JBF Express:  US to Canada Cross Border Parcel Distribution Solution.

The Geography:

JBF Express (JBF), is a specialty 3PL located in Buffalo NY and their focus has been truckload and LTL cross- border distribution solutions between the US and Canada.   The US and Canada are the world’s largest trading partners with the Buffalo, NY border gateway processing billions of dollars of goods annually.  Buffalo is close to Toronto, Ontario; the largest metro region in Canada and home to Canada’s biggest concentration of corporate HQ’s and manufacturing facilities.  The Toronto metro region, south to Buffalo and the US border, fuels Canada’s economy and makes Buffalo the ideal location to transit goods between the two countries.  Historically, the flow of commerce between the US and Canada has been fairly well balanced with a higher percentage of small parcel goods crossing the border southbound from Canada to the US. The concentration of commerce and manufacturing located within Southern Ontario’s metro Toronto region is what drives Canada’s export economy.

Business Context - Current Condition, The Client, and the Opportunity:

The US-Canada trade balance was also not reflected in JBF’s cross-border business activity as most of their freight originated in Canada and moved southbound to the US.  This in-balance has been most recently driven by the growth of e-commerce with JBF moving consolidated shipments of pre-labeled e-commerce parcels across the border from Canada for distribution in the US via UPS and FedEx.   Currency conditions have also led to the imbalance with the higher valued US dollar making it more attractive to import consumer goods from Canada to the US. 

Jim and Jeff Brewer are the father and son team that own, operate and are responsible for the success of JBF Express.    They both realized that they could drive additional profitability by moving more freight and parcels northbound to Canada via their existing cross-border, line-haul transportation model.  However, it was not exactly clear to Jim and Jeff how they could best grow the northbound opportunity.  Dean Maciuba is the US based Managing Partner for Last Mile Experts (LME).   During the fall of 2016, JBF collaborated with Dean and LME to support the following business development opportunity:

  • Identify a new northbound service solution, utilizing existing JBF Express line-haul assets and exploit the largest northbound demand opportunity.
  • Design and support implementation of the new specialty distribution solution.

Main Challenges:

Based on all 3 partners extensive cross-border experience, brain-storming discussions were held to suggest, review, and analyze various opportunities and the current conditions that might drive the need for a new US to Canada parcel solution.   The following reoccurring themes dominated the discovery process and ultimately became the foundation of the solution.  

  • Current International Ground solutions from the US were simply not marketed well by the US based parcel carriers and the USPS. In many cases, sales professionals did not understand their own service offering.
  • The transportation related cost of an International Ground parcel solution offered by the major US based carriers was surprisingly high, almost 3 times the cost of a typical US domestic ground shipment.
  • The fully landed cost of a northbound shipment including transportation, brokerage and D&T was not being offered by the carriers via a single and complete value proposition. This made it nearly impossible for a shipper to predetermine the fully landed transportation cost of the transaction.
  • Shippers required affordable regulatory guidance from the carrier or a broker to implement a cross border Ground solution and to support the solution moving forward.
  • Brokerage fees were nearly the same for a single package or a 100-package shipment. This dictated the need to focus on a consolidated shipment service which allowed the shipper to spread-out brokerage related expense across numerous shipments and customer transactions. 
  • Canada is being underserved by Canadian based e-commerce retailers. Canada Post was predicting that most of the new e-commerce growth within Canada could originate from US based e-commerce retailers.
  • Canadian based consumers required transportation options across transit days and cost. This meant the solution required a relatively inexpensive postal solution along with a higher cost, private carrier parcel solution with time definite transit day commitments.

The Market:

Once JBF and LME had defined the foundational characteristics of the new service, US based market segments to be targeted were identified.  These market segments included:

  • Existing e-commerce retailers that were already shipping directly to consumers in the Canadian marketplace.
  • Existing e-commerce retailers that did not offer cross-border distribution of their products.
  • Legacy retail businesses that had not yet implemented an e-commerce solution or previously failed with an e-commerce solution.

