Canadian Shipper September/October 2014

SEPTEMBER/OCTOBER 2014

PUBLISHED SINCE 1898 | FORMERLY CANADIAN TRANSPORTATION & LOGISTICS

SPREADING THE WEALTH Results from our 15th annual Survey of the Canadian Supply Chain Professional RETAIL LOGISTICS Modeling the e-commerce revolution

A CLOSER LOOK AT THE BORDER BEST STRATEGIES FOR TIGHT CAPACITY AND VOLUME FLUX

www.canadianshipper.com

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Ever better. That ’s Ryder.

TM

What does it mean to be Ever better ? It means starting when everyone else stops, digging in when others let up, and delivering solutions that help cut costs, crank up profits, and turn record quarters into record years.

At Ryder, it’s not just our job to be Ever better, it’s our job to make your business Ever better. That’s why when you partner with us, you can be confident that our combined experience and expertise can not only help your business run better, but also help it thrive. Discover how outsourcing with us can improve your fleet management and supply chain performance at ryder.com.

FLEET MANAGEMENT

|

SUPPLY CHAIN SOLUTIONS

Ryder and the Ryder logo are registered trademarks of Ryder System, Inc. Copyright © 2014 Ryder System, Inc. Ever better is a trademark of Ryder System, Inc.

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CONTENTS

SEPTEMBER/OCTOBER 2014

DEPARTMENTS

22

6 | Viewpoint Will 3D printing change the face of transportation and logistics?

COVER STORY TAKING A CLOSER LOOK

8 | In the News Tough fuel regs ahead for Atlantic carriers; Cathay’s Calgary freighter link

at the border on the ramp-up to eManifest regulations, and a look at trends and strategies for shippers

52 | Inside the Numbers The top issues keeping supply chain professionals up at night.

on US lanes.

54 | The Bigger Picture Room for more consolidation in the freight carrier industry?

THE 15th ANNUAL SURVEY

of the Canadian Supply Chain Professional is in.

What do the results indicate about YOUR salary?

©Laura Flugga/iStock/Thinkstock

36 A view of the Detroit skyline. Windsor-Detroit is a key crossing for Canada-US trade.

FEATURES LEADERS | 14 Kuehne + Nagel’s Detlef Trefzger talks about the company’s Canadian operations in the global context.

A WHIPLASH EFFECT | 32 E-commerce trends and effects both sides of the border.

CASE STUDY | 34 Pitney Bowes aims to eliminate crossborder friction via its eBay 3rd party shipping partnership. continued www.canadianshipper.com September/October 2014 3

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SURFACE TRANSPORTATION

On October 15th 2014, please plan on joining Canada’s top Transportation Executives for a day of education & networking.

ummit

2014

Introducing the 2014 team of presenters...

We have created an agenda that truly addresses the many challenges facing both Shipper and Carrier executives.

AGENDA LOOK AHEAD: The economy in 2015 – what trends will impact your business. Expert analysis from an economist, a transportation market specialist and two transportation company CEOs.

Patrick Cain

Elias Demangos

CEO Cain Express

President and CEO Fortigo Transportation Management Group Ltd.

David Bradley

Carlos M. Gomes

Jacquie Meyers

Doug Harrison

President Meyers Transportation Services

President and CEO VersaCold Logistics Services

Kevin Taylor

VP and General Manager DTA Services

THE VIEW FROM THE TOP: The transportation executive’s perspective on the major trends driving truck and rail transportation.

SHIPPER – CARRIER COLLABORATION 2.0: What does the new face of collaboration really entail?

CEO, Canadian Trucking Alliance

Senior Economist Scotiabank

Kris McBride

VP of Transportation Metro Supply Chain Group

Mark Seymour CEO Kriska Group

Mathiew Faure

VP of Marketing Sales, Intermodal, CP Intermodal

SAME DAY DELIVERY SERVICE: Are you ready for this game changer?

INSURANCE TELEMATICS: How they will reshape your insurance policy.

REGULATORY ISSUES IN TRANSPORTATION: An insider’s look ahead.

Greg Laurin

President Conestoga Cold Storage

Sean Watson

VP of Transportation SCI Logistics

Kelly Hawes

President ColdStar Freight Systems

David Newman

Silvy Wright

Michael Bourque

Alan Taliaferro

Equity Research Analyst President & CEO Transportation & Industrial Northbridge Financial Products, Cormark Securities Corporation

TECHNOLOGY IN TRANSPORTATION: Are you getting the most out of your TMS? WAREHOUSING & LOGISTICS: What makes for a Best in Class distribution network?

FREIGHT RATE PRICING: Skipping the tough talk and working on real solutions.

John Oldfield

Jason Sonnbichler

Senior Account VP Business Development Executive Supply Chain Solutions Dalton Timmis Insurance Ryder System, Inc.

Mark Sauve

Senior Manager Distribution Operations, Canada The Hershey Company

Sanchia Duran

Account Manager Sales Shaw Tracking

Ed Ryan

CEO Descartes

Ken Manning

President Transportation Costing Group

Rob Penner

Executive VP and Chief Operating Officer Bison Transport

Paul Cooper President SLH Transport

2014 SUMMIT SPONSORS

For more information and to register, please visit www.SurfaceTransportationSummit.com PRODUCED BY MOTORTRUCK FLEET EXECUTIVE, CANADIAN SHIPPER, AND DAN GOODWILL & ASSOCIATES

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President and CEO Railway Association of Canada

Marc Wulfraat

President MWPVL International

Director Deloitte Canada

Ryan Fletcher

Canadian Account Manager Private Fleets PeopleNet Canada

Registration: 7:30 am Presentations: 8:20 am sharp MISSISSAUGA CONVENTION CENTRE 75 Derry Road West, Mississauga ON

14-09-03 4:45 PM 14-09-09 11:20 AM

es

WHAT’S ONLINE

continued

RETAIL REVOLUTIONS | 44 Will postal services transform their business models via e-commerce?

EAST COAST INFRASTUCTURE REPORT | 46 How are marine and air ports in Canada’s Eastern provinces staying competitive?

Taylor

eral Manager ervices

Retail Revolutions

44

w Faure

WEB TV Transportation Matters

ting Sales, P Intermodal

WESTWARD BOUND A look at Canada Logistics Conference 2014: leadership, technology, and surface transportation strategies.

FIRST AND LAST MILE Is ‘co-opetition’ the key in emerging market supply chains?

Wright

nt & CEO e Financial ration

Ä

FEATURES What’s the Buzz?

Transportation Appeal Tribunal of Canada aims to ensure fair enforcement of transportation safety

liaferro

ctor Canada

The TATC is an independent Tribunal that provides recourse to the national transportation sector affected by administrative actions taken by the Minister of Transport and holds review and appeal hearings for those who have received a notice pertaining to enforcement or administrative action. In a comprehensive overview of its role in connection with the industry, the Transportation Appeal Tribunal of Canada explains its mandate. ©Thinkstock

etcher

ount Manager Fleets t Canada

arp

Find us on Twitter at: @CanadianShipper

|

@LouSmyrlis

|

@JuliaKuzeljevic

|

@JamesMenzies

|

@FleetExecutive

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uga ON

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THE VIEW Lou Smyrlis, MCILT September/October 2014 Volume 117 Issue No.5

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

You can print this 3D printing will make us rethink our current supply chain practice

W

hen I first wrote about 3D printing in this space back in 2011, I’m sure many of our readers outside of manufacturing weren’t sure what I was talking about much less had considered the implications of this technology on supply chain practices. I recall a few of you even wondering if I was pulling your leg.

Well, I was dead serious back then when I suggested this technology has the potential to change the face of manufacturing and along with that the transportation and logistics practices of the future. I still think that today and three years later 3D printing, or additive manufacturing as it’s also called, has definitely started to enter supply chain discussions. Eye for Transport, for example, will be looking into the impact of 3D printing on supply chain at its Supply Chain Officer Forum in Amsterdam this November 18-20. In preparation for the event, Eye for Transport prepared an information packet, which I found interesting in terms of documenting how far the discussion about this technology and its impact on supply chain has progressed.

A recent Eye for Transport survey of manufacturers found that nearly 20% are already using 3D printing while more than 15% are currently evaluating it. A survey of logistics providers found that 37% now view it as a business opportunity while almost the same amount view it as both an opportunity and a threat. More than 40% believed it would have a moderate to substantial impact on the logistics services they provide just in the next three years.

Since 2011 I’ve had the chance to see this technology in action during a tour of Bridgestone Tire’s facilities in Nashville. I have to admit the experience was rather underwhelming.

But I can’t say the same about the end result. Watching the first additive manufacturing printer I had seen at work was no more exciting than standing beside the office printer and watching it place row after row of colored dots on paper to produce an image. Except that in this case the final product would be a three-dimensional object ready for use.

Using 3D printing technology, along with a blueprint on a computer, a solid object can be built up gradually from a series of layers - each one printed directly on top of the previous one.

The raw material used is a powder, which can be a metal, plastic, aluminum, stainless steel, etc., or a combination of these. The object-a spare part for a car, a hearing aid, a bicycle frame-is built by either depositing material from a nozzle or by selectively solidifying a thin layer of plastic or metal dust using tiny drops of glue or a tightly focused beam.

What’s important for those of us concerned about supply chain practices is that it changes the parameters upon which our practices are set.The traditional supply chain is typically about warehousing mass produced products and shifting them outwards from the point of manufacture. What 3D printing does is make customization of (admittedly smaller products) feasible and economical on a local scale. As Ed Morris, director of the US-based National Additive Manufacturing Innovation Institute points out: “In terms of impact on inventory and logistics, you can print on demand. Meaning you don’t have to have the finished product stacked on shelves or stacked in warehouses anymore. Whenever you need a product, you just make it.

And that collapses the supply chain down to its simplest parts.”

It also changes the focus on global procurement. If people are able to print a growing number of customized goods in their communities or even their homes, countries such as China and India lose their edge as low cost options for manufacturing on a variety of products. Basically, Morris says, it tears the global supply chain apart and re-assembles it as a new local system.

Mark Patterson, vice president of innovation and product incubation with DHL Supply Chain, gives the example of an iPhone case. Right now consumers have a limited range of styles, which are manufactured in China and shipped here over the course of about six weeks.

A customized iPhone case can be printed locally in about an hour. CS 6

September/October 2014

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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.

SUBSCRIPTIONS: Contact us at: mmarasigan@bizinfogroup.ca Tel: 416 442 5600 ext. 3548.

Fax: 416 510 6875.

Website: canadianshipper.com (click on sub­scription button)

SUBSCRIPTION RATES: Canada: $65.95 + applicable taxes, per year; $107.95 + applicable taxes, for two years.

U.S.A.: US$107.95 per year. All other foreign: US$107.95 per year. Single copies $8 except for the annual Logistics Buyers’ Guide (Aug) $60.95 + applicable taxes, (not including HST) plus $2.00 for postage. USA: US$68..95, Foreign: US$68.95 ISSN 2292-2490 (print), ISSN 2292-2504 (Digital), (Can­adian Shipper.) Indexed by Canadian Bus­iness Period­icals Index.

Printed in Can­ada. All rights re­served. The contents of this publication may not be reproduced either in part or in full without the consent of the copyright owner.

POSTMASTER: Please forward forms 29B and 67B to: 80 Valleybrook Drive, Toronto, Ontario, M3B 2S9 Second Class Mail Registration Number 0721.

PUBLICATIONS MAIL AGREEMENT 40069240 We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage MEMBER CANADIAN BUSINESS PRESS CANADIAN CIRCULATIONS AUDIT BOARD

www.canadianshipper.com

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MOL VESSEL

ON-TIME PERFORMANCE APR. - JUN. 2014

ASIA-U.S. WEST COAST

98%

ASIA-U.S. EAST COAST TRANSATLANTIC

58% 30%

ASIA-EUROPE

46%

ASIA–EAST COAST SOUTH AMERICA ASIA-MEXICO/WEST COAST SOUTH AMERICA INTRA ASIA

72% 67% 62%

TARGET: 100%

IN-TERMINAL

TRUCK TURN TIME

NORTH AMERICA JACKSONVILLE

JULY 2014 16.0 MIN.

LOS ANGELES OAKLAND

33.0 MIN. 22.0 MIN.

TARGET: <30 MIN.

Operations performance you can count on.

Arriving. Reducing. Processing. Improving. MOL is now in the third year of publishing key performance indicators.

Numbers can fluctuate for a variety of reasons but we strive to be your partner in performance. Review all of our fresh KPI results at CountOnMOL.com.

MOL (Canada) Inc. has offices in Toronto, Vancouver and Montreal.

To book cargo, visit MOLpower.com or contact MOL Customer Service at 1-800-449-7575.

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IN THE NEWS

ATLANTIC CARRIERS FACE TOUGH IMO FUEL REGULATIONS

8

September/October 2014

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Photo: Gilles Savoie

In the boardrooms of carriers shipping containers or bulk products across the Atlantic and between North European ports, anxiety is rising over looming costly regulations that will not immediately apply to any other trade lanes – adding further pressures on bottom lines and provoking potentially increased freight rates for shippers.

As of January, ships sailing on Canadian, US and European routes will be compelled to burn much cleaner and more expensive fuel under new environmental regulations by the International Maritime Organization (IMO), the UN agency based in London. They are not scheduled to apply to other global shipping routes, including Asia, until 2020 at the earliest.

North America and northern Europe fall within so-called Emission Controlled Areas [ECAs] where ships will be required to burn fuels with a maximum sulphur content of 0.1%. This compares to 1% at present and an average 3% worldwide.

Drewry Maritime Research in the United Kingdom suggests that switching from heavy bunker fuel to marine gas oil would offer the most practical solution to meeting the new sulphur limits in the short to medium term. Otherwise, installing exhaust “scrubbers” is prohibitively expensive while using liquefied natural gas will require very large fuel tanks that will reduce cargo space.

Certainly, the matter is high up on the radar screen at the Montreal headquarters of Canada’s biggest international dry bulk shipping enterprise that transports about 25 million tonnes of bulk and breakbulk annually.

