The International Order Process

All orders received are carefully checked against any accompanying quote or invoice for compatibility with current material costs and rates. If there was no quote drafted, i.e. the order is unaccompanied by an invoice or estimate issued by an agent or direct employee of the seller/maker, the same checks are made to calculate margins (the cost of production and shipping, with acceptable mark-up included for profit). The resulting figure can be quoted to the prospective buyer and payment terms established based upon it. Trade credit might be available to the buyer, depending on their history of trade with the seller and evidence of solvency. The seller might consider obtaining credit insurance if the buyer is a first-time customer and wishes to pay through instalments. The seller will ensure that all costs are covered by margins that permit sufficient profitability to justify the trade.  Cost margins, performance bonds (if used), and all commissions paid to third parties such as agents and brokers will be reckoned. The relevant certificates and permits will be applied for, if they are not already stored in anticipation of overseas sales. These could be obtained from a freight forwarder or directly from the government by mail or download.

Written clarification will be necessary if the buyer has not used Incoterms correctly or at all to describe the allocation of the shipment’s costs and responsibilities borne by each party. There sometimes arise scenarios in which the buyer specifies Incoterms in the formal order but in other communications indicates preference for conflicting terms or additional services. In such instances, disambiguating written instructions of intention will be required. The selling firm’s production department will be requested to provide a delivery forecast and schedule to the sales/export department. The aggregate lead time (production plus shipping) will be communicated to the buyer for their acceptance or rejection. The seller will obtain from the freight forwarder cost estimates for packing, transportation, shipping, and insurance costs – as these are liable to frequent and sometimes dramatic price escalation. Only when the seller/maker has collated both sets of estimates (internal and external) based upon the very latest rates, provided the buyer with a quote developed thereon, and received the buyer’s formal acceptance, will the production order be launched and the shipping arranged with the freight forwarder.

When the seller deems the order and its shipping terms acceptable, and the terms of shipment are accurately defined in Incoterms, fully understood, and agreed upon, the order can be logged and production supply ordering and work initiated.  (The order process is much simpler if the seller is shipping a finished product directly from stock. In this case, neither a production cost quote nor a production lead time quote will be required. Sale of finished goods makes production supply ordering and work unnecessary. Stock availability and replenishment are the main concerns, and neither poses more challenges than production. Only shipping costs need to be reckoned into margins and incorporated into the quote.)