How do you find a logistics service provider (or LSP) in a different country?

The easiest way nowadays is to google for a LSP in a specific country. If you have connections to any of the large LSP’s you could also ask them to collect your cargo. This however does not mean that this is the best or most cost effective way to transport your cargo.

There is a general rule in trading: your supplier or customer will have the best connections to local LSP resources. If therefore you are located in Europe and your supplier is based in Asia, your best option would be to buy on FOB/FCA terms. You should then ask your local LSP to quote for the main and on-carriage.

How do you select a suitable warehouse?

Selecting a warehouse is heavily dependant on the type of cargo you will be storing and moving in and out of your warehouse. You should ask yourself some general questions:

- What type of cargo are you storing (frozen goods, chilled goods, non-duty/vat paid goods, chemicals, general cargo etc.)
- What is the packaging of your cargo (loose in pieces/boxes/cartons, palletized, drums, long cargo like bars, pipes etc., very heavy or bulky cargo)
- What volumes will you be storing in cbm, or no. of pallets, no. of drums etc.

Answering these general questions will assist you in selecting a suitable warehouse. These will also be helpful when planning what material handling equipment you require, if you require any racking/bins and how to structure your operations.

How do you select a suitable Logistics Service Provider (LSP) if you wish to sign on an annual agreement?

I dare say that there is no LSP that can offer all services in all countries. Even the large LSP’s have their limitations. It is therefore important that you know what services you are looking for. Here are some points that differentiate one LSP from the other:

- Services offered (ocean freight, airfreight, brokerage, storage and trucking)
- Sales force
- Market coverage
- Operations
- Customer Service

You could break down these points even further, e.g. ocean freight into FCL, LCL, Breakbulk, brokerage into import, export, transshipment, temporary imports/exports. Therefore it is important that your requirements are clearly specified before selecting a suitable LSP.

If you require services in a remote area in e.g. China then you might also be better off using a so called “local hero”. Large LSPs will generally only be present in remote areas if it’s commercially viable for them. If they don’t have an office and/or your business isn’t sizeable for them, then it’s unlikely they would open an office just for you there. In this instance, they might use a local hero and mark up the rates accordingly.

Difference between FOB and FCA

I wrote about when to use FOB and FCA. So I thought it would be good to add why it makes a difference.

I'll give you an example.

For FOB the seller is responsible for the loading of the cargo. Assuming that during the loading process the goods drop down unto the railing and are damaged. If the goods fall outside of the vessel, it's the responsibility of the supplier. If they fall into the vessel, it's the responsibility of the buyer (Hopefully the buyer has insurance).

For FCA the seller is NOT responsible for the loading of the cargo. When it comes to trucks and aircrafts the goods are handed over to the operator of the truck or the airport terminal who will load the goods. The only exception is if the place of receipt is at the sellers’ premises.

FOB for everything? Think again!

Many people that buy and sell products internationally use terms such as FOB irrespective of the mode of transport. This is WRONG!!! So what's the difference? INCOTERMS are generally believed to cover 1 area, that is where the ownership of the goods passes from the seller to the buyer. This affects what transport charges are borne by which party and when payment of the goods is due. But INCOTERMS also covers the liabilities (risk) of the buyers and sellers. If your supplier sells you a product on an FOB basis, then the ownership of the product passes to you once the goods cross the railing of the vessel. The only vessels that have railings are ships, boats or barges. Therefore, if your mode of transport is by air or truck, then you should use the term FCA. And if your buyer or seller doesn't know these terms, do yourself the favor and explain it to them.

Loads of TEU's

The volume of ocean freight trade is measured in TEU's (or Twenty-Foot Equivalent Unit). But there are many different types of containers and sizes so how do they come to 1 measurement? Basically everything is measured in 20ft container slots. Hence when a container occupies multiple slots they will count each slot occupied as 1 TEU.

Network Optimization?

No, network optimization is not about selecting a faster airline!

Basically it's about analyzing where your distribution or manufacturing hub is and where your customers or suppliers are located. Usually the analysis is done using a software where you would have to enter all your inbound/outbound movements (weight, volume, frequency, locations, type of carriage etc.) and the application will tell you if your distribution/manufacturing hub is in an optimal location. Performing this type of analysis is very tedious and takes quite a while.