International Logistics

Setting up a Business in the USA Part 3 - Understanding the Language!

2008-02-10T07:26:00.000-08:00

Please note: This article is written for the benefit of British companies looking to work in America for the first time.

George Bernard Shaw once described the UK and USA as "Two countries separated by a common language" and even though communications across the pond have increased in frequency in the 50 years or so since he died it is still notable how different the two languages are. And that's largely a reflection of the demographic of the country - the American language is as much a melting pot as the country itself, taking words from Dutch, Italian, Hungarian, Yiddish, Spanish and Russian to name but a few of the influences.

As a Brit in the USA you should expect to understand more than you are understood, simply because (despite the relative success of BBC America) media traffic tends to move from there to here rather than the other way round. Whether it's through comedy or drama, film or politics the average Brit can list a lot more distinctive American words than our Atlantic cousins can manage in return. Chances are that you know that a pavement is a sidewalk and a nappy is a diaper, and you probably understand that putting gas into a car isn't a major health and safety issue - but tell your American colleague that you like chocolate on your biscuits and ketchup on your chips and you may find yourself face to face with a look of slight confusion.

While we're at it, here's a quick note about accents - you now have one. Even if you have a middle-England, educated-out-of-you, could-be-from-anywhere, un-accent, you will have to get used to people commenting on your accent. And if you have a strong regional accent, be prepared to slow down, repeat yourself and try to talk 'a bit more proper' than you normally would - in 1964 the Barbra Windsor film Sparrows Can't Fly was subtitled for its US distribution for fear that American Audiences simply wouldn't understand the Cockney being spoken!

Article copyright John Cave 2008

Part 1 - Understanding the Geography
Part 2 - Understanding the Culture

Meet me at the "Focus on Doing Business in the USA Event" 13th March 2008 in association with the British American Business Council

If you have any queries on freight to and from USA, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Setting up a Business in the USA 2 - Understanding the Culture

2008-02-05T06:53:00.000-08:00

As I mentioned before, the USA is a big place and the culture on the east coast is quite different to the culture on the west coast or the deep south - that being said I'm going to make some sweeping generalisations and sum up the prevailing business culture in the USA in three words.

Respect, equality and success.

Time is money, so wasting it is not looked upon favourably. Punctuality shows respect, so turn up on time, or call ahead to say you are going to be late if you are delayed. Likewise, expect the people you are dealing with to have the same attitude and to be very task orientated - you'll find a lot less pointless 4 hour meetings with no real plan of action. Politeness is also paramount, use peoples titles and surnames until they have indicated that you may refer to them by their first name - they may well suggest that you do this almost as soon as you have been introduced, but it's still polite to wait.

Business is serious stuff in the US, and the sort of office humour, throw away comments and jokes that you may be used to could well be construed as deeply inappropriate - on the other hand when Americans do do 'funny' they do it, like everything else, big, bold and (some may say) brash. It's not true that Americans don't get irony and the British sense of humour, but you don't want to use the negotiating stage to find out whether your new business partner does or not.

Americans are proud of their culture of success - the American Dream is alive and kicking, and those who can work their way from the post room to the board room are highly regarded. America loves winners (which probably also partially explains why they do so well at the Olympics). Caution, self depreciating wit and a hint of cynicism may be the order of the day in the UK but may convey a much more negative impression than you intend in the US.

Article copyright John Cave 2008

Part 1 - Understanding the Geography

Meet me at the "Focus on Doing Business in the USA Event" 13th March 2008 in association with the British American Business Council

If you have any queries on freight to and from USA, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Setting up a Business in the USA 1 - Understanding the Geography

2008-01-29T03:20:00.000-08:00

The USA is, as we all know, fairly big. To be more precise the USA covers nearly 4million sq miles, which makes it 40 times larger than the UK (or 473 times the size of Wales...!). In fact 11 of the 50 states are bigger than the UK in terms of area - which gives you a lot of ground to cover. And there are a lot of people in the USA too - 300 million of them, making it the 3rd largest population in the world, after China and India.

But the thing to bear in mind, when considering setting up in the USA is while there are a lot of people in a lot of land, there is an awful lot of space. Even when you take into consideration that there is enough land in Alaska for each of its residents to have a square mile each, the USA is a relatively empty place, made up of areas of high density with huge distances between them. This in turn means that ,while there are federal laws and governance in place, in reality a lot of the administrative and legislative functions are handled state by state.

So what does this mean for you if you are considering setting up a business to distribute in the USA? Well, it means that you might be better off thinking of the USA more like a collection of small (and not so small) countries (a bit like the EU) rather than a single homogenous country. You can get away with having a central hub in Lyon if you want to cover all of France, but if you want your reach to extend to Turkey, Norway, Portugal and Poland, you might need to think again. Likewise a base on the West Coast of the USA is great… for covering the West Coast, but less useful if you want to reach those in the Central Time Zone and almost useless if you want to get to the East Coast - The distance between New York and LA is only 2/3 of the distance between New York and London.

