Importation Basic Computation

I started working for a major retailer in 1997 but it was in 2001 when I first got to deal with importation for another major retailer.  What I primarily have to import are toys, glassware, footwear, apparel, household linens, hardware stuffs.

When I began doing importation, I have totally no idea how to do calculations whatsoever, even for margins but learning on the job was really a real eye-opener, how big profit is being made by retailers especially those who do import goods for sale locally.

Let me share here one of those calculation that may prove useful for new entrepreneurs who wants to venture into overseas importation of goods.  I hope this will be useful for you readers.

Let us first learn the different importation terms:

Less Container Load or better known as LCL shipping is a good way to ship large orders and items that are large or heavy.  LCL shipping is based primarily on the amount of volume with a minimum shipment of one cubic meter.

Calculating volume of cargo is a common subject for all exporters and other shipping related companies. If cargo is Full Container Load (FCL), the freight charge is for full container load basis. But if the cargo is a Less Container Load (LCL), normally a freight forwarder charges freight on the basis of volume of cargo. A freight forwarder charges freight on the basis of CBM.

The method of calculation of volume of cargo under sea LCL shipment

CBM means Cubic Meter. However, the total weight of cargo should not exceed 1 ton. That means, if the cargo weight is above 1000kgs, the volume of cargo is treated on the basis of weight. In short, freight forwarders charges LCL rate on the basis of ‘per CBM’ or per weight of 1000kgs (1 ton) which ever is higher. CBM – cubic meter is calculated by multiplying length, width and height of packages of goods. For example, if the length, height and width of a cargo is 2.3 meters, 1.4meters and 2 meters respectively, the volume of cargo is 2.3 X 1.4 X 2.00 = 6.44 CBM. If you have the measurement in inches or centimeters, first you need to convert in meters and then calculate CBM which will be easier for you. If freight forwarder quote a rate of USD 10.00 per CBM, the rate will be 6.44 CBM X USD 10.00 per CBM = USD 64.40.

If the weight of the said package is 7 tons (7000kgs), the freight on LCL is calculated on the basis of weight. That is, 7 tons X USD 10.00 = USD 70.00. So, weight of 1 ton (1000kgs) is treated as 1cbm. In other words, the LCL freight is calculated on the volume of 1 CBM or weight of 1 ton (1000kgs) which ever is higher. 

Please note that the shape of the crate does not have to be 1 meter by 1 meter, it can be any size it is only the volume that is calculated.

We calculate LCL shipments by taking the item or items that you would like to purchase and calculate their given volumes.  To do this we first take the length, width and depth of each piece and add from 2-10 centimeters to each dimension.  We add the 2-10 cm to the size to allow for packing and framing.  Once we get the total volume of the pieces you are ordering we divide the total volume by 1,000,000.

We get the 1,000,000 figure from the length 100 cm multiplied by width 100 cm multiplied by depth 100 cm.  Take note that there are 100 cm in one meter, thus there are 1,000,000 cm in a cubic meter.

For example:

Item #Box1

Quantity 1

Size 75 x 50 x 90 cm

Let us assume that this item is fragile so it will need very good packing and framing.  To ensure that we are able to pack this very well, we will add 10 cm on to each side of the object.  The new shipping size of this box is now 85 x 60 x 90 cm.

85 x 60 = 5,100

5,100 x 90 = 459,000

459,000 / 1,000,000 = 0.46 or 46%

From this example we know that this box will occupy 46% or about half of a cubic meter.  Since there is a minimum shipping volume of one cubic meter for LCL shipping, there is an extra 54% of a cubic meter that can be used. 

Example 2:

Item #BOX 2 Quantity 2 Size 10 x 40 x 60

Item #BOX 3 Quantity 40 Size 50 x 30 x 20

Item #BOX 4 Quantity 1 Size 75 x 50 x 90 cm

Let us assume these items are all fragile so it will need very good packing and framing,  To ensure that we are able to pack this very well and we will add 10 cm on to each side of the object.  We now have the following shipping sizes.

