ART Delivery experts offer an effective solution for clothing coding
During the CPM 2019 exhibition held in Moscow in September, ART Delivery experts presented a solution that will allow importers to avoid a sharp increase in costs following the introduction of mandatory clothing coding in Russia.
All companies involved in the clothing industry are concerned about a potential hike in costs after the introduction of mandatory coding. At the same time, analysts say that demand for clothing is declining in Russia, primarily due to the shrinking real income of consumers. The test period for clothing coding will end on November 30, and the registration of clothing market participants is due to begin on December 1, 2019. According to the Russian government's draft decree on the rules of coding for consumer goods, the coding of clothing is to become mandatory as of July 1, 2020.
ART Delivery has designed a coding process that will allow importers and retailers to manage their costs following the introduction of mandatory coding.
Generally speaking, goods can be coded at:
All companies involved in the clothing industry are concerned about a potential hike in costs after the introduction of mandatory coding. At the same time, analysts say that demand for clothing is declining in Russia, primarily due to the shrinking real income of consumers. The test period for clothing coding will end on November 30, and the registration of clothing market participants is due to begin on December 1, 2019. According to the Russian government's draft decree on the rules of coding for consumer goods, the coding of clothing is to become mandatory as of July 1, 2020.
ART Delivery has designed a coding process that will allow importers and retailers to manage their costs following the introduction of mandatory coding.
Generally speaking, goods can be coded at:
- the manufacturing site
- the supplier's warehouse during packaging
- the consolidation warehouse
- the customs warehouse.
Ramil Suleymanov, the CEO of ART Delivery Group, presents a cost-free coding solution.
Foreign clothing manufacturers ship their goods in batches to consolidation warehouses that are usually located in Europe or Asia. There the goods are sorted and consolidated into separate orders. Then the importer classifies the goods by invoice according to the Federal Customs Service's rules, obtains a relevant code from the Chestny Znak (Honest Code) System for each item in the order and prepares shipping documents. Orders that go in the same direction, together with the relevant codes and documents for customs clearance, are shipped as consolidated cargo. According to ART Delivery's statistics, one consolidated shipment includes from 20,000 to 40,000 items transported under 40-70 contracts. On average ART Delivery handles more than 400,000 items in consolidated shipments per month.
To code each item of goods, consolidation or customs warehouses will require more than just additional hardware and software. The new system will call for changing shipping processes as well as hiring and training additional personnel. The time required to process a single order is bound to increase, and the risk of shortages will be significantly higher. Errors resulting from manual coding are also inevitable. It is estimated that shipping costs will increase by an average 0.5 euro per item or from 10,000 to 20,000 euro per truck.
According to the Federal Customs Service, in 2018 Russia imported $10.94 billion worth of clothing, footwear and textiles. Consolidated shipments made up approximately 30% of all imports. The number of imported goods in consolidated shipments is estimated at several hundred million units. Thus, coding each product at the consolidation warehouse at the rate of 0.5 euro per item will cost Russian retailers hundreds of millions of euros. This will inevitably lead to higher prices and lower consumer demand.
However, these huge costs can be avoided if consolidated order coding is employed. Simply put, the importer delivers the goods and hands them over to the retailer along with the shipping documents and DataMatrix codes. "The codes are applied to each product item in retail outlets. Coding costs are reduced by 10 times while delivery from Europe still takes 7 days maximum. In addition, this approach does not require changes to existing supply chain processes. If we consider retail stores, goods are prepared for sale anyway: they are unpacked, sorted and labelled," explains Ramil Suleymanov, the CEO of ART Delivery. "Most importantly, this approach does not violate the basic principles of the national coding system and ensures the traceability of goods throughout the supply chain. The interests of consumers and market participants are balanced out, which corresponds to the regulator's goals," Ramil Suleymanov emphasizes.
"Consolidated order coding does not relieve the importer or retailer of their responsibility for coding goods. However, this solution makes it possible to optimize costs and allows the retailer to control the correct in-store application of codes," says Natalia Miloserdova, International Trade Director of ART Delivery Group.
To code each item of goods, consolidation or customs warehouses will require more than just additional hardware and software. The new system will call for changing shipping processes as well as hiring and training additional personnel. The time required to process a single order is bound to increase, and the risk of shortages will be significantly higher. Errors resulting from manual coding are also inevitable. It is estimated that shipping costs will increase by an average 0.5 euro per item or from 10,000 to 20,000 euro per truck.
