Blog Category: Logistics & Supply Chain

The Same-Day Delivery concept

The internet allows people to achieve instant gratification for things that they want. All you have to do is open a search engine such as Google and request the information you need. For most parts, you can get what you want within seconds thanks to advances in supply chain operations, delivery logistics, and supply chain digitization and automation.

This drive for instant gratification has been introduced in today’s fulfillment practices as the concept of ‘same-day delivery. Understanding the answer to “what is the omnichannel supply chain” often focuses on operations. These processes are essential to mastering modern supply chain and e-commerce.

What Are Omnichannel Supply Chains and Same Day Delivery Services?

Same-day delivery is used chiefly for online companies to increase their sales. Customers are willing to pay an extra fee to get their products as fast as possible. The main reason is that it narrows the gap between instant gratification and brick-and-mortar store shopping. 

Embracing omnichannel supply chains can improve overall customer satisfaction, business performance, and profitability.

Effectively implementing this concept does, however, require a vast number of resources which results in large companies adopting this practice for the most part and leaving smaller companies behind as they gain a competitive advantage. 

Leveraging advanced supply chain tools, advanced smart technology, and  XPO Logistics freight tracking options can help improve end-to-end e-commerce performances.

With the rise in popularity of online shopping, e-commerce shipping, and M-commerce business, the need for reliable delivery services is more important than ever. As more people begin looking at online platforms and using eBay, Etsy, Amazon, and  Shopify plus B2B features, the more these digital tools and processes are needed. 

According to Marlin W Ulmer (Ulmer, 2017) and the EconoCourier website (EconoCourier, 2016), the same-day delivery concept comes with both advantages and disadvantages, which are listed and further clarified below.

Disadvantages of Same-Day Delivery for Supply Chains

A recent article published by Fulfillmentworks (Fulfillment Works, 2020) focused on the question of what is omnichannel supply chain operations and how they impact the network today? The study shows that there are three main disadvantages for both companies and consumers that correspond with the same-day delivery concept.

Same-day delivery can limit companies’ flexibility due to planning and order prioritization disruptions. Companies that don’t utilize the same-day delivery concept can adjust more efficiently in their fulfillment operations, such as re-routing, altering contents, canceling, and holding orders, to optimize their fulfillment strategy. 

Companies that utilize same-day delivery do not have this flexibility, as changes within the fulfillment process will result in delays, which can upset consumers who paid for the same-day delivery option (Fulfillment Works, 2020).

Efficiency is a critically important factor within all fulfillment operations. A powerful way to improve the efficiency in shipping is to group or batch orders, also known as consolidated shipping, as this can reduce travel times. 

Same-day delivery limits the possibility of grouping orders as there is less time available to accumulate charges in your picking queue before the rankings get processed.

Some M-commerce companies avoid a same-day delivery concept as the inherent nature of the concept offsets their sustainability practices. 92% of consumers are more likely to trust companies that support social or environmental issues (Fulfillment Works, 2020). This means that your brand’s perception may improve its reputation more than same-day shipping.

Advantages of Same-Day Delivery for Supply Chains

Utilizing the same-day delivery concept allows companies to gain a competitive advantage over other companies that do not use this concept. Research shows that consumers want to get their products as fast as possible. This reinforces the statement of gaining a competitive advantage using the same-day delivery concept.

Companies that utilize same-day delivery see a reduction in their inventory costs. This is because they can reduce the stock warehouses held for retail stores and also improve cross-border logistics.

According to EconoCourier (2016), companies that offer same-day delivery also require their customers to pay an extra fee to realize this concept. This is mainly due to the additional costs associated with the abrupt same-day delivery request. Consumers that need a specific product fast can use the idea of same-day delivery and reduce the time it takes before they acquire their product. 

This means they can reduce the time spent before they receive gratification by obtaining their product (EconoCourier, 2016). There are plenty of indications that same-day delivery will become an even stronger standard in today’s fulfillment practices since companies that do not apply this concept lose their competitive advantage.

