Global Supply Chain

Product Measurements Matter - DIM Weights, Trade Compliance and SOLAS Requirements

Weights and measures really do matter. Yet it is quite amazing how many organizations don't see the need to maintain weights and measures as part of their master data.

Ned Blinick

Co-Founder, 3rdwave

Weights and measures really do matter.  Yet it is quite amazing how many organizations don't see the need to maintain weights and measures as part of their master data.  For global companies, weights impact both domestic and international logistics and trade compliance in a significant way.  With the right system in place, product dimensionality can be controlled at the master level ensuring consistency of use throughout the organization.  A challenge for product measurement management is that there are often multiple measures required throughout a products international life-cycle.  Logistics requires gross weights and cubic measure to determine the correct weight declaration for shipping purposes.  Trade compliance may require product to be declared at the net, gross, or drained weight or in a totally different unit of measure.  Because product dimensionality is difficult to manage it is likely to be maintained at the departmental level and not within the product master.  This results in inconsistent product dimension management and control.Centralized product dimension management supports the multi-departmental requirements of product design, sourcing, purchasing, sales, logistics and trade compliance and saves the organization time, effort and money.  The reality is that for very little effort and cost weight management delivers significant return to the organization.DIM WeightsI recently reread an insightful blog post by Christina Carroll - CSCP - Manager, LTL Business Development at CH Robinson about managing LTL accessorial charges.   In the blog she outlines 3 major reasons why accessorial charges are levied by carriers - administrative, delivery and equipment.  While her focus is on domestic LTL her comments are just as true for international shipments in all modes.  Her basic point under "administrative" is that shipper misrepresentation of package measurements (weights and dimensions) is a major reason that accessorial charges are added to freight invoices because of the manual intervention that the carrier needs to make to correct inaccurate declarations by the shipper.With FedEx and UPS and other small package providers charging dimensional weights for domestic small packages it is becoming more important that shippers clearly understand their weights and measures for their shipping units and optimize packaging to ensure that they can accurately estimate their freight charges and correctly audit their carriers.However, properly managing package weights and measures is important beyond just managing small parcel freight. When products are not properly classified for weights, measurements and special handling requirements, it is probable that the shipper cannot accurately provide the correct information to the carrier of their cargo.  This often leads to conflict between the carriers and the shippers and plays havoc with freight cost estimating and freight auditing.  Anecdotally, we hear consistently from shippers that actually audit freight invoices, that the percentage of billing errors often exceed 2% of the value of freight.  It is rare that this error is in the favor of the shipper.SOLASFast forward to July 2016 and the implementation of SOLAS (Safety of Life at Sea).  The issue about managing shipment weights and measures is in the forefront for international ocean shippers.  This time the implications for international shippers are potentially more dramatic.  Incorrect declaration of weights can result in product not being shipped by the ocean carrier as contracted.  Correct declaration of weights may mean less product shipped in a container which impacts the cost per unit and affects the landed cost of the product.  With the implementation of SOLAS, shippers are required to provide a certificate of assurance that the weights declared are accurate.  These certificates must be filed with the carrier or 3PL prior to the goods being loaded.Having correct weights associated with SKUs is important and there is clearly a case to be made for managing this simple element of the business.  3PLs have announced that they will be charging shippers for the preparation and filing of the SOLAS certificate with the carriers.  For instance, DB Schenker announced recently a $25.00 filing fee.  For shippers doing many ocean shipments this can add up to substantial sums. With the right system, shippers can automatically prepare and file the certificate with the carrier through the VERMAS interface and save the filing fee.Trade ComplianceCustoms and regulatory agencies require weight declarations as part of their filing.  Often the duty rates and census data are dependent on the weight declared.  For trade compliance, there is the wrinkle that the weights required are not always the same as the weights declared for operational purposes.  Even across government agencies, the weight declaration of a product might be different.  Being able to capture and cross-reference weights through a master-data table streamlines the work of the trade compliance specialist and helps ensure that the information reported to customs and the other government agencies is correct.The reason centralized master data dimension management is important is that it touches virtually all aspects of the operations organization.  However, its most direct impact is on logistics and secondarily on trade compliance.  Being able to have a central repository for dimensionality is a small capability that delivers outsized cost savings and compliance value.