As your small- or medium-sized enterprise (SME) grows domestically, you may be encouraged to expand your operations abroad. Certainly, having access to a global supply chain will allow SMEs to achieve revenue growth greater than any domestic approach.
Whether you’re shipping to Germany or shipping to China, foreign destinations may prove to be lucrative. But the profitability that comes with international expansion can only be realized with effective freight spend management.
Without the right freight spend management practices, SMEs will find that switching operations to reach a global market will come with freight expenses that are greater than expected.
Unlike domestic shipping, the distances traveled to international destinations can vary greatly. This plays an important part in shipping costs. What’s more, there are additional costs such as customs fees, tax and duty charges, parcel handling fees, and demurrage charges.
While hardly a surprise, not carefully accounting for these costs can impact future international shipments. Effectively seizing control of freight spend will allow any SME to improve operating income and protect business continuity.
Cutting costs is not always easy. But with the right strategies, not only can SMEs trim costs, but they can also ensure freight spend improves overall business efficiency.
Let’s take a look at the five best practices that will help your business optimize transportation spending.
There’s a lot to consider when you ship freight internationally. Having the right agency to handle the considerable logistics of shipping goods can ensure that parcels are moved in a cost-efficient and reliable manner.
A freight forwarder can act as an SME’s shipping agent, managing the formidable burden of documentation requirements, customs regulations, insurance, storage, and shipping costs.
As they are fluent in international logistics, they can serve as your intermediary to negotiate tariffs, plan inland routing for efficient cargo delivery, and secure better rates for your parcels. If you are unfamiliar with the international shipping process, choosing the right freight forwarder is crucial.
When choosing a freight forwarder for your shipping needs, confirm that their range of services and network of global agents work in your desired destination country. Take the time to research their credentials and certifications. Ask for references as well.
And like any other industry, experience and customer service will determine how issues are dealt with. This is particularly crucial if your business has never shipped goods internationally and questions arise about a shipment.
Implementing the capabilities of innovative technology can help SMEs deconstruct the shipping process and isolate hidden fees or transportation costs to optimize freight spend. Technologies like real-time data integration and data visualization allow SMEs to maintain visibility on their parcels.
This type of insight provides anytime-anyplace accessibility which enables SMEs to enhance their planning capacities. Greater visibility means SMEs can immediately react to potential problems and develop a creative solution, mitigating supply chain impact.
A centralized booking platform is another technological asset available to SMEs. Being able to reference multiple vendors, shipping routes, and international freight rates on one real-time database provides SMEs with more transparent access.
SMEs can also integrate shipping automation technology into their logistic process, delivering incredible value. By automating tasks like order processing, shipping preferences, and packaging receipts, SMEs can save tremendous work hours.
Adopting greater digitization provides SMEs with heightened cost-control power. Greater efficiency means SMEs are less likely to experience costs overrun. And with today’s businesses being more customer-centric, technology ensures SMEs deliver a more consistent, quality service.
Optimizing how your products are shipped will not only maximize the volume of goods you can transport but also reduce shipping costs. There are several ways SMEs can go about optimizing asset utilization.
One of the main ways SMEs can trim down on costs is to standardize the dimensions of their parcel boxes. Packaging your products into the smallest possible dimensions allows you to maximize the amount of cargo you can stack onto a pallet.
This not only minimizes the number of pallet spaces needed, but it also allows SMEs to ship more products less often.
Similarly, as cargo is priced according to weight, reducing dunnage, materials like bubble wrap, air pillows, and corrugated paper used to protect products during transport ensure that your shipment becomes as cost-effective as possible.
A freight forwarder can offer advice on how to best ship products in just the right-sized box. They can also provide the necessary packaging you need to avoid dimensional fees.
Understanding the Harmonized System (HS) and knowing the different tariff classifications will allow your business to effectively avoid paying a more expensive tariff rate than necessary. And with more than 200 countries using HS, the wrong freight tariffs can result in your products being delayed.
Tariff codes are product-specific codes that work on a six to 10 digit system. Without getting too technical, the first six digits designate classification. These are based on the HS nomenclature and are standardized and maintained by the World Customs Organization.
The last four digits will further specify the product’s category. Certain countries will price freight tariffs at different rates. This is why every business should take it upon themselves to understand how the HS lists codes and accompanying product descriptions.
Luckily, there are practical tools available to SMEs to determine the right tariff classification for their products. SMEs can consult countries to find the appropriate tariff classification. Your freight forwarder partner will also aid in properly determining the tariff classification your products need.
While freight insurance may seem counterintuitive when managing freight spend, the truth is that refraining from securing shipping insurance in an attempt to save on costs can expose SMEs to more than just financial losses.
Even with additional technological tools, a lot of variables can affect how your product arrives in your destination country. During transport, the product could get damaged or lost. And if the cargo gets flagged for an audit or inspection, it could be delayed at the port.
Having insurance on your goods assures that any physical damage suffered during shipment is covered. Having coverage will also allow your business to expedite the claim process, providing efficient claim handling.
To maximize your cargo’s insurance coverage, precise declaration is vital. Accurately filling in all documentation and declaration forms will yield the best possible outcome should a worst-case scenario occur.
Most freight forwarders will provide supplemental insurance on top of the carrier’s alloted insurance.
Deciding to expand internationally is a small part of the complexities of international trade. Best-in-class SMEs understand that managing freight spend is crucial in ensuring shipping expenses don’t outweigh its benefits.
Implementing these practices is important in protecting your freight from wasted costs and making sure that it arrives on time and in good condition. The streamlining of the shipping process will also ensure that your business is perfectly positioned to get the maximum benefits that international trade has to offer.
Paul Rehmet is the Chief Product Officer for Shipa Freight. He is responsible for translating the company’s vision into an easy-to-use online freight platform for its customers. In his 25-year career, Paul has held various technology leadership positions with early-stage startups and Fortune 500 companies including Unisys, Destiny Web Solutions, and US Airways.