Last week we talked about shipping with a focus on customer orders and shipping with courier companies. There’s another side to shipping that we only touched on briefly, and that is actually getting the huge orders (usually from China) to our warehouse in Calgary. Unlike couriers, which handle millions of packages going between unique individuals every day and run on giant, well-greased systems where inefficiencies are not tolerated, freight companies haul enormous orders for businesses and don’t need quite so much organization, so they don’t have it.
Ocean shipping, or freight, only really concerns businesses selling physical merchandise that isn’t manufactured locally, and usually weighs over 100 kilograms (for anything weighing less it will be a better value to ship by air). But, even if this isn’t you, there’s still a fascinating world that goes on behind the scenes to read about.
For instance, why did Phidgets get a huge shipment of lawn furniture when we were expecting motors? No, we weren’t interested in taking a new business direction, it is the nature of freight shipping, unfortunately.
The logistics company we were using at the time hired one of their usual trucking companies. However, the trucking company didn’t check the paperwork when they left Vancouver for Calgary and they had loaded the wrong boxes onto the truck. This isn’t as uncommon as you might expect. Unlike courier, there’s no digital system in place where packages need to scanned. In freight, it’s people moving the boxes and although they should be checking paperwork, they rarely do. So, a shipment of lawn furniture arrives and we send it back. The next day, the same shipment comes to us. At this point, no one knows where the motors we’re expecting actually are. They could be at the doorstep of someone expecting lawn furniture or back at the freight warehouse. Two days later, they find the motors. They had to send people scouring their huge warehouse for these boxes and it couldn’t have been easy – none of the boxes said “Phidgets” on them.
Unfortunately, this is the story of freight, and you just have to put up with it, hope to find someone who cares enough to do it well and not charge exorbitant rates. When you’re shipping crates and cartons of merchandise, freight is your only option. So, let’s talk about how it works.
Freight is done by hand. For shipments to go smoothly, everyone in the freight company has to be motivated to do their job. If your customer is Walmart, you are highly motivated; You wouldn’t want to be the person who lost the Walmart account. If your customer is Phidgets, you are not going to get fired if they are unhappy because you took a week to do some step.
There are several stages to shipping. First, the shipment has to be picked up from the supplier, with all of the appropriate paperwork. Sometimes the supplier arranges this (called free on board or FOB) and sometimes the purchaser is responsible (called ex works or EXW). The shipment will make it to the port, be loaded onto a cargo ship and will set sail with hundreds of cartons destined for North America. Once arriving in Canada, the shipment will have to clear customs, and if the paperwork isn’t done well customs may do an inspection, which will take weeks and cost a lot (about $1000 CAD). So long as everything’s in line the ocean shipper will hand off the shipment and its paperwork to a trucking company, who will take it to our warehouse.
Plan on the shipment taking at least 4 weeks. The bigger freight companies, with more connections and better systems in place for tracking will likely be faster. For us, using UPS Supply Chain Systems, the timeline usually looks like this:
- 7 days for the shipment to be picked up from the supplier to when it reaches the port.
- 10 to 15 days for the vessel to cross the ocean and arrive in the Canadian port.
- 7 to 10 days to get through customs, onto a truck and into our hands.
Track everything yourself.
At Phidgets, with various shipments at different stages, the statuses of each are checked daily. When a shipment isn’t where it’s supposed to be when we expect it to be there (given the times expectations above), we get in touch with the logistics company and figure out what went wrong. It’s very important to stay on top of this to avoid completely losing a shipment.
Most logistics companies offer some sort of online tracking. This tracking is usually meant for the company, but the company doesn’t need all the information that you, as a customer, need to know – like when the shipment is expected to arrive at your warehouse. It’s good to note:
- When the shipment is picked up from the supplier
- When the shipment is boarded on the vessel (along with which vessel it’s on, and what the sailing number is)
- When the vessel departs
- When the shipment has cleared customs
- When the shipment is handed over to the trucking company (they will need to hand over the bill of lading here)
- When the shipment arrives at the warehouse
If the logistics company isn’t giving you estimated times of arrival, you can use tools like marinetraffic.com for tracking.
The toughest stage of the process is knowing what happens to the shipment once it hits the local port, the logistics company won’t necessarily tell you what trucking company they’re using, in which case you’ll have no tracking.
When it comes to freight, all the paperwork is done by hand and if it’s not done, your shipment doesn’t move. Keep a copy of all paperwork because the logistics companies have been known to lose theirs. Depending on what you’re importing, you’ll need different paperwork. Everyone will need a bill of lading, which details a shipment of merchandise and gives ownership of that shipment to the specified party. If the shipper doesn’t have a bill of lading, they cannot hand over any goods. This protects the suppliers from not getting paid for their goods. We also include a commercial invoice and packing list, which state what’s in the shipment, how many items there are, their value, and the classification codes for determining import duty. While the supplier makes their own commercial invoice and/or packing list, we will always check these and do our own if any of the numbers need changing for Canadian customs (let’s just say that some suppliers will fudge the numbers to lessen their duty, or use different classification codes than the Canadian government does).
At one point, we thought it would be cheaper to use different freight companies and handle some of the details ourselves, but have you ever considered all the steps involved in shipping, each one with their own expense? You’ll pay for:
- Trucking from supplier to port and port to warehouse
- Terminal handling at both ports
- Ocean shipping
- A customs broker
- Processing paperwork
And, to make it worse, many of the companies that manage these steps don’t accept any payment with fees behind it, like Mastercard! Larger logistics companies that handle shipping from origin to destination can handle these fees themselves, so it’s much less of a headache.
Choosing A Logistics Company
The salespeople will be the first people you come across when approaching a new logistics company. Since they’re the ones trying to get your business, they will lie to you about everything: how cheap it will be, how efficient their process is, how easy handoffs will be, how quickly it will travel, what systems they have in place, et cetera. Basically, don’t believe a thing they say. It will take longer, be more expensive and run into way more glitches than they quote.
Everything depends on the operational staff at the logistics company. After the salesperson has taken you out to lunch and told you lies, develop a relationship with someone on the operational staff who’s doing the real work and cut the salesman out as much as possible. The inside person will be your goto whenever you need a shipment. If you find someone really good then cross your fingers that they never leave.
Phidgets dealt with a logistics company for a while that efficiently got packages to us without any glitches. Our contact there cared about the shipments and cared about her job. But, she left, and things were never the same again.
For a year, we tried to use logistics companies in China to send the shipment to Vancouver. Upon arriving in Canada, we used local companies for customs and getting the package to our warehouse in Calgary. It didn’t work, and it won’t work for you. The handoff between companies is very error prone and expensive (it is, even if the salesman tells you differently). And that’s how we learned: Use only one logistics company to handle the shipment all the way from the origin to destination.
For now, UPS Supply Chain Service does the job really well. Their prices are ridiculously reasonable. Their online tracking is customer-oriented, is detailed and alerts can be sent to your email. They handle the shipment from origin to destination as well. There will always be the possibility for someone to drop the ball along the way, but the less hands it has to change, the better.
For an in depth look through the many variations of shipping, read this guide by the Canadian government.