And speaking of time zones - there are 4 of them on 'mainland' USA, not including Alaska and the various islands. So when it's midday in New York it's still 8am in California (and 5pm in the UK) which means if you want to deal with people all across the country, you might need to get a few extra clocks for the wall - and be prepared to work later or earlier than normal.

So, my top tip when understanding the geography of the USA is to focus on the 'United States' part first and 'of America' next. And remember, you're not in Kansas anymore, Toto....

Article copyright John Cave 2008

Meet me at the "Focus on Doing Business in the USA Event" 13th March 2008 in association with the British American Business Council

If you have any queries on freight to and from USA, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Maps from: Map of the USA - Visit us for more maps of the USA including all the states.

Impressions of India 4 - UK/Indian SME Partnerships

2008-01-22T02:58:00.000-08:00

Outsourcing and offshoring are nothing new, corporates such as HP, IBM, Intel, AMD, Microsoft, Oracle Corporation, and Cisco have been taking advantage of competitive and flexible workforces in the developing world for over a decade now and investing heavily in those areas to support their business aims. But there is a new trend appearing with more and more SME's looking further afield, to partners in China, Eastern Europe and India. In many ways the corporates have been blazing a trail for these SME's, not only by fine tuning the processes from the point of view of the outsourcing company but also by establishing an understanding of the business culture and requirements of the outsourcing companies within the offshore partners

IT, KPO and BPO business functions are obvious candidates for offshoring as improved technology allows information to be transferred immediately. This means that in principle an efficient offshored partnership can work as seamlessly as outsourcing to a domestic partner - In 2007 the global offshored BPO market was worth over £12billion with over £7billion of that going to Indian businesses.

But the opportunities are also there for more traditional business sectors, such as manufacturing, to gain a competitive advantage. While I was in India I spent 4 days with Srikanth G P, the Managing Director of Ibex Engineering, an export-focussed company that provides die-casting, tooling and precise machining services to businesses in Europe, New Zealand, The USA and Japan. Ibex have recently set up a successful partnership with HCM Engineering, a West Midlands based SME with a UK workforce of 25 and turnover of £1m. Simon Hanson, Managing Director of HCM said "The manufacture of tooling is very labour intensive and expensive in the UK, so by establishing a joint venture with Ibex, HCM can retain control over the quality and support services but gain a competitive advantage due to the reduction in costs. Currently the JV business turns over an extra £200,000 and is expected to double in size over the next 12 months, with some of that growth coming from sales to the Asian market generated in India"

Ibex Engineering, Bangalore

While talking with Srikanth G P about the potential for UK SME's to make the most of the opportunities that India offers it became clear that many of the issues are exactly those that face a company outsourcing to a British partner, but that there are also important additional factors to consider, and while there is no reason that an SME cannot benefit in the same way as a larger company they will almost certainly have less resources available to them so will need to manage the project to a much finer degree.

So, here are my top tips for any SME that is considering partnering with an offshore company:

Make sure there is a business case:

Offshoring can bring massive benefits, but it may not be right for all companies. Don't rush in and commit yourself without being sure that it's a viable option, and think long term - the cost implications on moving business processes back to the UK in 2 or 3 years time if outsourcing doesn't work could be very expensive.

Don't just think of the savings:

Wages for workers are considerably below those in the UK, but it is important to bear in mind that the salaries of more skilled and senior managers are rising quickly. In addition to that you will have to factor in the costs of travel and possibly relocation expenses if you decide to move a UK member of staff to oversee the offshore operation.
And while outsourcing can be highly efficient, it is not necessarily cheap to set up. It will take time, and unless what you are outsourcing is a new business area, you will have to maintain your current set up until it is in place. You will also need to make a reasonable number of trips to visit the potential new partner, and a visit to India takes a little more time and money than a trip to see a potential new partner in Milton Keynes.

And of course don't just look at cost, you wouldn't automatically go for the cheapest supplier in the UK, nor should you when looking for a supplier in India. Remember that everyone in the chain from customer to outsourced supplier/JV Partner needs to be looked after, so don't be greedy.

Be aware of cultural differences:

Even though business has been done between India and the UK for over 200 years and many Indian companies are used to dealing with UK clients, there will still be some cultural differences, and it is as much the responsibility of the outsourcing company to be aware of these and to accommodate them where possible as it is the responsibility of the offshore company to adapt.

Meeting face to face can go a long way to alleviate many of these problems, indeed I have developed a much deeper understanding of how things are done in India and why they are done that way since my visit, and this in turn will help me when dealing with Indian companies.

Be realistic and be prepared:

Be clear and realistic about what you expect, Set key performance indicators and have a service level agreement in place. You will probably have to allocate resources internally to manage the outsourced process from the inside, as well as to deal with any internal conflict that might arise from moving part of the business overseas. And like any partnership while you can hope for the best you should plan for the worse, if you have no plans in place for resolving conflicts and dealing with problems then, should they arise, they will have a more serious effect than they need to.

