You are on page 1of 3

Logistics is the management of the flow of the goods, information and other resources in a repair

cycle between the point of origin and the point of consumption in order to meet the requirements of
customers. Logistics involves the integration of information, transportation, inventory,warehousing,
material handling, and packaging, and occasionally security. Logistics is a channel of the supply
chain which adds the value of time and place utility. Today the complexity of production logistics can be
modeled, analyzed, visualized and optimized by plant simulation software.

 determine the mode you'll use. For example, if you need to ship information/files/instructions, then use
email. If shipping documents, utilize mail or courier service. If you're shipping perishable or time
sensitive goods in bulk, consider using air freight. If you're handling large amounts of durable goods,
consider using containerized shipping.
 2
Plan for your projected needs for at least one year. Logistics providers base rates and rate agreements on
either an immediate shipment basis (within 30 days), or based on a one-year agreement. If there is a large
volume of shipments, it's possible to prepare a bid that could warrant special terms and conditions.
 3
Solicit quotes from any vendor which can accommodate shipments. For small shipments less than a
container, contact freight consolidators/brokers. These entities are also known as NVOCC (Non-Vessel
Operating Common Carriers). For full container loads, also contact carriers/VOCC. There is no issue in
the industry for requesting rates from every vendor available.

 Analyze quotes and read the terms/conditions of the quotes. Check the validity of the quote (Is it for a
particular sailing, a month, a year?) and what surcharges it's subject to. Check if there are any value-
added services available such as extended demurrage (time at the pier/airport), detention (time to keep the
container), credit terms or volume incentive discount. Also ask if rates are subject to general rate
increases, new surcharges, war risk or terminal handling charges.
 5
Compare and counter offer the rate levels you were provided. NVOCC may offer lower rates than those
offered by VOCC. Within reason, negotiate for rates slightly lower than the lowest submitted bid. On a
periodic basis (every week for airfreight, up to bi-monthly for seas shipments), solicit for quotes again.
 6
Confirm that rates are filed in either a contract or in a governing tariff and regularly check the terms of
the filing. In markets where rates can constantly shift (Europe-Asia Trade for example), press for sales
representatives to honor the rates quoted for at least 30 days.

As companies continue to manufacture and source materials from overseas, controlling costs remains a
top priority for all those involved in international trade. One key factor that should be monitored more
closely is logistics management, which covers all activities relating to the procurement, transport,
transshipment and storage of goods. Depending on the industry, supply-chain costs account for 5 to 50
percent of a product’s total landed cost.
Some issues affecting logistics costs: Fuel prices remain high, and ports continue to experience delays,
resulting in higher transportation fees. Increasingly complex international trade laws and security
measurements threaten to lengthen delivery times and increase warehousing costs. According to a recent
report by TechnologyEvaluation.com, a typical airfreight shipment takes eight to 12 days. Of this, the
cargo is en route only 5 percent of the time. It spends the rest of the time sitting in warehouses waiting for
the required documents and compliance checks.
Here are 10 tips on how to reduce supply-chain costs:
1. Understand the true costs of sourcing overseas.
Calculate freight, duty, brokerage, and inventory-carrying costs to support these lengthened supply
chains. Factor in such items as the costs of flying engineers overseas. Once you understand the true total
landed cost and total impact to the business, buying domestically may look a lot better. Sourcing from
Ohio to your U.S. plant, distribution center or customer may, in the long run, be more cost-effective than
sourcing from China.
2. Focus on eliminating the variability from transit times.
The more variable the transit times are, the more likely it is that the receiving party is using more
premium freight, building buffers of inventory or ordering more often and more quantity than necessary
to compensate for the uncertainty. Understanding these dynamics can lead to the conclusion that paying
higher freight costs to ensure higher variability actually saves your company in total costs.
3. Tariff engineering.
Strategically source and manufacture products to take advantage of classification duty rates and eligibility
for special trade programs such as the North American Free Trade Agreement.
4. Consolidate.
If you have multiple suppliers in one country, consolidate their goods into one shipment. In addition, if
you always have less-than-containerload shipments out of one country, try to find another LCL importer
of goods from that country. You may be able to partner and consolidate to a more cost-effective full-
containerload shipment.
5. Informed decision-making.
Provide to the decision-makers/customers of your logistics network the cost of freight for each service
level, the reliability of each lane for each service level, and the true cost of carrying inventory so they can
make informed decisions. People generally want to be good corporate citizens and will select the less
expensive option that still meets their needs.
6. Sometimes insurance doesn’t pay.
When a company has a shipment of premium goods, they often tend to use the carrier’s insurance, which
is very expensive. If the company is self-insured, as most companies are, it should check its insurance
policy to see if it covers shipment of goods. If it does, the company does not need to add the extra cost of
carrier’s insurance.
7. Automate compliance processes.
Companies that implement software solutions to automate trade compliance are able to speed the cycle
times associated with tasks being performed manually, such as document preparation, and eliminate the
associated errors. Automated compliance procedures also bring fewer delays at border crossings, resulting
in on-time delivery, adequate inventory levels, increased customer satisfaction, and the avoidance of
fines.
8. Control your express shipping costs.
When a company runs into a supply-chain issue, it typically will have an entire shipment sent on an
express/expedited (highest-cost) service basis. Panicking often results in higher costs. A little bit of
calculating can help the company determine the amount of goods needed immediately. It can then have
that amount sent using express/expedited services, while the balance of the shipment can be sent using a
standard (lower-cost) service.
9. Planes, trains and automobiles.
Which is cheapest? In general, rail is more cost-effective than trucking or air. Water is cheaper than air
shipment. No matter the mode of delivery, always try to get three quotes for movements.
10. Be aware of non-tariff trade barriers.
Companies need to be more aware of the increasing level of non-tariff trade barriers that are in force to
reduce sweatshop labor and support human rights and animal welfare issues. These restrictions can bring
importers increased liability and compliance costs.

You might also like