The "thickening border," the sliding US economy, the parity of the Canadian dollar and the fuel crisis have all conspired to make Canadian carriers' southbound deliveries uncertain, expensive and time...
The “thickening border,” the sliding US economy, the parity of the Canadian dollar and the fuel crisis have all conspired to make Canadian carriers’ southbound deliveries uncertain, expensive and time-consuming.
The lack of northbound traffic has made life even worse. “Cross-border truck volumes are down by 20%,” says Bob Armstrong, the new president of Supply Chain &Logistics Canada (SCL). “That has created problems for shippers because of a lack of back-haul opportunities.”
In the face of such challenges, carriers are developing innovative strategies and introducing new services to streamline and simplify relevant processes. In view of the dodgy state of Canada’s transportation infrastructure and mounting regulatory hurdles, carriers now stress consistency and predictability of service rather than simply speed.
In Armstrong’s view, most of the new regulations focus squarely on security. “In the minds of government bureaucrats,” he says, “security always trumps trade.”
The continuing onslaught of new legislation and rules can stop shipments dead in their tracks.
“There are now so many different programs and initiatives from government departments and agencies that we need several employees to keep track of them all,” says Mike McCarron, managing partner of MSM Transportation “But after making the necessary IT infrastructure and process investments, our regulatory expertise has now become a competitive advantage and a sales tool.”
More and more, cargo-related data has become a virtual trade barrier replacing duties and tariffs. “It’s all about ensuring that the right information gets to the right person at the right time,” says Jayson Myers, CEO of Canadian Manufacturers and Exporters (CME) in Ottawa. “That’s because of the new world of e-manifest, a part ofACE (Automated Commercial Environment) rollout for the US Customs and Border Protection Agency (CBPA).”
Successful carriers are focusing on new technology, as well as driver and shipper training. In fact, many carriers are now more selective about whose shipments they will accept.
“The business model has to change,” says McCarron. “Carriers have become more willing to work more closely with shippers. We have to play to each other’s strengths. We now request customers to provide us with accurate cargo information to satisfy the data needs of regulators.
“Otherwise, problems arise that result in secondary inspections that lead to delays and higher costs.”
McCarron is not alone in pointing fingers at shippers. “Many large shippers with their own private fleets also have difficulty transmitting accurate and timely cargo information between their production and distribution functions,” says CME’s Myers.
Nevertheless, according to McCarron, sophisticated shippers are now willing to pay a little more to ensure consistent and reliable cross-border deliveries. “It is no longer just about getting the lowest rates,” he says. “If carriers do not spend the money to get up to speed with the necessary processes, they are going to be forced out of the transportation business because they won’t be able to compete.”
Like many other carriers, MSM has a border service surcharge, which McCarron claims does not completely cover the total cost of complying with government regulations.
For those reasons, the regulators come in for more than their share of criticism. “Although we see breakdowns in information handoffs involving carriers, shippers, brokers and government agencies,” says Myers, “at the same time, cooperation between and among various government departments such as CBP and FDA appear non-existent. All this is made worse by occasional glitches in government IT system.”
As for shrinking cross-border truck capacity, a major courier has recently introduced a new solution. On May 5, FedEx Truckload Brokerage arrived in Canada. As a non-asset-base service, FedEx Truckload Brokerage manages the carrier relationship on behalf of shippers. This new service offers Canadian exporters additional choices for moving their US-bound goods.
“We are looking for qualified Canadian carriers that have satisfactory safety records, proper insurance coverage, suitable industry experience and that conform to all the required US CBP and Canadian Border Services Agency security and other regulations,” says John Colonna, managing director of FedEx Truckload Brokerage. “So far, the response from both shippers and carriers has been very positive.”
FedEx Truckload Brokerage is actively signing contracts with Canadian carriers for both ad hoc and dedicated services for moving goods to the US. According to Colonna, carriers can arrange their own back-hauls, although on a best-efforts basis, FedEx Truckload Brokerage will also help out.
Another cost-cutting solution is for shippers to work more closely with carriers to align their shipping times with carrier delivery schedules. “We give customers better rates on days that work for our LTL schedules,” says McCarron. “To integrate our needs more tightly, shippers need to talk to their customers to find out if, with a little more planning on both sides, could they change the delivery days.”
