The Top 7 Markets for U.S. Medical Equipment Exports

The Top 7 Markets for U.S. Medical Equipment Exportsmedical bed

The category defined as Medical Devices or Medical Equipment is a broad one.  The U.S. Department of Commerce assigns 5 NAICS codes to this market, and digging into the specifics of each classification reveals several sub sectors and categories.  According to 2012 estimates, the United States market size for medical devices and equipment stands at $110 billion, and U.S. exports of such products were valued in excess of $44 billion.  The United States enjoys a tremendous advantage in this industry over other nations largely due to its advanced R&D capabilities in both the public and private sectors.  Based on data from the United States Bureau of Census covering several NAICS codes, here are the top seven export markets for U.S. manufactured medical devices and equipment for 2014:

7. China – 2014 Medical Devices & Equipment Exports – US$1,520,069.00

It’s rare that China is not at the very top of a list of export or import markets, especially where it comes to trade with the United States.  Nonetheless, with a burgeoning population, China’s potential as a market for U.S. made medical devices and equipment will remain strong for years to come.  The sub sector of “Surgical and Medical Instruments” stands out as the largest category of U.S. exports to China at $762,943,000 in 2014.

6. Germany – 2014 Medical Devices & Equipment Exports – US$2,267,567.00

Europe’s largest economy offers exporters of Medical Devices and Equipment a strong, stable environment for international sales.  While the current strength of the U.S. Dollar against the Euro may pose some short term challenges, higher value products from the United States will continue to enjoy demand and a trade friendly environment in Germany well into the future.

5. Mexico – 2014 Medical Devices & Equipment Exports – US$2,281,228.00

As we highlighted in a recent post, Mexico is a great trading partner for the U.S. as it serves as a source of two way trade.  Surgical equipment, appliances and supplies accounted for nearly 55% of U.S. medical equipment exports to Mexico in 2014.

4. Belgium – 2014 Medical Devices & Equipment Exports – US$3,405,914.00

One of 3 European markets on this list, Belgium has long been a standout market for U.S. made medical equipment.  Surgical instruments, appliances and supplies alone represent an annual export opportunity of $3.3 billion for U.S. companies.

3. Japan – 2014 Medical Devices & Equipment Exports – US$3,560,670.00

Japan ranks as the fourth largest market for U.S. exports as we detailed in a recent post here on the Exporting Excellence™ blog.  According to some measurements, it may even be the biggest export market for U.S. made medical devices.  As home to an aging population and a culture uniquely devoted to caring for its elderly, Japan will continue to be a source of export growth for U.S. manufacturers of medical devices and equipment for years to come.

2. Canada – 2014 Medical Devices & Equipment Exports – US$3,564,214.00

America’s largest export market overall stands to see a similar standing across specific industry segments as well.  Canada offers U.S. medical equipment manufacturers a diverse market, as no specific subgroup of medical devices and equipment accounts for more than 39% of the aggregate exports of this commodity.

1.The Netherlands – 2014 Medical Devices & Equipment Exports – US$3,929,604.00

Despite a strong presence in the global pharmaceuticals marketplace, The Netherlands looks abroad for its medical equipment and device needs and the U.S. has been the primary beneficiary of this search.  As with all European markets, an aging population has a strong impact on domestic demand for healthcare related products.  As we mentioned with Germany, current strength of the U.S. dollar may cause a short term decrease in sales opportunities, however medical goods tend to be better protected from such market events due to necessities.  U.S. exporters would be well served by focusing on this market as part of their future international sales strategy.

There are several other major markets that didn’t make the top seven list here based on specialization.  For example, the category described as Opthalmic Goods enjoys strong demand in Australia, France and the United Kingdom.  Similarly, “Dental Lab Products” enjoy strong demand and growth in Italy and Spain.  Newer or smaller volume exporters should consider developing sales in Saudi Arabia, Singapore and Switzerland all of which offer strong demand for all categories of U.S. medical devices and equipment, but do not have the scale that comes with the top seven markets in this list.

Irrespective of the market or category, a capable logistics service provider is required to facilitate the shipment and overseas delivery of goods such as medical devices and equipment.  From domestic compliance to international customs clearance, Crescent Air Freight offers the depth of expertise and skill to meet the demands of exporters while maintaining focus on reducing the hidden costs and inefficiencies that can come with the process.  We look forward to assisting your business in its international expansion today and for the long haul.

