You would not be reading this magazine as an industry observer if you weren’t already hyper-aware of the explosive growth of B2C e-commerce in 2020 and the impact that has had on supply chains and domestic parcel volumes. The global picture is even more complex. Online shoppers are ordering globally sourced goods and don’t even know it. And they don’t want to have to care.
First, the pre-COVID stats:
- A 2018 Pitney Bowes survey indicated that 49% of US consumers shop cross-border (62% of them on marketplaces and 38% on retailer sites) and the frequency of their making cross-border purchases is up five percent over the previous year.
- A 2019 eMarketer Global eCommerce report estimated that by 2021, global e-commerce will approach $5 trillion.
- An Accenture study found that cross-border e-commerce represents 20% of global e-commerce and is growing at twice the rate of domestic e-commerce. The surge is straining customs operations and creating challenges for authorities around the globe.
Now the COVID stats:
- According to Global-e research, cross-border online sales worldwide have increased by 21% from January 1 to June 14 (2020) compared with the same period a year ago.
- In the United States, April’s global cross-border online sales grew by seven percent; in May, it surged by 42%, with June showing the same positive growth trend, bringing total US cross-border e-commerce growth to 10.2% from January to mid-June.
- Air Cargo News reported that air freight volume plunged by almost 28% year on year in April, according to IATA.
- WorldACD reported that the capacity crunch has led the average air freight rate for transporting 1km of cargo to increase by 48% worldwide.
All this means is that despite the heightened demand for goods sourced out of country, the lack of air capacity to move goods internationally has driven prices sky high, making it not only too costly to ship one parcel at a time across borders, but also operationally complex.
Challenges in Managing Cross-Border Last-Mile Delivery
It’s easy to sell goods internationally. But there are many challenges that await those who are blissfully unaware of everything it takes to move goods across borders. To name a few:
Customs Compliance: It starts with the arcana of classifying your goods with six-digit harmonized codes (HC) for exports. But then there is the matter of determining how those standard codes will be translated into codes used by the importing country, which can be 12 digits long. These codes determine how you will comply with customs documentation, duties, and taxes. Getting them wrong can result in delays, sanctions, or, worse, customers having to pay the difference or reject receipt of the goods, which could result in an expensive returns process.Border Security: Since 9/11, regulatory mandates hold shippers responsible for ensuring international shipments are not bound for consignees on countries named on dozens of different US government watch lists. Not all shippers have implemented restricted/denied party and embargoed country screening programs as required by US regulatory agencies. Failure to meet these requirements could also mean delays or loss of export licenses.Addressing the De Minimis Dilemma: US Customs and Border Protection (CBP) recently raised the de minimis value threshold (the value below which goods are exempt from duties and more extensive customs documentation) from $200 to $800. This was intended to pave the way for more package volumes to flow through customs with minimum screening. But it has created more work for shippers to monitor the value of goods crossing borders.
Dynamic Requirements Cause Strain
Even if you knew everything you needed to know about international compliance, there is still the operational challenge of making it all seamless and transparent to consumers who don’t want to see the cross-border sausage being made. A few of the issues logistics operations need to consider:
Landed Cost Calculations: It’s one thing to understand the financial requirements for cross-border movements into each country; it’s another thing to apply those costs to product pricing in a way that enables you to maintain margin but still shield consumers from having to worry about paying duties and taxes. Presenting landed costs in a shopping cart almost certainly would result in abandonment.
Data Normalization: Cross-border logistics involves multiple touches by supply chain partners, across a series of data silos. From inventory to a first-mile carrier, to a freight forwarder, through customs clearance, to a drayage operator to a last-mile delivery provider, it’s hard to maintain data continuity and one source of order “truth.” And yet tracking data is critical for billing and customer service, not to mention returns processing, dispositioning and credit.
Regional Delivery Networks: In the US, the parcel carrier industry is much less fragmented and regionalized than in other parts of the world. This makes managing last-mile delivery carrier compliance very difficult. It is also tempting to think that last-mile customer delivery expectations in North America are the same all over the world. They aren’t. Lockers, kiosks, and hold-at-location pickup points are more commonly used, for example, in Europe and Asia than in the US.
Given all of the challenges, what is an e-commerce B2C provider to do? The logistics industry has seen many innovations because if necessity is the mother of invention, desperation is the father. That’s why global logistics organizations like UPS, FedEx, and DHL have stepped up to offer end-to-end international delivery services designed to optimize consumer international delivery experiences at a reasonable cost. They do this by consolidating individual parcels into a single container, clear the container through customs as a single entry, deconsolidate the container at the destination port, and then inject the parcels into a last-mile delivery network. Other global organizations like SEKO, Pitney Bowes, and multi-national 3PLs (“intermediaries”) are now offering similar services.
But those new technologies still require shippers to implement processes that enable intermediaries to do their job. To implement cross-border consolidation/deconsolidation, multi-carrier parcel management solutions (MCPMS) need to support processes that include the following steps:
1. Open a container: To maintain tracking capabilities, shippers need to be able to open a container (or gaylord) that will be used to consolidate parcel shipments destined for another country’s deconsolidation point.
2. Process drop ship labels: MCPMS solutions need a multi-regional capability to print parcel labels with return address and tracking information that will enable deconsolidation and injection into a carrier network from the deconsolidation point.
3. Load the container: The MCPMS captures and correlates the parcel tracking number with the container tracking number as “child” parcels are loaded into the master container(s). This will enable fulfillment operations to maintain end-to-end tracking continuity. Loading the container could take place over several days.
4. Close the container: The MCPMS prints the container label and all international compliance documentation necessary to execute a single customs clearance for all parcels.
5. Upload the manifest: The MCPMS uploads all the shipping data necessary for the global intermediary to complete the cross-border last-mile deliveries and accurately invoice the shipper for all landed costs.
There are many benefits this process offers e-commerce shippers. It automates the digital (shopping cart) and physical logistic fulfillment processes in the warehouse. It reduces shipping costs by consolidating parcels during the international leg. It reduces the risk of delays in customs by leaving regulatory compliance to the experts. It satisfies consumer demands for a seamless delivery experience. And it maintains global, end-to-end tracking visibility.
The Future Is Bright
We live in a digitized world and that is helping to streamline international e-commerce logistics. But shippers need to partner with the right global logistic intermediary and the right technology providers to stay competitive and profitable.
For more than 25 years, Bob Malley has helped thousands of businesses reduce costs and streamline logistics with transportation software solutions. As managing director of Pierbridge, Inc., Bob has built an international organization that has successfully established Transtream as an industry-leading multi-carrier management platform that powers some of the largest shipping operations in the world. For more information on cross-border automation, visit https://pierbridge.com/on-demand-take-the-mystery-out-of-global-delivery-webinar.html.
This article originally appeared in the Fall 2020 International issue of PARCEL.