Category Archives: Logistics

You Don’t Need Nuevo Esquema de Empresas Certificadas to Improve Cross-Border Shipping with Mexico

You just have to make sure that that the goods are picked up with a destination in the United States, not near the Mexican border, even if the customs broker tries to insist that the goods have to stop at a location near the border for dreyage or inspection under current regulations. The reason your broker wants the goods to stop at a Mexican border destination like Nuevo Laredo is because you have to pay the IVA (Impuesto al Valor Agregado), Mexico’s Value Added Tax, which he will then get a tax credit for when he ships the goods out of the United States.

Even though the proposed reforms in Nuevo Esquema de Empresas Certificadas, include:

  • flexibility on location,
  • direct clearance by companies,
  • pre-validation of electronic import and export data, and
  • the need to use a Mexican customs broker on the U.S. side of the border to release goods for entry into Mexico is eliminated.

At the end of the day, it doesn’t matter if these rules are in effect now or not or if you have to use a Mexican trucker to move your goods, it matters whether or not you have to use a Mexican broker that insists on shipping your goods to a destination inside the Mexican border to collect IVA and dreyage at your expense. It’s like Mr. Locke pointed out in his piece on Cross-Border Shipping with Mexico last fall: some of the issues … are common in every country and the Mexican trucking industry is changing. A properly run IPO will get on-time delivery to your US customers in the 98% range over long periods of time … and that includes supplier performance, cross border performance and logistics performance in two countries and it will do so quite affordably if you’re smart about how you do things.

While the Nuevo Esquema de Empresas Certificadas, should it come into effect by year end, will make shipping easier, by making sure you’re doing everything right, and not using a double-dipping customs broker, you can improve cross-border shipping, and the associated cost, with Mexico now.

Just Like There Is NO Free Lunch, There is NO Free Shipping!

Paul Downs is right, There is No Free Shipping. (In fact, the Free Shipping Amazon Prime service is so profitable that Amazon is planning to raise their prices and profit off of their best customers even more!)

Even though shipping is no where near as complicated and human intensive and error-ridden as it used to be (provided someone scans the damn code, reads the response, and loads the item into the designated truck), it’s still costly, and will always be because:

  • Every form of transportation requires a vehicle*
    and all vehicles have acquisition and maintenance costs.
  • Every vehicle requires some form of power
    and all forms of power have a cost, even if they are based on renewable resources (as someone has to build and maintain the windmill). So, even if your item can be shipped locally on a hybrid powered by renewable energy, the cost will not go to 0.
  • Every vehicle requires an operator
    even if that operator is the programmer maintaining the system controlling the drone, and operators need to be paid.

This assumes you are shipping a normal, everyday item that is typically ordered from an online merchant and for which packaging and shipping has been optimized.

This doesn’t account for the situation where you are ordering a fragile item, which may need extra, and/or special, packaging, an oversized item, which can’t just be tossed in the mail or picked up in a normal UPS or FedEX delivery, or a very heavy item, like the custom-made conference tables that poor Mr. Downs had to ship across the country at a time where piece-shipping was even more of a pain the backside than it is now. In each of these cases there are extra costs in packaging, handling, pick-up, and delivery (as some items will require LTL freight through a local or national carrier).

In other words, shipping is expensive and anyone giving you free shipping is including it in the price, probably at a padded mark-up. So don’t fret the shipping, fret the total cost of the purchase relative to the value received. Sometimes if you shop around you can get a better product at a lower overall price, shipping included. (Going back to Amazon, it’s amazing how much some of the third party merchants that use Amazon’s Prime Shipping mark up their merchandise to cover the shipping costs. the doctor has seen $40 to $60 small items that ship for a few dollars almost double the MSRP, some of which even ship for free at half the price on other sites, because the online retailers are still making a profit if they can get someone to pay MSRP.)

So when you are buying a commodity or a consumable, whether for personal or business use, always look at the TCO. It’s often the case that a supplier who breaks out shipping is attempting to keep costs low across the board for both parties. That’s the type of supplier you want to deal with.


* Since we are talking about shipping and anything that can be walked down the street by a human is not considered shipping for Procurement and Logistics purposes.

Optimize Your Supply Chain (and Your Company’s Worldwide Operation)


Today’s guest post is from Srini Vasan, CEO of eShipGlobal, a Transportation Management Software Company.

Our new global economy has opened the door to more opportunities than ever. Businesses have never had so many choices for products and services, or the chance to work so efficiently across borders. Technology has expanded options, as instant communication has made it possible to carry on business in three (or more) continents simultaneously. And the global nature of these innovations makes supply chain management more important than ever.

