When companies begin to think outside the box, or outside country borders, often the playing field changes. Maria Highland investigates how businesses can best navigate the open waters of international logistics…
Expanding internationally is the next big step both retailers and third-party logistics providers that have established their footprint nationally. But international expansion isn’t without its own set of new obstacles. Legislation, licensing requirements, customs and visibility all play a crucial role when it comes to mastering the art of international logistics. “In many cases it’s the fear of the unknown that prevents shippers from taking the leap to international shipping,” says MetaPack global solutions and new products vice president Duncan Licence. “However, once a shipper is aware of the possibilities it’s not difficult to reap the benefits of international growth.” Centiro global business development director Bobby Shome highlights that the “opportunities provided by e-commerce have increased competition for retailers, who need to make certain they are keeping pace with the changing international logistics landscape.” Licence agrees, noting that MetaPack sees “the emergence of domestic e-commerce markets like China, India and Brazil as catalysts for cross border growth, in both directions. In many cases these markets are growing more quickly than the established North American and European markets and will continue to be a source of both opportunity and disruption.” However, retailers need to cater to the needs of their international consumers, which may differ from their national counterparts. Shome explains that “research has found less than a third of Chinese consumers use Click and Collect, whereas more than half of UK consumers used Click and Collect in the past year. Meanwhile, in the US, consumers are looking for free delivery, with 88 per cent preferring free shipping to fast shipping. Retailers must be able to meet the differing needs and expectations of their international customers.” Customers all over the globe are becoming increasingly more demanding, especially when it comes to online shopping, says Shome. As a result, “many retailers base their export plans on the ease of delivery and shipping to the country in question, to make the process as simple as possible for themselves.” And often deliveries are handed over to local delivery companies to ensure the last mile runs as smoothly. “However, care is needed here,” warns Shome, “as the reduction in visibility when this is passed over can lead to the risk of reputation damage if there are issues with the international logistics providers involved in delivering the goods.” Therefore, retailers should put serious thought into which 3PL really meets its needs. And to be in a position to do this “they must ensure they have a strong mix of international logistics providers to consider in the first place,” says Shome. He also places emphasis on maintaining visibility at all times. In order “to provide successful deliveries, retailers should ensure they are able to track a parcel for its whole journey, no matter what country it is in at that moment in time, explains Shome. “With more static retail systems, a lack of visibility means deliveries are effectively left to fate once they have left the country of origin, so the better the overview, the easier it is to meet the expectations of global customers.” Supply chain visibility can also be an obstacle when it comes to international logistics. Workforce levels as well as maintaining the same high service levels across multiply regions, countries and transport modes are the other biggest obstacles encountered in international logistics. Technology can be a major stepping stone in maintaining visibility through the whole international shipping processes. Licence agrees, explaining that “managing the costs, complexity and compliance of international shipping is not without its pitfalls and challenges but there is a healthy ecosystem of providers to help shippers.” For example, working with enabling shipping software partners and expert cross border logistics suppliers “can help shippers navigate the regulatory and logistical complexity as well as manage the costs of shipping internationally. These experts can help shippers move into new markets smoothly and can provide guidance that will help avoid costly mistakes,” says Licence. Legislation and customs Additionally, when shipping internationally, legislation and customs play a major role as regulations for packaging, labelling, tariffs, VAT and Duty all differ from country to country. Flexibility and market understanding are essential for ensuring your customers receive the same standard wherever they are in the world. Alongside this, processes must be streamlined and standardised to comply with the latest rules and regulations – and these must always be kept up to date to ensure smooth passage. Licence explains that as governments and regulators are still getting to grips with international e-commerce trade, “we can expect an increase in regulation, which will result in an increasingly complex landscape for shippers”. For example, Australia “introduced a 10 per cent general sales tax (GST) on all cross-border shipments, which comes with new registration and accounting requirements.” The US Supreme Court has also “recently ruled that states can tax cross border and international shipments and while the implications of this are still unclear, we expect it to create a regulatory overhead on e-commerce retailers that will need to be managed,” adds Licence. Such problems can be navigated by achieving AEO accreditation, investing in bonded facilities, dealing with experts in customs clearance. Licence says retailers evolve their international shipping profile in three stages to better equip themselves to ensure that goods move efficiently between borders. The first being the use of “a single global carrier for all volume, the second is the use of consolidators for key markets to help lower costs and as international volumes grow further we see retailers evolve their own consolidation networks which help further reduce costs but also allows them to offer increasingly localised logistics solution.” “With consumers becoming increasingly demanding in all markets it’s essential for shippers to understand each market’s preferences and to create different logistics solutions that suit these needs,” he adds. Not one size fits all This applies to companies looking to expand internationally, too. “Achieving the benefits of international expansion requires a careful consideration and there is no one-size-fits-all,” says Licence. “Retailers and manufacturers need to consider their customers preferences, which will differ between markets, the impact on their cost to serve, operational considerations like returns handling and payment options.” For example, alternate payment methods are essential in some markets like cash on delivery in Russia and Germany. Shome also supports this view, suggesting that when expanding internationally retailers need to make sure they take control of their last mile of deliveries. “Retailers already spend a lot of their money getting customers to the point of purchase,” explains Shome. “However, this work becomes meaningless if retailers fall at the last hurdle – delivering the item.” He then asks: “So how can they control the international last mile?” Shome believes that if retailers invest in the right back-end technologies, then they “will be able to integrate live data points into their delivery management systems and provide customers with accurate updates, no matter where in the world they are based. This technology also aids retailers in tracking and managing delivery times against contracts and SLAs, to be certain they are making good on their promises to customers,” says Shome. “Another important area that can often be overlooked is tax,” continues Shome. “Retailers must be sure their systems can account for tax and duty for foreign purchases, as customers may be reluctant to complete their purchase when faced with an unexpected jump in cost at the payment stage. Making the effort to lay out the correct costs up-front will pave the way for smoother transactions further down the line, giving a more realistic chance of international success.”