Get as much support and advice as you can:

Offshoring an area of your business is a big step, and as suggested above the risks are greater for an SME because they cannot just throw money at a problem in the same way that a corporate body could. But there are plenty of experienced people who you can, and should call on for help. Speak to the international trade team at your bank and bring in appropriate legal support. Remember that many of the offshored companies that you will be speaking to will have a lot of experience in dealing with companies wishing to outsource elements of their business. While this is very useful once you have found the ideal partner, when it comes to the negotiation stage it can give them an advantage - make sure that you have someone equally experienced in your corner.

Offshoring is becoming a much more viable and practical for smaller companies but while going in unprepared and unsupported can lead to all sorts of problems, when done right and with the right partners it can bring wonderful results in terms of cost reductions, increased capacity and new opportunities.

Article Copyright John Cave 2008

Impressions of India 1 - A Tale of two Countries
Impressions of India 2 - The Cargo Explosion
Impressions of India 3 - The Rail Network

If you have any queries on freight to and from India, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Impressions of India 3 - The Rail Retwork

2008-01-11T01:51:00.000-08:00

While I was in India I wanted to make sure I really understood how freight was moved around the country, as well as how it could be shipped out of there. In the last article I talked about the expansion of the Jawaharlal Nehru Port Trust in Mumbai, but in a country the size of India, even getting things to port can be a logistical challenge. As a result of the under-developed trade and logistics infrastructure, the logistics cost of the Indian economy is over 13% of GDP, in comparison to less than 10% of GDP in most of Western Europe and North America. Rail freight accounts for 40% of freight moved around India, compared to 89% in 1951! Currently the majority of freight in India goes by road, and the improved highways being built to supply ports like the JNPT will begin to make this even more efficient (although efficient is a relative term..!)

There has been a huge investment in the road network in India over the past half century. Despite the fact that a freight train (or 'rake') can carry 90 TEU's or 3000 tons of bulk material, for journeys less than 450 miles it is still more economical to move containers by road - but the railways are working on an enormous fightback to regain some lost ground. Indian Railways makes 70% of its revenues and most of its profits from the freight sector, and uses these profits to cross-subsidise the loss-making passenger sector.

Anyone who has ever been to India or even seen a documentary about the country will already be familiar with the experience that is travelling by train, with passengers hanging onto the outside of the carriages and hawkers selling their wares whenever the train slows to a pace that they can keep up with. Trains began to appear in the mid 19th Century, set up by private companies with the assistance of the ever present East India Company, but by 1907 nearly all of the companies had been nationalised and in 1920 railway finances were considered so important that they were ring-fenced with a separate budget to keep them away from the rest of the financial negotiations that any government has to contend with. Indeed the Indian rail system is immense, it's the worlds largest employer with a workforce of 1.6m and it carries 15 million people and more than a million tonnes of freight every day over routes that cover nearly 40,000 miles - and it's about to get even bigger.

A further 1,650 miles of track are planned for the exclusive use of freight transport with an additional 3,000 miles feeder lines that will include some new construction and the upgrade of many existing lines. The plan is to provide dedicated freight lines that can isolate the freight from the passenger trains, increasing the capacity for both sections and slashing the amount of time that it takes to get goods across the country to export.

The first phase of the Dedicated Freight Corridor is the Western Corridor which will run from the JNPT in Mumbai to New Delhi. As you would expect from a line that goes straight to one of the fastest growing container ports in the world the Western Corridor is expected to carry mainly container traffic, and lots of it, with trains up to a mile long, double stacked with TEUs. The Eastern Corridor will run from Ludhiana to Sonnagar and is planned to eventually to join up with the deep water docks at Kolkata carrying coal finished steel, food grains, cement, fertilizers, and lime stone.

As well as the construction of the lines themselves there is a lot of work to be done to make sure that the tracks fit into the existing infrastructure, with the demolition of 30 Road Over-Bridges (or ROBs) and construction of another 150 with approximately 900 level crossings to enable travel across the lines.

While the Prime Minister Manmohan Singh laid the foundation for the Western Corridor in October, the Eastern Corridor may have hit a bit of a stumbling block. Both sections were due to be funded by the Japanese government, most likely through the Japanese Bank for International Cooperation (JBIC) in the form of an aid or a soft loan, and the Rs 16,000 crore deal (about £2billion) for the Western Corridor is still on track (if you will excuse the pun). But it seems that Japan is getting nervous about the spiralling costs for the Eastern Corridor (currently projected at Rs 11,000 crore, which is about £1.5billion) partly due to the increased cost in buying the land needed to lay the tracks and is looking for an opt out on that side of the project, but also because it has more interest in the fast turn around of the container freight than the industrial commodities that would be moved along the Eastern Corridor.

