If your import program's in need of a big fix, the answer might be to lose the slippery selling agent and bring in your own hired guns to manage inland transportation.
If you import goods from China, trouble's your business. You already know about the dismal realities of doing business in the shadowy Middle Kingdom. Bad roads, buying chains that are as opaque as a dirty window, language barriers and red tape make for more twists and turns than the plot of a Raymond Chandler thriller.
What you might not know is that your company could be getting taken for a ride. Most importers have only a hazy idea of what exactly they're paying for or even who's manufacturing it. They just know it turns up and it's cheap, so they don't ask too many questions. But if they nosed around a little, they'd quickly abandon any illusions of lean and efficient supply lines moving their goods from China's interior to the ports, says Bengt Henriksen, president of Quality Logistics Inc., a third-party logistics service provider based in San Carlos, Calif. Instead they'd likely be forced to confront the reality of a well-greased chain of players, all eager for a chance to line their own pockets.
Not that this is anything new. Over the years, all but a few of the most sophisticated companies have decided that when it comes to doing business in China, it's easier to stand for a certain amount of squeeze than to try to make their own arrangements. Importers typically buy their Chinese-made goods from selling agents, and the buying contracts they sign usually incorporate trade terms that make the seller responsible for getting the goods to an international port—Incoterms such as Free on Board (FOB). But there are several problems with that. Truckloads of stuff turn up from a mysterious interior at unpredictable times, and often errors in orders aren't detected until the cargo hits an unstuffing facility on the U.S. side. Another problem is that costs aren't broken out—it's impossible to tell how much the buyer is paying for the actual item … and how much for transportation and middlemen.
Likely as not, it's a lot of dough. Middlemen, which Henriksen says are a particularly Chinese phenomenon in trade (though they may not wear fedoras), have set themselves up with a pretty good racket. In recent years, a few buyers have ventured inside China to find the actual factories and figure out how their cargo gets to port, Henriksen reports. What they've found is that there are four, five, six layers of middlemen, he says, each one adding 20 to 30 percent to the cost.
But making direct contact with factories is often as complex as figuring out who killed whom in The Big Sleep. "A guy walks into a hotel in Shanghai and he's instantly identified as, say, a fireworks buyer. Then he's going to be mobbed by selling agents offering to show him their factories. And the one thing you can guarantee is that it's not the guy's factory," Henriksen warns. "If it was his factory, he wouldn't be hanging out in a hotel waiting to present himself that way." That is to say, importers should be wary of sellers, who are often as shadowy as a weeping widow in Sam Spade's reception room.
But it's worth playing gumshoe and making a few inquiries. By cutting down on middlemen and separating out transportation costs, importers can save huge sums. Henriksen reckons that simply dealing direct with the factory, not even haggling over Incoterms, can save between $600 and $3,000 per container. "Every supply chain is different," he says, "but the savings often add up to more than the total freight!"
Farewell, my middleman?
However, Henriksen doesn't recommend cutting out the middleman entirely. "You have to either use a [U.S.-based] third-party firm that will sort this out for you, or else develop a relationship with a buying agent that will accept a reasonable commission and whose workings are reasonably transparent," advises Henriksen. "But you have to live and let live in China. You have to give them something. If you're cutting 90 percent of the cost, then you don't mind."
Sounds simple, right? After all, contracting for inland transportation should hold few mysteries for the experienced logistics professional. In fact, Henriksen has managed to get a bit of a buzz going in the last few years, making his case for taking control of inbound cargo at presentations like the one he delivered with Andy Rosener, director of international logistics at Hasbro Toys, at a Journal of Commerce TransPacific shippers' conference in March 2002. (Hasbro presented itself as a poster child for the movement to take control of inventory further up the supply chain.)
Yet those shippers who flock to Henriksen's talks have been slower to act than an arthritic night watchman. Tradecard, an electronic trade documentation services firm that handles huge volumes of import contracts for U.S. buyers dealing with Asia, reports that only 10 to 20 percent of contracts are on an ex-factory or non-FOB/CIF basis. That means that 80 to 90 percent of the time, shippers are letting the seller (or selling agent) control the freight up until it reaches the port.
