Canadian Shipper MayJune 2014

MAY/JUNE 2014

PUBLISHED SINCE 1898 | FORMERLY CANADIAN TRANSPORTATION & LOGISTICS

FOOD Fresh strategies meet stricter regulations in food logistics AWARD WINNING SUPPLIERS Profiling the best managed transport and logistics firms

Trans-Pacific

TRADE Is the new ASEAN bloc Free Trade Agreement a ray of sunshine for shippers seeking logistics services in this priority market?

www.canadianshipper.com

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Simplify Every Process.

Empower People.

Create Consistent Flow.

Reject Complacency.

Set The Pace.

Raise The Bar.

Prevent Errors.

Do It Again.

Execution Is Everything.

SUPPLY CHAIN • DISTRIBUTION • TRANSPORTATION • CONTROL TOWER

©2013 Ryder System, Inc. All rights reserved.

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1-888-887-9337 www.ryderscs.com

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CONTENTS

MARCH/APRIL 2014

DEPARTMENTS

22

6 | Viewpoint Why a sector-by-sector approach regulating rail transportation does not address the broader issues faced across the system.

COVER STORY TRANS PACIFIC TRADE The ASEAN bloc is Canada’s 7th

8 | News Focus

largest trading partner, with

As a bumper grain harvest and bad winter weather create a backlog in rail transport, shippers and carriers hotly debate the prospect of more regulation on rail moves.

Hong Kong a key logistics hub.

Our primer offers insight into trade opportunities for Canada’s “priority market”.

52 | Inside the Numbers Canadian motor carriers are growing optimistic about freight volumes and rates in 2014

54 | The Bigger Picture

37

©SeanPavonePhoto/iStock/Thinkstock

How can shippers best mitigate freight rate increases?

The Port of Busan, South Korea is the largest transhipment port in north-east Asia

FEATURES

AWARD WINNING SUPPLIERS Profiling five transportation and logistics winners of the 2014 Canada’s Best Managed Companies award.

LEADERS | 16 FedEx Trade Networks vice president Lynn Wark discusses the company’s preparation for eManifest implementation.

FOOD LOGISTICS: ASSIGNING RISK | 28 More stringent food regulations mean any supply chain oversight will ‘come back to bite’.

FOOD LOGISTICS: FROM STRATEGY TO ACTION | 29 Canada’s national food strategy is industry-focused, and aims at improving access to international markets for exporters

FOOD LOGISTICS: STARTING FRESH | 30 ©idimair/iStock/Thinkstock

Preparing for more stringent regulations in the food supply chain.

continued

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FOL RO

69%

have added cart to qual free ship

THE ONLY THING FASTER THAN OUR TRANSIT TIMES IS OUR COMMUNICATION WITH YOU.

65%

of consume shop more w retailer if th offer a hass returns polic

Our P&D drivers transmit live shipment status updates including who signed for the shipment.

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Shipper. com CANADIAN

continued

WHAT’S ONLINE

Shipper news CANADIAN

E-COMMERCE FULFILLMENT: A STICKY RELATIONSHIP | 34 The rise in online purchases means supply chain stakeholders must do that deep dive to solution effective fulfillment.

Shipper CANADIAN

CASE STUDY | 48

Shipper

A look at software that addresses food and beverage traceability and documentation requirements.

34 87%

shoppers 80% ofuseonline Facebook

online shoppers prefer to shop with their favourite retailers online

of online shoppers who have liked a retailer on Facebook pay attention to retailer updates

58%

of Facebook users cite they “Like” a retailer

CONSUMERS WANT MORE OPTIONS & MORE CONTROL

61% 88%

2ND

MAKING IT EASY TO RETURN DRIVES SATISFACTION & REPEAT BUSINESS

61%

Conducted by:

CHOICES

x

x x x

70%

x

x 3–67D .2AxYx S

CONVENIENCE

THE SPIRIT OF INCLUSION At UPS Canada's Women in Logistics event March 7 a panel discussion looked at why diversity in logistics makes business relationships stronger.

Ä

76%

of online shoppers have returned a product purchased online

Transportation Matters

At Transportation Media’s Surface Transportation Summit a panel brought together both shippers and carriers to discuss the RFP process. In this episode, two shippers explain what they like to (and need to) see from the carrier before they can put together a comprehensive bid.

of shop see a pers exp ect 3–6 option day deliv to er at ch eck-ou y t

NEARLY HALF

WEB TV

FREIGHT BIDS - GETTING THE DETAILS RIGHT

x

most important factor at check-out: seeing estimated costs and delivery dates early in the process

will recommend the retailer to a friend if they offer a hassle-free returns policy

of shoppers say they are less likely to comparison shop when using a mobile app

of shoppers review a return policy before making a purchase

69%

have added to their cart to qualify for free shipping

46%

73%

e av yh d the onecart said and ing ab hopp as

of those who abandoned a shopping cart did so because of shipping costs

of consumers will shop more with a retailer if they offer a hassle-free returns policy

THE INFLUENCE OF ONLINE, MOBILE, SOCIAL MEDIA & OMNICHANNEL RETAILING

6 OUT OF 10

65%

Shipper CANADIAN

UPS® partnered with comScore to find out what consumers want during their shopping experience by surveying more than 1,000 Canadian online shoppers.

FOLLOW THE ONLINE SHOPPER’S ROAD TO HAPPINESS CHANNELS

CANADIAN

FEATURES What’s the Buzz?

Joint tanker venture on St. Lawrence to carry light Alberta crude

want e-mail notifications with a tracking number

Defining a New National Transportation Policy

© 2013 comScore and United Parcel Service of America, Inc. To download the full UPS Pulse of the Online ShopperTM white paper, go to: ups.com/comScoreCanada © 2013 comScore and United Parcel Service of America, Inc.

A Natural gas primer

Find us on Twitter at: @CanadianShipper

|

@LouSmyrlis

|

@JuliaKuzeljevic

|

@JamesMenzies

|

@FleetExecutive

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KLA_2013_

THE VIEW Lou Smyrlis, MCILT MayJune 2014 Volume 117 Issue No.3

EDITORIAL DIRECTOR Lou Smyrlis (416) 510-6881 Lou@TransportationMedia.ca

A holistic approach is best Why Ottawa should resist the temptation to provide industry-specific transportation regulations

T

here is no question Ottawa moved swiftly this spring to address the backlog of grain sitting in grain elevators across the Prairies. More challenging is the question whether Ottawa moved wisely in doing so.

Ottawa reacted to the railways’ inability to efficiently handle the unusually high grain harvest by first leveraging the emergency powers within the Canada Transportation Act to order the railways, under threat of significant penalties, to greatly improve their movement of the stored grain. Then it tabled Bill C-30, the Fair Rail for Grain Farmers Act, which provides a series of measures Ottawa thinks will improve grain transportation.

Should Ottawa have intervened? And will its intervention help or hinder the current situation? According to the Western Grain Elevator Association, the nation’s rail car capacity was woefully short of what was needed to move the 100-year crop, and the resulting backlog has resulted in artificially depressed prices to farmers. According to another grain industry group, the Western Canadian Wheat Growers Association, this is just further indication of the “chronic performance failures of CN and CP” and “their cavalier attitude toward the resulting losses suffered by Prairie grain farmers.”

That some of our Class I railways’ customers think of their service providers in such terms is an issue on its own, but can we realistically expect the railways, or any carrier for that matter, to routinely maintain capacity levels so high that they can address such a bumper crop? The five-year average grain crop yield has been 55-56 million tonnes.Yet the latest crop came in at 76 million tonnes.This was compounded by the fact Canada’s grain companies themselves did not realize soon enough the size of the crop that would be coming in. By late August they were still wondering if the grain would suffer from frost. And when the reality of the real size of the grain crop hit, we were already into one of the earliest, coldest and longest winters we’ve experienced nationwide the last 20 years and train lengths had to be shortened for safety, further compounding available capacity.

When you put all those factors together, is it any wonder there was such disruption to the grain supply chain? Does it really indicate the railways can’t efficiently move grain? And what is the impact, I wonder, on all the other commodities that still need to be moved when Ottawa forces railways to move grain?

The Western Canadian Wheat Growers Association wants Ottawa to bring about more competition in the Western Canadian rail sector, because it believes CN and CP essentially operate side-by-side monopolies in Western Canada. It points out that only 7 of the 342 elevators on the Prairies have direct access to both CN and CP. One of the measures in Bill C-30, which followed Ottawa’s emergency order to the railways, is an extension of the interswitching limit in Alberta, Saskatchewan and Manitoba, for all commodities, from the current 30 km to 160 km, as a way to increase competition among railways and give shippers access to alternative services.

But would the proposed changes to interswitching contribute much to alleviating the backlog? A policy brief issued by the Canadian Transportation Research Forum authored by Joseph Schulman points out that “CN and CP are both experiencing capacity issues in moving the 2013 harvest. It is not as if one railway has excess capacity while the other does not.

Second, similar problems are being experienced with rail service in the US, limiting the possibilities of re-routing traffic south.”

So it’s possible that expanding the interswitching limits may amount to little improvement as far as the grain supply chain is concerned.

A sector-by-sector approach does not address the broader issues faced across the system. Rather than focusing on one part of the economy, Ottawa should take a holistic approach to transportation challenges, and develop sustainable commercial solutions good for all sectors.

6

MayJune 2014

ASSOCIATE EDITOR Julia Kuzeljevich (416) 510-6880 Julia@TransportationMedia.ca PUBLISHER Nick Krukowski (416) 510-5108 nkrukowski@canadianshipper.com ART DIRECTOR Ellie Robinson erobinson@bizinfogroup.ca CONTRIBUTING EDITORS Carroll McCormick, Leo Ryan, James Menzies, John G. Smith, Ian Putzger, Ken Mark, Carolyn Gruske MARKET PRODUCTION MANAGER Gary White (416) 510-6760 gwhite@bizinfogroup.ca VIDEO PRODUCTION MANAGER Brad Ling RESEARCH MANAGER Laura Moffatt CIRCULATION MANAGER Barbara Adelt (416) 442-5600 ext. 3546 badelt@bizinfogroup.ca EXECUTIVE PUBLISHER Tim Dimopoulos VICE-PRESIDENT PUBLISHING Alex Papanou PRESIDENT Bruce Creighton HEAD OFFICE: 80 Valleybrook Drive, Toronto, ON M3B 2S9 Canadian Shipper is written for Canadian transportation and logistics professionals who manage product flow from manufacturer to point-of-­sale. Edit­orial is focused on re­porting, analysis and interpretation of Can­adian log­ istics trends and issues. It is published by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd.

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KLA_2013_All-Around_CanadianTransport

3/21/13

4:57 PM

Page 1

A

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IN THE NEWS

RIGHT-SIZING THE SYSTEM

CS

A government bill designed to address a backlog of grain in Canada’s Prairies this spring has led to a great deal of debate and dissent among shippers, rail and supply chain stakeholders.

The Minister of Agriculture and Agrifood tabled Bill C-30, the Fair Rail for Grain Farmers Act, in the House of Commons March 26. This followed an order on March 7 by the federal government, under emergency powers within the Canada Transportation Act issued to the railways to improve their performance.

The federal government said the bill would address a backlog of grain resulting from a 100-year harvest and would also assist other rail shippers in obtaining a reasonable definition of service from their rail carriers.

Bill C-30 builds, to some extent, on the Fair Rail Service Act passed in June 2013, said the Freight Management Association of Canada.

Bill C-52’s amendments to the Canada Transportation Act were in some ways seen as a belated response to deficiencies in the system in terms of rail carriage.

That new law was supposed to give every shipper the legal right to have an effective service level agreement with the railways, either negotiated commercially or imposed by an arbitrator.

But on the terms the agreement needed to contain the law was vague and as yet no service level agreements have been signed.

“C-30 provides for the Canadian Transportation Agency to give more specificity to the operational terms that should be included in Service Level Agreements (SLAs).

The Fair Rail Service Act gives shippers the right, for the first time in Canadian law, to some reasonable definition of service, and provides that if this cannot be successfully negotiated directly with the railway, the shipper can obtain a SLA through arbitration. The proposed regulations may assist shippers in that process,” said Bob Ballantyne, FMAC’s president.

In addition, Bill C-30 provides for a major change to the “regulated interswitching” provisions of the Canada Transportation Act. This provision is a surrogate for competition by giving shippers served by only one railway access to a competing railway where 8

May/June 2014

A larger-than-usual grain crop put storage pressure on available elevators. © Design Pics/Bilderbuch/Thinkstock

there is an interchange between two federally regulated railways within 30 km of the origin (or destination) point. Bill C-30 will, if passed, give the Canadian Transportation Agency the right to increase the distance to which interswitching may apply.

The government has signaled its policy will be to extend the regulated interswitching limit to 160 km in the Prairie Provinces for all shippers.

Wade Sobkowich, executive director of the Western Grain Elevator Association, provided an update on the grain handling situation as Canadian Shipper was going to press in mid April.

At the time, he noted the railcar shortfall to the grain industry stood at 70,000 rail cars.

“Lots of grain that has been ordered to be moved has not yet been moved, resulting in some serious vessel demurrage costs. The industry has paid in the neighbourhood of 50 million dollars on this. There have been contract extension costs to overseas customers and customers in the US,” he said.

“We’ve had a bad year.We started out with a crop that was a third larger than the previous year, but we got grain shipping that was slightly less than last year and there are about 40 million tonnes that have not yet shipped.The country elevators are full and our terminal facilities are at about 40 % of capacity for the majority of the year since the order was passed March 7,” Sobkowich added.

