As of 2020, the Philippines import a whopping 20.6B from China. China as we know is home to affordable goods, thanks to its fast production lead times and cheap labor, plus its proximity to our country, China has indeed become our number 1 supplier of goods. A lot of companies have been using China manufactured parts and products and because of that Small and Medium Scale businesses are having a hard time competing because of the cutthroat pricing that these big companies can offer due to the volume of goods and services that they can buy.
When big companies offer the same quality and brand as you, the only way for an SME to shine is to give value-added services or be able to offer the cheaper price, which is challenging due to the fact that these company giants are able to get big discounts on their purchases. Having said this it is important for SMEs to note that 30 to 40% of the cost of goods are logistics services, meaning if you are able to lower your logistics cost there is a higher chance for your prices to not only be competitive but profitable as well.
Special Consolidation Services is an emerging trend that is the answer to this dilemma.
What is Special Consolidation Services? Special Consolidation services entail the following:
1) Freight Consolidation – cargoes from different suppliers and going to different consignees are consolidated into one container either 20
or 40 footers, this way, the ocean freight charges are being shared based on the volume of their cargo by the buyers. FCL (Full Container Load) shipping is way cheaper if you can maximize space, thus, this is currently the cheapest option when shipping from China to Manila.
2) DDP – under Special Consolidati
on, cargoes are shipped under DDP term or Delivered Duty Paid, so it does not only cover shipping expenses but it covers Customs Releasing, Documentation, and Payment of Duties and Taxes. Since cargoes are named after one consignee which is your Freight Consolidator or Forwarder, they are able to declare goods as a whole and are able to pro-rate the Duties and Taxes of goods based on the total CBM (cubic meter) volume of your cargo.
3) Free Storage - Storage charges can be a big pain and unnecessary cost for importers. Usually, these charges become unpredictable and your whole budget gets out of proportion just because of this. Special Co
nsolidation offers free storage based on your agreed time with your service provider.
4) Free Shipping – shipping can be free based on your cargo’s volume and agreement with your service provider.
Things You Need to Consider when Utilizing Special Consolidation Services
1) Timeline – since this service needs time to consolidate cargoes to maximize container space, you need to plan your shipments in advance to manage expectations and lead times. Consolidation requires 15 to 25 days to lead time, longer than regular LCL (Loose Container Load) shipping but definitely cheaper by at least 60%.
2) Claims for Input VAT - since cargoes are consigned to your Service Provider, you will not be able to claim for Input VAT. However, some service providers can issue you VAT and OR for the value of your goods, making you qualified to claim for Input VAT that you can use to lessen the taxes you need to pay BIR (Bureau of Internal Revenue). If this is the case your total cost of importation can further lower down 12% of your projected expenses.
Special Consolidation Service is a go-to for SMEs and this is the definite answer for your worries with regards to pricing and profitability. Choose a partner that can cover all the above-mentioned services and concerns, if you find one, go for it and see how this hybrid service will catapult your business.