Crowdfunding Fulfilment Solutions – Part 2

Crowdfunding Fulfilment Solutions 2

Crowdfunding Campaign Fulfilment Questions Answered

This blog post is a continuation of a previous post on crowdfunding fulfilment

Anthony Lovell de Souza continues with this in-depth interview where he asks crowdfunding fulfilment experts Richard Perriman and Tony Leach to share many of the issues and solutions that project creators face when it comes to fulfilment.

Our questions continue:

Anthony: When it comes to time scales and delivery, say someone has run a crowdfunding campaign. They’ve got the money, they’ve got the product manufactured. It’s probably sitting somewhere in China.

When you look at time scales do you look at, say, China or from your hub? So if it’s all delivered into Los Angeles: what are we talking about when we talk about time scales?

Richard: If a hub and spoke method were applied, we may bulk ship all of your North American orders as one consignment into a USA hub by air or ocean.

For air freight from Hong Kong to the USA, including customs clearance, we would allow three to four days. That would include bringing the stock back to our warehouse in Los Angeles to sort and move it into a network for final mile delivery, either with the USA postal service or a UPS type service.

That service can take anything from two to seven days depending on the level of service, and where geographically within North America you’re delivering to.

An air freight from point of departure China, Hong Kong, through to final mile delivery can take about ten days. If ocean freight is used then add about 20 days.

A direct option straight out of Hong Kong for instance, with direct post or courier tends to be a much more expensive option, taking between five to seven days. However, it may not be the right fit for your needs.

Tony: When we measure what we call transit times or lead times to market we do measure them from the factory door to the end consumer.

Five Days VS 40 Days. There Is a Cost Difference.

When we speak to our customers at the planning stage, looking at their manufacturing windows and the campaign date, we could say: “These are five options that you have available and each option carries a different cost. But from factory door to an address in Spain via ocean freight into the Netherlands, or ocean freight into the UK, and then to spoke out from there, is going to take 40 days.”

However, if you go for an air freight into Heathrow and spoke out into a courier network, we’ve gone to most places in Europe within five days. But obviously there is a cost difference.

In the planning stages we may say: “Look, your product is not high value. You’ve not got a huge amount of margin so you probably want to do an ocean freight and then spoke out, which will be the most cost effective.”

Again, when you’re planning your launch date and you’re making promises to your customers for delivery, make sure you plan those lead times in.

That is why it is important that we sit down and plan those transit times; plan the lead times so you can maximise your profits within the supply chain by going ocean freight and spoke out via a mail service from Europe.

In that case, there is a 40 day window to get that product to market.

You have to allow that within your campaign and the promises you make to your customer.

You also need to allow for issues like manufacturing and production delays.

It does happen in China.

Nonetheless, we do try and give the customer the whole scope of what is available.

 

Fulfilment Packaging

Give Customers the Facts So They Can Make a Decision.

There are occasions where we may take the product anywhere in Europe within five days but that’s the most expensive option.

It does work for some customers who 1. have a high value consumer electronics or tech product, 2. have the margins to absorb the extra expense, and 3. feel very comfortable with that route.

The main thing is to give customers the facts so that they can make a decision.

Anthony: At what stage is packaging introduced into this process?

Richard: The packaging element is normally considered by the project creators themselves, but I think it would be naive for them not to consult us before they commit.

We are working with a campaign at the moment where the product is brought over in rudimentary packaging, purely to keep it safe for transit.

That packaging is still sourced from China but it’s brought over flat packed and constructed here in the UK.

The product is then also packaged here in the UK before delivery to the consumer.

The consumer gets the right client experience but the project creator has not had to pay two or three times the cost of the shipping.

Anthony: Do you do the packaging?

Richard: Yes, we do. The cartons in question are designed and manufactured in China. We bring them in very cheaply ahead of the product by ocean freight, so the unit price is less than pennies per item.

We then pop those cartons into position.

We can also do ‘kitting’, so the client might want to put in some special offer literature or a free give away with the product. At the last minute we can incorporate that when we do the packaging for final mile delivery.

