26 May 2011
Matthew Marriott, Commercial Director of Hellmann Worldwide Logistics UK explains why the job of a manufacturer is no longer just to manufacture. Matthew has been explaining the importance of Incoterms to manufacturing companies that trade on a global scale for over 20 years.
The government wants us all to move back into manufacturing and, therefore, remove the reliance on "intangible" industries like finance. In recent times we have seen a massive reduction in the UK manufacturing base and this is due to many reasons but for me personally, a contributing factor is the way we, as a country, market ourselves.
I spend a considerable amount of my time talking to major UK manufacturing companies and I am still flabbergasted at the arrogance we can sometimes portray. I'm sure this isn't deliberate but we certainly need to address the way we portray ourselves to the world.
I would honestly say that approximately 30% of all customers I visit sell finished goods on an Ex Works level. To me Ex Works means, " I can't be bothered to offer you a service". So, unlike our European counterparts who deliver door-to-door, we still refuse to break out of the British tradition of leaving the responsibility with the buyer to collect their own goods from the seller once purchased.
Through leaving the customer to arrange independent delivery, costs will always fluctuate depending on volumes, budgeting is made difficult and ultimately there is the risk of a knock on effect on margins because customers are finding it hard to buy the goods they want, need, and rely on.
If we look at European and North American manufacturers, not only are they focusing on branding but also on making it simple for overseas distributors or direct customers to buy their product. They do this through giving the client a landed cost or an arrival cost to the nearest Seaport or Airport.
Selling CFR (cost and freight) or DDP (delivered duty paid) to an overseas client has many cost advantages. If we look at Europe it is quite standard for British Manufacturing to offer Door-to-Door delivery but as soon as we move out of the EU we revert to our old "Empire manufacturing" ways. There are many leading UK companies that practice making it simple for overseas customers to purchase their product but I am afraid there are more companies that do not.
We have to wake up and make things simple for people to buy UK made products. If we're competing against German and North American companies then we need to make sure the UK isn't at a disadvantage. Sitting in Peru and reviewing three potential suppliers of Water Pumps that are manufactured in three different countries is not an easy task. If the UK company sells a landed cost product excluding duty and taxes then any concern on the purchaser's behalf is automatically removed.
We are currently inhibited by the tradition of British manufacturing. A job as a manufacturer is no longer just to manufacture goods but it is to make it easy for customers to buy their products, to add value to the service on offer, and create a positive experience from beginning to end.
For franchises in particular a lot of time, money and effort can be saved through door-to-door, leaving the franchisee to focus on sales and marketing, with the only additional cost of tax. Better delivery prices can be negotiated when buying in bulk, products become more competitive, and buying power increases due to shipping in bigger volumes, leading to greater sales and a larger market share.
It is a fact that if a UK company takes control of its supply chain and pays for the freight transportation from its factory doors to arrival port or delivery address that it will be more competitive than the client can buy from a local transportation company in its own market.
WHY? Because the manufacturer is buying in bulk from the freight transportation companies and, therefore, has a price advantage. Yard traffic is also reduced because multiple forwarders aren't needed to collect the finished product. Instead manufacturers can take control of their loading and despatch times, which reduces cost and improves quality within the warehouse.
There are so many advantages, not only to the customer but also to businesses; the only challenge is finding time to implement such a structure.