Friday, 28 June 2013

Incoterms 2010 / Terms of sale - insight into the basics

Good afternoon

Here's the first of our posts on topics which are useful and important for both our existing and future customers.

If you trade internationally, the Incoterms rules are a common language which, from a transportation perspective, clearly define the tasks, costs and risks involved in the movement of the goods. This is vitally important as it makes it clear who is responsible for the costs involved in physically getting the goods from shipper to consignee.

It may be that the consignee bears all transportation costs (Ex Works/ EXW) or at the other extreme, the shipper bears all costs (Delivered Duty Paid/DDP). More often it's something in between, where the seller/consignor and buyer/consignee pay a clearly defined part of the costs involved in moving the shipment from door to door (for example CFR). 

Crucially, it also defines at what point risk passes from seller to buyer, which is critical as often there's a misunderstanding and often goods are not fully insured, save the woefully inadequate standard liability provided by shipping lines which isn't sufficient in 90% of cases. Airlines offer more generous standard liability cover but if you have higher value goods, you really should consider your own marine insurance policy which means you won;t get any nasty financial shocks if your shipments are either lost or damaged.

Back to Incoterms 2010.

These terms are denoted by three letter codes such as EXW, DAP, FCA etc and in some cases they need to be supplemented with a place to denote exactly when delivery has taken place. In this context, delivery doesn't always mean delivery in the general sense (ie delivery to your factory or warehouse), it refers to the point when the seller has fulfilled his obligations under the contract. It could therefore be that "delivery" is effected when the goods pass over the ships rail at origin (under terms FOB).

The risk part is a grey area for many customers and, for example, they might reasonably assume that if the Shanghai supplier sends the goods CFR Felixstowe where they organise transport and pay for ocean freight to arrival Felixstowe that they would also carry the risk until the container has passed over the ships rail (ie Terminal Handling Charges, Customs Clearance, Delivery etc). Not the case, the risk passes once the container has been loaded onto the vessel at SHA.

In the latest edition, Incoterms 2010 (which were published in 2011), the number of different Incoterms was reduced from 13 to 11 along with a clearer and simpler definition of the rules.

Many of you will have heard some common Incoterms such as FOB (Free On Board) and Ex Works mentioned by colleagues who deal with international suppliers or customers, and often by your freight forwarders.

Couriers or FPOs (Fast Parcel Operators) such as DHL, UPS rarely mention the Incoterms, they're more likely to use general terms such as door to door or give detail on the service levels, next day, time critical etc and they're often very export driven and not flexible enough to apportion some costs to the shipper and some to the consignee as is the case with many Incoterms.

More later...

Thursday, 27 June 2013

How the phoenix rose from the ashes....

http://www.straightforwardconsultancy.co.uk/

Whilst my wife and I were in New Zealand and Australia in Nov-Dec 2009, I sketched out the business model for Straightforward Consultancy. We would focus on the small-medium sized customers in the North West and use our industry expertise, knowledge of the market and the freight forwarder business model to sharpen up customers' import and export freight models. We would also be available on a typical consultancy basis to help clients with their freight and Customs related problems.

I suppose the concern was that this was an idea, completely untested, and although I knew that there were consultancy businesses in the logistics sector, my vision for SCL was for something very niche and also one which was going to not only help customers to reduce cost, it would also walk alongside them on their logistics journey, a day to day source of advice and operational support.

In Sep-2009, I'd done some test tele-marketing to clients in the North West and talked about our business proposition and whether they'd be interested in our services. The results were pretty interesting, quite a few customers in my sample test marketing (say half) were quite interested, they thought an industry insider with a lot of experience might indeed by an asset, but they wanted to know how the fees worked.

Of course, in 2009, we were in the early stages of an economic recession and customers were very concerned about costs. There was also a reluctance to take on consultants as many customers felt they would be expensive and they couldnt be sure of the results - an uncertain return on investment (ROI).

So, in New Zealand, I was doing a lot of thinking about how we could make the value proposition attractive for small-medium sized customers. I knew there would be an interest in reducing freight costs but having said that, it would probably have to be results based.

Fast forward to February-10 and we had (almost) everything in place. We had a (basic) website, email address, business cards, a limited company, an accountant and visibility on LinkedIn. I also had access to a database of regular importers. I was also totally determined that it would be a success, for me it was like the phoenix rising from the ashes after all that had happened in 2009.