He said there could eventually be an issue if capacity is not apportioned appropri-

BY JULIA KUZELJEVICH

ately in all of the rail corridors.

“So far facilities are keeping up as long as the railways step up their programs to the US and to Eastern Canada,” he said.

Part of Bill C-30 includes an oversight provision to give the Canadian Grain Commission to look at disputes between grain companies and producers on contracts.

“We think that would happen anyway.

We don’t object to the disciplines in place but we need reciprocity in terms of accountability and compensation from the railways. If a grain company can’t take in a farmer’s grain because of rail capacity we need to be able to get financial compensation, then we can pass on compensation for (the farmers),” said Sobkowich.

Provisions for service level agreements are also not clear, he said.

“Bill C-30 aims to identify what can be arbitrated and ruled on and we need that to include financial penalties,” Sobkowich said.

The Wheat Growers are calling on the federal government to bring about more competition in the western Canadian rail sector, in light of what they are calling “chronic performance failures of CN and CP”, and “their cavalier attitude toward the resulting losses suffered by prairie grain farmers.”

Reacting to comments made by CN CEO Claude Mongeau in a speech in Winnipeg April 9, when Mongeau spoke out strongly against a provision in Bill C-30 that would give shippers modest improved access to US railways, referring to it as “poaching”, Levi Wood, President of the Wheat Growers, said “What Mr. Mongeau calls poaching, we call competition. Sadly, Mr. Mongeau seems to think no one else should have the opportunity to haul our grain, no matter how badly his company performs.”

The Wheat Growers note that CN and CP effectively operate side-by-side monopolies in Western Canada. Only seven of the 342 grain elevators on the prairies have direct access to both CN and CP. The expanded interswitching provision, now contemplated in Bill C-30, the Fair Rail for Grain Farmers Act, would give about 40 of those elevators improved ability to access the shipping services of BNSF Railway, the association said.

It added that the shipping backlog has resulted in artificially depressed prices to continued

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IN THE NEWS

continued from p. 8

farmers that some market analysts are saying will last into 2015.

The association has recommended several measures that it said would bring about more competition and more shipping capacity in the western rail network.

One is to give the Canadian Transportation Agency authorization to call out for more shipping capacity (locomotives, crews, cars or trains) whenever the backlog in grain shipping orders reaches a predetermined level.

This provision would a meansCalgary, to ensure there is ample “reserve Mercado, WSL, WSbeLeasing, Speed capacity” in the network whenever there is a large crop or heavy cusWs14-calg-business-thirdpage-speed.indd tomer demand, the association said.

FILEhave SIZE:also3.375" wide X 4.875” high rights provisions of They recommended the running the Canada Act be amended to give other railway C MTransportation Y K | US Newsprint SNAP 2007 operators the right to solicit business from shippers in a running BLEED: 0.0" on all sides rights application.

Amendments to Bill C-30 that would give the shippers the abilby: Westminster Department ity to Prepared obtain reciprocal penaltiesSavings as part Marketing of a contractual service Manager, Brand & Marketing Services: Champion agreement with the railways are also part of the Ben recommendations.

“Currently the legislation does not explicitly state that penalty D 604.528.3800 E bchampion@wscu.com provisions are among the terms that can be arbitrated in shipper arbitration applications to the Agency,” said the association.

Prepared by: Westminster Marketing Department Federal Transport Minister LisaSavings Raitt has commented that “forSenior Graphic Designer: David in Greb ward planning” is a major part of C-30 terms of the review of the grain handling system it Ewill afford.

D 604.528.3845 dgreb@wscu.com The interswitching provisions will be in place for a period of 24

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months while the government analyzes the rates and how well the system works.

Raitt also noted that discussions with other commodities may also emerge.

The federal government will also review what’s been going on since the Fair Rail Service Act passed and its review of the Canada Transportation Act will be pushed up to late 2014 rather than 2015.

Raitt has said that the government’s involvement is “not always about regulations” but about “economic imperatives”, “free trade agreements”, and “future investment.”

Rail carriers insisted the legislation amounted to increased regulatory intrusion and oversight.

“The legislation does not address the root cause of the current grain situation and will do little to move more grain, now or in the future,” said Claude Mongeau, CN president and chief executive officer.

In a speech to the Winnipeg Chamber of Commerce on grain transportation April 9, broadcast live, Mongeau set out to establish CN’s position on the government’s emergency order and accusations that the railway did not adequately respond to shipper demands for the grain harvest.

Mongeau stressed that carriage of crude oil constitutes only 1.5 % of the railway’s overall volume. He also noted the challenges the grain supply is facing stem from extreme circumstances - a huge, 100-year crop and “the winter of a lifetime.”

“Railroaders know what winter does-it’s not just grain-every one of the commodities we move got impacted. We did better for grain than we did for potash. Fundamentally the grain situation is about a record crop that produced 22 million more tonnes than in an average year, and 50% more grain that we have to export,” said Mongeau.

CN’s share of that harvest is about 10 million tonnes, and “nobody can expect any supply chain in the world to move this surplus of grain without adequate notice. In late August the CEOs of grain companies were talking about whether the grain would suffer from frost. It’s only fair to ask if the grain elevators should maybe ship earlier in the year to make room for crops,” he said in his address.

Mongeau also suggested that grain companies have a history of “over ordering” with 30,000 orders placed over their historical best.

“The lack of coordination is exemplified by the grain elevator companies’ handling of the current crop,” Mongeau said.“They got off to a very slow start in August 2013 while the huge crop was maturing in their own backyard. They unfortunately failed to take advantage of at least 10,000 carloads of rail capacity that was available on CN at the time. Then, as the enormity of the harvest struck home for all stakeholders, the grain elevator companies began, and continue, to flood the railways with far more orders than what the system is capable of handling, based on even best historical performance benchmarks.With these inflated orders, the grain elevator companies are setting unrealistic expectations, yet they have been vocally trying to single out railways for criticism, as if we were the only party that needs to step up its performance to meet the challenge of this harvest.”

Mongeau said that once the crop has been cleared, “We have a tough issue. We need to have an ‘adult’ discussion on ‘surge’ crop capacity. We need alignment and accountability for results. I believe in commercial agreements.We’re going to have to level the playing field and regulate ‘all the sectors’. I will make the case we should regulate the grain elevators-and we’ll try the regulated approach,” he said.

But Mongeau warned that the railways “have to protect ourselves against regulatory leverage against us.” continued

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May/June 2014

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IN THE NEWS

continued from p. 10

CP Rail president and COO Keith Creel, in his address to the Ottawa agriculture standing committee hearing on Bill C-30 April 1, encouraged the Committee to consider the serious capacity constraints within the current grain supply chain and highlighted that interswitching would worsen the situation for the movement of Canadian grain to markets.

“The reality is the current grain supply chain, of which rail is only one component, cannot move these extraordinary volumes over this short period of time,” said Creel.

“We need solutions that will increase throughput of grain from farm to ship.”

Creel noted that with the improved weather, the railway has “regained momentum”, moving 15% more Western Canadian grain in February and 20% more in March than the previous year, he said.

With respect to the proposed extended interswitching, Creel expressed concerns with its potentially damaging unintended consequences and how it would slow down the grain supply chain due to increased handlings, further constraining capacity. He not-

ed that allowing grain to be interswitched to US railroads could also potentially lead to a negative impact on the Canadian economy.

“I am proud of the railroaders who continue to work tirelessly 24-7 to move this record Canadian crop for the farming community,” added Creel. “Despite this fact, our efforts need to be matched by other partners in the supply chain. We should not allow railcars to sit, waiting to be loaded or unloaded, when they should be cycling back to the prairies or to the ports.”

A group representing the shippers of more than 60 per cent of the goods moved on Canada’s rail system also commented on the situation a week after the federal government introduced its Fair Rail for Grain Growers Act. Five national trade associations - including the Canadian Fertilizer Institute, the Canadian Steel Producers Association, the Chemistry Industry Association of Canada, the Forest Products Association of Canada, and the Mining Association of Canada stated their concern that a sector-by-sector approach would not address

broader issues faced across the system.

“Shippers, railways and the government need to take a holistic look at the challenges facing Canada’s transportation system, and develop sustainable commercial solutions that are good for all sectors, the railways, and the Canadian economy,” said Roger Larson, President of the Canadian Fertilizer Institute. “Canada’s prosperity depends on exports and we will all benefit if we enhance shipping capacity, said David Lindsay, President and CEO of the Forest Products Association of Canada.”Our long-term goal is to work with our partners to right-size the transportation system,” he said.

Larson said that this winter’s backlog of grain and other rail shipments “does not represent a blip. Canada’s commodity export pipeline is hitting the limits of capacity.”

He said that Canada stands ready to reap economic benefits from massive investments in key commodity industries and from the new wave of free trade agreements being signed by the federal government, “but only if our commodity export continued

12

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IN THE NEWS

continued from p. 12

pipeline is up to the task.”

FMAC’s Ballantyne said that a statutory review of the Canada Transportation Act, if it were started earlier than the June 2015 date originally proposed, “would be good as it governs the business side of the industries. It would be very useful it be moved ahead,” he said.

“Our hope would be that they would take another look at the amendments we suggested under Bill C-52 that would spell out in more detail what would be included in rail service agreements,” he said.

“I don’t know anybody within the shipper community that has a really good handle on what they anticipate the Canada Transportation Agency would do in that respect.The Rail Service Review panel did come out with recommendations so it’s possible the CTA would take something out of those,” he added.

Section 7 of C-30 provides authority for the Agency to extend interswitching limits “for the regions or goods that it specifies”.

The interswitching regulations have

been useful to shippers over many decades and are an effective surrogate for real competition. Given the current backlog of grain, this temporary provision may give grain shippers more flexibility in arranging service, Ballantyne noted.

“From a national policy point of view you like to see the arrangements between two countries are reciprocal and in the US they don’t have anywhere close to the regulated interswitching rates-they are trying to get some improvement they won’t be as good for shippers as the Canadian regulations,” said Ballantyne.

The other significant provision of C-30 relevant to all shippers is Section 8, which authorizes the Agency to make regulations specifying what constitutes operational terms” to be included in a SLA achieved through arbitration. While it is unclear how the Agency and the government will use this provision, it could be a vehicle for achieving some of the shipper amendments that were rejected by the government during the C-52 debates. FMAC will engage

with the Agency as the regulations evolve, FMAC stated.

“Two basic issues that the statutory review should address are the need to provide appropriate rail capacity for the needs of Canadian industry over the coming decades, and the need to improve the relationship and trust between the railways and significantly large segments of their customers.

With regard to shipper-railway relationships, it will be difficult to overcome the distrust and acrimony that currently exists,” Ballantyne said.

FMAC has noted there are informal discussions under way, under the academic umbrella of the Carlton University School of Public Policy and Administration.They run a process called ‘Critical Conversation’ that involves direct and confidential discussions among stakeholders to start a dialogue to overcome the distrust. While arrangements have not yet been confirmed for Critical Conversations to commence between railways and shippers, the planning discussions with stakeholders continue, FMAC said. CS

TF 14

May/June 2014

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LEADERS

FedEx Trade Networks Canada’s Lynn Wark details the company’s preparation for eManifest Background: eManifest (electronic manifest) is an initiative designed to establish advance electronic information requirements in the highway and rail modes of transportation, and to build upon existing advance commercial information requirements for goods in the marine and air modes. eManifest would ensure a paperless process, which starts before any goods reach the Canadian border, for commercial importations in all modes of transportation

CS: Canada Border Services Agency published a document this February in the Canada Gazette on “Regulations Amending Certain Regulations Made Under the Customs Act”. What was your impression of the cost analysis provided, and estimates about the potential savings and benefits around eManifest?

WARK: In reviewing the cost/benefit analysis, it is difficult to evaluate what benefits and savings this initiative will produce, as we are in the early stages of eManifest roll-out. Currently, we are focused on making the necessary IT infrastructure changes, as well as the analysis, development and implementation of new processes needed to support eManifest implementation. However, we believe the cost analysis presented in the Canada Gazette is reasonable.

Preparation for eManifest has required time, effort and research in advance of the coming changes, and FedEx Trade Networks believes these investments will ultimately benefit our customers.

Automation initiatives, such as eManifest, are probably inevitable in our industry, as our customers seek more information and quicker transaction times. As such, FedEx Trade Networks welcomes this initiative. We have been committed to techno-

WARK: Again, it

is difficult to put a dollar figure on the cost or estimate an ROI around the deployment of eManifest at this early stage; however, the investment in this initiative, as well as in Single Window and CARM, will be significant and the ROI will not realized for some time. Each stakeholder’s cost will vary, depending on the size and scope of their operations FedEx Trade Networks is working hard to have work flow processes and customer services prepared prior to the deployment of these new CBSA initiatives. We believe “early adoption” will benefit our customers. And while these are Canadian regulatory initiatives, there is a huge international component here; so it’s important that our staff not only in Canada know about eManifest, but also for our staff based in other countries around the world.

CS: Looking at the various programs you’ve

had to become familiar with, is there a particular program more than another that has provided the most challenges? eManifest will likely have the biggest impact, because it reaches all stakeholders within the trade chain. It is challenging because there are so many elements to the program: the new highway and rail carrier cargo and conveyance data electronic reporting feature, the electronic house bill data reporting requirements for freight forwarders and the new advance trade data reporting requirements for importers to consider, all of which are being deployed at different times.

