Spiking China Shipping Costs Lead to A Need for Better Product Inspections

McClain Warren

McClain Warren

McClain Warren is a Colorado-native who graduated with a B.S. in Communications and Marketing. She has written for some of the top marketing agencies in the Amazon and e-commerce space and is an Amazon seller and Entrepreneur herself.

Contingent on your ideology (and even political background), vaccines and masks help in the protection of the COVID virus. But what is helping protect the soaring and debilitating costs associated with shipping products from China to America? 

 

Shipping Costs for Amazon Sellers, Ecommerce Merchants, and Brick-and-Mortar Stores 

 

 

Container shipping rates from China to the United States have passed the $20,000 per 40-foot box mark – an increase of more than 230% the price from last year. These shocking price hikes are the cumulated result of peak U.S. shopping season moving into Q4 and surges in COVID-variant outbreaks across the world.  

The acceleration in Delta-variant COVID-19 outbreaks in several counties has put an incredible strain on the supply-chain process (particularly in China), causing mass delays on global container turnaround rates. 

Typhoons off China’s busy southern coast in late July and the beginning of August have only exacerbated overseas shipments delays as cargo ships encroach the ports along the U.S. Pacific Ocean 

The spot price per container on the China-U.S. East coast route has climbed over 500% from a year ago and there’s no suggestion that price hikes will stay stagnant there.  

 

What The Experts Are Saying 

 

“These factors have turned global container shipping into a highly disrupted, under-supplied seller’s market, in which shipping companies can charge four to ten times the normal price to move cargoes,” Philip Damas, Managing Director at maritime consultancy firm Drewry, said. 

“We have not seen this in shipping for more than 30 years,” he said, adding he expected the “extreme rates” to last until Chinese New Year in 2022. 

 

 

The surging container rates have fed through to higher charter rates for container vessels, which has forced shipping firms to prioritize service on the most lucrative routes. 

“Ships can only be profitably operated in the trades where freight rates are higher, and that is why capacity is shifting mostly to the U.S.,” said Tan Hua Joo, executive consultant at research consultancy Linerlytica. 

Is there any end in cite? 

“Every time you think you’ve come to an equilibrium, something happens that allows shipping lines to increase the price,” said Jason Chiang, Director at Ocean Shipping Consultants, noting the Suez canal blockage back in March was a major catalyst in encouraging freight companies to increase product shipping rates.  

“There are new orders for shipping capacity, equal to almost 20% of existing capacity, but they will only come online in 2023, so we will not see any serious increase in supply for two years,” Chiang postulated.  

 

Proper Product Inspections Can Help Alleviate Some of the Stress  

 

The harsh reality is that there is nothing Ecommerce sellers can do regarding the swell of product shipping costs. Those will still prove to be tumultuous as we round into Q4 with continual supply-chain delays and changes with Amazon’s inventory limits. However, you can still instill measures to safeguard your logistics process and one of them is implementing first-rate quality control on your products.  

 
Because most merchants are physically and emotionally separated from their inspections process, it’s easy to fall into the trap of trusting that quality control is operating the way it should be. In many ways, it’s like blinded faith. But the reality is, if your implemented QC process is allowing shoddy products to pass, you won’t know it until your customers get hold of your product. Then, you have to deal with bad reviews, refunds, and product returns and replacements. And, because of the massive delays in manufacturing and shipping, getting new units to replace the defective ones will take months.  

 

 
 

Hiring a third-party inspection company is like hiring someone to be the eyes and ears for your company. Not only is it vital to have your inspector perform a thorough pre-shipment inspection, but it’s highly suggested to do a mid-production inspection as well. Why? Well first… 

 
What is a mid-production inspection? 

A mid-production inspection is exactly what it sounds like: It’s when an inspection happens during the production process. For example, an inspector comes in at 5%, 20%, and 50% of the production completion and randomly tests a sample size. It’s much less expensive to go in and correct faulty products at this stage than if the entire order is completed. This is particularly recommended for first orders, high-risk orders, every order for high-priced luxury items, and any company that has a lower risk tolerance.  

 
Why perform a mid-production inspection?  

In short, mid-production inspections cut down on turnover time if there are issues with quality control during assembly. Yes, it adds time to the actual inspection process, but that’s peanuts when compared to how long it will take to correct an issue upon completion.  

 
For example, if you decide to do mid-production inspections, your inspector will come in at different times during the developmental process and check that there aren’t any issues. This is especially important at the critical point, which is when your product has surpassed the point where any defects can be easily corrected. If you only have your inspector check the quality of your products after the critical point (i.e. pre-shipment), then if there are issues with quality, your manufacturer will very likely have to start the production process all over again.  

 
Even worse, if inspections are done only during the pre-shipment phase and the inspector clears the cargo for shipment, then any defects that weren’t caught will now be in the hands of your customers. This leads to bad reviews, high return rates, and even more of a headache trying to get your inventory under control while also juggling the issue with FBA restock limits.  

Choosing the right sample size 

 

 
 

Understanding how to choose a proper sample size to limit the amount of defective products going to FBA can feel daunting.  

When controlling the quality of a batch of products, it is not practical to inspect 100% of the shipment. That would be a waste of money and time (save for certain instances in which that particular batch is very small). Many inspection companies won’t be transparent about this, as more units tested equals more money in their pocket. This is where Movley takes a very different approach. When we tell you it’s not necessary to test out a certain amount – we mean it.   

   

The truth is, rarely does a 100% check yield that much more information than inspecting a statistically representative sample. The question then becomes: How many products within your batch make for a statistically valuable sample size?   

   

The acceptable quality level (also known as AQL) is a measurement applied to products and defined in ISO 2859-1 as the “quality level that is the worst tolerable.” The AQL tells you how many defective components are considered acceptable during random sampling quality inspections and is usually expressed as a ratio of the number of defects compared to the total quantity of products.    

  

There are three levels for this (I, II, and III) with I being the smallest sample size and III being the largest. Obviously, the fewer samples you test, the less time it takes, and the more money you will theoretically save. On the other hand, a low sample size provides more room for error which might cost you a lot in the long term. Thus, it becomes a matter of your risk tolerance or threshold. 

 

The Bottom Line 

It’s incredibly important that you do everything you can to safeguard your inventory and implement steadfast quality control to ensure a smooth Q4. As any veteran seller will tell you, Q4 is chaotic even when things are running smoothly. But with all the added pressures associated with this particular Q4, keeping up with changes and protecting your business has never been so important.