In response to this The Dedicated Freight Corridor Corporation of India Limited (DFCC), the company set up to manage the project, are looking into the possibility of implementing toll charges (similar to those used on highways in the country) to fund the project, the cost of the toll would vary depending on the type of goods being moved.

The entire project is expected to take 5-7 years to complete and is set to have a significant impact on many areas of Indian industry. On the Western Corridor it will mean journey times from New Delhi to Mumbai are cut from 60 to 36 hours, with trains travelling at up to 60mph, leading to a faster turnaround, and lower transport costs making Indian goods more competitive worldwide. Container traffic alone on the Western Corridor is anticipated to increase from 0.69 million TEUs in 2005-06 to 6.2 million TEUs in 2021-22.

On the Eastern Corridor the coal and steel are mostly raw materials destined for the industrial areas and power stations in the northern area or Uttar Pradesh with traffic projected to grow from 52 million tonnes in 2005-06 to 142 million tonnes in 2021-22 providing the resources for a massive expansion in capacity.

The DFC is the single largest infrastructural project being undertaken in India, at enormous public cost, but it is being backed by inward investment from some equally enormous corporate bodies. At this point I must express my gratitude to Ashok Gupta, Director of the Indian Roadways Corporation Ltd, one of the most well established and respected road operators in India, who kindly arranged a meeting for me with the CEO of ETA Freightstar, Mr Sathianathan. ETA Freightstar is an Indian Division of the huge Dubai based ETA Group, a company with 140 branches in 21 countries employing over 48,000 people with an annual turnover of $4 Billion. ETA are one of the first private companies on the scene and are extending the network where the DFC ends by providing road freight to and from the rail network an handling to get the freight onto the rakes themselves, making the Dedicated Freight Corridor all the more efficient as a way of shipping goods around the country.

By upping their game the road freight groups are going to have to try to improve their efficiency to be able to compete, and by separating the passenger and freight aspects of Indian Railways both will be able to develop at a much faster rate.

This article is copyrighted John Cave 2008

Impressions of India - Part 2

2007-12-12T08:44:00.000-08:00

Part 2 - The Cargo Explosion

In part one I briefly mentioned the Jawaharlal Nehru Port Trust, the enormous complex of container terminals that handle over 60% of all sea freight that comes in and goes out of India. At the moment JNPT serves 25 ICDs (inland container depots) with plans for another 9 over the next few years. The port sees textiles, foodstuffs and medicines exported worldwide while at the same time chemicals, oils, petrol, plastics and heavy machinery are imported to aid the phenomenal growth in the Indian manufacturing economy.

JNPT is made up of 3 terminals: Gateway Terminals India is a container port with the capacity to process 1.3m TEUs a year, there is also a liquid cargo jetty capable of handling 5.5 million tonnes annually (including industrial and edible cargo such as molasses and vegetable oil), and finally the Nhava Sheva International Container Terminal, India's first private port.

Vessel loading at Nhava Sheva (NSICT)

We were fortunate enough to have an extensive tour of the facilities at Nhava Sheva, facilities that rival those anywhere else in the world (and I've seen a lot of container ports in my time...!). With the capacity for 100 moves per hour I was impressed by the efficiency of the operation, I was even more impressed when the CEO, Capt Rustom Dastoor, mentioned that they are on target to move 1,400,000 TEUs by the end of the year.

For those of you who don't speak logistics jargon, a TEU is a 'twenty-foot equivalent unit' - a container that is about 20ft by about 8ft. At the moment the TEU is the standard size of container, there are a smaller number of 10ft containers in use, and an increasing number of 40ft containers, these are sometimes referred to as 2 TEUs or logically FEUs. If all of the containers that NSICT moved in 2007 were laid side by side and end to end they would cover over 8 sq miles of land. To put it another way, if you were stood in the centre of this sea of containers, you wouldn't be able to see the edge. By 2015 JNPT as a whole is expecting to be handing 8m TEUs a year - That's 43 sq miles of containers. If you were driving at 30mph it would take you over 5 and a half hours just to drive round the perimeter.

To prepare for this, as well as the work I mentioned on the roads supplying the port, hundreds of crores (in India 1 crore = 10 million) of Rupees are being spent on expanding the container berth, improving the rail network to the ICDs and digging out the harbour channel so that it is deeper and wider to accommodate the ever expanding size of the ships that carry the containers all over the world. They are also planning a 4th terminal that will be bigger than the rest of JNPT put together.

Aerial view of NSCIT Terminal and Gateway To India Terminal

But the Nhava Sheva terminal isn't just some multinational company moving in and exploiting the natural resources of the area, they also have a real sense of what corporate social responsibility means. Many of the staff are recruited from the surrounding villages and given training above and beyond what is needed to carry out their day to day jobs. In addition to this DP world, the company that manages NSICT has also adopted the local community college with work beginning this summer on a new school building which will include science labs and a library.

