New Purolator White Paper Explores Growing Trend to Move U.S Manufacturing Back to North America

A recent post on BusinessInsider.com, coined the phrase “American Industrial Renaissance,” as a way to describe the growth taking place within the U.S. manufacturing sector.  That upward spike, which is occurring on an even grander scale in Mexico is due, at least in part to a growing number of U.S. businesses that are deciding to return manufacturing to North America, and away from China and other low-cost countries.  U.S. businesses returning home are said to be “reshoring,” while those relocating nearby to Mexico, Canada or Latin America are “nearshoring.”

The exodus from China includes a veritable “who’s who” of America’s leading companies – General Electric, Apple, General Motors, Ford, Caterpillar, Microsoft and Wal-Mart to name a few – and it seems to be picking up steam.  A 2013 survey by the Boston Consulting Group found that 54 percent of executives at U.S. companies with sales in excess of $1 billion are planning to return production to the U.S.  That figure is a sharp increase from the 37 percent of executives who said they were considering reshoring in a 2012 survey.

A new white paper from Purolator International, “Nearshoring and Reshoring on the Rise as Businesses see Greater Opportunities in Keeping Manufacturing Closer to Home,” explores the current trend away from China, and helps businesses understand the potential of a North American-manufacturing strategy for their own companies.

Why the sudden “rediscovery” of North America as a viable source of manufacturing options?  The simplest explanation is that China is no longer the bargain it once was.  Higher labor costs, inflation and increases in transportation costs have helped dim China’s star, and instead the spotlight has turned to North America.

According to a 2013 report by Bloomberg, Chinese wages are likely to increase by 10-15 percent during 2014, while U.S. wages will increase by less than two percent.  Or, put another way, a Chinese worker would be earning the equivalent of $46.23 per hour while the American worker’s wage would be $19.28 per hour.

At the same time, U.S. businesses have lost their penchant for locating production thousands of miles away from home.  Instead, managers are looking for more “regionalized” approaches, in which production takes place closer to the end customer.

A 2012 report by The New York Times referred to the majestic ships that haul automobiles from their Chinese manufacturing sites across the ocean as the “nautical workhorses of the industrialized world,” and described their capacity to haul 8,500 vehicles.  But, the journey across the ocean takes an average of 28 days, while transit from Mexico to the U.S. takes a fraction of the time, and can be 75-80 percent less expensive.

While no experts are predicting the end of China’s role as a leading destination for U.S. outsourcing, there is no denying that the decision to move production abroad is no longer as cut-and-dried as it once was.  To download a complimentary copy of Purolator International’s new white paper, please click here.

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When it Comes to NAFTA Benefits, not all Products are Created Equally

Although it’s generally understood that the North American Free Trade Agreement (NAFTA) eliminated tariffs on eligible products traveling between the United States, Canada, and Mexico, less understood is that not all products qualify for duty free treatment.

Determining which goods qualify for NAFTA benefits, and knowing how to initiate the process for claiming those benefits can be a highly confusing process.  A new white paper from Purolator International, “Understanding NAFTA and its Implications for U.S./Canada Trade,” offers a detailed overview for businesses that ship regularly to Canada, and want to ensure they take advantage of all available trade benefits.

As the paper makes clear, “origination” is the key factor in whether or not a product is eligible for duty free treatment.  NAFTA provided for the elimination of all tariffs and most non-trade barriers on goods produced and traded within North America.  But understanding if a product qualifies, or what percentage of a finished product’s component parts can be of non-NAFTA origin, can be an exceedingly intricate process.  Failure to assign the proper tariff classification code – based on the Harmonized Tariff Code of the United States — can result in having to pay higher duty rates than necessary, or in missing out on trade agreement benefits.

To help clarify eligibility, NAFTA established “rules of origin,” that drill down into a product’s component parts.  For every product, there is a rule of origin, but finding the appropriate rule  — and applying the correct interpretation — can sometimes be challenging.  For one thing, the rules are reviewed on a continual basis, so product eligibility may change over a period of time.   Consider the following example from the U.S. Department of Commerce website:

A batch of cupcakes have been baked in the United States, but are comprised entirely of imported ingredients.

