CASE STUDY:

Fishman Dramatically Reduces Costs With Purolator’s Consolidated Shipment Strategy Introduction Musicians around the world know and appreciate the innovative products offered by Massachusetts-based Fishman Transducers. From acoustic sound amplification devices to guitar synth systems, Fishman products are used by some of the music industry’s most accomplished performers, many of whom credit Fishman with helping them project the perfect sound while on some of the world’s biggest stages. Canadian musicians share this affinity for Fishman products and were delighted when they became available in local music stores.

But when Fishman’s Canadian distributor changed distribution models, the company faced a new challenge: finding a way to ship over the border directly to customers.

The company realized it made sense to use a logistics expert, especially since customs management is a necessary part of any U.S./Canada transaction. Fishman managers contacted Purolator

International, a full-service logistics company with decades of experience transporting shipments between the United States and Canada and with deep roots in the Canadian market. Purolator offered Fishman a solution that matched and, in some cases, exceeded delivery times of its previous transportation provider but at a price point that was roughly half the cost. Purolator is able to offer such tremendous savings by taking advantage of its unmatched U.S. and Canadian distribution networks to offer shipment consolidation services – a capability that most companies do not have.

Today, Fishman’s shipments arrive at their Canadian destinations on time, with all duties, taxes, and customs fees prepaid. Fishman relies on Purolator as a strategic partner and has full confidence in the comprehensive logistics strategy Purolator developed to meet its specific needs.

A Global Business Built by a Musician Who Needed a Better Guitar Amplifier

More than 30 years ago, Larry Fishman was a full-time student at Boston’s Berklee College and a passionate bass player in a local jazz quintet. It was a period when musicians were starting to use electric pianos, which had the effect of drowning out Fishman’s guitar. His bandmates suggested he switch to an electric bass, which Fishman wanted to avoid.

Instead, Fishman went in search of a bass pickup that would amplify his sound, with a clear, high

Fishman Dramatically Reduces Costs With Purolator’s Consolidated Shipment Strategy

definition sound. Try as he did, Fishman was unable to find a device that met his high standards.

So, he did what any good engineering student would do, and he built his own. In an interview with The Hub, a blog sponsored by musical instrument retailer Musician’s Friend, Fishman noted that it wasn’t long before other musicians started asking him to build their own bass pickups, and before he knew it, a cottage industry had blossomed. “A manufacturer’s rep contacted me saying he could help sell them to stores,” Fishman noted. “So it was quite accidental, but the extra cash was nice since jazz bass players didn’t make a lot.”

Next thing Fishman knew, his accidental business had opened a manufacturing facility in Massachusetts, and his part-time passion had become a full-time occupation. Today, the company that bears his name has become a worldwide organization. Fishman credits his company’s international success, at least in part, on its willingness to maintain a presence in international markets so that his premium products can be acquired without the added costs of duties and transportation costs. “So if a guitar is being made in one of the hundreds of OEM factories in China, for say a British or U.S. brand, they can afford to offer top-quality Fishman gear in that OEM guitar. If we weren’t willing to do that, the 75 or so brands that install our gear would be more like 10 or 20.”

Canadian Expansion Presented Several Challenges

The Canadian market presented a special challenge for Fishman. There was no question that the company would maintain its presence in Canada – its close proximity to the United States made it a natural market, and Fishman had seen strong demand for its products among Canadian musicians. But there were obstacles that needed to be overcome.

For one thing, the entire population of Canada is roughly 34 million people – about the size of California – but the country occupies the second-largest geographic space of any country in the world! (Russia is first, the United States third). While most Canadians live in urban areas, ensuring deliveries to the country’s outer provinces can be challenging. And, Canada is a bilingual country with roughly one-third of the population listing French as their preferred language. Subsequently, Canada maintains strict labeling and marketing laws that spell out requirements that labeling information appear in both French and English.

The U.S./Canada border clearance process presented another challenge. A U.S. business shipping to Canada must comply with both U.S. export requirements and Canadian import mandates. And unless a business is well versed in the process, clearing shipments through customs can be a highly complicated and time-consuming process. In addition to paperwork filing requirements, duties and taxes, and security mandates, a business must decide the terms of service between itself and its Canadian buyer.

Fishman Dramatically Reduces Costs With Purolator’s Consolidated Shipment Strategy

Among other things, the two parties must agree who will pay duties and taxes, and which party is responsible for clearing goods through customs.

If a buyer and seller agree to ship via the “delivered duty paid – DDP” terms of service, then the seller assumes responsibility for virtually the entire shipment, including up-front collection of all Canadian sales taxes and duties. This avoids the unpleasant possibility of a Canadian consumer refusing to accept delivery of a shipment after being presented with an unexpected invoice at time of delivery. But, U.S. businesses are prohibited from collecting Canadian taxes – or clearing goods through customs – unless they register with that government as a “Non-Resident Importer.”