Congestion is still a problem at JNPT though. The average container can wait up to 7 days to clear the port complex due to the sheer volume of containers being processed. Cargo throughput surged 26.4% in the 1st seven months of fiscal 2007/8 to 2,700,000 TEU across the three terminals and JNPT and Customs officials are looking at ways to cut down the waiting times while maintaining this phenomenal growth.

It is this sort of dual progress which is propelling India into the forefront of international trade, providing not only world class facilities but a world class workforce to run them to a world class standard.

If you have any queries on freight to and from India, please do not hesitate to contact one of our team on +44(0)121 713 7250 or by email for advice or further information.

Impressions of India - Part 1

2007-12-12T05:11:00.000-08:00

Having just returned from a 2 week tour of India I thought I would record some of my observations that may give you a flavour of this amazing country.

Part 1 - A Tale of 2 Countries

India has been described as a 'Rich country where poor people live.' The last few years have seen incredible growth in the Indian economy with huge organisaitions such as Reliance, Tata and Mittal making their presence felt on a global scale. Tata for example shocked many in the UK by buying Corus Steel, and is now going on to purchase Jaguar and Land Rover, which would make them one of the largest overseas investors in UK manufacturing. From 2000 to 2005, The Indian Economy grew from $460.2 Billion USD to $906.3 Billion making it the second fastest growing economy in the world after China.

The worlds' largest democracy, India is making huge investment in infrastructure which was evident while travelling round the country. In Mumbai, for example, more than 4500 crore INR (over 5 Billion GBP) is being spent on a project to link the port complex with downtown Mumbai via a 6 lane bridge across the bay, linking two of the most crucial areas in India - downtown Mumbai is the commercial capital of India, and the JNPT / Nhava Sheva port complex handles over 60% of the seafreight in India. This 22km bridge would cut average driving times between the two by 1.5 hours with a projected traffic by 2011 of 46,580 cars per hour. The area of Navi Mumbai (New Mumbai) where the bridge would terminate looks like any western city, with Malls, a state of the art railway and 30+ storey apartment buildings as far as the eye can see.

Downtown Mumbai

On the other hand, 26% of the 1.1 Billion population lives in poverty, that is, they earn less than 560 INR (£6.89 GBP / $14.20 USD) per month as explained in this interesting article. Any Indian would agree that this is the problem that needs a solution. To see such poverty at the side of some of the most expensive real-estate on the planet drives this home forcibly.

Progress is being made, with over 90% attendance at primary school, even in rural areas, and the development of low-cost, heavily subsidised housing to replace the slums that sprawl across every major city. Looking back at our own (UK) history, it is a similar picture to the Victorian / Industrial Revolution era. The big difference with Indian development is that they are going from the Industrial Revolution to the 21st Century and missing each of the steps in between..!

It was incredible to be hundreds of miles away from anywhere in rural India, to pull out a mobile phone and have a full signal...! Even in the middle of the jungle, we could text and phone home. The shop pictured below sold phone cards and DVD's! This is typical in this country of contrasts. India is definitely a rich country. India definitely has a lot of poor people. But the pace of development is incredible, and it is a country 'on the up.' It remains to be seen if it can get to grips with the dichotomy of rich and poor which is at the heart of its future, if it can, then India is without a doubt a superpower in the making.

Rural shop in Karnataka, India

All images and text copyright John Cave / Statistics from the World Bank Group

Logistics and Globalisation - An Inside View

2007-12-12T05:00:00.000-08:00

Logistics and Globalisation - An inside view

Globalisation

The world is changing. Last year, more than 50% of the growth of the global economy came from 'developing' countries. We are all well aware that the powerhouse that is China has been growing from strength to strength, and with India poised to eclipse China in the next few decades the manufacturing base is well and truly settled in the East.

The graph above demonstrates the incredible growth in GDP in India and China in comparison to the G7 countries combined growth.

This change in the global economy over the last 30 years has had a profound effect, and will continue to do so. When we look closer to home, we can see the decline of the UK manufacturing Industry. The second graph shows the extent of this decline over recent years:

There have been, and will continue to be debates about the effect of globalisation overall, but whatever your view - Globalisation is here to stay.

Jack Walsh, the CEO of General Electric once said: "An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage" and that sums up the current situation in the UK.

For those companies that are willing to look at the future and to embrace the changes, the rewards are substantial.

The Logistics Industry

The seismic shift from being the world's greatest exporter to one of the largest importers has had an effect on all industries, especially the Logistics sector. Even 10-15 years ago companies dealing in international Logistics and Transportation could easily afford to become niche players as either an 'import specialist' or an 'export specialist.' This is not so easy in the current climate, as companies are required to be more flexible in dealing with the customers' requirements, and specialist companies have given way to a 'one stop shop' approach that can be seen with the major third-party logistics companies (3PLs) and even amongst smaller operators.

