cars built in Mexico are exported to other countries, about two-thirds of them to the United States. “I can export duty free to North America, South America, Europe and Japan,” says Volkswagen of Mexico Vice President of Corporate Affairs Thomas Karig.

“There’s not another country in the world where you can do that.” Over the past decade Mexico’s wage gap with China has almost completely vanished. As a result, manufacturers, particularly in the automotive sector, have been investing heavily in building manufacturing capacity in Mexico. The country’s proximity to the vital U.S. market also allows it to benefit from lower transportation costs.

While most of the variables that go into deciding whether to “offshore” or “nearshore” production are influenced by macroeconomic issues, logistics service providers can play a significant role in advising clients on the benefits of selecting a particular country for manufacturing. Insights into transportation costs, logistics infrastructure in foreign countries, import duties in the United States, the existence of free trade agreements, and other such matters are part of a logistics provider’s daily process and can be instrumental to U.S. companies in determining the value of a country as a market for sourcing or overseas sales.

Of course, challenges remain. Companies would have to rebuild their supply chains and identify people with the right skills to handle increasingly sophisticated automated operations. Also, U. S. tax policy makes firms reluctant to repatriate profits earned elsewhere, making it more difficult to find the resources to invest in manufacturing operations.

With all these things considered, manufacturing has a chance to stage a comeback in the U.S. and as with all things, getting in on the ground floor is an exciting prospect for the import/export industry.

 

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Hurricane Katrina Stopped Gulf Fish Deliveries: Could Your Business Survive Such a Disaster?

Hurricane Katrina Stopped Gulf Fish Deliveries: Could Your Business Survive Such a Disaster?Hurricane Katrina and it's impact on Supply Chains at the time

Many of us responsible for the smooth functioning of our company’s supply chain view
risks mostly as they relate to shipments in progress. However, the risks to our supply chains and logistics functions can take many forms. Many are beyond our control such as interruptions created by weather, natural disasters, political unrest and labor problems.

Others risks, however, are more directly related to the business cycle, and though less frequent, they too are significant. These include unexpected increases in demand, economic crisis or business failure of one or more market participants or suppliers.

How to Plan for Supply Chain Risk

Planning during or just before an interruption occurs is often a futile exercise. Effective planning takes place before interruptions occur, and is a specific and analytical process that creates protocols which prepare your company for all types of disruptions.

Include the Best People in The Planning Process

When exploring risks to the supply chain, and the appropriate responses, make sure to include your most relevant personnel in the process. This means involving not only senior executives but also capable operational staff as well. Senior management has a strategic overview but may not have operational insights that are relevant to the daily operations of the business. Those responsible for day-to-day operations have their finger on your company’s pulse and are the stakeholders within your organization most directly impacted by work disruptions. Consider warehouse managers, customer service managers, manufacturing shift leaders and the like as their views help bridge the chasm between theoretical planning for disasters and the real tasks the company faces in working around the problems that disasters create.

Assess Risk & Prepare a Process

Preparation is the key to withstanding the pressures imposed by a supply chain disruption. The first step in being prepared is to establish a periodic review process that examines a company’s supply chain in depth and identifies potential weaknesses and threats. Think of this as a SWOT analysis for your supply chain.

Key items to consider include assessment of raw materials and inputs that are needed for production, identification of key suppliers and vendors and – from a logistics perspective – ports/airports of origin and destination.

The importance of a specific, analytical and detailed overview is critical at this stage of your planning. Here is an example of why –

In normal times sales and profitability data show that a customer in Japan places large, high yielding but sporadic orders for your product. This type of customer draws the attention of personnel at various levels of the organization and is likely to have high priority even in a supply chain disruption review process. However, easily overlooked in the planning process is a smaller, perhaps less profitable but frequent customer in Hong Kong. In the event of a supply chain disruption it would be prudent to have plans to continue support for the smaller customer from Hong Kong. While the Japanese customer is of greater value in normal times, it is the smaller customer in Hong Kong who relies on your product on a regular basis, and also one who orders (and hence pays) with greater frequency. Being prepared to continue supplying such a customer will likely avoid hidden costs of disruptions such as decreased cash flow while also ensuring an enduring relationship with a regular customer.

Develop Alternative Service Providers

On time delivery is critical to those you supply and worth the premium your company pays for direct delivery services. Nevertheless, there is a need for developing relationships with 2nd and 3rd tier service providers who can offer alternative transit choices.

