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Does it matter where it’s made?

Generally country of origin is just one of a number of factors people take into account when electing to buy or not to buy—but, okay, a ‘Made in North Korea’ tag may be an instant turnoff unless you love the Dear Leader.

Generally country of origin is just one of a number of factors people take into account when electing to buy or not to buy—but, okay, a ‘Made in North Korea’ tag may be an instant turnoff unless you love the Dear Leader.

A brand you don’t know from a place you’ve never heard of, as opposed to a strong international brand, may have trouble getting off the rank. But if your country brand has cool, credible and recognisable attributes that align with your product and service, and playing off those strengths will help your global strategy, you could be onto a winner in terms of differentiation and recognition.

Hans Frauenlob, NZTE director specialised manufacturing, says that fundamentally, brand grandstanding will eventually have to be synthesised down to meeting the market with a competitively priced offering and getting it there in the time frames and format agreed.

“Companies need to really understand where and how their customers attribute value (or negatively, discount value) in relation to where the goods are made. That’s not to say that you can’t be proud of your New Zealand origins, but national pride shouldn’t cloud your judgement and understanding of how the manufacturing and distribution model you select may help to determine how your product or service is pitched, presented and ultimately delivered.”

The choice of manufacturing models range from the traditional— where you start with raw materials and fabricate everything in your own factory—to virtual manufacturing, where you don’t make or handle anything yourself but coordinate others through IP licensing, contract manufacturing and third-party logistics to create finished goods and get them to customers.

Frauenlob says most companies that have gone global have followed one or more of the following paths:

  • Design in New Zealand, manufacture elsewhere.
  • Design and manufacture high-value items in New Zealand, manufacture low-value items elsewhere.
  • Design and manufacture very high-value items in New Zealand.
  • Design elsewhere (or buy in processing technology), manufacture in New Zealand.
  • Develop manufacturing process IP and license it.
  • Design and manufacture a high-value component here but final assembly happens elsewhere.
  • Do everything in New Zealand.

Consider this

Though some of these points may have been covered in your overall exporting business plan, looking at things with a logistical eye will help when choosing where to do or make things:

  • Are you manufacturing something different, as opposed to differentiating a product?
  • How well do you know your target consumers and their perceptions? An Indian consumer may see more value in a product imported from New Zealand than one from China in terms of quality and price.
  • If you’re manufacturing elsewhere simply to achieve scale, have you looked at forming a collaborative model in New Zealand?
  • Have you considered manufacturing the high-value portion in New Zealand and finishing the product in the market? This can also contribute to an IP strategy.
  • How far you are from the market? Whether it’s Australia or Europe will change the dynamics.
  • What is the expected speed of fulfilment in your target market? Some markets won’t tolerate a three month delivery cycle although, in some situations, the longer the delivery time the longer you have to ensure you get paid.
  • What are the rules of origin and certification issues and related legislation in your target market?
  • Are you confident of the security of supply for your key components? Sometimes where you are located can have an impact on this.
  • How reliable is the supply chain? Are you confident that you can get goods where you need to get them in a timely way?
  • How experienced are you around logistics and fulfilment management; in managing multisite manufacturing in multiple countries; and in managing a non-English speaking workforce, business partners and suppliers?
  • How good is your legal and commercial advice in your partner market?
  • Have you worked out your price/value competitiveness in your target market—how well do you understand where you need to be to compete successfully?
  • How is your ability to fund capital for expensive production machinery, and utilise it fully—are you better off to partner?
  • Do you have access to an appropriately skilled workforce that also understands your business?
  • Have you considered aftersales support and maintenance strategies? Often customers demand local support and service—are you prepared to deliver on this?

Next to contemplate is how you actually get your product from where it is to where you want it to be. Of all the areas of the exporting process, this is most demonstrably one where you must take expert advice—and more importantly, leave the process to the experts.

FreightOnBoard’s (FOB) managing director David Robertson and customs manager Peter Henderson agree. “Get as much advice as you can,” says Robertson. “Be meticulous in your preparation and documentation, and where professionals can do a better job than you, use them. Equally, in choosing a market, do your homework, realise the costs can be high in every sense of the word, and if your product or services suddenly takes off, make sure you can deliver.”

The pair remember the time they were asked—implored—to deal with a situation not of their making (and you get the feeling they have hundreds of such stories).

A European distributor had placed an order with a New Zealand manufacturer to supply a Vietnamese importer with product. The DIY New Zealander thought he’d save a few dollars by organising the exporting and shipping himself. To keep an eye on matters at the far end, he decided to travel there himself to ensure everything arrived smoothly. When he arrived at the point of quarantine, he wondered why there were so many armed people around. As it turned out, they were waiting for him. Shoddy paperwork combined with an incorrect international tariff code meant that the authorities at both ends of the process suspected something untoward.

