Logistics is both the art and science of moving goods, services and information into and out of an organisation. In business, it encompasses aspects of the supply chain involving inventory management and the transport of goods.
Any type of organisation can experience great benefits from getting to grips with logistics and managing it more efficiently but with tighter budgets and smaller margins, it’s especially important for SMEs to focus on these potential cost savings that could mean all the difference between make or break.
Have clear expectations and know-how of the customs process and paperwork requirements to ensure shipments are not held up.
To help explain the basics of logistics, we asked Sean Bradley, Managing Director of Freightworks, for his advice to small businesses that are just starting out.
“Have clear expectations and know-how of the customs process and paperwork requirements to ensure shipments are not held up. My advice is to deal face-to-face with any company to have a personal interaction, clarity on cost and expectations. Agree credit terms with a signed agreement. It saves for any conflict later on if paperwork is clear and signed by both parties”.
Here, Bradley shares more of his knowledge on successfully managing logistics.
How should a business choose a provider?
Research your logistics supplier well. The market is not regulated and there are many ‘logistics’ service suppliers in the UAE. From my perspective you need a well-rounded and experienced team to advise on best service for cost and quality expected. ‘Buy cheap, buy twice’ is relevant in the industry. A basic no-frills service won’t cost much on the surface but if you cut corners you will experience unwelcome unknown costs from demurrage, surcharges and other fees.
It is a good idea to use a reputable and knowledgeable company for this with a deep understanding of local customs rules and better if accredited by the Authorised Economic Operator (AEO), a new body whereby companies fulfill certain obligations that ensure transparency with Customs authorities which expedites clearance at the borders.
What kinds of savings can be made from an investment in managing logistics?
As a small business you can save fixed monthly costs with an asset light approach, where you get your service provider to do everything for you from warehousing, demand planning and fulfilment. Pay a monthly fee with a defined get out clause that allows small independent companies the flexibility to scale up or down easily without hiring staff, vehicles or long term building leases.
What do start-ups need to know about logistics and supply-chain management in the UAE economy?
It’s imperative to understand the financial cash flow requirements to manage the payments to airline carriers and shipping lines for a minimum period of three months. Significant up-front costs are required and 20 to 30 per cent contingency for the unexpected.
E-Mirsal II is the software used by customs to record all imports, calculate duty and record all commodities that are maintained off shore in free zone and brought onshore into the UAE. Duty and VAT is applicable at the point of entry and in some cases VAT is recoverable.
Free zone entities need to be aware and accountable for all inventory movements and records even if these are managed by a logistics party on the company’s behalf. The company is accountable in front of authorities and not the forwarding agent.
Geographically, the UAE is fairly well-placed as a global logistics hub, how does Dubai capitalise on that?
The world's largest man-made port, Jebel Ali Port, facilitates sea connectivity globally right on our doorstep. JAFZA is ideally located to connect Dubai with the rest of the world and serviced by more than 170 shipping lines. You can send and receive sea freight to any port in the world. JAFZA is the leading logistics hub in the Middle East supporting over 7,000 companies including 100 global Fortune 500 enterprises.
Being a free zone, the cargo will be under duty-exempt status. Customs duty is to be paid only when the goods are imported to UAE or GCC local market. As for rest of the world, the goods can move without any duty or tax element added.
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