Paul Gourdeau, executive vice-president of Fednav International Ltd., said in an interview: “The ECA requirement will have a significant cost impact, especially for the St. Lawrence and Great Lakes ports competitiveness since the length of the voyages within the ECA to reach these ports is significantly greater than competing East Coast ports.

“Since most ships will not be fitted with scrubbers or other SOX reduction technologies, they will be required to burn low sulphur gas oil instead of intermediate

BY LEO RYAN

Federal Kivalina enters St. Lawrence Seaway as part of regular Fednav FALLine service between northern Europe and the Great Lakes.

fuel oil when proceeding in the ECA.” Gourdeau estimates that the extra cost per tonne of fuel will likely be in the US$300 to US$400 range. “This will result in a significant fuel cost increase on those trade lanes.”

“Furthermore,” Gourdeau continued, “many ships have very limited diesel or gas oil storage capacity onboard and may often have to make intermediate port calls for the purpose of resupplying – which will also add cost and time to voyages.”

Deep-sea ocean carriers and short-sea European lines see no alternative but to pass on the extra costs to shippers.

A leading player in the Canada-Europe trade, Hapag-Lloyd estimates its transatlantic fuel bill will climb by US$120 million to US$200 million a year based on current fuel prices and its service network.

Maersk Line, its Safmarine unit between Europe and Africa, and Seago, its intra-Europe line, face a $200 million increase.

Hapag-Lloyd has stated bluntly that shippers will foot the bill.

“For all freight rates with validity in 2015, customers will have to amend their bunker formulas to cover the increasing costs for low sulphur fuel oil,” Hapag-Lloyd said in a recent statement. “Otherwise, Hapag-Lloyd reserves the right to charge an increased LSF [low sulphur fuel] surcharge separately once all cost components are confirmed.”

Shippers are already facing stiffer bills after the German carrier, citing continuing “dismal” financial results, announced general rate hikes

for all transatlantic cargoes effective July 1.

Drewry affirms that the introduction of marine oil will add around $29 to the cost of transporting a standard 20-foot container between the East Coast of North America and $49 for voyages from the US Gulf coast.The news is worse for small and older vessels than the current most modern fleets.

Niels Smedegaard, ceo of DFDS, a Danish short-sea shipping and logistics group, has warned of bankruptcies and route closures as the transport market slowly bounces back from the impact of the eurozone economic downturn. DFDS even plans to levy a low sulphur surcharge on shippers - a move that could drive some shippers to transfer their cargoes to trucks, further congesting Europe’s crowded highways.

Nevertheless, key players on the English Channel, North Sea and Baltic routes are investing heavily to comply with the new regulations. For one, DFDS has allocated US$140 million to equip 20 ships with scrubbers to remove sulphur from exhaust gas. However, it has warned that up to seven of its Baltic routes are still at risk of being closed.

As the marine industry prepares for the new “green” regime across the Atlantic, some observers are wondering whether the planned relatively low level of fines will not make it appealing for some carriers to resort to non-compliance.

For example, SeaIntel, an industry analyst, has calculated that a 4,500-TEU containership sailing at 16 knots from the entrance of the English Channel to Hamburg using 1% sulphur fuel, instead of 0.1% sulphur content, will save 12,000 euros (US$ 16,500) on this leg alone.That would be six times more than a German fine.

Meanwhile, not just ocean cargo shipping lines are weighing the overall costs of the upcoming new fuel regime. So are global cruise operators confronted with difficult decisions for the future. In this connection, one company running vessels in all the existing ECAs has calculated that the price of compliance could soar by up to US$275 million a year – compared with a current outlay of US$195 million. CS

O A

www.canadianshipper.com

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Old Dominion Freight Line, the Old Dominion logo and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2014 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.

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IN THE NEWS

CATHAY RESTORES ASIAN FREIGHTER LINK TO CALGARY Shippers in Alberta are poised to get a freighter link to Asia, courtesy of Cathay Pacific.The Hong Kong-based airline is due to

launch twice weekly all-cargo service between Calgary and its home base, with connections

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1-866-282-4332 CANADIAN INTERNATIONAL FREIGHT FORWARDERS ASSOCIATION

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September/October 2014

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throughout the Asia-Pacific region.

The carrier has set 17 October for the launch date of its new operation, which will utilize Boeing 747-8 freighter aircraft, which can carry 140 tons of cargo. Calgary is a stop on two weekly westbound flights from New York to Hong Kong.This routing will allow Cathay to load up Canadian exports to Asia while fuelling up, rather than have a pure refuelling stop in Anchorage.

James Woodrow, the airline’s director of cargo, says that his company is looking chiefly to the oil and gas sector to generate loads out of Alberta.

“We are very strong in oil and gas out of Houston. Calgary is not as big as Houston, but we are looking to build that up,” he comments, adding that Cathay is also targeting exports of meat and fruit.

“Cathay’s service here is driven mostly by oil and gas equipment,” remarks Mark Ruel, the airport’s director of air service development and industry relations.

“Oil and gas is time-sensitive. And there is a lack of capacity in our market,” he adds.

A freighter link across the Pacific has been a major target on his agenda since Korean carrier Asiana stopped its freighter flights from the US to Seoul via Calgary.

“When Asiana left in 2009, it left a hole in the market,” he says.

Stephan Poirier, the airport’s senior vice-president and chief commercial officer, highlights the Asian connection for Calgary.

“We have invested extensively in Calgary’s cargo infrastructure over the last 15 years, strategically positioning the airport for airlines such as Cathay Pacific to enter into Calgary’s market, completing our vision of linking Alberta’s businesses to Asia. As one of only two Canadian airports with non-stop freighter services to Europe and Asia, Calgary continues to be a place where people, places and business connect,” he comments.

Woodrow emphasizes the fast transit times to Hong Kong and Asian destinations continued

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14-09-09 11:21 AM

TO ALL OUR PARTNERS IN CHICAGO High-efficiency intermodal platform. First-class rail and road links. Strategically located on the shortest route between the Midwest and Europe or the Mediterranean.

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IN THE NEWS

beyond. “We will now be able to provide one of the fastest and most convenient ways to move time-sensitive freight from the Central Canada region, cutting down on time spent in transit, resulting in reduced handling costs for our customers,” he declares.

Unlike some rivals, who have cut down

their networks of freighter destinations, Cathay has expanded its roster of freighter destinations to generate better loads for these aircraft. North American destinations play a key role in this strategy.

“For freighters the transpacific market

retail and cpg APPS

“Cathay’s service here is driven mostly by oil and gas equipment.

Oil and gas is timesensitive. And there is a lack of capacity in our market.”

Mark Ruel, Calgary airport’s director of air service development and industry relations.

appsexpress.com 1.800.465.2513 12

September/October 2014

p08-13CdnShipper SeptOct2014_News.indd 12

is key,” Woodrow says. Demand has strengthened in recent months, but yields are still under pressure, he adds.

The addition of Calgary brings the number of freighter destinations in North America for Cathay to 14.

Freighter operators have been notoriously fickle, especially since the business went south in 2008, moving quickly in and out of markets. However, yields out of North America look set to remain weak for some time, underpinning the benefits of a stop that produces steady loads instead of a refuelling station. CS

www.canadianshipper.com

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LEADERS

Canada a “blueprint” for Kuehne + Nagel’s global businesses Background: Detlef Trefzger has been Chief Executive Officer and Chairman of the Management

Rob A. A

Portag

Board of Kuehne + Nagel International AG, Schindellegi, Switzerland since August, 2013. He previously was a member of the Kuehne + Nagel Management Board responsible for the Contract Logistics business unit.

Prior to joining Kuehne + Nagel, Detlef Trefzger was member of the Executive Board of Schenker AG, Essen, Germany, from 2004 to October 2012. He held

Gabriel M

C

worldwide responsibility for the business unit Contract Logistics and Supply Chain Management, and most recently he additionally was in charge of Global Air freight and Global Ocean freight.

It’s interesting that Canada was one of the first expansions for Kuehne + Nagel going back to 1953. Can you give us a sense of the importance of Canada within the worldwide Kuehne + Nagel organization?

CANADIAN SHIPPER:

Canada indeed was the first overseas settlement of the Kuehne + Nagel organization more than 60 years ago, and it’s still a very important country in the Kuehne + Nagel network, belonging to the top ten countries globally. In addition it is one of our breeding centres for our management.

Canada has a lot of tradition, it offers the full portfolio of our services and young managers are keen to to develop a career from here and then move on within the Kuehne + Nagel worldwide network.

Daniel B

M

DR. DETLEF TREFZGER:

Detlef Trefzger, Chief Executive Officer and Chairman of the Management Board of Kuehne + Nagel International AG

Jing

Miss

continued on p.18

Barbara

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September/October 2014

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A

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supply chain & logistics

cred-ability

No other credential says “professional logistics expert” as decisively as CCLP. CITT is proud to present the CITT-Certified Logistics Professionals who earned their CCLP designation between June 2013 & June 2014. Congratulations to the 125 dedicated supply chain logistics professionals who now join the ranks of the industry’s elite.

2014 www.citt.ca/cclp

Adeleye Oluwasanmi Adebusuyi, CCLP

Syeda Nazneen Akther, CCLP

Gandhi Alfaro, CCLP

Timothy M. Aseron, CCLP

James L. Backlun, CCLP

Portage La Prairie, MB

Gabriel M. Barberio, CCLP

Satinder Bhandari, CCLP

Jane Bigmore, CCLP

Shannon Blanchard, CCLP

Erwin Bolanos, CCLP

Danielle N. Bolianaz, CCLP

Daniel Boljkovac, CCLP

Lise Bourjot, CCLP Toronto, ON

Lisa Ann Brown, CCLP

Cheryl A. Bullen, CCLP

James Burkett, CCLP

Eian Campbell, CCLP

Moncton, NB

Jing Si Cao, CCLP

Sherilyn A. Carson, CCLP

Luis Vazquez Casal, CCLP

Linda Chen, CCLP

Andrew Danchuk, CCLP

Frank DeVries, CCLP

Barbara A. Dobbs, CCLP

Dean Evans, CCLP

Neely Fawcitt, CCLP

Ying Feng, CCLP

Mark Gaweda, CCLP

Deborah Gee, CCLP

Rob A. Adamson, CCLP

Calgary, AB

Mississauga, ON

Acton, ON

Grande Prairie, AB

Brampton, ON

Meadow Lake, SK

Edmonton, AB

p14-21 CdnShipper SeptOct2014_Leaders.indd 15

Winnipeg, MB

Mississauga, ON

Calgary, AB

East York, ON

Ajax, ON

Toronto, ON

Surrey, BC

Spruce Grove, AB

Quispamsis, NB

Toronto, ON

Richmond Hill, ON

Saskatoon, SK

Hamilton, ON

Winnipeg, MB

Toronto, ON

Milton, ON

Winnipeg, MB

Cambridge, ON

Cambridge, ON

Spruce Grove, AB

14-09-09 11:22 AM

Steve W. Giuricich, CCLP

François Gosselin, CCLP

Kelly Grace, CCLP

Lemin Guo, CCLP

Carlyle Henry, CCLP

Wazid Hyatali, CCLP

Shahid Jamil, CCLP

Ayesha Javed, CCLP

Robert Jensen, CCLP

Hong Ying Jiang, CCLP

Sathiaseelan Karunakaran, CCLP

Aaron W. Keating, CCLP

Kitchener, ON

Brampton, ON

Drummondville, QC

Mississauga, ON

Surrey, BC

Abbotsford, BC

Mississauga, ON

Richmond Hill, ON

Brampton, ON

Vaughan, ON

Toronto, ON

Saint John, NB

Thomas A. Kobayashi, CCLP

Lisa Korniychuk, CCLP

Michelle Kruk, CCLP

Johnathan Laird, CCLP

Carole Lamont, CCLP Iles Des Soeurs, QC

Ran Li, CCLP Markham, ON

Yang Liu, CCLP

Nan Lu, CCLP

Jeremy Magotiaux, CCLP

Karen M. Manchur, CCLP

Kelly Marek, CCLP

Bruce McNiven, CCLP

Georgetown, ON

Mississauga, ON

Toronto, ON

Mississauga, ON

Winnipeg, MB

Winnipeg, MB

Burnaby, BC

Mississauga, ON

Toronto, ON

Brampton, ON

David

Grand Ba

Leann

La

r

Pho

Ama

Yuri B

Thier Abel C. Mharapara, CCLP Calgary, AB

Sara Donn Morine, CCLP Saint John, NB

Leanne Munro, CCLP Guelph, ON

Juan Carlos Nino, CCLP Port Moody, BC

Mathieu Noreau, CCLP Montreal, QC

Bernard Ouellet, CCLP

Notre Dame De L’ile-perrot, QC

Dona

Ryan

Josep

Stjep Nick

Alexa

Dany

Fredr Lindsay Ouellette, CCLP Surrey, BC

Loni K. Palmer, CCLP Vancouver, BC

Rajendran Ponnuswamy, CCLP Ruwi, Muscat, Oman

Benjamin Power, CCLP Riverview, NB

Daniel Power, CCLP Saint John, NB

Sheetal Prashar, CCLP Aurora, ON

Kevin Sam

Leo M

Eric M Inge Joel

Avi M

Stephen Pratte, CCLP Winnipeg, MB

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p14-21 CdnShipper SeptOct2014_Leaders.indd 16

Inderpreet Shokar, CCLP Brampton, ON

Amir Siddiqui, CCLP Toronto, ON

Daniel Smedo, CCLP Laval, QC

Patrick Smedo, CCLP Laval, QC

14-09-09 11:22 AM

ww

i, CCLP ON

ng, CCLP NB

David Smith, CCLP Grand Bay/Westfield, NB

Andrea Spencer, CCLP

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Guillermo F. Ugalde, CCLP

Cresana M. Virtudazo, CCLP

Peng Xian, CCLP

Wayne Dan Yip, CCLP

Langley, BC

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CLP ON

n, CCLP

ON

et, CCLP

-perrot, QC

ar, CCLP

ON

o, CCLP

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supply chain & logistics

recognize-ability Photographs of these 2014 CITT-Certified Logistics Professionals were not available: Amanda L. Bartko, CCLP, Edmonton, AB

