I’ve been working with Canadian companies for several years and I love learning about their businesses and also why they are looking to expand. There are the typical common reasons – the desire for a “Made in USA” label or contract requirement, currency rates, and the ability to gain access to a market ten times larger than their own. Another consideration is border-crossing costs.
Many companies are looking at their US-based suppliers and what percentage of sales is going back into the US market. Once companies start to analyze these percentages, they also start to look at border crossing costs. I am currently working with a Southern Ontario company that purchases most of its raw materials from our west coast and thirty percent of its sales go back to the US. Another company is sourcing ninety-eight percent of its raw materials from the US and has sixty percent US sales.
There are several layers of border crossing costs to consider. There is the cost of physically moving the goods over the border twice. Then there is the cost of customs paperwork and fees associated with shipping and potential time delays. This becomes critical when it is a food product or other perishable item.
So what is the total cost of moving these raw materials across the border to be manufactured in Canada to then be sold and shipped into the US? Can these costs be reduced by opening a small manufacturing facility in the US? Can the shelf life of a perishable product be maximized by making it in the US? If the answer is yes, it makes sense for Canadian manufacturers to consider a facility in Buffalo Niagara where they can easily manage their US facility and share key resources. All while saving time and money.
By Carolyn Powell, BNE Business Development Manager