5 tips to turn around your logistics cycle

1- Consider the packaging options of inbound materials or export products

Some of the packaging used for exporting your materials could rise the freight charges up to 30%. While Saudi enjoys a strategic location in the world our lack of international rail system and the unified economic zones in the U.S and European Union make the cost of freight for a single export unit in our country above the international average. We had a client who would export barrels of chemicals to the GCC area with 40 ft. containers, changing his cargo method to breakbulk and setting packaging operations in one of his main clients’ countries has saved them in terms of time and cost of cargo. Keep in mind the international restrictions on some of the packaging materials.

2- Select key forwarders & improve tariff rates

When considering the number of carriers you hire to move your inbound and outbound freight consider reducing the number and selecting one or two key freight forwarders who can handle local transportation, too. This will ensure reducing the complexity of administering the different vendors, boost the volume of business with them putting you in a better position to negotiate lower unit freight prices, improve service levels, save on transportation cost and turning your freight forwarder into a strategic partner for your business.

The forwarder should be able to establish the most efficient travel routes and advise you on all paperwork to avoid expensive add-ons. One of our clients has 3 plants in 2 different regions. By consolidating the service contract they were able to negotiate better overall rates and had access to all our warehousing facilities to consolidate and distribute their products. Also, they were able to use a different seaport to export to their new markets in North Africa than they were able to do when used many local carriers cutting the lead time 40% for their new clients’ urgent orders.

3- Freight Consolidation: smart logistics

In the off-season period, shipment volumes are not always sufficient to purchase freight in Full Container Load (FCL) or Full Truck Load (FTL). But in the logistics world, smaller shipments tend to cost more. Ask your logistics provider for consolidation options for smaller less urgent shipments. They should be able to pool smaller parcels into zones and ship in bulk to you. If you are using multiple local suppliers for your goods, your logistics provider should be able to create consolidation hubs for you and ship the goods only when they are a truckload or you need them urgently. Be aware though that consolidation for multiple owners in the same BOL of AWB is not allowed by the laws of Saudi Arabia. So, all goods consolidated need to be yours.

4- Maximize customs compliance

If you are importing your final product or running operations on imported raw materials. Then this step is the most important. Make sure that you are updated on all new regulations and customs circulations. Make sure you are using all the exemptions that the ministry of commerce and investment is offering the manufacturers and make extra sure that you have valid chemical and security permits that your products need. Some higher-level logistics providers will assist you on that and provide you continuous feedback on the process. However, it is better to invest in your team and teach them the process and the regulation and expect them to always check the customs website for any new news that may affect your supply chain. Failing to do so may cause you unnecessary demurrage and hurt your credibility with the customs authorities.

5- Ask suppliers for multiple incoterms quotes

The cost of freight for products purchased from foreign suppliers will be built right into the cost the goods purchased, sometimes you would not know how much you pay for the inbound freight. Vendors sometimes make a profit from internal mark-ups on any freight charges and include it on the final price you pay. The best practice here is to ask the suppliers for two quotes: the normal one, and the ex-work option. This way you can take advantage of the consolidation opportunity and achieve better visibility on your supply chain. Some of our clients who followed this approach saved up to 75% of the freight charges when they utilized our European consolidation hub.

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For more information and discussion about the logistics world, please contact us at info@fourwinds-ksa.com or call your local Four Winds guy.

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