CONTROLLING EXPORT COSTS
There are two key drivers for installing specialised exporting software: documentation difficulties and the need to control international on-costs. Neither of these is addressed by the typical corporate ERP or financial system.

In the documentation area there are software products ranging from simplistic on-screen form-fillers to an automated but highly configurable procedure-oriented system. However, nearly all the system providers ignore the equally important area of export cost control.
Given the sheer complexity of the export distribution cost structure, lack of time, expertise and systems means that most manufacturers do not really know the precise profitability of any shipment. Still less do they know what they are making or losing on any one product for a particular destination.
Export costs fall into four main sectors: shipping, selling, financial and governmental. Within these, individual costs must be dealt with in many different ways, so a software system cannot just hold a simple rate for a cost-item. It must also specify other factors by which the rate can be calculated, such as weight, volume, value, quantity, etc. In the Exportmaster Professional software package, a cost-item’s rate can consist of up to six constituents, each of which can be manipulated by formulae in costing models. These are closely related to spreadsheet models but work in a more automated fashion with live links to the shipments to which they relate.
Freight is usually the most significant export shipping on-cost. The export system needs to store not only the freight-rate itself (eg 250.00) and the currency (USD, EUR, GBP) but also the amount (1000, 1) of the attribute (kilos, m/3, containers) to which the rate applies. In addition there may be fuel or currency surcharges (e.g. +2.5 percent, +7p per kg). Exportmaster may often store six different values against a single freight rate, all of which it uses in the final calculation. Similarly, an insurance rate could consist of three components, the rate (e.g. £0.55), the value to which the rate applies (£100.00) and the basis of adjustment of the CIF/CIP value (110 percent). Other shipping costs will include domestic haulage, port or handling facility charges and shipping agent’s fees, all of which can have a variety of methods of calculation (weight, volume, value, etc).
Many dispatches will incur consular or legalisation charges regardless of terms of sale. For terms of sale beyond CIF/CIP, there can also be other governmental costs such as duty and even local taxation at destination.
Financial costs can include bank charges, interest on bills of exchange or on other extended terms, and credit insurance premiums. The area of selling costs is usually dominated by third-party commissions, either at destination or in the exporting country. A rate of commission can apply to any level of sales revenue, from Ex-Works through to Delivered Duty Paid.
The Exportmaster Professional approach allows exporters to store these rates in a database and to build costing models that apply the rates in conjunction with a shipment’s products, product costs, revenues, weights, volumes and dispatch details. Expenses can of course be entered or amended by the user during the shipping or pre-shipment process. The models can show the profitability of the shipment and its individual products on the basis of estimates and of actual results with variances. For export quotations they also allow the user to calculate the prices the exporter needs to charge to achieve a desired margin.
Remember, if your costs are not known, your pricing is probably wrong!

Exportmaster Systems Limited
T: 020 8681 2321
F: 020 8667 1816
E: info@exportmaster.co.uk
www.exportmaster.co.uk


Industrial Focus May/June 2008