In todays global economy, American businesses are feeling the gravitational pull of the international market. Particularly as the US is expected to be a net importer for the foreseeable future, US-based firms are increasingly feeling the pressure to establish overseas operations, either in house, through a joint venture or with an agent.
While there will always be niche players who will remain
US-centric, many will find that their futures increasingly lie outside the domestic marketplace. You may be supplying a multi-national manufacturer with key components that are built into finished products at overseas plants. Perhaps you are outsourcing your production, expanding your product line to international end markets for the first time or attempting to enlarge your existing global footprint.
The opportunities are compelling. The Asian transportation market alone, for example, is expected to grow from US $700 billion today to US $1.3 trillion by 2021, according to forecasts from McKinsey and Boeing. Other overseas markets are expected to show similar robust growth. Besides the prospects for solid revenue improvement,
the advantage of going global is that goods often command higher profit margins overseas than those sold in the domestic market.
This is true for several reasons. First, many research and development expenses have already been absorbed through the domestic sales process. Second, there are fewer suppliers engaged in global sales. Third, marketing expenses are significantly reduced in cases where a product is sold directly to retailers, as is often the case in export shipping. By contrast, the traditional domestic business model calls for manufacturers to sell into their channels of wholesalers and distributors, where there is additional mark-up before the product hits the retail market.
Look Before You Leap
As more markets especially emerging markets open their doors for trade, exporters must nevertheless be mindful that the risk of doing business overseas can be as great as the reward.
The need for proper and thorough export compliance, for example, has never been more critical. Success as an exporter depends in large part on the ability to properly prepare a commercial invoice not as simple a task as it may initially sound. The commercial invoice may also require the accompaniment of a Shippers Export Declaration (SED), a document for shipments over a certain value, specific destinations or for specific commodities, which is used by the U.S. Census Bureau to compile trade statistics and prevent illegal exports.
In a volatile geopolitical climate, regulatory authorities have zero tolerance for export data they consider vague, incomplete, misleading or failing to comport with local customs. For example, exporting to
Similarly, off-the-shelf software which can generally be exported without an export license often requires very specific and detailed licensing requirements if being shipped to a country with poor political relations with the
Even if a shipment is bound for a friendly nation, the lack of robust documentation can lead to fines, penalties, lengthy delays and even seizure of cargo. It can also result in your company being placed on a customs watch list, a dubious distinction that can place all future transactions under a higher level of regulatory scrutiny.
Step I Know Thy Markets
Exporting and importing are two-way · streets that often dont follow the same path. In general, exporting is a more complex exercise and involves multiple steps. Is there an end market for the product? If so, can you market effectively to it? Should you build here and ship, or outsource your production in or near the end market? Do you understand the customs rules of the exporting country? And once you are there, are you aware of the risk triggered by issues such as poor infrastructure, political instability and differing legal practices?
Unlike exporting, which involves selling into different cultures and customs, the
A growing number of shipping providers supply importers with Web-based tools that enable them to take control of the supply chain and intelligently leverage the information at their disposal. After all, a logistics providers most important attribute is not so much its shipping, but its information network.
Step 2 Think Holistically
Importers and exporters have a tendency to view logistics as an afterthought, often the last step in the process. This can be a mistake. As an analogy, imagine a transaction as playing a hole on a golf course. The drive, fairway and approach shots may be flawless, but a failed putter can ruin the entire game. The same principle applies with supply chain management.
All of the hard work can be undone without strong logistics execution. The energy and talent invested in establishing a robust network of sales, marketing and production will be diminished if your product hits a bottleneck in transport, distribution and customs clearance.
To deliver the optimal outcome, all of your departments sales, marketing, finance, IT and logistics must work in harmony, with no silos keeping them apart.
Step 3 Choose Your Partner
Import and export planning involves a wide range of issues, from inventory levels and manufacturing lead times to customer preferences and transportation options. A freight
forwarder, whether it controls its own shipping assets or relies on others for transportation, can be an invaluable ally. Not only can forwarders offer the importer and exporter a broad range of transportation options, but they also understand the complexities of international trade and can guide you every step of the way, from purchase order management to final delivery, to get your goods to market quickly, efficiently and with minimal headaches.
As an importer or exporter, you can perform your own evaluation without the need of a specialist, especially in the area of carrier pricing. It would be wise to benchmark against the competition to determine the best rate for the transaction and work with carriers to explore ways to cut costs. Companies should consider purchasing a carrier-neutral, carrier-independent shipping system, especially one that calculates landed cost, the all-in cost of transportation, distribution and customs clearance.
These systems provide you with the flexibility to customize your shipping requirements while at the same time effectively compare carriers rates and service offerings. Many of these systems are capable of linking with your in-house IT structure to generate performance reports and other value-added services. These systems can quickly pay for themselves and, depending on the volume, will generate enormous savings and benefits for years to come, while saving your company from potentially costly mistakes.
There has never been a better time for companies to step outside of their home markets. Global disposable income is increasing, markets are opening, barriers are falling and the tools to capitalize on these favorable trends are more robust and functional than ever. It is right to be concerned about risk, but to coin a phrase, when it comes to breaking into the international market, the biggest risk your company may face is not taking one. Understanding the risks of entering the global economy is half the battle in reaping the rewards that come with making the world your market.
Jon Routledge is Vice President of International Sales for DHL Express. For more information, visit www.dhl-usa.com.
Besides the prospects for solid revenue improvement, the advantage of going global is that goods often command higher profit margins overseas than those sold in the domestic market.