Understand Same-Day Delivery and Omnichannel Services With ModusLink

ModusLink is ready to help you understand what it would take for you to be able to implement same-day delivery.  We can analyze where you do business and want to do business and give you proposals as to the best approach, whether it’s a “universal” same-day offering, a geographic dependent same-day offering, or some other fulfillment as service criteria.  

Bibliography:

Umer, M. (2018). Dynamic pricing and routing in Same day delivery. Informs, 1-2.

Ulmer, M. (2017). Delivery-deadlines in same day delivery. Logistics research, September. From inventoryops: https://www.inventoryops.com/articles/same_day_shipping.htm

EconoCourier  (2016, December 22). The advantage of same-day delivery to businesses and shops. From Econo courier blogpage: https://econo-courier.com/advantage-day-delivery-businesses-shops/

Fulfillmentworks. (2020, June 10). The disadvantages of same-day delivery. From Fulfillmentworks home: https://www.fulfillmentworks.com/blog/post/disadvantages-of-same-day-shipping/

Clarkec, I. D.-P. (2020). Same-day delivery with drone resupply. Informs, 1-2.

DHL, T. R. (2019, May 16). DHL . From DHL launches its first regular fully-automated and intelligent urban drone delivery service: https://www.dpdhl.com/en/media-relations/press-releases/2019/dhl-launches-its-first-regular-fully-automated-and-intelligent-urban-drone-delivery-service.html

EHang. (2021, January 29). EHang home page. From EHang: https://www.ehang.com/ehangaav

CNBC. (2019, July 15). How Amazon delivers on one-Day shipping .

Geekwire. (2016, December 22). How does amazon prime now deliver packages in under two hours?

Introduction

It is no secret that transport costs have been rising across all different modalities. Carriers must enforce measures such as peak surcharges, and records are being broken regarding transport costs throughput. Inflation puts immense pressure on many businesses and forces them to reevaluate their current transport operations. Keeping up with the latest trends in management, logistics, digitization, and automation is vital for supply chain growth and recovery. 

Many people today are looking at the growing supply chain and market trends and eyeing job and career opportunities. This is why high-paying logistics jobs are increasingly in demand and why the need for skilled and experienced personnel is higher than ever before. Continued growth and recovery of the industry depend on it!

The reasoning for the increase in costs is multivariate and can trace back to several causes. These include the increase in fuel prices, demand for transport services, or the rise of COVID-19. Another contributing factor is the online share of global retail trade, continuing to rise across most countries as omni carrier 360 services gain popularity (Statista, 2020).  It is all about improving supply chain management processes and key supply chain operations.

Understanding Omni 360 Carrier Logistics and Costs Management

Whether you are a smaller business or a large multinational corporation, any company would do well to keep a firm grip on its transport activities and understand how omni 360 carrier logistics and management impacts transport costs. Depending on the type of business, not managing your transport activities effectively could lead to unwanted consequences such as overpaying, decreased customer satisfaction, and inventory management problems.

Overcoming the rising e-commerce challenges related to costs and transport expenses is a critical area of focus for supply chain managers. Inflation and rising costs seen by transport service providers and fleet managers are not expected to become less prevalent anytime soon (Bloomberg, 2021). As you can see in Figure 1, ground transportation prices alone have and are predicted to outpace the Producer Price Index for the foreseeable future (TransportationInsight, 2021). 

Figure 1. PPI v Parcel, LTL and Truckload Price Indices June 2016 – May 2021

The Importance of Supply Chain Visibility – Filling High-Paying Logistics Jobs 

According to Hofman et al. (2019), lacking information and awareness on your current Supply Chain stakeholders and activities causes unnecessary delays and disruption amongst your business activities. If you are an SME that is growing, you understand the struggle of scaling effectively with your growth. Acquiring and allocating the right resources to the right business activities can be a challenge. Reducing transport costs starts with Supply Chain Visibility.

The concept of Supply Chain Visibility essentially means awareness of and control over end-to-end supply chain information. As often said, knowledge is power. Zooming in on the transport/logistics area of the Supply Chain, it is vital for a business to first understand its Shipping profile and current transport activities before aiming to enforce measures that lead to reducing transport costs. This can be done by applying the 2 key steps below.

• Request and analyse your current shipping profile.

