The Ultimate Guide For International Buyers Navigating Manufacturing, Quality, And Logistics. CHAPTER 3
Feb 24, 2024 | Tanya Sachdeva
CHAPTER 03 COST OF SHIPPING CROSS BORDER SHIPPING OPTIONS: AN OVERVIEW
As a handmade manufacturer, understanding the complexities of cross-border shipping is crucial for optimizing your business strategy and ensuring timely and safe delivery of your unique products. In this blog, we will explore various shipping methods, their costs, benefits, and drawbacks, with the objective of providing insights into optimizing shipping strategies to reduce costs while maintaining high-quality delivery.
Sea Shipping
Sea shipping is the most cost-effective method for transporting large volumes of goods over long distances. However, it is slower than air shipping and requires more planning due to the need for ocean-going vessels and port facilities.
Costs: Lower per-unit costs, but longer transit times and additional handling fees at ports.
Benefits: Ideal for large shipments, especially when cost is a primary concern.
Drawbacks: Slower transit times, increased risk of damage or loss, and potential for customs delays.
Air Shipping
Air shipping is faster and more reliable than sea shipping, but it is also more expensive.
Costs: Higher per-unit costs, but faster transit times and lower risk of damage or loss.
Benefits: Ideal for time-sensitive shipments, small shipments, and high-value goods.
Drawbacks: Higher costs, increased risk of damage or loss during air transport, and potential for customs delays.
Rail Shipping
Rail shipping is a cost-effective and environmentally friendly option for transporting goods over long distances within a single country or region.
Costs: Lower per-unit costs, but slower transit times and limited availability in some regions.
Benefits: Ideal for large shipments within a single country or region, especially when cost is a primary concern.
Drawbacks: Slower transit times, limited availability in some regions, and potential for customs delays at border crossings.
Flat Rate Shipping
Flat rate shipping offers a fixed price for shipping, regardless of the weight or dimensions of the package.
Costs: Fixed per-order costs, but may not be the most cost-effective option for all shipments.
Benefits: Simplified pricing for customers, and potential for increased sales due to the convenience of flat rate shipping.
Drawbacks: May not be the most cost-effective option for all shipments, and may not accurately reflect the true cost of shipping for larger or heavier packages.
Carrier Calculated Shipping
Carrier calculated shipping uses the actual weight and dimensions of the package to calculate the shipping cost.
Benefits: More accurate pricing for customers, and potential for increased sales due to the convenience of accurate shipping costs.
Drawbacks: May require more complex pricing structures and increased customer communication, and may not be the most cost-effective option for all shipments.
Customs and Duties
Costs: Customs fees, duties, and taxes, which can add significantly to the cost of shipping.
Benefits: Ensuring compliance with customs and duties requirements.
Drawbacks: Increased costs, potential for delays, and the need for accurate documentation.
COST FACTORS
The cost of international transport is influenced by a wide range of factors, including distance, geographical location, market structures, connectivity to transport networks, and cross-border trade efficiency. For instance, the cost of transporting T-shirts by sea from Bangladesh to Peru can be measured in terms of total transport costs, transport to Free On Board value, transport costs per unit, and transport costs per unit and distance. Additionally, the pricing strategy for handmade products should consider various costs such as fees for market research, international postage, freight forwarder fees, product modification, and special packaging costs.
When determining the export price, it's essential to consider the actual cost of the product, which includes the domestic manufacturing cost, administration, research and development, overhead, freight forwarding, distributor margins, customs charges, and profit. Moreover, additional costs may occur due to product modification for the export market. It's also important to factor in other costs typically borne by the importer, such as tariffs, customs fees, currency fluctuation, transaction costs, and value-added taxes, which can substantially impact the final price paid by the import. According to the International Transport and Insurance Costs of Merchandise Trade (ITIC) dataset by OECD, the average cost of sea transport for a 40-foot container from China to the United States was around $1,500 in 2019.
The Global Transport Costs Dataset for International Trade developed by UNCTAD and the World Bank provides information on transport costs, broken down by mode of transport, from 105 importing countries and over 200 exporting countries, representing around 95% of global merchandise trade in terms of value. The dataset has been linked with an interactive map that enables users to visualise the flow of commodities and their transport costs. For instance, the dataset provides total transport costs, transport to Free On Board value, transport costs per unit, and transport costs per unit and distance for transporting T-shirts by sea from Bangladesh to Peru.
