Global Chip Maker Uses DB Schenker’s FTZ Cross-Dock Operations to Save Millions in Merchandise Processing Fees
Tasked with deftly transforming thin disks of silicon (“wafers”) into semiconductors that serve as the very hearts of our mobile phones, TVs, medical diagnostic equipment, and various other electronic components, semiconductor manufacturers have unique logistics needs. Operating in a highly-competitive, fast-paced industry where new innovations are revealed almost daily, these companies must balance supply chain optimization with cost efficiency in order to meet their customers’ needs, stay one step ahead of the competition, and continue to grow.
As a global logistics provider, DB Schenker has been helping semiconductor companies conquer their biggest transportation and fulfillment challenges for more than two decades. “We’ve been shipping semiconductor tools and materials for the semiconductor industry for over 20 years,” says Peter H. Yang, Global Account Manager, Semicon/Solar Vertical Market. “Our deep understanding of the unique semiconductor supply chain helps businesses continue uninterrupted while meeting the fluctuating demands of a constantly-changing market.”
That’s exactly why one global chip manufacturer recently turned to DB Schenker for help improving and honing its supply chain. For years, the company had managed its logistics operations internally, using only its own staff and resources. But as the manufacturer continued to grow and expand internationally, it knew it needed a strong, reputable logistics partner to help it get to the next level.
“Because the manufacturer was doing everything on its own,” says Yang, “it was using up a lot of human resources and capital (i.e., on warehouses, labor, freight costs, etc.) trying to move its products around the world.”
Tapping into Free Trade Zone Cross-Docking
After learning about DB Schenker’s Free Trade Zone (FTZ) cross-dock operations, the manufacturer decided to partner up with the logistics provider in an effort to save time, money, and hassle. Defined as geographic areas where goods may be landed, handled, manufactured or reconfigured, and then re-exported with less complex intervention of the customs authorities, FTZs allow manufacturers, distributors, importers, and other entities to defer, reduce, or even completely eliminate duties and fees on imported goods.
For the chip manufacturer, the FTZ serves as a staging area where bulk product shipments imported from Asia and Europe “land” in Los Angeles or Chicago. Once on U.S. soil, those shipments are delivered right to DB Schenker’s FTZ warehouse. The time span from shipment receipt to final delivery ranges from 24 to 48 hours—or sometimes less, depending on what’s being shipped and where it’s going.
“We process the shipments immediately; they don’t just sit there,” says Yang. “Then, we send those shipments out for delivery to the final end user or distributor.”
Saving Money, Time, & Resources
By outsourcing the cumbersome importing process to DB Schenker, the chip manufacturer has saved millions of dollars in merchandise processing fees (MPFs). According to the U.S. Customs and Border Protection, importers of record pay this fee at the time of presenting the entry summary to the CBP. Formal entries are required for imports of commercial goods valued at $2,500 or more, and the ad valorem fee is currently 0.3464 percent (based on the value of the merchandise being imported, not including duty, freight, and insurance charges).
Yang says these fees can add up quickly for companies that are importing large volumes of product into the U.S. and not using FTZs like the ones that DB Schenker has established in Los Angeles and Chicago. “Along with the money that our customer is saving by not having to maintain its own warehouses and logistics staff,” says Yang, “it’s also significantly reducing the MPFs that it has to pay out on an annual basis.”
By leveraging DB Schenker’s extensive air logistics network—and utilizing the provider’s FTZs—the chip manufacturer has been able to optimize its supply chain in a very cost-effective and efficient manner. “We’ve developed a long-term relationship with the company through our dedicated Semicon division,” says Yang, “and we look forward to adding even more value to that relationship in the years to come.”