7 strategies for managing the big risks of international distribution

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Photo by Bernd Dittrich

In the international trade industry, it is vital to maintain a competitive advantage in the supply of goods on a global scale. Your business needs to deliver goods to the right place at the right time, consistently and efficiently.

Transportation costs need to be kept at a certain level to ensure healthy margins, and goods need to be delivered quickly and in good condition. No matter what you are transporting or what borders you have to cross, you need a flawless transport and movement mechanism, to have a competitive advantage as well as maintain profits.

While transported, goods exposed to many risk hazards — the more expensive the cargo, the higher the risk.

Understanding the types of risks your business can face is the first step. You should then develop a strategic risk management plan to protect your goods and pick an international shipping company wisely.

Risks of International Shipping / Distribution

  • Loss and damage to cargo.
  • Unexpected additional costs, such as storage.
  • Delay or interruption of the supply chain.
  • Injuries or death.
  • Increase in insurance premiums.
  • Higher prices of goods for consumers.

Seven Strategies to Reduce Risk Management

1. Choose Your Carrier with Care

The choice of distributor and the conditions of the relationship should serve as long-term goals when doing international business. "The most obvious and appealing distributor is not necessarily the best partner in the long term," says the head of Loctite.

Below is a checklist for choosing a carrier and distributor:

  • Determine how long the potential carrier/distributor has been in business.
  • Check their equipment or distribution center - If it is in good condition and is safe.
  • Determine your business model - your fleet or owner-operator contract.
  • Make sure their staff is well trained and qualified.
  • Check the carrier's track record.
  • Consult with other customers regarding their experience with the carrier.
  • Check the driver's training and accident information.
  • Understand the freight claim rates.
  • When using a freight forwarder, find out whom he or she is using as a carrier.
  • Work with vendors to ensure that the level of service is up to the industry standards (or higher).

2. Detailed Documentation

For international transportation, one has to know precisely what documentation is required.

Documents must contain all the necessary information. If your documents are inaccurate or incomplete, the shipment of your goods might be delayed or canceled altogether.

Protect your business, profits, and time by keeping strict records.

Many transportation services are paperless. For example, railway quotes, bookings, and other documentation are all online. In Canada, the United States, and most European countries, customs documentation is digital.

However, this does not apply to all countries. Be sure to consult with consulates and agents for all the information on all the procedures affiliated to filing customs declarations and documents in other jurisdictions.

Focus on accuracy, details, and complete documentation on shipping documents.

3. Clean, Clear, and Comprehensive Contracts

The terms and conditions with regards to the delivery of the goods will be specified in the contract of sale. The Incoterms® rules will affect how the goods are delivered, where the sellers and buyers take responsibility for the products, and for what each of them is responsible for.

Since the cost of transporting the goods are generally not included in the contract of sale, a contract with a third party company, which does international delivery and transport of the products is required.

Such a contract defines the rights and obligations of all parties involved. The contract is usually in the form of a consignment note.

Ensure that the terms of the contract of carriage are clear, and each party understands their rights and obligations under the contract.

If necessary, seek legal advice.

4. Clear and Timely Communication

Excellent communication is an integral part of risk management. The timely provision of detailed information can help you reduce any additional costs:

  • Prevent unplanned storage or transportation costs by ensuring that the carrier has specific data at the port terminal for cargo delivery.
  • When transporting dangerous or hazardous goods, provide emergency and rescue personnel with the necessary information to avoid the effects of any incidents.
  • Inform the importer when the consignment is at the border to ensure that customs documentation is submitted at the right time.
  • Ensure that your insurance company has the name of the mode of transport you are using, its registration number, and any other necessary information to cover any risks to the cargo.

Timely provision of vital information may be ambiguous in international trade due to different time zones and international databases.

It is crucial to keep everyone informed by providing them with accurate information.

Language and cultural differences can also affect communication. If documents in a foreign language are required, make sure that there are translators with experience in the transport industry, to ensure that the terms of delivery are clearly communicated.

Organizations often hire agents with specific business and language skills to accelerate their business in other countries.

5. Right Man for the Right Job; Always Hire Professionals

The people who are involved in the management and handling of the goods must receive the training necessary to ensure the safe and effective transporting of goods.

When using a freight forwarder to deal with Customs, make sure that he or she has qualified personnel.

Ensure that those hired to manage trucks, ship captains, operate sea container cranes, and manage customs processes are properly trained and qualified.

6. Implement and Execute Security Practices

Generally, expensive goods are designed not to be stolen and are usually easily identified and transported. However, there are many security measures that your company can implement to prevent theft:

  • Conduct a thorough background check on new employees and new contractors.
  • Simple containers without logos and company names are useful for hiding information about the type of product that may be inside.
  • Consider all goods leaving the warehouse and ensure that all trucks, containers, and boxes are properly sealed with the correct seal numbers in the documentation.
  • Use privacy and discretion when choosing where to store your goods.
  • Keep the time, place, and date of delivery a secret - this limits the ability of criminals to plan their thefts.
  • Make sure that the acceptance and delivery protocols are followed to ensure that legitimate drivers have access to warehouses.
  • Keep travel time short.
  • If possible, use direct routes or direct delivery.
  • Avoid long periods when containers are unattended.
  • If containers need to be stored, make sure they are locked and monitored by distribution centers or warehouses.
  • If possible, avoid high crime or high-risk areas.

7. Use Technology as a tool

Technological solutions range from seals and packaging for protection against unauthorized access to satellite tracking technology:

Locks:

  • Combinations of locking systems with threaded rods through door locks, rods, and door handle with steel ropes.
  • Electronic locks for container doors locking from inside the container, preventing thieves from accessing and breaking the lock.
  • Locks and electronic steering and engine systems that prevent truck and cargo theft.

Seals:

  • Plastic or metal pins that are made through container locks, door handles, or metal numbered tape over openings that will be broken if the container door is opened, indicating counterfeiting.
  • Reusable seals that electronically record the number of times they are opened and closed, indicating the number of stops of the vehicle and the frequency at which the container is opened.

Trackers and locators:

  • Barcoding, RFID tags, and GPS trackers allow you to track your goods and vehicles.
  • Systems where customers receive an online confirmation of delivery status and estimated delivery times.
  • Barcodes and RFID tags allow you to scan or track shipments automatically at any stage of the shipment process.

GPS systems, together with online electronic data interchange (EDI), as well as on-board communication systems installed on vehicles and containers, enable carriers to track their movements and ensure accurate estimated arrival times.

Loss of goods, theft, and damage can destroy any competitive advantage gained in international trade. Plan, prepare, and implement risk management strategies as well as improve the security measures taken to protect your shipments best.