As many of you that know me, or follow me on social media are aware, I assist companies and businesses from Australia, New Zealand, China and South Korea, understand the US market. Frequently this help extends to concierge type services for my clients and that includes finding a warehouse, 3PL, multimodal or distribution center from where their products leave to other parts of the country.
When I was putting together this post, my initial thoughts were about writing on efficient supply-chains, drayage, taxes and duty, and the benefits of having a good customs broker that can fulfill paperwork and counter any problems with manifests and dockside issues. Don’t get me wrong, these are common problems associated with international shipping, and can delay goods from the dock, and may sometimes be subject to search and seizure, and these issues are very important to manufacturers and importers. But this week I was talking to an Australian company that had recently learned some valuable mistakes when they took on a deal with a storage facility about 8 months ago, and it didn’t work out. So concerned they were, that they didn’t want this happening to other businesses – so I thought it may be a better topic. The Australian business has a product that was subject to returns, and that’s when they started running into trouble…
Firstly, while word-of-mouth may be a good indicator of quality, due diligence is required when entering into any business transaction, and no business should make arrangements based solely on how well a logistics or freight company managed a friends’ business. It is fine to put that logistics or freight company into a long list of potentials, but ultimately they have to be a “good fit” and support your business goals and needs.
Consider Making an Early Choice: When a company is considering moving goods overseas, it may be best to first find out what the costs associated with those goods being in another country will be. For those companies seeking FOB, this is increasingly becoming a harder option to obtain, given the way retailers negotiate returns and their requirements for shipping. FOB makes it easy for an exporter, but it is becoming less frequent. Given then, that FOB is taken out of the logistics equation for all but a few, the supply-chain just got a little more expensive: you will have to warehouse. The earlier then that a company consider the factors around distribution, the better able they are to manage costs and design a process by which there is less disruption, and one that suits the value of your customers. Logistics should be mission driven and strategic at its very core.
Services – Get it in Writing: Many warehouses offer a variety of services to cater to manufacturers and distributors. Whether you need picking-and-packing services, inventory control, local transportation, or ongoing maintenance and quality control, a contract warehouse can usually offer these services. Even larger warehouses offer fulfillment and customer relationship services. For many business owners, that means they can completely outsource operations so they can focus on building their business in the export destination country. A 3PL is ideal in this instance. Most can even handle returns and RFP’s. You have to negotiate these services up-front. Without a contract specifically stating a service they are under no obligation to return your product to a warehouse shelf. A good warehouse, 3PL or DC will sell their services to you and inform you of their obligation in writing.
Any additional fees, or carry-over costs should be made clear to you, including late payment fees or any other ‘overages’ should be handled in writing, and you should ask the logistics company to do that for you. keep good and accurate records.
Fees – Negotiate on Costs: Lessees are required to pay storage fees, and loading and unloading fees anytime they ship goods. Services can be maintained at lower costs, and 3Pl’s can often work with you to find the right combination of services to fit your budget and your needs. Just like goods, all services should have a manifest you are clear about, and the price for each clearly listed, whether on an invoice or part of the contract of ongoing services. Essentially a business wants to have some reduction and management of freight and inventory costs, so make your business case known to the 3PL at the time of negotiation. If that company isn’t a good fit: go elsewhere.
Control – Choose an Option Right For your Business: On the spectrum of warehouses, private facilities offer complete control with a the highest cost, similar to buying a house. A public warehouse is more like leasing an apartment, giving you little control. The contract warehouse serves up the perfect compromise between control and cost. This allows many small businesses to outsource their inventory holding and product fulfillment costs, so they can focus on generating more revenue and other business critical tasks.
Further, some companies that have seasonal fluctuation in volume often lose money by maintaining large inventory. 3PL’s mitigate this by helping you control and manage this through low and peak demand.
Compliance Issues: A good 3PL will stay ahead of compliance issues and regulations. This intimately effects your business as it determines your risk in the market place and mitigates it. The staffing, training and experience required to properly stay up to speed on international compliance issues, transportation & economic regulations, and supply chain conditions makes 3PL’s a better option for many and have tons of experience in dealing with the rapidly-changing international documentation and customs rules and regulations.
Secondly on the issue of compliance, it is ideal to make sure that the 3PL, warehouse or DC has all the bases covered when it comes to issues like, say, the Bio Terrorism Act and are able to take your import at all. Again, ideally a in-house customs broker to cover all bases is a great value.
Do they Handle returns?: Reverse Logistics is a thing. Some companies, whether it is a stroller, a piece of machinery, or a technology related device that occasionally needs to be shipped back to the manufacturer for replacement, end-of-life, or refurbishment. Select a location that is able to handle this request if you need it as part of your value proposition. It only gets tricky when you have to take someone to court over lost or discarded goods, when simply writing it into a contract is necessary. Further, make sure they have the capability to track the in-bound return – reverse logistics software, an inventory control system or some other means of tracking the return package or shipment.
Location: Location is a prime factor when determining what warehouse facility to opt for. Where your warehouse is based will determine how easy it is for you to distribute and receive goods. Therefore, it is important your warehouse is situated in a location that is convenient for shipping goods to your customers. That means, if your are a smaller, local business, then it will be wise to have a warehouse situated close to where your business is based. Also, regional factors such as population density and facility costs determine where and how businesses store and distribute inventory, like the shortest transit time due to density and distance of distribution lanes, volume and optimizing a service strategy with attention to cost.
Make Sure they are Reputable: In Greater Los Angeles there are literally thousands of DC’s and 3PL establishments. Do your homework! Make sure they are not going to go ‘belly-up’ and take your multimillion dollar inventory with it.
Beyond Price and Location: Some of the most critical elements for selecting a warehouse are not price-sensitive at all. How about layout, warehouse flow, size of the space needed and cubic capacity, a staging area, or even a handling area for potentially hazardous materials? Have you even considered truck access or turning lanes? All of these can mitigate your risk in the market. And future demand; have you considered future demand for your products? These are all important things when evaluating a site for selection.
Make a List and Check it Twice: Finally, short list your favorites and revisit each one to make sure you make the right decision that is goal or mission driven. Logistics should serve you and your goods, and should be a part of how you determine value in your business.