The alternative is for a transaction to be based on the “delivered at terminal – DAT” or “delivered at place – DAP” terms of service, whereby the buyer has responsibility for the import process, including all customs fees. Since many Canadian businesses and consumers prefer to have no role in the import process, careful consideration would have to be given before agreeing to either the DAP or DAT terms of service.

Fishman Relied on Single-Source Distributor for Canadian Logistics Formerly, Fishman chose to simplify the Canadian customs and delivery processes by entrusting sales to a single in-country distributor. This distributor represented a number of music-related businesses and used an internationally recognized transportation provider for deliveries to music stores across

Canada. “We were quite pleased,” said Fishman Sales Operations Manager Martin Gray. “We were essentially able to replicate our U.S. distribution model with our Canadian distributor, and deliveries were made on time with few, if any, complaints.”

Things were moving along steadily until the distributor announced it was evolving into a non-stocking representative firm for the Canadian market. They would no longer be handling the logistics for Fishman products.

Decision Time: Ship Directly to Customers or Find a Qualified Logistics Partner?

The company saw the unexpected change in its Canadian distribution model as a potential opportunity. “On the one hand, we could ship directly to customers ourselves,” Gray explains, which could conceivably reduce costs. “Or, we could go through the arduous process of finding another distributor to hopefully pick up where our previous one had left off.”

Fishman managers quickly realized the downsides of taking on the shipping responsibility internally. Among other reasons, the company recognized it would be forced to deal with shipments that were rejected by Canadian customers because of outstanding duties and taxes. “We realized the enormity of taking on the transportation process internally and realized the obvious choice was to search for a qualified logistics provider and continue our relationship with our distributor turned rep firm,” Gray said.

Fishman Dramatically Reduces Costs With Purolator’s Consolidated Shipment Strategy

Purolator’s Consolidated Shipment Plan Cuts Costs Dramatically

Representatives from Purolator International’s Boston office had previously contacted Gray, asking for a chance to demonstrate Purolator’s capabilities in the Canadian market. But when Gray received Purolator’s written proposal for overseeing Fishman’s Canada-bound shipments, he was shocked. The numbers were so low, so far below what the company had been paying that Gray thought it was a mistake. “I didn’t think the numbers were real,” he recalled.

But real they were. Unlike virtually every other logistics provider that offers service between the U.S. and Canada, Purolator is able to consolidate shipments, which can dramatically reduce freight costs.

“Consolidation is a tremendous advantage for our customers,” says Purolator’s Paul Serino, who manages the company’s New England accounts. “No one else is able to match our consolidation capability or the tremendous advantages it offers businesses that ship regularly to Canada.”

Consolidation is actually a very simple concept: Multiple smaller shipments are combined into a single larger unit and achieve tremendous economies of scale. The consolidated shipment travels directly to the border and clears customs as a single unit, thereby reducing clearance inspection times and customs fees.

Once in Canada, shipments are deconsolidated and enter Purolator’s extensive distribution network for direct delivery to Fishman’s customers.

Gray estimates that Purolator’s consolidated solution has reduced transportation costs by as much as 50 percent. “We had no idea this option was even possible, since we did not handle Canadian logistics internally,” Gray said. “Had we known we could reduce costs this dramatically, we would have contacted Purolator sooner.”

Highly Efficient Customs Clearance

Purolator was also able to ensure that all Fishman shipments arrived at the border in full compliance with all customs requirements. As the U.S. subsidiary of Purolator Inc., which is Canada’s leading provider of parcel services, Purolator International has a deep understanding of border clearance processes and is attuned to Canadian programs designed to facilitate the clearance process.

For example, every product entering Canada must bear a 10-digit “customs tariff” code that determines a shipment’s tariff amount. But if the wrong code is applied, a business may be forced to pay more tariff than is actually owed. Purolator’s customs experts ensure that every shipment is assigned the proper tariff classification code – an extra step many logistics providers do not take.

Purolator also ensures all businesses that ship regularly to Canada are registered as “non-resident importers,” which means taxes can be collected at time of sale. Since Fishman had experienced

Fishman Dramatically Reduces Costs With Purolator’s Consolidated Shipment Strategy

recurring difficulties with shipments arriving in Canada with outstanding duties and taxes, Purolator’s customs expertise was roundly welcomed.

Transit Times on Par With Expectations

Purolator offered dramatically lower costs and increased border efficiency, but would these benefits come at the cost of on-time deliveries? Fishman’s managers couldn’t help but think there must be a catch.

But there was no catch. Purolator is able to ensure delivery to the Canadian market within roughly the same delivery windows as Fishman’s previous provider. “Frankly, we haven’t had to keep an eye on transit times,” Fishman’s Gray says, noting that there have been virtually no complaints from customers about late deliveries.

Purolator and Fishman – Beautiful Music and Consolidated Shipments

Purolator has overseen the delivery of tens of thousands of Canada-bound shipments since signing on to transport Fishman music gear. The company credits Purolator’s consolidation strategy for tremendous cost savings and looks forward to a long and increasingly innovative partnership.

©2015 Purolator International