International Consolidation

Warehouse

What is International Consolidation Warehousing?

An international consolidation warehouse is normally a third-party storage facility in the country of export, which is used to combine small shipments into a larger more economical shipment bound for the same destination. International consolidation warehouse facilities are usually strategically situated in either a seaport or airport to accommodate for the export formalities.

The international consolidation warehouse typically utilises advanced technology to provide visibility of cargo receipts, inventory stored, the consolidation fulfilment operations and the despatches of shipments. The warehouse consolidation process allows the shipper to reduce shipping, reduce the number of dispatches, optimise their supply chain logistics and improve the customer experience.

International consolidation warehouses are a modern way to bring flexibility and efficiency, manage seasonal inventory upsurges and cost reductions within global supply chains. At ICS Global Services, we provide independent advice and strategies to optimise international supply chains.

10 Benefits of Consolidation | Value-Added Services | Overseas Procurement |

International Consolidation and Incoterms 2020 | Warehouse Consolidation Process

10 Benefits of a Consolidation Warehouse

The flexibility to merge shipments together in one location.
The ability to lower transportation costs.
The flexibility to ship goods more frequently.
The ability to ship flexible quantities.
The flexibility to lower inventory levels.
The ability to increase sea container utilisation.
The flexibility to provide value-added services and improve customer service.
The ability to provide agile distribution solutions and services.
The flexibility to speed up or slow down distribution to meet customer requirements.
The ability to ship directly to the end customer.

Overseas Value-Added Services

The primary function of an international consolidation warehouse is to consolidate small shipments into a larger more economical shipment. However, an international consolidation warehouse can also provide various value-added supply chain services. These services include Pick and Pack, Kitting, Blister Packs, Labelling, Relabelling, Tagging, Repackaging and Quality Control. As these services are being provided overseas, they can often be more competitive than within the receiving domestic market.

These value-added services may, in some cases, result in the goods being sufficiently transformed and their tariff classification being changed. This change of tariff classification could reduce the rate of import duty into the receiving country and avoid certain trade sanctions. Determining the correct tariff (customs classification) is often complicated. At ICS Global Services, we assist and support business with the process of tariff classification.

Overseas Suppliers and Procurement

An international consolidation warehouse provides cost benefits when utilised by multiple suppliers located in the same geographical area. These benefits are made possible by pulling together multiple shipments from various local suppliers and combining them into larger and more economical consignments. These consolidated shipments are then transported directly to the shipper’s end destination.

The process of controlling the movement of goods via an international consolidation warehouse will first require the renegotiation of supplier contracts. These new contracts will stipulate the correct Incoterms 2020, with the warehouse as the delivery point. This will require the overseas suppliers to work collaboratively with the shipper and their third-party warehouse. The contracts will also set expectations and pricing for foreign procurement in the international consolidation warehouse. Secondly, the development of strong relationships with overseas suppliers is critical for managing shipments into the international consolidation warehouse. This will require clear communications, regular updates, and a willingness to work collaboratively to streamline processes and improve efficiency.

International Consolidation Warehousing and Incoterms 2020

Under Incoterms 2020, FCA (Free Carrier) are the most favourable terms when the shipper wants to have control of the overseas costs and international transportation through a nominated international consolidation warehouse.

What is FCA (Free Carrier) Incoterms 2020?

The Incoterms 2020 rules are created and published by the International Chamber of Commerce (ICC), and these rules have been updated every 10 years, since 1980. The “Free Carrier” Incoterm means that the seller delivers the goods to the carrier, or another person in their own country, at a named place that has been nominated by the buyer. Therefore, the buyer will need to specify the International Consolidation Warehouse location as the named place of delivery on their purchase contract.

Supplier’s Responsibilities

The FCA Incoterms will require overseas suppliers (the sellers) to:

Complete all export clearance formalities and pay all export clearance expenses.
Deliver the goods to the international consolidation warehouse at their cost.
Take responsibility for any loss until the goods are received within the international consolidation warehouse.

Buyer’s Responsibilities

Once the goods arrive at the international consolidation warehouse location (the named place), the buyer is responsible for the unloading of the goods and all onward transportation, including freight costs, insurance, import duties, and import taxes. As the buyer is required to arrange the onward transportation of the goods, it is one of the most advantageous shipping terms because the buyer has greater control over all the costs associated with the shipping.

Incoterms 2020 Rules

Warehouse Consolidation Process

The consolidation process enables the international warehouse to combine several smaller shipments into one full sea container load, a full truck load, or an airfreight shipment. The process helps to reduce the cost of shipments and improve delivery schedules. These are the various consolidation process steps for an overseas warehouse to end recipient delivery.

Warehouse Consolidation Process Steps

The supplier will complete all export clearance formalities and pay all export clearance expenses.
The supplier will deliver the goods to the international consolidation warehouse at their cost, taking responsibility for any loss until the goods are received within the warehouse.
On arrival at the consolidation warehouse, products from different suppliers are receipted, documentation is checked, and a Forwarder’s Cargo Receipt (FCR) or Forwarder's Certificate of Receipt is issued. The FCR document can be used as the receipt of cargo when the payment is made using a letter of credit.
Once the goods have been entered into the warehouse inventory management system, the products are stored in accordance with the criteria and rules established in advance by the buyer’s logistics team.
Prior to onward shipment, the products may need to go through value-added supply chain services, such as Pick and Pack, Kitting, Blister Packs, Labelling, Relabelling, Tagging, Repackaging and Quality Control.
The consolidation of the products to meet the customer’s order is completed.
The buyer prepares the export documentation detailing the products, pricing and customer order details, such as commercial Invoice, packing list and a country-of-origin certificate.
A copy set of documentation is provided to the freight forwarder contracted by the buyer.
Once the shipment has been consolidated, packed and the documentation provided, the goods can be shipped to the recipient or end customer.
On arrival in the destination country, the freight forwarder will notify the customs clearance agent of the arrival, so that goods can be cleared through Customs.
The buyer or the Importer of Record should contact the customs clearance agent to confirm that the goods have been fully customs cleared and are available for onward delivery.

These consolidation process steps may vary depending on the type of warehouse, the characteristics of the products, the number of orders contained within the consolidated shipment, and the destination country.