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Top 5 Markets for U.S. Defense, Emergency & Security Vehicles

Top 5 Markets for U.S. Defense, Emergency & Security Vehiclesdefense vehicles

While U.S. trade in defense, emergency and security vehicles has seen a slowdown in recent years due to the end or drawdowns of overseas conflicts, the fact remains that these products enjoy substantial demand overseas, even in peace time.  Friendly nations continue to be buyers of U.S. defense and security vehicles in support of their domestic defense and law enforcement activities.  Additionally, emergency vehicles, such as ambulances manufactured in the United States, continue to enjoy strong demand overseas due to their capabilities and durability.  Lastly, despite drawdowns and withdrawals from conflicts in the past few years, the United States maintains a significant overseas defense presence that requires ongoing servicing and replenishment in the form of new vehicles and parts thereof.  The data on this market, sourced from the U.S. Census Bureau, requires some careful consideration as certain manufacturers may fall into categories that refer to their general defense business which often include categories aside from vehicles.  Meanwhile, a great number of exporters in this segment simply fall under the same classification of conventional heavy vehicles such as trucks.  At Crescent Air Freight, our expertise in the logistics of vehicles and parts thereof for defense, emergency and security vehicles gives us a unique perspective into the handling of these products as well as keen insight into the export markets and trade data that are truly relevant to this sector.  Based on NAICS code 336992, here’s a look at the top five markets for U.S. exporters of defense, emergency and security vehicles:

5. Australia – 2014 U.S. Defense, Emergency & Security Vehicle Exports – US $49MM

Signed in 2007, the Australia-US Defense Trade Cooperation Treaty has opened the door to expanded cooperation between the United States and Australia in the trade of defense and security related goods.  The treaty came into effect in May 2013, and a subsequent increase in shipments of U.S. made military vehicles has ensued.  U.S. exporters of such goods and related components will find easier trade and export control compliance procedures in dealing with Australia, which incidentally has also been a hot market for U.S. exports over the past decade.

4. South Korea – 2014 U.S. Defense, Emergency & Security Vehicle Exports – US $63MM

The United States has maintained a significant military presence in South Korea since the Korean War.  Export data will certainly reflect a bias towards the U.S. military business in the country, however, support for Korean defenses does offer significant opportunity for U.S. manufacturers of such vehicles as well as their components, spares and accessories.

3. Afghanistan – 2014 U.S. Defense, Emergency & Security Vehicle Exports – US $66MM

While combat operations in Afghanistan officially ceased at the end of 2014, the United States continues to be involved in training, equipping and generally supporting Afghan defense and domestic security forces.  Aside from vehicles themselves, we continue to see strong activity in the export of emergency and security vehicle parts such as engines, armor, body kits and affiliated products and believe this will continue for some years to come.

2. Israel – 2014 U.S. Defense, Emergency & Security Vehicle Exports – US $106MM

Like Australia and Saudi Arabia, Israel is neither a recent nor current “war zone” country, nor a place where U.S. combat operations take place.  As a beneficiary of U.S. military aid and cooperation, however, it is a market that is extremely friendly to U.S. exporters of defense vehicles and related components.

1.Saudi Arabia – 2014 U.S. Defense, Export & Security Vehicle Exports – US $253MM

Saudi Arabia is an excellent market for U.S. vehicles and related components in the commercial and defense sectors.  At Crescent Air Freight we have seen continuous and sustained demand for U.S. manufactured components of security vehicles ranging from sirens and light bars to engines, ambulances and armored vehicles for several years.  While there are some concerns about future growth in this market as a result of declining oil prices, it is clear that Saudi government expenditure on its defense and security sector will continue to be a high priority for many years to come.

While we’ve only highlighted the top five markets for U.S. defense, emergency and security vehicles there is significant opportunity for American companies in this sector to export to high demand markets including Canada, Colombia, Egypt, Iraq and Tunisia to name but a few.

At Crescent Air Freight we have developed a range of services in support of our clients who export security vehicles and parts thereof.  We provide U.S. shippers a complete package of services including trade and finance compliance, consolidation and proper shipping procedures and even final delivery solutions.  If you have any questions regarding these overseas markets, or procedures for shipping these goods internationally, please visit our website at www.crescent1.com or contact us at cargo@crescent1.com.

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Top 11 Export Markets for U.S. Oil and Gas Industry Equipment

Top 11 Export Markets for U.S. Oil and Gas Industry Equipment

Screen Shot 2015-08-30 at 5.47.22 PMDespite significant drops in global oil prices, demand for energy supplies remains strong.  While the supply of crude oil dominates industry and world news headlines, there are several industries ranging from chemicals to transportation services that are directly impacted by the flow of oil and gas.  We at Crescent Air Freight follow this industry closely as it directly affects many of our customers across a range of business segments from compressors to spare parts, valves and pumps and others.  Based on the general classification from the United States Census Bureau, here are the top markets for U.S. “Oil and Gas Field Machinery & Equipment” as defined by NAICS code 333132:

11. Colombia – 2014 Oil and Gas Field Machinery & Equipment exports: US$196,361,000

Beneficiary of a Free Trade Agreement with the United States since May 2012, Colombia’s oil & gas sector relies heavily on U.S. manufactured equipment to help meet its growing energy needs.  Exporters, however, should be very careful with commercial and shipping documentation to ensure compliance with local customs procedures.