The cost of cross-border shipping is influenced by various factors such as distance, geographical location, market structures, connectivity to transport networks, and cross-border trade efficiency. For instance, the cost of transporting goods by sea from Bangladesh to Peru can be measured in terms of total transport costs, transport to Free On Board value, transport costs per unit, and transport costs per unit and distance.
Logistics Partners: Tips for selecting and working with logistics partners, freight forwarders, and customs brokers
To optimise shipping strategies and reduce costs while ensuring timely and safe delivery of goods, it's essential to work with reliable logistics partners, freight forwarders, and customs brokers. Here are some tips for selecting and working with these professionals:
Experience and expertise: Choose partners with extensive experience in handling your type of products and a strong understanding of the relevant regulations and requirements for your target markets.
Transparency: Work with partners who are transparent about their pricing, services, and any additional costs. This will help you make informed decisions and avoid unexpected expenses
Reliability: Work with logistics providers that have a proven track record of delivering goods on time and in good condition. This will help you maintain customer satisfaction and build trust with your clients.
Cost-effectiveness: Partner with logistics providers that offer competitive pricing and can help you optimise your shipping costs without compromising the quality of your service.
Continuous improvement: Collaborate with your logistics partners to identify areas for improvement and implement strategies to optimise your shipping processes and reduce costs.
By following these tips, you can build strong relationships with logistics partners, freight forwarders, and customs brokers, which will help you optimise your shipping strategy, reduce costs, and ensure timely and safe delivery of your goods.
Handmade manufacturers seeking to optimise their cross-border shipping strategies should consider partnering with the following logistics providers, which offer cost-effective and reliable services:
Fr8App is a cross-border shipping platform that simplifies the complex process of international shipping in the USMCA region. They provide fast and hassle-free door-to-door shipments between Mexico, USA, and Canada, with a network of reliable carriers and dedicated bilingual experts.
Visigistics is focused on simplifying and providing a reliable end-to-end solution for all your cross-border logistics and warehousing needs. They excel in managing cross-border shipments, ensuring smooth customs clearance, and facilitating the movement of goods between the United States and Mexico.
Pitney Bowes has been a pioneer in cross-border ecommerce logistics for decades, helping thousands of retailers to grow their international business by providing the most comprehensive, award-winning, cross-border delivery solutions.
Freight forwarders are third-party logistics providers that coordinate and manage the international shipment of goods on behalf of their clients. They offer a range of services, including customs clearance, warehousing, and transportation.
Customs brokers are licensed professionals who specialize in customs clearance and compliance. They help importers and exporters navigate the complexities of customs regulations and ensure that their shipments clear customs smoothly and efficiently.
Third-Party Logistics (3PL) Providers
3PL providers offer a range of logistics services, including warehousing, transportation, and customs clearance. They help businesses focus on their core competencies without throwing transportation management and cross-border logistics into the mix.
COST SAVING STRATEGIES
Consolidation: Combine multiple shipments to reduce the number of deliveries, which can lower transportation costs and improve efficiency. If customers frequently make small orders, encourage them to make larger orders less often or collaborate with other shippers on your lane to consolidate freight
Packaging optimization: Reduce the size and weight of packages to lower shipping costs. Use efficient packaging materials and minimize the use of excess dunnage. Optimize packaging to reduce dimensional weight, which is calculated based on both the size and weight of a package
Negotiation with carriers: Leverage your shipping volume to negotiate better rates and discounts with carriers. Take advantage of bulk shipping discounts and other savings opportunities.
Choose the right shipping method: Select the shipping method that best fits the specific needs of each shipment. For example, ground shipping may be less expensive for heavy or bulky items, while air shipping may be more appropriate for smaller, time-sensitive packages.
Optimize shipping routes: Use shipping software to determine the most efficient shipping routes and identify opportunities to consolidate shipments or use intermodal transportation.
Implement dimensional weight pricing: Dimensional weight pricing takes into account both the size and weight of a package, so be sure to optimize your packaging to reduce dimensional weight.
Leverage technology: Use technology, such as shipping software and shipping labels, to streamline the shipping process and reduce manual labor costs.