Cupcakes:  Harmonized System Code:  1905.90

(In this example, the first two digits (19) are called the Chapter; the first four digits (1905) are called the Heading; and the first six digits (1905.90) are called the Subheading)

The first step to determine eligibility would be to look up the NAFTA rule of origin with regard to Chapter 19.  In this example, the Rule states that a product is eligible for NAFTA preferential treatment if component parts are not also found in Chapter 19.  For the sake of our cupcakes:

Flour – Chapter 1101

Sugar – Chapter 2102

Cocoa – Chapter 1806

Baking Soda – Chapter 2836

Eggs:  Chapter 0407

Therefore, because none of the ingredients fall under Chapter 19, the cupcakes are eligible for NAFTA benefits.

NAFTA recently marked the 20th anniversary of its implementation.  The agreement has its supporters and critics,  butit is undeniable that trade among the U.S., Canada and Mexico has increased dramatically during its period of implementation.  As the agreement begins its third decade, businesses would be smart to avail themselves fully of its benefits and opportunities.  Click here to down load a complimentary copy of the new white paper.

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New White Paper Focuses on Customs Process for Sending Goods into Canada

Each year the U.S. Department of Commerce publishes a “Guide to Doing Business in Canada,”  which offers detailed information for U.S. businesses interesting to exporting to Canada.

Quite possibly, the most important information appears in Chapter One, in the Market Challenges section, where it says:  “Canada remains among the most accessible markets in the world.  Nevertheless, doing business in Canada is not the same as doing business in the United States.  Canadian customs documentation, bilingual labeling, packaging requirements, ITAR (International Traffic in Arms Regulations) and Canadian federal and provincial sales tax accounting can be surprisingly challenging.”

The complexity of the U.S./Canada border clearance process surprises many people, who assume that because of the two countries’ strong relationship and shared border, that cross border trade must be a relatively easy process.

Unfortunately, that assumption is not correct, as many businesses have found out the hard way.  The fact is, the U.S. and Canada maintain very extensive and rigid border security and import/export control procedures.   Failure to understand and comply with any of these procedures could result in monetary penalties, excessive delays, or even a shipment’s outright clearance rejection.

A new white paper from Purolator International,  “Understanding the U.S./Canada Customs Clearance Process,” provides detailed information about the process U.S. businesses must follow to ship goods into Canada.  The white paper offers an overview of required customs paperwork, the Canadian sales tax structure, and increasingly rigid security mandates.  In addition, the paper reminds businesses that while their shipments may be considered imports into Canada, they are exports from the U.S., and subject to numerous U.S. export requirements.

The good news, the paper points out, is that things seem to be getting better.  Both the U.S. and Canadian government are committed to reducing the regulatory burden on traders, and on finding ways to encourage businesses to engage in cross border sales.

Learn more about the U.S./Canada border clearance process by downloading a complimentary copy of Purolator’s new white paper here.

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Route Optimization, Duty Relief among Cost Saving Ideas in New Purolator White Paper

It used to be that home furnishings retailer Crate&Barrel managed its annual load of more than 300,000 customer deliveries manually.  The company had a network of fixed routes, each of which serviced a specific geographic region.  A dispatcher would assign roughly 16 deliveries per day to each route, in a not so elaborate system created by hand.  The system trudged along with high levels of calls from customers wondering when their shipments would arrive, and one way or the other, the deliveries were made.

That all changed though, when Crate&Barrel was persuaded to implement a route optimization software system.  The company chose a cloud-based solution that offers a range of capabilities including mapping, route consolidation and real time visibility.  Today the company is using fewer trucks for the same amount of deliveries, and has been able to cut its delivery windows in half.

Clearly route optimization was a winning solution for Crate&Barrel, just as it has been for a growing number of businesses nationwide.  A recent supplychain247 article suggested that route optimization technology “can uncover millions of dollars in supply chain savings just by optimizing existing assets and processes.”

Route optimization is one of several money saving options discussed in a new white paper from Purolator International.  “Managing Freight Costs” offers a detailed discussion about how, at a time when shippers face significant increases in freight charges, smart planning and innovative thinking can help keep costs under control.

The paper also discusses opportunities for businesses that ship regularly to Canada to minimize costs associated with customs clearance.

U.S. Customs and Border Protection’s “duty drawback” program is one opportunity.  Businesses that pay import duties on products that are subsequently exported, are entitled to a refund of up to 99 percent of  the duty paid.  In addition, a business may find that its shipments have been assigned an incorrect tariff code, meaning they may be paying more duties than necessary, or missing out on trade benefits to which they are entitled.

