Saturday, February 28, 2009

Shipping Terms

So when you get to the point where you have a product built and shipped, you will need to pay attention to the shipping terms. Unlike when you buy your dell computer and the computer comes damaged, and you reject it, on the B2B side that doesn't happen. Most items will be shipped FOB or Free on Board.

FOB is what is called an Incoterm or International Commerce Term. Wikipedia has a great synopsis of the various Incoterms and what they mean.

http://en.wikipedia.org/wiki/Incoterm

It is important to realize that shipping terms and conditions are litterally centuries old. Lloyds of London was originally set up to insure spice shipments. Risk Management departments litterally spend weeks negotiating, shipping terms, conditions, and even the definition of Free on Board. If the crain drops the container and it hits the railing, was it considered "on board"?

Since in all possibility you will not have a cargo insurance program, evaluate the risk of product being lost or stolen in transit. While it is a big money maker for sellers (think Best Buy makes money from selling a TV? Nope just the insurance on it.), it may make sense for you to have them cover the cost of the product.

This becomes a bigger deal on high value items where the truck driver, stops to use the bathroom, and "forgets" to take his keys out of the truck. Oops, the truck is gone. And yes, it does happen! It is sometimes less of a deal when you use a common carrier like Fed Ex or UPS but try and understand the terms you are accepting from your manufacturer.

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