John Penny is the Commercial Manager for Postal Logistics at New Zealand Post. He manages a wide range of international distribution and logistics solutions for importers and exporters.
John.penny@nzpost.co.nz

What is logistics?

Logistics is the art (or science) of getting your goods from your suppliers into your warehouse or manufacturing process, and then transporting them to your customer.

There are many different options you can use, but the main three are:

• Seafreight: especially good for large volumes where speed is not important

• Airfreight: especially good when speed is crucial. Airfreight is generally more cost effective than a courier or parcel service if the shipment is over 70kg in weight

• Parcels or courier: especially good when selling directly to consumers or directly into retail outlets.

In a perfect world, most exporters and importers would like their logistics chain to:

• Achieve lowest cost of operation possible

• Deliver and receive on time and to order

• Achieve total transparency throughout the entire supply chain

• Achieve best utilisation of assets in the supply chain

• Create competitive advantage from a truly integrated supply chain.

Choosing a logistics provider

Most airline and shipping lines are not interested in dealing directly with importers and exporters unless you have particularly large volumes. This means you are likely to get a better price and a better service by using a freight forwarding, courier, or mail company than you are by going to the airline or shipping company direct.

Freight companies provide a different set of services from mail and courier companies. The basic services provided by freight forwarders are:

• Seafreight and airfreight, although some freight forwarders may also offer a parcel or courier service as well

• Arranging and booking the movement of goods from origin to destination. Like a travel agent, a good freight forwarder will have a comprehensive knowledge of best available routes, carriers and rates to find you the best deal available

• Arrangement of onward delivery. Although freight is often delivered from port to port (or airport to airport), they will also be able to offer you the option of door-to-door delivery

• Customs clearance. This includes the completion of customs documentation and the payment of duties and taxes (which will then be billed to you, probably with a customs clearance fee added)

• All necessary documentation

• Advice on compliance and all relevant foreign import/export regulations and ensuring all these are fulfilled and any dues correctly and fully lodged and paid

• Tracking of your goods. Some forwarders have automated on-line tracking systems that allow you to track your goods at all times. Others have manual systems that require you to contact the forwarder for updates.

Mail and courier companies offer a slightly different set of services:

• Door-to-door delivery for parcels up to around 50kg per box, depending on the company. Some mail and courier companies also offer airfreight and seafreight services as well

• Fixed, known price that does not fluctuate from shipment to shipment

• On-line tracking

• Some customs clearance services are generally available, especially if you are using a courier service

• Import service to collect parcels from your supplier and deliver it to you in New Zealand, or direct to your customer

• Some freight forwarders, mail companies, and courier companies can also offer you a number of value added services including:

• Warehousing

• Pick ‘n’ pack

• Fulfillment of purchase orders down to bar code level

• If you aren’t, or don’t want to be, an expert in logistics and supply chain management, outsourcing your warehousing function can create savings and free you up to concentrate on other aspects of your business.

Looking for the right freight forwarder

• Understand your own requirements.

Some of the critical questions to understand before seeking quotes from forwarders are:

• Where are my goods coming from or going to?

• What quantities will I be importing or exporting? If considering sea freight, how many cubic metres? If considering air freight or courier, what weight and what volumetric weight?

• How often will I be importing or exporting?

• Do my goods have special requirements (e.g. temperature requirements, or dangerous goods)?

• How time critical are my goods?

• How important is it for me to be able to track my goods in real-time?

• If importing: Do I have to arrange the pick-up from my supplier’s premises (ex-works)? Will the supplier deliver to the port, but leave me to arrange export clearance, insurance, and freight?

• If importing: Are there any import restrictions or import licenses I need?

• If exporting: Will my customer arrange the pick-up from my premises (ex-works)? Will I have to deliver to the port, but leave my customer to arrange export clearance, insurance, and freight? Will I have to arrange the delivery right to my customer’s door?

• If exporting: Do I have a large number of small customers or a small number of large customers?