This one stop shop approach has led to a number of high profile mergers and acquisitions involving major logistics names such as DHL, Exel, Kuehne and Nagel, ACR (formerly Hays) Wincanton and P & O. Deutsche Post, the German post office, has acquired companies across the logistics spectrum, including Danzas (Freight Forwarding) Air Express International (air freight), DHL (Express deliveries), Exel and Nedlloyd Districenters (Contract logistics) to enable them to provide a comprehensive portfolio of logistics services including purchasing stock on behalf of their clients.

The requirement for warehousing is also likely to be on the increase as lead times for stock become longer and companies strive to meet customer demands. This is a paradigm shift from the utopian position of Just in Time concepts of the 1980s and 1990s.

Pressure on margins as a result of overseas manufacturers entering the market has meant that any UK manufacturers have had no alternative but to drive costs down, and transportation is often the first area that companies look at to reduce costs.

The trade imbalance has also had an effect on the viability of specialising in export logistics. A combination of the huge volumes coming inbound, and the advent of the new 'super-vessels' has meant that shipping lines are desperate to get containers re-positioned. The same is true of European transport. The influx of European hauliers carrying goods into the UK has meant that a great number of these trailers go back empty. The result is that you can pay as little as £250 for a full trailer of goods to some areas of Belgium, France and the Netherlands and as much as £1300 to bring goods in from the same area. These figures illustrate the imbalance.

The combination of the downward pressure of the manufacturing sector and the imbalance of trade has had the effect that many logistics companies are now working on unsustainable margins, as costs are pushed ever lower. Combined with the rise in fuel prices this has lead to companies operating large fleets of vehicles re-assessing their position, or getting into difficulty. It is estimated that the cost of operating a vehicle has risen between 15-20% over the last 12 months, while rates have actually decreased. Average margins for 3PLs in the UK are currently in the region of 2.5%

Technology

We cannot think of Global Logistics without looking at the leaps and bounds taken in recent years on the technology front. Track and trace systems, RFID technology, real-time web interfaces and many other tools have revolutionised the way we work. The 3PLs have put a great deal of their resources into developing tools to assist in the flow of information, and now some of the companies lower down the supply chain are experimenting as well.

In a recent presentation on technology in logistics it was stated that, in the not-too-distant-future it will be possible, via telematics, to trace any piece of cargo in real time, anywhere on the planet, across any mode of transport or warehouse. This is still relatively new technology, but it is coming to market, and will change the way logistics companies operate once again.

The idea of a unified, cross-platform, track and trace system is truly mind-blowing - but it is a real possibility.

Moment of Truth

In these uncertain times, Logistics companies have to look at a strategy that can sustain them financially for the medium to long term, and for many this has meant some major changes.

Many companies are now looking at allied areas such as inventory management, purchasing, factoring, sourcing and complete supply chain solutions. These 'integrators' are leading the way for other Logistics companies. The DHL/NHS Logistics contract is a typical example of this.
Diversification in this global market is the key. Those organisations that can listen to their customers, see their changing needs and adapt to cater for their supply chain requirements are the ones who will succeed in the long term.

Napoleon Hill said "Opportunity often comes disguised in the form of misfortune, or temporary defeat." And for many in the Logistics sector, especially the smaller companies there are some major opportunities that have been opened up through Globalisation. It is an exciting time, but a risky one as well.

About the Author: John Cave is the General Manager of Westhaven Worldwide Logistics, and founding partner of Novatus Global Solutions. He comes from a background in the Manufacturing Industry as a Logistics Manager and has always been fascinated by International Trade.

All content copyright John Cave 2006.

All graphs are copyrighted by HSBC Trade Services and used with permission.

Dummies Guide to Importing - Part 2

2007-12-12T04:58:00.000-08:00

In part 1 (written over a year ago...!) we looked at the information required to ensure that you can get an accurate freight cost for goods coming into the UK.

As mentioned in the article, freight costs are often the largest chunk of the bill, but what else is there to consider? Most obvious:

Products and Suppliers

When thinking about importing you are probably in one of 3 camps:
1. You have an existing product and are looking for outsourced production to cut costs
2. You have an idea for a specific product and are looking for outsourced production partner
3. You are a "trader" - looking to make money on the transaction of many different types of goods

Existing products:

In the UK we often hear about the decline of manufacturing with many businesses unable to compete with the low cost base of overseas production. This is a fact, and it is not going away. There are still a great number of (mainly) small businesses that are still manufacturing goods in the UK, and there will always be niche areas where production lead times outweigh the emphasis on cost, but there are many that are afraid to look at overseas partners and are facing difficult times as a result. So how can you limit the risk of outsourcing?

Like any business transaction, it has to come down to your trust in suppliers to deliver on their promises. Just because the supplier is on the other side of the world, it makes no difference. Some tips to get started:

Meet face to face: You can never underestimate the power of going out and meeting potential suppliers face to face, preferably at their premises. It gives you a chance to start building a relationship and getting a feel for the people involved - just the same as you would do if it was a local business.