Purolator’s new white paper offers many options for businesses interested in reducing freight costs.  You can click here to download a complimentary copy of “Managing Freight Costs.”

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When it Comes to Replacing your Vehicle, 11 is the new 5

Next time you go to start your 11-year old car or light truck, you can find comfort in knowing that roughly half the vehicles on the road are older than yours.  As reported on CNN, 2013 data from Polk market research firm found the average age of vehicles on the nation’s highways reached a record 11.4 years.  This represents a marked increase from ten years ago, when the average age was 9.8 years.  The upward trend is expected to continue, with the number of vehicles 12 years of age or older expected to increase by more than 20% by 2018.

According to Polk’s research, fallout from the economic recession caused many people to hang on to their existing vehicles longer than they normally would.  In addition, overall auto quality has gotten better, meaning fewer breakdowns and less need to purchase a new vehicle.

The growing age of the nation’s fleet has impacted the nation’s $318 billion automobile aftermarket.  The aftermarket is generally defined as all products and services purchased for light, medium and heavy-duty vehicles after the original sale.  This includes replacement parts, accessories, lubricants, appearance products, tires and collision repair parts.

Aftermarket suppliers maintain replacement parts for all vehicles, regardless of obscurity.  But with more than 2 million SKUs to manage, the trick is to manage inventory so that the correct part can be identified and installed into a customer’s vehicle in the shortest amount of time possible – generally within 24 hours.

The nation’s aging fleet is good news for aftermarket suppliers, since older vehicles tend to require more trips to the repair shop than newer models.  At the same time, newer models – hybrids and electronic vehicles – have introduced completely new product lines.  Managing the extensive inventory adds a new twist to the already complicated aftermarket supply chain.

Many aftermarket businesses have found technology and “better thinking” to be lifesavers.  As reported in IndustryWeek, Discount Auto Parts turned to technology as a way to manage scheduling and distribution issues, along with its SKU inventory.  The result?  $106 million in cost reductions over four years.

At the same time, new concepts for inventory and warehouse management are getting serious attention as supply chain managers search for greater efficiency in an increasingly competitive environment.  One concept gaining attention is the idea of “horizontal collaboration” whereby businesses with products headed to the same retailer or distribution center share truck space as a way to reduce transportation costs.

Taking advantage of new supply chain processes is the subject of a new white paper from Purolator International:  “Using Best Practices and Innovation to Drive Your Automotive Aftermarket Supply Chain.”

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Visibility Still Lacking in Many Supply Chains

The newly-released 2014 Smart Manufacturing Technologies Survey found 40 percent of manufacturers say they have no real-time visibility into their supply chains, with nearly 10 percent admitting their factories spend a considerable amount of time “looking for” equipment and products.

The survey results confirm research from past surveys, which also found a lack of supply chain visibility among U.S. businesses.  These findings are surprising, alarming even, given the proven positive impact improved visibility can have, and the widely available technology solutions that can help a business improve its processes.

A new white paper from Purolator International:  “Supply Chain Visibility is Key to Improved Efficiency and Reduced Costs” provides an in-depth look at the benefits visibility can bring to a business, and also discusses the specific considerations a business will need to take into account.

For example, an operations manager is told by senior management to cut costs by 10 percent.  But how can the manager do that without understanding how a cutback in one area will reverberate across the rest of the production process?  Instructing Vendor A to change a process without understanding that Vendor B relies on Vendor A’s output, could uproot the whole process.

Allowing the manager to have insight into the entire process – greater visibility — would avoid potentially disastrous scenarios such as this from playing out.

This then, is a key objective of all businesses:  360-degree insight and awareness of all processes to ensure synchronization, awareness among all stakeholders, and maximum efficiency.

To start, the operations manager would need to work with senior management to consider three core questions:

1)     Who do we want to share information with?

2)     What information do we want to share?

3)     How do we want to share that information?

Determining the who, what and how will drive a business’ approach to visibility.  The more stakeholders “in the loop,” the greater the likelihood for collaboration and efficiency.  But, that collaboration will come with increased exposure to risk.  Finding the right balance is key.

To download a copy of Purolator International’s new white paper, please click here.

