When Forrester Research Group asked corporate managers what this year�s greatest fulfillment challenge would be, the answer was global distribution. Lowering fulfillment costs came in a close second. The study goes on to say that 85% of US companies cannot fill international orders.
That�s an awful lot of lost opportunity. Furthermore, the 15% of companies that do engage in international shipping are forced to confine most of their business to a few key business-center cities in Europe and Asia. And too much of the shipping is done at a loss.
The wrong strategy can cause system-wide problems
But that is not the most threatening problem. The most explosive landmine is the fact that adopting an ill-conceived international small-parcel shipping strategy could completely destroy your carefully orchestrated ERP system, resulting in lost visibility and, at the very least, retraining.
As we all know, building an overseas warehouse is simply not an economically viable option for most companies just beginning to ship to individual customers in other countries. Direct shipping is preferable since it not only eliminates overhead costs but is much more flexible.
Look ahead to multi-distribution international shipping
Of course, once a company�s international business is established, it does make sense to build overseas warehouses. In fact, when designing your shipping system, it should be ready to accommodate multi-distribution shipping and foreign-origination shipping.
Thus, the best way to ship overseas �- either direct to consumer or direct to retailer � is through your own logistics chain, from order entry through to your shipping platform. The good news is that ERP and warehouse management systems are becoming more internationally sophisticated, providing intelligent access to overseas markets. The key stumbling block is small-parcel shipping. Creating a small-parcel international shipping system is not simply a matter of printing a label or becoming carrier compliant.
Culture and language are both a challenge and opportunity
The international shipping challenge encompasses culture, language and politics. The answer lies in a combination of technology and tactics. Here�s an example of a culture and language challenge. Very few Japanese truck drivers read English, just as you don�t often find an American truck driver who can read Japanese. The quick answer is to print package labels in Kanji; however, this then presents a technology challenge. Japanese characters can�t be conveyed in traditional single bit characters. You need double bit. Even shipping to Canada requires code that handles both numerical and alphabetical characters in the postal code field � a small but critical detail. Of course one answer, albeit an expensive answer, is ship small parcels through a single, premium-cost, US-based carrier.
The best way for larger companies to approach international shipping is to extend their existing multi-carrier systems to encompass overseas destinations. Not only do you receive significant cost savings through lower rates, you can also enable your shipping platform to provide key features such as tracking, address verification, package return and management information. Thus, you will be able to harness cost savings, customer satisfaction and centralized information benefits of your existing multi-carrier shipping software system.
Quality and functionality of your software is key
As is apparent, the key to adapting your shipping system for international business is the same as when you first selected and installed your existing system. It�s the quality and functionality of the software, especially in its ability to select the best carrier and service. This is not simply a rate issue. It is a business rules issue. It is about harnessing and enhancing the existing logistics chain, with implications for order-entry, CRM, WMS and the warehousing of financial and marketing data. Good shipping software can encompass all of these areas. And when it comes to international shipping, integration into the ERP is more important than ever.
And so is system flexibility and smart tactics. For example, one company that ships relatively light parcels to Japan was paying $30 per overnight air package. To say that per-unit cost cut into profit margins is an understatement. The problem was solved when the company changed its system to allow bulk shipping via overnight air to a local Japanese carrier. From there, the products were unpacked and express shipped to individual customers. This required the bulk package to have two labels, one of which was in Kanji. And inside the bulk packages were the individual packages with Kanji labels. Thus, the customers received their products quickly from familiar carriers. And the cost went from $30 to $8 per package.
A true global shipping system must be fully integrated with ERP
If you don�t adopt a true global, point-to-point multi-carrier shipping system, you lose the advantages of an integrated ERP system. And you literally will be required to change the way you do business. You will lose your system-wide visibility and be forced to make adjustments to your workflow, giving up hard won ground. Customer service will be affected and retraining may be necessary.
Now for a word about customer relations. Or should we say cultural relations. In international shipping, that translates into two areas: getting the parcel to its destination and making sure its label does not offend your customer. Does the order entry system allow for umlauts and accents? There are city names in Germany that are spelled the same and differentiated only through an umlaut. And a customer in France would justifiably be offended if the accent that is a part of his first name were missing.
Is it worth the trouble? Only if you want to profitably tap into international markets.
Michael J. Kurgan is chief executive officer of ShipNow, a software design and integration company specializing in multi-carrier, small-parcel shipping. Reach him at 312-587-2800 ext. 2881 or mkurgan@shipnow.com.