We focused on importers to begin with as it is generally accepted that around 75-80% of worldwide air and ocean freight is consignee controlled (Incoterms Ex Works (EXW) or Free On Board (FOB) and they would pay any freight costs. They'd therefore have an interest in reducing and controlling their landed costs so in Mar-10 I started calling companies in the North West using a post code based system (as we wanted to be physically close to our customers, able to see them regularly to advise and support them).


Then the question of fees started coming up in conversations. The customer would express interest in our service and then ask how our fees worked. I'd initially hoped that companies would be happy to pay a standard consultancy type day rate but it was clear this was an issue. To make it attractive, it would have to be results based, some sort of gain share / shared savings model.

This way we'd be paid on results and the client would see nett cash savings on their bottom line alongside any service improvements we'd introduced as a result of our logistics / freight review.

This then meant we'd have to design some rigorous processes and robust measurement tools to clearly and accurately measure the savings, shipment by shipment. That was when I decided to sign up for an advanced IT course at Warrington Business School to design the tools we'd use to carry out the bid process and also generate our monthly savings and freight activity reports.

Luckily I was able to take advantage of a 100% grant and I embarked on the course for a year. It was really excellent and I was provided with 1-1 tutoring.

More tomorrow.

Monday, 24 June 2013

China manufacturing shrinking according to Bloomberg report

Interesting report here - this may have an impact on the ability of shipping lines to implement their General Rate Increases (GRIs) in Jul 2013. Clearly there's a connection between a weak Eurozone and a weakening of Chinese manufacturing output.
http://theloadstar.co.uk/china-manufacturing-shrinks-faster-in-threat-to-europe/

Our first customer - Manchester Grammar School - continued

So, back to Manchester Grammar School. I really enjoyed working at the school and meeting a completely different group of people. I started at 0800 each day and worked until 1530 (when the school day finished) however I often worked later, mainly because I really enjoyed the role and also because our department was a service provider and it was key that we didn't let anyone down, all part of the partnership we built between the teachers and our department.

I also reviewed the trip application processes and started to push back, letting the teachers know that we needed a minimum of 48 hours notice of any trips, explaining that when this was observed, we could run more efficiently and avoid any last minute panics. There's nothing more frustrating than not being in control, especially when you're trying to provide a service and this reinforcement of the notice period allowed our department to breathe, and also gave us time to work on the department, instead of just working in it.I worked at the school for 6 weeks and only had to leave as my wife and I had decided to put the months of stress and worry behind us (linked to the DHL redundancy process and the appeal I made) and booked a holiday of a lifetime, 6 weeks in New Zealand and Australia.

Before that, the school needed to seek a permanent person to run the department after I had left and I was very flattered to be involved in the recruitment process, where I spent 15 minutes with each candidate after their formal interview. It was really quite remarkable as we both selected the same candidate even though we'd met them separately.

The day I left, Jim Mangnall and Eric Cittanova made a presentation to me to thank me for the work I'd done and I later received very complimentary testimonials from both Stuart Leeming and Jim Mangnall which are shown below.Testimonial from Jim Mangnall below

Re: Andy Cliff
 

Andy joined MGS for most of the Michaelmas term of 2009 to carry out two roles.

He worked as our visits assistant, providing a wide range of back up to tens of offsite school visits home and abroad.

While doing this we requested that he provide us with some analysis and consulting about the process, roles and challenges as a basis for future development in the role.

We were absolutely delighted by all the work that he did. He very quickly formed easy and valued working relations with a large proportion of the staff, both teaching and non teaching and commanded their respect – they all valued his help.

Andy is very clear thinking, well prioritised, analytical and imaginative.  He very quickly got to the heart if the issues that troubled us and rapidly put in a largely computer based system to address them, which has all proved to be effective.

He quickly adapted to the very different style and priorities in a school as opposed to a business.  Indeed, it was very pleasing to note how Andy embraced and valued the philosophies of the school and took a keen interest in school life, supporting various functions.  It was also notable that he worked way beyond his allotted hours and showed huge commitment.  I should add that this extra time in no way reflected any lack of speed in his work or time management both of which are formidable.