Anthony: I’ve come across this term ‘kitting’ before. Would you elaborate?

Tony: Kitting is when we assemble individual items into ready-to-ship sets or kits. We call them SKU codes or Stock Keeping Units.

A customer of ours may source from four or five different factories in China but they bring all those products together to make the final ‘all-in-one’.

In other words, we receive them from different factories, so we have a number of products that need to be built for that single, final product.

We would rather do our kitting in Asia, using our warehouse there where traditionally it’s a lot cheaper to push it back up the supply chain. We kit into one box or into one product.

We can also do that at our warehouses in Europe and the USA.

Items Are Assembled Into Ready-To-Ship Sets or Kits.

It’s very common to have products that are manufactured by multiple suppliers and that customers want to add promotional items or an additional product into the final delivery.

So that’s one option.

We also do assemble on occasion in Asia for some of our customers when a product needs to be built up. Basically, kitting is taking multiple products and assembling them into a single box.

Anthony: As far as projects being subjected to tax or duties, when does that come into play?

Richard: Again, the conversation really needs to happen from the get go because it can have a massive impact on your margin, your cost to sale.

A lot of electronics into the USA and Europe are duty free.

However, if you discover when you’ve brought your product in that you have to pay 8% of the value to customs in terms of duty plus VAT, the margin now goes out the window.

My advice would always be: talk to us as soon as possible about this.

We can then help you classify your product with the local customs authorities, both here in the UK, in the USA, and other territories to ensure that you have absolute clarity of what the cost to market, the cost to sale, will be for your product.

There are also minimum thresholds that apply in different regions, so anything coming into the UK is subject to VAT if it’s over £15. It’s subject to duty and VAT if it’s over £150.

In the USA you can go up to $800 before you encounter any duty or tax on importation. However, the duty classification does not just impact on the duty and VAT you pay.

It also impacts on the customs processes and the compliance elements.

A lot of project creators are coming up with original products. By default, they are trying to break boundaries and come up with that unique new thing.

Those new things aren’t necessarily classified by customs yet because they don’t actually exist.

 

Customs and classifications

No Hold Ups And No Arguments Delaying Final Delivery.

So we work with those customers and with customs to get an agreement and a ruling to say: “UK customs are happy that my gadget falls under this classification code attracting a duty rate of x percent.”

That can then be used at the point of importation to ensure that there are no hold ups and no arguments delaying the transit time and final delivery to your end customers.

Anthony: Have you come across a practical example of that recently with a project creator?

Richard: Yes, a client had a product that operated different functions into one unit. You could classify it in four or five different ways.

They’d received some advice that turned out to be poor advice from a party that suggested that the product could be brought in as an MP3 player (it did have that as a contingent part) which attracted no duty.

However, customs decided to focus on the fact that it also had LED lighting and Bluetooth technology. They felt that was a much more primary feature than the MP3 player and as a result there was a delay in clearing the shipment.

Customs wanted to examine it before they made a ruling.

Additionally, the duty and tax applied killed the client’s margin.

Again, those conversations should take place way, way earlier giving an opportunity to iron these things out with the local customs authorities, so before the physical product arrives and is seen.

Correct Classification Of a Product Is Really Important.

Anthony: Sure, that’s a great example. Would you like to add anything, Tony?

Tony: Yes. Classification is really important and it does always give better margin management. If you haven’t classified your product and you don’t know what charges you could potentially experience, then you can’t manage your margins.

Another great example was when we were engaged with a successful crowdfunding campaign which featured a GPS device for cyclists.

The device enabled them to navigate but also to go off roads and not have to stay on tracks.

So you can cut through the park or you can go down the alley way and it will still get you to your location. You’re not fixed like a car to stay on roads.

Had that product been classified as a GPS unit it would have been subject to duties.

In fact, it was a Bluetooth device that connected into a smartphone.

It was the smartphone driving the technology for the GPS unit, so by classifying it as a digital compass, which is what happened, it didn’t have any duty.

The difference could have been a 6% additional charge on the value of the product, the wholesale value of the product and shipping, or a 0 percent charge.

