Lack of Carriers keeping US Businesses out of Export Market

A not so well kept secret – less than one percent of U.S. businesses engage in some type of export activity.  This is despite the fact more than 95 percent of the world’s consumers live outside the U.S. borders.

Then-Secretary of Commerce Gary Locke addressed the issue, in a series of speeches he made to regional business audiences.  The purpose of Secretary Locke’s tour was to (a) remind businesses of the potential of the international market, and (b) to extend the federal government’s helping hand to businesses interested in expanding their businesses to outside markets.

The Secretary also laid out a few reasons why businesses are reluctant to export:

  • Trouble getting the necessary working capital;
  • Concern about receiving timely payments from foreign customers;
  • Difficulty navigating foreign customs and regulations; and
  • Lack of networks necessary to make proper contacts and identify plausible business partners

But a concern Secretary Locke didn’t cite, and one that is of concern to businesses interested in exporting to Canada, is the lack of qualified carriers to transport goods from the U.S. into the Canadian market.

This fact surprises people, since the presumption is since Canada and the U.S. share so many cultural and geographical similarities, it would be relatively easy to transport goods into Canada.

But the fact is, there are a lot of nuances about doing business in Canada, including a complicated border compliance process, different taxing authorities, language issues, and the vastness of the Canadian landscape.

Doug Kroll, National Traffic Service’s director of consulting gave Canadian Transportation & Logistics a frank assessment:  “On the LTL side, there’s a limited amount of carriers available to US shippers who can serve Canada.  They’re actually interlining with a Canadian carrier,” he said.

A May 2012 report by the Journal of Commerce seems to support this notion.  JOC reported that, because the strong Canadian dollar is fueling a demand for U.S. imports, trucks are actually being diverted from intra-Canada shipping to help handle the need for cross border service.

And this, says Kroll, is not necessarily a good thing.  “You actually lose custodial care of the shipment,” Kroll added.  “There’s concern around tracing the shipment, loss or damage, and filing a claim.”

U.S. businesses need to choose wisely when selecting a logistics partner to handle their cross border shipments.  Many carriers claim to have expertise in the Canadian market when in fact they do not.  Take the time to find out exactly what a carrier’s qualifications are:

  • Does the carrier have a network in place to ensure delivery to Canadian addresses?
  • Is the carrier a participant in U.S./Canadian “trusted shipper” programs?
  • What is the carrier’s expertise in understanding the border compliance process?
  • How flexible is the carrier in offering pickup/delivery times that meet your needs?
  • Will the carrier maintain control of the shipment throughout the entire cycle?

As the above discussion indicates, there is a lot of opportunity beyond the U.S. border.  It’s important though, to do your due diligence and make sure you enter the export market smartly, and with the right logistics partner on your team.

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Consumers Show Little Patience for Late Deliveries

“Hell hath no fury like a consumer with a late delivery,” could be the new mantra for today’s businesses.  After all, expectations for fast, on-time and free shipping have never been greater, with more than 55 percent of consumers expecting free shipping on all orders, and roughly 65 percent of retailers offering some type of free shipping.

But heaven help the retailer who signs on with a delivery company unable to make good on promises for guaranteed service, or even worse, makes an incorrect delivery.  A new survey by Voxware voice solutions provider, found nearly 30 percent of respondents said they would abandon shopping with a retailer if they receive an incorrect or late order just one time.

The survey, which asked 600 consumers about their delivery expectations for items purchased either online or by phone, found consumers are willing to cut retailers very little slack for failure to deliver as promised:

  • 62 percent of respondents are less likely to shop with a retailer in the future if an item they purchase is not delivered within two days of the date promised.
  • 59 percent said they would abandon future shopping with a retailer if they receive two to three late or incorrect deliveries.
  • 68 percent of respondents have higher expectations for correct and on-time deliveries during the holiday season.
  • 56 percent said that as much as 10 percent of the items they have ordered either over the Internet or by phone have arrived later than promised.

