By Sebastian Tschackert

Shipping from China can appear a complex and confusing topic for newcomers in direct sourcing. However, with a smart selection of the right partner this can quickly turn into an easy game. The following article provides an insight into the scope of work of an international freight forwarder and on how to select the right partner, enabling you to fully focus on your core business -- trading/sourcing -- not spending too much time and money on logistics matters.

The process of shipping from China can be split into many small steps with a surprisingly large number of interfaces between various parties involved. The following graphic displays an average movement of a shipment via ocean freight ex South Mainland China to Europe (for example, from Guangzhou to Germany).

Process flow with involved parties in shipping from China to Europe

As highlighted in the graphic, we can expect approximately 12-15 different parties and bodies to be involved in the freight movement. Hence, it triggers the key question: "How much do you want to manage yourself?"

Usually newcomers do not benefit organizing and managing the entire transport flow of their supply chain in-house and by themselves when sourcing from China. Their focus should be on buying and trading rather than acting as a logistics company. The right way seems to be to rather concentrate on selecting one or two service providers (freight forwarders in this case), capable in organizing the entire shipping process from door to door and providing you with the extra piece of mind in this new business environment.

This will not only give you the support you need to focus on your core business, but should also be the more cost-effective model of transport as it enables you to utilize the scale of the freight forwarders' networks and buying power and hence, you benefit on the cost side as well.

Before moving on to the selection criteria for the right international freight forwarder suiting your needs, the scope and scale of a freight forwarder's work shall be defined as follows:

• An international freight forwarder is an individual or company that books or otherwise arranges space for shipments between countries via common carriers.
  
• Freight forwarders do not ship cargo themselves but instead arrange for its carriage by others.
  
• Freight forwarders also prepare and process the documentation and perform related activities pertaining to their shipments. Some of the typical information reviewed by a freight forwarder is the commercial invoice, shipper's export declaration, and other documents required by the carrier or country of export, import, or transshipment.
  
• In these cases the `forwarding' company takes on prime responsibility for the entire transport operation, specified in each contract, for a charge or fee, which covers the total transport operation and in turn, pays the actual carriers for the transport services rendered to it.

Moving on, one has to make some key decisions in selecting the right partner for your business needs. The following guideline should support you in moving through the process quickly and successfully.

The basic selection criteria are:

1. Global coverage and local expertise. Does the potential partner have own offices and coverage in your sourcing markets as well as in your home area bundled with the necessary experience in moving freight between those two areas?

2. Reference customers. Can the provider show to have know-how in your industry, for example, knowing the specifics in customs clearance, etc.?

3. Wide product portfolio. Can you rely on this partner in making use of the different transport modes available (such as Ocean and Airfreight) as well as providing additional value-added supply chain services if needed.

4. Own (in-house) consolidation services, as you may not ship full containers for yourself in the beginning stage, but need to make use of a comprehensive consolidation service in which the provider is consolidating small shipments of various parties and hence can pass a cost advantage to you.

With regard to actually sourcing and shipping from China you may want to further elaborate on the following points:

5. Can the provider proof to "understand" China and has a proven track record in shipping from China?

6. Potentially the forwarder of your choice might have an overseas delegate from your home country in China, enabling you to communicate with a single point of contact in your mother tongue.

7. You may further want to elaborate, whether the desired partner values a personal business relationship versus just having an anonymous call centre.

8. You might wish to have a single point of contact within your hometown, which is organizing all transport matters for you.

Last but not least, money matters and hence, you may want to seek a provider, which is offering beneficial rates to you. However, the rates shall not be the single most important selection criteria as a very cheap price might have to compromise on service.

In order to kick-off the process we would recommend you the following simple steps in order to get the right information and personal feeling for your selection:

1. Select a few potentials randomly. The major forwarding companies should be known and you may further ask customers/colleagues/sellers, etc. for referrals. In addition to this you can simply search the Internet for potential candidates.

2. In the next step you may want to invite those potentials to send a representative to your office in your hometown for an initial discussion. Within this meeting you may want to ask the representative to give you a basic introduction of their setup as well as scope of services in relation with China. Asking for reference customers out of your industry/business field is an absolute must and should be answered promptly. Additionally, you may want to provide the cornerstones of your business and planned projects so the representative can give you first hand comments and suggestions on this. This should also specifically be focused around potential risks and/or pitfalls.

3. As a last step, you should collect rates and prices for the requested service and benchmark the service portfolio, your personal impression and the given rates between the potential providers in order to make your final decision. Again, the price should not be the single criteria.

To conclude and summarize the above:

• Shipping from China can be a complex topic for newcomers.
  
• In-depth know how is needed to manage the process in-house efficiently.
  
• Clarification of responsibilities via the Incoterms is necessary.
  
• 3PL Provider/Freight Forwarder is the expert to manage the process for you.
  
• Smart selection process of a forwarder is the key to success.
  

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Readers have left 3 comments.

 1. Sales Manager
Ibo, Unregistered

I think it is a very interesting article. In fact it highlights the basics of the shipping trade in general, however China might have a kind of special system with regards to the terms of sales and we kind find considerable differences in the way how freight rates are established by carriers. I think Cargo market is more dominant in China most of the times, every body must follow

 Posted 2008-11-02 06:44:38

 2. Miss
Nikhila, Unregistered

It is a very interesting and helpful article. i am trying to collect some information about importing from China.
what will be the approx differnce in shipping 10tonnes of paper (suppose in 20' X 8.5' X 8' container) by air and sea.
Will it be bebeficial using the airfreight considering the time for sea freight

 Posted 2008-12-17 13:09:47

 3. freight shipping services
freight shipping services, Unregistered

Great post and quite impressive writing style. Keep up the good work.

 Posted 2009-06-26 17:24:44

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