Air Freight & Courier from China – Basics, Strategies & Issues
- For sending samples.
- For high value – low volume goods (that are not extremely heavy), e.g. Tablets, Watches, etc.
- When your goods are time-sensitive or there is an urgent requirement.
- When you want to keep your cash-conversion-cycle (CCC) short as compared to sea, air shipments tend to take much less time.
- Haulage/domestic courier from factory to the airport
- Customs clearance costs & forwarder costs both in China & USA
- Haulage/domestic courier from the airport in US to your door
1. Damage in Transit:When sending goods by air, it is important to ensure that you avoid damage in transit by being specific in your instructions to the supplier about your packing requirements. This should look at both the packaging used to protect the product as well as the quality of cartons. I have seen a lot of cases where goods that were perfectly OK when they left the factory ended up with all kinds of damage by the time they hit the importers warehouse.Why does this happen?
- People handling these cartons are not always too kind to the packages and often throw them around & when you are importing from China, those large “Fragile” stickers often don’t work either.
- Packaging, especially the quality of cartons is an area where suppliers do like to cut corners when possible to cut costs.
2. Expensive SurprisesFor some reason which I am yet to understand, Chinese factories often miscalculate the correct volumetric weight of goods, especially before the goods have been produced. This has been a constant issue for us especially when working with new factories. You would believe that a factory making standard products and sending them out regularly would have mastered the volumetric weight calculations, but there is often a big difference in “volumetric weight” informed by the factory to the client and that measured by courier companies. This often leads to an expensive surprise when the importer receives the invoice from the courier services company or forwarder.
3. FOB Quotes Changed to EXWWhen getting quotes on B2B websites, suppliers often quote on FOB basis. However, importers often end up getting goods by courier or getting goods from multiple suppliers sent to one consolidation location. This normally means, this you are essentially now getting the goods on EXW Basis, i.e. the suppliers quote included their expenses for “customs clearing” in China but now they do not need to do this. Many importers, in this case, end up paying more for logistics. Therefore, it is important that you decide on your logistics plan early. If you are planning to consolidate your goods or use courier an EXW quote is a better idea than an FOB one.
4. Risk of PilferageThere is always a small risk of pilferage when opting for “air freight” as the goods go through several hands. This is something that applies to LCL shipments too. My experience over the years has been that this risk is quite small in China, however we do see more cases of pilferage in “developing countries” at destination port as opposed to developed countries. This risk can be minimized to some extent by “smart packaging”.
5. Changes in Courier & Freight QuotesMany importers ask us to quote for a courier shipment that will be ready after a long period of time. We have to tell them that we can quote them however the quote would only be valid within that week. This is because like “sea freight” rates, courier & freight rates update weekly, primarily due to the “Fuel Surcharge” element which is linked to oil prices. Therefore, you should always get a fresh quote once your goods are ready. This, when combined with re-confirming the volume of goods will also help avoid expensive surprises and can often result in good news if the rates fall. By making small changes to your goods & packaging you can significantly reduce your air courier costs.
1. Fully use the carton spaceLeaving empty space in cartons (or containers) is almost a crime when it comes to international trade. When you do this with LCL shipments you can get away with a little impact on your margins but with air cargo & courier this does add up and eats into your margins. Packaging Tip for China Imports To avoid this, you should ensure that you give specific packaging instructions to your suppliers & ensure that no space is wasted. Other than the cost benefits of doing this, this also helps minimize “damage in transit” as cartons with free space often get damaged as heavier cartons are put on top of them during their journey to your warehouse. Smart suppliers will normally do this for you, especially selling on FOB basis however when importing from China, it is normally a good idea to be proactive about these things.
2. Package DesignThis is an area where you can get really creative & something that often gets ignored, especially with small & mid-sized importers. A lot of the private label sellers for example like to differentiate themselves by going for “premium-packaging” which is a great idea. However, sometimes the packaging is extremely bulky while the product is tiny, in an attempt to copy the premium package designs of branding stalwarts like Apple. This is a great idea if your product has the same price tag as an iPhone, however, this can really eat into margins when your product sells for anything under $50. Pro Tip: In the e-commerce/Amazon space, competitive advantage can often be gained by spotting products selling well & coming up with a package design that makes your “logistics costs” half of that of the competition.
3. Product Design ChangesThe above concept can also be applied to product design, although this might not always be viable for smaller importers. Being creative with things like the type of charger to use or the size of an accessory can all help reduce package size, which results in logistics $$ saving.
4. Type of Courier ServiceWhen using courier services there are a lot of services that many importers are not aware of that can help cut costs significantly. I am not referring to the choice of companies here although different players like DHL, Fedex, UPS, etc. do have different pricing & routes where they are strong. Courier companies offer large discounts to forwarders or accounts with large volumes, depending on the volumes you are shipping which is why it is often expensive to go directly to a courier company. We for e.g. at Wedoimport have at least 8 different types of courier services depending on the speed vs. cost preference of clients.
5. Tiered PricingThe pricing in courier industry is often on tiered basis, therefore if you have been quoted $5/Kg for 200Kg and you do 4 shipments a month & your cash flow allows you to do 1 shipment a month instead, this means, you may be able to get access to a lower price if you were to do a single 800Kg shipment. I think you will find this theme repeats itself everywhere when it comes to international trade, i.e. increase the volume to reduce your “unit costs”, whether its pricing from suppliers, quality control companies, logistics, lab testing or pretty much anything else. Choosing the right mode of transport in the right situation is something that will come naturally to you once you have done a few shipments, however by making small changes to your product & packaging, planning in advance and understanding the numbers, you could make significant savings in logistics costs which ultimately boost margins. If you found this post valuable please spread the love by sharing the post using the share buttons on the left. It helps this blog get found & provides me the motivation to keep writing. As always, If you have any questions about shipping from China by air freight or courier please feel free to ask in the comments section below.
basics, china, courier, freight, issues, strategies