The goal for our industry is to transmit accurate data to the CBSA at the right time. As a customs brokerage house and freight forwarder, this is of particular significance because we want a process

WARK:

Lynn Wark, Vice President, FedEx Trade Networks Canada

logical innovation for more than 40 years, and we will continue to advocate measures aimed at facilitating trade.

Can you provide a sense of the time and costs industry faces in terms of getting up to speed on the requirements of eManifest and what is the perceived ROI around it?

CS:

continued 16

May/June 2014

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LEADERS

continued from p. 16

whereby our trade chain partners (both within Canada and globally) can work together to communicate shipment activity collectively and efficiently.

To achieve our goal, we have to do both back-end work, including the adjustment and adaptation of our information technology, as well as the front-end preparation that

includes providing information to our stakeholders (e.g. customers) in the supply chain, so they know how and when to complete their electronic submissions to the CBSA. What has been the most helpful approach for you in getting up to speed on these initiatives?

CS:

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In terms of our approach, our goal is to have our work flow processes and customer services prepared prior to the deployment of these new CBSA initiatives so we can continue to provide top-level service to our customers.

Our Preparation: We have been proactive in our preparation, working to have our systems ready and our people and customers properly informed and prepared to comply with the new CBSA rules and regulations.

One of the challenges for our company, and the industry at large, is that these initiatives (eManifest, Single Window and CARM) are being deployed simultaneously. We have to verify that our process changes work with each new regulation and do not conflict with other pre-existing rules and/or regulations.

FedEx Trade Networks has created a number of project teams to prepare for these new regulations with representation and engagement from almost every department. However, IT and Operations are taking the largest roles.

Each initiative and component has its own set of challenges for adoption.We have been looking at each segment of eManifest, CARM and Single Window on its own merit to gauge their impact. Then, we’ve looked at them together to see how all the components fit together in a cohesive and smooth manner. The considerations we’ve identified include the following: Operations - reviewing the change in rules, understanding the changes and implications of them and changing or adapting any necessary work flows and processes.

Human Resources - changing and/or creating job descriptions.

Training – Training affected staff (in Canada and internationally) that will deal with the new regulations.

Business IT analysis – determining the business requirements and then mapping out existing computer processes and developing new ones.

IT programming – creating and testing new computer processes ahead of deployment dates.

Legal – determining what services the Government of Canada authorizes us to provide to our customers.

Communications – informing customers, suppliers, and other key stakeholders of the changes and details on our new services and processes.

FedEx works to educate customers on the processes involved in crossing borders WARK:

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LEADERS

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continued from p. 18

“FedEx works to educate customers on the processes involved in crossing borders through seminars and other educational sessions, and we will continue to develop solutions that make compliance easier. ” Lynn Wark, Vice President, FedEx Trade Networks Canada

through seminars and other educational sessions, and we will continue to develop solutions that make compliance easier. To date, we have held one customer information session in Toronto on CARM and three customer information sessions (in Montreal, Toronto and Vancouver) on eManifest.

In the future, and up through deployment, we plan to host more information

This allows truckers to transmit eManifest electronically, in advance of arrival, which is allowing for faster customs clearance.

Once the advance trade data component is deployed, we will be offering new solutions for our customers, which we anticipate will help them comply with the new eManifest regulatory requirements.

We are currently ironing out the details so that these two service solutions will be ready once the advance trade data component of eManifest is ready for use.

What do you think of the government’s proposed Performance Report Card as a way of ensuring compliance amongst stakeholders?

CS:

sessions in major centres, as well as webinars for customers unable to attend in person.

WARK: To

Our Accomplishments: FedEx Trade Networks is committed to assisting customers in their compliance efforts.

To date, we have created solutions for the highway component of eManifest, which has yet to become a mandatory requirement.

the extent the CBSA can track progress in compliance and report that data back to industry, CBSA will be helping ensure compliance amongst stakeholders. However, we do not believe administrative monetary penalties should be used in a punitive manner. CS

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TRANS PACIFIC TRADE

AN EMERGING, DYNAMIC CONNECTION AS ASEAN’S ECONOMIC IMPORTANCE TO CANADA INCREASES, IT HAS BECOME A PRIORITY MARKET UNDER THE GLOBAL COMMERCE STRATEGY

BY KEN MARK

E

xpanding Hong Kong’s role as a logistics services hub for Southeast Asia has become a high government priority. At the Third Asian Logistics and Maritime Conference last November, Hong Kong chief executive, C. Y. Leung told the audience, “Here in Hong Kong we are preparing to negotiate a Free Trade Agreement (FTA) with the 10-member ASEAN bloc. The Hong Kong-ASEAN FTA will help to strengthen trade and logistics in our region and add to the competitiveness and efficiency of our supply chains.

“ASEAN represents important opportunities for investors to connect with some of the world’s most dynamic emerging economies. Massive public sector infrastructure programs in countries such as Thailand and new markets such as Myanmar and Cambodia present exciting opportunities for the logistics and maritime sectors.”

Canada is also optimistic about expanding its presence in the

region as well. Anne Waldes, Hamilton-based president Trade Link International Ltd, who led the Canadian contingent to the conference, said “As ASEAN’s economic importance to Canada increases, it has become a priority market under the Harper government’s Global Commerce Strategy.

“It has more than 600 million consumers, a growing middle class and abundant natural resources including mining and minerals, oil and gas, and lumber as well as agriculture in which Canadian expertise has developed marketable services, technology and equipment.”

Citing a recent Hong Kong Trade Development Council survey that identified Hong Kong’s strength in high-value logistics, Chief Executive Leung also stated, “We are also working to enhance efficiency at our container terminals and identify land for the development of third-party logistics service clusters. As neighbouring ports become more efficient, Hong Kong’s logis-

22 MayJune 2014 www.canadianshipper.com

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TRANS PACIFIC TRADE

A view of the Hong Kong skyline and the planned West Kowloon Cultural District

Hong Kong Without Tears Canadian firms can reap huge benefits by incorporating a company in Hong Kong and setting it up there as a virtual business. For starters, they pay less tax. Says Simon Wong, Toronto-based president with Redstone Sales (Canada) about his new Hong Kong company, Bridgeport Enterprises Limited, “We pay lower taxes on income earned in Hong Kong where the corporate tax rate is 16.5% compared with 30% to 35% in Canada.”

The combined companies source consumer goods and promotional items for smaller retailers and distributors across Canada.

“They tell us what products they need and the price they are willing to pay and we go to Hong Kong to find suppliers who can deliver them at a price which enables us to earn a profit,” says Wong.

But instead of establishing a physical footprint there that involves renting space and hiring employees etc., he outsources those burdens to

tics and maritime sectors must move up the value chain.”

To help achieve such goals, he noted that the government will set up a C$14.20-million (HK$100-million) maritime and aviation training fund and create a strategy and roadmap for expanding Hong Kong’s maritime services cluster.

Geographically, the ASEAN region’s South China Sea is a logistics choke point through which an estimated 50% of the world’s seaborne traffic must pass. It links the burgeoning Asia Pacific markets with India, the Middle East, Africa and Europe.

According to James Woodrow director Cathay Pacific Cargo, Hong Kong is actively serving as an ASEAN hub with passenger belly load capacity and more important, frequent freighter services to major cities in the region including Singapore, Hanoi, Ho Chi Minh City, Kuala Lumpur, Penang, Bangkok, Jakarta, Manila, Phnom Penh (Cambodia),Yangon (Myanmar) and Vientiane (Laos).

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CS

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TRANS PACIFIC TRADE

Meridian Partners Limited. Besides handling all the necessary legal and regulatory paper work including setting up a business bank account, it also helps clients save time and money and avoid hassles by looking after their day-to-day, back-office accounting, finance, tax and logistical needs.

Help with the last-named is crucial.

“Before, we left it up to our Chinese suppliers to find freight forwarders to arrange shipping goods back to Canada. But they did not always choose carriers offering the best rates or service. But after Meridian assumed the task, their more business-like approach helped us to reduce costs and ensure reliable deliveries,” he says.

Like many other overseas buyers,Wong is now facing higher Chinese production costs. “One supplier recently told us his labour costs have risen 25%. As a result, we may have to start sourcing products in Southeast Asian countries such as Vietnam and Cambodia,” he says.

If so, Meridian Partners is standing by. Says June Ko, the Torontobased director, with Meridian Partners Limited Canada, “Regardless of where the client is sourcing from, Hong Kong simply acts as the hub for the international trade for documentation and money arrangements. Some of our clients already source from Thailand, Indonesia and Vietnam.”

Meridian Partners’ innovative approach levels the playing field for Canadian small-and medium-sized trading companies, distributors and others expanding into Asia. They can now enjoy the convenience and comfort of engaging a trusted on-site partner to manage and monitor the work of Hong Kong professional and logistics service providers. In the past, such an option was limited to very large players.

Hong Kong Basics With a population of close to 7 million people or slightly more than that of the GTHA (Greater Toronto-Hamilton Area), Hong Kong is the world’s 11th largest trading economy. For the past 18 years it has been named the world’s freest economy, thanks to its low-tax, lightregulation approach to government. The Hong Kong Stock Exchange is the third largest in Asia. Many of the world’s largest firms have set up regional offices there attracted by its independent judicial system, and a transparent and efficient bureaucracy, not to mention a full range of business, legal, financial and related service providers. Business is conducted in both English and Chinese.

As a special administrative region (SAR) of China since 1997, Hong Kong retains control over most domestic policy as outlined in its constitution called the Basic Law. The Closer Economic Partnership Agreement (CEPA) with China, similar to NAFTA, facilitates the movement of duty-free goods, capital and business people into China.

Hong Kong is also a global transportation and logistics giant that serves as a major Asian regional distribution centre. In 2012 Chek Lap Kok airport ranked number one in air cargo tonnage handled while Hong Kong’s port facilities ranked third in container traffic.

Modern Infrastructure Galore Further modernization of Chek Lap Kok International Airport and other related projects mark the latest chapter in Hong Kong’s non-stop upgrading of its already world-class transpor-

tation and logistics infrastructure.

Already in place is the C$850 million Executive C.Y.Leung (HK $5.9 billion) Cathay Pacific Cargo Teraddresses the Third minal, which officially opened on February Asian Logistics & Maritime 2014 after a yearlong phase-in period. CaConference November 7, pable of handling of 2.6 million tonnes of 2013 in Hong Kong. freight annually, it will serve as a commonuse facility for all airline customers.

“A tremendous effort by our dedicated team has finally resulted in the new terminal moving into full operation It took a lot of hard work and commitment to ensure a smooth transition over the past eight months. The new facility will not only enable the Cathay Pacific Group to offer tailor-made services to our own cargo customers, but it will also raise service standards within the industry to new heights,” says James Woodrow, director, Cathay Pacific Cargo.

Thanks to ultra-modern technology involving RFID, LED displays and other innovative equipment, truck drivers no longer have to wait 60 to 90 minutes to drop off and pick up loads. As well, online booking and RFID-powered iPasses increase visibility and security throughout the entire building.

The use of automated materials handling systems including elevator transfers have been expanded. Loose items now move in boxes on rollers and are not just left sitting on the floor for manual movements. Similarly, Hong Kong customs officials can easily summon any containers for inspection stored in secure floor-to-ceiling racks.

The aircraft-to-terminal cargo transfers are no longer done manually outdoors but moved by machines under cover for greater safety and protection. Overall, such streamlined handling processes have boosted productivity and efficiency enabling Cathay Pacific to extend cargo cut off times by 30 minutes.

Similarly, the introduction of quick transfers (QT) for trans-shipments can now be completed in five rather than eight hours since incoming shipments no longer have to first be broken down to be cleared as imports only to be reconsolidated as exports.

Not to be outdone, the Hong Kong Airport Authority is also busy conducting an environmental impact study to advance its plans to build a third runway.With a target completion date of 2023, the project will expand the airport’s capacity to handle more than 600,000 flight movements a year by 2030 while doubling the current volume of cargo and passenger traffic. The expansion will deliver three new passenger concourses and a new, exclusive, cargo freighter apron featuring tunnels under the runway to connect with the centre runway.

The project’s total cost may exceed C $12.23 billion (HK $100 billion). It will involve 650 ha. of reclaimed land as well as landfill from marine sand and urban building sites. A 13 km-long seawall will surround the third runway system and all supporting service areas. By comparison, the original airport, which opened in 1997, occupied 12.48 sq. km or 1248 hectares of land, including 950 ha of reclaimed land resulting from flattening Chek Lap Kok Island and two adjacent islands as well as 2.83 million cubic m. (100 million cubic ft.) of land fill. As a result of current environmental regulations, there will be no sea dredging.

The airport ‘s role as a true intermodal hub will finally be fulfilled thanks to the extensive highway links resulting from the 2016 completion of the Hong Kong-Zhuhai-Macao tunnel-and-bridge project. The 42 km-long roadway will directly link Hong Kong’s Hong Kong Chief

24 MayJune 2014 www.canadianshipper.com

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TRANS PACIFIC TRADE

Further modernization of Chep Lap Kok International Airport marks the latest chapter in Hong Kong’s transportation and logistics infrastructure upgrades.

western end with the both the eastern and western sections of the Pearl River Delta (PRD).The region is often called the world’s shop floor because of its high concentration of factories.

Before, trucks leaving the airport had to drive through the heart of Hong Kong to reach border crossings before entering neighbouring Guangdong Province. But a new customs clearance/toll collection plaza is being erected on man-made islands visible from Cathay Pacific Cargo’s airport offices.

