If you are using nearshore or offshore manufacturing, you have to get your product from your factory to you to sell it. This step is called international freight shipping. As with so many things, the COVID-19 pandemic and subsequent supply chain disruptions taught us to take this step seriously when bringing a new product to market. Even when global logistics work well, shipping rates can eat into your profits or keep you short on inventory.
Whether you hire a third-party logistics company or have an internal supply chain team, it’s good to know your options for your international shipments. In this article, we’ll cover what you need to know about international freight shipping: when to use it, how to keep costs down, and where to get started.
What Is International Freight Shipping?
When determining your requirements for cost and timelines associated with international freight shipping, you need to understand how you’re going to ship, how you will pack your product in bulk, and the rules, regulations and tariffs that will be in effect for the countries your are shipping from, through, and to.
Whether by ocean, rail, or air freight, there are five common steps to the process:
1. Export Haulage
The freight service moves products from the factory to the port, rail terminal, or airport where they will leave the country of origin. This may require warehousing along the way, consolidating products, or special packaging for the mode of transport. Sometimes this is called door service.
2. Export Customs
Every country has its regulations, fees, and tariffs for exporting goods. This is a critical step to pay attention to because if you or your shipping partner doesn’t handle export customs properly, your shipment can be delayed, and you might pay unexpected or unnecessary costs.
3. Transportation
Once past customs, your product gets loaded in whatever mode of transport you’re using and shipped via some combination of air cargo, ocean freight, and land freight services.
4. Import Customs
Upon arrival, your shipment must clear customs. Customs clearance is a complicated process and it’s important that you have the right contact. This can make a big difference in how fast or even if you clear customs at all.
5. Import Haulage
Last but certainly not least is how your product travels from your warehouse or distribution center. Your logistics solution provider must find the best domestic freight shipment option to finish the journey.
What each of these steps looks like is determined by your product. You must account for your shipment’s volume, size, and weight because they will have the biggest impact on each step.
Before we move on, it’s helpful to know some common acronyms logistics providers use to capture how large your shipment is relative to the size of a shipping container or standard truck sizes:
- LCL: Less than container load
- FCL: Full container load
- LTL: Less than truckload
- FTL: Full truckload
When Should You Use International Freight Shipping Services?
You must use international freight shipping if you’re making your product in another country. But you can pass this process on to your manufacturer or a third party. For example, if you’re using Fulfilled by Amazon (FBA), someone else will move your product from your foreign manufacturing partner to Amazon’s warehouses.
However, you’re trusting a pivotal part of getting your product to market to someone else. You’re at their mercy for schedule, cost, and breakage.
If any of the following are true, you should be directly involved in your international freight shipping:
- The shipping cost is a substantial portion of your product’s price.
- Your product has stringent transportation, import, or export regulations.
- The tariffs on your product are expensive or complicated.
- Delays or not getting your product when expected significantly impact costs or sales.
Another thing to consider is your familiarity with the world of global freight. If you’re new to this, working with a logistics service may be a good place to start.
How Can You Lower Shipping Costs?
Global freight is big business, and it’s in the middle of a long-term growth trend. The global logistics market is projected to double over the 10 years from 2017 to 2027, from $7.6 trillion to $13 trillion. As that market grows, so will the options for your company to save on their international freight costs. Below are some suggestions you can apply to understand and optimize your freight services costs. Given the current environment with rising transportation costs, any one of these recommendations can save you money and reduce your CPG.
1. Only Pay for the Speed and Certainty You Need
How quickly you move your product is the biggest driver of cost. The cost of air freight is much higher than ocean freight. And within a given freight class, you simply pay more for your product to move faster. You also have to pay more to move to the head of the line or move product in an LTL or LCL situation. When you get a shipping quote, look at transit time, the cost of customs brokerage, and other shipping options to compare prices and their impact on your revenue.
The accuracy of your delivery date can drive up prices. A broader set of dates, called the delivery window, is less expensive than a hard due date. You save money as logistics companies use this flexibility to schedule cost-effectively and consolidate shipments to create a full container load.