“We got this call from a very nervous man who knew of us as independent agents and brokers and hoped that we could help out. It turned out we could,” says Robertson.

From offices in New Zealand and Australia, the FOB team is plugged into the 24/7 global process known as importing and exporting. Over decades in the business they’ve witnessed a dramatic shift in turnaround times and export markets.

“In 1966, when I first started,” says Henderson, “everything went to Britain. Ships were in port for three weeks. Now for the same destination and through containerisation, there is a one-day turnaround. Slowly the markets evolved from the UK to Europe to the United States but now the real area of action is South-East Asia and of course China.”

Sustainability is a relatively new trend too. Although the company has gone through the process of being carboNZero-certified, it doesn’t tend to influence any efficiencies as most manufacturers have implemented their own strategies by the time products are ready to ship. Still, a number of customers wanted it to comply with an environmentallyfriendly standard of accreditation. Plus, being the business of relying on those producing air and sea miles, FOB felt it would be a positive way to signify that the company was doing its bit.

In an era when technology gives the ability to track information and shipments in real time, you’d think the process of freight and customs management would be easier.

“Our industry has used IT for over 20 years and has kept up to date with changes in platforms and integration of software. So synergies exist within our own organisation as well as being able to build in information about airline and ocean carriers and port company sites. Everything is transparent, seamless and visible to everyone involved in the process.”

Yet this same technology has made it all the more easier for authorities, in a post-9/11 world, to compare information and protect their mutual borders.

Along with a changing exporting landscape, Henderson and Robertson concur that border protection, sharing of intelligence among Customs and biosecurity agencies, and the burden of responsibility on logistics managers and exporters to get compliance correct have added weight and complication to exporting. If anyone in the Port of Los Angeles has any level of doubt about what is in container XYZ picked up in Auckland, it will never make it to shore.

Says Henderson: “If there is any area where the New Zealand DIY attitude will come unstuck it is in trying to shortcut or second-guess an incredibly well established, internationally governed system and process of trade. People have an idea it might be similar to packing up a crate and shipping it down to Hamilton. The systems are very sophisticated; the process is complicated. Any mistake in documentation or information capture along the way is not only costly in terms of double-handling and possible fines, but the exporter runs the risk of having their whole shipment confiscated. As the agents involved, we may also get fined up to $10,000 for not having the correct information. Clearly, given the stakes, shortcutting is not a sound strategy.”

Robertson and Henderson point to a literal bible of international trade that contains the international Customs classifications for every product imaginable. More than 98 chapters long (each prefaced with legal responsibilities and implications) and thicker than many other holy books combined, its purpose is to harmonise every tariff into an initial six-digit number. This particular code then triggers the information accumulation and processing that goes into monitoring and managing distribution that is built into the layers of electronic and physical paper work that documents the transaction.”

This same information is also used by authorities during the tit-for-tat tradeoffs that go into negotiating global trade deals. Ensuring the information is accurate and correct becomes all the more critical, elevating mere exporting to the realm of affairs of state.

“As logistics specialists, our job is to get a firm understanding of what an exporter is trying to do and then begin the process of putting together the various stages in the right sequence and play,” says Robertson. “How to classify the shipment; what the Customs implications might be; what tariffs are involved and the ramifications of point-of-origin where various free-trade agreements or levies might be in play; whether there are dangerous goods involved; how soon the shipment needs to arrive at the destination, which will determine air or sea freight; what banking or payment agreements are in place and in what currency; and what are the necessary arrangements at the point of destination that need to be managed and then integrated into.”

An even more important offering is having someone to turn to when things get ugly and you, as an exporter, need solutions sooner than later. FOB’s service covers troubleshooting, problemsolving and ensuring everyone in the process is operating off the same information and the same expectations—particularly when it applies to ensuring an urgent order arrives in Shanghai on time.

The earlier a logistics expert is involved in the process, the relatively smoother the whole exercise will be.

The language of logistics

Is this really the second language you want to learn as an exporter? Believe us, leave it to the experts

  • CIF: Cost, insurance and freight (to a named port of destination)
  • FOB: Free on board (to a named port of shipment)
  • DDP: Delivered duty paid (to named place of destination)
  • DDU: Delivered duty unpaid (to named place of destination)
  • CFR: Cost and freight (to a named port of destination)
  • CPT: Carriage paid (to a named place of destination)
  • CIP: Carriage and insurance paid (to a named place of destination)
  • DAF: Delivered at frontier (to a named place)
  • DES: Delivered ex ship (to named port of destination)
  • DEQ: Delivered ex quay (Duty Paid) (to named port of destination)