10. United Arab Emirates – 2014 Oil and Gas Field Machinery & Equipment exports: US$285,467,000

Home to the vast oil reserves of Abu Dhabi and trade friendly distribution “mega hub” Dubai, the UAE has been an ongoing buyer of American made products for the oil & gas industry.  The presence of major oil industry players such as Halliburton and proximity to the world’s largest oil & gas producing markets ensures that American businesses will continue to find the UAE to be a growth market well into the future.

9. United Kingdom – 2014 Oil and Gas Field Machinery & Equipment exports: US$218,238,000

America’s single largest market for exports amongst the European Union member nations, and home to vast reserves of North Sea oil, the United Kingdom proves its worth as a solid market for U.S. exports in the oil and gas industry.

8. Canada – 2014 Oil and Gas Field Machinery & Equipment exports: US$301,898,000

As we had highlighted in our list of Top 10 Markets for U.S. Exports, Canada is the # 1 destination for U.S. exports overall.  The country has been in the midst of an oil boom over the past decade and will continue to offer American exporters of oil and gas equipment, services and affiliated products, opportunities close to home.  The Canadian Energy Research Institute estimates the country will see over $500 billion in new investment over the next 25 years, ensuring excellent opportunities for industry suppliers for years to come.

7. Angola – 2014 Oil and Gas Field Machinery & Equipment exports: US$326,030,000

In 2013 Angola ranked as the 71st largest market for U.S. exported goods (source: Office of the United States Trade Representative).  An OPEC member since 2007, Angola derives nearly 45% of its GDP from oil production.  All of this combined with a strong rate of economic growth spells good opportunity for American businesses.

6. Brazil – 2014 Oil and Gas Field Machinery & Equipment exports: US$367,223,000

While a great deal has been made of Brazil’s use of ethanol to achieve energy independence, the fact remains that the world’s 5th largest country does have significant oil reserves and demand.  When it comes time to get the crude “out of the ground” or process its natural gas, Brazil looks to U.S. companies to provide key equipment and technologies to support its energy sector.

5. Russia – 2014 Oil and Gas Field Machinery & Equipment exports: US$395,135,000

Recent political developments have resulted in the enforcement of significant trade sanctions against Russia.  U.S. exporters must exercise caution in dealing with this market for the foreseeable future.  On the upside, however, when sanctions end, business comes roaring back.  Until then, however, there’s always…

4. South Korea – 2014 Oil and Gas Field Machinery & Equipment exports: US$477,029,000

Another country on this list that enjoys a Free Trade Agreement with the United States, South Korea purchases significant volumes of oilfield products and services from the United States.  A favorable trade environment and strong political ties have made this country a Top 10 trading partner for the United States and growth opportunities will exist in the energy sector for years to come.

3. China – 2014 Oil and Gas Field Machinery & Equipment exports: US$503,942,000

Trade compliance issues are to be noted, as well as some difficulties with customs procedures, which we detailed in this recent article.  Nonetheless, China is the biggest overall market in Asia and not surprisingly this applies to the oil and gas industries as well.

2. Saudi Arabia – 2014 Oil and Gas Field Machinery & Equipment exports: US$587,509,000

The conversation on oil, gas and energy begins and ends here.  To say Saudi Arabia is a key market for the oil and gas business is to overstate the obvious.  Luckily for American exporters in this field, Saudi Arabia remains the place to look for growth.  Despite recent drops in oil prices Saudi Arabia has maintained, and slightly increased, its annual budget for 2015 and the energy sector will be the prime beneficiary of this spending.

1.Mexico – 2014 Oil and Gas Field Machinery & Equipment exports: US$842,216,000

As we detailed in this recent blog post Mexico is a great market for two way trade with the United States.  A beneficiary of the North American Free Trade Agreement, Mexico looks to the United States to service the needs of its growing energy demands.  U.S. companies enjoy the ability to reach most parts of Mexico by overland transportation services, and NAFTA enables a smooth and orderly flow of goods thereby minimizing potential customs or regulatory problems.

Rope BailerKeep in mind that these figures only refer to one classification of oil & gas industry equipment.  As energy is a massive industry, so too are the product classifications.  Exporters must take the time to learn about compliance issues and regulatory concerns for their specific product line.  Logistics companies can help by applying their considerable market knowledge and expertise.  U.S. companies are also advised to check with the U.S. Department of Commerce for market and compliance data relevant to their specific products.

