Saturday, December 1, 2012

Zepol Moves Ahead, Piers, and are an excellent foil against which to promote the proper way to start up or expand an international business.  I've blogged on them before. Their model is based on the erroneous premise that the way to start-up is to find out what your competitors are doing and copy that.  Find out your competitors sources (or in export, customers) and then just copy your competitors.  That is the way of failure.  The way to begin is to find out what your customers need that they are not getting.  That is building a viable business.

The difference is profound, it is the difference between success and failure.

"But everyone needs lower prices, and I will work for less, and therefore succeed."  No, you will not.  Read on.

Here is an article out of the New York Times regarding  The fellow explains the problem:

But a month came and went, and then three months, before Mr. Rosenfeld found out that the manufacturer’s paperwork just wasn’t cutting it for United States Customs. “I lost an account because I didn’t get those bags,” he said. “I decided that was the last time I’d use a company that can’t prove it’s done a lot of exporting to the U.S.”

OK, so Mr, Rosenfeld did not check references.  But that is his job.  And how is getting a list of other importers suppliers going to help?

“If I can see they’ve been shipping at least two containers a month to a company like Purina, I know they’re legitimate,” he said. 

But you still have not checked references.  As a buyer I've always had various suppliers, with a varying degree of satisfaction.  Two shipments a month to Purina does not tell you if Purina has about had it with the supplier, or the buyer is working with this supplier only for the kickback, or whatever else may be going on.  Every good supplier has a variety of customers, and only by checking references will you get a good enough picture.  So Rosenfeld is still not checking references.  He is just paying $1200 a year to get names with no particular benefit.  I bet he could just call Purina and ask the buyer where he gets his bags.  I've done such things.  I think most people would be surprised at how little "secrecy" matters in business.  In any event, nothing beats checking references from its clients around the world for verifying qualifications.

Let's give the devil his due.  From the article we can extrapolate some numbers. I can imagine someone importing $36 million first cost (if true) in plastic bags and moving from supplier to supplier, as much as Rosenthal says he does, can find $1200 value in Panjiva.  It sounds like he would need a full time person just to track down suppliers, so $1200 would be cheap.  But I focus on the start up, and the $1200 would be a waste.  (The story sounds doubtful, the shift to overseas for plastics bags started in the early 1980s, not 8 years ago.)

So the article goes on to speak glowingly of precisely the fundamental error in using such services:

An American meat-processing company shared with him the name of the distributor that provided its super-airtight bags. Mr. Rosenfeld used Panjiva to track down the Indian manufacturer supplying the distributor, and also confirmed that the manufacturer shipped to a large American supermarket. So he visited the manufacturer in India, negotiated a deal, and has been told by the meat-processing company that a big contract is, well, in the bag.
So what is the plan?  Rosenfeld will replace the meat-packer's present supplier, a distributor?  So the meat packer, presently getting a bag at one penny each from the distributor, will be offered the same bag at 3/4 pennies each from Rosenfeld?  Will the meat packer say "o goody, now our bags are 3/4 pennies each," or will they say "present distributor, can you match Rosenfelds price?"  As a buyer, I encourage people to beat my suppliers prices on commodities, so I could keep my present suppliers but at a lower price. Of course the meat company will ostensibly "helped Rosenthal out" with a tip on a supply because Rosenfeld will come back with a warrant for the distributor to lower its price to the meat packer.  Rosenfeld does not get a deal, and the meat packer gets a lower price from the present distributors.  That is how the world works.

I wish they would do follow-ups on these articles.  A deal "in the bag" does not tell us much.  Let's see how all this works out for Mr. Rosenthal in 4 years.  In one instance of a follow up, it did not look so good.

And coincidentally I get a notice from

The buzz at Zepol is all about U.S. export data. Yes, that's right, Zepol is currently developing phase two of our TradeIQ™ Export database. After launching phase one in August, we are thrilled to announce that the next phase will quadruple the number of U.S. export bills of lading available.

From generating new sales leads to competitive intelligence, Zepol's export data is delivering powerful insights every day. We are eager to deliver even more. Zepol will continue to send updates on our progress and an official launch date as it becomes available.

This is not the way to start.  You must start earlier in the game, and follow the trade flows, follow the money.  The article talks about difficult trade data.  Well, it's not difficult, and I gladly send out a .pdf of instructions on how to get raw trade data, analyze it, and from there track down the best suppliers (in importing, or customers in exporting). Just email me I and I'll send it.

Now this all suggests to me yet another business opportunity.  To wit: Customs pulls the suppliers name from the "shipper/supplier" box on the bill of lading.  (this is partially why, as the article above notes, about half the data is useless). There is no legal requirement that that field name anyone in particular.  Some companies knowing they'll end up in piers or panjiva list their freight forwarder or customs broker.

This does give me an idea for a business though:  asking USA suppliers if they will name a particular source as the supplier on the BsL, so people cannot find the USA importers real supplier through panjiva.

Next, sell to overseas suppliers names of hungry start ups, or scam artists, or whoever, to be named as the shipper.  That is to say broker that field on the form to interested parties who desire to either show up in panjiva's reports, or not show up.

Now USCustoms does need a real entity named in that box, but  in most places on earth a real entity can be a sheet of paper in a file folder.  "Bob's Discount Heart Regulators."  Should be some good money in that.  

Feel free to forward this by email to three of your friends.