Assume that your company receives an important raw material from an overseas supplier. The cargo is normally imported by ocean through the port of Long Beach, California. However, due to an earthquake traffic to the port has been disrupted. An advance plan for this scenario would include an ocean rate contract that includes service to the ports of Oakland and Tacoma. Typically the same vessel calls on all three ports and for very little price difference, hence most steamship lines will often readily add these ports to a service contract. Furthermore, adding these destination ports into your contracts with a steamship line during normal conditions can save your company from the additional costs likely to be imposed by negotiating during an emergency when demand at nearby ports is likely to surge. Use of alternate ports may increase the cost of domestic transport to your factories and distribution centers; however, keeping your brand on the shelf and in the consumer’s eye is well worth it.

Collaborate With Your Freight Forwarders and Other Third Party Logistic Providers

If you do not include these groups in your planning process you are increasing the risk of your plan’s failure. While your plan may call for a freight forwarder to warehouse extra finished goods inventory in advance of a supplier’s strike, failure to include them in the planning process, and failure to update them on the likelihood of the strike will most likely cause the plan to fail as the freight forwarder would be in a reactive position without a complementary plan in place to support your company’s emergency plan.

One good solution is to form a crisis management task force that includes all the stakeholders in the supply chain. Since disruptions sometimes develop a life of their own, activate the task force members directly involved in any situation and keep others informed. If disruptions spread, other members join without the need for playing catchup.

Involving business partners in your planning works well. Under certain circumstances logistics service providers can allow for shared access to raw material and inventory systems providing all stakeholders with simultaneous updates on the flow of goods and materials.

This process is gaining popularity in the supply chain industry and is often called the “control tower” approach to managing the supply chain. Cloud computing has allowed smaller service providers the same abilities that were once the domain solely of global service providers and hence allows even small logistics providers to play a vital and leading role in a large supply chain.

Large Company Advantage

Companies having several layers of suppliers and transporters and sub-contractors are fortunate. They can work with them to develop advanced predictive models that may even have statistical foundations. The statistical models serve the same function as flight simulators for pilots and show how a number of events impact the supply chain and company operations and how well decisions from the crisis management team work to lessen or eliminate incident impact.

The task of preparing the supply chain for disruption is doable and critical to your company’s success. It is important to keep in mind that while you are far from a port that is earthquake prone, for example, your suppliers may use it to get products to you. Carefully analyze every step of your supply chain, identify weaknesses and ways to overcome them. Check your emergency plans annually and partner in this effort with your logistics vendors.

 

 

The Importance of Understanding Dimensional Weight

The Importance of Understanding Dimensional Weight

A great deal has been written in recent months about the decision by FedEx and UPS to increase pricing based on dimensional weight of cargo being shipped. Most recently, Forbes published this article on the subject http://www.forbes.com/sites/robertbowman/2014/08/19/with-fedex-and-ups-rate-increases-looming-shippers-explore-their-options/ .

This increase in pricing is making news now primarily because of its impact on e-commerce shippers. However, dimensional weight pricing has been a fact of life for shippers of air and ocean cargo for many years. So, what’s all the fuss about and why does dimensional weight even matter?

In the logistics industry, especially in the air cargo market, dimensions are crucial. The logic is actually quite simple here as there is a limited amount of space available on an aircraft and larger freight simply eats into that capacity.

When explaining logistics to customers, we often ask a simple question:
“What weighs more: a ton of feathers or a ton of bricks?”.

ton of bricks vs. ton of feathers

Some people quickly answer “bricks” without giving it much thought. Of course, this is wrong!
The correct answer would be “a ton is a ton no matter what the commodity” and therefore both would weigh the same.

However, when it comes to shipping, it’s the ton of feathers that “weighs” the most.

The explanation for this lies in an age old concept of physics called “density”. Quite simply, bricks are dense objects and feathers are not. The problem with objects that lack density is that they occupy more space than items which are more dense. Hence, a typical pallet or skid of bricks could easily weigh 1000 lbs, whereas the same pallet loaded up with feathers would scarcely weigh 100 lbs including the weight of the pallet itself! For an airline or a trucker, the lower the density the more space they lose inside their aircraft or trailer and as we mentioned before lost space eats into revenue and profits for the carriers.

In order to offset the loss in revenue the carriers use a formula to calculate dimensional weight, which is:

Length x Width x Height x # of pieces / 166 = volume weight or dimensional weight in lbs.

Length x Width x Height x # of pieces / 366 = volume weight or dimensional weight in kilos.