According to the Federal Customs Service, in 2018 Russia imported $10.94 billion worth of clothing, footwear and textiles. Consolidated shipments made up approximately 30% of all imports. The number of imported goods in consolidated shipments is estimated at several hundred million units. Thus, coding each product at the consolidation warehouse at the rate of 0.5 euro per item will cost Russian retailers hundreds of millions of euros. This will inevitably lead to higher prices and lower consumer demand.
However, these huge costs can be avoided if consolidated order coding is employed. Simply put, the importer delivers the goods and hands them over to the retailer along with the shipping documents and DataMatrix codes. "The codes are applied to each product item in retail outlets. Coding costs are reduced by 10 times while delivery from Europe still takes 7 days maximum. In addition, this approach does not require changes to existing supply chain processes. If we consider retail stores, goods are prepared for sale anyway: they are unpacked, sorted and labelled," explains Ramil Suleymanov, the CEO of ART Delivery. "Most importantly, this approach does not violate the basic principles of the national coding system and ensures the traceability of goods throughout the supply chain. The interests of consumers and market participants are balanced out, which corresponds to the regulator's goals," Ramil Suleymanov emphasizes.
"Consolidated order coding does not relieve the importer or retailer of their responsibility for coding goods. However, this solution makes it possible to optimize costs and allows the retailer to control the correct in-store application of codes," says Natalia Miloserdova, International Trade Director of ART Delivery Group.
Natalia Miloserdova, ART Delivery Group's expert on foreign trade, speaks at the RFRF round table on September 5, 2019.
The Chestny Znak System calls for coding leather clothing, knitted blouses, overcoats, short overcoats, cloaks, raincoats, jackets, windbreakers, weatherproof jackets and similar items as well as bed linen, table linen, toilet linen and kitchen linen. The Center for Advanced Technologies Development now also manages the coding of fur garments which was previously supervised by the country's tax authorities.
Vera Volkova, the Head of the Consumer Industry Project of the Development Center of Advanced Technologies (CRPT), spoke about the regulator's requirements, explaining the stages and terms of digital coding implementation.
ART Delivery experts presented their proposals during the round-table table discussion organised during the CPM exhibition in Moscow on September 5, 2019. Both suppliers and retailers were genuinely interested in the proposed logistic solutions and embraced the ideas presented by ART Delivery.
Vera Volkova, the Head of the Consumer Industry Project of the Development Center of Advanced Technologies (CRPT), spoke about the regulator's requirements, explaining the stages and terms of digital coding implementation.
ART Delivery experts presented their proposals during the round-table table discussion organised during the CPM exhibition in Moscow on September 5, 2019. Both suppliers and retailers were genuinely interested in the proposed logistic solutions and embraced the ideas presented by ART Delivery.
Natalia Miloserdova, ART Delivery's expert on foreign trade, talks about the importer's coding responsibility.
"Innovation must be effective and make the process simpler," said Carla Korn, the managing director of Unique Selected, a supplier of fashionable women's clothing. During the discussion Roman Vyrodov, the head of Strellson AG's representative office, stressed the importance of maintaining processes between suppliers and customers built over the years.
André Baum, the owner of Ceder GmbH, noted that "the objectives of coding are traceability and supply chain transparency, while the coding application method must be chosen by the customer on the basis of effectiveness".
"Coding at retail warehouses is an excellent logistic solution that not only reduces logistic costs but also ensures that codes are applied correctly," said Irina Ilyina, the head of logistics for Boutique.RU, a well-known clothing and footwear retailer.
We hope that the regulator will take the business community's opinion into consideration and use the proposed solution in the interests of the state and society.
André Baum, the owner of Ceder GmbH, noted that "the objectives of coding are traceability and supply chain transparency, while the coding application method must be chosen by the customer on the basis of effectiveness".
"Coding at retail warehouses is an excellent logistic solution that not only reduces logistic costs but also ensures that codes are applied correctly," said Irina Ilyina, the head of logistics for Boutique.RU, a well-known clothing and footwear retailer.
We hope that the regulator will take the business community's opinion into consideration and use the proposed solution in the interests of the state and society.
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