 

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Breakbulk Shipping

Breakbulk Shipping

In shipping, breakbulk cargo or general cargo are goods that must be loaded individually, and not in intermodal containers nor in bulk as with oil or grain. Ships that carry this sort of cargo are often called general cargo ships. The term breakbulk derives from the phrase breaking bulk—the extraction of a portion of the cargo of a ship or the beginning of the unloading process from the ship’s holds. These goods may not be in shipping containers. Breakbulk cargo is transported in bags, boxes, crates, drums, or barrels. Unit loads of items secured to a pallet or skid are also used. A break-in-bulk point is a place where goods are transferred from one mode of transport to another, for example the docks where goods transfer from ship to truck.

Breakbulk was the most common form of cargo for most of the history of shipping. Prior to the mid 1950’s ocean shipping looked very different from what we know it to be today.  Cargo was loaded onto vessels in barrels, crates, sacks and other forms of bulk packaging that were irregular in size and shape.  Manual labor was required to physically unload these goods from ships onto piers where consignees took delivery of their cargo.  In the 1950’s the advent of containerized shipping created a revolution in the way goods were transported by ocean.  This standardized method of shipping changed everything from the nature of ships used for cargo to the need for manual labor and even allowed ports to move away from the edges of major cities into areas where larger terminals could be built to manage the inventory and flow of containers.

Since the 1960’s the volume of breakbulk cargo has declined dramatically worldwide as containerization has grown. Moving cargo on and off ship in containers is much more efficient, allowing ships to spend less time in port. Breakbulk cargo also suffered from greater theft and damage. There were some basic systems in place, of course, to make the process more efficient, such as the use of rope for bundling timber, sacks for carrying coffee beans, and pallets for stacking and transporting bags or sacks. However, industrial and technological advances, such as the spread of the railways in the 18th century, highlighted the inadequacies of the cargo shipping system. The transfer of cargo from trains to ships and vice versa became a real problem.

Before the container shipping industry emerged, boxes of various types and sizes had often been used in transporting cargo simply because this was the logical way to move things en masse from one location to another. However, despite these developments, cargo handling was almost as labor-intensive after World War II as it had been in the mid-1800s.

According to Breakbulk.com, the interest in breakbulk shipping has grown so large there are conferences dedicated to just that topic such as Breakbulk Americas 2015, which is the largest exhibition and educational forum in the Americas addressing the needs of traditional breakbulk and project cargo logistics professionals.

The method of loading cargo in a “loose” or non-containerized manner, however, persists to this day. Breakbulk is the method of shipping needed for cargo that is too big or heavy to be loaded into a shipping container, or for cargo that cannot enjoy economies of scale through containerized shipping.  The most obvious commodity that comes to mind is an automobile, which can be driven onto a Roll on/Roll off (“Ro/Ro”) vessel thereby allowing a liner to transport more vehicles than they could if shipping containers were used.

080113-N-0292S-066Breakbulk shipping has now come to be a key mode of transport for shippers of large freight such as oil & gas equipment, military vehicles, cranes, earth moving equipment, large reels and spools of cable, manufacturing equipment and other oversized goods.  The impact & benefit of breakbulk shipping is obscured by the volume of container shipping.  However, consider the fact that it is breakbulk shipping which allows major oil and gas projects to become operational by facilitating delivery of oilfield compressors and drilling equipment.  Similarly, worldwide construction is directly affected by the availability of construction cranes.  Major infrastructure projects such as road, train, and dam construction would not be possible without the use of massive earth movers, pile drivers, and other excavating equipment.  All of these key elements of the global economy and the movement of capital goods are made possible by breakbulk shipping.

The specifics of breakbulk shipping are often overlooked, but highly relevant to shippers of large cargo.  Here are some general insights into how such cargo is loaded:

  1. Unlike containerized cargo which can be loaded at a shipper’s facility or a container freight station, breakbulk cargo has to be delivered directly to the port of departure and stored in warehouses.  From a cost standpoint, shippers should be aware that there are almost always receiving and warehousing charges applied by the origin port for receipt and storage of this cargo.
  2. At time of loading the cargo is moved to the quay and can be loaded onto ships in several ways.  For example, ports may have cranes on the port side of the vessel which actually hoist the cargo onto the ships.  Many breakbulk ships also have their own cranes on board which can lift the cargo from port side onto the vessel.  Shippers of cargo built onto a platform such as an oilfield compressor, or cargo housed in large crates such as turbine parts or industrial machinery often have their cargo hoisted onto vessels by either port or ship cranes.  Cargo that is “self propelled” such as heavy vehicles, construction cranes and other cargo of a vehicular nature will often be driven onto the vessel.
  3. Once on board, a pattern of load planning is implemented by the lines.  For example, large wooden crates are often stowed in the mid or “’tween” decks of the vessel, with heavier crates often being loaded at the bottom of such decks.  Also, the cargo is often lashed, strapped or otherwise secured in place to prevent shifting in transit.  Vehicles, are usually driven on & off the vessel but can also be hoisted on board by cranes, and are secured on board with lashings. Vehicles, especially cranes, and military vehicles are often towed on board with the use of MAFI trailers which are essentially platforms or chassis that can haul the vehicle.
  4. Cargo is unloaded at destination in much the same manner as it is loaded, only in reverse of course. Aside from conventional unloading at destination piers, cargo can also be hoisted from one ship to another, a process often referred to as “hook to hook” delivery.  For example, mining equipment, oil and gas equipment and similar products which are to be barged or sailed to remote destinations often are delivered this way.