Kenesha Neil, CCLP, Brampton, ON

Yuri Butler, CCLP, Calgary, AB

Doreen Newman, CCLP, Woodstock, ON

For more information

Thierry Cano, CCLP, Toronto, ON

Joseph Nudo, CCLP, Caledon, ON

about logistics courses and

Donald I. Clarke, CCLP, Chateauguay, QC

Derek Polman-Tuin, CCLP, Surrey, BC

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Ryan J. Connell, CCLP, Calgary, AB

Alena Prasad, CCLP, Edmonton, AB Kerry Ronald Rambalie, CCLP, Mississauga, ON

CITT, visit www.citt.ca or

Joseph Desjardins, CCLP, Olds, AB Stjepan Filakovic, CCLP, Calgary, AB

George Randall, CCLP, Ingersoll, ON

Nick Gianikos, CCLP, Surrey, BC Alexander M. Graca, CCLP, Halton Hills, ON Dany Graziano, CCLP, Laval, QC Fredrick Highland, CCLP, Scarborough, ON Kevin Lee, CCLP, Windsor, ON Sam Lui, CCLP, Burnaby, BC Leo Mark, CCLP, Ancaster, ON Eric Mathias, CCLP, Mississauga, ON Inge McGrogan, CCLP, Woodbridge, ON Joel Mikkelson, CCLP, Winnipeg, MB Avi Milgram, CCLP, Montreal, QC

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contact us at 416-363-5696 or info@citt.ca

Gurinder Jit S. Samrao, CCLP, Caledon, ON Malcolm Skingley, CCLP, Dundas, ON Michael Stojanoski, CCLP, Aurora, ON Andy Tobler, CCLP, Vernon, BC Allan C. Umoquit, CCLP, Markham, ON Mathieu Vezina, CCLP, El Paso, TX, USA Hans Voortman, CCLP, Ancaster, ON Peter Westhouse, CCLP, Hamilton, ON Ryan Willey, CCLP, Winnipeg, MB Alexandra Zaborsky, CCLP, Airdrie, AB Zhongshui Zhang, CCLP, Mississauga, ON

www.citt.ca • info@citt.ca • 416-363-5696

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LEADERS

continued from p. 14

We speak all languages in Canada. The Canadian organization is, like our national companies in Germany, the Netherlands, Mexico and Singapore, exactly how we would like to have the international organizations set up. These are blueprints for how we want to do business globally with regard to the competence of the people, and the full portfolio of services.

Mercado, WSL, WS Leasing, Calgary, Experts CANADIAN SHIPPER: For those not familiar with the network, .indd what is the size of the operation?

FILE SIZE: 3.375”wide x 4.875 high | C M Y K BLEED: 0.0"TREFZGER: on all sidesGlobally, approximately 63,000 employDR. DETLEF ees operate at more than 1,000 locations in over 100 countries. In Canada we have 16 operational branches offering a mix of forwardby: logistics.

Westminster Marketing Department ingPrepared and contract Here,Savings we employ 1,100 people, 600 in contract logistics, and 500 in the forwarding business.

We offer all the Marketing Services Coordinator: Vivian Cheung touch points of the supply chain including customs clearance and D 604.528.3833 E vcheung@wscu.com control tower activities, messaging, track and trace, etc.

Prepared by: Westminster Marketing Department CANADIAN SHIPPER: One Savings of the most important things about Canada is that we shareCarly a border Graphic Designer: Swiftwith the largest economic power in D 604.528.3845 E cswift@wscu.com

“Canada is a unique place in North America in that we develop solutions here and take those solutions to other regions and countries.”

the world. How important is the US economy to Kuehne + Nagel’s overall operations?

Canada belongs to the NAFTA region and we employ almost 6,000 people in the US in our 90 branches there.The US and Canada share the longest land border in the world between them so therefore we have a customs-oriented approach.

DR. DETLEF TREFZGER:

Are there specific solutions within the NAFTA region that you cross-sell across the globe?

CANADIAN SHIPPER:

DR. DETLEF TREFZGER: To

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start with contract logistics, we are going to establish a centre of expertise in Canada for warehousing - it will be a global activity. All the solutioning for complex warehousing e.g. for the pharmaceutical and telecommunications industries will come out of Canada, and the global support team will be stationed here in Toronto. We have a lot of activities in pharma.

Canada is a unique place in North America in that we develop solutions here and take those solutions to other regions and countries. We have references for each and every thing we do somewhere else in the world in Canada.

CANADIAN SHIPPER: Can you give examples of some case studies?

DR. DETLEF TREFZGER: We perform control tower activities for a major automotive Tier One based here in Canada -we even won a prize as a service provider for our overland traffic solution in Europe. We developed that solution specifically for that customer.

For a company such as Kuehne + Nagel, obviously every area has its unique strengths. When you look specifically at the Canadian operation, what would you identify as those unique strengths and capabilities?

CANADIAN SHIPPER:

It’s the sincere quality approach, the operational excellence, comprehensive expertise in regard to solutions for our target industries and the excellent reputation for developing talents.

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18 September/October 2014 www.canadianshipper.com

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CANADIAN SHIPPER: Where does the Canadian operation rank nationally when looking at air freight, sea freight, contract logistics, and customs brokerage? How does it rank against competing companies? continued on p.20

14-09-09 11:22 AM

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LEADERS

continued from p. 18

DR. DETLEF TREFZGER: In Canada we are market leaders in sea freight and air freight. In contract logistics we will develop our position further. For many of our customers we are also the partner of choice for customs brokerage.

CANADIAN SHIPPER:

I’m assuming that

to maintain that leadership position and grow it in other areas as well one of the key challenges for your company and many companies is talent recruitment and retention. Certainly that is going to be a challenge as we have a lot of people retiring who have been in supply chain and logistics for a long time. That experience is

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Challenging tasks are assigned to them and the results of which are presented to the Management Board. It’s an international program with participants from all over the world. This also will help to optimize the collaboration within the organization.

DR. DETLEF TREFZGER:

CANADIAN SHIPPER: So you are not just relying on the educational institutions within these countries to provide the knowledge base necessary-the organization itself is getting involved to make sure it is spreading that knowledge within the workforce?

Exactly. Our organization has its own development and training programs because we have specific content and focus topics that we want our new managers to be aware of and apply them in their daily work.

DR. DETLEF TREFZGER:

CANADIAN SHIPPER: Being international in scope, you’re able to learn different things in different parts of the world, and then bring that knowledge and experience to Canada, the US, Europe-you’re able to spread that around?

As I said it’s a cross-selling approach on solutions and experience to other customers, industries, countries, and regions, and to cope with the diversity and different requirements we see all over with our customers.

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14-09-09 11:22 AM

CROSSBORDER TRADE REGS

MANIFESTING BELIEF Communication, participation encouraged in the ramp up to e-Manifest

BY JULIA KUZELJEVICH

rade data is going where no one has gone before. eManifest, a multi phased, multi year project that aims to modernize and improve cross-border commercial processes, will, once it’s fully implemented, require all carriers, freight forwarders and importers to send advance commercial information about their shipments electronically to the Canada Border Services Agency (CBSA).

The collection and risk assessment of pre-arrival data also aims to improve the Customs and Border Services Agency’s ability to detect high-risk shipments before they arrive at the border. As Oryst Dydynsky, a Consultant at DAP International Trade Consulting puts it, “The movement of data and documents is becoming more important than the movement itself.”

“EManifest is a major transformation.

We’ve seen that in a lot of government agencies’ scope of modernization and transformation,” said Candace Sider, Director, Regulatory Affairs at Livingston International. It’s a change in how they do business, to be able to risk assess and deploy resources where it makes sense. There is a real will though to address challenges and put in corrective actions. Now we’re in an informed compliance stage so participants should be submitting data electronically,” she added.

Where things have lagged is in uptake and preparation. These have by no means been a smooth sail.

The freight forwarder piece, which should have been going through in July this year, is delayed. In some cases message mapping is not in place yet on the freight forwarder piece.

“There are some concerns about consolidations in terms of secondary cargo info and what’s that message map that will determine if that good is ready to move or not,” said Sider.

“Freight forwarders have been voluntarily trading house bill data since spring 2013 but the numbers have been low. But they have proven they can move the information, though there are still some tweaks required,” said Oryst Dydynsky, who is also the Cochair for the IE Canada Customs and Legisla-

©Thinkstock

T

tive committee and the CIFFA committee.

Many Canadian freight forwarders are already sending supplementary data, and informed compliance is in effect for highway carriers. “Some of the challenge unfortunately is the scope of the project is very significant and touches on other government departments. Perhaps it’s not realistic to say everything will be implemented end 2014. When CBSA says we’re at that enforcement stage, it’s important for noone to be blindsided. There isn’t an opportunity not to participate,” said Sider, who added, “It’s a totally different way of looking at business but with opportunities for efficiencies and reduced cost.”

While there has been a lot of active engagement, Sider said, there are probably more carriers that need to be engaged.

“In some cases non-resident carriers may be a bit out of touch about what’s happening. But hopefully they’re aware at this point. The agency has done a lot of outreach. They are not going to get released at the border if they have not sent their conveyance data,” she said.

Another consideration is that companies really have to take a look at what their IT manpower hours are to have successful implementation.

“There has to be infrastructure investment. In tandem with that is there is also the

communication outreach, making sure our clients are aware of the changes that are coming, what they mean and what they need to do to be ready. When it comes to working around the potential pain points of implementation, in addition to the Customs requirement of one hour advance reporting, the customs broker will require an additional two to three hours to prepare the importer’s advance information,” Sider pointed out.

“I think there is a bit of a misnomer.

CBSA may be under the impression 90% of the data is in electronic format. The truth is that in the environment we’re in today the reality is that when eManifest is implemented we’re still going to receive faxes, and hard copy documents that we will have to put into electronic format for CBSA to do the risk assessment. If it’s a straightforward shipment, fine but if it’s multiple pages or lines, it has to be reviewed for OGD parameters.

There’s a lot of discussion right now, and a draft e-mail out about what are the requirements in terms of providing the information within specific time frames,” said Sider.

While CBSA has not announced an official implementation date, they have announced that there will be a 45 day implementation timeline when that new date is eventually decided.

“That’s very tight. Companies will have to be very proactive. Importers, carriers and

22 September/October 2014 www.canadianshipper.com

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CROSSBORDER TRADE REGS

vendors will have to be communicatingthe last thing they want to see is a delay in their cargo. When I refer to EDI, most importers are doing the bulk of their business with 20% of their vendors, so those are really the vendors they want to be most engaged in, to get some type of EDI format, and expedite the whole clearance process.

The whole intent of eManifest is to risk assess, and deploy resources where it makes sense.They will look at shipments that pose the highest risk. I think the agency is very committed to identifying challenges in eManifest that prohibits it-identifying what those are, very quickly risk assessing how they can move forward.We anticipate some movement on that by the end of the year, and a better sense of those final implementation dates going forward. I think the agency is committed to getting it right.

They’ve partnered with external third party service providers. It really is a collaborative discussion,” Sider said.

Sometimes when you’re walking through the process in theory it works but in practice there are certain caveats that prevent it from being successful, she added. eManifest will be a ‘new normal’ for freight forwarders in Canada. Investing in the future “is going to cost money,” said Dydynsky “You need to budget for it. Canada is close to reaching the 1 billion mark in investments as Customs positions themselves for an electronic environment. They do not receive paper, they will not stamp documents anymore,” he said.

The next piece in the puzzle after the investment aspect is the budgeting: Who will champion these efforts within your organization, assign schedules, etc?

“Senior management needs to know about it and you need to have a project manager for this new process,” he said.

Other government departments in Canada are involved in the single window initiative with Customs the gatherer of that data.

“The initiative is on a fast track.The active ones are those that need to be involved in the release of the goods, and the passive ones that need the data after the fact. All trade chain partners will be required to move the data to Customs,” Dydynsky said.

What does eManifest promise for commercial transactions?

“It has proven quicker at the border.

From a Canadian perspective (Customs) feel if they have that info the threat, whether real or potential, is reduced. That remains to be proven as we move through the process of a new electronic environment. The quality of the information, i.e. the description of goods, has always been a problem. It continues to be a problem, and will continue to be a problem. There may be circumstances where amendments to data will be required and will be allowed. You can make the amendment after the fact if you find it. But if they find it there will be a penalty,” he said.

A voluntary compliance period will remain in effect until eManifest-enabling regulations come into force. The CBSA will communicate when regulations to enforce eManifest requirements for freight forwarders are expected to be in place,

tive. “We are not fighting change, but it is evident that eManifest ‘freight forwarder component’ is not ready to come to market.

The freight forwarding community requires a year to implement after we have achieved a solid platform of policies from which to operate, transmissions tested in the thousands, and a regulatory framework that is reasonable and workable. Therefore we urge the CBSA to move back the mandatory eHBL implementation date for freight forwarders.

Last week in a bi-lateral meeting with senior representatives of the CBSA we thoroughly discussed our letter and provided additional context to help the CBSA understand the issues at the highest levels of the organization.

The planned date of July 1, 2014 for mandatory freight forwarder eManifest will be changing. However, the CBSA cannot provide a new mandatory date. We also held at-

Sometimes when you’re walking through the process in theory it works but in practice there are certain caveats that prevent it from being successful once confirmed, and at least 45 days in advance of the mandatory compliance date.