At least one major e-commerce retailer has recent experience with consumer ire over late packages.

Last summer the UK Guardian reported more than 5,000 angry consumers posted messages on the retailer’s website, demanding that one apparently inefficient delivery company be dropped.  Complaints ranged from inaccurate tracking information to poor customer service, to packages being left out in inclement weather, to orders that simply were not showing up as promised.

As the Vox survey – and this retail giant’s experience – make clear, consumers place a high premium on deliveries that are on time and correct.  A retailer can offer the best products in the world, or the best deals around, but if a logistics company fails to deliver those goods on time, then everything else is for naught.

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Trade Programs Expedite the US-Canada Border Process

A study of U.S./Canada border crossing delays found the average wait was 29 minutes.  But for participants in the U.S./Canada “Free and Secure Trade Program” (FAST), the wait time was only eight minutes.  The study, conducted by the International Mobility and Trade Corridor Project (IMTC) concluded trusted shipper programs are effective in reducing border congestion.  Which raises the question:  Why would any reputable logistics or transportation provider that offers service between the U.S. and Canada not take advantage of trusted trade program opportunities?

Businesses with regular U.S./Canada transactions should take a few minutes to familiarize themselves with current trusted trade programs, and to make sure their logistics provider is a member in good standing!

Joint U.S./Canada Program

  • Free and Secure Trade Program (FAST): FAST is a joint initiative between the Canada Border Services Agency (CBSA) and U.S. Customs and Border Protection (CBP) that offers expedited clearance for low-risk commercial shipments. Eligible carriers must complete a background check and fulfill certain eligibility requirements. Benefits of FAST include:
    • Access to dedicated lanes (where available) at border crossings for greater speed and efficiency
    • Reduced number of inspections
    • Enhanced supply chain security
    • FAST membership card can be used as proof of identification
    • Streamlined process that reduces delivery times and landed costs of imports
    • Allows border agents to focus on higher risk shipments

Canadian Programs

  • Partners in Protection (PIP): CBSA program enlists the voluntary cooperation of private industry to enhance border security and verify the safety of the supply chain.  Participating businesses agree to implement and adhere to high security standards throughout their supply chains.  In exchange, PIP members are considered “trusted traders,” and entitled to expedited clearance and additional preferential treatment.
  • Customs Self Assessment (CSA): Program administered by CBSA designed for low-risk, pre-approved importers, carriers, and registered drivers.  Membership in the CSA program simplifies the border crossing process for low-risk shipments so that border agents can allocate resources to higher risk shipments.  CSA is the foundation for the FAST program.

U.S. Programs

  • Customs-Trade Partnership Against Terrorism (C-TPAT): Joint business-government initiative, administered by CBP, that enhances U.S. border security by verifying the safety of the supply chain.  Businesses that apply to be C-TPAT members agree to conduct a self-assessment of supply chain security and to encourage their business partners to verify the security of their supply chains.  In exchange C-TPAT participants receive certain benefits including:
    • Reduced number of border inspections
    • Access to C-TPAT membership list
    • Eligibility for account-based processes (bimonthly/monthly payments, etc.)
    • Emphasis of voluntary participation, rather than government mandate
  • Importer Self Assessment (ISA): C-TPAT members are eligible to participate in CBP’s Importer Self Assessment program, which exempts importers from certain CBP audits in exchange for establishing internal compliance controls.  Through ISA, an importer will conduct an internal audit of its own compliance record, and determine and address and risk areas.
  • Certified Cargo Screening Program (CCSP): Administered by the Transportation Security Administration (TSA), CCSP allows qualified transportation carriers and logistics providers to screen air cargo away from an airport, at a certified location.  CCSP was developed as a way to address expected congestion and wait periods following a Congressional mandate that all cargo transported on passenger aircraft be pre-screened as of August 1, 2010.