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Businesses Find B2B Returns can be Opportunities for New Revenue, Customer Satisfaction

A report last year from Forrester Research found that spending by U.S. businesses on B2B eCommerce during 2013 was more than twice the amount spent on B2C online sales.  B2B eCommerce reached $559 billion, versus $252 billion spent on B2C transactions.

These numbers reveal a fundamental change taking place in the world of B2B transactions.  Purchasing managers are increasingly putting down the thick catalogues that traditionally served as their “bibles,” and instead looking online for the same access to product and pricing information they access for their own personal shopping needs.

The reality that the B2B eCommerce market is twice the size of the B2C market is causing many businesses to retool their B2B marketing and “outreach” efforts, with many companies redesigning their websites and mobile outreach to provide B2B shoppers with retail experiences that more closely resemble B2C transactions.

So too is eCommerce changing the face of B2B product returns.  A recent article in Forbes discussed how managers who place B2B orders online, expect the same high quality service they receive when they shop for themselves.  This extends to expectations that B2B returns will be easy and hassle free.

Changes in B2B returns management is the focus of a new white paper from Purolator International:  “B2B Returns:  Finding Value and Opportunity in a Well-Managed Returns Process.”

As the paper discusses, while B2B returns generally fall within one of the same “buckets” that have always defined B2B returns:  Defective Products, Product Recalls, End-of-Life Merchandise, Obsolete/Unsold Merchandise, or Warranty Returns, manufacturers are realizing new ways of evaluating those returns.  Whereas returns were traditionally seen as a drag on the bottom line, businesses today are committed to capturing value from those returns.

Undamaged products, for example, can be sold in an outlet store or via eBay.  Useable parts and components can be salvaged and made available for resale.  Other goods may be remarketed and sold overseas.

Businesses that cater to the B2B market are enlisting the services of their logistics partners to help better understand their opportunities, and to develop customized approaches to fit their unique situations.

To find out if your business might benefit from a new B2B returns process, please click here to download Purolator’s new white paper.

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Better Options for Expedited Air Service to Address Capacity/Congestion Issues

Despite its leading role in global manufacturing, China has a first-rate problem when it comes to reliable air service options.  Namely, that its two major airports, Beijing and Shanghai, rank dead last and next-to-dead last in terms of on time departures.  Flights taking off from Beijing were delayed 82 percent of the time during 2013, with a 71 percent late departure rate for Shanghai.

While many factors are at play in causing the delays – poor infrastructure, tightly-controlled air space, increased regulatory and security mandates, and overcapacity – the impact is taking a toll on supply chains dependent on goods arriving from China.

This is especially true for urgent, time-sensitive products traveling as “expedited” shipments, for which a premium price has been paid to ensure an on-time arrival.  Expedited shipments range from machinery parts that must arrive at a North American factory in time to avert an assembly line shutdown, to a shipment of desperately-needed temperature-controlled vaccines, to any range of reasons a shipment needs to be delivered as fast as humanly possible.

But as the China example makes clear, external factors are affecting expedited service providers’ ability to guarantee delivery times.

The good news though, is that innovative expeditors are finding ways to offer creative options to circumvent those external factors.  A new white paper from Purolator International, “Expedited Air Service:  Innovative Logistics Solutions for High-Value, Most-Urgent Shipments,” discusses some of the more compelling new options.

For example, many businesses are finding air charter services, generally thought of as cost-prohibitive, to be a highly efficient alternative.  Air charters allow an expeditor to customize a flight plan, so that busy, notoriously congested airports can be avoided.  Instead, a shipment can travel via a less congested alternative, such as a regional airport.  Or, a shipment can travel through a country with a more efficient customs clearance process, or that has a favorable trade agreement in place with the United States.

Expedited air service is a premium solution that offers on-time, seamless delivery.  As Purolator’s white paper makes clear, new solutions can help a service provider facilitate delivery of those high levels of performance.

Please click here to download a complimentary copy of “Expedited Air Service:  Innovative Logistics Solutions for High-Value, Most-Urgent Shipments.”

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U.S. Businesses Fail to Claim more than $2.4 Billion Annually in Drawback Reimbursements

U.S. businesses are legally entitled for reimbursement of up to 99 percent of duties paid on qualified goods that are imported into the U.S., but then subsequently exported or destroyed.

