Canadian Shipper Mar/April 2015

MARCH/APRIL 2015

PUBLISHED SINCE 1898 | WRITTEN FOR BUYERS OF TRANSPORTATION SERVICES

3PL SURVEY Our annual survey of outsourcing RETAIL FOCUS Will lockers cure final mile woes?

Interprovincial

TRADE REDUCING RED TAPE IN THE SUPPLY CHAIN

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CONTENTS

MARCH/APRIL 2015

DEPARTMENTS

12

5 | Editor’s Forward Greetings from newly appointed Canadian Shipper Editor Julia Kuzeljevich.

COVER STORY

Interprovincial Trade

6 | The View with Lou Low energy costs won’t reduce costs forever across the supply chain.

Canada aims to become a bigger player in the global trade arena, but how does it fare on interprovincial trade restrictions, and what are the provinces doing to reduce barriers to trade?

8 | In the News Quebec presents a sweeping maritime strategy blueprint seeking to transform the St. Lawrence River into a competitive gateway of choice for continental logistics.

52 | Inside the Numbers The drop in energy pricing and its effect on current pricing pressure, modal shifts.

Towards more strategic solutions for congestion at West Coast ports.

18 3PL Survey Survey of Canadian Third Party Logistics An in-depth look at shipper outsourcing philosophies and strategies in our annual survey of Canadian third party logistics, sponsored by

©Misty Sprouse Photography/iStock/Thinkstock

54 | The Bigger Picture

Rocky Mountain highway.

FEATURES SUPPLY CHAIN VISIBILITY | 26

THE ROI OF SUSTAINABILITY | 36

How technology, best practices can help shippers achieve it.

Greening the supply chain can be good for the bottom line.

RETAIL FOCUS-RETURNS | 28

CASE STUDY | 42

Parcel carriers are mining returns for more elaborate offerings.

Day & Ross embarks on the path to paperless transactions.

RETAIL FOCUS-LOCKERS | 32

CARGO LOGISTICS CANADA CONFERENCE | 48

Ryder System Inc. Will lockers be the solution for final mile home-delivery?

Fine tuning intermodal supply chains-what are the challenges, where are the solutions? www.canadianshipper.com March/April 2015 3

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You strive for world class performance. So do we.

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WHAT’S ONLINE

EDITOR'S FORWARD Julia Kuzeljevich

ns.

The constancy of change

T

hey say change is the only constant in life. As Canadian Shipper celebrated its one year anniversary under a new name and format this past January, yet another change is before you as readers: I am now taking on the role of Editor from my former position as Associate Editor with the magazine.

Lou Smyrlis remains an influential part of Canadian Shipper as the Editorial Director of the publication.

I hope that my 15 plus years in trade journalism, covering transportation and logistics industry news and events, delving deep into research, and managing the day to day issues around publishing schedules, will serve the readership well.

I am looking forward to getting to know the readers better and I ask you to please keep the dialogue open, with any ideas, concerns, commentary, and questions.

So change is in the works but it’s said the more things change, the more they stay the same.

For shippers that means that the foremost issues of concern to your daily business, issues we at the magazine will attempt to shed more light on for you, have remained constants: capacity, costs, rates, collaboration, volatility, infrastructure, weather, risks and contingencies, all tied up with the technology and trends that will play major roles in how you address your supply chain. CS

WEB TV Transportation Matters

Class A Conundrum Why making a mandatory level of driver training will benefit shippers

t

Pictured: Mark Oldershaw, Sprint Canoeist

Photo by: Matthew Plexman

BLOG BITS Search our blog archives at ctl.ca Julia Kuzeljevich The paradox of “continuous improvement”

Carolina Billings What would never failing look like?

You may be surprised

Dan Goodwill Some Major Trends Shaping the Freight

ng

Transportation Industry in 2015

ay.