Be culturally aware: There is a need to be culturally aware of differences between Western and Eastern cultures as this can be the first stumbling block to building a healthy relationship. Just making the effort to understand is often appreciated by the supplier and can help to build the initial bond. For example, in China it is considered rude to discuss business over a meal, when it is the normal thing to do in Western culture. Also (my favourite) never finish your meal completely in China as it is seen as an indication that you are still hungry! Have a look at www.cybor.com/besite/ for more tips on this

Use your Bank!: The financial transaction is the most worrying part for most people. If you have a good relationship with your International Trade team at your bank, they can be an excellent source of ideas and information. Trade finance of some type is a pre-requisite for most larger overseas transactions whether it be a Letter of Credit or another arrangement it offers a safeguard for both parties.

New Products:

One of the greatest additional fears of having new products manufactured overseas is the protection of your IPR, and rightly so! There is an excellent article here written by the China-Britain Business Council, and the same is true of any supply overseas. Do not suspend your common sense and business sense. Check your suppliers thoroughly or even better go into Joint Venture or a "Wholly Foreign Owned Enterprise."

Traders:

The key to being a very successful goods trader is spotting the potential in a product before anyone else does! Again, it comes back to the face to face approach. If you are serious about trading goods you need to visit the country you plan to source from and meet your contacts face to face. There are a huge number of trade shows in India, China and many other emerging markets and these are a great place to try and look for the next "big thing." Again, do not suspend your normal due diligence just because of the distance.

Some people rely on a google search or a website link to find a new supplier, and for very small businesses and speculative trading it may work.......but it may not...! The risks lessen considerably if you make the effort to see how things work on the ground and understand them. Do not be afraid to ask people for advice - use your Bank, your Chamber of Commerce, your Logistics company, your friends, anyone with the right experience could savee you some painful experiences!

Please let me know if you found this information useful, and I am always happy to answer specific questions and offer advice.

Dummies Guide to Importing - Part 1

2007-12-12T04:48:00.000-08:00

Thought I may save myself some e-mails in the long run by trying to put a decent idea of what to look for when importing products from overseas.

This is not an advert, this is what we do (there, that's the only plug you will get!)

The UK has been a net importer of products for some time, and as manufacturing companies in the UK struggle to compete on costs with their overseas partners, many large companies and SME's are changing their strategy to become stockists and distributers.

Also, the massive boom in online trading through E-Bay has lead to people doing the same from their home - and many of our customers are home traders.

Depending on comments, I am happy to go into any amount of detail, but I will try to keep this a brief overview at the moment. I will concentrate on imports from China, as they are the largest volume, but the same goes for anywhere outside the EU. India for example, is becoming a real manufacturing powerhouse, and will be challenging China especially for industrial goods.

If you are considering bringing something in from overseas, the most important thing is the product. I am sure there are garages full of products that nobody ever bought..... Market research is vital.The second is the supplier. The third is the supply chain.

I will concentrate on the information needed for Freight rates at the moment, but in following blogs I'll try and pick up on the Market Research and developing the right partner overseas. Freight costs are the largest cost of most imports from China, often more than the goods themselves, so it is very important to be able to get an accurate picture of costs you are going to face.

I often have people coming on to me asking "I've got this idea of bringing widgets into the UK from China - how much will it cost?"

These are the questions that need to be answered first:

Question 1

How much do you have?
To be able to give any real idea of costs, any freight company needs some fairly accurate details. The ideal way is to get weights and dimensions of the whole shipment from the supplier when you are negotiating rates etc. with them. Manufacturers are more than used to giving these details out, and will have them at hand.

Question 2

What are the terms of supply?
You may have come accross 3 letter acronyms such as FOB, CFR, CIF, DDP, DDU, FAS etc. These are vitally important, as they say when the suppliers liability ends, and yours begin. To give an example. If a supplier gives you a term of FOB, they will take responsiblility for the goods to get "Free On Board" the vessel. In other words they will pay for the goods to be delivered from their factory, to the port, and any terminal handling costs at the port as well.
If they say DDP. That means they will deliver to your door, and pay all duties and taxes in the UK. Quite a difference.

Question 3

How quickly does it need to get here?
Does it need to come via Air or Sea? Airfreight can take from 3-6 days, and seafreight can take around 4-5 weeks. This obviously has a bearing on the cost of a shipment. For small amounts (up to 200kg, depending on volume) it is often cheaper to send via Air, as the minimum costs at the ports outweigh the total airfreight rate.

Question 4

How important is cost / transit time?
It is no different to any business. Customers often want the cheapest possible price, for the best possible service. This doesn't work. Especially when dealing in Airfreight this can be a problem. The cheapest rates may only be based on one flight per week, that travels via another airport, and has to wait there for 3 or 4 days before connecting on the final flight to the destination.
The more expensive rates will offer a better service, possibly a daily service, direct to the destination. This is very important to think about before approaching a freight company, as you will rarely be comparing like with like.