Trucks leaving the airport will be able to reach Macao and Zhuhai in about one hour and three hours to most of the Western PRD’s major towns and cities. Today, the region is all but inaccessible by road from Hong Kong.

million) in the Enterprise Support Scheme for private sector R&D, opening up 150 new spaces at the Hong Kong Science Park for the further expansion of the Digital 21 Strategy, including the Smarter Hong program that aims to double the number of free Wi-Fi spots within the city.

As well, Andrew Yui, director, Canada, of the Hong Kong Trade Development Council (HKTDC) Toronto Office reminded the audience that his organization is the major trade show organizer in Hong Kong. Besides sponsoring dozens of incoming and outgoing trade missions between Canada and Hong Kong, it also offers oneon-one business matching services. Its 43 worldwide offices can share the latest market information about trade opportunities throughout Asia. CS

The Hong Kong Family At a recent Hong Kong Canada Business Council (HKCBA) event, Gloria Lo, Director of the Toronto-based Hong Kong Economic and Trade Office (HKETO), outlined recent changes to its corporate ordinances that will streamline and simplify compliance and other business-related procedures. To nurture high tech development, she outlined an increase to C$l.42 million (HK $10

Ken Mark is a Toronto-based freelance writer and a 2013-2014 Asia Pacific Foundation of Canada Media Fellow supported in part

by Cathay Pacific Airways.

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TRANS PACIFIC TRADE

ASEAN 101-A PRIMER FOR TRADE ASEAN, A MARKET OF MORE THAN 615 MILLION CONSUMERS, IS NOW CANADA’S SEVENTHLARGEST TRADING PARTNER

T

he Association of Southeast Asian Nations (ASEAN) consists of 10 member states: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

To increase regional economic integration by 2015, members plan to launch the ASEAN Economic Community (AEC). It will transform ASEAN into a group similar to the European Union that offers members the free movement of goods, services, investment, skilled labour, and freer flow of capital.

According to recent DFAIT figures ASEAN, a market of more than 615 million consumers, is now our seventh-largest trading partner. From 2007 to 2012, Canada-ASEAN

©pixtawan/iStock/Thinkstock

BY KEN MARK

26 MayJune 2014 www.canadianshipper.com

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TRANS PACIFIC TRADE

bilateral merchandise trade rose 19.2 percent to $15.8 billion.

Canada’s Export Development Corporation (EDC) looks beyond conventional foreign trade and investment categories - physical goods exports and inbound foreign investment - to encourage more modern, value-to-Canada approaches. These include integrative trade in which goods produced by Canadian firms overseas may never come back to Canada and outbound foreign direct investments that make such production possible. That combination adds value by maintaining head-office, management jobs in Canada and streaming profits and dividends back home.

At the same time, smaller Canadian businesses often lack the time, money and resources to pursue foreign markets on their own.

A more effective approach is to join the value chain of large multinational corporations.That starts with being a valued supplier to the company here in Canada. If the buyer opens up new overseas operations, it may ask the Canadian supplier to ship inputs over there.

If the supplier agrees, it becomes an exporter, which can help open up other opportunities in that country or in others.

EDC can support such efforts by offering to firms financing, insurance against receivables, expropriation and political upheaval insurance as well as market intelligence.

According to EDC chief economist Peter Hall, Indonesia is one ASEAN country to watch closely. “It has a quarter billion - 250 million - people. But here in Canada we are seeing a shrinking labour pool - we’re running out of skilled labour. We need to find them somewhere else,” he says.

“If Canadian producers can work with Indonesian partners who have skilled workers, they can employ labour without having to move it.” When that happens, it solves problems for both sides.

For an in-depth analysis of the region, check out the 59-page ASEAN Commercial Opportunities Study for Canadian Business available from the Canada-ASEAN Business Council website: www.canasean.com.

The following is a snapshot of the economies and possibilities in each ASEAN member nation: Malaysia is the region’s sixth most-populous country with the highest per-capita income among these six. Its central location within ASEAN makes it the ideal regional showcase for retail brands looking to target the well-travelled, middle-income consumers of the trade bloc. Zaimah Osman, the MATRADE representative in Hong Kong, encourages Canadian importers to attend the annual Malaysian International Halal Showcase (MIHAS), the world’s premiere showcase for sourcing and trading of halal goods.

Indonesia, the largest economy and the most highly populated country (250 million) has become a lucrative market for multinational retail companies attracted by its robust economic growth, rising domestic consumption driven by an expanding middle class and a youthful population. Attrac-

tive sectors for Canadian firms include infrastructure, shipping and ports, agri-food, oil and gas, mining and power.

Singapore is a sophisticated city-state that resembles Hong Kong as the region’s financial, business and logistics hub. Foreign investors are also attracted by its electronics industry, contract manufacturing services, integrated research, logistics services and top standards in technology manufacturing.

The Philippines offers a rapidly evolving food and beverage market that is adapting to the habits of a youthful urban population with money to spend. Canadian agri-food exports there have been very successful, making it the third-largest ASEAN export destination.

From 2007 to 2012, Canada-ASEAN bilateral merchandise trade rose 19.2 percent to $15.8 billion.

Canadian exporters should explore the market’s developing appetite for modern agricultural equipment, high-yield seeds and fertilizers.

Thailand and Canada enjoy a robust trade relationship, heavily weighted in Thailand’s favour. Domestic firms known as efficient assemblers must still import most of their production inputs, which creates opportunities for high quality, competitively priced Canadian suppliers to set up a local presence and become part of the sector’s extensive supply chain.

Vietnam, an ASEAN member since 1995, is the size of Germany with a young, skilled and educated population of more than 85 million.

Its skilled, low-cost workers, proximity to customers, reliable power and water supply have brought in massive foreign direct investments. Goldman-Sachs has predicted that by 2025, Vietnam will rank 17th in the world.Thousands ofVietnamese who have immigrated to Canada are an untapped resource for opening doors to business deals back home.

Brunei Darussalam is an oil-rich sultanate on the island of Borneo. It offers trade opportunities to Canadian firms in the oil and gas, information and communication technologies (ICT), agriculture and agri-food sectors.

Laos, Cambodia and Myanmar (formerly called Burma) are smaller countries, which are now on the upswing after recently restoring political and economic stability. Owing to their central location, these countries will expand quickly once proposed high-speed rail and modern highway projects link the region with Kunming in China’s southernmost Yunnan Province. When linked to modern harbour facilities under construction in Yangon (formerly Rangoon) in Myanmar, the port will serve as a direct sea link to South Asia and beyond.

The proposed Dawei deep-sea port and special economic zone is moving forward after Thailand and Myanmar recently signed three memoranda of understanding. Located some 350 km from Bangkok by road, the project is a key part of the East-West Corridor that will enable Thailand to become an ASEAN logistics hub. CS

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FOOD REGULATIONS

ASSIGNING RISK

FOOD REGULATORS AIM AT PREVENTION, RISK ASSESSMENT IN FOOD SYSTEM

BY JULIA KUZELJEVICH

F

ederal regulations that govern food handling and transport are in the process of being revamped to meet the more stringent demands of the Safe Food for Canadians Act which received Royal Assent in late 2012.

The approach regulators are taking to modernize Canada’s food system was the subject of deep discussion during the Conference Board of Canada’s 3rd Canadian Food Summit this spring.

“We’re looking for a more preventive system that strengthens risk assessment.The biggest complaint we get is about having an inconsistent approach so we aim to have clearer approaches and clearer decision making,” said Neil Jan Daniel Bouwer, senior vice-president, Agency Transformation, Canadian Food Inspection Agency.

Changing regulatory requirements has more to do with industry than governments, he added, noting that government is just the “overseer” but needs to be flexible.

CFIA is working with CBSA on import single window systems.

The Safe Food for Canadians Act has received Royal Assent and will be enforced once the regulatory framework has been established, he added.

Based on the consultation process, Bouwer said the key messages from stakeholders were the requirement for clarity, for well-trained inspectors, and strong support that imported food should meet the same regulatory requirements as domestic food, said Bouwer.

Submissions are under review and there will be major consultation this June, then release of a draft regulatory text in late summer, with regulations expected to be in force by summer of 2015.

Anatole Papadopoulos, Director, Policy, Regulatory and Governmental Affairs, Food Directorate, Health Canada, noted the Food and Drugs Act regulatory framework “presumes most food products are considered safe and can go directly to market.”

In terms of regulatory challenges, the structure has been developed over the last 50 years and the scope of regulations is broad.

The objective is “a framework that is more responsive and flexible to emerging safety and/or nutrition challenges.We could also be making better use of collective international observations, eliminating duplications and inconsistencies in defining terms across Acts,” said Papadopoulos.

“The Safe Food for Canadians Act allows us to look at more technologies that produce safe food,” said Bouwer.

In terms of Canada being able to maintain autonomy in its food system in case there are disagreements around science in agriculture, “at the end of the day the decision making is always sovereign but we’re seeking more collaboration, and sharing of information,” he said.

The same regulatory standards will apply on imported goods but the question is whether the oversight will be as robust, he added.

“In our new inspectorate the scientists will be more quantitative.The CFIA of the future will benefit from more comprehensive training, and we’ll have to be more deliberate with tools like AMPS,” said Bouwer.

In terms of the rollout on the Food and Drugs Act side, the

©designaart/iStock/Thinkstock

CFIA is “moving in aggregate mode, while at Health Canada we’re modernizing as we go,” Papadoupoulos noted.

Would we want imports to meet a certain certification model, such as GFSI? “A number of countries are looking at adopting private certification schemes into the public systems. We will assign risk to every importer. We want to able to take private schemes into account and adjust the risk accordingly. That’s a pretty novel approach but it doesn’t go as far as we would like in terms of accepting private schemes. That’s the proposal we’re advancing and we will put out a discussion paper (in late spring),” said Bouwer.

Looking at the status of non-resident importers, Bouwer said CFIA “recognizes the challenge and we’re exploring approaches that would simplify the requirement for those importers.”

When considering the issue of interprovincial harmonization in food regulation, the Food and Drug Act applies to all of Canada, and applies to all non-federally registered and imported sectors.

CFIA’s focus really lies on intraprovincial and international trade, “but at some point we’re going to really want to ask ourselves how can they (the provinces) bring their systems into alignment with where the Feds are? Some already have,” Bouwer said. CS

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FOOD REGULATIONS

CONFERENCE BOARD OF CANADA UNVEILS NATIONAL STRATEGY ON FOOD

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Canada’s gross domestic product, and this can become even larger if Canadian producers capture a share of the growing international food market, such as in the dairy sector, where exports could grow dramatically.

“Taken as a whole, Canada’s food sector has the potential to be among the foremost export industries for Canada, since worldwide demand will continue to rise for decades and few other countries have the potential capacity to satisfy the needs of these burgeoning markets. Some of the desired results are achievable in the short term, while others will likely take much longer-but significant progress can be made toward all of them,” said the report.

“Canada should strive to become the top food safety performer in the world, to both safeguard the health of its people and strengthen its competitiveness,” the report said.

Voluntary private national standards, modelled on ISO standards, should be implemented and connected to Global Food Safety Initiative (GFSI) and other multilateral, international standards and procedures, said the report.

A universal traceability system and nationally standardized traceability are also key goals as they aim to increase accuracy in identifying sources and taking remedial action.

Food and food-related businesses, including producers and farmers, processors and manufacturers, distributors, shippers, retailers, and food services, “can take the lead in accomplishing many of the goals and desired outcomes highlighted in the Strategy”.

Addressing a session on developing a food export and trade action plan to grow the food sector, Bloom said that typical view of government’s role is the ‘macro’ around the trade deals, “but there’s capacity to take it to the micro in terms of identifying the trade opportunities at that level.”

“We know we’ve had issues around bridges between Canada and the US, and a rail system that supports commodities to the scale we want. We need to be more proactive in what’s going on. Our reality is that we’re a trading nation,” he said.

Noting that it’s an issue that hasn’t got an easy answer, Bloom advocated looking at opportunities in the emerging markets.

Based on a recent Conference Board survey of over 600 companies looking at innovation, the companies that exported were found to have done better. The behaviour of the companies was to stay in the markets they were in. They were not very often looking beyond borders, except to the US, Bloom noted.

“We know there is a demand rising in Africa, and there’s more capacity, opportunity to become engaged. India too has demand and an economy but the regulatory burden is high. We have to not only think about firm level supported by government but act on strategies. There’s demand in most countries and as they grow they’re going to need to import more,” he noted. CS

he Conference Board of Canada unveiled its Food Strategy at the 3rd Canadian Food Summit 2014: From Strategy to Action, this March.

“From Opportunity to Achievement: Canadian Food Strategy”, was written and researched

by Dr. Michael Bloom, Vice-President, Industry and Business Strategy, Conference Board of Canada, with contributions from Michael Grant, Director of Research at the Centre for Food in Canada (CFIC).

The CFIC was launched as a major, multi-year initiative to raise public awareness of the nature and importance of the food sector to Canada’s economy and society; and to create a shared vision for the future of food in Canada, the Conference Board noted.

The Canadian Food Strategy was designed to be a comprehensive, action-oriented framework to guide and stimulate change in food and the food system, and “was developed from a conviction that changing our nation’s food system is both an opportunity and an imperative,” noted the Board.

The report emerged through a process that involved 20 major research studies and wide consultation with experts, stakeholders, and the public.

There are five key elements to the strategy, which include industry prosperity, healthy food, food safety, household food security, and environmental sustainability. These elements make for a strategy that “is more comprehensive than most of the world’s national food strategies, which tend to be more industry focused,” said the Conference Board.The report also sets out eight goals and more than 60 desired outcomes, and provides 110 action strategies that can help to achieve them.

