International logistics: Meaning, process, and challenges explained
Global expansion was a big dream for companies a few decades back. But with rapid technological advancements and the existing globalization channel, international expansion has become easier. With this being said, as more and more businesses expand internationally, the competition is increasing as well.
What will set your company apart? Or what can your company do to stay ahead in the game? One simple answer — international logistics. Having a firm gathering and understanding of international logistical data can give your company an edge over others.
What is international logistics?
International logistics is basically the study, strategizing, and execution of data and plans through which a company transfers its products or services from the producer or seller to the consumer.
This movement includes crossing international boundaries at least once. The transfer is not just goods but services, information, and money as well. In short, it is a movement between two or more countries.
Goals of international logistics
In simple terms, the goal of international logistics is to provide efficient and steadfast movement along with cost-saving and risk reduction. It also aims to smoothen vendor-customer relationships and management. However, here is a further detailed breakdown:
1. Cost efficiency
One of the primary reasons businesses use and optimize international logistics is cost efficiency. Cross-border expansion might have gotten easier, but it is still pretty expensive. Tax, tariffs, shipping costs, and other expenses all add up to a huge amount.
Hence, having a good detailed understanding and strategy related to the cost structures, alternatives, basic framework, etc., helps get profitable results out of the invested cost. All this comes under international logistics.
2. Reliability
Not possessing adequate knowledge about the countries your business is dealing with can cause various problems. International logistics helps with building reliable basis and transport channels.
Let’s say the shipment your business is sending across gets stopped or confiscated due to some error in the paperwork or material used in the goods. This not only creates delays but also raises problems for the future of the business.
International logistics helps build viability, without which a business would fail to survive in the market.
3. Relationships with customers worldwide
International logistics creation and building doesn’t only mean research and online data collection. It also includes building relations overseas. These partnerships tend to be useful and reliable when a business maintains friendly terms.
Providing customers with their chosen product/service at a fair price and in less time is the best way to create loyalty. Plus, everything will be set if your business pays its vendors on time.
Process involved in international logistics
Handling and planning of goods
International expansion requires close calculation and planning related to everything. Let’s start with the goods you will ship. You begin by calculating or estimating the price of transporting the goods from your warehouse to the customer location. For example, you store all your produce in your native area. You can either send the goods directly from there.
However, if the costs are higher, you can either shift to a warehouse closer to the border. Or you could store, pack and ship the goods from fulfillment centers located in the receiving country.
Mode of transportation
Based on the type of goods, cost, reliability, and place where the shipment has to go, different modes of transport. Fright or parcel transport type, sea, ground, air shipping, etc. However, various channels/modes are used to move the goods from the supplier to the consumer when it comes to international transport.
For instance, from your warehouse to the shipping docks, ground transport takes the goods and from then on to the border of the other country it is taken through seas ways.
Transportation process
The goods produced by your business are shipped through freight forwarders. Basically, the goods are loaded into trucks or carriers, then they go through airplanes or ships to the final customer. Freight forwarders corporate with different shipment options and providers to offer the best possible movement mode.
International deliveries can be complicated. Spending on from and to where the goods are being transported, these transfers take a longer time. Hence, always double-check all the shipping documents and make sure that the goods you are sending are in accordance with the trade regulation of the other country.
Also, always keep clear communication with the customer in regard to estimated delivery time and if any problem arises what can be done.
Customs and import duties
International shipping always includes extra duties and tariffs like import duties. Import duty is charged by the customs authority of the destination country. Every package or shipment being transported has to clear all checks and taxes before reaching the consumer.
This means you have clearly communicated all the additional charges the customer has to pay to receive their order. If the consumer isn't aware of these charges and refuses to pay them, your company will have to bare a great loss on those payments.
This is why many companies choose to go with the Delivery Duty Paid (DDP) shipping method. With this, the company is responsible for all the costs and risks till the shipment reaches the customer.
Grow your international business with Volopay's all-in-one financial suite
Challenges in international logistics
1. Time-consuming
Since it is shipments of goods being transferred cross-boundary, the logistics related to it can be sickening. Calculation of all the costs, packing and transportation of the products, finalizing courier partners and channels.
