With the latest developments in third party logistics or fulfilment warehousing and new services by freight forwarders and shippers, supply chain control has become a lot easier for exporters. Mary Mackinven reports.
But warehousing has changed dramatically in the past seven years, says Rod Giles, managing director of Contract Warehousing.
Now a warehouse can stock goods; pick, pack and send out to order; manage a client’s inventory and more – thanks to changes in computer programs, warehouse design and buying habits.
“A client just has to make a phone call and they know the goods will get out and on which carrier. Our in-house chartered accountant can do monthly balance sheets, GST returns and invoicing for our clients. We know their stock levels and even place orders for the client. All they have to do is market their products. It’s very easy to do business with 3PL.”
That’s Third Party Logistics, which is more common overseas than in New Zealand.
Warehousing is one of the biggest employers in the world and is increasingly a skilled profession, for which Giles has helped develop qualifications. Staff have to know all the products and how to handle them safely to meet tight dispatch deadlines, and control stock levels.
With an increase in scan packing and paperless picking, driverless fork hoists picking out orders down narrow aisles, warehousing is very efficient, he says. And smaller players are falling away as the big players move in.
But in his 40-plus years in this industry Giles could count on two hands the number of business people who understand stock and inventory properly. “I recommend clients talk to me and I’ll walk them through and show them what and how we do it.”
‘Fulfilment warehousing’ is the more common term for 3PL in the US. As a fulfillment-warehousing provider in the US, New Zealand-owned Base3usa stores the goods and distributes them when the exporter sends an order. In addition it provides product assembly, packing and invoicing as required, with optional extras such as answering the phone in the name of its exporter customer.
Managing director Moira Moroney says an advantage of fulfillment warehousing for Base3usa’s European clients is their banks will loan against the goods if they are held independently, but not when in the hands of a distributor who is less incentivised to be honest about sales if the exporter has offered them credit terms.
“Base3usa usually only sends goods out when the exporter has been paid: this keeps everyone honest. We can’t let them out the door without instructions from the exporter.”
This type of service is not common in New Zealand, but is expected in the US, she says.
Furthermore, most large retailers expect suppliers to offer multiple delivery options such as ten-day, two-day or overnight. US consumers expect choice and add-ons to product price.
“In the B2B market, goods might be needed urgently and you will miss the sale if you do not offer fast enough delivery.”
Moroney warns that exporters whose goods are not pre-sold when they enter the US need to set up a legal entity in the US to import them, as a warehouse does not own the goods. This can either be a company or a non-resident importer account, arranged through a US Customs broker.
Base3usa is also a trendsetter with its online visibility. “We have always had an online inventory system to see the exact status of everything in the warehouse, and the tracking numbers when it leaves our building. This is an increasing trend, and something that exporters should demand of any fulfilment warehouse they use.”
Online Distribution is a 3PL managed warehouse in New Zealand catering to e-commerce companies with a B2C channel as well as B2B companies. Business development manager Guy Evans says the company operates on a pay as you go basis: fulfilling orders and shipping them directly to client’s customers, all over the world – also using its expert network partners such as freight forwarders.
Online Distribution can also collect from the manufacturer in New Zealand or overseas, manage Customs clearance and store goods in its warehouses around New Zealand.
“Our staff can then manage Facebook, email and phone inquiries on behalf of the client, allowing them to focus on production, design, marketing and sales – their areas of skill.”
Evans says one of the next big challenges will be ‘bricks and mortar’ versus ‘clicks and mortar’ for retailers; plus seamless integration of omni channels – that is, website, social media, catalogue and physical shop.
“We can add a lot of value there. New Zealand firms have a lot of catching up to do with the rest of the world on this, and on improving their inventory management and efficiency and their customer service, and reducing their costs.”
He says the next evolution will be ‘the last mile’ – that is, increased delivery options to the customer without charging a premium.
The warehouses, they are a-changing
Today’s warehouses are being built with higher studs for increased capacity through racking height; to meet seismic ratings; and increasingly with sustainability principles in the building products used, and in more efficient lighting and power design, says Jarrod MacGregor, portfolio manager at Goodman – a company that designs, builds, owns, manages and leases warehouses.
