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Canada offers host of e-commerce opportunities, but is not "extension" of US market. "Misconception" is the root cause of crossborder shipping mistakes: white paper

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By: Julia Kuzeljevich
2014-03-01

In a white paper on Canadian e-commerce opportunities, published in October, Purolator International, Peerless Research Group (PRG) and Logistics Management noted that a rise in B2C, as well as B2B e-commerce, has brought challenges to businesses exporting products to Canada.

Among these are transit times that can be difficult to measure in days or hours, lengthy delays at the border due to incomplete or incorrect customs paperwork, and multiple handoffs among carriers that are not uncommon, said the paper.

The belief that the Canadian logistics market is an extension of the US market is another common misconception as well as the “root cause” of most mistakes made in crossborder shipping.

E-commerce shipping to Canada is growing. Canadian consumers represent a $292 billion export market to United States retailers, Purolator revealed.

But logistics and transportation managers say they continue to experience higher costs and some level of dissatisfaction in crossborder logistics.

They cite the lack of a coordinated Canadian freight network, additional paperwork and related transactional costs, and damaged goods as persistent problems, said the paper.

John Donahue, a director in Price Waterhouse Coopers’ (PwC’s) transportation and logistics practice, said that many of his clientele deal with a significant import-export imbalance on the north-south lanes.

“Dealing with costing models and strategies for asset utilization around these issues is key. We’re very active in these conversations. It’s an ever-changing model-what worked one year may not work the next year. It’s about understanding the bottom line cost and what you can do with vendors to make that sit correctly. Most of it is around cost and vendor modeling and developing good relationships so that they have the background to pull in the right people at the right time,” he said.

“Asset management and route management are probably the two largest issues we’re approached with. The regulatory issues north-south are more informational, with regard to the transition of information to a system, although it’s not as big of a challenge today as it was four years ago. Putting that information into a consolidated environment is probably the best thing that’s happened in the last four years,” he added.

Canada’s total population of nearly 35 million is spread across a large geographic area, so logistics costs can also be higher because of the difficulties in building freight “density” into operations.

Of some 218 US operators surveyed who conduct business in Canada, of these, about 40% currently take orders over the internet from Canadian customers, and, of those, nearly one-fourth (22%) maintain a website specifically geared to the Canadian market. The majority of these operators claim their Canadian sales volumes have either grown in the past two years (51%) or stayed level (37%). And, the Canadian market should continue to be fertile territory for US businesses. Two-thirds of respondents (65%) expect Canadian sales volumes to increase in the next two years, the Purolator study said.

Those doing business in Canada ship across the US-Canadian border with relatively high frequency. Nearly two out of three (62%) ship at least weekly with more than one in four companies (27%) dispatching goods on a daily basis. Slightly fewer than 20% of those interviewed ship at least a few times per month.

These Canada-bound shipments tend to be handled by a variety of carriers. Small package carriers, either express, courier, or postage are widely used. In addition, LTL (57%) are also a provider choice when shipping to Canada. Postal services (35%), freight forwarders (31%), 3PLs (26%), full truckload providers (25%), or air freight services (23%) are also common solutions for those shipping to Canada.

Four in 10 respondents say they have experienced problems at some point shipping from the US to Canada, including shipment delays resulting from improper paperwork, noncompliant packaging, or just a failure to satisfy border procedures.

Border interruptions were most common at (63%), transit time delays (47%), or incomplete or incorrect customs paperwork (47%). Non-compliance with customs regulations (28%), unexpected expenses (22%), and tracking multiple parcel handoffs (19%) were also common impediments, said the study.

Two-thirds of these shippers (65%) say carriers submit a full “landed” cost-that is, total cost to include complete shipping fees, taxes, and tariffs. Some contend this information varies by carrier while others assert they were hit with additional, unexpected costs in trans-border shipments.

Business-to-business and business-to-consumer US manufacturers shipping both domestically as well as to Canada believe their level of service to US customers is superior to what they are able to provide their Canadian customers. Nearly all (93%) rate their service to US clients as excellent or very good. In comparison, roughly three out of four (73%) consider the quality of their service to their Canadian clientele to be as strong.

Canadian customers’ most common complaint is the high cost of shipping (40%) followed by problems with returned (26%) or damaged (14%) merchandise, unforeseen or unexpected shipping costs (22%), and lack of inventory or too many back orders (6%).

In terms of solutions and strategies for navigating border issues, the survey found that about 7 in 10 organizations relied on a third-party such as a customs broker (39%) or logistics provider (30%) to help solve the problems. Another one fourth work to resolve these hassles in-house.

In a related survey looking at product returns, John Costanzo, President of Purolator International, noted that e-commerce merchants and retailers “can add value and a level of comfort to Canadian customer purchases through a free and easy return policy across the border.”

Total returns from Canada to the United States were valued at $8.6 billion in 2011.



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