As retailers are dealing with ocean price volatility and capacity restrictions and looking at new strategies to keep unit costs in line.  Even if shippers can find room aboard a ship, small players are implementing new strategies including air freight.    

To cushion the impact of this volatile freight environment, shippers have to innovate and bring higher value products through new new direct order supply chain solutions.  The decision to rethink logistics can be tough for traditional logistics providers who rely solely on low cost  ocean, inland freight and domestic warehousing.  BUT the lower cost is not so low, the time frames less sure, and most warehousing is above capacity.

Jet Worldwide helps companies break down the barriers to online commerce to expedite growth to connect people, parcels and businesses globally.

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A paradigm shift:  Direct Order Cross Border

The cross border sourcing of overseas products - namely from Asia to North America and Europe - is transitioning from container size orders to single order containers (i.e. parcels).   The regulatory environment has lessened the byzantine import processes that once made clearance of single orders impossible.

Section 321, IOSS, LVS and Express Clearance

The USA continues to lead the world with preferential duty free access for orders up to $800 via section 321 informal entry processes.  But the rest of the world has opened up considerably.  Europe and the UK have similarly updated their processes to allow duty free access for goods up to 150 euros / 135 UKL, respectively).   

Other countries have clarified clearance of online orders, often referred to as express processes.  Also, mentions of express clearance processes are now a regular part o free trade agreements.

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Focus Shift from Duty to VAT

Traditionally, duty was viewed as the key obstacle to trade but as duty rates have trended down - and with the proliferation of global free trade agreements - the focus has shifted to payment of taxes.   The focus on sales tax in the USA was address several years ago with domestic e-ecommerce transactions including sales tax of where the order was placed.  We  recommend that international sellers build sales tax payments in the USA even if this practice is not commonplace.

jet-VAT-vector imageThe tax issue is most prominent in countries with a national (versus state and local in the USA) tax regime.  These are often referred to as value added tax and are meant to be paid by the end consumer and can average around 20%. 

In Europe, the Import One Stop Shop (IOSS) facilitate payment for all E.U. customers using one point import.   The UK VAT processes are similar to IOSS with payment of VAT being required at time of check out (via an online markeplace or B2C seller) and processed at time of import.

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Offsetting Costs of Air Freight

Air freight is - by order of magnitude - much more expensive than ocean freight.  But these costs can be somewhat offset by lower inventory, less warehousing, lower duty (often duty free) and product selections with a higher value per weight.

Real time aggregating of orders

The traditional role of a retailer of aggregating demand by buying wholesale in bulk and selling smaller quantities direct to the buyer has evolved.  The aggregating of demand is a function of the online marketplace and happens in real time.   

Rather than having to purchase in bulk using projected sales, online orders serve to aggregate orders real time.  The orders can be processed and shipped direct to the end customer via specialized processes with deliver within 1 week or less.

Parcel carriers in Europe, for example, report around 40% growth in parcel volumes per year with over half of the parcels delivered worldwide being B2C.   Even as growth will certainly tapers off, new logistics processes are needed to provide customers with greater choice and businesses with greater efficiencies.

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Just in Time Inventory Direct to Consumers

The adaptation of direct order processes can be thought of in the same way Industrial processes long ago  incorporated just in time product flows to lower inventory and greater production efficiencies.   The new direct shipping model includes integrating suppliers into the process with more warehousing in the country of origin.

The direct shipping of online orders can be considered as a "just in time" B to C system while the traditional stock warehoused domestically can be the "just in case" backup solution.

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Beyond B to C: Direct to businesses

It is important to note that cross border direct order sales are much greater than consumer sales.  In fact, business procurement processes can be more predictable and more easily fit the direct shipping model.

Multi- processes for best in class logistics

Even as cross border direct purchase processes are growing faster than the rest of the economy, they still represent a small fraction of total global commerce.  The building direct air freight e-commerce  processes is a way to supplement existing process,  grow sales with greater market reaction, customization of orders, and to minimize and supplement inventory on the fly (pun intended).  

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Revolutionary Change and Evolution of Logistics Processes

Technology, regulations and logistics processes are converging to enable improved order flows directly across borders.   Visibility into new processes are needed to counter increasing freight costs and to bring  new opportunities to ship faster with greater net margins.

.....  and, this is especially true as we stand at the brink of the holiday demand rush


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NOTE: We work hard at presenting the best information possible and have become a leading online resource for international shipping.   However, it important to note that the information in all Jet Worldwide blogs and postings are for general information only and  provided “as is”; no representations are made that the content is error-free.

 

Written by Timothy Byrnes