To avoid paying for speed and certainty, consider keeping inventory of your product as a buffer. Storage cost is associated with that, but it may be less than the increased shipping costs. Take a look at our article on supply chain strategies for more suggestions on how you can be less sensitive to schedule.
2. Optimize Volume and Weight
Shippers charge by volume and weight. You usually pay per container, truckload, or train car. Your cost per product goes down if you can fit more in a container.
For example, the inside of a 40-foot shipping container is around 93 inches tall. So you should design your shipping boxes to stack close to 93 inches. If the boxes are 2 feet tall, you can stack three. But you can stack four if they’re three-quarters of an inch shorter.
Weight impacts the cost of every transport mode because weight impacts fuel consumption. And this is especially true for air freight. Minimizing your product’s weight should be a design requirement if you plan on shipping by air.
Once designed, packaging is the biggest factor of weight. Remember this when you decide what materials you use to secure your product for transport. Moving from wood to plastic pallets or removing pallets can impact weight and shipping costs. All of these considerations should be a part of planning during the design phase of product development or later if you optimize your current designs.
3. Be Accurate With Paperwork
Getting stuck in customs when your products cross a border can be expensive. It costs you time and may involve fees if your paperwork is incorrect. Make sure your bill of lading and commercial invoice are clear and accurate. Paperwork can cause additional costs and delays. Double-check addresses and dates and make sure contact information is correct.
In addition, how you classify your product under the harmonized tariff schedule can drive your export and import tariff costs. Make sure you explore options and pick the correct classification.
5. Reduce Damage and Loss
Damaged or missing goods are an often-overlooked cost in international freight shipping. Having to toss out or repair products can add up quickly. Your product and its packaging need to withstand all the bumps and occasional falls that they encounter making their way to your shelves. Make sure you understand how your product moves throughout the entire journey. It’s not uncommon for a product to ship unscathed only to shatter when it falls off a forklift because the box is top-heavy.
6. Get Multiple, Accurate Freight Quotes
The international freight shipping world is very competitive. Some small suppliers do just one part, whereas giant multinational companies manage the entire process. They negotiate prices with each other and their customers based on the current state of the market. To get the best freight rates, get quotes from multiple logistics companies. Ask for different options on speed and delivery window and see how much you can save.
Also, make sure you give them an accurate estimate of your volume and weight. If you’re vague, they will estimate high. And if you’re wrong, they will charge you overage fees.
Who Provides International Freight Shipping?
The best way to look at international freight shippers is to classify them by what services they provide. Do they manage the whole journey and physically transport your products? Do they handle customs clearance? Or are they middlemen who get quotes for every step in the process?
Companies that handle the whole process refer to themselves as international freight forwarders. Suppose they go a step further and treat moving products as a system and put processes and technology in place to manage and optimize that system. In that case, they may refer to themselves as a global logistics company. Whichever company you choose should have robust digital systems, multiple modes of transport, and a good understanding of regulations, rules, fees, and tariffs at every border your product will cross.
On the other end of the spectrum are marketplaces where you can bid for each portion of your product’s global shipping journey. You’re on your own here, so make sure you or someone on your team can manage the whole process. When things go wrong, they should untangle the mess and get things back on track.
Where to Get Started With Your International Freight Shipping
Understanding your needs is the first step in setting up your international freight shipping. Document what you’ll ship, where you’ll ship it, and when. And don’t forget to include this information in your product specifications and communicate them to your manufacturing partner.
Next, you need to decide who will manage the process. Maybe your company has an internal supply chain team that will contract out or handle each step themselves. Or perhaps you will outsource the entire operation to a third-party logistics company. Finally, you may choose to hire an international freight forwarder and build a relationship with them.
Regardless of your path, Gembah has the expertise and the contacts to optimize getting your products from factory to shelf. Our product development process includes logistics and compliance. Or, you can take advantage of our Logistics Services, which include obtaining quotes for drayage, oversight of cargo transportation and loading, and assisting with customs. Make sure that this critical step in bringing your product to market positively impacts your bottom line — contact us today.