I believe I am right in saying that the report Andy wrote, at the conclusion of his time with us was his first involvement in such a document.  It was undoubtedly one of the clearest, most articulate, perceptive and wise documents of its type that I have read in a very long time and showed great professionalism.

When Andy’s time with us came to an end as arranged, we were all sad to see him go, he had become a part of the team in a short time and we enjoyed his company and the sense of fun and enthusiasm that he brought.

We have been glad to see Andy socially since he left the School.

Yours faithfully
 

Jim Mangnall

Surmaster & Head of Co-curriculum
 
Testimonial from Stuart Leeming below
 

Andy Cliff – Straightforward Consultancy

 
The Manchester Grammar School prides itself on its very active co-curricular programme which makes considerable demands on our logistical planning.  As well as managing a disparate transport operation incorporating our own services and those of third party providers, regulatory demands in these risk-averse times are considerable.
For some years, our Trips Office had been operating under increasing stress and the staff turn over had been higher than we were comfortable with.  During the Michaelmas Term 2009 (September through December) we decided we needed an independent assessment of our systems and personnel, especially as we had the opportunity for change when yet another trips administrator gave notice of leaving.  Andy Cliff was thus engaged to work within the Office to assess how we were operating and to advise both about potential changes to systems and to define the job description for and help appoint the replacement Trips Administrator.
Andy quickly developed first rate working relationships with everyone he had contact with.  The significance of this cannot be over stated.  We were very impressed with his analytical skills; his ability to quickly assimilate unfamiliar systems and to incisively identify short-comings and stress points, but also to recognise strengths.  His final report was clear and concise, and it identified specified mechanistic solutions.  We were able with confidence to implement key recommendations, changing elements of procedure (often simplifying them) and appointing the right person to the Administrator post.  In his report, Andy indicated areas that would benefit from longer term attention too and we continue to work on these.
Six months on, the Trips Office is a calm and stable place; testimony to the quality and validity of the advice we received.  Those who worked alongside Andy during his brief period with us continue to speak highly of him and some keep in touch with him.  I would not hesitate to use the services of Andy Cliff in the future.
Stuart Leeming
Deputy High Master

Sunday, 23 June 2013

Our first customer - Manchester Grammar School

It is quite bizarre that although Straightforward Consultancy was going to focus on helping small-medium sized customers with their import and export challenges, that our first client was Manchester Grammar School http://www.mgs.org/. This school has an impressive history - it was formed in 1515, yes almost 500 years ago, and of course in 2015 they will celebrate 500 years as a private boys school.

Arriving there for the first time was a little daunting in some respects. I was (I believed) completely out of my depth, surrounded by highly educated academics and an organisation I was totally unfamiliar with.

Stuart introduced me to two very key managers at the school. Eric Cittanova and Jim Mangnall. Eric was the Educational Visits Coordinator (which is a highly responsible position). Eric was personally accountable for the school's actions in relation to Health & Safety for all the boys who took part in Educational Visits, whether this involved a short coach trip to the theatre, or a trip to the Atlas Mountains in Morocco (both of which were real trips). Jim Mangnall was their Surmaster and Head of Co-Curriculum.

They introduced me to my new colleagues in the administration department of which the Educational Visits team was a part. It was all very new and there was of course a lot of take in. But at the same time, it was completely different, interesting and I could see that even though this was very different to my former role at DHL, it was about two key things - people and processes. Because we were in effect a support mechanism to the teachers, who would be the ones leading a trip, they were our internal customers but it seemed as though we were quite a way apart and the Visits Department was seen as bit of an obstacle in some ways. The teachers just wanted to lead the trip with as little hassle as possible (quite understandable because they were taking ownership of these trips in addition to their core teaching roles) but my department had to ensure that the School fulfilled all of its legal and duty of care responsibilities so we were striking a balance here.

One thing I decided very early on was that even though my department was there to support the teachers in their execution of the educational visits, that they also needed to understand our limitations and that we needed sufficient time to process and approve their trip. I therefore decided to enter their hallowed territory, the common room. This was where teachers had their elevenses and lunch, and some non academics didnt feel comfortable entering this room. I decided that I would
go their every day at 1100 for morning tea and biscuits and set about developing relationships with the teachers, many of whom used my department for their UK or overseas trips applications and approvals.