Despite its importance to the worldwide market for project cargo and capital goods, not all logistics providers are capable of offering breakbulk service to their customers.  The planning that goes into the quoting, booking and execution of such shipments can be painstaking and the cost of mistakes can be high.  For example, a logistics provider will often have to account for haulage costs which include specialized trucks, port receiving charges, usage of port equipment such as cranes and hoists, port warehousing charges and inspection charges at time of loading.  And these are charges to be considered before the cargo even gets on board.  Similarly, logistics providers must be aware of costs, permits, and potential problems at destination ports as well as in any transit points en route.  The potential for cost overruns and unanticipated costs is very high.

A logistics provider also must have sufficient knowledge and capability in place to meet the needs of clients who ship large or oversized cargo that would require breakbulk service.  Many a freight forwarder has quoted and accepted breakbulk business only to realize at time of booking that the cargo simply does not fit in an ocean container and falls outside their expertise.  The ensuing costs and trouble to shippers can be significant as cost overruns, delayed pick-ups or sailings and other problems can arise that adversely impact the success of an order for such an important part of their business.  Breakbulk shipping does involve a high degree of complexity and hence each shipment requires unique practices and protocols to ensure proper execution.

While close collaboration and planning is required between a shipper of breakbulk goods and their logistics provider, shippers should have clear plans in place to address the following issues related to a breakbulk shipments:

o      Transit times & Vessel frequency – breakbulk vessels do not always follow the weekly sailing schedules that are typical of containerized vessels.  Also, breakbulk ships can often be diverted to pick up special shipments on a charter basis.  Accordingly shippers need to share their lead times, required delivery timeframes, and other key transit details to plan accordingly.

o      Inland – as mentioned above, large cargo may often require special permits due to domestic road restrictions, size limitations, etc.  Also, ports may have restrictions on times or types of cargo delivery.  Shippers need to be aware of this as “just get it there” is rarely an option where it comes to breakbulk shipping.

o      Permits & Restrictions – continuing on the matter of inland shipping, shippers need to know what limitations their cargo faces.  Is the product so large that it can only be trucked at night time to avoid traffic problems?  Does the haulage of their product require multi-state permits?  Failure to know any of these requirements can stop a shipment right at the factory door, long before reaching ports.  Failure to comply with inland regulations can additionally cause penalties to be enforced against the shipper or their vendors.

o      Loading – hoisting, roll on/roll off, towing, and other means of loading result in charges.  Ports will charge for usage of cranes with a minimum of several hours usage even though hoisting may only take a few minutes.  Costs need to be budgeted accordingly.  Similarly, durability of packing and crating needs to be considered; not just for the haulage and sailing of the cargo, but also for the loading of the cargo.

While the advent of container shipping has brought fantastic advantages and benefits to the shipping industry and the global market, we cannot discount the fact that breakbulk shipping still has its place. At the end of the day, a shipper needs to understand all facets of breakbulk as well as containerized shipping if they are going to efficiently and effectively charge for the job and get it done right.

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Top 10 Markets for U.S. Exports

Top 10 Markets for U.S. ExportsScreen Shot 2014-05-22 at 12.51.06 PM

At the Exporting Excellence™ blog, we’re all about international trade.  International trade does more to create jobs, promote cultural ties, create an interchange of ideas, transfer technology and promote understanding throughout the world than any other means of diplomacy, foreign aid, statecraft, etc.  Most of all, international trade is a great enabler of economic growth and wealth creation for all countries of the world.  While we have posted content about specific markets on this blog, we’d also like to introduce a series of lists that outline the best markets for U.S. exports in general and by specific industry.

The proof is overwhelming: export sales can grow your business far more than local sales.  After all, why limit yourself to your zip code when you can literally sell to the world.  Here then, is a look at the top 10 markets for U.S. exports:

# 1 – Canada.  Value of U.S. exports purchased in 2013: US$301.6  billion. Exporters of automobiles, trucks and accessories thereof take note: Canadians love large and midsized cars and trucks made in the USA.

#2 – Mexico.  Value of U.S. exports purchased in 2013: US$226.1 billion.  America’s neighbor to the south is well situated to engage in two-way trade with all NAFTA countries as we detailed in a recent blog post.  U.S. exporters of industrial machinery, agricultural products and dairy products will find a great deal of opportunity in Mexico.