Making the food sector an excellent environmental performer that increases food production sustainably is one of the key goals identified in the report, as is improving exporters’ access to international markets through government-negotiated multilateral and bilateral free trade agreements.

To create a food sector that is innovative, competitive, and growing, the report advocates implementing a universal “one-forward, one-back” food traceability system in Canada, to help firms build their traceability capacity so they can participate. The aim is to promote a more comprehensive food traceability for food supply chains and value chains, and to take advantage of transportation infrastructure improvements to increase the scale of trade, noted the Board, which is advocating selectively harmonizing Canadian, US and other international regulatory systems as a key part of this goal, with North American government standards for imported foods developed jointly with the US and Mexico.

The report also suggests increasing inspections and testing of imported foods and food ingredients prior to import and after arrival, also in partnership with the US, Mexico, and other trading partners.

In Canada, the food sector already contributes more than 8% of

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BY JULIA KUZELJEVICH ©Sergey Nivens/iStock/Thinkstock

FROM STRATEGY TO ACTION

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©designaart/iStock

FOOD REGULATIONS

STARTING FRESH HOW TO PREPARE FOR MORE STRINGENT FOOD REGULATIONS IN YOUR SUPPLY CHAIN

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he Canadian Food Inspection Agency’s (CFIA) Safe Food for Canadians Act is currently scheduled to come into effect on January 1, 2015. The modernization Act will see CFIA implement consistent practices for all food commodities, many of which were not previously subject to CFIA registration and licensing.

This means a series of new requirements for companies that import or export food commodities as well as companies that prepare food commodities for international or interprovincial trade. Among the requirements are mandatory federal licenses, a Preventative Food Safety Control Plan including recall plans, record keeping requirements and a new inspection model.

In a recent webinar examining the compliance requirements for various supply chain stakeholders under the Safe Food for Canadians Act, Candace Sider, Director, Regulatory Affairs, with Livingston International, noted that there are a “lot of governing components, and it’s important to determine where each aspect falls,” she said.

“When we talk about modernization, CFIA is moving to an outcome-based approach, increasing due diligence in the supply chain.”

The Act aims for a more robust recall, traceability and AMPS structure.

“They’re going to take a look at director and officer liability when there’s a major food contamination issue.The potential is there to have criminal intent or even when there’s not, there’s potential to pursue with charges,” said Sider.

Licensing will be a mandatory requirement under the Act. Companies subject to the new regulations will be required to register and apply for licenses through a CFIA web portal, and must renew every two years. License requirements will apply to legal entities only, not individual establishments or locations.

While it appears there will be one license requirement per one importer/company, there is still some discussion around the impact of any penalties that would be assessed against a master business number vs. other business units, noted Sider.

“What we’re looking at in terms of modernization is introducing licensing of all importers, so you know what’s coming in before it comes and you know the players.You then can put in preventive control recall plans,” said Neil Jan Daniel Bouwer, senior vice-president, Agency Transformation, with the Canadian Food Inspection Agency.

“We hope to move quickly on the timeline for the importer licensing system.

Hopefully within the next twelve months there will be new imported food sector regulations-the proposals are already well advanced,” he said.

It’s expected a compliance period of at least a year is being built in. The government expects to have comprehensive licensing of all food importers and products will also now have to meet the import/ export requirements of the country they are being exported to.

How can regulated parties comply?

While many will already have quality management programs in place, regulated parties will need to develop internal risk management plans and to demonstrate what their plans have effectively covered, Sider said.

They must determine their level of risk and what they have to add in terms of additional information.

The third point in the outcome based approach is really performance-based, and looks at the imported Food Sector licensing requirement.

“The consultation process has been very critical. CFIA wants to

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FOOD REGULATIONS

facilities, equipment, employee training, sanitation and pest control, transportation, storage and more.

Oftentimes plans are written but not put into effect so it is important to “execute it and demonstrate it” for effectiveness, to measure the gaps and ensure that you put the corrective measures in place,” Sider noted.

Lists, such as clearly defined documents of ingredients lists, become very critical.

“You must maintain all the detailed records within a company’s books and records.The CFIA will be conducting more robust audits.

There will be an issue for corrective action, allowing companies a certain amount of time to bring themselves into compliance or alignment,” she noted.

Companies will also need to ensure they evaluate their level of risk/exposure to AMPS.The time parameter for companies to address compliance issues, with potential for suspension, is up to two years.

“People tend to forget that they need to go back and review procedures as a ‘fluid’ document.You need to make sure there is an owner and sponsor ensuring these programs are updated, and that there is focus. Oftentimes I find companies have a good sense of where there was contravention, in others, that’s not the case,” said Sider.

Preventative measures are a key component of CFIA’s modernization and food safety efforts. Even companies that aren’t the licensed importer must have procedures in place to track and trace any food product.

“It’ll be up to you to demonstrate that your documents detail any and all product ingredients and that your books and records contain a full trail of your goods. Those records can be requested by CFIA and must be provided within 24 hours if it is determined that a food hazard exists,” she said.

Your company’s compliance history will be an important factor in demonstrating your ability to meet all of CFIA’s new requirements.

Under new regulations, CFIA requires that exports affected by the new standards also meet the standards of the importing country – and Canadian standards may not align with all other countries (for example, Canada and the US are currently operating under different standards). CFIA is assessing its options, one of which may be affixing a label or symbol which would identify that the goods are not for sale in Canada but are viable for export. Exporters will need to remain flexible in case CFIA implements new requirements.

Under the Beyond the Border Action Plan there has been a huge push for alignment and harmonization. Echoing similar levels of increased food safety, the US Food and Drug Administration (FDA) announced recently that it will publish the Sanitary Transportation of Human and Animal Food Proposed Rule after hosting a series of public meetings.

This proposed rule will be the seventh and final rule under the FDA Food Safety Modernization Act (FSMA) and would establish criteria for the sanitary transportation of human and animal food.

Generally, the proposed rule would apply to all shippers, receivers, and carriers who transport food in the United States by motor or rail, whether or not the food enters interstate commerce.

Melanie Neumann, vice president and CFO with The Acheson Group, a strategic consulting firm for food and beverage companies,

©roibu/iStock/Thinkstock

get it right. Some of the requirements would have potential impact for importers- it’s important you voice your concerns if you feel there is a better approach,” said Sider, who noted that CFIA, from the initial engagement, has really taken to task a lot of the key issues that have been raised.

“We have seen a push from 2014 into 2015 to really allow manufacturers, importers, and exporters time to meet the new standards.

Additionally there are program or IT changes that have to go in, in order to more effectively administer policy-it is not all in a manual format,” Sider noted.

“When does licensing apply and when does it not? We don’t have a lot of the detail now on interprovincial trade, so it’s really a communication right now,” Sider said.

Casual importers are also considered outside the scope of CFIA modernization and transformation. There is no change to the imported requirements on chemicals in food processing, and animal feeds and supplements are governed under different regulations.

The issue of non-resident importer is currently under review as an outstanding issue.

Exceptions to the licensing requirement include food sold within the province that meets the requirements of appropriate legislation, and companies that are transporting food or storing it but that are not involved in importing or exporting.

The Act’s Preventive Food Safety Control Plan will also shiftfrom being a voluntary to a mandatory measure.

Under CFIA’s new food inspection regulations, every company that deals with food and food products will be required to have a detailed Preventative Food Safety Control Plan (PFSCP), documenting all aspects of your food handling operation, including your

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FOOD REGULATIONS

said the rule has been in the making for the last 20 years and while the main focus is on separation and proper temperature control it will also have a broader impact. It is not just limited to FDA facilities but to businesses regulated by FDA and USDA, she said.

“It’s normally applied to interstate

commerce-but this rule applies to in-state shipments, a different ballgame. Also, receivers now have heightened duties: while there are some exemptions, this rule is shaking up the transportation industry more than had been anticipated,” Neumann noted in a webinar on food safety

retail and cpg APPS

appsexpress.com 1.800.465.2513

moderated by Safety Chain SVP and cofounder Barbara Levin.

“The breadth of coverage is much greater than many of the other Food Safety Modernization Act rules. When you’re looking at shippers, carriers and receivers, you can see that it will touch just about everybody-most are one of these or in between. Shippers need to specify their conditions on the foods. If the food is exposed they need hand washing facilities available.

There’s a good deal of responsibility on these shippers and a need for heavy communication with the carriers,” she said.

Carriers, who are executing, need to have transport appropriate for hauling, written procedures for cleaning or handling,” said Jennifer McIntyre, vice president and chief science officer with the Acheson Group.

The rule will result in a lot of documentation requirements and become a huge training issue, noted Neumann.

“A lot of the industry is probably already practicing many of these protocols but they need to be focusing on training and documentation, and also on developing procedures for communicating records to shippers, carriers and receivers,” she said.

“In the eyes of the regulators if it’s not documented it did not happen.”

Darin Cooprider,Vice President, Consumer Packaged Goods, Ryder System Inc. said food recalls are a common enough occurrence today that they have become very much a “top of mind issue” with industry, consumers and regulators, and with food supply chains that have become tightly integrated.

“Rarely a few months go by where we don’t see a food recall.

“Nothing is more important than safety and that goes for managing food safety in the supply chain. What that means is we work with our customers to make sure we’re compliant with the law and out there in a leadership role with respect to independent 3rd party audits of our facilities,” he said.

In the event of recalls how much the 3PL becomes involved is on a customer by customer basis.

“In the broadest sense, the customer (manufacturer of the material) is the first holder of liability so they generally seize control of the process. They would activate the recall team, identify who among their 3rd parties received the distressed materials and would identify the code dates in ques-

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tion. We would identify which inbound shipments, carrying party, stock, what has left the building, transport outbound party, and when did it arrive at consignee. We could do this all in a matter of a few minutes. Every outbound customer order is scanned-picking up all the metadata, scanning to a particular pallet. We actually perform mock recalls on a regular basis in a non stressed situation, several times a year with our customers, to make sure people trained and familiar with it,” he said.

“Processes are codified and trained, every touchpoint of the supply chain monitored and at the same time we make sure our systems and processes are in place to make sure that even if a manufacturer were to have an unfortunate circumstance, we would be able to track it from source to destination. Certainly if there were weaknesses it would be incumbent on us to raise our hand and get ahold of the net,” said Cooprider.

He said the US and Canada together are among the world leader s

in the food supply chain.

While some transportation providers may be more rigorous than others, “I think by and large if you draw a large canvas print they are all moving in the same direction,” said Cooprider.

“Procedures can be onerous but that’s a good thing. If it was so easy and there weren’t time and money commitments to be made it would jeopardize quality.

It’s one of those areas where regulation is necessary to protect the public,” he said.

Collaboration with transportation providers has improved, he noted.

“A good deal of rigour is put into chain of custody, from source to shelf. Obviously there’s some benefits to reducing handoffs in that regard.There are fewer broader relationships-this improves the shippers’ ability to hold providers accountable.

The one thing I worry about a little bit in transportation is brokered transportation-you don’t really know who is picking up the load-this places a premium on the

warehouse provider to make sure the equipment is functioning properly,” he said.

Two pain points in food transport include fresh (produce) and temperature controlled, where there is a narrow band of temperature ranges outside which there is the threat of spoilage or susceptibility to spoilage.

Maintaining integrity through longer supply chains becomes about addressing infrastructure, processes, compliance, and making sure that the supply chain functions in reliable, repeatable manner.

“It’s making sure we’re joining technology and physical transportation,” Cooprider said. CS

©tolisma/iStock/Thinkstock

FOOD REGULATIONS

Associate editor Julia Kuzeljevich has been writing about transportation issues for more than a decade.

Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.

Challenger Engineered Logistics Solutions

Truckload | Temperature Controlled | Special Commodities | Waste Haulage | Logistics | Warehousing

.com Connect with us on:

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E-COMMERCE FULFILMENT

A STICKY RELATIONSHIP E-commerce fulfillment creates both challenge and opportunity when it comes to costs, services and distribution strategies

©EmilieGerard/iStock/Thinkstock

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E-COMMERCE FULFILMENT

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BY KEN MARK

ews stories chronicling how e-commerce is reshaping the global retail landscape tend to overlook its huge potential impact on logistics.

In a recent study, Jean-Paul Rodrigue, professor, Department of Global Studies and Geography at Hofstra University, in Hempstead New York, concluded “In the conventional retailing system, shoppers bore the costs of moving the goods from the store to home. But with e-commerce, this segment of the supply chain has to be integrated into the freight distribution process.”

Among the various e-commerce-inspired trends, he states that spatially disaggregated retail distribution reverses the economies of scale resulting from the current practices of consolidating deliveries to larger stores and larger distribution centres.

Another one is the new system’s reliance on large warehouses located outside metropolitan areas from which vans and trucks can deliver a vast number of small parcels to individual online buyers. As if on cue,Walmart recently announced that it is planning to build an e-commerce-dedicated distribution centre in Bethlehem, PA which is 112 km from New York City and 82 km from Philadelphia, PA. According to Rodrigue, such a change will result in more packaging and more tons-km of freight transported.

E-commerce technology has created a digital platform enabling more and more consumers to “let their fingers do the shopping”. At the same time, convenience - home delivery - has now joined cost, price and product quality as their top priorities. For logistics and transportation service providers, that creates both challenges and opportunities.

Rumours of the death of department stores have been greatly exaggerated. Although online shopping and various other social and economic upheavals have taken their toll, hardy survivors are planning a comeback. It’s based on leveraging their traditional strengths – long-time relationships with customers and their vast, strategically located real estate holdings. To lend them a helping hand, major courier companies offer services to speed up their successful transition to the digital marketplace.