• Do I want to freight directly from my supplier to my customer without the goods coming through my warehouse at all?

With your list of requirements, you should shop around and get quotes from more than one provider. Different companies have different strengths, so the pricing you are offered could vary considerably. If your goods are on the borderline between parcels and freight, make sure you get quotes from freight, mail, and courier companies. In this case, you may want to use a company that can offer you all three services.

• Size of freight forwarder
Choose an appropriate size freight forwarder for the size of your business. Larger freight forwarders can generally get better rates from airlines and shipping companies. This is great news if you import or export in large volumes, but if you import or export in small quantities they may not pass these good rates onto you, or you may not get the level of personal service you need. If you are small, you may find that you are better off being a large customer of a small freight forwarder than a small customer of a large one.

• Strengths of each company
Forwarders tend to specialise in airfreight, seafreight, or in mail or courier deliveries, and they tend to have strengths in different geographic locations. By shopping around you will be more likely to find a forwarder who has strengths in exactly the areas you need.

• Border clearance expertise
Border clearance includes clearing both customs and quarantine requirements (e.g. MAF in New Zealand and AQIS in Australia). If border clearance is not handled properly you can incur unnecessary delays enforced by customs or quarantine agencies, additional costs from these delays (such as additional transport and devanning and storage charges to allow Customs to examine the goods), as well as unnecessary duties if your goods are not classified correctly. A good forwarder will have access to quality customs brokers (either their own or via agents) that will give you accurate advice on tariff concessions that can save you money on duties as well as avoiding costly delays from incorrect handling or documentation. Check what customs expertise is available to you through the forwarders you are considering.

• New Zealand border clearance expertise
All imports and exports into and out of New Zealand must be cleared through the New Zealand Customs Service. Some forwarders have direct EDI links with New Zealand Customs that speed up this process and keep costs down.

• Quality of other advice
Similar to border clearance expertise, there are other parts of the process that can create unnecessary delays or costs if not handled correctly. Look for the best source of information and assistance on import and export regulations, security and bio security protocols and compliance, documentation, shipping methods, and freight costs. Getting this right at the beginning can save you a lot of money later on.

• Additional costs
There may be additional charges for things such as duties and taxes, customs clearance, insurance, quarantine fees, and remote area delivery fees. To avoid unexpected costs, ask your forwarder about additional costs up front.

• Tracking
Some companies, particularly mail and courier companies and the large forwarders, offer real-time on-line tracking systems that give you complete visibility of the of the location of your goods at all times. Others have more manual systems which mean that you’ll have to contact your forwarder for regular updates. Decide how important real-time tracking is to you when assessing which company to use.

Exporters are increasingly e-business driven and therefore looking for IT solutions as a faster way of doing business. If you have the interest and the capability to integrate IT systems, look for a logistics company that has a sophisticated IT system.

Once you have chosen which forwarder to use, keep the quotation and compare it with subsequent invoices.

Most large providers provide electronic invoicing with fully itemised accounts. You should demand total transparency.

What to Ask a Potential Provider

Depending on the nature of the business you’re doing, some or all of the following questions will be relevant:

• Are you capable of directly controlling the freight throughout the supply chain?

• What are your agreements with transporters? Do you have capacity allocations?

• Are you capable of professionally representing my company when dealing with banks, carriers, Customs and other agencies?

• Can you pre-clear my goods through customs?

• What advice can you give me on export/import regulations, customs classifications, security requirements, and other documentation I need to get my goods moving efficiently?

• What tailored solutions can you offer?

• Are you financially stable with the backing to deliver on your promise?

• What added value services can you offer?

• How easily will your IT systems interface to gain maximum benefit? How comprehensive is your system? Will the system advise my company of the status and whereabouts of my cargo at any given time?

• What is your knowledge of my export markets?

• Where do you have expertise and local presence?

• Will my company have a an account manager?