Find us on Twitter at: @CanadianShipper

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@LouSmyrlis

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@JuliaKuzeljevic

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@JamesMenzies

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@FleetExecutive

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THE VIEW Lou Smyrlis, MCILT March/April 2015 Volume 118 Issue No.2

EDITOR Julia Kuzeljevich (416) 510-6880 Julia@TransportationMedia.ca

Don’t get complacent You can’t count on low energy pricing to reduce supply chain costs for much longer

H

ere we are five years into the economic recovery that followed the Great Recession and supply chain managers should be fretting over how to best fine tune their supply chains to expand or improve service to new markets and customers.Yet the cold reality is that, as our recently completed Survey of Canadian Third Party Logistics reveals, the focus remains on cost reduction. More than half (54%) of supply chain managers responding to our survey listed cost reduction as their top challenge. It’s a sign of the times that despite a growing economy – even the most pessimistic of economic forecasters are now projecting growth till the end of 2016 – reducing costs easily trumps enhancing customer service (chosen by just 11% of our sample) as the top challenge and that it is ranked even higher this year than last.

The good news is that the significant drop in energy pricing is creating a cost-saving windfall for shippers. Will low-energy pricing be the new norm or is it too good to last?

Roger McKnight, chief petroleum analyst with En-Pro International, likens the current situation in crude production to “a game of chicken with two trains heading directly toward each other.” One train is operated by OPEC (which really means the Saudis) and the other train is operated by all the other oil producers in general and North American oil sources in particular. McKnight explains the Saudis are bent on maintaining production at high levels as a play for market share. And when they’re accused of flooding the market and bringing prices down, the Saudis point the finger at North American producers. US crude inventories are at the highest levels in 80 years for this time of year, thanks to strong shale and oil sands production. In fact, the US is sitting on over 1.2 billion barrels of crude if you count the Strategic Petroleum Reserve along with the commercial inventories.

And there is more crude finding its way into the market from the Canadian oil sands, even without approval of the Keystone pipeline. How? Expansions to existing pipelines have increased delivery capabilities by 2,030,000 bpd. Crude moving by rail on its own is projected to increase from the 200,000 bpd in 2013 to 700,000 bpd by 2016. Canadian exports of crude to the US are at record levels – 3,260,000 bpd.

The Saudis are betting that North America will blink first in this game of “low price” chicken but, according to McKnight, existing oil sands facilities are enjoying operating costs in the $30 to $33/barrel range, which means their operations are still viable even at today’s crude price levels.

McKnight figures the floor price for crude will settle around $40/bbl. And he expects the market to get there around late March, pointing out that drilling rig counts are already starting to drop off and crude is being left in the ground due to the low pricing. Which will likely mean price will start to creep upwards again. Which will mean, in turn, 2015 will not be the year to get complacent about watching costs. And it’s certainly not the time to wait for all the cost savings to come through your suppliers.

A recently published Eye for Transport survey polled supply chain managers on the most effective methods used to cut supply chain costs in the past 12 months. Improving internal efficiencies was by far the most important approach, cited by close to 70% of survey respondents. Improving forecasting came out as the second most important, cited by a bit less than half the survey sample.

So enjoy the current reprieve on supply chain costs provided by the drop in energy pricing.

But remember, the only thing certain about energy pricing over the long term is its volatility.

This is no time to place all your hopes for lowering supply chain costs on the Saudis. CS

6

March/April 2015

EDITORIAL DIRECTOR Lou Smyrlis (416) 510-6881 Lou@TransportationMedia.ca PUBLISHER Nick Krukowski (416) 510-5108 nkrukowski@canadianshipper.com ART DIRECTOR Ellie Robinson erobinson@annexnewcom.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@annexnewcom.ca VIDEO PRODUCTION MANAGER Brad Ling RESEARCH MANAGER Laura Moffatt CIRCULATION MANAGER Barbara Adelt (416) 442-5600 ext. 3546 badelt@annexnewcom.ca VICE-PRESIDENT PUBLISHING Joe Glionna PRESIDENT Jim Glionna 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 NEWCOM BUSINESS MEDIA INC.

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CONCEPT B – T

IN THE NEWS

AMBITIOUS QUEBEC MARITIME STRATEGY BLUEPRINT FACES FUNDING ISSUES The Quebec government that came to power in April 2014 plans to outline by June a sweeping maritime strategy blueprint seeking to transform the St. Lawrence River into a competitive gateway of choice for continental logistics and for trans-Atlantic trade in the coming years. Billions of dollars of public and private investments in infrastructure would be involved if the ambitious scheme meets expectations.

Certainly, it is motivated in part by the prospect of increased commercial exchanges expected to be generated by a CanadaEuropean Union free trade agreement that could be ratified by 2016. In addition, the expansion of the Panama Canal promises to boost the flow of goods between Asia and the East Coast of North America.