Key to that turnaround is converting existing stores into distribution centres. That enables them to ship online orders to consumers or offer the option of picking up their purchases at a store near where they live or work. A recent Wall Street Journal article noted that UPS is helping about 40 US retailers to make that transitiontwice as many as a year ago. For example, it provided Sears with software to show the shipping status of all its orders across the entire system along with tracking numbers.

Other tools include more muscular RFID systems that can track items more accurately in near real time anywhere in stores’ or online inventories to eliminate stock outs.

Nicolas Dorget, Burlington ON-based vice-president of Customer Solutions UPS Canada believes that tools and systems now exist to eliminate that nuisance forever. “If customers identify an item they want to buy but that is not available in that store, a sales rep can check and tell them where they are. If requested, the store can ship it to their home or office within a specific time or send it to another store for convenient pick up,” he says.

“We can help them capture the sale while the customer is in the store.”

To create an effective e-commerce fulfillment system for stores, UPS experts conduct a deep-dive analysis to identify of areas of possible im-

provement and offer suggestions to fill in the gaps.

Says Dorget, “We need to find out what products they sell, where they locate them, their quantities etc. at each location because they all different.

“We provide consulting but we are not just consultants because we have ‘skin in the game’- providing the necessary transportation and logistics services logistics to ship goods from mixed DCs.” As you might expect, Walmart is leading the parade. Currently it is using 35 of its more than 4,600 US stores as e-commerce sales fulfillment centres. Such stores handle a double-digit percentage of Walmart.com orders, with most items delivered within two days or less. Some of the planned dedicated e-commerce facilities may be part of a conventional DC. According to Jim Hendrickson, Pitney Bowes vice-president, logistics solutions, retailers adopting ship-from-store deliveries are unlikely to close warehouses or other DCs.Their main focus will be on better labour and retail-asset usage along with shipping cost management, not on adopting a fundamentally new business model.

However, he adds that the transition will inevitably change elements of the vertical logistics supply chain. Advanced concepts such as sameday delivery, more focus on cross-border shipping, and cross-store stock management will become more common. Retailers will also be looking for new services, advice and counsel to optimize and manage these processes.“Logistics companies moving in to fill this gap will find themselves in a deeper, more ‘sticky’ relationship with their clients,” he says.

In Canada, the changeover among conventional retailers has been painfully slow with some notable exceptions. Says Ashish Anand,Vancouver-based partner with the survey firm, Chasm Inc.,“Many of them are just waking up to that reality now. After setting up a corporate website, executives at several major retailers are simply going through the motions.They need to set up a planned path to the future.”

Various new digital platforms including the Tulip Commerce Engine have emerged to guide retailers on that planned path. Such BFG (business-friendly giant) IT systems can be compared to the extensive capabilities found on today’s sophisticated notebook and tablet computers. It is entirely possible to run a business using the software etc. found on them.

By pulling product, customer, and transactional information into a single, cloud-based hub, the Tulip Commerce engine empowers large retailers to create seamless consumer experiences across their stores, website, and mobile storefronts.

Operationally, it creates a digital platform that can consolidate, analyze, link share and synchronize data to create a single, unified cloud-based repository.That replaces the existing hodge-podge of disconnected and scattered physical and other data repositories.

Says Tulip founder and CEO Ali Asaria, “It can display inventory data in all locations and current quantities. It is also multi-functional so employees can access training videos as well as systems and equipment user manuals, print price tags and accept credit cards payments on their tablet computers.

“By making employees staff more productive and efficient, stores can boost sales and improve customer satisfaction.

“We are targeting very large retailers. These capabilities will enable them to use their existing strengths to gain repeat business by offering

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E-COMMERCE FULFILMENT

UPS® partnered with comScore to find out what consumers want during their shopping experience by surveying more than 1,000 Canadian online shoppers.

FOLLOW THE ONLINE SHOPPER’S ROAD TO HAPPINESS CHANNELS

THE INFLUENCE OF ONLINE, MOBILE, SOCIAL MEDIA & OMNICHANNEL RETAILING

87%

shoppers 80% ofuseonline Facebook

6 OUT OF 10

online shoppers prefer to shop with their favourite retailers online

of online shoppers who have liked a retailer on Facebook pay attention to retailer updates

58%

of Facebook users cite they “Like” a retailer

CONSUMERS WANT MORE OPTIONS & MORE CONTROL

61% 88%

2ND

MAKING IT EASY TO RETURN DRIVES SATISFACTION & REPEAT BUSINESS

61%

of consumers will shop more with a retailer if they offer a hassle-free returns policy

Conducted by:

will recommend the retailer to a friend if they offer a hassle-free returns policy

x

x

x x x

x 3–67D .2AxYx S

of sho see a ppers exp ect to 3–6 d ay optio n at c delivery heckout

CONVENIENCE

NEARLY HALF of online shoppers have returned a product purchased online

x

70%

most important factor at check-out: seeing estimated costs and delivery dates early in the process

65%

CHOICES

of shoppers review a return policy before making a purchase

69%

have added to their cart to qualify for free shipping

of shoppers say they are less likely to comparison shop when using a mobile app

73%

e av yh d he one art dt c sai and ing ab hopp as

of those who abandoned a shopping cart did so because of shipping costs

46%

76% want e-mail notifications with a tracking number

To download the full UPS Pulse of the Online ShopperTM white paper, go to: ups.com/comScoreCanada © 2013 comScore and United Parcel Service of America, Inc.

UPS Canada and ComScore infographic displays results of a survey of online shoppers.

customer experiences which Amazon and Google cannot - physical locations with actual products and knowledgeable staff.”

While Tulip is an early-stage IT company, its technology has been field tested by underpinning the success of Guelph ON-based Well.ca, Canada’s largest online health and beauty products store. It offers a comprehensive assortment of more than 50,000 items involving almost 3,500 different brands.

Says president Rebecca McKillican, “Our typical customers are women between the ages of 25 and 45 with families since diapers and other baby products are among the most popular items we sell.

“They come to us because we focus on

selling green and environmentally responsible products, especially vitamin and supplement that large chains don’t always carry.

Many of them live in smaller centre or in rural areas so they appreciate the convenience of home delivery.”

Well.ca provides free shipping over $25 on almost all orders in Canada excluding remote regions. Fulfillment oc-

curs in a 50,000 sq. ft. DC. However, serving outlying locations creates opportunities for smaller couriers since the giants are not interested owing to the low volumes. However, to succeed there, Claude Germain, Aurora, ON-based Managing Partner, Rouge River Capital suggest that carriers must focus on specific service offerings. The first is speed- sameday deliveries within a close-density zone - downtown, urban region etc. that do not have pass through a hub.

The second are agent runs or covering peripheral areas such as Vancouver Island, Northern Canada etc. where major players do not want to invest in setting up their own networks. And finally, over-dimensional items such as TVs, large appliances etc. Such items also open up other service offerings beyond delivery that include set-up and take-away as well as repair and maintenance.

Other innovations are emerging to eliminate some of the frustration of ecommerce home deliveries. Throughout Germany, DHL has set up thousands of freight lockers called Packstations in accessible urban locations. Resembling sophisticated versions of Canada Post superboxes, they can receive small to mid-sized parcels to eliminate the hassles of missed home deliveries. Consumers can pick them up at any time using a credit card.

A Canadian version called BufferBox developed by a Waterloo-based start-up is more high tech. At a self-service kiosk, consumers deploy a single-use code to pick up the package. Regrettably Google, which bought the company in 2013, recently announced that it will soon close the Canadian operations and transfer it to its California head office.

Finally, Canada’s very large retailers are nervous about their US counterparts setting up shop here soon. However, UPS’s Nicolas Dorget states that most major US retailers are not too interested in coming north because Canada is such a small market with numerous challenges. As a result, there can be a bumpy learning curve as Target recently discovered.

Still, Canadian retailers need to move quickly to get their e-commerce fulfillment systems in place to scare away potential US competitors. CS

Ken Mark is a veteran technology expert who has covered supply chain management since it was called distribution and has documented its legitimization as a critical business function. He holds an MBA from York University.

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5

AWARD WINNING SUPPLIERS ARMOUR TRANSPORTATION SYSTEMS BISON TRANSPORT CONESTOGA COLD STORAGE OCEANEX TRANSX

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ARMOUR TRANSPORTATION SYSTEMS

FLEXIBILITY AND ADAPTABILITY Wes Armour explains why those two qualities fuel success at Armour Transportation Systems and what they mean to customers CANADIAN SHIPPER: Congratulations on once again being included in the prestigious list of Canada’s 50 Best Managed Companies.

They say getting to the top is hard but staying there is even harder.

What would you say accounts for your company’s ability to consistently retain such high performance over the years?

ARMOUR: I

think one of the keys to our success has been our ability to effectively adapt our business to the changing needs of our clients over the years. Flexibility and adaptability are qualities we cherish and foster.

At Armour we have created an environment where the customer’s needs come first. We are not just 'truckers' – we provide a diversified service offering or a 'one-stop shopping' suite of transportation solutions. With every customer, we thoroughly analyze their requirements and assess their needs so we are able to adapt to customer requirements and change to meet these requirements without sacrificing the bottom line.

Our first three customers were Kraft Foods, Robin Hood and Maritime Beverages (now known as The Pepsi Bottling Group).We are proud to say that all of these accounts are still major accounts with us today – and growing. Each of these internationally recognized brands has experienced significant changes in their own business models.

It has been through the dedication of our people to our customers and our willingness to change over the last 50 years that we have retained, grown and expanded our client base to include some of the world’s largest brand names. Today we have over 5,000 customer accounts – some are very small while others are very large accounts, but they are all important to us.

CANADIAN SHIPPER: Investments in technology are often essential to improving efficiency. What areas has Armour Transportation Systems targeted for technology investment of late and what will you be focusing on in the future?

In order to be a leader in the industry, we continually strive to integrate leading edge IT solutions, including: • Tracking ability on our entire fleet • Complete EDI customized solutions • Full suite of on-line customer tools, including real-time delivery status updates, viewable shipping documents and customer based shipping solution • Integrated hand-held technology for both delivery and dock operations, including signature capture and scanning capabilities • Extensive fleet management tools, monitoring speed, idling and fuel usage Most recently, our company is looking forward to an exciting new path in technology, specifically with our transportation management software (TMS). We recently purchased TMW’s Truckmate software, which will

ARMOUR:

replace our current LTL 400 software as our TMS solution. This is the largest IT project in our company’s history and will help to improve our operational efficiencies.

This solution will replace all aspects of our current systems relating to transportation, including Operations, Administration, Finance, Payroll and Maintenance.

CANADIAN SHIPPER: What are the outcomes from these technology investments? Is there a tangible benefit to your clients?

ARMOUR: The Truckmate solution will provide a better system to move, track and monitor equipment, improve how we manage our customer’s freight and give our people the tools they need to better meet industry needs.

As the demand for information changes, we must also adapt with these changes and we are confident we can do this through the TMW solution.

On tangible benefits to our customers, the enhanced web services provided through TMW will enable them to have even more visibility and detail on their freight as well as their account in general (for example, payables and rates). It is no longer only the movement of the freight that we sell as a carrier; it is the visibility of the freight.

By providing our people with the 'right tools', we will see efficiency improvements because not only will the information be easier to retrieve, it will be faster, more accurate and reliable for us and our customers.

So it is an exciting time in technology at Armour Transportation Systems and we look forward to the future!

CANADIAN SHIPPER: With the global economy strengthening, port to door services will become increasingly important for Canadian importers and exporters. Can you outline your suite of offerings in this area and how they help ease the challenge of doing business overseas?

ARMOUR: Our full range of port-related services includes: container stuffing, de-stuffing and preparation services, deconsolidation of containerized shipments, warehousing capabilities, cross-dock both truck and rail, distribution services to facilitate the delivery of product to various points throughout Canada, the USA and Mexico. We also offer drayage service and administration.

To accommodate the growing port-related traffic within Halifax, we recently expanded our facilities in Halifax, NS, which now encompasses 200,000 sq. ft. of food-grade warehousing as well as a 60-door cross-dock and distribution capabilities. This enables us to offer our customers a total solution under one roof for warehousing, LTL and courier service needs. CS

38 May/June 2014 www.canadianshipper.com

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Armour Transportation Systems is honoured to receive the prestigious Canada’s Best Managed Companies Award for the 11th consecutive year. Thank you to our valued people, customers and suppliers for your contributions to the success of our company.

At Armour Transportation Systems our driving force is people – people working together to provide our customers with excellent service.

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BISON TRANSPORT

PULLING IN THE SAME DIRECTION Senior vice president sales and marketing Jeff Pries on Bison Transport’s key to long term success CANADIAN SHIPPER: You’ve been on the list of Canada’s Best Managed Companies every year since 1994, a considerable achievement considering not only the length of time but also the fact the economy during this period has experienced its greatest expansion and its second worst contraction, both of which bring unique challenges for motor carriers. How does Bison manage to stay on track?

PRIES: We really have great people. Trucks are trucks and trailers are trailers and computers are computers but if you don’t have people making the best decisions around your assets, things don’t come together. And it’s one thing to have great people – we have a staff of 2,600- and another to get them all pulling in the same direction. If they are pulling in different directions, even if they are great people, you won’t get too far. Establishing a mission for the organization and a group of core values that people can engage with while pulling in the same direction is the key, the magic, to being a successful, well-managed company.

