One giant leap

by Array

In the era of outsourcing, why would a company ditch most of its Customs brokers and opt to manage its import program in-house? Giant Tiger found out. Deborah Aarts explains.

Accuracy means a good deal to a company like Giant Tiger. Every year, the discount retail chain imports thousands of containers. Given the complicated nature of dealing with multiple vendors located around the world, there’s plenty of room for error—and until recently, plenty of errors were made.

For the past two years, the company has been working to revamp its Customs compliance and other import activities. It’s done so partially by implementing new programs and technologies. But by far the biggest benefit came from discovering it could do things best on its own.

A national presence
Giant Tiger operates 193 stores across Canada.

To keep the shelves stocked, the company is constantly on the lookout for good-quality, low-cost merchandise. It relies heavily on opportunity buys—that is, one-time purchases from suppliers looking to offload surplus product. As a result, its pool of vendors is constantly changing.

Every year, the company imports roughly 500 trailerloads from the US and 1,000 40-ft containers from Asia. The marine shipments come into Canada through the Port of Prince Rupert, Port Metro Vancouver or the Port of Halifax.

Immediately after each imported shipment enters the country, it is transported to the company’s 500,000sqf distribution centre in Ottawa, Ontario. In the DC, inbound shipments are broken down and reorganized into deliveries for each individual store. From there, Giant Tiger’s dedicated fleet of 30 trucks and 80 trailers hauls the merchandise to stores in central and eastern Canada. Thanks to a partnership agreement, shipments to stores in western Canada are sent to the Winnipeg, Manitoba DC of fellow retailer The Northwest Company, which handles final delivery.

The centralized DC model works well, but import/export manager Roger Matchett says it is considering establishing a small deconsolidation facility in Vancouver. This would allow the company to break down shipments immediately and ship them directly to western stores.

“This program is something we’re considering, as the real benefit would be to the stores,” he says.

Trouble on the import front
Until 2006, when it came to imports there was little validation among what was purchased, what was received and what was paid—information that must be accurate in order to comply with Canadian Customs rules. Because the company depended almost entirely on its vendors and Customs brokers to provide the correct information to the authorities—“we did not have the manpower to do it,” Matchett explains—errors became common.

Often, these mistakes would not be caught until months after the fact, when the company would call in a third-party auditor. Correcting them could be complicated; since many of Giant Tiger’s vendors sell goods to liquidate, they often cease to exist after the deal.

While this approach was far from ideal, it was more or less workable—that is, until things went wrong. In 2006, some of the company’s vendors declared shipments of textiles as NAFTA-qualified, but failed to prove it to the Canada Border Services Agency (CBSA). The vendors were flagged for a NAFTA verification audit, and Giant Tiger found itself on the hook for the duties.

This was a wake-up call for Matchett.

“We realized then that we couldn’t rely on our vendors to understand CBSA regulations,” he says. “We basically decided to take complete control of our Customs program. We wanted to maintain Giant Tiger’s integrity and eliminate any liability.”

Drawing on internal expertise
Giant Tiger made the decision to start validating every import shipment itself. It hired three employees to help with the process, doubling the size of the import/export team. The company became vigilant. It locked down import traffic, refusing to accept any shipment until someone had examined the paperwork and validated the information. Almost immediately, staff members discovered numerous errors, particularly related to shipments from the US. Matchett calls the experience “eye-opening.”

While the manual verification process greatly reduced errors, it proved to be very time-consuming and strenuous. It soon became clear that it was far too labour-intensive to be a sustainable part of the business.

But because Giant Tiger verified everything, it found itself providing more and more information to Customs brokers. It was gathering, checking and submitting all the data for the CBSA’s B3 Canada Customs Coding Forms. It was providing information on Harmonized System Codes, value for duty and tariff treatment.

Behind much of the work was Dan Leslie, the company’s import/export Customs specialist, an individual who knew the ins and outs of the company’s Customs clearance process better than anyone.

“We realized that we were doing the majority of the work on behalf of the Customs brokers,” Matchett says. “They were just keying it in for us.”

Recognizing the inefficiency of paying good money for little more than data entry, the company started looking for ways to bypass its Customs brokers. It started by looking at a few off-the-shelf software suites designed to automate the process and provide a direct link to the CBSA.

While relatively inexpensive, that software made Matchett uneasy. Leslie was, and is, the company’s main source of expertise on the Customs process. If Giant Tiger were to sever itself totally from its brokers and handle the process independently, it would be stranded whenever Leslie was unavailable.

Eliminating the middleman
Around this time, Giant Tiger crossed paths with Mantoria Inc, a Montreal, Quebec-based freight brokerage that had been developing a new program—called the Canada Import Program—to handle the clearance process.

The program allows shippers to key in and submit Customs information to Mantoria, which in turn automatically sends it to the CBSA. Through a web-based portal, importers can see exactly what is being cleared in real time.

President Bob Elvidge explains his rationale for developing the program. After meeting with many importers, he discovered that most were already doing extensive Customs work.

“They were putting together transmittal packages—and taking a fair amount of time to do that—and sending them in to the broker. The broker would simply take that information and provide a data entry function. The importer would sometimes have to wait to make sure it was done, and sometimes it wasn’t done correctly,” he says. “The reality is, importers know their SKUs and tariffs better than anybody.”

Like the software Giant Tiger considered, the program effectively eliminates the middleman. But the company was attracted to one key differentiator: backup support. Since Mantoria’s main business is brokerage, the company could call in some extra help if Leslie was out of the office or if there was a spike in import volumes.

The team decided to give the program a try. Leslie traveled to Montreal for some training, the two companies worked together to implement a secure web portal and the program went live in the spring of 2009.

So far, it’s been a success. Giant Tiger has trimmed 60 percent from its Customs broker fee payments. It has eliminated the time spent communicating back and forth with its brokers.

The program has also increased Leslie’s workload, since almost everything now goes through him. But it has also given him the ability to create a flexible schedule. He can now make quick decisions to expedite the clearance of priority shipments or delay those that can wait.

In Leslie
’s view, the real-time visibility has been a tremendous asset to the company. He can monitor the process more accurately, and react much more quickly when something is wrong. “If we do see something is off, we can amend it immediately,” he says.

More than six months in, the majority of Giant Tiger’s import clearances are now managed in-house through the system. Not all, though. The company still uses one broker—Montreal, Quebec-based Omnitrans—to manage its imports of textiles. It’s a highly complicated area, and Matchett says he’s content to leave it to the experts.

Peace of mind
The company’s efforts to take control of its imports are helping it establish a reputation as a good importer. The more streamlined and accurate processes have helped it meet the mandates of the US Customs-Trade Partnership Against Terrorism (C-TPAT) and the Canadian Partners In Protection (PIP) border security programs. It signed on to the programs to ensure border delays were minimal, both for imports into Canada and for shipments to its single store in the US.

At a time when many companies are seeking to outsource as much of their supply chain processes as possible, Giant Tiger’s decision to take things in-house may appear unusual.

But Matchett doesn’t see it that way. He sees the company’s choice to take on its import processes as a sort of insurance. His team no longer has to worry about vendor or broker mistakes. It doesn’t have to chase down suppliers months after the fact. If something goes wrong, it has the tools—and the confidence—to correct the situation immediately on its own.

“I wanted to make sure we were accurate. If there’s a problem with one of our imports, Canada Customs doesn’t go to our Customs broker, our freight forwarder or any other third party. They come to Giant Tiger, as we are the ones responsible. We wanted to take ownership of the process,” he says.

“We’re ready for any Customs audit. We’ve validated everything, documented the processes and have done our due diligence. We have a very smooth operation now.”