Do you currently hold a one-carrier approach, or are you using multiple carriers? Which modalities are you making use of? How much are you shipping, and where to? Are your transport carriers the same for import and export? What is your average weight per shipment? These are all questions to be asked when analysing your shipment profile. A business must first know the exact ins and outs of its Shipping profile before attempting to reduce transport costs. Request the corresponding data/documents from the purchase department or transport stakeholders.

• Maintain a structured and detailed overview of currently incurred costs

Once the Shipping profile has been analysed and the transport activities are clear, you must strive to create a clear overview of all incurred transport costs. This optimizes your awareness of currently spent resources and allows a business to evaluate their current activity by reviewing the performance/resources spent ratio.

Reduce Transport Costs and Utilize Third-Party Services

Now that your current shipping profile and costs are clear, you can start implementing measures to reduce transport costs. There are many ways to achieve transport cost reduction. One important strategic decision concerns the choice of whether to insource or outsource your transport activities.

Insourcing your transport has many benefits such as reducing third-party liability, clear transport activity overview, and eliminating unwanted waste processes. However, keep in mind that transport tariffs are rising and are expected to continue to rise. This essentially minimizes and complicates the benefits gained from insourcing nowadays. 

Companies that are unsure of their current transport activities do well by considering outsourcing to a professional and competent third party that has a deep talent pool to pull from for high-paying logistics jobs. Even as companies look to outsource supply chain operations the need for skilled workers continues to rise.

Transport tariffs are often more expensive the lower your shipment profile. The more shipments you send, the lower the price per shipment, as tariffs are usually charged depending on the number of items or overall volume shipped. 

This means that third-party companies and omni carrier 360 proficiently in handling transport activities maintain and combine high-usage shipping profiles to get surprisingly low rates and reduce transport costs for many participating parties.

Motor and Control Transport Costs With Help From ModusLink

Expert companies such as Moduslink allow businesses to reduce transport costs effectively by providing businesses the opportunity to outsource their end-to-end Supply Chain and transport activities. Get a personalized offer, contact Moduslink today.

Bibliography:

Bloomberg. (2021, April). Higher Shipping Costs Are Here to Stay, Sparking Price Increases. https://www.bloomberg.com/news/articles/2021-04-12/higher-shipping-costs-are-here-to-stay-sparking-price-increases

Campbell, S., Phillips, D., & Campbell-phillips, S. (2020, July). Lack of Communication between Management and Employees. Researchgate. https://www.researchgate.net/publication/342796387_Lack_of_Communication_between_Management_and_Employees

Hofman, W., Dalmolen, S., & TNO, The Hague, The Netherlands. (2019, August). Supply Chain visibility ledger. Researchgate. https://www.researchgate.net/publication/334883753_Supply_Chain_Visibility_Ledger

Statista. (2021, July 7). Online share of retail trade in selected countries 2014–2021. https://www.statista.com/statistics/281241/online-share-of-retail-trade-in-european-countries/

A little over a year has passed and Brexit is still causing many disruptions amongst industries. Virtually any company that must maintain a streamlined Supply Chain cannot deny the strong effects Brexit has had within the industry. Companies must deal with rising issues such as changing Import/Export regulations, restrictions concerning the free movement of people and managing supplier relations. One of the most predominant effects faced by companies concerns the increase in complexity in cross border customs/tax regulation. This is especially relevant in the Transport and Logistics sector.

The new customs/tax regulations force companies that conduct trade between the UK/EU to reassess their strategic decision-making regarding the clearance of goods and paying VAT (this includes any additional tariffs when selling to EU customers). Doing so is necessary, but will result in increased transport costs, extensive paperwork, and prolonged delivery times. Companies can also choose to regain control by acquiring warehouse space within the EU to function as a fulfillment center and vice versa. This decision will, however, implicate high opportunity costs (Williams, 2021).

