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# What is a logistics company and how it can benefit your business

Brian McLaughlin
4/9/2023
13
mins

Advice on optimising your logistics for global exporting.

The global logistics industry was aggressively challenged by Covid-19.

Exporters were left in the lurch. Costs to ship from abroad skyrocketed to 10 times the normal price and rates for ﻿shipping containers﻿ shot up from $ 15,000 per container to $ 20,000.

Now the last residues of the pandemic are beginning to subside. Exporting rates are down to almost pre-pandemic levels and capacities for exporting via steam freighters are opening.

SMEs can’t afford to suffer disruption a second time. The question is, how can they optimise their logistics?

We asked three logistics experts to tell us how global SMEs can optimise their export strategy, as well as give the ins and outs of international logistics. Warts and all.

Without further ado, let’s get started.

## Do your homework on shipping companies

Do your research. This is according to ﻿﻿﻿﻿﻿﻿Jannie Mollengarden﻿﻿﻿﻿﻿﻿, a US-based exporter with over 50 years of international export and import experience. She’s worked for major companies such as Stora Enso and as an independent international logistics expert.

“Look for qualified buyers,” she says. “Make sure you check out their backgrounds — particularly, the financial status of your international buyers.”

Check them out through Dun and Bradstreet reports. Ensure that your buyers can issue letters of credit. Check with references from the buyer’s suppliers and be sure to rigorously check the payment terms.

Exercising due diligence on potential clients and buyers saves you trouble and risk in the medium to long term.

Mollengarden found that out early in her career. Her company rush-shipped sporting goods to the demands of the buyer. Her haste resulted in a loss when the buyer filed for bankruptcy upon receipt of the goods.

Mollengarden gave the following advice:

- Research and engage Drayage carriers
- Research domestic and foreign ports (for domestic and foreign port-located warehouse specialities)
- Request at least three RFQ/Proposals from logistics companies

A parting word? “Avoid ‘cheapest logic' to get the best shipper.”

## The importance of Incoterms

Incoterms — or sometimes called ‘specific contract' — is another crucial thing to understand.

Incoterms (International Commercial Terms) comprise the bible of all things logistics, 11 rules issued by the International Chamber of Commerce aimed at reducing confusion between buyers and sellers.

We sat down with Steve Chisum, Manager of Strategic Customers — Southeast — at DHL Global Forwarding.

He’s a senior expert in international logistics with over 25 years' worth of experience in logistics, advising and consulting exporters and importers.

He said that many exporters are unaware of just how important Incoterms are. “Take the acronym EXW (for Ex-works), as an example. This refers to who accepts responsibility, and who pays for freight,” says Chisum. “It's often the least known item for IncoTerm payment terms.”

Specifically, an EXWorks IncoTerm is an agreement maximizing buyer’s risk and responsibility, by requiring sellers to only make goods available for buyers at their warehouse or dock.

## Why you must get your freight insured

﻿﻿

﻿﻿﻿﻿﻿﻿In 1997, a shipping container﻿﻿﻿﻿﻿﻿ containing millions of Lego pieces fell into the sea. Cornish beaches keep washing up with Lego pieces to this day.

So make sure that “your freight is adequately insured”, says Mollengarden.

Some erroneous estimates claim that five per cent of steam freighter cargo never makes it to its destinations. “I think that’s pretty high,” Mollengarden says. She’s correct.

World Shipping Council (WSC) r﻿﻿﻿﻿﻿﻿eports only 1,382 containers/per annum﻿﻿﻿﻿﻿﻿ on average were lost at sea between 2018-2019.

Of course, glitches occur. More than ﻿﻿﻿﻿﻿﻿2,675 containers were lost in five accidents﻿﻿﻿﻿﻿﻿ between the end of November 2020 and February 2021. ﻿﻿﻿﻿﻿﻿WSC issued an eye-opening report in July 2020﻿﻿﻿﻿﻿﻿. Only .0006 per cent per annum of roughly 226 million containers shipped across oceans were lost — and that average is declining.

## Know your shipping line

﻿﻿

Sourcing quality shipping lines is important.

We spoke to Martin Brennan, a Marine Consultant, to get a clearer idea.

“Usually, Maritime incidents are a series of mistakes or oversights which eventually compound to cause an incident,” he says.

From his experience in the North Sea offshore industry, a single vessel typically undergoes several regular inspections. A platform supply vessel in Aberdeen will be visited by the following:

- Port State Control (MCA)
- Class Surveyors
- Marine Assurance Surveyors
- Internal company personnel (vessel superintendents, marine technical authorities, etc.)
- Marine Warranty Surveyors (on behalf of insurers)
- Personnel from the energy company chartering the ship
- And others

In a growing and increasingly consolidating ocean shipping industry, demands on human capital are becoming strained. Exercising due diligence in sourcing shipping lines lessens risks and liabilities on the goods being shipped.

According to Brennan, this includes the following:

- Physics of container weight distribution
- How containers are pre-loaded using computer software and carried out by shoreside planners
- Manners and quantities of lashings
- Adequate lead time loading containers onto ships
- Quantity of port loading stevedores and their attention to lashing details
- The quantity of onboard crew-to-container cargo ratios
- Chief Mate’s attention to cargo details, in checking the load plan into the ship’s loading/stability software

Brennan explains: “Oversights and mistakes happen. These can lead to things being missed or forgotten."

Ships are getting bigger and crews are getting smaller. Brennan says that a large container ship will unlikely have more than 30 crewmembers onboard. In contrast, a port may provide 20-40 stevedores to a single vessel to complete the lashings, who will then depart the vessel before the crew has been able to fully check their work.

Inevitably, cargo losses cannot be 100 per cent preventable and crew safety takes priority over cargo during storms at sea.

## Freight forwarder v third-party logistics

﻿﻿

While not a failsafe guarantee, there’s merit in consolidating your logistics operations through either a Freight Forwarder, Ocean and Inland Freight transportation company or a third-party logistics company (3PL).

It can eliminate hassle, confusion, and bottlenecks. Ultimately, it allows businesses to focus on selling their products as opposed to getting them from A to B.

With access to ocean steamers, planes, trains, and multi-transaxle automobiles, comprehensive Freight Forwarding can engage in “limitless logistics possibilities”, shipping via any of these modes of transport.

At least, this is the gospel according to Chisum. “There's no limit to what we can ship.” Chisum can charter aeroplanes of any size. For example, he recently chartered a Boeing 747 to transport his client’s larger pallets of cargo.

Mollengarden disagrees. “Diversify your carrier base. Never put all your eggs in one basket. Have a backup system that’s flexible and efficient. And give the customs broker the authority to issue a delivery order.”

Other shipping industry critics argue that companies like 3PLs (Third Party Logistics) make exporters complacent about ﻿﻿supply chain﻿﻿ control. ﻿﻿﻿﻿﻿﻿Ned Blinick﻿﻿﻿﻿﻿﻿, co-founder of 3rdWave (dot)co is one such advocate for separating.﻿﻿﻿﻿﻿﻿﻿﻿﻿﻿﻿﻿ “The cost of this dependency on the BCO is steep in terms of operational effectiveness, information and decision support, lost value opportunities, and overall supply chain control.”

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