CONSIDERATIONS FOR SHIPPING BY AIR TO ASIA
It was the classic shipper’s nightmare of an overseas shipment gone wrong. Albert Saphir, president of logistics consulting and training firm ABS Consulting, recalls the case of a client a few years ago whose shipment to India ended up in the wrong airport. A clerk at the forwarder that was managing the transportation had entered the wrong three-letter airport code, sending the cargo to an entry point a few hundred miles away from its destination.
To salvage the situation the forwarder tried to arrange a transfer to the right gateway but found himself up against arcane customs regulations that rendered this solution virtually impossible. To make a transfer, a $1 million bond was required—for a shipment worth about $50,000.
In the end, the cargo was sent back to its origin and flown out from there to the proper destination.
Notwithstanding this episode, Saphir sees no cause for headache in flying cargo to Asia. “I don’t see any unique challenges shipping goods by air to Asia as opposed to other export markets. To most destinations in Asia it’s as easy as to Europe,” he comments.
Some aspects have to be checked, though, starting with requirements for special documentation in some markets, Saphir notes. Rich Zablocki, vice-president, Global Product Development, North America at CEVA Logistics, advises that it is important to be aware of holidays in the destination country and their effects on cargo flows. During “Golden Week” in October, for example, shipments face delays in processing at airports in China. Such hiccups can lead to expensive storage charges or, worse, cause problems with timelines for letters of credit, he warns.
Seasonal traffic patterns are another element to be mindful of, remarks Saphir. “You have to look at your own seasonality. Are you expecting peaks and valleys? Then you have to overlay your seasonality with the market. For example, during the cherry season out of the U.S. Northwest, carriers bump regular freight to load up with cherries going to Asia. You may need some contractual commitment from the airline to get your cargo moved during such a peak. There may be a surcharge to pay,” he says.
For the most part, companies that have ad hoc shipments headed to Asia are not facing any serious issues finding a lift. If they have not shipped by air before, they may face delays associated with security regulations for cargo moving on passenger aircraft, but there is ample freighter capacity available across the Pacific, where this does not apply.
“With the trade imbalance there is plenty of space available for any shipper who has cargo. Shipping ad hoc to Asia is not an issue, known shipper or not,” Saphir says.
In cases where a delay in production has caused the shipment to miss the deadline for ocean transportation, there should be more than enough time to truck the cargo to a freighter gateway (usually one of the larger international airports), if there are problems getting a flight at the airport near the factory, he adds.
Zablocki remarks that some Asian airlines have recently cut freighter flights at short notice to reduce overcapacity and improve their load factors. This can cause some inconvenience, he says.
With airlines vying to fill their cargo holds on the way to Asia, there are many routings possible. Typically a forwarder would pick two or three options for a shipper to choose, Saphir says, adding that the importer on the Asian end would usually determine the airport to which the goods should be flown.
Larger shippers tend to look at door-to-door arrangements, Zablocki says, whereas smaller exporters usually get involved only as far as arranging the movement of the freight to the airport on the other side of the Pacific, where the logistics provider of their customer takes over.
“I would not touch customs clearance or delivery. That gets complicated,” comments Saphir.
The approach is different if the shipper is looking to establish a pipeline to Asia for regular traffic by air. This scenario is not limited to large shippers. “We have lots of mid-sized to smaller companies that are shipping very nicely to Asia,” says Zablocki.
For such clients much hinges on the question of whether or not they need a distribution center in Asia and where this should be located. This is where logistics providers should be—and usually are—involved, remarks Zablocki.
“It depends on the size, complexity and sophistication of the client if they require help determining the number and location of distribution centers,” he says.
He points out that the decision process can be quite time consuming. A large European retail customer of CEVA spent about 12 months working out where to set up a distribution center and how to feed it for a planned expansion into the U.S. market, he reports.
Asian locations such as Hong Kong and Singapore are often chosen for such a role, given the ease of doing business and the ready availability of ample flight options. “These places offer lots of opportunities to ship bulk out and then distribute,” says Saphir.
Having a distribution hub in China can be challenging, he adds. On the other hand, foreign trade zones can play an important role in a company’s Asian distribution strategy. “An FTZ can make a huge difference for them,” confirms Zablocki.
Another factor to consider is the frequency of air service to Asian entry points. Some cities in northeastern China have started manufacturing, but from a transportation perspective they are still way behind locations in southern China, Zablocki says. “There can be significant delays due to the need for trucking to the nearest port with good airlift capacity.”
This can be cumbersome and risk additional delays and other hiccups. Hence many shippers have a clear idea about direct air links. “Our U.S. clients look for service to accomplish a minimum three-day transit,” he says.
Saphir favors a stable routing over an ongoing push to find lower rates for regular traffic to an Asia destination.
“If you have continuous flow of goods to Asia—say, twice a week—make sure you use the same airline and route,” he says. “You want consistency. You don’t want to change carrier or routing every time.”
WHAT’S MOST IMPORTANT TO YOUR INTERNATIONAL PROGRAM IN THE NEXT FIVE YEARS?
38.7% | Expanding into additional markets
37.7% | Increasing sales in current markets
1.9% | Establish supply-chain space in foreign markets
19.8% | Improving my global logistics strategy
1.9% | Improving my supply chain financing
LEARN FROM THE PROS…
WHAT VALUE-ADDED SERVICES SHOULD SHIPPERS BE NEGOTIATING FOR, AND HOW CAN THESE SERVICES IMPROVE THEIR COMPANY?
“Tools to automate processes and data driven cost saving initiatives. Features should include procurement, planning and optimization, execution, freight audit and bill pay, reporting and analytics.” – Derek J. Leathers, President and CEO, Werner Enterprises
WHAT LOGISTICS CHALLENGES ARE COMING OVER THE NEXT FIVE YEARS THAT NO ONE IS TALKING ABOUT NOW?
“The impact of driver-less trucks and drones on insurance costs for OS&D [over, short and damaged claims].”
– Allan J. Miner, President, CT Logistics
HOW FAR WILL SELF-DRIVING TRUCKS COME IN 15 YEARS, AND WHAT WILL BE THE IMPACT ON THE SUPPLY CHAIN?
“Very far. [They] will eliminate the issue of driver shortages and all other HR challenges.” – Scott Weiss, VP of Business Development, Port Logistics Group