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Sameworld.net is the networking blog for Supply Chain Specialists interested in creating channel partners around the globe.

A key essence for success in a new market is to identify the ‘Right Partner’. We appreciate the huge importance of this aspect and are willing to invest the necessary time and effort to get it right. There is NO substitute for "Grunt Work" and it is essential to meet the prospective partner, understand their technical capabilities, visit their manufacturing unit and assess the management team. With the partners who add to this blog we hope to achieve that. Mark Kennedy Same World Trading


Monday, 9 August 2010

The Hidden Costs to Freight Forwarding



There is no real science to the hidden cost, but many companies chose the CIF route because it is easier, so they think, and therefore hidden costs can be inevitable.

Importers face higher freight costs under CIF terms because the supplier chooses the freight company and is inclined to mark up freight costs for the extra service provided in arranging shipments. There are several reasons for this:

1. The shipper does not have the vested interest or the leverage, to get the best freight price.
2. The shipper pays for the insurance; which there may be substantial surcharges.
3. Currency rates fluctuate widely and the shipper may charge additional cost to cover them.
4. Import quotas, bad weather, and other problems may add additional unexpected cost, which the shipper will cover using a higher rate.
5. The shipper will charge a higher rate to cover its administrative costs for licensing, storage, loading, and other activities.

Hidden Costs

Trading Incoterms used to be limited generally to “Cost, Insurance, Freight” (CIF). CIF terms include all insurance and freight charges in the shipping price, making verification of the charges for freight and insurance difficult.

CIF terms can also involve reporting and information delays and incorrect or insufficient shipping documentation. This creates problems as companies increase their number of overseas suppliers and overall freight volume, and can find it harder to obtain information and mange their inbound shipments.

As a result, CIF shippers often build substantial additional freight charges into their rates, which often are not itemized for the importer.

For Greater Control you should use use “Free on Board” (FOB) Incoterms, giving you greater control over their shipments and eliminating the hidden shipping costs that create inefficiencies. Increased supply chain visibility and the control of import shipments are critical FOB benefits.

By taking control as cargo crosses the ship’s rail at the port of origin, importers are better able to obtain accurate and timely shipment information by working with their choice of third party logistics provider.

If you are shipping at present then perhaps you could do with looking at a Freight Audit which Same World Trading can offer a free consultation and a no gain no fee basis.

If you’re not shipping yet but are about to or are thinking about it I can recommend a Freight forwarder who can help you with your new venture or we can offer the full service with Quality Control for your manufacture base, or looking for suppliers. We also offer a representation for your company via our Indian or Chinese offices.

Contact me via www.sameworldtrading.com

Mark Kennedy

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