Why are shippers so reluctant to take charge? Henriksen says the trouble usually lies within the importer's own organization. Typically, the traffic or logistics people in a large company are fully aware of how much the company could save by seizing control over the buying process, but the merchandising folks, who don't want to mess with existing relationships or products, don't want to hear about it. "So you have an internal battle between the people responsible for costs—the logistics people—and the people responsible for the product. And they don't want the logistics people to interfere," he laments. "In some companies— for example, Nike—the people at the very top see what needs to be done and will immediately go after the savings and make sure everyone coordinates and works together. But with other companies—no."
Beautiful friendships
But there's more to it than the Fat Man in marketing's reluctance to ruin a beautiful friendship. Cutting buying and transportation costs often means taking charge of the arrangements for inland transport in China. And that, as anyone involved in the logistics business locally can tell you, can be more complicated than piecing together a torn-up ransom note in the dark.
"The problem is that China is not really an integrated market in any sense or form," says Paul Clifford, managing partner for China at Mercer Management Consulting's office in Beijing. "China grew up in the '50s and '60s as regional markets with their own sources and homegrown logistics networks. When you start getting beyond one region and try transporting across many regions, it gets troublesome."
Even Wal-Mart, which will spend $15 billion in China this year and whose whole business model is built around logistics efficiency, is finding it challenging, Clifford says. "They have to outsource a lot of trucking, for instance, and even they find it very difficult to operate across provinces. The regulations mean you have to have a license to transport across borders load by load," he continues. "Of course there are local transport and freight forwarding companies that specialize in that, but they also have a history of being quite local. They're formed of smaller branches that put together a nationwide service by passing the product on to the next branch, but it's not a seamless, reliable service."
Then, of course, there are the roads, which have more holes in them than a drugged-up heiress's alibi. The further inland you go—where labor is cheaper and many new factories are springing up—the worse the infrastructure gets. The roads are not the half of it. Buyers also have to wrestle with decisions like which port to use. Tradecard president Kurt Cavano says the ports in the Pearl River Delta, such as Yantian, Guangzhou, Shenzen, Zhuhai and Shantou, have been giving Hong Kong a run for its money in recent years, siphoning off some of the larger port's business. But all that means is that buyers now have to weigh one relatively undeveloped port against another, or against trucking over the border to Hong Kong.
Mum's the word
Despite the difficulties, some U.S. importers have taken charge of their inbound freight, changing their Incoterms and/or port of export. But they've gone very quiet about it. Even trailblazers like IKEA, the Swedish furniture giant that publicly announced in 2002 it had moved all imports from China to FCA terms ("free carrier"—i.e., handed over to the buyer's carrier, often inland), have clammed up, declining to be interviewed on the subject. Industry commentators say this is because the ability to fine-tune shipping arrangements from China gives them an important edge over the competition.
"It's definitely a competitive advantage, giving you better assurances that the right product will be shipped when you want it shipped," says Maureen Saul, who's been helping U.S. importers consolidate and ship inventory from China for 15 years, most recently as vice president of logistics and marketing for United States Consolidation Services in Paramus, N.J. (now a subsidiary of the U.K. third-party logistics firm Exel).
"We do still see a fair number of selling agents, especially for U.S. companies that don't have offices in China," Saul says. She says companies are looking for transparency not only to save money, but to fulfill the increasingly strict security- related regulations about knowing who packed what and where. "If you go to ex-works terms, you have to know where the factory is, so that helps address the visibility problem," she says. "Customers want more transparency, and the security concern is a big part of that. People are engaging in vendor management programs and vendor certification. This makes it easier."
Overall, it seems even the largest shippers need a little help from an experienced third party when it comes to unraveling the mysteries of moving goods in China. IKEA, for example, makes heavy use of Maersk Logistics. Exel, Nippon Express, Panalpina, Schenker, APL Logistics and TNT Logistics are all active in the region, often working in partnership with the state-owned logistics firm, Sinotrans.
Henriksen's firm, Quality Logistics, also prides itself on knowing its way around China. "When I talk about this at meetings and conferences, I get an overwhelming reaction from importers from all walks, who say they want to know more. But then I explain that you have to delegate it. I can do lots of things for you but you have to let go," Henriksen says. "Our type of logistics service is to unbundle the transportation costs for our clients. [O]ur clients are so busy selling the products that they leave it to us to manage logistics, giving us a free hand to immediately go after the savings on their behalf." Basically, he tells 'em, if you need help, you just whistle. You know how to whistle, don't ya?
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.