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HOW TO: Choose a freight forwarder

How to choose a freight forwarder?  On the face of it, it would seem pretty simple.  But in my experience, those who embark on the process of buying product from overseas can find it a bit of a challenge to select the right freight forwarder and customs broker for their business.  In many instances the intricacies of the logistics and supply chain process is not a core skill.

In general, as an importer you will – rightly – devote most of your attention to sourcing the right product, negotiating with overseas suppliers, obtaining product samples by international courier and/or visiting the overseas supplier abroad to meet with product managers, visit and inspect their site, quality control and obtaining an understanding of their manufacturing process.

When the overseas supplier assures you that they have their own forwarding agent with whom they regularly ship on a CFR (Cost of Goods and Freight) basis the challenge of the supply chain process and selecting a forwarding agent may seem to be alleviated.

So, job done – right?  Couldn’t be simpler to have the supplier handle the exporting too.  While this might seem like a big relief and a streamlining of a seemingly cumbersome process, there are often services and deals to be had by working with an Australian based freight forwarder and customs agent for two main reasons:

  1. The overseas supplier will book with their preferred agent, usually not to meet the needs of the importer, but to suit their own,
  2. CFR (Cost of Goods and Freight) is not the end of the story and often by the time the importers receive the invoice from the local receiving agent in Australia, a lot of unnecessary cost has been incurred which is often be due to the supplier’s handling of the negotiation. This is especially prevalent with LCL (Less than Container Load) cargo where, a whole system of rebates between the load port forwarding agent and the destination port forwarding agent are available.

How to choose a freight forwarder checklist:

  • Find your own freight forwarder and import on an FOB (Free on Board) basis to ensure control of costs, visibility and flexibility.
  • Understand and extrapolate what it is you really want and what your logistics needs are now and in the future. Ask the appropriate questions to qualify your freight forwarder candidate.
  • Select a forwarder who specialises in the market or industry you participate in. For instance, if you are importing clothing or footwear, find a forwarder that specialises in this.  There are a number of players in the marketplace that specialise in apparel logistics – large, medium and boutique.  It can be a good idea to match your business size relative to your industry to that of your forwarder.  For example, if you are a medium sized or boutique business you will have specific needs and may require a bespoke service to meet them.  Forwarders that serve a niche market tend to be more agile, flexible and adapt quickly to sudden changes to your freight requirements.
  • Pricing is important and it is imperative to not leave your money on the table, it is also important to find a forwarder that has good systems and processes and a good reputation amongst your peers. Your industry networks and social media can help you find a reputable company.
  • Ensure you understand what you will pay for your consignment and beware of extra or hidden costs.
  • Seek full transparency and integrity from your forwarder.
  • Choose a forwarder with an appropriate reporting or tracking system for visibility.
  • And finally, many forwarders in Australia have a wealth of knowledge about your origin country and markets and in many instances can provide you with the benefit of this to save you time, money and anxiety at all stages of the importing process.

 

If you would like a confidential discussion about your  importing and freight forwarding needs please call Edi Lenkic on 1300 651 888,  or if you’re in New Zealand call Paul Knight (09) 974 4818.  Alternatively visit www.magellanlogistics.com.au for more information.

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PROTECTING YOUR SUPPLY BASE

Most companies do not regard their supply base as intellectual property but they do so at their peril. Protecting your intellectual property is essential in this day and age as it provides a company or individual with a competitive advantage over other players in the industry.  Exposing your supply base to your customers can have dramatic consequences – the worst of which is the danger of your customer going directly to your supplier.

Australian retailers are well placed to deal directly with offshore manufacturers and indeed most of them have some direct supply in their product offerings. If you are currently supplying the larger retail chains with product you source from overseas you will have noticed an increased pressure to provide that product on an FOB basis rather than the traditional free into store approach. One of the dangers of agreeing to provide product on an FOB basis is the potential exposure of your supplier information to your customer – who could then quite realistically become your competitor.

Normally, when shipping goods from, say, China to Australia a bill of lading is cut with the consignor and consignee details listed on the bill. In normal circumstances the consignor would be the offshore manufacturer and the consignee would be the name of the entity that is to take delivery of the product. In the above FOB scenario the consignor would be your supplier and the consignee would be your customer. So it is easy to see that in this case your supply base is exposed. However, Magellan Logistics can help you with protecting your supplier information by manipulating the documentation to provide you with comfort that your valuable IP is being hidden.