In addition to the increase in complexity concerning customs/tax regulations, UK regulatory compliance now exists separate from EU regulatory compliance. The most essential requirements in terms of environmental issues, safety, and health will not change substantially. However, there are most certainly some major changes applicable to UK/EU product compliance regime (Grist & Erasmus, 2021). Two of the most significantly changing instances are:

• The introduction of a UKCA mark and a UK Declaration of conformity for market entering products.
• A shift in obligations and duties between ‘manufacturers’, ‘importers’, and ‘distributors’

Brexit has caused many Supply Chains to have their weaknesses exposed as a result from the above stated effects. This does not mean, however, that there are no opportunities for the sector. Experienced businesses know that problems create opportunities for improvements.  Organizations are adapting by reassessing their current Supply Chain operational processes. This is vital for improving post Brexit. Companies must reevaluate their current transport activities and adjust their strategies in accordance with the Brexit effects and regulations. One of the ways of doing so is Outsourcing.

According to Investopedia (2021), the definition of outsourcing is defined as: ‘the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff.’.

In essence, companies that outsource elements of their Supply Chain can achieve benefits such as:

• Reducing Operational Costs
• Increasing Flexibility
• Mitigating risks
• Creating opportunity for innovation
• Streamlining operational processess

Working with experienced professionals that deal with outsourcing daily is an effective way to quickly increase your company’s efficiency. Some organizations outsource their entire Supply Chain to expert companies that are up to date with the latest knowledge. This allows them to tackle the complex issues concerning customs/tax changes resulting from Brexit. Others merely outsource elements of their Supply Chain to increase their proficiency in that specific area. For both cases, Moduslink is  your partner of choice and can provide you with customized solutions that fit to your needs, increasing your needs and allowing you to anticipate growth, streamlining your costs, increasing your revenue, and building brand loyalty.

If you are a company that is struggling to effectively resume your business between the UK and EU, allow Moduslink to relieve you of your worry by offering a wide variety of outsourcing solutions backed by industry experts. Our solutions allow you to improve your Supply Chain by implementing:

• Packaging, Kitting & Assembly
• B2B and B2C Fulfillment
• Reverse Logistics
• Warehousing and Distribution
• Delivery and Logistics
• Location optimization

Gain control over your Supply Chain and experience the benefits from Outsourcing through Industry experts.

Sources:

Supply Chain Statistics – 18 Key Figures of 2022, Accessed 25 October 2022 From

https://procurementtactics.com/supply-chain-statistics/

KPMG International. (2017, February). Brexit: The impact on sectors. https://assets.kpmg/content/dam/kpmg/uk/pdf/2017/03/brexit-the-sector-impact.pdf

Investopedia. (2021, May 2). Why Companies Use Outsourcing. https://www.investopedia.com/terms/o/outsourcing.asp

SchoenHerr, T. S. (2010, January). Outsourcing Decisions in Global Supply Chains: An Exploratory Multi-Country Survey. International Journal of Production Research. https://www.researchgate.net/publication/247162714_Outsourcing_Decisions_in_Global_Supply_Chains_An_Exploratory_Multi-Country_Survey

Williams, C. W. (2021, March 26). How is cross-border e-commerce and distribution adapting to Brexit? KnightFrank. https://www.knightfrank.com/research/article/2021-03-26-how-is-crossborder-ecommerce-and-distribution-adapting-to-brexit

Grist, E. G., & Erasmus, P. E. (2021, January 1). Brexit: Product Compliance and Liability implications. Bird & Bird. https://www.twobirds.com/en/news/articles/2016/uk/brexit-product-compliance-and-liability-implications

The European Union (EU) has established new rules for all EU imports in 2021 and those have continued to be tweaked and updated this past year.  

The new rules, collectively called Import One-Stop Shop (IOSS) are an attempt to both simplify Import VAT collection and level the playing field between EU and non-EU players.  

The newest updates to VATs on imports further extend regulations and provisions, something all shippers, carriers, brokers, forwarders, and anyone dealing with cross-border transport needs to understand. Everything from VAt collection to VAT returns can complicate cross-border logistics and imports significantly.

Until recently, EU and non-EU sellers selling goods online to EU consumers can import the goods into the EU, directly to the consumer, and import VAT-free if the consignment of good(s) is valued at or below €150. This can have a significant impact on M-commerce and online businesses.

This ends on 1 July 2021 and all imports will be subject to EU Import VAT. Sellers and facilitating marketplaces can collect import VAT on import consignments valued up to €150.