Main Challenges:

  • Developing a fully landed cost rate for the customer that included local pick-up, cross border transportation and parcel delivery across 95% of Canada.
  • Collaborating with a 3rd party shipment processing system/vendor that could process labels for both postal and private carrier solutions.
  • Offering a regulatory solution for the customer via a 3rd party that could provide all-inclusive regulatory guidance, direction and support.
  • Providing an e-commerce support solution for prospects that were eager to expand their reach northbound to Canada but had a broken or no e-commerce business strategy.

E-commerce Go to Market Strategy Support: (South Pole Digital)

JBF and LME had reviewed data that strongly suggested the largest opportunity for new business might lie with small to medium sized, legacy retailers that had not yet fully embraced an e-commerce solution.  It was also believed that potential opportunities existed with retailers that were engaged in a failing or recently failed e-commerce, northbound, parcel solution.  The solution for JBF Express was to have them engage the resources of LME’s alliance partner, South Pole Digital (SPD) and have SPD available to support an e-commerce go to market strategy as needed for JBF clients and prospects.

Preferred Brokerage Offering (FedEx Trade Networks)

JBF already had a policy in place where they would not act as the importer or exporter of record for any cross-border shipments.  LME agreed with this policy that limited JBF’s regulatory liability.  However, LME also insisted on a recommended policy that would ask all shippers to act as the Importer of Record via the Non-Resident Importer program.  This program enabled the US shipper to be invoiced for Brokerage, Taxes & Duties.  Under this program, the Canadian recipient would never be responsible for any fees at the time of delivery and the US based e-commerce shipper could offer products for sale at a fully landed price, including any Taxes & Duties that may apply.

LME also suggested that FedEx Trade Networks (FTN) be recommended as the preferred broker of choice for all shippers.  FTN has completely embraced the Non-Resident Importer program and could support JBF customers with all other brokerage services that might be required to process a cross-border distribution solution.  These services included:

  • Northbound and Southbound Customs Brokerage Service.
  • Non-resident importer designation (NRI).
  • Provide applicable, SKU level, taxes & duty rates, and tariff codes.
  • Tax exposure consultation services.
  • Duty draw-back support.

 

While FTN would be the preferred Brokerage service provider, the client would still be permitted to select their own broker of choice.  JBF Express would support brokerage clearance via any broker that offered cross border brokerage services between the US and Canada. 

 

Carrier Selection Process.

JBF already had their own cross-border line-haul solution in place. However, they did require a domestic Canada Ground service solution.   Canada Post, FedEx Canada, UPS Canada, and Purolator International were considered:

UPS Canada-Did not respond to our request.

FedEx Canada-Originally the preferred carrier of choice, their process for responding with a rate program was drawn out over a long period of time and they could not quote their Canada Ground service in US dollars.

Canada Post (Direct) – Canada Post responded quickly with a favorable rate program but with somewhat limited automation support.

Purolator Canada- Right from the start, it was apparent that Purolator Canada was hungry for the JBF Express business opportunity.  Purolator Canada is owned by Canada Post and offered JBF a combined Purolator/Canada Post program. The combined service offering included the following benefits:

  • Processing shipments for both carriers from a single shipment processing platform.
  • Provided for a single invoice for both services.
  • Both services would be supported by a generous discount program.
  • Purolator could provide JBF Express with an Excel based rate calculator that would allow shippers to easily quote shipment rates.

After evaluating all the carrier programs, it was clear Purolator Canada offered the best overall value proposition and was selected as the preferred Ground carrier for Canada.

Collaboration:  The Role of Last Mile Experts:

Last Mile Experts guided and directed the client throughout the evaluative and design processes.   Most importantly, LME supported a client driven schedule that lasted over 9 months, while always maintaining focus on the stated goals and objectives.  Jeff Brewer, Vice President of Operation at JBF Express, had this to say about LME: “Dean Maciuba from LME really hung in there with us while we moved slowly and deliberately through the various processes.  We needed a solution that covered all aspects of a complicated specialty distribution solution.  LME was there to work through all the details with us and continues to serve us on the project us with implementation and marketing support of the northbound parcel solution”.