Classifying the product correctly saved our customer with a very successful campaign considerable charges in getting that product to market.

Richard: “It’s really worthwhile understanding what the product components are and classifying them correctly.”

Anthony: With regard to tracking: suppose you have a dashboard that the project creator has access to and they can add or upload their information.

Are they able to track the order right through to the final destination? What other tracking do you incorporate into that?

Richard: We are a freight company as well as a logistics company. What I mean by freight company is that we can move bulk products around the world.

We move thousands of ocean containers and air freight consignments as well as small packages and courier.

We’ve had to invest quite heavily over the last five years in what we call end-to-end visibility.

We are quite unique in that our customers can log into our dashboard and secure portal.

There, they can actually see their product. We call that vendor and P.O. management. We have origin teams that will check the status of our client’s manufacture so we can go much deeper into the supply chain.

A customer can ask whether their manufacturing is on time, or whether it will leave the factory at a certain date.

Once it leaves the factory we take management of that product.

They then get visibility of all the major milestones and stages within the supply chain. So for example, has the product cleared customs at origin, has it left China, has it arrived in Europe, has it gone into a courier network and has it been signed for and delivered by the end customer?

We’re quite unique in the sense that we offer a complete end-to-end visibility.

 

Product Returns

Customers Can Manage Their End-To-End Supply Chain.

It’s very straightforward and easy to use as it tells the customer exactly where their product is within the supply chain, and then where that individual order is: Has it been delivered to Mrs Brown or Mr Smith?

It’s great from our customers’ perspective because they can manage their supply chain from end to end.

Where that’s really good is if they’re working with multiple factories or if they’ve had a successful campaign and they want to have a platform to continue trading.

They can utilise this platform going forward to manage their end-to-end supply chain.

Anthony: There must be occasions when you use third party couriers to do the final mile. Can your tracking software include that as well?

Richard: Yes. We always use third party couriers.

The major players, be it FedEx, DHL, DPD, UPS. Obviously, we have contracts with them.

One of the advantages of having contracts with those courier providers is that we get favourable rates because of the volumes we move via the fulfilment and via B2B transactions.

We can pass those favourable rates on to the customer.

Equally, because at peak season around the world we could be processing around 20 thousand orders a day, we have to have integration with those courier partners and with the local mail service.

We have bi-directional customer integration and our customers can physically see when a product has been shipped. They can see on the dashboard the status of that product, COD (Cash on Delivery) proof of delivery and nine times out of ten a signature on glass.

So yes, that last mile is critical.

They can also see exceptions.

Has the product been carded because someone wasn’t at home, is it being returned for whatever reason or has it got stuck in customs?

This does happen in global trade, no matter how many boxes you tick or how much paperwork you complete.

We do work by exception and we manage those shipments that potentially could have issues.

Also, one must remember the reverse logistics.

Exceptions and Returns Must Also Be Considered.

There will be times when delivering to consumers’ homes, that they’re not in or not available (especially when they pledged to a crowdfunding campaign four or five months ago).

We manage those returns as well and customers can see what product is being returned. Then we also manage the refund fulfilment that is also necessary. Our system allows the customer to decide how they want to manage those returns.

The answer is that we have integration with all of the key courier parts.

Finally:

This blog post is part two of a series of three blog posts. Part one can be found here if you missed it. Be sure to read all three for a fully comprehensive answer to many of your crowdfunding fulfilment needs.

 

Richard Perriman

Richard Perriman is the UK Supply Chain Manager for Horizon International Cargo (HiCargo).

His role is to help startups and crowdfunding campaigns bring their products to market, involving crossing borders, sourcing product, ensuring compliance and looking at the best methods to fulfil orders with the most appropriate and cost effective approach.

Tony Leach

Tony Leach is Supply Chain Product Director Globally for Horizon International Cargo. His role is to work with project creators and startups from a global perspective. He has teams in Asia, the USA and Europe.

They build solutions that enable them to effectively support a successful crowdfunding campaign and get the product to market anywhere in the world.