Wednesday, June 5, 2013
Overseas Sourcing & International Shipping
A customer recently asked why we are marking up on shipping related charges. This is at least the second episode with the same customer that resisted on sending the order in due to shipping. The previous epsidoe can be found here.
In the field of printing, especially when it pertains to flexible packaging, it took me many years to acquire the necessary knowledge and pay for the mistakes to gain the experience. To date, I've been in the printing industry for over 20 years. I've started doing overseas sourcing in China since about year 2000, and like printing, I have to take the time and money to learn about international trading and shipping. That's now about 13 years under my belt.
I never make an effort to hide that we are technically a brokerage company. Although we are not an average broker who's really just a middle man. I have companies set up in the greater China region to do sourcing, quality control, warehousing, and export. So, I'd like to think we are more of a management company. No matter how it's called, at the end of the day, I do not personally and physically engage in manufacturing of anything tangible. The only thing that make money for me is my service. In other words, my knowledge, experience, and connections that make an order competitively priced while always moving forward for my buyers. That's it, nothing more. You buy me, and everything that makes who I am.
I do not understand how you are willing to pay for the cost of management of manufacturing your products while you do not want to pay for me to manage the logistics. International trading isn't exactly like shipping UPS Ground in the U.S. There is a wide variety of things that can go wrong, especially to more exotic destinations all over the world. And within China, there are so many games, tricks, and hoops that you have to go through in order to meet the projected delivery date. One little thing that goes wrong may mean delay of days or weeks. I am sad to say that I've experienced delays of two months due to improper logistics selection. That experience costed me my best customer back then. It would never happen again as I do not have that many customer to lose. But the point is that even with such a high degree of confidence and experience in handling international logistics, we still get screwed every now and then.
Moreover, the physical activities involved in logistics is comparable to the resources we spend on managing the manufacturing. A lot of customers think that shipping internationally is something that can be done online, like UPS. But the truth of the matter is far from it. As stated previously, there are many more components involved in logistics than manufacturing. One single incident will just compound our work more and more. So, please don't mistaken it for a push-button transaction. There are more people to call, more documents to send around, in international logistics. Managing manufacturing is relatively easier compared to this.
The common misperception about international logistics is caused by the number of freight forwarders. To be a forwarder, all one needs is a computer and phone; it is a very low-cost operation. Hence, the high number of people who may be offering their services. However, based on my experience, 90% of them are not worth your time. Most of them basically piggy-back on bigger forwarders that much bigger volume. Problem with these smaller forwarders is simple - when something happens, they become invisible. Invisible meaning that they have no way to rectify the situation, and more often than not, they do not have the necessary information for you in a reasonable amount of time. Believe it or not, in the past 12 months, we've dumped two of the top 10 ranked freight forwarders in the western region of U.S. These two companies are huge; they do billions of dollars in business annually. However, their ability to get shipment through promptly and correctly eventually caused them to lose our business. We have very high criterion and expectation on the freight forwarders that we work with.
And as I tell all of my customers: Overseas Sourcing is half manufacturing and half international trading. This is not a difficult concept to grasp. However, many of my ex-customers and/or prospects may have elected to buy directly from China. With that, they'll just gain the manufacturing half as most Chinese factories knows nothing (or not enough) about international trading. I've heard many horror stories about manufacturing in China; I've also heard the equal amount of horror stories about not handling the shipping correctly. In the end, I actually have had many U.S. competitors who came to me for an order because they can't overcome certain logistics-related difficulties on their own.
Lastly, unlike manufacturing, international shipping is a very tricky game when it comes to cost. Whatever is quoted now doesn't really equal to what we'll end-up paying when the order is ready to ship, or when the order is finally delivered. Nowadays, things are relatively calm. But a couple of years ago, the price of fuel were so unstable we lost a lot of money on handling shipping for our customers. Shipping prices is not only connected with cost of fuel exclusively. The actual oceanliners also have a lot of politics that they play. Every now and then, they'd play games like cutting down on the availability of ships (reduce supply) so they can increase the cost of shipping to make more money. Real costs in international shipping are neither predictable nor stable.
So, I hope you can see why I am charging for my service on international shipping as I am doing the same on the manufacturing. With manufacturing, you get something tangible, but with shipping, it's all just intangibles. But the reality is that one cannot live without the other. We are spoiled here in the U.S. because shipping is so easy and common that we take it for granted. I can assure you, once your shipment arrives on U.S. soil and clears customs, the shipment will also be able to enjoy the same accommodations. However, it does take work to get things from China to wherever you want them to be.
To win you over, I am willing to lower my pricing down to the bare minimum. However, I must be honest with you that at that level, I still have some mark-up. That margin of mark-up is not going to make me rich. Far from it. I need it to pay for people's time and salary. I wouldn't even call it a profit, more like to cover cost other than the direct shipping related bills.
I want to establish our working relationship more like partners instead of vendors. But to get to that level, it'll take both of us a lot of time to get to know each others. It is not in my personality to try to spike a job because I see opportunity to make lots of money. I tend to take the more consistent route - I always keep a very low mark-up and hope that the business will continue over time. I'd much make a whole lot less but have things to work on every month. There will be jobs that I'm not competitive on. If I have to lose money, I can't do the job. You'd do the same.
I know you feel there may have been some mistakes made on the present order. If so, I am truly sorry. While I cannot guarantee a 100% error-free workflow going forth, you know I'll work very hard to have that as my goal. There will be times when mistakes or issues will still come up, but I'll always be there to take care of our mistakes.
I'd love to win you over by writing long love stories like this. At least, this is how my wife fell for me. But at some point in time, I guess only real actions can prove if we can become good partners. As I've always tell my other customers: "If I can't save you money and hassle, I don't deserve your business." I think this will be very applicable to our situation as well. If my pricing is solid and competitive on the current quote, I think I, we, deserve the continuous opportunity to work together. The more interactions, the more opportunity to learn about you. And the better chances of a more fruitful and smoother working relationship.