Jean D’Amour, Quebec Minister for Transport and the Implementation of Maritime Strategy, has been picked by Premier Couillard to lead the charge for articulating what would historically represent the first such comprehensive blueprint in this crucial sector of the Quebec economy.

Moreover, it is being qualified as a cornerstone of overall economic policy – an element that has not failed to make a favourable impression on Quebec marine industry circles and such associations as the St. Lawrence Economic Development Council (SODES), despite underlying skepticism on the plan’s achievability.

Illustrating his continued strong interest in the maritime strategy file, Premier Couillard paid a visit to the Port of Antwerp (Europe’s leading maritime trading partner with Canada) in January on his way to the World Economic Forum in Davos.

Some 30 ports are situated on the St. Lawrence River, including Montreal, a container port on the Eastern Seaboard and Sept-Iles, the continent’s largest iron ore port. The 10,000 ship calls through the 1,200-km corridor generate 110 million tonnes of cargo annually.

Addressing an industry conference in Montreal in February, D’Amour reiterated 8

March/April 2015

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the provincial Liberal government’s plans to create 30,000 new jobs between now and 2030 by investing $3 billion in infrastructure, intermodal improvements and other undertakings encompassing ports, shipyards and shortsea coastal activities. The government scenario also assumes that private investors will be prepared to invest up to an additional $4 billion over the next 15 years, What he called “the Quebec of tomorrow” must be ready to meet severe competitive challenges for ensuring a smooth and efficient flow of goods.

Thanks to a strong geographic position, D’Amour said Quebec was well placed to capitalize on increased trade with Europe.

To encourage more enterprises to set up operations in Quebec, he said planned regulatory changes would provide for simpler and more rapid procedures for industries than is presently the case, compared with other Canadian provinces.

Already in motion, the minister said, were various projects at the ports of Montreal, Sept-Iles, and Contrecoeur as well as the first ferry that will be powered by natural gas.

He disclosed plans to create initially eight “industrialo-port zones” - with a first wave to be launched in the coming months.

In this regard, he pointed to Valleyfield, a growing logistics centre near Montreal.

To encourage Quebec shipowners, including cruise and cargo carriers, the 2014-2015 budget accords an additional capital cost allowance of 50% for the construction and renovation of vessels.

BY LEO RYAN

Financial funding challenges But observers consider that, in the present tense climate of contract negotiations with Quebec’s civil service and key departments, serious questions persist on the capacity of the government to financially maintain the lofty goals of maritime strategy. Some hints should be offered in the 2015-2016 budget slated for this spring.

Meanwhile, Claude Comtois, a geography and logistics professor at the Université de Montreal, suggests that a heavy assignment lies ahead for bringing Quebec infrastructure up to world standards as seen in China and Europe. “This is not negotiable - it will have to be visually in place over the next 10 years.”

According to Comtois, at least $250 million in new government funding should be allocated annually for expanding and improving certain infrastructures and adding such features as multi-task berths.

“Otherwise, it will not be credible.”

At the same industry conference, Eric Tétrault, President of Manufacturers Exporters Quebec, was similarly candid.

“We need to create,” he said, “a supply chain and a logistics chain so we can export in greater quantities at lower cost. Basically, It’s as simple and as complicated as that. As one says in English, we will have to walk the talk.” 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.

©roripond/iStock/Thinkstock

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IN THE NEWS

New Marine Hall of Excellence created to honour industry leaders The bi-national Chamber of Marine Commerce has created the new Marine Hall of Excellence to honour those who have made significant contributions to advance

marine trade and commerce in Canada and/or the U.S. Both countries owe a large amount of their success as trading nations to the vital

role of marine commerce, from their emergence as prosperous economies and democracies to the present day.

“While the exploits of our early marine pioneers are documented in many museums, the Marine Hall of Excellence will provide an opportunity to promote the accomplishments of more recent leaders whose direction and accomplishments sometimes go unrecognized, especially outside of industry. Just like our athletes, enter-

INFO YOU NEED, ANYTIME, ANYWHERE Get all the news and information you need! Subscribe to email updates and notifications, or use our mobile app for easy shipment tracking.