If it sounds like there is a lot of overlap between these programs, you are correct.  In fact, a key tenet of the 2011 U.S.-Canada “Beyond the Border” initiative called for increased harmonization of trusted shipper programs.  Efforts are underway to improve coordination between C-TPAT and PIP, for example, so that going forward, applicants will use a single application and share processing and documentation practices.

What programs is your company utilizing and if they are not, why?

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Cloud Technology Leaves Americans Fuzzy

A study by Gartner technology consultants found usage of cloud-based solutions within the supply chain management sector increased by 40 percent during 2012.   Further, the study projects cloud usage will increase by an additional 47 percent by 2016, during which an eye-popping $206.6 billion will be spent on cloud solutions.

The tremendous growth of “cloud computing” – defined by Logistics Management magazine as “the shared software and information that users access via the web” – is a solid indication that businesses are in need of options to help better manage their businesses.  Through the cloud, businesses can offer shared access to certain projects and processes.  Software systems used to be prohibitively expensive, are now viable options.  And the cloud’s web-based functionality means a business’ data can be accessed from any computer with an Internet connection.

Despite the tremendous success and the aforementioned positives, there is one glaring hurdle yet to clear:  Most Americans have little understanding of the cloud concept – although an alarming number say they have “faked” their knowledge in order to get by.

An August 2012 study by Wakefield Research asked more than 1,000 American adults about their knowledge of cloud computing.  Among the key findings:

  • 51 percent believe stormy weather could interfere with cloud computing.
  • 22 percent of respondents have pretended to have knowledge about the cloud, either during office hours, on a job interview or, as 17 percent revealed – on a first date.
  • 54 percent claim to never use cloud computing.  But, the survey revealed that 95 percent actually do use the cloud:  65 percent bank online; 63 percent shop online; 58 percent use social networking; and 22 percent store music online.

But all is not doom and gloom.  They survey found that even though Americans admit to not fully understanding the cloud, 68 percent, after learning a bit more about the concept, said they saw important economic benefits, including lower consumer costs (35 percent), small business growth (32 percent) and greater customer engagement (35 percent).  And not to be overlooked, 40 percent cited being able to access work information from home, while in their “birthday suit,” as a worthy advantage.

Cloud technology, which has only existed for the past five years or so, has already revolutionized the way many businesses and industries function.  And clearly, the cloud is here to stay.  Which means that as consumers expand their understanding , we can expect to see even more innovative uses of cloud-based solutions, and greater integration of the cloud into everyday life. Do you currently use the cloud? How do you feel this improves your business’ efficiency?

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Help Wanted: Supply Chain Candidates with Communication and Technology Skills

Considering a career in supply chain or logistics management?  If so, then it might be helpful to know what types of experience and education are most helpful in landing the job.  A recent study sponsored by Supply Chain Management Review asked hiring managers for feedback on current hiring trends.

Among the findings?  Confidence is in, but arrogance is out.  Also in are enthusiasm, communications skills and critical thinking.

Perhaps a bit surprising is most hiring managers seem to place a higher premium on communications skills than on knowledge about supply chain trends:

  • 58 percent cited communication skills as a desirable attribute
  • 40 percent are looking for candidates knowledgeable in the latest technology
  • 35 percent want relevant technical training
  • 33 percent look for knowledge of industry trends.

The purpose of the survey was to gain insight about the effectiveness of various academic programs designed to train supply chain managers.  Managers reported that job candidates “are sufficiently prepared” in the areas of Supply Chain/Design Fundamentals (44%), Transportation and Logistics (33%) and Technology Solutions (32).

The more interesting findings were managers’ concerns about areas in which candidates were not sufficiently prepared:

  • Supply Chain Strategy –47%
  • International Experience – 44%
  • Management Skills – 44%
  • Transportation and Logistics — 41%
  • Customer Relationships – 40 %

Speaking about the implications of supply chain academics on real-world applications, Damon Willis, logistics supervisor at medical supply manufacturer Zimmer, Inc. noted that students “are often well versed in ‘book’ knowledge, but lack real-world expertise.  He noted that there is no replacement for “practical supply chain knowledge,” and suggested that potential supply chain professionals consider an internship as a way to gain critical experience and insight.

