24 Apr Global Freight Management: Tackling International Freight Costs
Global freight management is an increasingly important aspect of a company’s supply chain. However, controlling the potentially erratic nature of international freight expense can be a daunting task. If your company isn’t careful the logistics costs associated with operating a global supply chain can far surpass your domestic transportation network.
If you’re a shipper looking to tackle and control global freight management through best practices, we recommend the following:
1. Review and Consolidate Carrier Options
Consolidating international freight activity to a core carrier group will allow a shipper to leverage volume to yield maximum discounts without compromising service. The transportation and logistics team should be able to use a system that enables users to define their requirements (date, origin, destination, etc) and access all contracted rates. This optimization process will allow the shipper to determine all available routes under contract and compare costs. Using spreadsheets to compare costs is nearly impossible. Instead, to access these rates, employ a technology that can readily present all feasible routes and service options, including transshipment points. The shipper must be able to compare costs that include all accessorials and features side by side. Making better decisions using automated tools can have a substantial impact on global freight management.
2. Centralize Access to Carrier Contracts and Amendments
Entering the complex world of international shipping will require that both shippers and logistics providers automate their sea and air freight activity. Unfortunately, many importers do not have an organized solution to roll out and manage international transportation. Simply, a competency in domestic shipping practices will rarely compensate for the intricacies found in a global freight management solution.
It is highly recommended that a process be established where all contracts and associated terms, including up-to-date rates, be centralized and accessible from anywhere in the world. Shippers can then use role-based access amongst international logistics staff to view current and approved carriers. Additionally, an online library of contracts will give shippers confidence knowing all carrier agreements and amendments are being reviewed by their international freight payment firm and that a global freight audit is in play.
3. Global Freight Management requires Oversight of Accessorials
Can you imagine trying to buy a car without knowing the additional cost of taxes, licensing, title work, insurance, or available service plans?
For many shippers, the base freight rate that is negotiated and listed in the freight contract is a fraction of the total cost. Dozens of potential surcharges may come into play. When it comes to international shipping, there will always be additional, special or supplemental services, over and above the freight charge. The short list you can count on most often include congestion surcharges, currency adjustment factors (CAF) and terminal handling charges (THC).
The right transportation management system can make a global freight management solution more transparent. This will allow shippers to monitor the carrier’s governing rules, tariffs and fluctuating rates from accessorials. Monitoring and calculating a complete bottom-line rate will help minimize surprises. In addition to your specially negotiated business rules, your system should be able to track tariffs from multiple sources and with diverse formats.
4. Partner with a Firm that has International Freight Payment Experience
The world has gotten smaller is a common sentiment, but the complexities of international shipping practices are ever present. There are more than 250 sovereign nations in the world trading in more than 180 currencies and speaking more than 6,500 languages. Geo-political factors, local tax laws, and other government regulations compound the complexity and risk associated with shipping in and out of these nations.
With complexity, comes error. Carriers make mistakes. Erroneous billing can become even more prevalent during carrier acquisitions and mergers. However, international shippers can hold carriers accountable by means of a global freight audit. A partner well-versed in international freight payment can provide such a service if best practices are employed. Naturally, an audit can be performed according to your contract, including all published amendments, applicable tariff rates, and accessorials. However, a global freight audit and payment project starts with having a good plan. To implement and manage the solution, individuals throughout the organization will need to supply information and conform to the centralized systems and standards. It’s necessary for each international business unit to commit to the plan.
To gain this commitment, or buy in, it’s helpful to have a small number of easily understood profiles for each business unit to consider. Each business unit can then choose the most appropriate profile to aid in facilitating global buy in. This approach allows business units who are less committed to an international freight payment solution to choose a lower level of participation than others who wish to participate at a higher level.
Shippers must look at the global freight audit and payment objectives and balance them appropriately. Factors to acknowledge and consider include foreign language support, currency management and disbursement, and international branch locations. Surprisingly, the influence of these factors can be greatly minimized if the shipper couples their global freight management solution with the right international freight payment partner.
Going global can be a streamlined and efficient process for most shippers. Critical to this endeavor is the consolidation of carrier-use, a centralized contract management system, accessorial oversight, and implementation of a global freight audit.
SSI funds over 5,000 carriers globally every year. We pay in dozens of different currencies. Our clients trust our international freight payment solution to implement a global freight audit. For our customers, global freight management is a natural appendage of a lean and efficient supply chain.
For more information about our services, download our white paper today.