The so-called International Boundary between Canada and the United States may be the longest undefended border in the world, but that's only the case in terms of arms and munitions. There's still an army of Customs agents each side deploys that shippers have to battle. That's why it's important to keep such encounters to a minimum. If you can manage that, as a U.S.-based manufacturer and distributor of parts and accessories for all-terrain and utility vehicles knows well, you can save a bundle.
Super ATV, based in Madison, Ind., has a huge product line that it ships all over the United States for the benefit of outdoors and off-road enthusiasts, but its business with Canadian buyers was significantly limited due to the cost of shipping. That was true not just from the transportation perspective but from the standpoint of brokerage fees for Customs clearance. Sometimes, the expense of moving parts or accessories could approach the cost of the item purchased, says Joe Sage of Super ATV. Sage's title is IT administrator, but he wears many hats, including dealing with logistics and transportation providers, so he knows about mounting shipping costs. “You don't want to spend $300 in shipping for a $300 item,” he says.
Admittedly, many of the items that Super ATV ships are heavy. In addition to steering wheels, soft tops for the vehicles, shift knobs and brake pads, other products include frame supports and replacement axles. That last item can weigh about 15 pounds, Sage says, which means it's no inexpensive thing to ship. That's especially true when only a few items are shipped each time; in addition to weight considerations, duties are assessed every time something moves through Customs.
Super ATV handles a long line of products from some big names in the recreational off-roading and utility business, including Polaris, Yamaha, Honda, Kawasaki, Arctic Cat, Suzuki, Can-Am, Bobcat, Kubota and John Deere, but it only fulfilled two or three orders a week for Canadian destinations, mostly to dealers.
Sometimes the shipments were large orders, but that couldn't always be guaranteed. To save money, Super ATV did what it could to consolidate orders when possible. But there's a risk in waiting too long for additional orders to come in.
What a difference a day – and a cold call – makes. Andy Paff, a branch manager for Purolator International, the U.S. subsidiary for Canada-based Purolator Inc., simply walked into Super ATV's 232,000-square-foot warehouse and distribution facility, inquired how shipments were made and offered an alternative solution.
Chris Antonelli, Purolator's district manager for the Great Lakes region, describes a typical relationship like this: “We look for customers who can give us more than one or two packages at a time,” he says. “which we're able to consolidate into one order. The big savings is in Customs clearance. We're able to take advantage of that because we build all of their packages on one skid, shrink-wrap it, then move it to the border as an LTL shipment.
“Once there, it's viewed as a single Customs clearance, so there's good brokerage cost savings at that point. Rather than sending 25 orders, where each package has a single brokerage clearance cost, which can range from a couple of bucks to $25 or more, now you have one fee. That's pretty good cost savings there.”
From that point, says Antonelli, the skid is broken down once it arrives at, say, Purolator's Toronto induction hub. Each package, already labeled by Super ATV, is “Purolator-compliant” for easy tracking. From the hub they move as individual shipments, but they are costed as intra-Canadian versus individual packages clearing international points. That's much cheaper.
In the U.S., Super ATV's shipments may have been combined with other companies' packages and moved cross-border as one truckload. However, though each company has to clear Customs individually, there is but one Customs process and one brokerage fee for each company, no matter how many packages they have in their orders.
There are five or more trucks moving from Purolator's Detroit hub to Toronto and Montreal. So, for Super ATV, shipments to destination can usually be made in two days, Antonelli says.
Obviously, it's important to a customer that deliveries are on time. Antonelli says a “launch process” at Purolator is designed to ensure that punctuality. “We want to make sure in our project plan that everything, from IT, Customs brokerage, everything from the transportation and contract perspective, to auditing invoices, everything is exactly as we promised.”
It's crucial to make sure that a company can deliver the solution sold. “Customers want a perfect transaction,” Antonelli says. “If, for example, a customer orders a part from Super ATV and things go wrong, the chances that that customer orders again from them are diminished, so you must do everything you can to make sure the launch process takes care of that.”
Well past the launch stage, the relationship is clearly going well. Sage says Purolator has assigned Super ATV a customer relations representative, who is prompt to respond to inquiries.
The biggest benefit, however, is in the money saved. With the previous carrier, Super ATV might pay $80 or more per shipment. That figure is down to $30 or less. At the same time, shipments from Indiana to Canada have skyrocketed, going from two or three a week to more than 200.
“We have absolutely no problem now reaching customers anywhere in Canada,” Sage says. “You know, I was told when I got involved that the rule of thumb was, if your Canadian shipments are higher than your shipments to California, then you're doing well. Our Canadian shipments are much higher than our shipments to California, so I guess we're doing very, very well.”
Keywords: 3PL, third party logistics, global logistics, logistics services, logistics management, supply chain, supply chain management, inventory management, inventory control, transportation management, international trade