Everything takes a lot of time to decide. Many companies prefer using third-party logistics platforms to help with all the logistics and details.
2. Shipment delay
As there are various steps and processes included in the international transfer of goods, there is a fair chance that anything can go wrong. This will ultimately delay the shipment delivery. Delays can be caused due to errors in paperwork, or maybe the customs hold up the shipment or any other issue.
To avoid this, many businesses choose to store the products within the consumer’s country so that there is no these issues can be sidestepped.
3. Customs & taxes
Every good type has a certain tax code assigned to it. Make sure that the documents of your international shipment have that code and other details correct. If not, customs won’t let the shipment pass. This causes delays and hefty money for the fault.
Wrong details and custom codes can also result in legal actions against the company. Hence, always check the information multiple times before sending the goods.
4. Return management
The return of goods is an inevitable phenomenon in the business world. But not having a proper returns management system can cost the company a lot of money and also create frustration among the customers.
Hence, an efficient return management process and logistics will not only save you huge sums of money but also time and profit.
5. Government rules and regulations
One of the most tricky challenges of international logistics is the government's rules and regulations for both the supplying country and the destination country. Many countries do not allow the import of certain items or have heavy duties on particular products.
As a business dealing internationally, you need to be mindful and aware of any and all rules related to the movement of the goods under your concern.
Do you know procurement is an important part of business operations? Check out our detailed guide on what is procurement and know the best process and steps to do procurement for your business.
Ways to optimize international logistics
Having international logistics presented in different ways every time becomes difficult to analyze and make decisions. So, create a template that includes space for all necessary information in a sorted and organized manner.
When everyone uses the same format to enter information, employees will be able to process the data and continue the process easily.
One of the most effective ways to optimize international logistics is visibility tools. Keeping track of everything to every last bit can help you make quick decisions and communicate clearly with everyone involved in the process.
Along with this, if there is any error or delay in the transfer, you can easily resolve it. Expense management tools and tracking tools with the real-time tracking feature is a blessing for all businesses in terms of visibility.
Build strong and reliable relationships with your vendors and partners overseas. Working in different time zones, holding different expertise, and using different languages are all factors that make international business dealing complex.
However, with the right partners, these problems won’t turn into hurdles. Good partners always look out for each other and always proactively help each other.
Another way to optimize international logistics is by estimating and calculating all costs and taxes related to the transfer of goods overseas. Before climbing that your business provides international shipping, know all the import duties and rules related to the goods your business is selling.
Proactively calculate all the costs and determine the average value of the order and what profit your business will make.
Understand how your product is categorized internationally. Then make sure that the countries you are exporting allow that product or if there are any specific rules related to it. For example, many Gulf countries do not allow any food item or import of Poppy seeds.
Hence, it is essential to know the standard procedures and classifications related to the product of your business.
As the expansion is the next step for every successful business, international logistics automatically becomes an integral part of the process. International logistics helps in making the right decision and calculation at the right time.
As it is basically the planning and implementation of strategies for international transfers, every minor detail is important for the process.
Therefore, make sure to know about your product, the rules of the destination country, the custom requirements and taxes, shipment partners, and other information before expansion. Jumping head-first without international logistics can cost your company fortunes.
Plus, there are various third-party platforms that can help you get started with the logistics and ease you into the process. Along with this, you can also go for an automation software that takes over the management of data and give you the space and reports to make decisions and save time from grunt work.
How can we help — Volopay!
International logistics is all about being prepared and organized with all information and tools required for overseas/cross-border shipping.
Now, what is that one thing essential for all companies when it comes to expansion? The answer is expense management. So why not automate your expense management process and let the rest flow?
Volopay is one such platform that can help your business by taking over all expense management procedures. It can assist to manage your vendors using virtual cards for payments, individual vendor accounts to keep a tab on the due dates, and international money transfer support at the lowest FX rates possible.
Along with this, Volopay also provides real-time money transfer tracking, automatic expense reporting, and direct accounting integration for ease of management and operations. Efficiency and visibility together.