Ex-Factory date and Ex-factory are one of the most used but misunderstood term in logistics of manufacturing business. Theoretically there is no incoterm mentioned as Ex-factory, but over the period SMEs related to export-import business have made this an understood term parallel to ExWorks.
What does Ex factory mean ?
Considering Ex-factory and ExWorks to be same logistic term, it means buyer is going to collect goods from vendor’s premises. Here, logistics charges and taxes incurred till goods reaches to buyer or customer’s destination are addressed by buyer. Though it sounds very simple but there is a serious misconception associated while considering shipment date and Ex-Factory dates.
Shipment dates, Ship dates, Delivery dates and their relationship with Ex-Factory:
As word to word meaning suggests, a shipment date should be registered as the day goods are shipped. In primitive trade scenario, most of exports were furnished by waterways, hence the term shipment was coined.
This is one of most crucial time-bound registration for any vendor and buyer. In present context, where mode of shipment is diversified into many advance modes it becomes more crucial to have clarity on shipment dates, actual ship date, Ex-Factory/ ExWorks dates and delivery dates. All or either of these four terms are rigorously used in time & action calendars, critical path draft, OTIF measurements and even performance analysis of supplier, manufacturing unit or order management (read: merchandising) professionals. Shipment, Ship & delivery dates being generic terms are now-a-days relatively dependent on fixed terms like ExWorks (read Ex-Factory). ExWorks is an INCOTERM2020 and globally accepted under one rule. We can try to understand these relations through below cases:
Case 1: where purchase order received by vendor demands ExWorks
1.1 For Supplier/ Vendor
“Ex-Works = Ex-Factory Date = Shipment Date = Ship Date = Delivery Date”
This is as simple as making an end checkpoint in a linear project map or TNA. Supplier makes the goods as per PO terms, register actual invoice for it and finally hands-over with related document to buyer. The moment supplier receives acknowledgment from buyer or nominated forwarder, all these dates are furnished at once. In this case most of suppliers, makes mistake of making an early checkpoint of dummy ship date/ Ex-Factory date. This might provide them a false assumption of enhanced performance. Ideally this is against the logic of PEX (process excellence). Result can be non-value addition of time and activities for making some fancy reports.
1.2 For Buyer/ Customer
“Ex-Works = Ex-Factory ≠ Shipment Date ≠ Ship Date ≠ Delivery Date”
Even for a buyer who have raised Ex-Works purchase order and got goods collected from supplier, shipment date can be different. If an external forwarder is linked for transit, buyer can consider shipment made on the date port or carriage handover is made. Here, ship date can be vessel sailing date and delivery date can be GR (goods receipt) date at buyer designated warehouse. Otherwise, these terms will have case to case meaning based on stakeholders involved in movement or delivery of goods.
Case 2: Where purchase order received by vendor demands Free Carrier (FCA) to Delivery Duty Paid (DDP) :
2.1 For Supplier / Vendor
“Ex-Works = Ex-Factory ≠ Shipment Date ≠ Ship Date ≠ Delivery Date”
In this case Ex-Works cannot be mentioned in any part of supply chain but generic term like Ex-Factory can be mentioned. Ex-factory is the date when goods are moved out of factory irrespective of INCOTERM mentioned in purchase order. For these orders, a shipment or actual shipment (as some may say) is on the date logistics terms of PO are fulfilled. So, TNA or any linear logistics report will measure order completion from fulfilment of INCOTERM and not from Ex-factory or any other self-declared shipment date. Special to mention, in these cases vendor links any third part forwarder or transit agent to take care of logistics. Still, responsibility of goods remains with vendor. Therefore, shipment is not made until handed over to buyer as per PO terms.
2.2 For Buyer/ Customer
Buyer should not be measuring ex-factory dates but focus on vendor delivery performance based on fulfilment made as per INCOTERM of respective POs issued by them. Though tracking Ex-Factory as an INVA (important non-value addition) will improve their notification feeds but cannot be termed as critical activity. If POs have agreed terms as FCA, FAS, FOB, CFR, CIF, CPT or CIP a shipment date can be different from ship date or delivery date. For DAP, DPU & DDP terms, shipment dates and delivery dates are same. In very special DPU term, vendor performance is measured by timeline made to reach buyer’s customs clearance only.
How to measure shipment performance (confusion of shipment and actual shipment dates):
This is obvious that Ex-factory can be shipment date only in Ex-Works orders. What vendors or manufacturers should call a date when goods are ready for shipment but not moved out of factory? This is a common scenario in all low & mid value manufacturing sectors including apparels manufacturing industries. There is a type of PUTAWAY time in supplier’s warehouse. Better to document it as “ready-to-ship date”.
Also, there can be scenarios where vendor is having multiple end-to-end manufacturing facilities or process segmented multiple job locations. In this case, a buyer PO might not be of much importance to these separate factories. They work based on internal job orders or internal POs given by HO or better known as BU head offices. These types of factories should not follow PO given by external customers/buyers to BU offices but focus on work orders or internal PO raised by BU to factories. Important to say, role of PEX in finished goods warehousing becomes very important in this situation to handle best PUTAWAY and further handovers.
Whatever be the case, seamless integration of PPC, PEX and order management is required to draft best budgeted TNA for any order flow. A well-planned critical path with proper divisions and understanding of Ex-Factory, Shipment, Ship and Delivery dates are must have for excellent order execution. It is also important, professional must use standard terminologies while executing their expertise. Each order case is different and becomes more specific to respective business scenarios. Suggestion is to have logic-based order management SMART tools like Jaza OptaPlan, SAP PLM, Oracle Netsuit etc… These can lower the costs substantially by determining the most optimal method for shipping any order. Complex logic can also enable you to make intelligent choices in case the method is inexpensive but not efficient.