Monday, November 21, 2011

Back to the Basics: FOB

The goal of this post isn’t to get into the Incoterms or technicality of buying FOB from China.  I’m highlighting some of the moving pieces during the heat of battle…I mean…during the heat of the order. 

Friction:  This China-side freight forwarding office that your local shipper arranges is, 9 times out of 10, a pain in the butt to your China-side supplier.  Especially if it’s a first-time order with a supplier then undoubtedly that shipping company is going to be a source of annoyance.

You’d would think since the ultimate goal is to send the goods overseas the China shipping office and the supplier or factory would be partnering up for the greater good.  That’s far from the case.  These shipping offices are hard to work with, they purposefully don’t answer and are hard to track down.  Then for each job inside of the company, they have a different contact person.  Your supplier has to jump through all of these hurdles just to get your goods exported.

Why so much strife?  Since the shipping company thinks they are working on behalf of the overseas shipping office, they want to do as little as possible in helping the supplier line up the shipment and get all moving pieces going forward.  It’s the Chinese mindset of “I don’t know them, why should I help?” 

This seems counterproductive, right? 

The Chinese-side shipper is making extremely low margins (they work on volume, not individual cases).  If the supplier and freight forwarding office don’t have a history together, both parties are probably not working up-to-speed for the other;  ie finding the right sync.  Instead of either side taking responsibility, important points and confirmations are left by the wayside thus leading to possible delays and customs inspections.

Promotional Products FOB Perspective:  As always at the JLmade blog, the focus is on promotional products and branded merchandise.  A large portion of our manufacturing is for promo campaigns, launches and events.  Quick delivery time is always required; therefore consider the following when doing FOB.

*  When ordering from many factories and suppliers your shipper is reestablishing this relationship with a new company every time.  See above “getting to know you problems”. 

*  A good supplier helps to overcome these issues and will fully-partner up with your shipper in spite of the trouble the shipper is giving.    

*  Your shipper doesn’t give you the whole story.  Many delays are because of the shipper being hardheaded and non-transparent with the factory on when goods need to be in the warehouse, closing dates, etc…  If your delivery time is urgent, control the shipping via your local office; be "in the know".  Leaving it all up to the supplier does not equal you putting in the proper amount of legwork.

*  When planning on delivery times with your Chinese supplier leave out the unnecessary information.  The supplier doesn’t need to know when you need it in what city for what brand, for what campaign, for what event.  They need to know when the goods need to leave their factory and when it needs to leave China.  Don’t focus on in-hand date, focus on China departure date.  If you are booking this from abroad, you and your shipper focus on all dates once it leaves China.  Believe me; I’ve seen great confusion in buyer and supplier talks, where the buyer is talking about an “in-hand” date and the supplier is talking about a out-of-factory or at most, China-departure date. 

A 1-day delay can lead to a 1-week delay.  The China-side shipper doesn’t do a great job coordinating the closure and sailing options with the factory (which shipping lines leaves, what day, for what delivery?).  The China shipper should be spoon-feeding the factory this info, but instead the factory has to scratch and claw just to get fuzzy facts.  Again, lack of margin leads the shipper to do as little as possible.  

Keep in mind when dealing with factories; their vision is not extending too far past the factory walls.  Delivery to them means the day the goods leave the factory.  And rightfully so..they are a production facility, not a logistics company.

These are headaches a supplier shouldn’t have to put up with…but they do on their buyer’s behalf.  On the overseas side, be sure to do your due-diligence in making sure all moving pieces and parties line up.  Don’t leave it all in the hands of the factory.  Allow them ample energy to focus on production.

Related Posts:  click below for similar topics

No comments:

Post a Comment