# 3 – China.  Value of U.S. exports purchased in 2013: US$121.7 billion.  See, it’s not a one way street!  While China does supply an enormous amount of manufactured goods to the United States, American companies exporting agricultural products and hi-tech equipment are going to see growth in China for years to come.

# 4- Japan.  Value of U.S. exports purchased in 2013: US$65.2 billion.  Japan has a diverse consumer market as demonstrated by the fact that U.S. exports of medical instruments, aircraft equipment and industrial machinery are in high demand.  Japan, like China, is a good market for U.S. technological goods and services.

#5 – United Kingdom.  Value of U.S. exports purchased in 2013: US$56 billion.  See how trade works?  Not only political allies, but also major trading partners, the U.S.-U.K. relationship remains one of the closest in the world on so many levels.  U.S. exports of agricultural products as well as foods continue to enjoy growth in the U.K. despite the economic turbulence of recent years.

# 6 – Germany.  Value of U.S. exports purchased in 2013: US$44.2 billion.  Technological goods, pharmaceuticals and medical equipment from the United States are in high demand in Germany.  It is the strongest of Europe’s economies and should be a key part of your Europe export strategy.

#7 – Brazil.  Value of U.S. exports purchased in 2014: US$44.1 billion.  We profiled Brazil in a recent blog post as it offers great potential for U.S. exports.  Machinery and aircraft equipment account for the lion’s share of Brazilian imports from the U.S.  Tourism also remains a growth sector with substantial interest from U.S. tourists and investors.

# 8 – The Netherlands.  Value of U.S. exports purchased in 2013: US$42.6 billion.  U.S. exporters in the fields of “Clean Tech”, medical equipment, and biotechnology will find The Netherlands to be an attractive market with strong growth potential.

# 9 – South Korea.  Value of U.S. exports purchased in 2013: US$41.7 billion.  Along with Canada and Mexico (NAFTA), South Korea is one of the few countries that shares a Free Trade Agreement with the United States.  Opportunities abound for companies exporting aircraft related equipment and for providers of research and development services and technology.

# 10 – France.  Value of U.S. exports purchased in 2013: US$31.8 billion.  Known for their rich artistic tradition, ironically, French imports of U.S. artwork exceed $200 million annually.  Industrial goods such as specialty chemicals and high technology equipment from the United States enjoy strong demand in France as well.

Sources for this list include the U.S. Commerce Department which publishes superb trade data available at no cost to U.S. businesses. 

Additional country data was obtained from the U.S. Bureau of Census, and Inc. Magazine.

What is the greater cost: Stockpiling Inventory or Missed Sales?

What is the greater cost: Stockpiling Inventory or Missed Sales?stockpiling inventory warehouse

Logistics professionals are on the front lines of the fight to maintain market presence and minimize costs of product supply. One of the main issues faced is whether or not to stockpile inventory in an overseas destination or risk losing sales due to lack of inventory in that market.

Most large organizations have implemented good demand planning practices which enable them to plan production and shipping schedules. A client of ours, who is a global leader in the tobacco business, had such an efficient schedule in place for their business in Turkey that they were able establish a precise order flow one year in advance. Their demand planning was so effective that they almost never required air freight service for this market and could tell months in advance exactly how much product was to be shipped in any given week of the year.

On the other end of the spectrum, another client of ours who is a global leader in the foods business had a simple mistake in their demand planning process force them to de-list product from the market in Singapore for an entire month until they could send over the product needed to meet demand by ocean.

So you want to stockpile?

Here are some factors to be considered when deciding whether or not to stockpile inventory:

  • Failure to have inventory in market leads to obvious decreases in sales, cash flow and profitability.
  • Storage of inventory, especially overseas, is often expensive and eats directly into profit margins.
  • Inventory shortages often have to be met by expedited modes of transport and often specifically by air freight which is generally expensive and adversely impacts profit margins.
  • Excess product can be subject to damage, theft, obsolescence or other misuse which can result in direct and substantial losses in terms of write offs, discounted selling prices or additional processing costs.

So what to do?

The primary determinant of whether or not to incur increased transport or storage costs is profit margin. Coming back to the example of our client in the tobacco business, even though they enjoyed tremendous operational efficiency in their exports to Turkey, this client often relied on air freight to meet demand in the Far East. They also used air freight for new brand or product introductions and generally developed a market by using air freight first and then gradually shifting logistics to ocean freight. Very often the excess air freighted product was warehoused overseas in markets such as Japan and Hong Kong. Their tolerance for such expense came from the substantial profit margins they enjoyed. Equally important was their branding. The client believed that the cost of not having product in the market was not only high in terms of lost sales, but also in terms of damage it would do their brand in overseas markets.