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U.S. – Canada Price Discrepancies Focus of Senate Inquiry

Speculating about why consumer goods cost more when purchased in Canada has become something of a national pastime for some Canadians.  For the past several years, Canadian media outlets and blog posts have regularly asked why, despite the influx of American retailers in Canada, and the sustained strength of the Canadian dollar, Canadian costs are significantly higher than in the United States.

For example, a well known U.S. fashion retailer charges 15 percent more for merchandise sold in its Canadian stores and on its Canadian website.  (Online shoppers were infuriated to realize that duties and taxes pushed the price discrepancy to as much as 50 percent higher in Canada).  The Retail Council of Canada reports that automobile tires in Canada cost $169.69 in Canada, but sell for $128.21 in the U.S.  And a 2012 survey by the Bank of Montreal found that retail prices in Canada are about 14 percent higher.

The issue became so infuriating, that a senate finance panel launched a 16-month investigation, the results of which were released in February 2013.  The panel’s report, “The Canada-U.S. Price Gap” examined the underlying causes of the price discrepancies, and offered recommendations for alleviating those pressure points.  Noteworthy though, is the way in which the report begins:  “Canadian consumers are feeling ripped off.  When the Canadian dollar is at parity with the U.S. dollar, Canadian consumers notice that prices here are typically higher than in the United States.  When buying books or magazines, they notice two prices on the covers, and usually the price in Canada is higher.”

The report heard testimony from hundreds of experts and found several contributing reasons for the price discrepancies:

  • Customs Tariffs. Tariffs were cited as a significant cause of the price discrepancies.  The Retail Council of Canada said that Canada imposes rates of tariffs that are consistently higher than rates imposed by the U.S.  In one example, the Council cited ice hockey pants, which are subject to an 18 percent tariff rate in Canada, but a 2.9 percent rate in the U.S.
  • Product Safety Standards. Different standards imposed by the Canadian government force U.S. manufacturers to revamp products before they can be sold in Canada.  For example, the Canadian Apparel Federation told the committee that Canada imposes a different testing process for garment flammability, which means that items approved for sale in the U.S. must endure a second review in order to be sold in Canada.
  • Relative Size of the Canadian Market: Canada’s small size relative to the United States means that importers pay a higher price for smaller shipments of goods.  Canada’s small size also contributes to a lack of competition in certain retail categories, which results in higher prices.
  • Country Pricing. Country pricing refers to the practice by some manufacturers of adopting different price structures for different countries.  The Retail Council of Canada told the senate committee that some manufacturers charge Canadian retailers 10 to 50 percent more than U.S. retailers for identical products.  Three reasons were cited:
    • Canadians are used to paying higher prices
    • Higher operations and supply costs in Canada
    • Higher prices are necessary to compensate Canadian distributors and wholesalers

The study recommended that steps be taken to address each of these contributing factors.  Speaking specifically about the culpability of tariffs, Finance Minister Jim Flaherty said that while the government has reduced tariffs on a number of products in recent years, “I expect more tariff reductions” down the road.

Senator Joseph Day, chairman of the senate committee, urged Canadian consumers to be more price conscious and savvy as a way to control prices.  Day’s comments reflect the fact that price discrepancies are largely driven by market factors.  “There is no one answer,” he said in releasing the report.  “The government doesn’t determine prices.  The marketplace determines prices.”

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Return on Investment Doesn’t Always Mean Lowest Cost

It used to be when a business looked for return on investment (ROI) from its logistics provider, the provider would be expected to find the lowest cost carrier.  End of story.  Now however, it’s not that simple.

Instead, logistics providers looking to help achieve maximum ROI take a more macro look at a customer’s overall supply chain, and utilize several efficiency tools.  The result is often a leaner and meaner supply chain that improves efficiency across the supply chain – but does not necessarily look at lower transportation costs as the defining bellwether of its success.