So why do more than $2.4 billion in eligible reimbursements go unclaimed each year?

It’s complicated.  That is to say the process for seeking reimbursement is complicated, so most businesses don’t even try to claim the monies to which they are legally entitled.

The process for seeking duty reimbursement is called “duty drawback,” and is administered by U.S. Customs and Border Protection (CBP).  Drawback has actually existed in the United States since 1789, when the first session of the U.S. Congress sought to encourage manufacturing within the young nation.

A new white paper from Purolator International, “Duty Drawback:  Could your Business be Eligible for a Duty Reimbursement?,” offers a detailed overview of the drawback process, and helps make sense of what is generally regarded as a highly complicated application and qualification process.

Any business that imports materials into the United States must pay duty on those goods.  If those materials are then used in the manufacture of products that are subsequently exported – they are taxed again.  For example:   A U.S. manufacturer imports a quantity of zippers from Canada, and those zippers are used in the production of jackets that are subsequently exported.  Well, the U.S. manufacturer would pay a duty on the zippers when they arrived from Canada, and again upon export from the U.S.

Through drawback, the manufacturer could be eligible for a refund of up to 99 percent of duties paid on the zippers when they were initially imported.

To qualify, a business must maintain meticulous records and be able to provide a clear “trail” that a product initially imported into the U.S. is the same – or in some cases nearly the same – as the product subsequently exported (or destroyed).  In addition, a business must demonstrate that a product meets CBP’s strict conditions for qualification.

As Purolator’s new white paper makes clear, most businesses rely on a third party logistics expert or customs broker to manage the drawback process on their behalf.  And with good reason, since CBP’s own website acknowledges:  “[T]he process of filing for drawback can be involved and the time it takes to receive refunds can be lengthy.”

Despite the apparent bureaucratic hassle involved, an experienced logistics provider will be well versed in understanding the process.  With billions of dollars waiting to be claimed, what do you have to lose?

A good first step is to download Purolator’s white paper, which can be accessed here.

 

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Logistics Clusters are Helping Businesses Innovate Supply Chains and find Efficiencies and Cost Savings

The nation’s top freight carriers record an annual empty miles percentage of roughly 12.5 percent.  That is to say that trucks are forced to make the return trip to their point of origin empty, because no additional conveyances are available along the route.  And the figure is much higher – as much as 25 percent – for private carriers that only carry loads for a single shipper, and thus have fewer reloading opportunities.

Clearly this is a waste of good cargo space, and a lost opportunity for carriers to profit from miles that are already included in a shipping route.  Yossi Sheffi, director of the MIT Center for Transportation and Logistics theorizes that empty miles are something that can be largely avoided through migration to “logistics clusters.”  As Sheffi notes in an excerpt from his new book Logistics Clusters:  Delivering Value and Driving Growth that appears in the Sept/Oct 2012 issue of Supply Chain Brain magazine:  “Delivering freight into a logistics cluster means that there is a high likelihood that there will be a follow-on load going out of the cluster.  This is due both to the large number of logistics operators in such a cluster and to the interchangeable nature of freight flows.”

What exactly is a logistics cluster?  As reported in Industrial Distribution magazine, a logistics cluster refers to a “geographically concentrated set of logistics-related business activities.”

Dr. Sheffi illustrates the positive impact of a logistics cluster by citing two manufacturers – competitors in some product categories – that decided to join forces and share logistics services in order to more efficiently serve a shared customer via its Vero Beach, FL distribution center.  One of the manufacturers, a leading producer of batteries, was sending 9,000 pounds each week to the DC using an LTL carrier.  The other, a manufacturer of home cleaning, air care and other products, was averaging 20,000 pounds of freight per shipment with a truckload carrier.

The two manufacturers approached their common customer – a national retail chain – and asked to have its ordering system modified so that the manufacturers’ shipping schedules would be the same.  As a result, the two manufacturers are now able to share a single truckload carrier.  The results have been win-win:  reduced transportation costs, improved carbon footprint, improved on-time delivery and reduced shortages and deliveries.  In fact, the customer has been so pleased, it has approached other manufacturers within the cluster area to arrange similar arrangements.

As businesses increasingly search for “out of the box” ways to streamline operations and tweak their supply chains, logistics clusters are increasingly proving to be a valuable way to achieve synergies and savings.

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