With capacity concerns at work both in the air and on the ground, savvy shippers are weighing the costs of moving parcels by less-than-truckload (LTL) versus domestic air freight, whether overnight or deferred.
Although air freight is often costly, shippers are willing to pay premium rates for several reasons, according to George Hamlin, director of logistics consulting firm MergeGlobal (www.mergeglobal.com), including:
- Movement of high value goods
- Perishable commodities, for either/or perishable and economic reasons
- Theft-endangered products
- Business process impairment (e.g., a production line needs parts or it will shut down).
Product distribution is a critical component of the cosmetics business, notes Patrick Duffy, customs compliance & distribution manager of Caboodles Cosmetics (www.caboodlescosmetics.com). Although most of Caboodles' freight is moved via LTL carriers, the company uses domestic air — specifically, DHL Air (www.dhl.com) — in a number of situations.
"We have a very lightweight product," Duffy explains, "and the cost of using air is comparable to shipping 10 to 15 LTL cartons. With my discounted rates, and for peace of mind, I prefer to use domestic air."
Speed is another factor, Duffy adds. "Using air, I can knock off two to three days."
Duffy handles everything from import and export to transportation and customs brokerage. Caboodles' customers include some of the country's biggest retailers, with their notoriously tight requirements for deliveries — Wal-Mart Stores, Target, Kroger, Nordstrom Rack, a large number of drugstore chains and Boots in the U.K. Caboodles manufactures and sells a line of products aimed at the teenage market.
"We import a lot of product components from Asia, with actual manufacturing done in Canada and the U.S.," Duffy explains. He estimates that between Canada and the U.S., 90% of the company's products are manufactured in North America. Caboodles has one Canadian distribution center (DC) outside of Toronto, which services most of its Canadian customers. All U.S. distribution comes from its Memphis facility. International freight comes to Memphis, though a minor amount does go directly into Canada.
Duffy handles specific customer needs through special handling, if required. "We do a lot of parcel direct to Target stores, for example, if they have a re-set of wall units," he says. "But mainly we go to Target DCs, receiving a weekly order from them and servicing 22 of their DCs out of the Memphis facility."
For Canadian business, Duffy receives a call or e-mail, and he issues a transfer order from one warehouse to another. He handles the transactions electronically, instructing his DCs which carrier to use on the shipment.
Duffy uses some freight forwarders for international shipments, but he dictates everything to them because, as he explains, he's a licensed broker — so some of them don't like working with him. He classifies everything for Customs, providing all product codes. If there are Federal Drug Administration (FDA) holds put on products, Duffy is the person who works to get them released.
"In servicing Target out of our Memphis DC, we occasionally won't be able to fill their order at 100%," explains Duffy, "We may need to send an exact item they have from Canada to Memphis. Shipping by LTL will delay the Target order by days and we would get penalized for the delay. So I use DHL Air for that. Our previous air carrier was constantly having Customs hold issues. No one would call us on holds and they didn't want to work on our shipments because of FDA regulations."
Caboodles has one product containing alcohol, which is classified as a dangerous-commodity. Its only other dangerous good is nail polish, which is produced in the U.S.
"We use domestic air for about 30% of our moves," says Duffy "My rule is pretty much, if it's over 50 pounds, I will look into comparing rates between air and LTL. But under 50 pounds, I definitely go air. After all, I can cut three or four days off of transit time."