For example, in a recent World Trade 100 article, Douglas Waggoner of Chicago-based Echo Global Logistics noted that “achieving a truly meaningful return on investment is a matter of having a good, integrated solution that uses best-of-class transportation providers, technology, the optimization of the flow of goods, and the reduction of work-process expenses.”

Bringing together “experts” to offer input on various parts of a business’ supply chain – and then having them compare notes and arrive at a comprehensive solution – is central to achieving better ROI.

And what should be on the agenda when those experts meet?  A few key points:

  • Process Improvements: The first thing a logistics provider should do, is to dissect the inner-workings of each part of a business’ operations, and make sure that there is no overlap, and that all divisions are on the same page and working toward a common, clearly defined goal.
  • Regulatory Analysis:  Is there a process in place to make sure that a business is in full compliance with all necessary regulatory mandates, and that no unnecessary penalties or fees are accrued?  And, is there a mechanism to ensure that the business is achieving maximum tax incentives or, if applicable, favorable trade treatment?
  • Continuous Improvement:  It’s also important to look at ROI as an ongoing goal, rather than a short-term achievement.  Hopefully, a logistics partner will have established a long-term relationship with its customers, and will fully understand the business needs and priorities of that business.
  • Open Mind:  Finally, it’s important for businesses to understand that technology and supply chain management have evolved so much in recent years that processes that were considered cutting edge a few years ago, may now be obsolete.  Businesses need to be open to new ways of doing things, listen to advice, and not be afraid to try new strategies.

So next time a business wants to ensure that it is receiving maximum efficiency from its logistics provider, it’s important to talk in terms of improving ROI across the board, rather than just looking at one piece of the overall pie.

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Border Compliance Provides a Competitive Edge

Growing frustration about the increasingly complex U.S./Canada border clearance process has been well documented.  But some affected businesses seem to be turning the lemons of border compliance into lemonade, using their determination to master the compliance process as a competitive advantage.

“Look on the bright side,” one commenter to a recent Canadian Transportation & Logistics blog post wrote, “companies that can manage these issues properly can gain more competitive advantage over competitors.”

This particular blog commenter might not have realized how perceptive his comments were, given some of the “tweaks” that have been made in recent months by the Canada Border Services Agency. Canada is continuing with the rollout of an electronic cargo transmission process – eManifest – which, when fully implemented will require advance notification of all shipments headed to the Canadian border.

CBSA has announced that all highway carriers must be in compliance with eManifest by November 1, 2012.  Failure to comply could result in denial of entry and monetary penalties.  Industry analyst Laurie Turnbull, writing in his CT&L blog noted that the eManifest requirement “has tremendous significance in terms of the possibility for delay, or potential inadmissibility, of shipments.”  Turnbull suggests that transportation managers might want to “reexamine supplier agreements” to make certain that their carrier is up to the task of eManifest compliance.

Turnbull also highlights recent changes to Canada’s Custom Tariff Schedule that took effect on January 1.  Like most industrialized nations, Canada adheres to the list of internationally recognized tariff codes, as established by the World Customs Organization (WCO).  WCO maintains a list of more than 5,000 commodity groups, and assigns a six digit identifying code to each.  That six digit code means that shipments will be classified similarly around the world – a shipment of oranges traveling to Canada will bear the same six digit code as a shipment of oranges headed to China or anywhere else.

Each country is then authorized to use subsequent identifying codes, as a way to further track goods entering and leaving its borders.

Recently, the WCO made some changes to its coding system, which had the trickle down effect of causing some of Canada’s codes to change.  Unless a shipper or its logistics provider is aware of these changes, any affected items arriving at the border runs the risk of being deemed non-compliant, or of missing out on favorable tariff actions as a result of the mislabeling.

Which reaffirms the point that a savvy business will take advantage of the growing complexities of the compliance process, and turn it into a competitive advantage.

