WARRANT GROUP

Head Office, Warrant Group Ltd
Warrant House, 157 Regent Road
Liverpool L5 9TF

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enquiries@warrant-group.com

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+44 (0)151 955 0600

The price is right

Posted on 26 May 2016

The price is right

You know how much it’s worth in the UK but what about overseas? Pricing a product for export means taking into account the logistics costs, which can be split into three core areas.

Taking control of your supply chain is an effective way of providing a valued added service to your overseas clients but it also means having a clear understanding of all the financial elements involved.

Ensuring these costs are built into your pricing structure depends critically on your Terms of Trade, which establishes the “delivery point” of the goods between the buyer and seller.

For a hassle free experience as an exporter, it’s best to sell your goods on an Ex Works incoterm, which means the seller is only responsible for making the goods available at their premises and the buyer bears the full risk from factory gate to the delivery point.

This means pricing your goods for export is relatively simple and transparent but not all overseas buyers will work on this basis and it’s more common for the buyer and seller to agree a delivery point to a named destination port or final place of delivery.

Dependent entirely upon the incoterm, there are two methods of approach to pricing a product for export. You can either incorporate your costs into the price of the product or you can maintain product price and logistics separately (including treating any duty separately).

SO WHAT ARE THE LOGISTICS COSTS?

There are three types of costs: (Incoterm specific)

  • Carrier Cost to move goods – the costs to transport the goods by air, sea and road
  • Forwarder costs to move goods – the expertise and knowledge of a professional and competent partner
  • Destination charges (Incoterm specific and not applicable to several Incoterms)

The total of all charges can be treated in different ways, as an example, the total number of packages or items divided by the cost:

  • Cost added to each SKU on a pro-rata basis
  • Percentage variant added to each SKU to reflect the total cost
  • Shown as a separate item in full

Supply Chain specialist Andy Simpson, Business Development Director of Warrant Group and a Chartered member of the Chartered Institute of Logistics and Transport, explains:

“Taking control of your supply chain is an essential part of a successful exporting strategy.

“Not only are you providing the buyer
with a product relevant to their needs or market place but by successfully managing the transportation process, you are providing added value and creating strong partnerships which can stimulate further sales and growth.

“To manage the logistics element, it is important to have a clear understanding of all the critical factors involved and that’s where employing the skills, knowledge and expertise of a professional freight forwarder is a real differentiator. They help businesses navigate the complex world of carrier rates, customs and documentation as well as creating efficiencies and innovation to deliver confidence and peace of mind.”

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