The export documentation will be produced as normal and used for clearing the goods through the offshore Customs authority. However, once export formalities have been completed Magellan Logistics will raise a separate house bill of lading to indicate that you are the consignor and your customer is the consignee. Further, the invoice accompanying the shipment will be the FOB invoice raised by you on your customer. This documentation will be used to clear the goods through Customs in Australia. In this way, your supplier information is hidden from your customer and should go some way towards providing you with peace of mind.

As this is an extremely commercially sensitive area of concern we suggest that a Standard Operating Procedure (SOP) should be developed to ensure that all stake holders are fully aware of their obligations at each step of the way.

If you would like to discuss this issue further please contact Jeff Kershaw on 0418 543 994 or at jeff@maglog.com.au

AS ALWAYS – MAGELLAN LOGISTICS IS HERE TO HELP

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Magellan Logistics featured in Ragtrader Magazine, September 2014

Read the latest power brokers article where our sales director, Joe Carbone, shares his knowledge and experience on the supply chain.

Let us know your feedback in the comments.

(Hit CTRL + to zoom in)

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The Advantages Of Shipping FOB

AN EASY REFERENCE GUIDE ON SHIPPING FOB YOUR FASHION GOODS

When buying or selling garments or other goods across international boundaries, there are certain stringent terms of delivery that need to be adhered to for a successful importation. INCOTERMS are international trade terms which define all rules of engagement with regard to goods delivery to the intended destination or from the seller to the buyer.

INCOTERMS

are the widely used standards that guide international trade. When it comes to international shipping, FOB and CIF are the most commonly used agreements which determine the responsibility of both the buyer and the seller. At the same time, it defines the point where this responsibility passes to either party.

Difference between Shipping FOB and CIF

First, it’s imperative to understand the difference between FOB and CIF. As mentioned above, both are INCOTERM agreements.

FOB stands for “Free On Board”. Under an FOB agreement, the seller shoulders all transportation costs up to the port of shipment.  This includes all loading costs. On the other hand, the buyer is responsible for all marine freight, insurance, unloading costs right from the port of loading. Moreover, the buyer will meet all transportation costs from the destination port to his or her factory. It is important to note that all risk is transferred to the buyer when the goods are loaded on board at the port of shipment.

Under a CIF (Cost, Insurance, and Freight) agreement, the seller should provide minimum insurance for the goods in transit, pay for freight costs and is responsible for all costs of goods in transit up to the buyer’s preferred destination point.

Why should you consider shipping FOB for your garment and textile import?

Having explained the two agreement terms above, considering FOB to import your garments and textiles will give you an upper hand in minimizing overall import costs and increasing your convenience. More often than not, first time importers and people importing small quantities use CIF where convenience is guaranteed. You don’t have to deal with unfamiliar shipping and freight details. Notwithstanding the convenience factor, you may end up paying a fortune to import your textile, garments and other goods under this agreement.  This is because the seller will collaborate with his forwarder and is likely to mark up the costs charged by his forwarder to make a profit. As a buyer, you will have no control over the invoice.

Importing FOB Garments

When shipping FOB, you have total control over your freight costs. You have the benefit of hiring your own forwarder at an agreed freight rate, among other charges.  You will also be able to get exact and timely information from your forwarder, hence solving any service issues or hassles during transit. You will also enjoy transparency on shipping movements, as you have a local contact to provide shipping information, quoted costs for both freight and locals. On the other hand, if you ship CIF, you may not know who the local handling agent is and what their charges will be, which may bring with it inconvenience and additional costs in handling your shipment.

Ultimately, if you decide to ship with an FOB agreement, you will be in control of your shipment.  You will be in a position to choose a method of shipment, your own agents, organise for a convenient insurance policy and set your own transit time. With CIF, all the above-mentioned variables are controlled by the seller, which may disadvantage you.

Please download our INCOTERMS quick reference guide or refer to the Australian Customs and Border Protection Service Fact Sheet. 
(Note this fact sheet is a general guide only)

To request more information on shipping your goods FOB and how we can assist, contact Magellan on 1300 651 888 or email us at fashion@maglog.com.au with your enquiry.

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