But what if we don’t have the profit margins to support such costs? Let’s re-visit the example of our client in the foods business. Despite having a very good demand planning system in place as well as the resources that came with being one of the world’s largest corporations, this client ran into a problem that could happen to anyone: human error. Apparently, one of their demand planners in Singapore simply forgot to enter her orders before leaving for vacation. As a result production never got the orders and nothing was scheduled to ship by ocean. By the time the problem was detected the client had no other option but to use air freight to meet the demand of 30 tons of their merchandise in the local market. We assisted the client by providing a combination of cost effective air freight, and even created a schedule to stagger the shipments in such a way as to spread the cost out over several weeks just to minimize the cash flow impact they were about to feel. After careful review of the numbers, however, the client decided that their profit margins simply did not justify them incurring the cost of air freight. For 30 days they had no goods to sell in Singapore. From a profit and loss standpoint the choice was clear and that was the client’s main deciding factor. We presume that the loss far exceeded benefits that they may have realized in terms of brand equity and market share.

In both instances, what we have learned is that there are direct, indirect, obvious and discreet costs involved in managing international business. One of the best things a logistics professional can do is to learn what matters to their organization not only in terms of delivery but also in terms of profitability, cash flow, market-share and brand equity.

Logistics professionals need to consider the following when deciding whether or not to stockpile inventory:

  • Cost of domestic/overseas warehousing of excess inventory.
  • Cost of insurance of stored excess stored inventory.
  • Cost of air freight for excess inventory versus cost of ocean freight & storage of excess inventory.
  • Impact on company profitability and cash flow from absence of product in market.
  • Importance of product availability to the corporate brand.

So when you are in a position where you need to decide whether or not to stockpile, don’t hesitate to reach out to us and talk with one of our Logistics Professionals to make sure you understand all of the associated costs which will allow you to make the best, most informed, cost effective decision for your company.

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LCL: Ocean Shipping for the smaller volume shipper

LCL: Ocean Shipping for the smaller volume shipper

Screen Shot 2014-11-20 at 2.38.31 PMShippers often believe that they have to choose between enduring the high price of air freight in order to trade in small lots, or scaling up to large volumes in order to drive down per unit transport costs through containerized or bulk shipping.   There is however, a viable solution that allows companies to move product in small lots without paying the air freight premium.  Known as “LCL” or “Less than Container Load”, this mode of ocean shipping offers companies of all sizes substantial benefits and can help optimize their supply chains and international business processes.

What is LCL?

Quite simply, LCL is consolidated ocean freight.  Instead of consolidating sufficient orders to fill one’s own container, a shipper can tender their smaller lots to a freight forwarder or ocean freight consolidator who will in turn load a container with cargo booked by their other customers.  There are several advantages to having LCL as a shipping option in your firm’s logistics process including the following:

  • Shippers who do not wait to ship product until they have enough orders to fill their own container are able to supply or receive their goods much more quickly.  The benefits of this alone are significant as it can have a favorable impact on sales, profitability, order to cash realization, warehousing costs and customer satisfaction through expedited delivery.
  • Shippers who do not need the speed of air freight can realize tremendous cost savings by routing cargo through LCL ocean freight.  While the unit transport cost of LCL will not be as low as that of a full container (FCL), it can be substantially lower than that of air cargo.
  • Using LCL as a mode of transport allows shippers to engage in test marketing or perhaps even embark on a gradual market expansion.  LCL does not require a company to ship entire container loads of merchandise when such demand has yet to be established, thereby eliminating risks of overstocked merchandise, warehousing costs in the destination market, and other such carrying costs.
  • LCL is more expensive on a per unit basis than FCL shipping.  This is rather straightforward since buying part of a container will not yield the cost benefit of buying an entire one.

Small and midsized shippers are the most direct beneficiaries of the LCL mode of transport. The logic here is straightforward, as companies lacking larger volumes will simply take longer to realize enough demand/sales to fill a full container.

Large shippers also have the ability to benefit from LCL cargo in several ways.  By using LCL to reach markets that have demand, but are so small as to not justify entire container loads of volume, large companies can continue to meet their customers’ needs.  Also, large shippers may have a tremendous amount of cargo from various suppliers or going to various domestic distribution centers.  This effectively enables them to build their own consolidations across a region.  As an example, imagine a retailer with outlets throughout the United States East Coast region who sources product from 5 different suppliers in China.  The opportunity exists to consolidate cargo from all the suppliers and build one’s own container.  Upon arrival in the U.S. the container can be delivered directly to the retailers’ regional distribution center for onward distribution.  The retailer hence realizes a considerable saving by not using air freight from 5 different suppliers and by building their own consolidation.  They would have also likely realized similar savings (though somewhat less) by booking their shipments with an ocean consolidator from each of the 5 origins in China.