With the implementation of eManifest, freight forwarders in all modes of transportation will be required to transmit house bill data to the CBSA within mode-specific time frames. Freight forwarders will also be required to transmit a house bill ‘close’ message once all house bills within a consolidated shipment have been sent to the CBSA. The ‘close’ message establishes the link between the previous Cargo Control Number (CCN) and the lower-level house bills in the chain of cargo control. House bill data provides the CBSA with detailed secondary cargo information on shipments that are consolidated and require deconsolidation, and are similar to supplementary data currently provided in the air and marine modes. In their May 13, 2014, eBulletin, the Canadian International Freight Forwarders Association (CIFFA) made note of a letter the association had sent to the Vice President of the Canada Border Services Agency on March 31, about the freight forwarder component of the initia-

tended several meetings and sub-committees in Ottawa with the CBSA, still trying to hammer out detailed policy and systems solutions to a complex eManifest project. We are making some progress. We are also adamant that we must have tested systems that can transmit data, the capability of moving cargo out of the terminals, and a full understanding of the requirements before eManifest is made mandatory - or can even be tested significantly. The CBSA has acknowledged our request and, we think, will provide the additional transition time needed to implement. However, it is coming.We must use this additional time to prepare.We encourage you to continue to test with eManifest. Customs brokers and freight forwarders must invest in the ‘catcher’s mitt’ data capture in their systems that will make Manifest Forward a benefit. Drive your third party service providers to get their systems approved and tested. The date is coming - maybe in three months, maybe in six months. We must be prepared,” CIFFA said. As of July 28, 2014 CIFFA noted, there were 948 freight for-

CS

continued

p22-31 CdnShipper SeptOct2014_USCoverStory.indd 23

www.canadianshipper.com September/October 2014 23

14-09-11 7:52 AM

Hercules D

CROSSBORDER TRADE REGS

continued from p. 23

warders in total, 522 bonded and 426 nonbonded. From May 2014 to July 2014 there were 2107 electronic house bills and 72 house bill close messages.

With the implementation of eManifest, freight forwarders will also require an 8000-series carrier code (a four character

code that begins with an ‘8’) in order to transact business with the CBSA. A carrier code is a four-character unique identifier that is assigned by the Canada Border Services Agency (CBSA) to identify a carrier. Only one carrier code is issued to each legal entity (corporation,

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partnership or sole proprietorship).

CIFFA said it will make its Members’ 8000-series carrier codes available to the public, on a voluntary basis, by allowing Member firms to add their 8000-series carrier code to their company profile data on the CIFFA website. By sharing a code, the Member agrees that it will be made public.

While come concerns have been raised regarding privacy, CIFFA commented that mandatory electronic submission of HBL data “should eliminate any concerns regarding abuse, as both the portal and Manifest Forward will require electronic business profiles in place with CBSA prior to a company having the ability to transmit HBL data electronically or receive a Manifest Forward.

This should alleviate the majority of concerns; however there may still be a slight window of risk. It is a good idea as the list of 8000 codes does not exist anywhere else,” said CIFFA. Forwarders and carriers will need to know 8000 codes and whether or not that code is bonded, especially in coload situations. Manifest Forward will allow trade partners to identify other parties (e.g. carrier, freight forwarder, warehouse operator, customs broker) within the trade chain to whom the CBSA can forward an electronic copy of house bill data. The parties to whom the CBSA can forward house bill data are nominated by the transmitter of house bill data through a Secondary Notify Party (SNP) identifier (ID). Carriers will be identified by their carrier code, Freight forwarders will be identified by their 8000-series carrier code. Brokers will be identified by their account security number, and warehouse operators will be identified by their sub-location code. Importers (TBA) CIFFA has prepared a fact sheet that provides clarification and the most current information on the 8000 series carrier code. The document has also been reviewed by the CBSA, the association noted.

It includes definitions, the differences between bonded and non-bonded 8000 series, how to apply for an 8000 series, when you need it and much more. 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.

24 September/October 2014 www.canadianshipper.com

p22-31 CdnShipper SeptOct2014_USCoverStory.indd 24

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14-09-09 11:23 AM

CROSSBORDER TRADE

TAKING THE LONG TERM VIEW SHIPPERS MUST STAY AHEAD OF THE CURVE ON THEIR TRANSBORDER STRATEGIES

BY JULIA KUZELJEVICH

F

or shippers transiting the border between Canada and the US a number of issues remain front of mind.

Whether it’s taking into account the effects of US Hours of Service regulations on drivers or CSA Safety Measurement System scores for fleets, pricing mechanisms and border wait times, transborder is a complicated mix. Canada and the US share a relationship that generated more than $340 billion in cross-border trade in 2013.

Trade growth is up but supply chain networks still struggle as they recover from a stagnant first quarter 2014, choke points and tight capacity scenarios.

In a recent JOC Group webinar on trade, Dawn Desjardins, Assistant Chief Economist with the Royal Bank of Canada, said that despite a slow start for 2014, as the economy dipped because of weather delays and stoppages, that weakness didn’t persist into the second quarter.

Desjardins predicts 3.4% growth for 2014 and 4 % growth heading into 2015 for Canada.

She also pointed to durable goods orders that are in recovery mode in the US. “It’s a story of broadbased gains for the US

economy. We think the US trade sector will show good momentum, and good activity. A strengthening in the domestic economy will spur import activity,” she said.

Canada suffered the same weather-related issues as the US in the first quarter. “For Canada, our monitoring suggests the economy picked up speed in the 2nd quarter. We think positive momentum will be sustained over the next 18 months. There’s been a pickup in foreign demand for Canadian exports. We had been reliant on domestic demand, and we are starting to see a narrowing in that gap. This will be key to prolonging and seeing our economy grow at quicker rates,” she said.

“Volume has picked up in crossborder traffic and this has much to do with the accelerated growth of the US economy, not so much the Canadian economy,” said Guy Toksoy,VP & General Manager, Supply Chain Solutions at Ryder Integrated Logistics.

Southbound traffic has increased and southbound freight rates are increasing along with this.

“The fact that there is a severe driver shortage in the US and that the new Hours of service regulations were put in place several months ago has added to the scarcity of resources,” said Toksoy. continued

26 September/October 2014 www.canadianshipper.com

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©Thinkstock

14-09-09 11:23 AM

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CROSSBORDER TRADE

continued from p. 26

The driver shortage situation in Canada is not far behind the US, and this is creating a market where carriers can charge higher freight rates and modify routing options.

“Some of the engineering analysis done on certain routes may need to be modified.

We have had to do that for our steady runs into the US. Some of the designs have changed. Ryder has the advantage in the sense that for our dedicated and even managed transport solutions we have a strong presence in the NAFTA countries and can work with those organizations to bring available capacity in. Having that presence in those markets has been very beneficial,” said Toksoy.

He also noted there is increased inventory in the supply chain. “In order to respond to delays whether crossborder or driver rest times the inventory has increased in the supply chain (especially on some of our automotive accounts) and there is a propensity for some of our clients to look toward safety stock which for years had

been coming down,” he said.

An engineering and solutions view to transport analysis has become “really necessary” for when the constraints change, Toksoy said. “We are being asked to model pool points or cross docks, enable steady flows. The port situation is a completely different animal but it is indicative of supply chain disruptions that throw off all the inventory models people have been working with,” Toksoy said.

Capacity issues will fluctuate depending on the region in question, noted Mike Chapman, Vice President Sales at Transplace Canada.

“We’re definitely finding an imbalance of commodities coming out of Canada, affecting TL carriers in terms of backhauls. So shippers are having to pay a lot more money to secure the trucks. We’re educating our customers to stay ahead of the bell curve on regions where prices are affected,” he said.

The border has its good days and bad

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p22-31 CdnShipper SeptOct2014_USCoverStory.indd 28

days, and there are not as many headaches as a couple of years ago, said Chapman. But he said “we have not seen the worst on the driver shortage. We owe it to clients to educate them about what’s coming down,” he added.

Chapman noted that some Canadian fleets entering the US are now hauling on a 400-500 mile radius vs. distances like 600-750 miles.

“Currently there is a tightness of equipment off the East Coast and back into Canada. There is more freight than trucks,” he said.

With capacity tight,Transplace consulted with some of its customers on adjusting their order processes.

“Could they ship a little bit in advance vs. Just in Time? For some of our customers we’ve set up a staging scenario at our crossdocks and we’re not charging them for that.

We knew going in that we were able to do that from our own crossdocks-we didn’t strip every load but if we had shipments going on to the Maritimes we would hold on to them. We tried to work with all parties. We have two customers who have already said this is the kind of solution they want to have built in to their own business model. We’re now going in to some of our other clients to see if such scenarios can also work for them,” said Chapman.

With West Coast port issues still on the radar, lots of shippers are asking for options via alternate ports, shipping earlier in the season, or making use of transshipment and storage availability, he said.

Thanks to a healthy e-commerce market, shipments originating in the US and shipping to, from and within Canada are also on the rise, creating the need for better fulfillment capabilities both sides of the border.

“E-commerce is another driving force in the increase of shipments to Canada making the traditional brick and mortar walls of retailers disappear,” said John Costanzo, president, Purolator International. The company first incorporated in the US in 1998 with one office and is now up to 30 markets that represent 80% of its trade with Canada.

“Our customers in the US that ship to, from and within Canada are looking for ways to improve and enhance their overall Canadian distribution and supply chain operations,” said Costanzo.

In July Purolator International expanded its capabilities through Purolator Logistics, offering a one-stop shop for several logistics capabilities including warehousing, continued

14-09-09 11:23 AM

FREIGHT SYSTEMS LTD.

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Cross Border LTL and Truckload Freight Management Logistics Warehousing and Distribution

14-09-09 11:23 AM

CROSSBORDER TRADE

continued from p. 28

fulfillment and returns processing.

Transportation spend to Canada has also increased slightly this year to 29%, Costanzo noted.

“Purolator International has about 12% share of the small parcel market and is aiming for 30%,”he said. Production costs in Asia have been rising and Costanzo attributes this to the increases in cross border movements, as product is sourced closer to market.

“Some big companies have pulled out of Canada, as a result of not having a good handle on their logistics costs. A lot of industrial companies have a good understanding of running in Canada, and 60-70% of our customers are industrials.

The industrial returns rate is fairly low but consumer goods are a different story-they have a 10-20% returns rate. Our Etobicoke facility is one of our induction points from the US to Vancouver and to Montreal and is used also for returns. The majority of our returns to the

US go through Etobicoke,” he said.

The company’s PuroPost hybrid service, only offered from the US, includes pickup, linehaul and full integration into the Canada Post network. “On the e-commerce side, returns are a big challenge. We added a nice feature for returns which is the ability for customers to drop a shipment at a Canada Post counter and have it returned through them to US retailers,” Costanzo said.

The Port of Vancouver has become a growth area for Purolator International but the challenge clients have in Canada is that it’s vast.

“Moving shipments from a DC in Toronto to Vancouver can be intimidating, or the reverse with companies in B.C. setting up in Ontario. Trying to serve the whole country from one DC doesn’t give quality consumer experience which is the aim of the consumer products industry. Fulfilling from a US DC is often the better option for some

companies and we work with a lot of companies to do that. Our logistics division allows companies to set up distribution in Canada via multi user warehouses, distribution of smaller lots,” he said.

“HOS and further regulations on the transportation industry are here to stay so I think people are taking a long term view.

There may be certain instances where reactionary things are happening. In our business nothing is long term design and forget.We’re always in a flux-we have to be flexible, innovative and creative with our solutions. That’s the beauty and difficulty of the supply chain,” said Toksoy. 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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14-09-09 11:23 AM

E-COMMERCE

A whiplash effect A LOOK AT THE RISE OF E-COMMERCE AND ITS EFFECTS BOTH SIDES OF THE BORDER

BY KEN MARK

T

here’s a bright future for retail and it’s omnichannel. That’s e-commerce talk for a seamless, multi-stream link to all consumer shopping experiences. That includes digital, electronic, paper-based, bricks-and-mortar and other modes yet to be devised.

More relevant to Canadian Shipper readers is the whiplash effect on the supply chain that this revolution has unleashed. All this and more is contained in his 2013 Industry Canada report, The Impact of Logistics on E-Commerce in Canada.

In the tight 32-page publication, Al Saipe, the retired KPMG consultant and current president of Supply Chain Surveys, Inc. lacked the space to highlight all the challenges and solutions at play. And yet, Saipe touches on the major issues that retailers and their logistics service providers must address to ensure their prosperity amid the disruption from digital commerce. Their common concern is the proliferation of choices.

For generations, retailers successfully followed a simple and basic business model. Customers entered stores, chose items they wanted to buy, paid for them and took them home. Not only has the Internet broken up that cozy cycle, it also continues to add new wrinkles with each passing day. All players must now adapt quickly or fall behind.

While most estimates conclude that about 10% of Canadians are buying on-line, the percentage of those shopping online is much higher. “That figure is just for actual transactions. When you include pre-purchase activities – awareness and discovery — that involve checking product availability and prices or just browsing — it’s actually closer to 85%,” says Ashish Anand,Vancouver-based partner with Chasm Digital Inc. “Most surveys don’t capture the complete picture. We are seeing a digital retail world that will flush out inefficient operators.”

Industry Canada commissioned the Saipe study since it fears that Canadian firms, especially small- and medium sized online merchants are falling behind their counterparts in other nations.

To catch up, he counsels them overcome their conservative approach to business, reluctance to innovate and unwillingness to invest in technology. More specifically to overcome their lack of size, scale and resources, he suggests upgrading their business strategies to: 32 September/October 2014 www.canadianshipper.com

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• Focus on developing unique or branded goods unavailable from competitors that do not compete on price and have higher margins to absorb higher logistics costs.

• Optimize packaging • Increase value and size of individual orders.

• Offer a wider selection of products • Try drop shipping — accept orders but have producers or external DCs to ship products • Segregate e-commerce fulfillment from regular products in DC • Set up a special, dedicated facility • Share services by working together with others to combine LTL into TL shipments.

• Engage third-party logistics service providers • Deliver items to convenient drop-off location – stores, stations, etc. not to homes In e-commerce’s infancy, shoppers were limited to choosing and buying on desktop computer screens.Today, screens are getting smaller, more powerful and more mobile. For example, there are reports of a Chinese airline planning to install an in-flight system that will enable passengers to order vehicles from their seats. Such wild-eye innovations will reshape today’s retail landscape beyond recognition.