Other Sources of Information

Find out about logistics and freight service possibilities from:

Logistics & Transport NZ
www.ltnz.org.nz/anout.htm

Customs Brokers & Freight Forwarders Association (CBAF) www.cbaff.org.nz

Chambers of Commerce
www.bvital.com and www.nzchambers.co.nz

New Zealand Trade and Enterprise
www.nzte.govt.nz

New Zealand Shippers Council
www.shipperscouncil.co.nz

Export New Zealand
www.exportnewzealand.org.nz

to the seaport as required. In the achievement of perfect efficiency, an empty container could be returned to the IP and exchanged for a full container.

Getting your Goods to and from the Port

By Anne Hunter
Anne Hunter is the New Zealand correspondent for UK-based Fairplay International Shipping Weekly. Anne specialises in writing articles and reports on shipping, ports, airfreight and trade with particular focus on New Zealand exporters, their exports and markets.
anne.hunter@xtra.co.nz

With Government support, rail and coastal shipping are targeted as a cheaper, greener alternative to trucking for the movement of New Zealand freight. As international shipping lines reduce New Zealand port calls to focus over one or two major hub ports,  so demand increases for efficient transfers and feeder services for cargo moving to and from hub ports.

Freight moved nationally in New Zealand in 2006/07 was around 225 million tonnes. Of that an estimated 70% moved by road including some 2.5 million tonnes that crossed Cook Strait on trucks each year. By comparison, only 1 million tonnes moved each year on ships round the New Zealand coast. Currently, rail and coastal shipping each have a minor 15% share of NZ freight movement.

Sea Change

A Sea Change Strategy introduced by Government in 2007 is designed to revitalise coastal shipping to help manage expected growth in New Zealand domestic freight movement and to reduce freight carried on roads thereby reducing road congestion and greenhouse gas emissions. Under Sea Change, Government funding will assist with the development of additional coastal shipping services and port infrastructural improvements required to service coastal shipping’s targeted increased carriage of 30% of all New Zealand domestic freight movement.

For several years until November 2008, there were no scheduled coastal shipping services provided at New Zealand’s major ports of Auckland (Waitemata harbour), Tauranga and Dunedin. In November, Pacifica, New Zealand’s foremost coastal operator supplemented its Lyttelton, Nelson, New Plymouth, Auckland (Onehunga Port on the Manukau Harbour) weekly service with a new weekly service between the ports of Auckland (Waitemata) Tauranga, Lyttelton and Otago. The Spirit of Endurance will move some 1,000 containers a week on the service.

At the same time Pacifica announced the withdrawal of its three times weekly Lyttelton/Wellington coastal service due to ‘rising port costs that have eroded the viability of the service’. Meanwhile, the Government has received a number of applications for funding under the Sea Change Strategy and with approval these should give rise to the introduction of further new coastal shipping services in 2009.

Rail

In 2008 New Zealand rail was once again nationalised. The operating and infrastructure divisions KiwiRail and Ontrack are combined as a single SOE  - NZ Railways Corporation. Since the nationalisation varying amounts (NZ$1 billion is one reported figure) have been recommended for investment into new trains and infrastructure upgrades to enable the ailing rail network to carry 30% heavier weight and for tunnels to be enlarged to accommodate the extra weight and height of containers.

Current weight restrictions and tight tunnels mean that significant volumes of rail freight is transferred from rail to truck for certain sections of the trip. The goal is for rail to become much more efficient for the movement of containerised goods around New Zealand and new developments in 2008 are already giving improved access.

With 40% of cargo moving in and out of the port by rail, the Port of Tauranga is committed to using trains as the best way to move goods to and from the port where possible. A state of the art rail head at Ports of Auckland has remained under-utilised due to a lack of rail services and a lack of commitment by former rail operators. New developments include a new rail siding at the port company’s inland port (IP) at Wiri.

This will enable the replacement of road transfers between the IP and the seaport with a rail shuttles which is expected to considerably increase utilisation of the POAL rail grid and significantly increase the amount of cargo moving in and out of the port by rail.