Companies are beginning to recognize the importance of maximizing supply chain efficiency and minimizing costs. In a 2012 U.S. Supply Chain Survey conducted by IDC Manufacturing Insights, 80% of supply chain managers reported that reducing their total supply chain costs was a top priority. And supply chain improvements can have positive implications across the board: A freight transportation infrastructure study by Boston Strategies International showed that a 10 percent reduction in direct transportation costs would result in supply chain improvements that could reduce companies’ overall operating costs by 1 percent.

Successful management of a global supply chain can be daunting — there are so many moving parts than ever before — but there are steps that can help your company tackle the inevitable issues and take advantage of the opportunities.

Review Your Talent Pool — Three-fifths of the supply chain management executives who responded to a 2013 PricewaterhouseCoopers’ survey said that the “acquisition or development of supply chain talent and skills” was essential to their current success. Note the word “development”. Of course your company can hire new talent, but you can also better utilize existing staff by ensuring their skills are up to date. Provide ongoing and intensive training, whether through internal education or by outsourcing training to supply chain management academies.

Focus Your Energies While Broadening Your Horizons — It’s not just training that can be outsourced. Consider your company’s core competencies. Where does your company shine? What are the tasks your managers and staff must do? Are there any that could be done more effectively out-of-house? Outsourcing can focus your staff’s energies and help them perform at the top of their game. And keeping a global perspective can be very cost-effective. According to a 2013 white paper by Fifth Third Bank (on optimizing the global supply chain), analysts report that companies can substantially lower supply chain expenses by identifying countries or regions with low-cost suppliers (and by keeping managerial staff limited).

Communicate and Collaborate — An optimized supply chain is just that, not a bunch of independent activities and functions, but a chain. All of its links — from small internal departments to large global trading partners — must communicate with each other in order to optimize efficiency. Better communication and collaboration between manufacturers, suppliers and retailers can improve everything from data-driven forecasting to inventory management.

Today’s technology can make communication easier than ever. Andrea Robinson, the UK business development manager for CargoWise, suggests that “using a single automated database ensures trading partners can communicate in a language compatible with other companies to identify common key performance indicators that provide a level of integration for shared systems and processes.”

Embrace Technology — An investment in information technology is critical for supply chain infrastructure development. IT supply chain solutions can:

  • Organize and unify supply chain processes
  • Integrate department activities
  • Enable sharing of software and information resources
  • Provide metrics that help to evaluate performance
  • Provide transparency
  • Offer customer service
  • Identify trends and changes more quickly and enable the supply chain to respond faster to both

Mobile technology can also be a supply chain game-changer. According to Ms. Robinson, “This technology can help improve field sales, merchandizing and marketing, and enable direct services to the consumer (through customized location-based coupons or services that improve employee productivity in the field). Providing information such as provenance, origin, item contents and specialized information on demand about sustainability, local content or manufacturing methodology enhances the brand and allows companies to connect directly with the consumer.”
Of course, an investment in IT is like any other. It’s vitally important to assess your needs, conduct a thorough search, and carefully choose the right solution for your company.

Plan (but keep an open mind) – IT solutions can also aid in planning, by providing information that helps to predict needs, forecast trends, and identify strengths and weaknesses within a supply chain. Companies can (and should) utilize this information to set goals, remembering to be realistic, flexible, and open to input from collaborators. “Adaptability is key!” was one of the takeaways from a recent “successful supply chain optimization by HP” on supply-chain.org, the operator of the largest IT supply chain in the world.

By following many of the steps above, HP was able to “streamline, simplify, standardize” and profit. By optimizing its global supply chain, the company leveraged scale spend and common parts; consolidated suppliers manufacturing partners and logistics providers; eliminated unnecessary or duplicate nodes; reduced the number of drivers; and decreased the number of IT processes and applications used.

HP also learned a few lessons along the way. As mentioned, the company found that adaptability is crucial, as is business continuity, especially during transformational efforts. But the most important idea behind the company’s success is also one of the simplest: Strong organizational leadership is essential. In the end, a thoughtful plan created by collaborative, creative leaders is the strongest link in an optimized global supply chain.

Thanks, Srini.

Anticipatory Demand Planning is Good, but Anticipatory Shipping?

SI can believe that Amazon patented a Method and System for Anticipatory Package Shipping (US Patent 8615473) but can’t believe it would use this for more than a small number of items. Nor does it believe the system would be implemented as outlined in the patent as filed, at least in the short term.