Ordering from almost anywhere at any time is just the front end. As always, the key to closing the deal and getting paid is delivering orders on time, in good condition and at reasonable cost. Originally, shipping online purchases to offices or centralIllustrations ©Thinkstock

14-09-09 11:24 AM

E-COMMERCE

20 cm while almost all the others use 25 cm. In fact, I had to special order envelopes from a stationer to comply.”

The lack of consistent standards often leads to other problems when Canada Post provides final delivery services for major couriers such as FedEx, UPS and Purolator. (The last named is 91% owned by Canada Post.)

“Canada Post has more restrictive package limitations in their network than do either Purolator or UPS Canada,” says Jack Ampuja, Amherst NY-based CEO of Supply Chain Optimizers. “If a shipper hands Purolator Ground a parcel but Canada Post completes delivery, the customer will have to come to the post office if the package(s) exceed any of those Canada Post maximums… or it will be returned to the shipper at the cost of the shipper-of-record.”

According to Ampuja, for Purolator Express Network service, the maximum package attributes are weight 150 lb., longest side = 96” and parcel size, 144”. However, Canada Post maximum package attributes are weight, 66 lbs., longest Side, 78” and parcel size, 118”.

“That’s the problem for Canadian shippers who want to use ecommerce to grow their business,” he says. “They cannot accurately state the cost or time-in-transit for their customers in remote deliveries. The shipper can’t even confirm that the package will make it to the destination or if the customer will have to drive to a post office to pick up themselves.”

One issue not raised in Saipe’s report is the e-commerce impact on real estate.According to aVancouver real estate executive, e-commerce double-digit annual growth rates are boosting demand for facilities close to large populations to meet consumer demands for speedy deliveries of their orders.Without such land available, many e-commerce projects and the accompanying jobs may go elsewhere.

In the Lower Mainland, however, the executive points to the recent 19 ha. Boundary Bay Industrial Park, the site of 83,613 sq. m. (900,00 sq. ft.) distribution centre featuring 10.9 m ceilings and reinforced floors to house inventory and state-of-the-art picking equipment.

At the consumer end, cutting–edge concepts such as BufferBox are starting to emerge.The Canadian-developed technology offers centrally located, temporary lockers to store packages sent by online retailers.They ask users to sign up for a BufferBox address. When the parcel arrives at a self-service kiosk, users receive an e-mailed single-use code to pick up the package. Afterwards, the locker becomes available for another user. After buying the Waterloo-based start-up in 2013, Google recently announced that it will soon close Canadian operations and move it down to its California head office. It is reassuring to see Canadian IT entrepreneurs developing solutions for tomorrow’s omni-channel retail problems. CS

ized depots for customer pick up was more than good enough.

But now home delivery has become the Holy Grail. Online retailers are eager to satisfy today’s double-breadwinner families’ demands for greater convenience. But as courier companies have discovered, achieving receipted domestic deliveries in the era of working couples remains a huge challenge.

As well, the Internet has complicated how and where to fulfill and deliver those goods. Faced with more choices, consumers can pick and choose the times and destinations. But their busy and complicated lives often require them to change their minds about when, where and how they want deliveries made.

And then there is the cost. Saipe points out that free delivery has become indispensable to e-commerce. The February 2013 State of Canadian Online Retail report cited that 68% of survey respondents stated that high delivery costs as a prime concern when shopping online. For many, the lack of free shipping is the ultimate deal breaker.

In fact, its availability has now started to affect products for which it was previously unthinkable. For example, a US-based handcrafted boardroom table maker had to think seriously about offering free delivery after several online inquirers began asked for it. His final product consists of several large pieces of solid wood weighing about 375 kg that require on-site assembly.

To maintain his profit margins, he had to find ways to streamline production and re-jig his business strategy to achieve the necessary cost savings. Similarly, makers and distributors of everyday products must also discover innovative business and fulfillment processes to offer competitive all-in pricing.

One of Saipe’s key conclusions is that the supply chain is not a barrier to e-commerce development in Canada. At the same time, he details how delivery charges from Canada Post, the go-to, last-mile carrier for most on-line sellers are much higher than those charged by the United States Postal Service. One often-cited example is that to ship a six-pound, medium-sized parcel from Toronto Vancouver by ExpressPost, Canada Post charges more than three times what the USPS charges for moving the same box a similar distance from New York to San Francisco. Both promise second-day delivery which Canada Post guarantees but the USPS dos not.

Saipe and others point out that US firms benefit from lower costs for labour, fuel, employee benefits as well as transportation and warehousing equipment. Moreover, US market size and greater competition from more, larger players further drive down costs. In addition, Canadian logistics firms must deal with our unique commercial geography – a country that is 3,000 miles wide and 100 miles deep.

That reduces hub-and-spoke opportunities in populated regions while adding significantly to serving outlying destinations.

Since there is little than can be done about what Canada Post charges, various shippers question some of its business processes. Says Peter Smith, founder of Daneson Ltd. purveyor of flavored toothpicks in Mactier, ON, “Unlike many other postal offices in the world, Canada Post does not offer a first-class, flat service rate [Canada Post charges by distance while the USPS charges the same basic rate for all packages using the same level of service.]

“Canada Post also uses a non-standard letter-mail dimensions of

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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14-09-09 11:24 AM

CASE STUDY

THE INTERSECTION OF DIGITAL AND PHYSICAL COMMERCE HOW PITNEY BOWES IS EVOLVING ITS MAILING STRATEGIES

BY JULIA KUZELJEVICH

P

itney Boweshas been in business for almost 100 years, and was at the forefront of postage meter technology developed and used mostly for business purposes and to enable commerce ‘back in the day’.

“Most people think of Pitney Bowes with the red indicia at the top of envelopes.

But how we enable commerce today has changed a lot,” said Mark Shearer, Executive Vice President and President, Pitney Bowes SMB Mailing.

While the company still has its core mailing business as well as a significant market share globally of the postage meter marketplace,“We have now evolved our view of the market we serve. Mail is actually going through a rather interesting transformation with physical mail often being linked to digital formats, and with physical mail being more cleverly targeted through digital analytics. There’s an interesting intersection between digital technology, physical mail and physical parcels. While we’re still focused on helping deliver physical mail and parcels, we’re also investing heavily in location intelligence technologies,” Shearer said.

“In the US we handle about 89 million packages a year through our meters with the USPS. We have built and are currently enhancing an online shipping portal for US postal service products with material discount in 20% range for people who use this tool,” he said.

Some of Pitney Bowes’ core assets are used by Facebook and twitter to recognize physical location, and to send relevant marketing messages to people based on their physical location.

“Because of our mail business we have very good databases with addresses so we can rationalize physical, geographic identifiers with businesses, addresses and use this intelligently,” he said.

The company has been investing in data analytics capabilities to make sense of the location intelligence data.

“At the end of the day there really is some synergy between analytics, location and physical mail.We’re sort of operating at that inter-

© VLadgrin/iStock/Thinkstock

section of digital and physical commerce.

That’s really our core sweet spot. We used to view the world as mailing. Now we view the world as shipping and mailing. And that’s a reflection of our customers’ business challenges and frankly their postage spend. Clients are spending more on office shipping, and they are spending more on e-commerce and e-retailing shipping,” Shearer said.

In the enterprise space, Pitney Bowes offers a multicarrier outbound shipping solution called SendSuite Live.

“It’s really about enabling the lowest cost shipping alternative for each parcel, based on the service level requirements. The way it works is we have an office mode and a production mode. In an office mode, say you want to get this widget from Toronto to Paris, France, what are the shipping alternatives that would meet a service level of 48 hours, and it

presents all the relevant carriers from carrier libraries. It can be rules-based and present the top choices or the low cost choices as defined by user and company,” he said.

The same offering is also used in production/high volume shipping and can be deeply integrated with ERP systems.

At the enterprise level the multi carrier shipping capability seems to be important, Shearer observed.

“Although they don’t change the rules every day there is a vast variance of shipping costs for the same service level across the carriers.The problem of optimization is actually quite complex because it depends on origination and destination and boundaries and rates but I’ve seen so many cases where the same service level had a tenfold delta between low cost and high cost,” he said.

This year Pitney Bowes kicked off some

34 September/October 2014 www.canadianshipper.com

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14-09-09 11:24 AM

CASE STUDY

market research specifically around SME shipping requirements.While the data has not yet been synthesized, “for me there were some surprises vs. what I was expecting. We did the market research in about a dozen countries, and of course the shipping environment differs so greatly. But what was really interesting to me in terms of small business shipping is that low cost for a package does not appear to be the primary decision factor.What we’re hearing is most small businesses pick a shipping carrier partner and maybe validate it once a year, and they definitely have their preferences, and even when presented with opportunities to save maybe 20 % they don’t necessarily change their preferences. I found that fascinating,” said Shearer.

In some cases the brand of carrier is considered part of the value proposition. In other cases it’s the convenience that the carrier always picks up at a certain time or is located just down the street.

In the North America solution Pitney Bowes has some 50-60 carriers included in the SendSuite offering.

“These are largely a reflection of our 1000 North America-strong client base. In terms of our crossborder carrier selection we have contractual relationships with a certain set of carriers that are managed centrally And the client does not participate in this selection,” he said.

“I’ve spent my time in about 15 countries around the world, each of which have their own dynamics but what’s so fascinating to me is that universally the post see parcels and ecommerce as the solution to the obvious financial challenges. Going forward I think shipping infrastructure and capacity may become more of the backbone of the international posts.The other interesting thing is I’ve been doing this market research and the other requirement is clients’ desire to have simpler inbound tracking of shipments. Today they have to go on every carrier website to understand the status.They’d really like an integrated company-centric view, not a carriercentric view, of the inbound process. One of our fastest growing products in Europe is the SendSuite tracking-multicarrier inbound shipping capability that is also available in North America,” he said.

Since 2012, Pitney Bowes has also embarked on a partnership with eBAY in the US for outbound cross-border shipping. The eBay pilot began in 2012

and has been ramping up ever since.

“The value proposition makes it much easier for an eBay retailer to conduct crossborder business. If you live in Toronto and you are trying to buy something from an eBay retailer in the US, you are presented with the fully landed cost that is guaranteed.

It has enabled retailers to participate in the global marketplace with more certainty and in a much simpler way,” said Shearer.

Canada is the home base for Pitney Bowes’ cross-border shipping and e-commerce solution.

“We used to view the world as mailing. Now we view the world as shipping and mailing.”

Mark Shearer, Executive Vice President and President, Pitney Bowes SMB Mailing.

“Our development team is based here in Toronto and supports the eBay initiative,” Shearer said.

The Pitney Bowes’ EBay partnership aims to eliminate cross-border friction.

“We’ve been really hitting the gas up until now and we plan to really expand the program and increase the number of countries we can serve. We’re now at 54 from 18 countries in 2012. We’re also looking for ways to optimize the service,” said Craig Reed,Vice President of Global e-commerce at Pitney Bowes.

“We provide software services to US based retailers that allows them to price their goods accurately for international transactions, using cost engines, importexport compliance engines, and different integration points with our clients.”

The process locks in the cost with no COD, with Pitnew Bowes providing the services throughout the fulfillment processes.

“We receive the items in the US and convert the domestic inbound parcels to international compliant partners. We work with linehaul agents and inject directly into local players, i.e. integrators. We don’t actually physically touch anything but can provide all of the data and tracking,” said Reed.

He says the service shields buyers from some of the things that go on.

Canada has a geographic advantage (for US sellers),“and we’ve done a really good job of lowering the cost. When you compare to

p32-35 CdnShipper SeptOct2014_CrossBorder.indd 35

some of the negotiated rates shippers get from US based carriers it’s an advantageous service for Canadians.It’s to our advantage financially to drive costs out because it’s a volume game-increasing volume and lowering cost is more advantageous to us,” Reed noted.

Since import and export compliance rules can change pretty quickly, “We have to be able to adapt to that quickly to protect the buyers. Strategically we think this is a good business to be in-the biggest merchants are not going to be equipped with watching what is happening around the

world.We have a pretty streamlined process for changing calculations. The nexus of English-speaking countries tend to have very high transactional volumes because the barriers to transacting are very low. So those are the primary volume corridors.”

Where previously the Canada-US corridor would have been exclusively what has been concentrated on, “now it’s become broader, because of burgeoning demand in the BRIC nations, merchants are looking more and more to global markets to maximize their business. Canada and the US is always going to be the number one corridor for most merchants depending on what’s being sold.That said, the relative mix of demand in business from new sources will continue to grow as a percentage.That carries with it a lot of complexity which not surprisingly we’re happy to help them solve. Generally there will be a lot more choice for Canadian consumers in terms of what they want to buynot just with eBay but with the other merchants we’re working with,” Reed said. 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.

www.canadianshipper.com September/October 2014 35

14-09-09 11:24 AM

SALARY SURVEY

SEE WHAT THE RESULTS FROM OUR 15TH ANNUAL SURVEY OF THE CANADIAN SUPPLY CHAIN PROFESSIONAL INDICATE ABOUT YOUR SALARY

BY LOU SMYRLIS

SPREADING THE WEALTH

36 September/October 2014 www.canadianshipper.com

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SALARY SURVEY

Brought to you by our survey partners:

BASE SALARY INCREASES

As the leading and largest association in Canada for

Survey Average

CS Readers

Increased

65%

62%

Remained the same

31%

35%

professionals in supply chain management, the Supply Chain Management Association (SCMA) is the national voice for advancing and promoting the profession.

SCMA strives to ensure that employers recognize the critical contribution that SCM professionals make to the success of their organizations. SCMA sets the

SIZE OF INCREASE

standard of excellence for professional skills, knowledge and integrity. With nearly 8000

Survey Average

CS Readers

2.0% or less

32%

31%

2.1% to 4.0%

40%

46%

4.1% to 6.0%

11%

7%

6.1% to 10.0%

7%

5%

10.1% or greater

9%

10%

members working across the private and public sectors, SCMA is the principal source of supply chain training, education and professional development in the country. http://www.scmanational.ca/

T

his economic recovery has been referred to as the Great Okay – there is growth but nothing to get overly excited about. For supply chain professionals there is growing job security – daily layoffs and nail-biting uncertainty are thankfully years behind us. But with continuing focus on cost control (see our Inside the Numbers report on page 52) the chances of returning to the pre-recession days of swiftly growing salaries appears unlikely, according to the results from our annual Survey of the Canadian Supply Chain Professional.

