Most countries encourage manufacturers and distributors to export their product to other countries because exporting encourages production in the domestic country and thus increases employment and income.
In Canada, two Crown corporations, the Business Development Bank of Canada (BDC) and Export Development Corporation (EDC) offer additional support to Canadian companies, particularly those small and medium sized companies that export or plan to export. Beyond financing and securing credit, BDC, EDC, other banks and local economic development offices offer valuable advice with respect to foreign markets and how to work with global suppliers and customers. These services offer an important leg-up to the uninitiated exporter.
Often however, the new exporter is left to navigate the logistics marketplace in search of solutions and service providers to support their day-to-day exporting operation – the freight, distribution and customs clearance – the blocking and tackling of global trade.
This is a problem because the competitive nature of the $4 trillion logistics industry is such that it is difficult to differentiate between an optimal solution and a good sales pitch. There are hundreds of service providers to choose from. Freight forwarders, 3PL’s, customs brokers and carriers all offering integrated end-to-end solutions. Unless costs, terms and conditions are skilfully negotiated – cost overruns, credit holds and a soured relationship could ensue. Without a fully flushed SOP (Standard Operating Procedure) – damages, misrouted and delayed shipments translate to lost customers for the exporter.
Successful Canadian exporters of manufactured products also know that the import process is just as important and complex as the export process. Imported components must flow through the supply chain in perfect synchronization with finished, exported products. Information used to determine commodity tariff classifications, country of origin and valuation for duty is fluid and must be tightly controlled.
To improve the exporter’s odds of success, a detailed transportation and logistics strategy should be an integral part of the company’s business plan. If the exporter does not have a dedicated logistics director on staff, an external consultant and/or government funding should be made available to identify suitable service providers, recommend global logistics solutions and negotiate optimal terms, conditions and landed costs on behalf of the SME.
Depending on the size and stature of the exporter, Canadian companies are afforded different levels of attention and support by the logistics industry.
Following are the three proposed classes of exporters:
Class A – Large Exporters:
- GM, Bombardier, Domtar, for example.
- Spend more than $1M in transportation and logistics services per year.
- In house logistics teams empowered by systems and expertise.
- Leverage and buying power. Heavily solicited by global logistics industry.
- Minimal need for external coaching or advisory services.
Class B – Medium Sized Exporters:
- Spend $100,000 – $1M in transportation and logistics services per year.
- Logistics services have evolved overtime with minimal direction.
- Day to day issues becoming more frequent, complex and difficult to manage.
- Market opportunity to leverage growing buying power.
- Opportunity to integrate with value added turnkey shipping systems.
- High need for a transportation and logistics intervention.
- Return on investment in an intervention is immediate.
Class C – Small Sized Exporters:
- Spend $0-$100K in transportation and logistics services per year.
- Start-ups, entrepreneurs, new companies.
- Under solicited, under supported by the logistics industry.
- Minimal buying power or leverage.
- Owner operators must navigate the marketplace with little or no direction.
- Transportation and logistics are a necessary evil.
- High need for a transportation and logistics intervention to establish best practice, factor in business plan.
- Return on investment now and on future volume.
Ninety eight percent of all Canadian businesses are defined as small companies with less than 100 employees. Training and support for day-to-day logistics processes would have a significant impact on the success of small or medium sized companies and would ultimately increase Canadian exports.