Manage returns effectively: Implement a process for managing returns efficiently, such as using pre-printed return labels or offering store credits instead of refunds.
Here are some innovative techniques that handmade manufacturers have recently adopted to optimize the cost of cross-border shipping:
1. Localized Production and Fulfillment Centers
One effective strategy has been the adoption of localized production and fulfillment centers. By establishing manufacturing or fulfillment operations closer to their primary markets, handmade businesses can significantly reduce shipping distances and costs. For instance, Etsy, the global online marketplace for handmade goods, has encouraged its sellers to use Etsy's shipping label service, which offers discounted rates with carriers. This initiative not only reduces costs but also speeds up delivery times, enhancing customer satisfaction.
2. Bulk Shipping and Consolidation Services
Handmade manufacturers are increasingly leveraging bulk shipping and consolidation services. By combining shipments with other businesses to fill a container, they can take advantage of lower shipping rates typically reserved for larger volumes. Bokksu, a brand offering authentic Japanese snacks through subscription boxes, uses consolidation to ship products in bulk to their distribution centers in various countries, from where orders are fulfilled locally. This approach minimizes customs and duty complications and reduces per-item shipping costs.
3. Direct-to-Consumer Sales Channels
Transitioning to direct-to-consumer (D2C) sales channels has allowed handmade brands to streamline their logistics and shipping processes. By selling directly online, brands can manage shipping options more flexibly and negotiate better rates with carriers. Tropicfeel, a travel gear brand known for its handmade shoes, has effectively used a D2C model to offer customers worldwide shipping options that balance cost and delivery speed, optimizing both operational efficiency and customer satisfaction.
4. Utilizing E-commerce Platforms’ Global Shipping Programs
Many handmade manufacturers are tapping into global shipping programs offered by major e-commerce platforms. For example, Amazon’s Global Shipping Program and eBay’s Global Shipping Program (GSP) handle customs clearance and international shipping logistics, making cross-border sales more accessible and less costly for small businesses. Handmade artisans using these platforms can reach international customers without the need for complex logistics arrangements.
5. Sustainable Packaging and Shipping Materials
Sustainability is not just an ethical choice but also a cost-saving strategy in shipping. Handmade brands like Pela Case, known for their eco-friendly phone cases, utilize sustainable, lightweight materials for packaging, reducing both shipping costs and environmental impact. By optimizing packaging dimensions and weight, these manufacturers can lower the cost per shipment significantly.
6. Advanced Analytics and Shipping Software
Investing in advanced analytics and shipping software enables handmade manufacturers to optimize their shipping operations. These tools provide insights into shipping patterns, costs, and carrier performance, allowing businesses to make informed decisions. ShipStation and Shippo are examples of shipping software that offer integration with multiple carriers, comparison of shipping rates, and batch label printing, which help small businesses save time and reduce costs.
7. Strategic Partnerships and Network Building
Finally, building strategic partnerships with logistics providers and other businesses can lead to mutually beneficial shipping solutions. Handmade brands often partner with local and international logistics companies to secure discounted shipping rates. For instance, NOVICA, in partnership with National Geographic, connects artisans with a global audience, leveraging partnerships with shipping companies to offer competitive shipping rates for unique handmade products.
CONCLUSION
In conclusion, navigating the global furnishings framework can be a complex process for international buyers, involving manufacturing, quality, and logistics considerations. However, with the right strategies and partners, it is possible to optimize shipping strategies, reduce costs, and ensure timely and safe delivery of goods. Handmade manufacturers can implement cost-saving techniques such as consolidation, packaging optimization, and negotiation with carriers, as well as partner with logistics providers and 3PLs to streamline the shipping process. Additionally, they can consider environmental regulations and product improvement solutions to meet the growing demand for sustainable and eco-friendly furniture. With the right approach, handmade manufacturers can successfully navigate the global furnishings framework and thrive in the competitive global market.
Read the Complete Topic
Chapter 1 - CROSS BORDER PRODUCT DEVELOPMENT
Chapter 2 - QUALITY MANAGEMENT SYSTEM (QMS)
Chapter 4 - A STANDARDISED PROCESS FOR INTERNATIONAL PROCUREMENT AND PRODUCTION TO STREAMLINE OPERATIONS AND REDUCE RISKS.
Chapter 5 - PACKAGING
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