The new regulation regarding  cross border logistics allows for a low-value consignment   Import VAT exemption, known as the “low-value consignment stock relief”, and was intended to relieve EU member countries’ customs from the burden of checking large volumes of packages for small amounts of potential tax revenues. 

An unintended consequence of this exemption left EU-based sellers at a major price disadvantage since they must charge VAT on goods that are dispatched from within the EU. The exemption has also encouraged large-scale fraud by sellers deliberately under-declaring the values of goods to escape the EU imports bill.

How Does This Impact B2B Fulfillment in the EU?

There are a number of considerations to keep in mind, especially as these regulations continue to be updated. In 2021, Michel da Silva, an e-business and B2B fulfillment expert at ModusLink was asked to help explain the new VAT on imports and similarly related regulations. His responses are below and later we will dive into the very latest updates that you need to know about B2B e-commerce fulfillment and imports.

Q: What does this supply chain change mean for a typical non-EU seller?

A: Non-EU sellers, including those from the UK, will have to appoint a VAT Intermediary to act as their agent. This is similar to a Fiscal Representative or to use a Merchant of Record, who will take care of payments, taxes, and compliance. It will significantly impact how importers handle fulfillment solutions, and customer service, and protect bottom-line profits.

Q: Can you give us an example to better understand the effect of the new  Import VAT rate regulations on an average non-EU company?

A: Let us consider the EU imports VAT obligations today and post-2021 reforms for an example non-EU seller, Client ABC from China:

Today:  Client ABC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or Client ABC has to pay the  VAT on imports at the rate of the country of import. To provide a good seller experience, Client ABC pays the import VAT on behalf of its customers.

After July 1^st, 2021: Client ABC will charge VAT at the point-of-sale and declare it in a  cross border logistics return if not exceeding €150. They are then exempted from paying import VAT at customs. Client ABC may also declare sales to customers around the EU via its IOSS return, as discussed in the above section.

Q: What about transactions for items greater than €150 for non-EU sellers or those dealing with B2B and B2C orders?

For consignments exceeding the €150 IOSS threshold, the  Import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for Client ABC from the above example if they wish to sell the goods locally or to consumers in the rest of the EU.

Q: What is a Merchant of Record (MOR) and why would companies or big box retailers dealing with VAT on imports use them?

A: A Merchant of Record is a legal entity selling goods or services to a cardholder on a company’s behalf and to whom the cardholder owes payment for such goods and services. The MOR is the responsible party for meeting all of the  cross border logistics and regulations in the EU.  The MOR processes all payments and takes on those transactions. Using a MOR is a very good way to ensure VAT-registered companies are in compliance with the law as these payment service providers can manage the entire process for you.

EU Import VAT and Regulations for 2022 and Beyond

There are a number of considerations to keep in mind, especially as these regulations continue to be updated. In 2021, Michel da Silva, an e-business and B2B fulfillment expert at ModusLink was asked to help explain the new VAT on imports and similarly related regulations. His responses are below and later we will dive into the very latest updates that you need to know about B2B e-commerce fulfillment and imports.

Q: What does this supply chain change mean for a typical non-EU seller?

A: Non-EU sellers, including those from the UK, will have to appoint a VAT Intermediary to act as their agent. This is similar to a Fiscal Representative or to use a Merchant of Record, who will take care of payments, taxes, and compliance. It will significantly impact how importers handle fulfillment solutions, and customer service, and protect bottom-line profits.

Q: Can you give us an example to better understand the effect of the new  Import VAT rate regulations on an average non-EU company?

A: Let us consider the EU imports VAT obligations today and post-2021 reforms for an example non-EU seller, Client ABC from China:

Today:  Client ABC can sell and ship consignments under €22 to EU consumers VAT free. Over that limit, then either the customer or Client ABC has to pay the  VAT on imports at the rate of the country of import. To provide a good seller experience, Client ABC pays the import VAT on behalf of its customers.

After July 1^st, 2021: Client ABC will charge VAT at the point-of-sale and declare it in a  cross border logistics return if not exceeding €150. They are then exempted from paying import VAT at customs. Client ABC may also declare sales to customers around the EU via its IOSS return, as discussed in the above section.