For the third year in a row, the survey was conducted in partnership with our sister publications MM&D and Purchasing B2B, as well as the Supply Chain Management Association, offering one comprehensive national survey which included responses from more than

For nearly 150 years we have been where the growth is, connecting customers to opportunities. Today, HSBC serves businesses in over 60 markets around the world.

Whether it is working capital, trade finance or PCM solutions, we provide the tools and expertise that businesses need to thrive. hsbc.ca/business

continued

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14-09-09 11:24 AM

SALARY SURVEY

BASE SALARY RANGES Survey Average

CS Readers

Less than $40,000

2%

3%

$40,000 to $49,999

7%

6%

$50,000 to $59,999

10%

14%

$60,000 to $69,999

12%

10%

$70,000 to $79,999

12%

$80,000 to $99,999

MEAN SALARY BY POSITION Survey Average

CS Readers

Total Respondents

$86,967

$86,465

11%

Clerical/administration

$61,838

$56,134

22%

19%

Consultant

$85,616

$84,344

$100,000 to $119,999

10%

10%

Engineering/professional

$85,903

$71,362

$120,000 and higher

10%

10%

Executive

$128,497

$127,500

Managerial

$95,285

$88,849

Operations/Tactical

$73,902

$73,008

$81,101

$73,030

1,500 supply chain professionals across Canada.

Once again this year we are breaking out all survey results to show the overall survey average and the results specific to Canadian Shipper readers. Our readers have a strong transportation management focus (as opposed to warehousing or purchasing) and we feel it is more accurate to isolate their results.

Two years ago we were hopeful that things were looking distinctly better when we found that 71% of our survey respondents received a salary increase, a marked improvement from dismal 2009 when only 39% received a pay increase. But, as we commented in last year’s report, the research proved we were overly optimistic.

Last year’s survey found that only 66% of survey respondents received an increase in 2013. And this year, unfortunately, it’s more of the same with only 65% of respondents reporting a pay increase. When we isolate Canadian Shipper readers it’s even more disappointing as only 62% received an increase. This is a far cry from the pre-recession years when more than three quarters of supply chain professionals could count on an annual increase.

Looking at the size of increases received, more than two thirds (67%) of re-

Supervisor

MEAN SALARY BY SUPPLY CHAIN FUNCTION Survey Average

CS Readers

Total Respondents

$86,967

$86,465

Supply chain management

$91,277

$94,514

Purchasing/procurement

$86,390

$88,402

Strategic sourcing

$92,348

$89,384

Logistics

$88,665

$87,452

Warehousing

$88,920

$89,316

Transportation

$89,849

$88,137

Inventory/Material Control

$83,146

$86,506

Information Technology

$92,291

$88,961

Project Management

$93,560

$91,975

Consultant

$92,064

$82,922

continued

38 September/October 2014 www.canadianshipper.com

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p37-43 CdnShipper SeptOct2014_Survey1.indd 39

14-09-09 11:24 AM

SALARY SURVEY

MEAN SALARY BY COMPANY SIZE spondents received an increase above 2%, which also represents a drop from the past two years’ results. The vast majority (40%) received a salary increase in the range of 2.1-4% with 27% receiving increases above 4.1%. Canadian Shipper respondents did a bit better in terms of receiving an increase above 2% with 68% doing so. The vast majority (46%) had a raise in the 2.1-4% range but only 22% received an increase greater than that.

The mean gross salary for 2014 was $86,465 for Canadian Shipper readers with 39% of our readers now pulling in base salaries of $80,000 or more and 20% reporting six-figure base salaries.

Looking at mean compensation levels by supply chain function, our readers deemed to be involved in supply chain management are by far the best paid, enjoying a mean base salary of $94,514.

Those with demand planning/forecasting functions are the next best paid with a mean compensation of $93,140. Those with transportation functions had a mean salary level of $88,137.

When examining salary levels by position within the organization, what’s more informative than simply paying attention to the actual figures is paying attention to the gaps from one level to another. For example, our readers in operational or tactical roles earned a mean salary of $73,008 in 2014. Those in managerial roles enjoy a mean compensation of $88,849, about $15,000 more. But, as noted many times before, it’s those individuals working for companies sophisticated enough to consider supply chain as an executive-level function who enjoy the greatest spread in

Survey Average

CS Readers

Total Respondents

$86,967

$86,465

Less than 50

$74,912

$69,563

50 - 249

$78,760

$88,684

250 - 499

$79,925

$81,739

500 - 999

$87,385

$87,008

1,000 - 4,999

$92,020

$97,301

5,000 or more

$101,059

$96,107

MEAN SALARY BY EDUCATION Survey Average

CS Readers

Total Respondents

$86,967

$86,465

High school or less

$74,386

$83,767

Trade/technical diploma

$84,152

$76,375

College diploma/CEGEP

$79,805

$78,333

Some university

$85,304

$78,337

University Bachelor’s degree

$91,307

$98,060

MBA

$107,131

$121,673

Other Masters

$88,884

$88,857

$140,000

N/A

PhD

MEAN SALARY BY YEARS OF EXPERIENCE Total Respondents

5 years or less

6-10 years

11-15 years

16-20 years

21-25 years

26-30 years

31 or more years

Survey Average

$86,967

$63,675

$74,216

$85,834

$88,845

$96,522

$94,999

$109,984

CS Readers

$86,465

$56,761

$73,920

$82,297

$80,035

$104,859

$87,643

$104,903

40 September/October 2014 www.canadianshipper.com

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SALARY SURVEY

MEAN SALARY BY INDUSTRY SECTOR Survey Average

CS Readers

Total Respondents

$86,967

$86,465

Education

$80,493

$59,426

Manufacturing

$80,810

$85,795

Public administration

$82,341

$90,429

Healthcare

$83,991

$94,800

Natural Resources

$101,023

$95,803

Services

$87,109

$79,858

Trade/Wholesale

$81,209

$97,382

MEAN SALARY BY PROVINCE Survey Average

CS Readers

Total Respondents

$86,967

$86,465

Atlantic Canada

$72,279

$67,077

Quebec

$80,580

$98,293

Ontario

$85,612

$87,607

Manitoba

$72,911

$77,750

Saskatchewan

$86,876

$84,962

Alberta

$98,109

$88,896

British Columbia

$85,542

$89,682

salary levels. The mean compensation for a Canadian Shipper reader who is an executive level supply chain professional is $127,500. Understanding your company’s perspective when it comes to the value of supply chain management is critical.

Our survey also records differences in pay levels attributed to a variety of factors such as the sector you work in, the region of the country in which you are based and the size of company for which you work.

Company size makes a similar difference in base pay levels. Canadian Shipper readers working for companies with fewer than 50 people had a mean salary of $69,563, more than $15,000 below the survey average for our readers. Those working for companies with 5,000 or more employees posted the largest compensation level at $96,107. That’s more than a $35,000 difference for those working for smaller companies.

The survey also examined compensation packages in different sectors. Mean salary in the trade/wholesale sector was highest, coming in at $97,382 followed by natural resources at $95,803.

Geographic location and its influence on pay is reflective of both long term trends (depressed pay levels in the Maritimes) and new trends (fast growing industry sectors). Looking at the mean compensation for Canadian Shipper readers, only those working in Quebec, British Columbia and Alberta came in above the survey average this year.

The survey also looked at the impact of personal factors such as years of experience and education. Our readers are in their top earning potential in the 21-25 year range of their career. Those in that bracket earned a mean compensation of $104,859 in 2014.

Does higher education pay off? Our research shows it clearly does. Those with a university degree earn above $98,000 in pay on average while those with an MBA reported salaries above $121,000. CS

continued

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SALARY SURVEY

continued from p.41

RESPONDENT PROFILE & METHODOLOGY The majority (39%) of the 1,509 supply chain professionals included in our sample defined themselves as being in the managerial ranks of their organizations and 7% said they were in the executive ranks. Another 10% described themselves as being in supervisory positions.

The vast majority of respondents (80%) were over 35 years of age with the mean age being 45. The majority (88%) had at least a college degree. More than a third (39%) of respondents were women.

Respondents performed a variety of functions ranging from supply chain management (68%) and purchasing/procurement (83%) to transportation (44%) and

warehousing (35%). The majority of respondents who are Canadian Shipper subscribers had transportation and supply chain responsibilities. Their survey response totals are shown separately in our charts as a comparison to the overall survey numbers.

The survey enjoyed wide geographic reach across Canada. While 32% of respondents came from Ontario, another 47% were from Western Canada and 17% from Quebec and the Maritimes.

The respondents also represented a mix of small, medium and large enterprises with 43% working for large companies employing more than 1,000 while 9%

worked for small organizations employing fewer than 50.

E-mail invitations were sent to supply chain professionals across Canada from e-mail lists provided by Canadian Shipper and our sister publications MM&D and Purchasing b2b as well as the Supply Chain Management Association. The survey was handled once again by the research firm of G. Bramm Research Inc. After filtering out unqualified respondents and incomplete surveys, we compiled data from a record 1,509 respondents. This represents a margin of error of plus or minus 2.6 percentage points, 19 times out of 20. CS

GEOGRAPHIC DISTRIBUTION Quebec Atlantic Canada

11%

6%

Yukon/ Northwest Territories/ Nunavut

1%

British Columbia

12%

Ontario

32%

Alberta

24% Manitoba/ Saskatchewan

11%

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SALARY SURVEY

SIZE OF COMPANY Less than 50

HIGHEST LEVEL OF EDUCATION

9%

High School or less

5%

50-249

20%

Trade/technical diploma

5%

250-499

13%

College diploma/CEGEP

22%

500-999

12%

Some University

21%

1,000-4,999

26%

University degree

33%

5000 or more

17%

MBA

7%

Other Masters/PhD

4%

StatE oF thE Supply Chain WEbinaR

Brought to you by

thursday, november 27, 2014 – 12:00pm-1:00pm Et Looking for insight into whether you’re being paid fair market value? Want to hear about your future career prospects? Learn more about the results from the

2014 Annual Survey of the Canadian Supply Chain Professional.

We invite you to join us on November 27th for a FREE one-hour webinar that will include presentations of the survey results by Michael Power, editor, PurchasingB2B; Julia Kuzeljevich, editor, Canadian Shipper; Emily Atkins, publisher/editor-in-chief, MM&D; and SCMA president and CEO, Cheryl Paradowski, along with commentary from top Canadian HR professionals and recruiters.

2014

RegisteR today at: www.scmanational.ca/annualsurvey

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S:

RETAIL FOCUS

RETAIL REVOLUTIONS Canada Post hitches its wagon to the rising star of e-commerce

U

nlike most other carriers that are trying to cope with e-commerce’s impact on their operations, Canada Post is on a mission to transform its corporate business model.

To make it happen, it will refocus its efforts to deliver parcels not letters. That’s because letter mail volumes are in free fall. In 2013, Canada Post delivered 3.8 billion letter mail pieces, a decline of 4.8% from 2012 while it accounted for about 50% of its annual revenue.

The trend is clear. Last year, Canadians mailed almost 1.2 billion fewer pieces than they did in 2006. And in the age of e-mail, Facebook, Twitter, LinkedIn, Instagram and other social media available on portable devices, future volumes will drop further and faster.

In a recent CBC radio interview, Canada Post CEO Deepak Chopra attributed the plunge to the rising popularity of tablet computers, which sharply reduces the use of paper, a communications medium over which, at one time, all post offices around the world enjoyed a monopoly. He compared Canada Post’s current modernization plans to the tough choices railroad executives faced in the late 1970s.

To stay competitive, Canada Post must create a sustainable business strategy that can develop services to meet shoppers’ demands and shippers’ needs at competitive prices while relying less on the public purse.

Although dogged by the “snail mail” tag, Canada Post is likely to become financially self-sufficient long before other government agencies or Crown Corporations such as urban mass transit operators. (This article deals only with parcel delivery not with letter mail concerns.) That’s because of its unique competitive advantages that include having Canada’s largest retail network of almost 6,400 postal outlets, access to every address across the country and deep relationships with shippers going back at least 150 years.

More important, Canada Post is hitching its wagon to the rising star of e-commerce. Canadians are increasingly pressing the buy button when they shop online. Last year, revenues from its top e-commerce shipper customers grew 29%.That boosted annual parcel volumes by 5 million pieces while increasing revenue by 7.2% compared to 2012.

In fact, many of the necessary solutions are already in place. Chopra has stated that increased parcel delivery, Canada Post’s fastestgrowing sector in the era of online shopping, is gradually offsetting the drastic reduction in letter mail volumes.

Purolator, of which Canada Post owns 91%, is the preferred choice for delivering B2C (business-to consumer) packages. A 2013 survey concluded that Canada Post handles 65% of all of B2C deliveries in Canada since it works closely with major retailers such as Walmart and others. Currently close to 40% of its total revenue comes from its parcel business and direct marketing services.

“E-commerce buyers are seeking value propositions based on free delivery, convenience and returns,” says Ottawa-based Canada Post spokesperson Anick Losier. “Canada Post needs to stay one step ahead. One way we have done that was launching the E-commerce Innovation Awards in 2012.”

In its first two years, the winner of the Best Online Large Retailer of the Year was Guelph ON-based Well.ca, Canada’s largest eseller of personal care products. “We use Canada Post for expedited, next-day services in Ontario and other highly populated regions,” says Well.ca CEO Rebecca McKillican.

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BY KEN MARK

“Canada Post’s service metrics – delivery within specified time frames, damage rates and lost parcels are well within acceptable levels. It has also has provided us with a simple way to resolve customer delivery complaints.

“One major advantage it has over its competitors is exclusive access to post office boxes and those in apartment and condominium buildings.”

The annual Innovation Awards prizes are more than just a plaque on the wall. Well.ca receives a $100,000 credit to be applied against Canada Post fees for shipping goods, creative work and direct-marketing flyers. The firm is gunning for a three-peat in 2014.