Item #BOX 5 Quantity 2 Size 20 x 50 x 70	Item #BOX 6 Quantity 40 Size 60 x 40 x 30	Item #BOX 7 Quantity 1 Size 85 x 60 x 100 cm
20 x 50 = 1,000 1,000 x 70 = 70,000 70,000 x 2 =140,000  (2 is the quantity)	60 x 40 = 2,400 2,400 x 30 = 72,000 72,000 x 40 =2,880,000	85 x 60 = 5,100 5,100 x 100 = 510,000 510,000 x 1 =510,000
Now we add the volumes together to get a total shipping volume:140,000 + 2,880,000 + 510,000 140,000 + 2,880,000 + 510,000 = 3,530,000 (this is the total cm) 3,530,000 divided by 1,000,000 (the number of cm cubed in a cubic meter) = 3.53 cubic meters.

If you do not understand these examples don’t worry when ordering all you need to do is give us the items that you would like and the quantities we will do all this for you.

At the beginning of this answer we mention that volume is the primary factor in calculating LCL shipment there are a few other things that affect the way LCL shipping cost are calculated.

1. all order need to be insured, insurance for LCL shipments is calculated at a rate of 3% of the cost of the goods.

2. Document and Export Fees are added to the shipping cost per order not per cubic meter

3. The maximum weight of a cubic meters goods can not exceed 350 Kilograms, if this is the case with your order we need will need to calculate shipping rates by weight not volume.

Good luck to all entrepreneurs who are eyeing to enter the importation business and may you find this educational.

Brand Rescue of Clorox

Some blue-chip companies have adopted a longer view of brand management and are starting to show positive results. For example, Clorox, a leading consumer-packaged-goods firm, is ahead of the curve in its use of long-term metrics to steward its brand. Until the second quarter of 2005, the Clorox bleach product line was in a seemingly endless cycle of discounting. Almost once a month, the price of a 96-ounce bottle of regular Clorox bleach was reduced to $0.99 at retail—even cheaper than most bottled waters. The company had also reduced its advertising spending. From a short-term perspective, the promotions appeared to be quite profitable. Yet consumers learned to lie in wait for these deals, which increased short-term sales but decreased baseline sales.

In the midst of this, Stephen Garry, director of advanced analytics at Clorox, introduced long-term metrics to measure brand performance. The top chart in the exhibit “How Clorox Rescued Its Brand” depicts quarterly baseline sales for the brand and the projected incremental lift arising from promotions. Both measures are expressed as a percentage change from the corresponding quarter of the previous year to control for seasonal fluctuations in sales and to protect the company’s data.

How Clorox Rescued Its Brand

Garry found that before the third quarter of 2005, baseline sales were low (not depicted in the chart) and decreasing. Lift over baseline—which reflects price sensitivity—was extremely high (not depicted in the chart) and increasing. These numbers indicated weakness in the brand from the perspective of both sales and margins. In response, Garry initiated an effort to reverse this trend by reducing discounting and increasing television advertising. The changes, implemented in July 2005, are depicted in the middle chart of the exhibit.

As a result of the policy change, baseline sales increased dramatically and lift over baseline decreased. Consumers were no longer buying from promotion to promotion but were instead purchasing more volume at full price. These changes had a positive long-term effect on the company’s revenues and profits by increasing the brand’s quantity and price premiums.

As shown in the bottom chart of the exhibit, revenue (which was low before the policy change) eventually began to turn around as a result of the reduction in discounting. Clorox further indicated to us that profits, which continued to fall in the short term (the third and fourth quarters of 2005), rebounded sharply in the first and second quarters of 2006.

Note the implication for the analyst who typically focuses on short-term metrics such as quarterly revenue. In the third quarter of 2005, the analyst might have downgraded the brand as a result of revenue and profit decreases. Yet these short-term decreases reflect the time it takes for consumers to acclimate to the price changes and respond to the advertising. Clorox, with the foresight and temerity to monitor the attendant long-term changes in brand health, persevered with its strategy. The ensuing quarters yielded higher revenues and substantially increased gross profits. Without long-term brand-health measures, the analyst may have come to a misleading conclusion about the value of the brand or Clorox may not have realized the fruition of its strategy. Armed with long-term metrics, firms and analysts can assume a longer-term perspective on the brand, leading to improved profitability.

Brand management today is like driving a car by looking only a few feet ahead. The drivers can change direction rapidly, but they’re not necessarily on a path that will take them where they want to go. In the face of an increasingly fragmented media and powerful retailers, brand managers cannot afford to be steering their brands in the wrong direction. Mounting evidence suggests that a short-term orientation erodes a brand’s ability to compete in the marketplace. Accordingly, managers are well advised to refocus their attention on the basic principles that once made their brands ascendant.