WHITE PAPER: How to Save Money Importing
For U.S. based importers and distributors, one
of the most important factors in the success of
their business is the ability to get a good price
for the material they buy. Then, they can set a
reasonable price on the market and still leave
room for profit. This makes sense because why
bother going all the way around the world to
have something manufactured unless it was
cheaper to have it manufactured in the same
country where you are selling.
However, the price of the material alone does
not give the importer a true picture of their
costs. There are several other costs that must
be considered including:
Ocean Freight
Duty
Customs Broker Fees
Inland Freight
Drayage
And Others
When you add all costs together and divide by
the quantity, you get the “landed cost per
unit”. For the purpose of this article, we are
going to focus on one technique to reduce your
landed cost per unit so you can increase profits.
Let’s say that you are importing and distributing
rubber snakes from China. You negotiate a
contract with a factory that will produce these
toys for you at a cost of $.23 per unit FOB
China, meaning you will assume responsibility
for the goods at the port of departure. Then,
you make arrangements with an ocean freight
carrier for $1500.00 per container.
The trick to keeping your landed costs low is to
maximize container space. The more units you
are able to fit into the container, then the less it
costs to ship each unit. So if you were to ship
10,000 rubber snakes, your landed cost would
$.38/unit ($.23 x 10,000 +$1500/ 10,000).
However, if you were to fit 15,000 snakes in the
container, your cost would be $.33 ($.23 x
15,000 = $1500/ 15,000). That is a 13% savings.
You cannot count on your supplier to know how
to best maximize container space. You will
need the dimensions of the carton to calculate
the CBM per case (for our example, let’s say .5).
You then figure out the case/pack or packing
per case (like 100 snakes per case). When it is
time to place your Purchase Order, you will
take the total CBM for a container (67.7 for a 40
ft. container) and divide by the CBM per case
and multiply by the units per case.
***Note: I recommend using 65 as the total
CBM per case to account for irregular shaped
cases and/or poor stacking.
So, for our example, we would want to order
13,000 units (65 CBM for the container/ .5 CBM
per case x 100 units per case) to maximize our
container space and minimize our landed cost
per unit.
Doing all of these calculations by hand is time
consuming and certainly not cost effective.
When ordering multiple products on a PO, this
calculation gets even more difficult. The good
news is that there are software programs that
can assist in this calculation: VISCO software for
importers (www.viscosoftware.com)