Back in 2008, when Well.ca founder Ali Asaria was looking for a carrier to deliver its products, he quickly discovered that Canada Post was just about the only game in town. “I reached out to all of the courier companies but Canada Post was the only one to respond because of our very low volumes.

“It was still very early days in e-commerce when there were not many consumer sites. Most of the other carriers preferred business-tobusiness shippers and were not looking for new business. Back then, there were no guarantees when it came to residential deliveries.”

How times have changed. Well.ca now engages a number of different carriers. Says McKillican, “We had to diversify.We can’t put all our eggs in one basket just in case there is a strike at Canada Post.”

Canada Post is well aware of the changing times and is actively addressing its relations with its various unions. In April 2014, employees represented by the Public Service Alliance of Canada/ Union of Postal Communications Employees accepted Canada Post’s final offer. Union members will receive modest wage increases in the first two years of the four-year agreement. Current employees will also enjoy job security provisions and defined benefit pension benefits. But new employees will receive a lower starting annual wage and pension coverage from a defined contribution plan.

Such terms are similar to recent settlements by automakers to hourly paid employees represented by the Canadian Autoworkers Workers union.

Contracts covering other more militant employees - postal clerks and mail handlers as well as letter carriers and motorized service carriers come up for renegotiation in January 2016. If history is any guide, those talks may not be as smooth. Over the next few years, Canada Post plans to reduce its employee head count by 6,000, mainly through attrition.

Controlling labour costs is key to Canada Post’s competitiveness since most other carriers do not have unions. Says Ali Asaria, “The greatest attraction for online shoppers is free shipping. But they don’t consider the cost of gas or the time they spend going to the mall. Quality of service has no value for them. So carriers have to come up with the lowest bids to win contracts.”

Canada Post also is moving aggressively to reduce costs and boost productivity by tightening up its logistics network and operations through introducing a hub-and-spoke network. New large, modern sortation plants close to airports in Vancouver and Winnipeg have replaced older, stand-alone post office buildings in city centres. Inside them, new technology automatically sorts parcels and letters at the same time right down to individual letter carriers’ routes and in Illustrations ©Thinkstock

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RETAIL FOCUS

the proper delivery sequence.

Using a “park-and-loop” system, letter carriers can now park small, fuel-efficient vehicles at well-chosen spots to carry bundles of mail to the door on foot and loop back to the vehicle. Since this eliminates the need for relay boxes, they can now make individual delivery stops for single, multiple or centralized points of delivery.

Besides protecting letter carriers from snow, rain or sleet, the new approach also deals with density and scale by boosting the number of items left per stop through combining the delivery of letters and parcels for the same address. As well through greater mobility, it increases the number of stops per kilometer, or to borrow a term from professional football, Canada Post is “flooding the zone.”

“Economies of scale may be more important than labour costs,” says Tom Schmitt, president and CEO of AquaTerra Corporation and former CEO of FedEx Global Supply Chain Services and of Purolator, Inc. In addition, Canada Post has launched innovative services such as The Delivered Tonight pilot program in the Greater Toronto Area from September 2013 to February 2014. During the test period, when customers ordered items by the afternoon they could receive them later the same day. The project involved several of Canada’s most popular online retailers including Best Buy, Future Shop, Indigo, Mastermind Toys and Walmart.ca.

Canada Post plans to it roll it out again later this year during the busy Christmas shopping season. Says Anick Losier, “In 2013 at that time, when we worked seven days a week for six weeks, we had 10 individual days when we delivered more than one million parcels.The year before, we had only two.”

Other postal administrations are actively introducing their own innovative processes and services. The USPS recently expanded its Sunday delivery of Amazon.com orders in New York City and Los Angeles to 15 smaller cities across the US. Orders placed Saturday morning will be delivered the next day.

European post offices have also been busy developing similar services leveraging their coverage of highly clustered urban regions.

Belgium’s bpost has been building on its earlier same-day delivery service trials and extending it to delivering grocery items. About 80% of the orders are for fresh or frozen foods, with the five most popular shops being a local supermarket, fruit and vegetable store, butcher’s/delicatessen, bakery and liquor store. The Swedish post office Postens also offers similar services.

Even though such services are still in their infancy, it is clear that various postal authorities have become bold enough to launch such cutting-edge solutions.To many logistics practitioners, delivering fresh food is the Holy Grail of their profession. As expected, Amazon.com is still leading the pack with its AmazonFresh delivery initiative in Seattle, Los Angeles and San Francisco.

So far, many of these post-office delivery innovations stay within the originating country.That’s because post offices are creations of individual governments, so there can be gaps in how they handle foreign parcels and shipments, especially returns. Says Amine Khechfe, Palo Alto CAbased co-founder and general manager of Endicia, “The hardest thing for post offices to do is to act as one network. Each has its own services

with unique branding and service standards.Although there is a network to exchange data, which general customers can access, there really are no combined strategies to serve global companies that wish to use the postal network as one entity, i.e. FedEx and UPS. “By partnering with strategic technology providers like Endicia, post offices can tackle these challenges. For example, since Endicia can print outbound and return labels for both Canada Post and the USPS, it can easily turn exports into returns and offer this solution to postal customers.

“Now, US-based businesses using Endicia can create Canada Post shipping labels with postage and email them to any Canadian customer requesting to return parcels to the United States. Similarly, Canadian merchants using Endicia can also facilitate the return their products from the United States. As a result, retailers on both sides of the border can use the same technology for outbound and return shipments.”

In a recent Mississauga speech,Valerie Normand, Canada Post director, Parcels and eCommerce Solutions Integration emphasized the importance of focused on domestic reverse logistics or returns.“They are the necessary evil of e-commerce and they present a cost challenge for shippers and carriers, accounting for up to 22.3% of electronics, up to 34% of health and beauty items and up to 54% of fashion outbound shipments.

“You need to make returns part of your business decisions. About 70% of Canadian shoppers believe it is most convenient to include the return label in the original purchase, and 76% of Canadian shoppers feel a clear returns policy is important.

“We are seeing a lot of positive data around customers being inclined to shop again or recommend the site to someone else once a clear returns policy has been established.”

Finally, catching consumers at home when their purchases are delivered remains a pain point for all carriers. Chopra estimates that 40% of consumers are not at home when goods are dropped off. In response, Canada Post offers various solutions. In the short term, consumers can indicate a convenient post office outlet in pharmacies and other partners located in malls, business centres etc. which buyers frequent. Longer term, the much-discussed community mailboxes have been designed to accommodate up to 80% of all parcels.

Although many others consider it a problem, Jim Eckler, President, Eckler Associates and former president & CEO of SCI Group Inc., a Canada Post affiliate, believes that it is a merely a business challenge that can be resolved with imaginative solutions such as automated storage boxes accessible by secure one-time electronic codes or credit cards placed in stores, gas station, malls, office, condo or apartment lobbies.

Whatever the parcel’s final destination, Canada Post wants to be there as the last-mile carrier of choice. 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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EAST COAST MARINE

STAYING

COMPETITIVE EAST COAST PORTS PURSUE INFRASTRUCTURE DEVELOPMENTS TO STAY COMPETITIVE

BY LEO RYAN

T

hroughout ports in eastern Canada, enhancing or increasing infrastructure capacity in order to remain competitive and meet demand represents a vital priority of their commercial strategies.

This is coinciding with generally improving global economic trends, both in North America and Europe. For some ports, too, it’s a question of positioning themselves to capitalize on a marked spike in North Atlantic maritime trade expected to flow from a Canada-European free trade agreement that could be implemented by early 2016.

The Port of Montreal, positioned as a container gateway, has been quietly assuming an East Coast dominant role. Indeed, statistics show Montreal handling 28.1 million tonnes of cargo in 2013– that’s more, for the first time, than the principally bulk ports of Saint John, Quebec and Sept-Iles.

At the Port of Montreal, the strong expansion in recent years of Asian and emerging markets has generated a significant diversification of cargo business.

For instance, in 2000, nearly four-fifths of Montreal’s container traffic came through Northern Europe. By 2013, this market accounted for only 44%, while Asia accounted for 14% and the Middle East 8%. Last year, Montreal’s container output amounted to 1.34m TEUs. Montreal port officials consider that with goods transshipped from mega vessels to smaller ships, via the Suez Canal, the Port of Montreal has become an alternative to West Coast ports for reaching the Pacific Basin.

“We are seeing solid growth in 2014, with total tonnage up 3% and container cargo up 4.3% at 611,720 TEUs in the period to end June,” indicated Tony Boemi, vice-president of growth and development for the Montreal Port Authority.

“There’s a big jump in Mediterranean, Latin America and US Midwest shipments,” he told Canadian Shipper. “The European market is showing good signs of recovery.”

Buttressing Montreal’s cargo activity was 2013’s record investment of $55 million infrastructure investments – notably used to boost container capacity by 13% and to redevelop an area of the petroleum products sector to be able to accommodate larger vessels.

An important development, as well, for the competitiveness of the Port of Montreal was the announcement this spring by Montreal Gateway Terminals Partnership (MGT), the biggest cargo container operator at the port, and Navis, based in Oakland, CA. They announced the successful implementation of the Navis N4 terminal operating system at MGT.The new system, a global technology stan46 September/October 2014 www.canadianshipper.com

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Container handling at Port of Montreal.

dard for managing cargo movement, helps MGT to optimize terminal productivity and empower further enhancement of service delivery, reinforcing its position as a leader in the industry.

The implementation was a migration from Navis’s legacy software SPARCS and an internally developed data host system to N4, Navis’s latest generation terminal operating system. N4 allows customers to run their operations from a single terminal to multiple terminals spanning numerous geographic locations managed from one central location. Navis is part of Cargotec Corporation.

“MGT’s migration to N4 demonstrates our focus on providing customers with the highest level of service,” says MGT chief executive Michael Fratianni. Another development of note was the decision by CanEst Transit Inc. to establish on port territory this year a facility specializing in the containerization of agricultural products destined for local and international markets. This is regarded as an added asset for the anticipated increased maritime trade with Europe.

Ambitious multimodal complex at Valleyfield Some 70 km west of Montreal on the St. Lawrence waterway,Valport Marine Services and the expanding multimodal port of Valleyfield ©Richard Jemison/iStock/Thinkstock

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EAST COAST MARINE

© Port of Montreal

have emerged as a regional hub worth watching closely.

What is described locally as Canada’s “largest small port” is well known as the chief staging ground for Canadian Arctic sealift services, also handling project cargo, general cargo, and liquid and dry bulk.

Last year, cargo volume at Valleyfield jumped by 15% to attain nearly one million tonnes. Instrumental in this growth has been recent direct access to new Autoroute 30 in addition to the existing CN, Canadian Pacific, and CSX rail networks stretching to many US markets.

But arguably a game-changer for the future will be the $100 million investment by US rail carrier CSX in a 36-hectare intermodal terminal slated to go on stream this October. The facility, located in Perron Industrial Park, will seek to handle up to 100,000 containers a year – using modern, rubber-tire gantry cranes to transfer containers between trains and trucks.

Moreover, industry sources have recently singled out Valleyfield as a potential port of call for the recently-launched Cleveland-Europe Express container service (the first liner service of its kind into the Great Lakes in several decades).

On north-south container business especially, observers consider that Valleyfield could cut into some of Montreal’s well-established markets.

On the north shore of the St. Lawrence River, the Port of SeptIles is North America’s largest iron ore port, handling 27.7 million tonnes last year.

Sept-Iles is destined for bigger things when a $220 million deepwater, multi-user facility under construction is completed.The latter terminal, which is now expected to be finished by the end of this year following some delays, will play a pivotal role in shipping large volumes of iron ore to Asian markets in particular that could spur total port tonnage to a much higher summit.

Worth recalling is the fact that in July of last year, Sept-Iles was the first port on the continent to handle a giant Chinamax bulk carrier. It loaded 300,000 tonnes of iron ore destined for a Chinese steelmaker.

The Port of Quebec, which handled 27 million tonnes of mainly bulk cargo in 2013, invested approximately $55 million with its partners in infrastructure improvements last year. And a similar amount is earmarked for this year.This fall, under new business, wood pellets will begin arriving by rail for transshipment to markets.

The Port of Halifax in 2013 posted a 9.3% decline in total cargo to 8.6 million metric tonnes as a result of fewer bulk cargo continued

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EAST COAST MARINE

shipments and more rail shipments of agricultural products. Containerized tonnage was up 8.6%.

Impacted, possibly more than other Canadian east coast ports, by the severe winter conditions affecting vessel schedules and intermodal services, the cargo numbers for the first six months of 2014 showed an 8% drop in TEUs to 206,125 units and a 14% decline in total volume at 3.9 million tonnes.

However, port spokesman Lane Farguson stressed that with various infrastructure projects reaching completion, the Port of Halifax was “well-positioned” to take advantage in the future of the Canada-European Union free trade deal and multi-billion dollar Atlantic region mega energy projects.

Large infrastructure investments at Halifax Since 2011, more than $100 million has been invested in infrastructure, notably allowing the Nova Scotia port to accommodate the largest containerships calling on the eastern seaboard.

Over the past few years, container cargo moving on Asian trade routes, chiefly via the Suez Canal, has expanded, and accounted for 46% of Halifax’s box volume of 442,173 TEUs in 2013.

Karen Oldfield, president and ceo of the Halifax Port Authority has stationed special marketing representatives in Europe, the US Midwest and in India through a partnership with Canadian National Railway, the sole continental railroad serving Halifax. Oldfield is clearly targeting growth opportunities in Europe and Asia.

Seventeen shipping lines serve Halifax, including leading global carriers. Earlier this year, French carrier CMA CGM doubled its capacity out of Halifax for shipments of frozen seafood and other perishable cargoes.

Fritz King, Halifax-based managing director of ACL, feels the timing of the Canada-EU accord could be “particularly fortuitous for ACL as we introduce our uniquely-designed and newly-constructed G4 vessels to the market in 2015.”