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Canada Continues to Draw U.S. Retailers

U.S. businesses continue to enter the Canadian market at a brisk pace, with apparel retailers Express Inc., Ann Taylor, and Tory Burch opening stores in recent months.  These fashion retailers join a growing number of U.S. businesses that have branched out to Canada including Lowe’s, J.Crew, Crate&Barrel, Victoria’s Secret and Bath and Body Works.  Retail giant Wal-Mart has been in the Canadian market since 1994, and currently operates 329 retail stores across the country.

The American invasion is set to continue, with Target Corp. planning to open its first Canadian store in March 2013, with as many as 135 stores to open by 2014.   High-end retailer Nordstrom has announced plans to open four stores in Canada by 2014.  J.C. Penney, Kohl’s, Macy’s, Bloomingdale’s, and Saks Fifth Avenue are among other U.S. retailers interested in establishing a brick-and-mortar presence north of the border.

Why the sudden interest in Canada?

Retail consultant Wendy Evans, of Evans and Co. told Reuters “Many chains see Canada as untapped territory, having nearly run out of promising locations in the United States to open new stores.”

For others, the allure of operating in a relatively stable economic environment has been a deciding factor.  The Canadian economy weathered the economic recession better than the U.S., although disappointing economic indicators in early 2013 point to a possible slowdown in coming months.  Still, the comparative strength of the Canadian dollar has given consumers newfound buying power for desirable U.S. goods.

But despite the steady trek north, retailers need to do their homework before setting their sights on the Canadian market.  Canada is not ripe for every business.  As Alison Paul, vice chairman at Deloitte LLP told Reuters:  “Just picking up a store that you have in the U.S. and plopping it down in Toronto is not going to mean you are successful.”

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When it comes to Exporting – Logistics is Local

According to data from the U.S. Commerce Department, less than one percent of U.S. companies’ export – and of those that do, 58 percent export to only one country, typically to Mexico or Canada.  U.S. businesses’ rate of participation in the export market is significantly lower than other developed countries.

With all the talk about “the global marketplace,” the perception for many was that exporting companies were the norm, and that companies without export markets were being left behind.  This line of thinking was fueled when President Obama set a goal of doubling U.S. export growth by 2015.

In fact, most U.S. companies do not export and according to at least one logistics expert, businesses should be careful not to enlist a logistics carrier that specializes in “global service,” when a more regional approach is needed.  “We know that globalization has been vastly exaggerated, and that relying on a ‘mega-forwarder’ is not always the distribution answer,” Shay Scott, director of the Global Supply Chain Institute at the University of Tennessee recently said in an article that appeared in Logistics Management.  Instead, Shay concludes that most U.S. businesses “only require a basic forwarder.”

This sentiment is echoed by Pankaj Ghemawat of IESE Business School in Spain, and author of World 3.0.  In his book, Ghemawat notes ,“the number of American companies with any foreign operations is vastly overstated.”

Businesses should focus on finding a logistics partner that best meets its specific needs.  Buy only the logistics you need and do not be swayed by glitzy advertising and sales talk that offers unnecessary global reach.  U.S. businesses that export to Canada, for example, should partner with a logistics provider with Canadian expertise.  As Shay points out, “Many of the smaller forwarders have better relationships with Customs than the bigger players.”

This local expertise can be extremely valuable, especially when a “routine” shipment goes awry.  “Imagine your goods have gotten stuck somewhere en route – perhaps the paperwork wasn’t filed correctly because the regulation has changed, or the promised transportation service didn’t materialize,” says Delcan Corp. senior business analyst Rosalyn Wilson.  “The delay can hit your bottom line in terms of dollars, but can also damage the reputation of your product or company.”

At a time when many U.S. businesses are looking to Canada – and its 34 million potential new customers – having the right logistics partner can be a very valuable tool.  The trick though, is taking the time to research options and choose the provider that will be the best fit.

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