Headwinds on the horizon
As markets expand, the need for cross border collaboration and international expansion also grows. Increased collaboration between international shippers and logistics providers will enable them to better manage the costs of serving increasingly demanding customers. “Joining the regulatory conversation, whether at the postal unions or in government is crucial if shippers want to influence the outcomes that will ultimately shape their business,” says Licence. “For example, the European Union has a working party on the harmonisation of cross-border trade with the explicit aims of increasing access to markets and lowering costs.” This poses the next question on everyone’s lips: Brexit and what this will mean for British trade – whether that is import or export. “The impact of Brexit on international trade is still unclear, however, it is unlikely to be without it’s challenges. We expect growth in non-EU trade, as well as additional regulatory requirements for shippers between Britain and the EU,” says Licence. He believes that “manufacturing, agriculture and retail will take the brunt of the challenges presented by Brexit; with the change in labour availability and lengthening supply chains impacting each of these industries in different ways.” The Freight Transport Association and Road Haulage Association have both expressed industry distress regarding Brexit and the lack of clarity the future brings when it comes to international trade. The FTA has stressed that the logistics industry needs “a clear road map” with crucial information to keep trade moving efficiently post-Brexit, or the UK will face delays and shortages of the products and services it relies on. “The logistics sector will be key to making Brexit work for the UK but we can no longer work blind and be left to guess what we may have to do, and when by,” says FTA president Leigh Pomlett. He explains that businesses need to start making spending decisions and committing to operating plans for post-Brexit now but are currently operating “in the dark”. “Without knowing who we will be employing, how we will be crossing borders, what certifications and permits goods and vehicles will require to travel, business as we know it will be unable to continue,” states Pomlett. Likewise, RHA chief executive Richard Burnett has described the days left until the UK formally leaves the EU as a “worrying time”. He highlights that operators have been warned that if additional customs checks are imposed post-Brexit, then every additional minute’s worth of checks at peak times will result in around 10 miles being added to queues. Although transport secretary Chris Grayling has said that the UK will maintain a free-flowing border at Dover, Burnett asserts that: “Mr Grayling’s comments fly in the face of those made by EU chief negotiator Michel Barnier who has been quoted as saying ‘frictionless trade will not be possible after Brexit’.” Brexit will have an impact on the entire UK economy, especially for transport operators making journeys out of the UK every day. Many in the third party logistics sector are expecting potential cross border delays, additional legislation and custom clearances processes, reduction in workforce and adding to the current driver shortage post-Brexit. And, not surprisingly, 3PLs reckon it will be important for companies that are importing and/or exporting from the UK to ensure they partner with a company that has a global presence, and with the flexibility to cater for the unknown challenges Brexit will bring. The government has recently published its detailed proposals for the future trading relationship between the UK and the European Union entitled “The future relationship between the United Kingdom and the European Union”. The white paper sets out a plan for a common rule book for goods, covering only the rules necessary to provide for frictionless trade at the border. The proposal aims preserve the UK’s and the EU’s frictionless access to each other’s markets for goods, proposing a free trade area that would “protect the uniquely integrated supply chains and ‘just-in-time’ processes that have developed across the UK and the EU.” This is a step forward towards clarifying which angle the government wants to take when it comes to Brexit but still leaves a lot of unease about the future of the country’s trade. Especially as the European Union has now called on member states to step up preparations for Brexit in an advisory document that warns that the UK’s withdrawal will undoubtedly cause disruption whether or not there is a deal. The document points out that if a withdrawal agreement is ratified before 30 March 2019, EU law will cease to apply to and in the UK on 1 January 2021, that is, after a transition period of 21 months. However, if a withdrawal agreement is not ratified before 30 March 2019, there will be no transition period and EU law will cease to apply to and in the UK as of 30 March 2019. “It is important that businesses of all sizes, including small and medium-sized enterprises, prepare and that they take action now,” states the document. And, in the latest round of talks EU negotiator Michel Barnier ruled out a key element of the UK’s proposal – allowing the UK to collect VAT and excise duty on its behalf as part of a frictionless trade deal. “The EU cannot – and will not – delegate the application of its customs policy and rules, VAT and excise duty collection to a non-member, who would not be subject to the EU’s governance structures,” said Barnier.
This feature first appeared in the August issue of Logistics Manager.