For its part, the Port of Saint John, New Brunswick, which handled 27.7 million tonnes in 2013, is witnessing a pronounced increase in its relatively small container sector, while Irving oil shipments continue to represent the bulk of the tonnage. The port’s container throughput rose by 60% in 2013, and the upward pattern continued in the first six months of 2014, with a total of 45,000 TEUs, thanks to increased calls by Mediterranean Shipping Company and the north-south operations of longtime stakeholder Tropical Shipping. CS Leo Ryan is a veteran journalist who has reported on key transportation and trade developments in Canada for more than two decades. A former Montreal bureau chief for The Journal of Commerce, he specializes in port and shipping issues and was awarded the Medal of Merit in 1992 by the then Canadian Port and Harbour Association.

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EAST COAST AIRPORTS

HANGING ON TO FREIGHTERS

AIRPORTS HOPE FOR GROWTH IN CARGO

BY IAN PUTZGER

S

ince April shippers in the Moncton area have had a lot more lift to move their cargo to overseas markets, courtesy of CAL Cargo Airlines.

The Israeli carrier operates a Boeing 747 freighter once a week through Greater Moncton International Airport en route from New York to Liege. continued

©Panagiotis Parthenios/iStock/Thinkstock

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EAST COAST AIRPORTS

CAL’s management has been bullish on the new point in its network. “Looking forward, we forecast significant growth in our Canada business, and we are developing the infrastructure to support future sales and business development activities in the region,” declares CAL CEO Eyal Zagagi.

Moncton’s cargo throughput was up 11% in June, bringing the tally for the first half of the year to 4.7% growth over the first six months of 2013.

According to Jacques Fournier, the airport’s head of cargo development, CAL usually loads between 20 and 40 tons of cargo in Moncton. “There is upward potential on seafood,” he says, pointing to exports that are trucked to catch planes out of Toronto, Montreal and Boston.

“We would like multiple frequencies,” he continues. “We have companies that ship 20, 30 tons multiple times a week. It is hard for them to shift one weekly load to a different route.”

A few weeks after the launch of CAL’s flights through Moncton, Halifax International Airport saw the start of weekly widebody freighter flights to the opposite end of the world, as Korean Air extended one of its Toronto frequencies to the airport, flying a B777 freighter to Seoul. This provided shippers in the area with a 14-hour transit to the Korean capital and onward connections to other Asian destinations.

Both operations were fuelled by seafood exports from the Maritimes, particularly lobster.

“We have had phenomenal growth in live lobster exports to China,” says Jerry Staples, vice president of business development of the Halifax International Airport Authority. “They doubled both in volume and in value between 2011 and 2013.”

Other seafood - such as mussels - and fish make up the bulk of the rest of the freight lifted out of the Maritimes on those freighters. Mussels are farmed, which means they can be shipped year-round, like lobsters, notes Staples.

Still, for the most part international freighters have been a temporary feature at airports in the Maritimes. Halifax saw the suspension of a freighter link by Icelandair to Liege via Reykjavik in late 2012, and a transatlantic service to Cologne by Cargojet launched two years ago from Moncton subsequently shifted to Halifax and was suspended altogether last December.

Moncton had a weekly B737F link to

Reykjavik and on to Cologne by Bluebird Cargo, but the carrier stopped the operation after about a year because it needed the aircraft for other work.

Korean Air’s recent operation at Halifax came to an end in late June. The airline is looking at possible ways to make this a sustained activity, perhaps by linking the airport to a New York-Seoul flight, says Andy Lyall, the airport’s manager of air service cargo sales.

Seasonality of traffic has been one issue.

Lobster exporters in the Maritimes have worked hard to turn their business into a year-round selling operation, but demand

fleet expansion in the wake of the new contract with Canada Post will reignite Cargojet’s transatlantic venture.

“We are currently reviewing whether or not to re-enter that market. We will have the aircraft availability and the desire and can definitely fill the return load from Europe, but unless we can get a consistent commitment from the perishable shippers ex-East Coast, I don’t see this happening in the short term,” comments Jamie Porteous, the airline’s executive vice president of sales and service.

Air Canada Cargo is looking to Cargojet to tackle markets in the Maritimes to-

“We will have the aircraft availability and the desire and can definitely fill the return load from Europe, but unless we can get a consistent commitment from the perishable shippers ex-East Coast, I don’t see this happening in the short term.”

Jamie Porteous, Cargojet’s executive vice president of sales and service

is also subject to seasonal fluctuations, not to mention factors like currency exchange rates, notes Mike Morey, director of operational strategy at Air Canada Cargo.

Another problem for carriers: imbalances in directional flows and yields. Korean did not have much freight going into Halifax. Cargojet suspended its transatlantic flights from Halifax due to plane availability, but another factor were depressed yields on the eastbound sector, says Staples. He hopes that the airline’s

gether, having signed a far flung co-operation agreement. According to Morey, the passenger airline has adequate lift out of Halifax, which could be supplemented at peak times with maindeck capacity from Cargojet, but in Moncton and St John’s, it only has narrowbody equipment with virtually no cargo capacity.

At this point the partnership of the two carriers is in its infancy. “If we get the collaboration going more fully with Cargojet, there may be opportunities,” he says.

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EAST COAST AIRPORTS

A sustained operation would make a significant difference in the market. Faced with sporadic freighter capacity, which has usually waxed and waned, seafood shippers have been reluctant to commit the bulk of their traffic to these all-cargo operations, worried that giving up their allocations out of Montreal, Toronto and other nearby gateways could leave them stranded when a freighter operator pulls out. Moreover, yields and inbound traffic usually do not allow all-cargo outfits to mount multiple weekly frequencies, forcing shippers to split traffic between different carriers.

Hence Fournier is keeping his eyes open for a second freighter airline. “Our focus is on CAL, but we are always looking for other opportunities. We have a need for a mid-week freighter,” he says.

For Morey St John’s is the most promising of the airports in the Maritimes, due to the oil business in the region. This could generate good inbound loads to complement lobster and other seafood exports.

“We are putting more focus on St John’s because of the potential there. It would be balanced, oil equipment going in, fish and seafood going out,” he comments.

One obstacle for these ambitions is the infrastructure at St John’s International Airport. “They need aircraft parking space and taxiways,” Morey says. “We are in a new facility there. The facility is great, but you need to park freighters there.”

The airport authority is aware of this, but for the time being its focus is on the $243 million infrastructure improvement plan centred on the expansion of the passenger terminal. Morey hopes that its completion will open the door to the necessary cargo developments beyond the new facility, which replaced the old set-up that had to make room for the terminal building.

“Right now they are a bit distracted with their passenger terminal. Their business community is chomping at the bit,” he remarks.

At Moncton a private investor put up a 40,000 sq ft warehouse right off the airport with ample capacity for cool and cold storage, notes Fourier. The airport completed its runway extension last November, which brought its length to 10,000 feet, long enough for fully loaded large freighters.

Halifax has no plans for new cargo infrastructure for the moment, having extended its runway to 10,500 feet last year and a 40,000 sq ft multi-tenant cargo building that opened in 2010.

This is not for lack of growth projections.

Staples and Lyall are upbeat on the free trade agreements with Korea and the European Union that are in the works.These will eliminate the tariffs on lobsters, giving a further boost to their export potential.

“We are optimistic good things will happen in 2015,” says Staples. CS

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Ian Putzger is an award-winning journalist with more than 20 years experience covering transportation and logistics issues. He is a former writer and editor with the Hong Kong-based Asian Sources Media Group, and Airtrade, a British magazine covering the global air cargo industry.

www.canadianshipper.com September/October 2014 51

14-09-09 11:25 AM

INSIDE THE NUMBERS

WHAT’S KEEPING YOU UP AT NIGHT? Our latest Survey of the Canadian Supply Chain Professional, conducted in partnership with the Supply Chain Management Association, polled supply chain professionals about the top issues they faced in the past 12 months and which they anticipate facing over the next 12. A slow economy means cost control topped the charts for both questions, yet this has declined since 2012.

Respondents also identified external groups most impacting their supply chain role and which areas of government regulation

Top 3 supply chain issues anticipate facing next 12 months

were taking up most of their time.

Issues

Top 3 supply chain issues faced past 12 months Issues

% of respondents

% of respondents

Cost control

51%

Supplier relationship management

27%

Reorganization

27% 23%

Cost control

46%

Risk management

Supplier relationship management

30%

Skills shortage

22%

Reorganization

27%

Forecasting

21%

Forecasting

23%

Technology upgrade

19%

Risk management

21%

Capacity shortages

18%

Skills shortage

20%

Government regulation

13%

Capacity shortages

17%

Transportation

12%

Technology upgrade

16%

Inventory visibility

12%

Inventory visibility

16%

Political uncertainty

9%

Government regulation

15%

Overseas sourcing

8%

Transportation

15%

Outsourcing

8%

Political uncertainty

9%

Software/ SaaS installation

7%

Overseas sourcing

8%

Corporate social responsibility/sustainability

6%

Outsourcing

8%

Software/ SaaS installation

8%

Corporate social responsibility/sustainability

6%

Areas of government regulation taking up most of supply chain managers’ time Government regulations

External groups having largest impact on supply chain role External groups

% of respondents

% of respondents

Customs & security

35%

Government procurement rules

33%

Employee health & safety

23%

International supply chain

19%

Competition

16%

Taxation

12%

Business reg. & reporting requirements

12%

Suppliers

67%

Customers

60%

Government & regulatory agencies

44%

Sustainability

12%

Shareholders & investors

21%

Consumer safety

8%

Industry and professional associations

12%

Intellectual property

8%

Local community

12%

Employment

7%

Privacy

7%

Standards bodies

9%

Aboriginal groups

7%

Media

5%

Building permits

6%

Surveys & statistics

4%

Immigration & foreign workers

3%

C

N b a

W o w T

TF

52 September/October 2014 www.canadianshipper.com

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14-09-09 11:26 AM

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Take another look at Vitran!

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14-09-09 11:26 AM

THE BIGGER PICTURE

“

THE INCREDIBLE SHRINKING CANADIAN FREIGHT CARRIER INDUSTRY For many years, industry experts have been predicting a consolidation in the Canadian freight industry. During and after the Great Recession, the decibel level of these warnings increased as most trucking companies faced the challenges of reduced freight volumes, sinking rates and the difficulty of managing a business during recessionary times. In fact, the industry did shrink by an estimated fifteen percent during the downturn, not through acquisition, but through companies closing their doors or parking equipment.

As one looks back over the past five years, the Canadian

creasing technological sophistication and regulatory changes, have made life much more difficult, particularly for small fleets with limited access to capital.

In addition, there were and still are willing buyers. Some of the larger trucking companies and conglomerates have been active buyers. With TransForce’s acquisition of Contrans, we are now seeing a very large conglomerate devour a large conglomerate. What does this all mean for the Canadian freight industry?

The owners of the fleets being acquired are receiving some sort of retirement nest egg depending on the value of

Many trucking company owners, particularly those in the baby boomer generation, without a succession plan, or with poor prospects for survival, saw the sale of their business as the most logical business option. economy has been recovering, albeit painfully slowly. There has been some growth in GDP and in jobs, largely in the west.

During this same period, the Canadian freight industry has been consolidating and continues to consolidate. This has been driven by a host of factors.

There were and still are willing sellers. Many trucking company owners, particularly those in the baby boomer generation, without a succession plan, or with poor prospects for survival, saw the sale of their business as the most logical business option.

The post-recession business climate brought a host of challenges.The driver shortage, coupled with rising costs of fuel and equipment, low margins, in-

their businesses. It is questionable if some of these companies would have survived if they hadn’t been acquired. While some people are often released during or after an acquisition, many people were able to retain their jobs within a financially more viable structure.

Of course, a very high percentage of mergers and acquisitions fail. These can be visible or invisible to the shipping public. If you look back at the list of companies acquired over the past five

to ten years, you will find some names that are missing, either because they have been merged with another entity, or they simply failed due to incompatible cultures, the loss of key employees, weak business models, or a host of other reasons.

What are the implications for shippers? The consequences of these M & A activities vary from segment to segment.

While there has been consolidation in the truckload sector, and there will be more, this market is large and very diverse.

However, for the reasons outlined above, it is becoming increasingly difficult for the smaller fleets to survive. In addition to driver and capital issues, there is the matter of economies of scale. It is likely that we will continue to see more consolidation. This may result in fewer options and higher rates. To make this business more attractive for entrepreneurs, the regulatory and economic climate may have to change. Whether this will happen is questionable.

The LTL market is quite different. To properly serve this market, viable players must have terminal networks. Fewer than ten companies control this market in Canada. The same is true in the United States. TransForce’s recent acquisition of Clarke Transport,Vitran’s Canadian operations and QuikX/ QuikTrax, within a very short time, has certainly changed the dynamics of this specific (eastwest intermodal) market. It will

©Thinkstock

be interesting to watch if the three western Canada (intermodal) businesses are integrated into one consolidated business.

The point is that for national LTL freight distribution and major regional LTL shipping as well, the number of options is quite limited. If any of the large LTL carriers (e.g. Day & Ross, Manitoulin,TransForce’s stable of LTL carriers) were to contemplate a merger with each other, one would have to wonder if this would be a tipping point for Canada’s Competition Bureau.

The courier market is similar to the LTL market.To effectively serve this market requires sorting and processing facilities.

Any further consolidation (e.g. the sale or Purolator to another big player) would certainly raise issues of competitive service options in Canada.

We can expect to see more M & A activity in the days ahead. Shippers must use due diligence in selecting modes and carriers. With capacity tight and expected to get tighter and with the industry consolidating, manufacturers and retailers must become very thoughtful and methodical in finding core carriers to support their supply chains. The rise of logistics service providers in the LTL space may be the best indicator that shippers are reaching outside traditional assetbased carriers to find companies that can creatively come up with competitive service and pricing solutions. 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 September/October 2014 www.canadianshipper.com

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14-09-09 11:31 AM

“There’s always going to be risk. The issue is how to manage it.”

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14-09-09 11:31 AM

Refrigerated Services

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14-09-09 11:31 AM