Today we’re going to be talking about how to manage your international logistics as a one-person business. Or in other words, how to make sure your products successfully flow around the world when all you have is an internet connection.
It’s easy to get intimidated by international logistics. But don’t worry. Although it is complicated, and there are plenty of resources and companies out there to help. And by the end of this article, you should be ready to tip your toes in. There is also a companion podcast if you want it explained through audio.
There are lots of different product-based businesses that this guide applies to, and they generally have the same theme:
- Someone makes a product
- Someone does quality control
- Someone then transports it to a destination company
- Someone then stores it
- And finally, someone fulfils and delivers it to the final customer
Major businesses may decide to do every step in the chain themselves. But as a one-person business we are going to outsource as much as possible.
If you have read my guide on how to start an Amazon FBA business, you may already be familiar one type of business that this model applies to:
In this guide, we are going to go into more depth.
I go into a lot of detail on how to find factories and create your product in other guides. These two are a good place to start:
- Step-By-Step Guide to Creating and Selling a Physical Product
- How To Find The Best Products To Sell On Amazon
So I am going to assume you have that part sorted, and focus on the logistics.
Communicating with factories
If you are dealing with a factory based in a different country where they speak a different language. You are going to have to communicate over the internet.
Why not just fly out there and manage it yourself? For one it is often cheaper to order your first lot of a product than it is to travel and speak to them in person. For example, your initial order if often for under £1,000 – the same price as an extended trip to China.
And secondly what you’ll find when dealing with companies in India or China, it’s not particularly useful to visit them anyway. If they are dodgy they’ll put on a show for you and even take you to a factory that isn’t even theirs.
Instead, it is much more useful to develop a relationship with your contacts over Whatsapp or Skype. This is how the majority of communication will take place and the delay gives both parties time to reflect and translate each message.
Unfortunately, international logistics is a long game. And dealing with factories is part of that. Remember they actually have to make your product. That can take time.
- It can take 2-3 months to get prototypes made.
- It can take 2-4 months for your first order to be made.
- It can take 2-3 months for each subsequent order to be made.
How to pay factories
This can be difficult if you are dealing with different countries and cultures and so worth addressing.
Some of the suppliers I just pay once the order is ready. But this may only be possible when you have worked with a supplier for a few years and have built a good relationship.
Most new relationships will ask for some kind of upfront payment. Generally I recommend negotiating 30% to 50% upfront, followed by the rest after passing inspection. If they don’t pass inspection they need to fix the problems before they get the final payment.
There are a few ways you can make things financially safer such as paying through Escrow services where you don’t receive money until you’re both happy. Websites like Alibaba, Alipay and also PayPal offer buyer protection, but they do take quite high commissions.
Personally I don’t use such services but instead, start off with a very small order and build up. That way it is always in the factories best interest to play fair and means that if I get cheated I won’t lose much money.
When dealing with companies in different countries always use money you can afford to lose. If you get cheated there is very little you can do about.
Which brings us on nicely to inspection. When you start a new relationship you would want to have some kind of quality control done before you accept the goods from the factory.
There are a lot of inspection companies who will go in to the factory and check the products. For 1,000 units a partial inspection will cost roughly $100 and a full inspection roughly $300.
When we did an inspection after the labelling and bottling of our first batch of gin there were a number of real problems. The packaging didn’t fit and the labels smudged. If we had sent them straight to the customer it would have been a disaster.
And that is a product that is produced completely in the UK. We get much worse issues when dealing with factories abroad.
What I normally find is that as you work with a factory and you get to know them and they understand your needs, the defect rate will drop. And eventually it will get to a low enough that you don’t need to do an inspection any more.
I am not going to recommend any one inspection company because location is very important. If you choose an inspection company on the other side of China to the factory it is going to cost you a fortune. Find your factory first, then find a local inspection company.
Now your goods are ready, it is time to ship them!
A freight forwarder is a business who specialises in moving goods internationally. There are well-known names in this industry like FedEx and UPS who are good at doing small quantities by air freight. Then there are some huge companies that you will have never heard of because they only deal with large shipments.
How To Pick A Freight Forwarder
For small shipments under 100kg use FedEx or UPS. It is cheaper, simpler, quicker and is like likely to get stuck in customs.