CANADIAN SHIPPER: One of Bison’s most unwavering of attributes is its focus on safety. Bison outdid the competition yet again at the Truckload Carriers Association Safety Awards. Considering how much Bison has grown over the years, how many drivers you employ and how many more miles you are running, how are you managing to maintain such a high level of performance with safety?

PRIES: It’s always rewarding to receive an award and be recognized but what leads to awards and leads to results is good decisions made mile after mile, day after day, load after load. And even before that it’s the training and the culture of safety you generate so that before you put the keys in the ignition you are deciding whether the next mile can be safe. It’s always the next mile that matters.

some big investments and now is the time to capitalize on them.

CANADIAN SHIPPER: Although the North American economic outlook is solidifying, and carriers are keen to return to more profitable rate structures, shippers remain vigilant about cost increases.

What is key to providing cost-effective solutions for shippers that also represent a fair return for the carrier?

PRIES: No question, shippers are very cost conscious. Cost matters but most customers are interested in their carrier making a profit.

They understand that if the carrier is not making a profit that is not a sustainable situation. Our experience recently is that we have been able to demonstrate to our customers that in many cases our costs are on the rise – driver pay, fuel, equipment. We are working with our customers to either drive costs down or raise revenue quality. We strive to provide options for customers in a collaborative way. We look at variables such as day of week shifting, ease of loading and unloading, days on trailer, and so on.Those are ways to mitigate price increases. Today’s pricing structure for most trucking companies is much different than it was 10-15 years ago when the focus was on the base rate. There are many accessorials that need to be looked at now. It’s not always about the base rate.

CANADIAN SHIPPER: Capacity is tightening. Does Bison have plans to expand its capacity in 2014?

PRIES: No plans to add additional equipment this year, however, our

new areas of focus such as intermodal, logistics and LCVs are our solution to expanding capacity: pulling two trailers more often, using rail where appropriate and partnering with other carriers who complement our network and customer base.

CANADIAN SHIPPER: What do you see as the top opportunity and the top challenge for Bison in 2014 and how are you looking to respond?

CANADIAN SHIPPER: You mentioned your growth in several markets.

Any plans to grow into any other markets or new areas of business?

PRIES: Our top priority for 2014 is to capitalize on our investments. Over the past 12 months we made significant investments in a lot of different areas. We grew our staff to ensure that we were properly resourced and that we could provide the best service to our customers. We invested in new tractors and trailers. We grew our fleet by about 100 trucks.

And we also invested in terminal facilities across Canada. We have significant terminal facilities in just about every major city in Canada. So we’ve made

PRIES: We are now offering dedicated services in a way that we think is unique.We are combining the dedicated equipment, ensuring capacity, with the benefits of being connected to a larger organization and network that can ebb and flow with the needs of our shippers – essentially serving surges when required and redeploying when necessary. Our dedicated service was launched this year with a flagship customer in Western Canada and we fully plan to roll it out to other customers, particularly in the retail and food and beverage sectors. CS

40 May/June 2014 www.canadianshipper.com

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CONESTOGA COLD STORAGE

A COMPETITIVE EDGE Conestoga Cold Storage president Greg Laurin on how to provide one for cold chain customers

CANADIAN SHIPPER: The Canadian food industry is becoming a highly competitive one. How is Conestoga adapting its strategy and service offerings to provide its customers with a competitive edge?

With the entry of Target into the Canadian market last year and Loblaw’s purchase of Shoppers Drug Mart, the Canadian retail food market is more competitive than ever. As a result, our customers are looking at every opportunity to find efficiencies and save money. Recently, we’ve put a lot of work into integrating with our customers’ computer systems so that any changes made to our system are automatically updated. This includes not only order shipment and product receipts but order and product hold, updating case dimension and real time inventory levels. Ensuring that our customers know the exact status of their inventory at all times gives them a sales advantage as well as more accurate demand planning and production scheduling information. Increased energy and labour costs are particularly difficult to control but investments in new equipment and technologies are paying off. For example, we are in the process of replacing all of our lights with high efficiency LED fixtures that are long lasting, energy efficient and produce far less heat, which is particularly important in the cold storage environment.

LAURIN:

CANADIAN SHIPPER: You offer delivery service for all of Canada through Conestoga Franchise Services. Can you discuss this division of Conestoga and its services and capabilities?

LAURIN: Conestoga Franchise Services operates a fleet of trucks and distributes to over 350 franchise stores across Canada. We act as the wholesaler for franchise operators and can handle all aspects of product flow from purchasing inventory to storage, picking, delivery and receivable collection. Our system is highly flexible and can be customized to handle any Canadian distribution requirement.

CANADIAN SHIPPER: Good supply chain practices require a robust IT infrastructure. What does Conestoga have to offer in terms of inventory management and

how does it keep its IT infrastructure up to date?

LAURIN: We

are continually investing in our IT infrastructure. We recently completed a hardware upgrade to all of our database servers and have now fully virtualized our back end systems. This has made our systems more robust and has allowed us to cluster data across our network so we can back up our Kitchener warehouse to our Mississauga facility in real time. Virtualization of servers has the added benefit of reducing our total number of servers from over 30 to only six.This has dramatically reduced the potential points of failure, energy consumption and air conditioning required to support our IT systems. We are also upgrading our wireless and network infrastructure to improve coverage, speed and security.We have recently added wireless HD cameras to our stacker cranes so our operators can now troubleshoot most problems from their computer without having to enter the building.

CANADIAN SHIPPER: You offer a fully automated solution for frozen storage. What advantage does this provide your customers?

LAURIN: Automation

is well suited to the cold storage environment.

Our newest building, completed last year, is 125 feet tall and has three fully automated stacker cranes. These buildings provide a much denser level of storage, reduce wasted aisle space and use less land than a conventional 40 foot tall building. Food safety and inventory control are increasingly important and our clients appreciate the additional security that these buildings provide. Product is stored and tracked automatically by robots and damages and misplaced pallets are virtually eliminated.

Technology improvements over the last several years have helped simplify the construction and installation of automated systems but they are still notoriously difficult to get right on the first attempt and are often plagued with software issues or changes to customer requirements. Automated buildings are much more popular in the high labour and land cost areas of Europe than they are in the North American market but we are starting to see some movement towards more automation in the US market. CS

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OCEANEX

SOLID SOLUTIONS With no fixed links to the mainland, marine transport is the only option for getting cargo to Newfoundland. Executive chairman, Captain Sid Hynes, explains how Oceanex rises to the challenge CANADIAN SHIPPER: Congratulations on once again being named to the prestigious list of Canada’s 50 Best Managed Companies. Our readers may not be familiar with all the services Oceanex actually provides to Newfoundland and Labrador from anywhere in North America. Can you provide an outline of what you offer and the vessels in your fleet?

Oceanex Inc. specializes in the handling of all types of cargo from anywhere in North America. Through a combination of direct and agent networks, Oceanex is capable of handling anything from: full container loads, LTL (less than full load), project cargo requiring standard and specialized equipment, commercial vehicles, new automobiles, heavy equipment, heavy lifts and both heated and refrigerated container/trailer service. Oceanex provides a seamless transportation solution for our clients to any destination in Newfoundland and Labrador. Cargo can be picked up around the continent and consolidated at either Montreal or Halifax for shipment to the province.

Oceanex has three ships in its fleet: Oceanex Sanderling, Oceanex Avalon, and Oceanex Connaigra.

HYNES:

CANADIAN SHIPPER: With no fixed links to the mainland, marine transport is the only option for getting cargo to Newfoundland.

Obviously this places great pressure on Oceanex in terms of reliability of service. Can you comment on how Oceanex ensures it can rise to the challenge?

HYNES: Oceanex is committed to delivering a safe and reliable service to its customers. To do so, we must constantly review our equipment and personnel needs, ensuring that we have the necessary resources to operate both safely and efficiently. Oceanex regularly invests in our fleet and equipment, most notably of course with the recent addition of a state of the art vessel, the Oceanex Connaigra. This vessel alone represented an investment of more than $100 million, demonstrating Oceanex’s commitment to meeting the needs of our customers. The vessel is designed to meet our anticipated growth for the next 30 years. In addition to welcoming the Oceanex Connaigra, we continue to invest in our existing fleet to ensure it is

well equipped and maintained for service continuity.

On the terminal front, Oceanex has recently added a new terminal called Terminal 3 in St. John’s and continues to renew and increase its container and rolling stock fleet by adding new units each year.

CANADIAN SHIPPER: Last we spoke around this time last year you had acquired a number of reefer units and were in the process of fabricating new flat rack containers to containerize cargo presently carried on flat bed trailers. Has this now been completed and are you seeing the increase in your vessels’ loading factor and capacity you had hoped?

HYNES: As

noted last year, Oceanex had initiated a trial process of a prototype flatrack design with several customers. Based on some of the challenges we encountered, we refrained from pursuing or building more units. However, we have maintained a fixed number of these units which cater to a specific demographic of customers requiring this type of equipment.

Oceanex has invested in reefer units and continues to expand in this area as the demand for the service continues to grow. These reefers are all fully utilized and we are currently completing a trial for a marine-rated 53 foot reefer container which we plan to add to our fleet.

CANADIAN SHIPPER: There is a great deal of project work in the future of Newfoundland and the entire Maritimes region. What kind of pressures do you anticipate this will place on the region’s transportation system and how do you envision your company responding to this challenge?

HYNES: Oceanex has been heavily involved with numerous projects

in and around the Newfoundland market. With our existing fleet of equipment, we are well prepared to handle the work projected for the province for many years to come. Oceanex works closely with its customers to ensure a seamless transportation solution. We have been quite successful in meeting these requirements and poised to continue expanding our service network accordingly. CS

44 May/June 2014 www.canadianshipper.com

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TRANSX

SOLUTION DRIVEN TransX vice president of operations Mike Jones on the company’s diverse service options CANADIAN SHIPPER: Congratulations on being named to the prestigious list of Canada’s 50 Best Managed Companies. Considering the extremely challenging economic climate motor carriers have had to navigate over the past five years, what do you think this says about your company?

JONES: We are very proud of the recognition that this award brings to the company. The criteria of this program is based on sustainable business performance and growth, alignment of the entire organization, and the presence of some intangible values that set the company apart from others in the Industry. I think that the award speaks to the way TransX continues to be customer and employee-centric, while delivering a unique mix of products, services, technology and value to the marketplace.

CANADIAN SHIPPER: Intermodal service can be a very cost-effective option, provided it is also reliable. Can you outline what TransX offers in this area, both domestically and for overseas customers?

We offer a number of different intermodal services. We have dry, heated, and refrigerated LTL and truckload services. We leverage our terminal infrastructure to create unique product solutions for our customers; we provide intermodal cost savings without compromising our ability to deliver to the grocery warehouse business in Western Canada. This reliability comes from a number of different areas, and improving reliability to the customer comes from good relations with the railways, doing what you said you are going to do, and having the assets (for example, company-owned chassis, secured yards, locally dispatched trucks, local management and dispatch, local company-owned maintenance facilities), and infrastructure to provide a well-trained and service orientated team.

JONES:

CANADIAN SHIPPER: Your TX Logistics provides thirdparty solutions. Can you elaborate on the services offered and how they are integrated with TransX’s full slate of transportation services?

JONES: Our logistics team offers truckload (TL) and less-than-truckload (LTL), dry, heated and refrigerated services. By combining carefully selected partner carriers and the extensive TransX network of services, we have developed North America’s largest, most flexible and advanced integrated cargo network. Our partner carriers enable us to extend and grow our existing LTL and TL network by adding short and long-term capacity.This results in a stronger overall available capacity and a more extensive network that we can provide our customers.

CANADIAN SHIPPER: With all the new border regulations and delays at the border, transborder shipping is becoming increasingly complicated. Does having your own brokerage division simplify the process?

JONES: Expert Customs Brokers have been part of our organization

for 18 years. We started into this business to make shipping to Canada easier for our customers. We had never really thought about the regulatory side of the business and the impact that those kinds of changes would have on our industry; understanding and complying with these regulations is not just an asset, it is imperative. Having the knowledge base and a different lens within the company has greatly enhanced some of our operational effectiveness, which translates into value to our customers.

CANADIAN SHIPPER: How would you like to see your company positioned 10 years from now and how will it get there?

JONES: In 10 years? WOW, that’s like 2-3 generations from now in the trucking business. We turned 50 this year, and although that’s a major milestone, you can’t look into the past, you always need to look forward. If asked that 10 years ago, knowing what I know today, my answer would be the same; we will be servicing the same customers while making the appropriate investments in people and capital to ensure that we can deliver cost-effective solutions to those customers. We know one thing for sure; we are well-suited, through our diversity and solution-driven approach, to keep ahead of the times and make sure we are here for the long run. CS

46 May/June 2014 www.canadianshipper.com

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CASE STUDY

TRACEABILITY

SYSPRO Canada works with food and beverage, nutraceuticals manufacturers to fine tune supply chains

48 May/June 2014 www.canadianshipper.com

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allow you to do so in a minute or two versus a week or more with a paper backed system,” Dyke said.

Saint John, New Brunswick-based Crosby’s supplies molasses and sweeteners to retail and industrial markets under the direction of Jim Crosby – a fourth generation molasses purveyor.

While molasses continues to be the mainstay of the business, Crosby’s also has an expanding line of dry-sugar-based products and syrups. Sold across Canada, the New England states and other international locations including Korea and Iceland, Crosby’s imports over 6,000 tonnes of molasses a year.

Crosby’s has been working together with SYSPRO to tailor its ERP software which helps it to stay competitive in the highly regulated food and beverage industry.

