What are logistics?
What are “logistics”? In short, it is the business of transporting freight cargo, whether by ground, air, or sea travel. When working in any business that deals in physical products, you’ll want to know the in’s and out’s of logistics, especially once your business or agency starts moving product nationwide or internationally.
Moving from “point A” to “point B” may sound simple, but there are a lot of complicated steps and players in this process. The shipment in question may end up visiting a lot of loading docks, warehouses, or fulfillment centers before it reaches its final destination. A lot can go wrong between these steps, and you want to be prepared for the day you get that dreaded email from customs.
As an agency, we don’t produce all of our products in-house. We have a strong network of manufacturers, suppliers, and artists to rely on. But with many of our specialized contacts based in different states, sometimes even different countries, we often need to facilitate the shipping logistics between them and the end client. We’ll be going over the basics when it comes to domestic ground logistics and handling customs for international logistics.
Domestic Ground Shipments
LTL and FTL
Ground shipments by trucks are classified as either LTL or FTL. These stand for “Less Than Load” and “Full Truck Load”, respectively. LTL shipments tend to be between 100lbs and 10,000lbs so most of your early shipments will likely be LTL. Before scheduling an LTL shipment with a freight forwarder, make sure you have as much information about your shipment as possible. Because your shipment is LTL, it will be sharing truck space with other shipments carried by your freight forwarder. In order to lock in your shipment, it is vital to provide the carrier with your cargo’s exact weight, dimensions, and pick-up time.
Ideally, you will want to know how your freight is packaged as soon as possible. Your cargo will likely need to be palletized so that it can be easily moved from its origin to its destination. Calculate how many pallets you require and make sure to account for the added height and weight from the pallet dimensions. Without this information, your freight forwarder will have trouble coordinating how they will schedule your cargo pick-up and delivery. A drawback with LTL shipments is the overall delivery timeline. Since you are sharing the delivery truck with other shipments, the truck will have multiple stops to make and will not be on a direct route to your destination. The last thing you want to do is schedule an LTL shipment when you are short on time, so make sure to start early to be as prepared as possible.
If you have a much larger shipment to send out (or if you find yourself without enough time), you need to turn to an FTL shipment. These are more expensive, but you gain more scheduling flexibility and cargo space. FTL shipments are also better for high-risk or delicate shipments. LTL shipments may be unloaded and reloaded at multiple fulfillment centers along its route. Since an FTL shipment stays on the truck until it reaches its destination, there is less risk of damage to your goods. You can read up on more differences between the two with FreightRate’s article here.
Freight Classes and BoL
Aside from LTL and FTL, there are many other aspects to consider when planning your shipment. One of the first ones is determining your freight class. Freight classes are a categorization, similar to custom codes, based on your cargo’s density, volume, and materials. Higher classes are usually hazardous or extremely heavy. Hint: trade show materials are always class 125!
One of the most vital aspects about planning your shipment will be your Bill of Lading. This is your last line of defense before your shipment leaves. It details everything about your shipment: dimensions, weight, class, pick-up location, destination, and schedule. If you are able to see your shipment off, you should make sure the freight driver’s Bill of Lading is completely accurate.
You will also want to make sure you sort out pick-up logistics. Our items don’t always send out from warehouses. In some cases, custom projects need to leave from a street business or your own headquarters. With larger shipments, you will need a forklift on site in order to load your cargo on the truck. If one is not available, contact your freight forwarder about getting a truck with a lift gate or an accompanying forklift rental.
International shipments will usually adhere to the following order: shipper, origin warehouse, origin port, destination port, destination warehouse, and finally the consignee. Our domestic ground logistics overview covered the first three locations, but things get a lot more complicated when shipping to other countries.
Customs are the national government inspections at ports of entry. They examine and verify all materials going in and out of the country. In order to ship anything outside of the country, you’ll need clear customs. This involves preparing and submitting various documents to facilitate your import/export. The commercial invoice details the parties involved in the shipping transaction, the goods being transported, the country of manufacture, and the Harmonized System codes for those goods. It must often include a customs declaration statement certifying that the invoice is true. Depending on the type of goods, you will have to pay a percentage as a duty. Duties are determined both by the commodity and the countries it is traveling between. Because of this, if you are exporting a product to multiple countries, clearing customs can be a real headache.
Commodities are classified by customs Harmonized System codes. This is what will determine your duties due, but keep in mind that these codes are determined at customs and by customs. You may be able to predict your commodity’s customs code, but a product could be reasonably classified under more than one code and this can incur a different duty rate than you were expecting. To look up a customs codes, you can visit the Harmonized Tariff Schedule. A customs broker can be a useful resource in determining how best to get your commodity through customs and managing logistics between different nations.
When discussing an international shipment to a client or from a vendor, you’ll hear a large variety of acronyms. These describe the party or parties responsible for overseeing the shipment before and after customs. DDP stands for “Delivered Duties Paid”. If you receive a quote from a vendor that they will deliver X units at $6/unit DDP, then this means they are will pay duties and hold responsibility of the shipment until it is fully delivered. Alternatively, there is DAT, which stands for “Delivered at Terminal”. This “terminal” usually refers to the destination port of entry. So a vendor selling a product DAT means they will oversee and hold responsibility of the shipment until it reaches the destination country. After that point, the remaining logistics to get the product to you is your responsibility.
There is a wide variety of shipping incoterms, so we’ve prepared a small summary and diagram below!
Your shipments incoterm also determines the responsible party for dealing with customs. If you are receiving an incoming freight shipment and do not have experience dealing with customs, you should pass on the customs authority to the freight forwarder moving the cargo. For example, if you are expecting an EXW shipment from a vendor who is using DHL Express for the delivery, you can contact DHL and have them handle the customs clearance on your behalf. You will be expected to fully repay duties and taxes to them of course. We recommend this method as the freight forwarder will be much more experienced in pushing shipments through customs, and they will be easier to work with as well.
Overall, our best advice for organizing logistics is to get started early. Do your homework and be as prepared as possible. Work with your freight forwarder, they are experts in this field and will be able to address any of your concerns. Logistics are complicated and there are a lot of moving parts to organize, but we hope this guide has helped your next shipping endeavor.
To read up more on the day-to-day of running an agency, check out our WAYPOINT blog guide on Music Licensing here.
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