Taking a different view, DHL is focusing more on the logistics side than simply transportation to help Canadian exporters streamline their flow of US-bound goods. “Couriers can play a critical role through their engineering function,” says Michael Chabot, senior vice-president of operations for DHL Express (Canada). “It’s all about communication and developing a relationship with our customers to help us understand who they are and how they do business. We send in a team of industrial engineers to share the expertise they’ve gained internally through upgrading processes in our own operations.”
According to Chabot, many couriers believe offering such logistics services is only a small part of the supply chain. “But it is expanding,” he says. “Courier companies need to diversify their service offerings by providing a portfolio beyond ordinary pick-up and delivery services.”
So far, DHL is targeting specific production sectors that include high tech, pharmaceutical, industrial, and au- tomotive. Such re-engineering practices are particularly helpful, especially for small and medium-sized operations, which may at times overlook such opportunities.
Chabot also promotes “earlier volume availability” as part of its innovative Volume Management Inventory (VMI) process to boost customer efficiency. Typically, the cut-off time for receiving goods at a carrier hub is 8 p. m. or 9 p. m. However, many customers have built their loads and are ready to go by 2 p. m.
If couriers can move those shipments to their hubs and start the processing of trailers earlier, it can enhance the efficiency and capacity of its hub because DC staff have more time to load trailers properly and deal with any shipments requiring rework by avoiding the last-minute rush.
“Flowing goods through the DC and on to trailers throughout the day makes more sense,” he says. “We call it, ‘the profit through process model.’ The system allows the employees to work towards the set standards, and they produce less failures and perform at a higher rate of productivity.”
By adjusting the volume flow through its own facility, Chabot claims that DHL has boosted the capacity of its DCs by up to 25%. As a result, DHL has attracted new customers by passing on savings to them.
However, Chabot concedes that this approach may not meet every shipper’s needs. “For some companies, late pick-up times are key to their customer service strategy,” he says.
At UPS, the key to eliminating the border is to rely on technology and bundling trade services into a comprehensive package. “Since January 2008, we have been offering paperless invoicing through UPS WorldShip,” says Greg Kane, vice-president of communications and public relations for UPS Canada “While through our Trade- Direct service, Canadian exporters can consolidate their LTL US shipments.”
Such an all-in-one approach has simplified cross-border shipping for Markham, Ont.-based CDI Computers, a supplier of high-quality refurbished computer systems. Originally, when it handled shipping products to US customers on its own, it faced two major barriers. The first was preparing individual customer orders and trying to comply with the ever-changing documentation to get them across the border quickly. The second was the high cost of clearing individual documents.
To solve the problem, the firm brought in an outside vendor that offered consolidated Customs clearance and US-based warehousing. However, CDI Computers soon bumped into two new problems. One was the vendor charging full rates for US domestic shipping. And the second more critical issue was its inability to provide real-time tracking of deliveries. For CDI Computers that was a deal breaker since agile customer service helps differentiate it from its competitors.
Ultimately, it turned to UPS World Ease to handle such shipments. In quick order, World Ease delivered better customer response because when buyers called in to find out the status and location of their orders, CDI employees simply clicked on the unique shipment tracking number to pass on the information.
There were also major time savings since UPS could handle the customs details more quickly which reduced cross-border delivery times by more than a day. As well, CDI enjoyed costs savings thanks to volume discounts for UPS’s time-definite US domestic deliveries.
But just as the trade community is adjusting to the current state of the regulatory jungle, more changes are coming down the pike. One of the more upsetting ones is the soon-to-be-announced 10+2 requirement from the US CBPA. The new regulation calls for more details including the HS (harmonized system) tariff codes. They will also force carriers, shippers and customs brokers to collaborate more closely to ensure that accurate information is transmitted electronically to the CBPA on time.
And there’s more. “We are seeing more non-tariff barriers emerging,” says Carol Beaul, Toronto-based president of Intelli- Trade Inc. “The FDA wants to inspect beef shipments that pass through, but are not destined for, the US, i. e. Mexico. FDA officials must sign off on the shipments at the port of entry and exit. However, shippers can apply for an FDA exclusion permit which can take up to six weeks.”
What does the future hold in store for cross-border shipments? “We expect it could become a whole lot worse,” says McCarron. “In fact, our firm is moving into different sectors -launching a US domestic trucking unit and going overseas.
“Here in Canada, we are likely to see more consolidation in the trucking industry as uncompetitive carriers get bought out.”