Road

Some 250 trucking companies deliver and collect containers at Ports of Auckland, New Zealand’s largest port. Operating 24/7, the port has achieved an increasing spread of business throughout the day and night however, as volumes increased, there remained a concerning ‘disconnect’ between the port’s 24/7 operation and the restricted business hours of New Zealand shippers (exporters and importers) all of which contributed to the marked operating pattern of peaks and troughs of truck movements at POAL.

New Zealand has in fact been described as light years behind other countries in its restricted opening and operating hours with many warehouses, distribution and acceptance centres closed between 5pm and 7am weekdays and all weekend.

One possible outcome of POAL’s 2008 introduced Vehicle Booking System (VBS) is that it will put pressure on shippers to extend freight facility operating hours. Majors including The Warehouse and Farmers already operate extended warehousing hours. Modeled on similar systems in Australia where it was introduced to reduce truck queues of up to 18 hours at some ports, POAL’s VBS  is primarily designed to relieve truck queues at the port and to encourage transporters to utilise off peak hours of delivery and collection.

A prominent member of the VBS working party, Tapper Transport is New Zealand’s largest container transporter and largest wharf carrier. In Auckland Tapper operates Australasia’s largest freight station and a highly sophisticated IT system. The Tapper’s operation includes wharf cartage, unpacking and packing of LCL containers, national distribution of cargo and containers. In line with overseas trends, Tappers’ freight station is a 24/7 operation which enables the company to decrease day time transfers to and from the port while increasing off-peak night moves.

When shippers are selecting transporters, fast and accurate information exchange must be a priority requirement. Tapper describes its IT system as its major competitive weapon. Called onTap, it underpins Tapper’s entire operation allowing electronic despatch of all the company’s vehicles, GPS tracking of the fleet, the production of realtime web-based reports which means that customers can access the Tapper web site to get cargo tracking information which at any time is no more than 2.5 minutes old.

Inland Ports

The introduction of Inland Ports (IP) has been advantageous for exporters and importers. The efficient flow of cargo to and from the wharf has become a very important element in the supply chain today. The IP is designed to bring the wharf closer to the customer’s doorstep. Generally, the IPs are Customs bonded and MAF approved transitional facilities.  Port of Tauranga was the New Zealand inland port pioneer with its introduction of Metroport in the middle of POAL’s industrial Auckland heartland. The Auckland port quickly followed suit and now has two inland ports in South Auckland.

Some of the advantages of the Inland Port (IP):

For exporters:

• Container acceptance 24/7 without the need for the carrier to go all the way to the port

• Using POAL’s IP at Wiri as an example, the inland port accepts containers up to 10 days prior to loading for free storage however, exporters can use the Wiri IP to feed export containers in as and when they wish thus freeing up capacity on their site

• Export boxes awaiting CEDO numbers can remain at the inland port until the CEDO number is issued and attached to the container

• They enable exporters to clear their own production facility and yard reducing land requirement

• Once containers are delivered to the inland port exporters can forget about them since the inland port takes responsibility from thereon and delivers containers to the port one or two days before vessel arrival.

For importers:

• They get a ‘where and when and how do you want to receive your container’ service

• Faster delivery of containers because they move straight off the wharf to the IP to await Customs and MAF clearance

• Using POAL’s Wiri IP as an example, containers are repositioned from the seaport to the IP ready for immediate release next morning or, they can be held for as long as importers require. Demurrage is not in the equation. At Wiri there are six storage-free days after which there is a cheaper storage rate scale rather than a demurrage scale.

An important element of the IP service is the repositioning of empty containers. Because of the nature of New Zealand’s manufactured and dry goods imports and domination of reefer exports, there is a proliferation of empties awaiting transfer  out of the country. The IP gives the opportunity for these to be removed from importers’ yards where they take up valuable space, and held at e.g. Wiri where they await redirection.