Let’s take a look at an example of what could be shipped on a dimensional weight basis. Say, for example, a shipper wants to send a consignment of networking gear (routers, switches, reels of cable, etc) by air from San Francisco to London. We’ll leave out the actual pricing for the moment, but let’s see what impact the dimensions have on the chargeable weight of the shipment.

Presume the shipment consists of 3 pallets weighing 250 lbs. each and with dimensions of 40 x 48 x 62 inches per pallet. The gross weight of this shipment would be easy to calculate: 250 lbs x 3 = 750 lbs. (340 kilograms). The dimensional weight of the cargo is going to be 40 x 48 x 62 x 3 pcs/166 = 2,151 lbs. (975 kilograms).

As you can see, by not charging on dimensional weight, the trucker or airline is getting paid for 750lbs of freight while giving the customer 2,151 lbs. worth of space. In international shipping, and especially by air, the carrier charges the shipper for the higher of the dimensional vs. gross weight. We chose networking gear as a good example, because products such as computer equipment, electronics, and their accessories are very often subject to the discrepancy between gross weight and dimensional weight. So too are products such as point of sale displays, signage and advertising materials, certain foods such as marshmallows, crackers, biscuits, etc. as well as many others.

High density products can also come from these categories, however. For examples laser printers, despite being computing equipment, are high density items. From the foods group, cheeses and liquids such as juices, sauces, etc. are high density items. Also within the paper products group, items such as pulp and paperboard are high density items. So too are building materials such as tiles, ceramic goods, etc.

For examples affecting e-commerce shippers, try looking up a commodity on Amazon, Ebay or other leading e-commerce sites. A good example would be a plastic chair mat such as the one beneath your office chair. In many instances you will find that the cost of shipping this type of product exceeds the value of the merchandise itself. That’s essentially what dimensional weight pricing now means for customers of online retailers.

While some commodities just cannot be shipped by any other means, in many instances shippers can reduce or possibly eliminate their exposure to the spread between gross weight and dimensional weight by taking actions such as making changes to packaging. Simply using smaller boxes, and protecting product inside the boxes with sufficient, but not excessive packaging material can make a significant difference in the density of freight, for example.

Alternatively, international shippers, and companies who move larger cargo may choose to mix & match their shipments so that low density freight is bundled with high density merchandise thereby allowing the aggregate consignment of goods to enjoy a more favorable weight charge.

Knowledge of dimensional weight and the density of one’s cargo is critical to protect your profitability and keep your costs in check. As we have explained in some of the above instances, freight charges can increase by 3x or more due to lack of density, and if a shipper is unaware of this, their export business can be severely compromised.

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MINT- The new BRIC

MINT- The new BRIC

During the first half of the year 2014, we focused on the BRIC nations: Brazil, Russia, India, and China.

Map of the MINT countries

Now as we move towards the latter half of 2014, we plan to focus on yet another group of emerging markets vital to the international business prospects of U.S. exporters: MINT. MINT nations consist of Mexico, Indonesia, Nigeria and Turkey.

Some of the major highlights of each of these markets, which we believe will be of great interest to U.S. exporters are as follows:

  • Mexico – According to economists, the average income of Mexican households will grow four-fold over the next 25 years. Along with this, recent market oriented reforms undertaken by the Mexican government are designed to attract more foreign investment. Thus the opportunities for U.S. exporters as well as investors seem to be very favorable for several years to come.
  • Indonesia – A stable political environment, strong coal reserves, a population nearly as large as that of the United States (est. 250 million) and a median age of only 28 makes this country an attractive destination for U.S. exports.
  • Nigeria – One of Africa’s largest countries, it has a population of 177 million. Powered by excellent oil reserves and recent implementation of stable economic policies, Nigeria expects a long period of sustained high economic growth. Export potential for U.S. goods is likely to grow in several sectors as a result.
  • Turkey – Due to its geographic location, Turkey enjoys the status of being both Eastern as well as Western. Having enjoyed strong economic growth over the past several years, it promises to be a continued source of opportunity for U.S. export and import growth.

Alongside the fruitful opportunities each of these markets presents to U.S. exporters, there are unique logistical challenges as well. Ranging from customs regulations to bureaucracy and infra structure issues, these challenges can pose great threats to export order profitability as well as business development. Thus, we at Crescent Air Freight look forward to leveraging our four decades of experience in international logistics by keeping you updated on the challenges of these markets.