It took Amazon 7 years to turn its first profit, and while Prime is currently very profitable to Amazon (which makes $78 more in profit per year per Prime customer, on average, than non-prime customer according to CIRP’s market research – Source: Wired), those margins would drop substantially if Amazon started shipping tens, or hundreds, of thousands of packages a year that no one wanted. Amazon does have an efficient distribution network and probably has the absolute best deals with postal and courier services that can be papered, but every shipment costs money and every unnecessary shipment eats into profit. Returns cut into profit margins enough, how much are returned shipments to nowhere going to cost?

Thanks to big data, predictive analytics is getting better by the day, but it’s still hit and miss at a granular level. While it’s pretty easy to use correlation data across a large customer base to predict that you are likely to desire an item, it’s harder to predict whether or not you’d actually buy it, and if you would, at what price point, assuming you don’t already own the product in question. (It’s always telling the doctor he wants books and media he already owns.)

As a result, any predictive analytics at the individual consumer level are going to be hit-and-miss at best. Predictive analytics work best across a large consumer base with a lot of data where one can predict that, on average, 5 in 100 people who match a profile will buy the product from Amazon.

And, from Amazon’s viewpoint, the best use of the predictive analytics is on new releases, as the bulk of sales in many of its categories, and books and media in particular, are in the weeks immediately following a new product release. With the right data and the right algorithms, it can not only predict how many units it is likely to sell against its current customer base, but if the demand is enough, how many in each region that is associated with each distribution center and how the orders will likely track over time on a daily basis.

In this, and only this situation, would anticipatory shipping, and in particular, anticipatory packaging, make sense in the short term. For example, if Scott Adams were to release a new Dilbert book and Amazon predicted 200,000 copies would be sold in the first 3 weeks, and expected that it would get 50,000 of those sales, pre-packaging 40,000 for shipment and then distributing those across it’s DCs such that each DC received a number of books proportionate to the expected sales in the serviced area would be a good idea. All Amazon would have to do to speed up shipment would be to slap the delivery address on the boxes as the orders came in and have them ready to go in the next pickup for local delivery.

In the future, once the system is fine-tuned and its delivery partners have the technology to replace a unique delivery address identifier with a specific delivery address on-the-fly, Amazon can pre-ship a set number of these pre-packaged items to the local post office or delivery company every day, which can, in turn, load those packages onto the appropriate courier truck each morning as the addresses in the system are updated with consumer delivery addresses sent over by Amazon upon each purchase.

But not everyone would get faster shipping service. In order to prevent too many unnecessary shipments and loss, Amazon would have to err on the side of caution and pre-package (and pre-ship) less unit of an item than it expected to sell, and restrict the anticipatory shipping and packaging to only those items expected to have a large sales volume. In most cases, the best Amazon will do is optimize the distribution of inventory across its warehouses. However, this can still take a day (or two) off of average delivery time, so this is still a good start.

Any differing opinions?

MAP-21? Or, More Accurately, RIP-21?

Remember when SI asked if your supply chain was compliant with MAP-21 last fall (on Oct 17 and Oct 18) and pointed out, in bold, section 32918 of the new Commercial Motor Vehicle Act Safety Enhancement Act: Subtitle 1 which states that each broker subject to the requirements of this section shall provide financial security of $75,000 for purposes of this subsection, regardless of the number of branch offices or sales agents of the broker? It did this because it knew this would be a big problem. However, even SI could not have predicted the damage this has caused.

As per a recent article over on Bulk Transporter, 9,800 freight transport brokerages [were] forced to close during December which represented over 46% of the independent broker market! 46%! On December 1, there were 21,080 independent brokers. Today, there are 12,996. So, even though a few new ones opened and a few existing ones eventually managed to raise the money required for the bond (and re-opened), the number of independent brokers is still down almost 40%!

SI agrees that this is indeed a crisis for the independent freight industry and for American consumers and manufacturers, as costs will rise for virtually all goods shipped within the United States. This requirement presents independent brokers with an unreasonable, and in many cases, insurmountable barrier and virtually guarantees that only multi-nationals will be able to participate in what should be a free logistics market. 10K might have been too low, but it should be up to the merchant to decide if the bond put up by the carrier is enough or not. If all you are shipping is low cost consumer purchased goods or packaging material, a 10K to 25K bond is more than enough. If you are shipping smartPhones, you probably want the carrier to put up a 100K bond. If the market really is free, small and mid-sized business should have a choice. But now they don’t.