This turned out to be a master stroke, mainly because it created a relationship, but more importantly I was able to explain what we needed from them to help us provide them with a better service. In effect I created a bridge between our non-academic department and the teachers/academics by meeting them on their home territory, and this had a great impact on our partnership. They now understood what our challenges were, and that we wanted to do our very best for them - but to do that, they had to meet us half way.

More tomorrow.

Friday, 21 June 2013

DHL Global Forwarding detox & Manchester Grammar School

Good afternoon All

In my last blog post, I talked about the lightbulb moment and the idea of the company name. I set up Straightforward Consultancy as a limited company on 4th September 2009 and secured web addresses for www.straightforwardconsultancy.co.uk and www.straightforwardconsultancy.com.

It's almost 4 years ago now so I can't remember the exact timelines but I do remember creating our first basic 3 page website and then putting my toe in the water and going to a local business networking meeting in Lymm, I think it was a South Warrington Business Forum. I'd received some excellent business start up advice from Business Link, a government funded body who were there to help people with start up businesses and they'd helped educate me on what was involved in starting your own business, whether to be a Sole Trader or Limited Company, and lots of other things such as seeking out an accountant etc.

Anyway, it was quite a special moment, talking to other attendees of the networking event and talking about my business for the very first time, after 30 years of working for logistics/forwarding companies as an employee. I got home later on and my wife Diane told me that one of our neighbours, Stuart Leeming had popped round whilst I was out and wanted to discuss an opportunity with me. He'd only just heard about my redundancy with DHL and thought he could possibly help me out short term with a job opportunity. Stuart was the Deputy High Master of Manchester Grammar School, a very prestigious private school and we'd been neighbours for around 9 years.

The next morning, I went over to see him to find out about the job opportunity - I was a little curious as I couldn't imagine them needing anyone with my international freight forwarding or Customs experience but it all became clear. Stuart told me that they had a very active Educational Visits Department which coordinated all the extra curricular activities for their students (say an overseas ski trip or a trekking expedition to Morocco) and their trips coordinator had just left. Although they intended to replace this person, Stuart thought it might be a great opportunity to inject some external commercial expertise into what was of course an academic organisation. I told Stuart from the off that I wasnt sure that I would be a good fit because I had no experience of schools, minibuses, health and safety and all the other things that made the department tick.

Stuart said he thought I would be ideal, he had known me for nine years and we'd had plenty of chats over the gatepost so to speak and he thought my core and interpersonal skills were very transferable into their environment. I explained that I had just launched Straightforward and so I could offer my services on a consultancy basis. I made the proposal the same day and it was accepted.

Our very first customer was Manchester Grammar School!

Thursday, 20 June 2013

Asia to UK ocean container rate increases less than 2 weeks away - are you prepared?

Here's a piece I posted on LinkedIn yesterday, quite relevant if you're an Asia importer. I have a lot of contacts in the forwarding sector and have our ear close to the ground on this one (as always!).

Major ocean freight rate increases from Asia to UK just 2 weeks away - are you prepared?

For those of you who import product from Asia, hopefully you’re aware of the huge rate increases planned for July 1st, just 2 weeks from now.

The question is, where are you now in terms of your inbound freight costs and have you arranged to have as much product on the water from Asia by June 30th? Have your rates and landed costs been following the market on the way down for the past 3-4 months and do you have a strategy to limit the impact of any GRIs(General Rate Increases)?

We’re now in the run up to peak season on Asia-Europe, when volumes will firm up, space will become tighter and your landed costs could rapidly escalate.

We’re actively managing a portfolio of ocean (and air) freight traffic on behalf of our UK customer base and monitor the market daily.
If you are concerned about the impact of these increases, which will effectively add up to USD 2000 to the freight cost of a 40 foot container from Asia to say Felixstowe, then please do contact us.
We’re expert in this area and use our market knowledge and collective bargaining power to ensure our customers’ freight costs are kept competitive and under control.

I’m happy to speak with any companies in this group with concerns and who wish to find a way to reduce their air or ocean freight costs and find a way to better manage their freight and Customs activity.

Kind Regards


Andy Cliff
Director
Straightforward Consultancy

http://www.straightforwardconsultancy.co.uk

Tel : 07934 443492
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Twitter: @AndyCliffSCL