Q: What about transactions for items greater than €150 for non-EU sellers or those dealing with B2B and B2C orders?

For consignments exceeding the €150 IOSS threshold, the  Import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation for Client ABC from the above example if they wish to sell the goods locally or to consumers in the rest of the EU.

Q: What is a Merchant of Record (MOR) and why would companies or big box retailers dealing with VAT on imports use them?

A: A Merchant of Record is a legal entity selling goods or services to a cardholder on a company’s behalf and to whom the cardholder owes payment for such goods and services. The MOR is the responsible party for meeting all of the  cross border logistics and regulations in the EU.  The MOR processes all payments and takes on those transactions. Using a MOR is a very good way to ensure VAT-registered companies are in compliance with the law as these payment service providers can manage the entire process for you.

EU Import VAT and Regulations for 2022 and Beyond

Like many things in life and global business, the only thing that stays the same is that everything changes.  This is true of the latest  Import VAT rulings in the EU as it relates to fulfillment centers, importers, and third-party logistic providers. 

According to a report on  cross border logistics and regulations in the EU from Bloomberg Tax on Oct 21, 2022, “Import VAT is payable by any person or persons designated as liable by the EU member state of importation, according to Article 201 of the EU VAT Directive 2006/112/EC. The indirect representative is generally a payer of import duties to customs and charges those duties from the business it is representing: However, the problem arises if its principal goes bankrupt, disappears, or refuses to pay the import taxes payable.” 

But what does this mean for those who rely on imports and what power does  EU import customs have when it comes to collecting VAT tax payments?

Customs has the power and authority to actually go back several years and request the payment of import taxes on past shipments and imports. They can, in fact, go back many years after the goods have been released and are in free circulation within the EU. 

Waiting until years later to collect payments and chase down VAT on imports can help improve access to goods and materials among retailers and consumers. It is one of the downsides of the digital approach to omnichannel supply chain networks that are growing in popularity today.

However, there are obviously major risks involved for those funding, and dealing with the reimbursement and regulation side of imports into the EU. Therefore, representatives and those willing to take on this level of risk are not easy to find or only come at a very high cost. 

The additional pressure on  cross border logistics only adds to the complexity of managing finances, cash flow, invoices, payments, and overall budgets- something EU importers will have to adjust to and prepare for.

There are many layers to the EU import rules and regulations, including carbon emission monitoring and control, tax and payment constraints, load and product limitations, and many more. Each one brings fees and additional expenses for importers and adds to the cost of shipping and transportation services. 

Many countries and even individual shipping companies are ill-equipped to handle these changes and will likely struggle to adapt and keep up with the ever-changing field that is EU imports. But you don’t have to struggle with ModusLink on your side!

Navigate the Changes Now and Down the Line With Cross Border Logistics Experts From ModusLink

ModusLink is a provider of a multitude of e-business services including Merchant of Record and can assist with a range of b2b fulfillment needs and concerns. Stop wandering around blindly trying to make sense of the latest changes to EU imports and the newest VAT on imports. 

Let the pros handle the complicated work and let you focus on managing your logistics. Contact ModusLink today by clicking here to start the process to get help navigating these newest regulations.

Bibliography:

Council of the European Union. Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. 11 November 2006. Accessed 26 October 2022. From https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32006L0112.

Europe Daily News, 24 October 2022. 24 October 2022. Accessed 26 October 2022. From https://www.mayerbrown.com/en/perspectives-events/publications/2022/10/europe-daily-news/europe-daily-news-oct2422.

KULDKEPP, AIKI. EU Court Clarifies How VAT Applies to Customs Agents. 21 October 2022. Accessed 26 October 26 2022. From https://news.bloombergtax.com/daily-tax-report-international/eu-court-clarifies-how-vat-applies-to-customs-agents.

Russia/Ukraine Crisis: Update on UK and EU Sanctions on Russia. 17 October 2022. Accessed 26 October 2022. From https://www.ropesgray.com/en/newsroom/alerts/2022/October/Russia-Ukraine-Crisis-Update-on-UK-and-EU-Sanctions-on-Russia.