 

 

Optimization of Routes

Optimization of Routes

Multiple Routes Map

Moving your products and goods in an effective manner should be at the core of your logistics strategy. From the assembly line to the store front, transporting your product might be harder than you think. When debating how to increase revenue without taking away from your bottom line, stop and look at your logistics process. How frequent are your deliveries? Are you able to lower costs by altering your transit times? If you are unsure of the answer to these questions, continue to read below. Here are a few solid tips to make your logistics an effortless process.

Optimizing Transportation Routes
In order to reduce the cost of transporting goods, you must utilize an entirely new approach to planning your routes. There are a few things to keep in mind when calculating your overall goal:

  • Cutting fuel costs
  • Lower truck mileage
  • Distribution networks
  • Reduce transit times

When going through your route schedule, look at your sales and replenishment allotment. How fast are you selling product, and does the product reach overstock? If you are sending items back due to excess product you may be able to bundle your deliveries, in turn creating less routes for your drivers. It may seem small, however, together these elements create the overall costs of getting your goods from point A to point B. Although this is just the beginning, this process lays the foundation for the steps ahead, and that means you are able to save from the start.

Direct Line Feed
When done accurately, you can increase savings and add to your bottom line through proper management of the DLF. When the truck arrives and drops off shipment, be sure to have your pick ups ready and all data into the feed. Getting items checked in can determine future sales, and that means it affects your ability to lose or save money. Logistics begins before the customer buys your product; you will need the items available for the customer to purchase. Let’s look at this in a step-by-step process.

  • Suppliers
  • Purchasing
  • Warehouse
  • Sales department
  • Replenishment

When your product is moved and being purchased by consumers, the warehouse is automatically notified. This direct data feed helps alert the department manager and allows for easier replenishment later on in the process. You will be able to help your inventory team with stocking the items, in turn, creating productivity and cost-effective payroll strategies. By having your team ready and up-to-date with the latest picks, you are able to have accurate bins, which leads to more sales. If items are not moved effectively, you may lose out on profits due to a potential sale that was lost as a result of poor line feed.

As you can see the steps necessary for a successful logistics operation are complex and each step counts. From transporting to binning, the goal is to avoid wasteful procedures and implement cost-effective strategies that will bring in more profit to the company. Rather internally or externally, movement matters when it comes to your product. Using a provider like Crescent Air Freight provides you with the logistics solution necessary to increase efficiency, improve margins, reduce risks, and grow your business.

 

 

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Growing Your Business Through International Sales

Growing Your Business Through International Sales

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In her June 11th article on Forbes.com entitled “Why Do So few U.S. Businesses Sell Internationally?” (http://www.forbes.com/sites/juliapimsleur/2014/06/11/why-do-so-few-u-s-businesses-sell-internationally/) Julia Pimsleur touches on a business development concept that we at Crescent Air Freight believe in strongly and have written about in the past on the Exporting Excellence™ blog (http://www.crescent1.com/blog/) . Namely, that tapping the potential of overseas markets can create an enormous flow of new leads and business for a company that is looking to grow. The numbers in terms of potential customers, as Ms. Pimsleur mentions in her article, are compelling. A company that confines its target market solely to the United States is confined to a marketplace of 300 million potential customers, whereas a company with an export program in place is facing a global market of 7 billion potential buyers.

As Ms. Pimsleur mentions in her article, there are several components to be addressed in developing an export strategy and her article seems to be more about direct sales to customers, however, one of the key components of this process is to “Master international shipping:…”. Further on in this paragraph Ms. Pimsleur refers to “freight forward (better for bigger shipments)…” Crescent Air Freight is an international freight forwarder and mastery of the international shipping process is precisely what we have done for our clients for nearly 4 decades. For our B2B corporate customers we have offered a wide range of services and solutions for international shipping, and have serviced the needs of customers ranging from Fortune 1000 sized businesses as well as companies that are just getting started with the export process.

Here’s a look at some of the ways in which we’ve helped our customers that may be relevant to your small business:

  • One of our clients, the largest foods business in the country, had an R&D project for us to work on. They had developed a new variety of sausage for the prepared foods product line in Taiwan and needed to have the product shipped there for sampling and testing purposes. The challenge was that as R&D product for testing purposes there was no prior format to work from. The product had never been cleared by Taiwanese health bodies, it had no SKU #’s since it was just in testing phase, and because it wasn’t even sold goods there was no formal commercial documentation such as invoicing or packing lists. This is a scenario that many a small business may find themselves in when developing a new marketing or test marketing a new product in a market. Crescent, in close collaboration with the client’s shipping, manufacturing and R&D personnel (scientists involved in the logistics business) was able to develop a documentary process that allowed the product to be flown to Taiwan, cleared through local customs and delivered to the local testing facility all while maintaining compliance with local regulations.
  • Recently, the life sciences department of a major university was looking to ship temperature sensitive samples of cells and other biological materials to their counterpart in Abu Dhabi, UAE. Most of the product being shipped has to be moved in special cryogenic containers to maintain frozen state while also withstanding the heat of the destination market and non-frozen transport conditions. On top of this constraint, the goods had to be received from the flight at destination and immediately transferred to the destination laboratory for immediate placement in their freezer. Lastly, the goods could not ship until all UAE Ministry of Health approvals and permits were in place, many of which were issued on a special one time basis due to the sensitivity of the project and the goods. In this case, again, Crescent was able to develop a customized process that allowed the product to reach destination. In many ways this too resembles a case where a small business may find themselves looking to test a new market or product overseas and Crescent is able to assist with the shipping & logistics of such situations.

Aside from unusual or highly sensitive cases like the ones mentioned here, each country has its own set of customs and governmental regulations which can have a tremendous impact on the viability of your overseas sales. Factors such as landed cost, customs duties, import restrictions and regulations, etc. are key components of the international shipping process, and to keep with Ms. Pimsleur’s advice to “Master international shipping…” a company seeking to develop export sales really must start by talking to a freight forwarder who can guide them through the challenges and complexities that come with overseas shipping.

In addition to trade procedures, a freight forwarder can also make recommendations on modes of transport that could assist with your budgeting and demand planning and forecasting. Why pay the high cost of air freight when ocean transport could be a better option, for example. Or if you don’t have enough product to fill up an entire ocean freight container a freight forwarder can offer you consolidated freight options that meet your needs. Air freight itself is expensive, but a freight forwarder can also give you an analysis of the true cost benefits associated with this mode of transport and how it could actually improve your business performance in the long run despite a higher short term cost.

Ms. Pimsleur’s article makes an excellent case for considering exports and a logistics partner like Crescent Air Freight is capable of advising you on the complexities of such a process.

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The Importance of Getting the Paperwork Right

Logistics Planning

The Importance of Getting the Paperwork Right 

There is no question that pre-planning and making sure everything is addressed ahead of time is the key to successful international shipping. Those who try to manage cargo movement without taking the time to address these seemingly bureaucratic issues will quickly find themselves being stymied and losing money as material sits for months on end at the first port of entry. Here are some time-tested tips on how to handle the paperwork successfully:

Different Country, Different Documentation Requirements – Every country’s government, even the smallest one, has some kind of regulation on what comes through its ports into the country. This is often a means by which the government can raise revenue through tariffs (import duties) or control competition at home (blocking competitors from shipping in or restricting them to a costly level). That regulation includes a list of documents that must be presented, including the cargo manifest, commercial invoices, certificates of origin and others. Fortunately, most countries make known what’s required ahead of time. Not providing these documents is just asking for a delay.

Make sure the documents can be read – If going into a country that speaks Spanish, English shipping documents aren’t going to help much. A copy should be prepared ahead of time in the destination country language. This expedites the review and eliminates delays due to not understanding what’s being shipped. It also helps avoid filing mistakes that could result in higher fees and tariffs.

Where possible go electronic – Most modern countries have the ability to take shipping documents electronically. This allows mistakes and issues to be spotted way ahead of the shipment arriving, giving time to sort out issues. It also improves transmission and proper receipt of shipping documents by the port authorities.

Double-check records regularly – Whenever possible implement a process whereby paperwork is checked over regularly, no matter how experienced export documentation personnel may be at preparing the shipping documents. This ensures that even the hardest to see mistakes are usually caught ahead of time instead of by a port authority.

Don’t Take Someone’s Word for It –

It's all good!Always confirm in writing that shipping documents have been received and are approved by a port authority. Relying on someone’s word only is a amateur mistake, and most port authority personnel shake their head at how often this error still occurs. It’s also usually a source of fraud if handled through a third party who disappears after the fee is paid for brokering services. By confirming ahead of time if things are in order, mistakes or corrections can be made early, well before a shipment arrives. That saves time as well as money in deliveries.

If all of these requirements sound like more risk than you are willing to take, then bring in a professional service that can manage this entire process for you. Companies like us have the ability to manage your shipments through our logistics process which we ensure aligns with your process as well as the import regulations of the country we are shipping into. As always, don’t be penny wise and dollar foolish when it comes to your logistics.