There are some pitfalls associated with LCL cargo, and the most notable of these is a lack of transparency.  While a full container is easily tracked, as is an air freight shipment, LCL cargo may sometimes appear to be in a “black hole” once it is loaded at origin.  This is because cargo may change hands between a few consolidators, or containers may transship through multiple ports en route to final destination which may not be apparent at time of booking.

There is also some difficulty in understanding total costs of shipment.  Due to charges incurred at destination, such as port charges, warehousing and unloading costs it can be difficult to arrive at a an accurate, consistent landed cost.

Fortunately, both of these problems can be minimized by a freight forwarder.  Freight forwarders maintain strong buying relationships with ocean freight consolidators which enables them to make pricing and routing decisions based on best practices in the marketplace.  Shippers/importers don’t have to feel like they’re taking a leap of faith with a consolidator so long as they have an experienced freight forwarder assisting with booking, documentation formalities, route optimization and tracking capabilities.

As ships sail faster, and countries develop better inland infrastructure in the form of railways and highways, LCL cargo will continue to become a more viable transport option for shippers of all sizes.  By working with a freight forwarder, shippers and importers can develop and implement a plan to ensure timely and cost effective supply of merchandise without having to incur the expense of air freight and without being forced to commit to the volumes needed to maximize utilization of a dedicated ocean container.

Some Interesting LCL facts:

As a general guideline, 10-15 cubic meters of cargo is considered the upper limit for LCL freight.  If a company is shipping more than this quantity, it is likely that they would benefit from using their own 20’ container even if the containers capacity is underutilized. 

The main unit of measure for LCL cargo is the cubic meter (cbm).  To determine the # of cubic meters you are shipping use the following calculation:

In Inches:Container Info & Spec Sheet

Length x Width x Height / 1728 = cubic feet

# of cubic feet / 35.31 = # of cubic meters

In Meters:

Length x Width x Height = # of cubic meters

By Gross Weight:

Gross weight in kilograms/1000

LCL charges will be based on the higher of the cubic meters or gross weight (kgs.) per 1000. 

 

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.

 

 

Is Air Always the Best Way To Go?

Is Air Always the Best Way To Go?

Air freight is often the most effective way to ensure safe, fast, long-distance transport of your materials and products.  When something needs to get somewhere as soon as possible, it’s the only choice available.  Air freight, however, is just one component of the supply chain available in today’s marketplace.  Shipper’s today have options ranging from truck consolidations to intermodal transshipments via foreign ports.

When should you consider alternatives to air freight?  Here are some circumstances and alternatives for your supply chain:

  1. LCL Ocean – Shippers whose supply chains include liquids, building materials, bulk commodities and other special commodities are well aware of full container load (FCL) shipping.  However, very often shippers may have loads that are not big enough to fill an ocean container.  As a result they will delay shipping product until a sufficient number of orders are compiled to fill up a container thereby delaying a sale, and impacting cash flow.  Alternatively, a shipper may opt to send the product by air thereby incurring a significant additional cost that has a direct impact on order profitability.  However, shipping by less than container load (LCL) is an appealing option for shipper’s who don’t have the urgency of a typical air freight shipment nor the volume to realize the cost benefit of a full container load.  While this option may carry a slightly higher price on a per cubic meter or kilogram basis, it does provide a great deal of flexibility to a supply chain.
  2. Break Bulk Shipping – Large products such as oilfield equipment, compressors, specialized construction equipment and other capital goods can be flown by air.  It often requires a specialized aircraft to do so and that’s normally only available on a charter basis.  The costs of using this method of transport are enormous and generally not viable.  For commodities of this nature the best option available tends to be a method of ocean transport known as break bulk shipping.  Using vessels equipped with special berths, large sized pieces of freight can be driven or hoisted onto vessels.  This is a highly cost effective and strategic solution for cargo needing special handling and transport, as is often the case with goods for major capital and infrastructure projects.
  3. Bulk Lot and Others – Sheets of lumber don’t need much in the way of specialized logistics.  The same is true for used clothing, waste paper, and scrap metal.  These products are pure commodities and the companies who sell them generally work under intense pricing pressure, which makes Full Container Load (FCL) shipping the most viable option.  Another example of bulk shipping would be liquid.  While most people are familiar with oil and coal tankers that have liquefied product pumped directly into their hulls, there is also a very large segment of the supply chain, especially in the chemicals industry, that requires the usage of Liquid Bulk Containers, ISOTAINERS, or ChemTainers as they are often known.  These units are designed to allow shippers of liquids to safely transport larger quantities of product than they could through ordinary container shipping with product loaded into drums.  The result being a lower unit cost per pound, liter or gallon of product shipped.

While air freight is an essential option when goods need to be shipped quickly, there are several shipping methods which could be more effective for your supply chain needs.  Working with an experienced logistics services provider can help ensure that you make the right decision based on your needs.