There is a trend to contract out warehousing globally, and e-tailing is a big driver, especially overseas, MacGregor says.
“Retailers won’t carry so much stock in the future.”
Warehouses are also getting bigger: up to 100,000 square metres in Europe compared to Goodman’s biggest standalone warehouse here at 55,000 square metres, and an average of 4,000 to 6,000 square metres in New Zealand.
And there is increasing demand for warehouses to be located near rail sidings to open up transport options.
Maersk NZ trade and marketing manager David Gulik says ships are effectively warehouses on water these days too; a place to keep a portion of stock compared with a buffer stock at the destination warehouse. This is especially so on the east-west trade routes – driven by improved schedule reliability in the past few years.
Nowadays the greater number of ships and slow steaming mean boats will not be held up in a storm or terminal, making delivery more reliable.
In turn, if warehouses move location it affects ships, which follow the cargo. “We might have to change the ports we call at or change our rotation.”
Already Maersk has withdrawn from Timaru and New Plymouth ports because large exporters load in Lyttleton or Tauranga.
Communicating directly with the line can be an advantage for an exporter, reducing complexity and possibly cost; but it might be easier to hand over logistics to a freight forwarder who also provides Customs clearance and documentation and packs a consol box (less than a container load or LCL), he says.
Documentation: the starting point
A starting point among the freight changes for exporters is the constantly changing requirements for export documentation, reports Go Group managing director Murray Painter.
The recent hit to ‘NZ Inc’ following the dairy botulism scare in China has created hold-ups in other industries too – such as honey, wine, meat and apples – all for technical reasons that weren’t issues before.
Painter says this will be an ongoing issue for some time. Even with correct documentation exporters will struggle: “Once the rules are in you can expect them to change again. If the goalposts keep changing it’s hard.”
A small company should align itself with a freight forwarder they feel comfortable with, he advises.
“Every freight forwarder will have something go wrong because of distances to market and the many parties in the [logistics] process, but stick with them because it’s a cut-throat business and someone will always try to offer a better deal [as shipping lines and even freight forwarders increasingly consolidate].
“While you need them to get you the sharpest freight rate, the service has to have some value too.”
Freight forwarders are up-to-date with export document changes, the importing countries’ requirements and opportunities created by countries’ trade agreements, says Rosemarie Dawson, CEO of the Customs Brokers and Freight forwarders Federation.
For example, the Government’s new Trade Single Window programme, whereby information from export and import documentation is collected by various government departments from a single online entry and payment, will depend on the accuracy of the documents – which a freight forwarder will have created or overseen.
But it will be about 18 months before freight forwarders fully implement this ‘joint border management system’ – designed to speed up data processing by Customs and the Ministry of Primary Industries, and to facilitate border clearance.
Dawson says freight forwarders also help exporters obtain the best freight rates for the needs of their products, and the best handling for their products. “That’s because they do this all the time and have relationships with the carriers.”
Exporters can also rely on their freight forwarder to use the correct Incoterms, or trading terms, on documents to clarify what the seller and buyer pays for in the movement of goods. China’s recent imposition of taxes on imports and exports makes this especially important, for example.
The role of the COO
Creating a Certificate of Origin (COO) for exporters’ goods is the job of COO export certification administrator Villingi Young at Independent Verification Services Ltd (IVS).
This certificate verifies that the goods originate from New Zealand, based on one of three main criteria: wholly originated, wholly produced or a product specific rule.
A lobster fished in New Zealand is ‘wholly originated’ but bread or a superyacht is made in New Zealand from imported components.
An FTA COO needs the following information: goods name, its source and (if applicable) the materials used to make it, the Harmonisation System code, the packing number, shipping marks, weight, invoice value, consignee’s name and transport details.
The COO accompanies the exporter’s document set – for example, commercial invoice, packing list and Bill of Lading.
For most goods, the certificate will result in a reduction in tariff and speedier border clearance.
In non-FTA countries, producing a Non-FTA COO confirms the goods have been manufactured in New Zealand and helps develop New Zealand’s good trade relations.
Mary MacKinven is an Auckland-based writer.
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