For shipments over that amount, you need to find a Freight Forwarder. If you are dealing with only two countries then it is best to find a local freight forwarder. It will be the cheapest option and they will be able to hand-hold you through the whole process.
What I do is a bit different. I use a freight forwarder broker called Flexport. It is the one-stop-shop that combines price comparison, end-to-end management and an online dashboard. But most importantly for me, it means that I can use it to ship from anywhere to anywhere.
A bit of advice when dealing with these companies. Don’t be afraid to look like an idiot and ask loads of questions. There are a lot of industry terms that you won’t understand, ask. And if the price list is confusing, get them to calculate exactly how much it will cost in total.
There are a few international freight terms (called incoterms) that it is important to distinguish between. Because you will need to decide which you want and agree it with the factory.
There are three you need to know EXW, FOB and DDP:
- EXW – Stands for Ex-Works. This means your freight forwarder will pick it up from the factory.
- FOB – Stands for freight on board. The factory will deliver your goods, cleared for export, loaded on board the vessel at the named port.
- DDP – Duty paid delivered. This is a term that you only really need when using UPS or FedEx to send small shipments direct from a factory to an Amazon FBA warehouse. It means that they will be delivered to the final destination with all taxes and duties paid.
FOB is often recommended by shipping experts. But it is more complicated and I find that factories will charge through the nose for it. Plus I send most of my shipments by plane and not ship because it is much much quicker.
Personally I use EXW and Flexport for shipments over 100kg. And DDP and FedEx for shipments under 100kg.
But just booking the shipment is one thing. The second part is making sure it gets through customs and the correct taxes are paid.
Each country has a very different requirement of what it takes, including licences and paper works. But luckily a good freight forwarder will do all of that for you.
Most of the time I don’t do a lot of research for a particular country, I will just ask my freight forwarder to send some stock to the country and make sure I am compliant to get it through customs.
The one thing to keep an eye on is how much you will need to pay in import duty and other taxes. Here is a handy free calculator to work it out.
You pay import based on the cost you paid for the goods plus the freight cost plus the insurance.
Warehousing & Product Prep
Once in the country, you can store your goods in your own country, or much better use a third party company.
A lot of people use Amazon FBA including myself, it’s a very popular fulfilment service and very simple to use. Plus it integrates directly with Amazon which is where I sell most of my products.
But they have very high long term storage fees for anything stored over 6 months and will do no product preparation or repackaging. They are also very expensive for fulfilling wholesale orders.
Therefore I have a two-stage system. A smaller fulfilment warehouse that stores my products long term, fulfils any large orders and does any prep or repackaging I need.
What you use for what is going to be maths calculation. You can use the Amazon FBA calculator to see all the costs involved.
Another reason some people might use a different fulfilment centre to Amazon FBA, is if you have a lot of products coming from different countries and needs to be packaged together. Such as subscription boxes.
Finding other fulfilment centres is a case of Googling for them. You want one that is small enough they can do the customs jobs you have.
Now the very final part. Completing orders and making sure.
If you are small business working from your garage you can put your product in your box and take it down the post office and send it to your customer. But that is a lot of work and can get expensive.
If instead, you are using a third-party fulfilment centre like I recommend in the previous part. They can package and send the order for you. They will have deals with delivery companies meaning it works out cheaper than if you were posting it yourself.
Amazon FBA will integrate automatically to Amazon, eBay and your website meaning any order are processed automatically. As well as letting enter orders manually. They will also process any returns.
And that’s really it. Simple.
Managing international logistics as a small, one person business may seem daunting at first but after breaking it down, its really not so bad. Hopefully this post and the accompanying podcast have helped you in this. To run through it all, these are the simple steps.
- You find a factory.
- Make sure you have a way to inspect and run through quality control.
- You need a freight forwarder to transport it to your destination country and get it through customs.
- In the final country, you need somewhere to store it. If your selling on Amazon, Amazon FBA is a no brainer.
- If you are doing a lot of wholesale or storing longer term then another fulfilment centre.
Still confused? Check out the accompanying podcast:
Listen to episode 7 of the Lazy Entrepreneur Podcast: How To Manage International Logistics As A One-Person Business iTunes | Spotify | YouTube | Stitcher