Question 5

Have you researched Customs Duties / Licenses etc.?
I have come across a number of people who have called me when their goods are sitting at the port, and they have been faced with a Duty rate of 20% asking me if there is any way round it? The answer is no! Make sure you have your tariff code well researched, and if applicable lodged with customs, so you know what your costs are going to be.
Another one that I have come across recently, was someone that had brought in a load of cotton t-shirts from India via air, but hadn't done any research. He had paid for the goods, and the airfreight and called in a panic because Customs wanted an Import License. Sadly, he had to apply for the license, and wait for it to come through. This took 3 weeks and left him with a hefty storage bill from the airline.

Hope this is a helpful introduction, please feel free to contact me for further information.

What we get up to....!

2007-12-11T15:30:00.000-08:00

Over the past few years we have had some wierd and wonderful shipments, we thought we might share some of the highlights:

Highlight 1 - Causing Mayhem in Manhattan!

We were contacted recently by one of our customers, a UK Manufacturer of Flight simulator machines. They had secured a contract to supply their Simulators to the prestigious American toy store FAO Schwarz. The only problem, was to get the simulator there....

We had to pack and load the simulator in the UK, transport the goods to New Jersey where we built a custom built rig and frame to enable us to lift the simulator without damaging the delicate fibreglass panels.

The store is on 5th Avenue, on the corner of Central Park - one of the busiest junctions in the world. We had to close it.

The delivery had to take place at 11.00pm and the road was closed by the NYPD. The Custom built rig was then erected to take the simulator off the delivery vehicle and onto the 2nd floor!

Flight Simulator in Willenhall, UK

Flight Simulator in 2nd storey of FAO Schwarz, New York

Our Customer said:

"Thanks for all your assistance with the New York and Las Vegas flight simulator jobs, things couldn't have gone more smoothly."

Nick Hughes, Project Manager

Highlight 2 - Keeping the A380 on course..

A Client secured some lucrative engineering work for the new Airbus A380 assembly. These pieces, made in Birmingham (UK) were over 2 tons each, and had a highly polished steel surface. The manufacturer asked us to provide a door to door airfreight solution for these pieces to Alabama (USA) where they would undergo further work. We had to collect the finished goods, pack them in custom built crates and airfreight them on the first available flight.

The shipments varied from 2 tons to 9 tons, and up to date we have shipped over 70 tools. Every one on time.

Tools in custom built crates

Our customer said:

"This is a very important contract for our company and with Westhaven's help we have kept to schedule and on budget. I would also like to add that the personal service and support provided by the whole Westhaven team has made the whole process very easy. This level of service would make us go straight back to Westhaven in the future"

Chris Blanco, Project Manager

Highlight 3 - The show must go on......

We were contacted by a Theatre Production company who were arranging a tour of the Hit US musical "Kiss me Kate." The set was in the US and needed to be transported in 5 containers to the UK. The timescale was critical - as the first show was less than a week after the ship was due to arrive.

Also, because of the value of the set (over $1million) we were able to arrange for an ATA Carnet to offer exemption on Customs Duty, as the goods were only on loan to the UK - saving the company thousands of pounds.

Highlight 4 - An unusual request.....

Our final highlight caused some amusement in the office. When a Marketing company enquired about sending a cow from Glasgow to Ibiza, we wondered... As it turned out, "Daisy" was a Fibreglass cow made for a drinks marketing campaign - complete with Leather boots, Hat and goggles.

She had to be handled very carefully, and again timing was crucial to coincide delivery with the product launch.

"Daisy" on her summer holiday

We hope that this brief insight has been both interesting and useful to you. Please do not hesitate to call us if you have any Logistical nightmares, or urgent deliveries.

It's a matter of balance - UK Exporting Opportunities

2007-11-12T15:35:00.000-08:00

Although most people know that the UK regularly imports more goods than it exports, its perhaps not so well appreciated that the resulting imbalance has a direct and very useful effect on export freight costs - something which can be very helpful to wouldbe exporters.

Because imports outweight exports, there is, on balance, a much lower demand for export freight services than for import deliveries. In other words, there is much more space on trucks, ships and aircraft leaving the UK than there is available export cargo to fill them. This shortfall has a dynamic effect and freight prices reduce to very competitive levels as freight companies seek to win business in an effort to fill the empty space. However, at current levels of trade, there is evidently never enough cargo to match the capacity.

The effect on price is very appreciable. For example, a full lorry load from Antwerp in Belgium to Birmingham in the UK might typically cost as much as £1100 (due to excessive demand for transport to the UK). The same vehicle, from Birmingham to Antwerp, might cost less than £350 (due to very poor demand for transport from the UK to Belgium). And the same principle applies to a greater or lesser extent for nearly all of the UK's export markets.

So, potential exporters should be aware that they may have an immediate comparative advantage over many of their foreign competitors in terms of transport costs. A very good reason to explore any export possibilities from the UK and at least one advantage offered by our overseas trade imbalance.