Cutting Air Freight Cost by 20-40%
When shipping from NAFTA to EEC using French domestic mail rates
Using two little-known French islands, 10km off the coast of Newfoundland
St.Pierre et Miquelon are the last French territories in North America
Using Air St.Pierre's customs-bonded offices at 5 Canadian airports
...we could ship from NAFTA to the EEC as French domestic mail
By transferring waybill data between 4 systems, in the same facility
Likeliest Products: Contact lenses, gems, DVDs, flash drives, urgent medical doses
Conceivably, a novel economic strategy for French Overseas Departments
But this is not practical for a small manufacturing company
It disrupts thin margin TransAtlantic marine freight networks and some airfreight networks
UPS, Fedex, DHL, and Mondial Relay would step in, using Paris, Brussels, Ottawa, and Washington networks
Instead, while dimension-costing all product with Karen Aroutounian, we found a "small company" solution
Karen, our Shipper/Receiver, realized that he could disassemble and flat-pack; just like Ikea
Cutting 3D volume cuts cost and weight
Business Pain
Shipping Costs were hurting Orders
During 2011, European customers were cutting orders by 50% because of high freight charges (nearly 50% of bill)
Marine shipping is cheapest but is slowest, hurting retailer cashflow at start of season.
Sales Manager looking to ship to a Euro distribution centre, by ship, over the slow winter season.
Challenges
Internal
High-end, hand-sewn goods
Cyclical seasonal core market
Sales Manager built exposure in EEC
But orders cut because of costs
Fuel costs driving freight charges
We sold in volume to manage (Weight x Dimension x Fuel Cost x Cashflow) aspects of the shipping event
Market
Paddlesports now an upscale activity
High-visibility competitors (Peak, Survitec, Mustang, Level Six) have better margins
...And some build high-quality consumer goods in Asia at lower cost
A major customer introduced competing gear at ~40% below our public MSRP
Investigative Action #1
Investigating VAT-free shipping to UK
With permission, investigated Tesco’s ability to ship Value-Added Tax (VAT)-free goods to the UK
A major UK customer used the Channel Islands method, so we could partner with them
But management decided that it would not help cut net costs
We wanted to use lowest-cost marine shipping, but 8-12 week's in time cost affected retailer cashflow
Investigative Action #2
Investigating French territorial islands near Canada
On a hunch, and with approval, investigated St.Pierre et Miquelon...
Discovering that Air St.Pierre operates a customs' bonded warehouse at Halifax airport
Discovering that Alliance Europe offers a weekly marine connection between Le Havre and the islands via Halifax
Most Importantly...
Discovering that French overseas territory mail rates are the same as domestic rates
Under a certain weight and time frame, it was economic to ship ~100 products, as single items, as French domestic mail
...from NAFTA, with much the same cost effect as VAT €-free shipping from the Channel Islands
Impact
Product can ship from Halifax, Montreal, St.John's, Sydney and Stephenville...to France, by air or by sea
Physically, between three territories at the French domestic mailing rate...
by transferring waybill data between 4 systems, in the same facility.
