The cost to actually get your product from an offshore manufacturer into your warehouse can sometimes add a considerable amount to the sourcing price.
Often we jump to the conclusion that sending a shipment by sea is obviously going to be the most economical method. If you have (and need) a full container of goods and delivery time can accommodate the traditional sea freight times then this is probably a safe assumption to make.
But what happens when you can't order a full container of goods. When you only need a partial container or a pallet (or less).
As a novice when I first tried to ship a LCL (less than container load) from an offshore supplier I did the natural thing, asked the logistics company to consolidate the container with someone else (save some $$ on the sea freight). Sure it did save on the actual "sea freight" component, but what hit us hard was the added costs: delay while waiting for another consolidation, delay getting it cleared going out of the LCC and coming into Australia, the cost to unpack the container on the docks and then pack the goods onto a delivery truck.
It all added up. So I started to think about the situation a bit "What would happen if I simply shipped a half empty container?" I know this goes against the grain for a lot of people. When we think of shipping goods we typically are trying to minimize the amount of empty space we pay for in that shipment. Sea freight is charged by volume not weight after all. So why intentionally ship a container that is half empty. Here is what I found: No freight delays waiting for another party to consolidate, easier customs clearance (both sides), no dockside unpacking charges. All up it worked out CHEAPER for us to ship the half empty container than to ship as a LCL.
What happens when you don't even have a half container? Well typically you need to start getting quotes. Look at economy airfreight. Decide how much you really need? Do you need a pallet delivered in 6-8 weeks or would a carton shipped by air every week work out better for your warehousing and shipping costs?
Do some serious thinking and analysis of your situation and costs involved and you may actually find yourself saving some money in logistics and storage as well as potentially improving your supply chain agility and reducing the finances committed to excessive stock levels.
Isn't it time you re-evaluated your International Supply Chain setup? If there is one thing 2020 taught the world, it is how fragile supply can become when the majority of the world's manufacturing is conducted in the same country. If we are being honest with ourselves, China has not offered a significant financial or capability benefit for several years now. Ever increasing wages and operating costs compounded with the desire for those traditionally employed as factory staff to better their life and livelihood has pushed manufacturing costs up and the inherent IP risk has never really been resolved. Now with trade wars and retaliatory "anti-dumping" fees / embargos for Australian products imported to China coupled with growing consumer resentment around the "Made in China" tag, it is becoming more and more the time to re-evaluate. There are a multitude of options outside of China as well as the possibility of return to local manufacture for some products but it is best to have a definite plan on your future strategy and actions required to get there. EQP can help you to plan and execute your future sourcing and manufacture strategy by working with you and potential manufacturing partners either locally or offshore to ensure that any move away from China does not result in a drop in capacity or quality whilst potentially saving you money. There is no better time to plan for the future than today. Get in touch to explore your options and resolve some of your Supply Chain headaches.
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Phil Khor, Founder at SavvySME
Awesome article Brian, thanks for sharing. This example of LCL shipping consideration shows that we can't always rely on our first instinct but on the experience of others around us. Thanks for being part of the community and bringing your experience to the table.