“Since partially implementing SYSPRO’s traceability module, we have reduced the average trace time by 50% from 16 hours down to 8 hours – and we have set a goal of significantly further reducing trace time down to one hour,” said Kelly Moore, Comptroller at Crosby Molasses Company Limited.

Expiry date and shelf-life information can also be recorded and powerful queries enable both upward and downward searches by stock code, lot number and transaction type.

SYSPRO’s integrated nature enables full backward and forward traceability, as well as comprehensive record-keeping to meet strict compliance requirements, noted Dyke. Shelf-life management is facilitated through expiry dates and you can use SYSPRO’s customization and custom form features to record other compliance-code dates, as well as to capture storage and transport compatibility codes.

“Flexibility is very important for our users. SYSPRO ERP software works for us providing information. Unlike other similar software solutions, we don’t have to sweat to get the information out,” Moore said.

“SYSPRO lets you look at different ways of building things, testing, and performing a ‘what-if ’ analysis. It also helps with co-and by-products, whether it’s keeping track of rejects/outcomes of the quality control process. We also work with the warehouse management end-if I promised a client I will have a batch of goods delivered to them, how do I make sure what I’m shipping out manages that by oldest stock first? This gives you the tools to that, and the visibility into the inventory, and control over who is picking what,” Dyke said.

The company also does a lot of work with documentation control, such as with export declarations, generating forms that are used in the compliance process.

“The key to success in our clients’ experience has been understanding very well what the regulatory bodies require and being able

©urfinguss/iStock/Thinkstock

T

he traceability of products from material origins through manufacture to final destination is a key system requirement in many industries, whether as a compliance-critical requirement, or an analysis tool for continuous improvement strategies.

According to Richard Dyke, vice president, with ERP provider SYSPRO Canada, “the most critical piece for our clients is knowing you have the right things being shipped out the door and documenting that with complete reliability and minimal work.”

The essence of the changes to the Safe Food for Canadians Act aims at strengthening Food traceability in Canada.

“Both makers and importers of food must be able to follow an item or a group of items from one point in the supply chain to another. And in the case of a recall, to be able to quickly and efficiently collect and dispose of contaminated products. Finally, to document and enact the procedures and controls needed to make food safe in Canada, including mandatory record keeping requirements,” said Dyke.

“For many food processors, their current challenge is to find a solution to traceability that is both cost-effective and a good fit for their current business operations,” he said.

In a recent report on Manufacturing Innovation in Atlantic Canada, SYSPRO investigated manufacturing trends, government incentives, academic and private alliances and growth along with a series of SYSPRO customer stories, local insights and future predictions.

“At one end, our clients want to be able to enter a forecast, in terms of what’s in demand from the client, from industry, and getting the right supplies at the right time. They also want the ability to do twostage receiving-i.e. quarantine the order while doing quality assurance tracking, managing expiry dates, managing lot by lot,” he added.

SYSPRO’s lot traceability and serial tracking functionality afford this full visibility to the origins, build and customer destination of products and batches, so that there is the means to rapidly trace and analyze the source of defects, should they occur, Dyke noted.

“For so many of our clients in food and beverage lot traceability, and the order of lots is mission critical, and we build confidence into that.Whenever we buy raw materials you need to keep track of the lot they were from. As you put them into production you create a new serial number to track them. As you ship them out the door you need to track the lot number as it goes out, and remaining inventory. You need to be able to type in the serial number and see where all that product resides, and you need to be able to identify the client, order date, etc. and see what is potentially left in the warehouse for disposal or quarantine. You also need to be able to trace backwards on ingredients, i.e. sugar. Our total recall abilities

By Julia Kuzeljevich

continued

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CS

CASE STUDY

continued from p. 48

to mimic that in your computer system.

For example US border services requires that we know exactly how many miles from border end point to delivery point. I find that we have a strong client community. We have user group sessions where clients talk about common issues of concern. In the SME market where we play there is a great deal of ‘collegiality.’

When we’re dealing with clients we can often suggest who they should talk to. For the latest changes I see that people seem to be rapidly up to speed-they take a great interest and want to make sure they have it right. It makes a big difference to the bottom line,” said Dyke.

“For example once the order is ready to go out the door on our end, we can dial into the shipper system, schedule the order, retrieve the shipment order number, and the shipper system spits out the paperwork and documentation,” he said.

“When it comes to getting an audit done, the auditor just has to verify that procedure

50 May/June 2014

has been set up and followed through. It makes the certification process a lot easier.

But a certification audit will be unique to each individual client. SYSPRO works with a variety of other systems-some will want integration through to a UPS or FedEx type of system. SYSPRO itself is a pretty complete practice-it handles everything from basic accounting needs through to warehouse management. For the transport partners, we often end up integrating it into their systems-planning and automatically scheduling pick up and deliveries,” said Dyke.

Business intelligence is another big trend in terms of what’s impacting clients.

“The environment is becoming very competitive so being able to spot trends and purchasing patterns, like product sizes etc., and having the ability to slice and dice data and to get at critical points is increasingly important for anyone in the sectoryou need the right tools to drill down and find the answers,” he said.

Additionally, improvements in forecasting, scheduling and order fulfillment can have a positive impact on customer service. The same automated system that addresses the ‘overhead’ requirement of traceability can also be used to improve bottom-line profitability and competitiveness.

“Compliance requires linking ingredients to end-items. This is best accomplished by real-time recording of lot numbers and the actual quantity consumed.

Using bar coding, computer-based batch sheets generated by the ERP system will link consumption to end-items with accuracy,” he said.

Another SYSPRO client, Natural Factors, headquartered in Coquitlam, British Columbia produces millions of tablets and capsules every month. On a daily basis, the company packs an enormous variety of finished goods into thousands of bottles, and fills hundreds of sales orders. At present, Natural Factors carries thousands of

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CASE STUDY

active stock items, with new formulations continually introduced. The company’s corporate structure includes company owned distribution centers and manufacturing facilities.

Natural Factors began automating its systems in 1992, at which time the company chose SYSPRO Enterprise Re­source Planning (ERP) software for its total supply chain management and financial tracking capabilities.

Today, SYSPRO continues to provide Natural Factors with complete control over the planning and management of its operations, including sales, accounting, manufac­turing and distribution. As a manufacturer of naturally-sourced nutraceuticals and supplements, Natural Factors places enormous em­phasis on quality control.

“The sales order entry functions are straightforward and intuitive. In addition, they’re integrated with inventory and inventory management. At any time, and at any stage of the supply chain, we can get accurate, real time information on our products.” Jaime de Sequera, Chief Information Officer, Natural Factors.

As batches are produced, each one is given a specific, serialized lot number.That iden­tifier allows Natural Factors to know everything about its product, including where the raw materials came from, when they were received in inventory, who received them, and to what job the raw materials were allocated, he said.

“Lot Traceability builds a very useful database,” de Sequera says. “In the event that a problem occurs, we can trace the product back to its source. Without that function, we would have much less control over the quality of our products.”

When the US Department of Homeland Security (under the Bioterrorism Act), issued guidance for the entry and release of imported food products into the United States, Lot Traceability provided an additional dividend, the company said. Essen­ tially, the Department of Homeland Security wanted as­surances that Natural Factors had the systems in place to provide relevant information if there was ever a problem with a product. SYSPRO’s Lot Traceability provided that capability.

In 2005, Natural Factors decided to switch SYSPRO from its original Unix platform to Microsoft’s SQL Server 2000.

The migration to Windows, which took two months, allowed Natural Factors to

leverage Microsoft’s .NET component archi­tecture to deliver SYSPRO’s e.net solutions. This new wave of Web services enables functions such as remote sales order entry and inventory status determination using re­mote devices such as palm pilots and cell phones, noted the company. CS

Associate editor Julia Kuzeljevich has been writing about transportation issues for more than a decade.

Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.

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INSIDE THE NUMBERS

MORE FREIGHT; HIGHER RATES Motor carriers across the country are growing more optimistic about freight volume growth. Overall, 40% of Canadian motor carriers expect an increase in 2014, according to our annual Transportation Buying Trends Survey. The optimism for

Canadian motor carrier expectations for freight volumes in 2014

freight volumes is highest in Western Canada where 48% of carrier executives

40%

Increase

indicated they expect an increase this year. Despite the expected increase in

of respondents

freight volumes, however, only 38% of Canadian fleet executives expect to push through an increase in core rate pricing this year. The majority expect an in increase

Decrease

7%

Stay about the same

53%

in the range of 2.1-4%. In addition 41% expect fuel surcharges to rise in 2014.

Our Transportation Buying Trends Surveys have been published for a decade and are conducted in partnership with the Freight Management Association of Canada, Cormark Securities and CITT.

CS

Canadian motor carrier expectations for direction of core rate pricing in 2014

Canadian motor carrier core rate pricing increase projections for 2014 Greater than 6%

Increase

Decrease

11%

38%

4.1-6%

of respondents

Stay about the same

22%

44%

5% 58%

1

2.1-4%

22% of respondents

UPWARD MOVEMENT ON RATES

Canadian motor carrier fuel surcharge pricing increase projections for 2014

C

Increase 1-2%

I S N m

Canadian motor carrier expectations for direction of fuel surcharges in 2014

Greater than 6%

E

I M v y t

Increase

23%

2.1-4%

33% 4.1-6%

Decrease

4% 23%

41% of respondents

Stay about the same

55%

D

M R D R

23% of respondents

Increase 1-2%

52 May/June 2014 www.canadianshipper.com

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THE BIGGER PICTURE

“

FREIGHT RATE INCREASES What can shippers do to mitigate these?

Freight rate increases are coming this year. The economy is on the upswing. Truck capacity is tightening as driver shortages, government regulations, cost overruns from a very challenging winter and carrier financial prudence all push freight rates in one direction – higher.What can shippers do to mitigate the impact? A lot.

Here is my list.

1. Capture your Freight Costs

Take a look at your freight costs and compare them to prior years. Look for opportunities to fix negative trends (e.g. lack of discipline in moving less than optimum size shipments, too much expedited or air freight etc.) that may have arisen.

2. Benchmark your Freight Costs

Obtain rate quotes from carriers that serve your traffic lanes.

Compare their rates to yours.

If your company ships high volumes, consider obtaining a benchmark freight rate service on at least your major lanes of traffic. The study will at least tell you if your company is paying market rates or higher and identify carriers that provide the same service at lower rates. There are also companies that provide an ongoing feebased benchmarking service.

3. Standardize your Accessorial Freight Costs

Small parcel, LTL, over the road truckload and intermodal carriers utilize a variety of fuel surcharge formulas. Do your due diligence and negotiate a fuel surcharge that is appropriate for the type and volume of freight your company ships. In addition to fuel surcharges, carriers charge for myriad services (e.g. apartment deliveries, job site deliveries etc.). One of the most common charges is

for trailer detention.Very often this can be rectified by ensuring your carriers book scheduled appointment times and arrive on time. Review the top two or three accessorial charges that your company pays and look for ways to reduce or hopefully remove them.

have its primary and backup carriers identified for every move. Routing non-compliance and load refusals need to be closely monitored to guard against unnecessary cost overruns. Carriers that consistently don’t supply their committed capacity should be replaced with companies that do meet

Rail service has improved over the past decade and intermodal service can be a viable option on lanes of 500 miles or more in some parts of North America. An intermodal option can help you save money on freight.

4. Evaluate opportunities to switch modes

Look at the location of your vendors and customers. Rail service has improved over the past decade and intermodal service can be a viable option on lanes of 500 miles or more in some parts of North America. An intermodal option can help you save money on freight.

5. Conduct a Post-Audit of your Freight Costs

Does your company audit its carrier invoices. Rate errors, whether intentional or unintentional, can drive up freight costs. A freight auditor will identify errors and assist you in filing a claim with the offending transport companies.

6. Verify Routing Guide Compliance

Routing guides should be established for all major lanes of traffic. Every shipper should

your company’s capacity needs at the preferred rates that you negotiated.

7. Take Advantage of Technology

Transportation Management Software (TMS) systems help companies route shipments to the best carriers (based on rates, service and capacity) on every lane. They can monitor orders and look for consolidation opportunities. Cloud-based pay as you go systems can be quite cost-effective. Many leading freight management companies offer this capability.

8. Develop a Core Carrier program and Collaborate with Carriers

Look for opportunities to convert spot moves to contract rates with core carriers. Establish honest, open communication with these carriers. Together, look for opportunities

to remove redundancies, inefficiencies and excess costs from your operation.

9. Optimize your Freight Network

Search for situations where inbound and outbound moves can be combined into round trips. Are there situations where one move can be connected with another (continuous) move? These types of situations provide you with leverage in carrier discussions and save you money on freight.

10. Take Advantage of Consolidation and De-Consolidation Opportunities

Rather than moving all of your freight in small parcel or LTL size shipments, look for situations where shipments can be consolidated (e.g. shipped in full truckload or partial truckload quantities to a warehouse) and then deconsolidated and shipped to customers. Of course, if your company hasn’t conducted a Freight Request for Proposal in the last year or two, this is still one of the best ways to ensure your company pays market rates. Over time, shipper volumes and lanes change as do carrier requirements. New carriers enter the market from time to time. A well-structured RFP is still a very effective way to save money on freight and create a solid routing guide. As we come out of this nightmarish first quarter, shippers should take advantage of the tools available to manage their freight spend. CS

Dan Goodwill, president of Dan Goodwill and Associates has more than 20 years of experience in the logistics and transportation industries in both Canada and the US. Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. He has held several executive level positions in the industry.

He can be reached at dan@dantranscon.com.

54 May/June 2014 www.canadianshipper.com

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