Stephen Brooks, President, Chamber of Marine Commerce

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tainers and aviators, this ‘hall of fame’ will recognize talented leaders who have helped shape the success of shipping and our two great nations. The Marine Hall of Excellence will lend voice and personality to an industry that has some amazing stories that have remained under the public radar for far too long,” said Stephen Brooks, President of the Chamber of Marine Commerce.

The Chamber is now accepting nominations for potential inductees who can come from any profession but who must have demonstrated vision, leadership and direction resulting in important impacts and significant tangible results for the world of marine commerce. The first inductees into the Marine Hall of Excellence will be honoured at a ceremony later this year after a selection process undertaken by the Chamber of Marine Commerce board of directors.

Inductees receive a prestigious, handcrafted award as well as a lapel pin, featuring one of the most recognizable marine symbols, the compass rose. CS

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INTERPROVINCIAL TRADE

BACKYARD BURDEN CANADA’S A GLOBAL PLAYER IN INTERNATIONAL TRADE, BUT BETWEEN THE PROVINCES RED TAPE REIGNS

BY JULIA KUZELJEVICH

A

s Canada expands its global trade agenda, with trade agreements already in force or being finalized with 43 countries, internal trade red tape, and crossborder restrictions between provinces, continue to be a burden.

So much so that, according to 48% of SMEs surveyed by UPS Canada last October, these restrictions inhibit business growth.

The current model for trade between provinces is built on a principle that protectionism for Canadian industries should be the default, until a case for an exception can be made.

Yet UPS Canada survey data, released in October, found that despite the hurdles, 73% of SMEs are conducting business with customers or partners in other provinces.

The focus on reducing red tape in Canada’s own back yard has become a hot topic, said Paul Gaspar, director of small business, UPS Canada.

“We continue to see growth within our country’s borders, fueled by market opportunity and customer demand,” he said.

With regard to small businesses, “we keep hearing they have a lot of government issues.”

With 4/5 businesses seeing global trade as a competitive advantage, to even consider going south of the border they need to be able to trade interprovincially, he said.

“If we don’t help them succeed here it will be harder for them to grow. SMEs that don’t go global today will be playing catch up tomorrow,” he said.

There are discussions underway to modernize Canada’s internal trade, and this could further enable the remaining quarter of SMEs not currently doing business in other provinces to do so in the next five years.

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INTERPROVINCIAL TRADE

Industry Canada’s James Moore laid out key areas of concern around the current Agreement on Internal Trade in his August 2014 federal proposal, One Canada, One National Economy: Modernizing Internal Trade in Canada, released following extensive cross-country consultations.

When the AIT was signed, in 1994, Canada had free trade agreements with two countries, the US and Mexico. In 2014, Moore said, “Canadian businesses have preferential access to over 1.1 billion consumers worldwide. Persistent barriers to internal trade, including regulatory differences, inconsistent standards, and restrictions on the free movement of people, goods and services, fragment our economy and put Canadian firms at a disadvantage.”

“One Canada, One National Economy,” outlines two options for improving the AIT, the first, a simplification of business rules, and modernization of government procurement to make it more open, and the creation of a more comprehensive AIT. The second proposes a redesign of the internal trade framework in Canada, similar to the basis of Canada’s most recent international trade agreements.

“The result of redesigning the very structure of the internal trade framework would be clear and comprehensive: all economic activity would be covered automatically,” the report states.

Jake Enright, Press Secretary to the Honourable James Moore, told Canadian Shipper that for the past year the Minister has been working with his provincial and territorial counterparts to modernize Canada’s Agreement on Internal Trade (AIT).

“Part of this plan includes greater harmonization of transportation regulations.

For example, the current AIT does not address the fact that some weight and dimension regulations are not harmonized among provinces. This means that companies transporting goods across Canada require permits from every province or territory through which they do business. Such an amendment will allow businesses to compete and succeed in all of our domestic markets, resulting in more job creation and economic growth for Canada.

The Minister is hopeful that the Committee on Internal Trade will meet again before the end of spring,” he said.

Harmonization cannot come soon enough for the trucking industry. Jennifer Fox, who is VP, Customs, with the Canadian Trucking Alliance, and VP Customs and Compliance at the Ontario Trucking Association, outlined priorities for the industry in a discussion with Canadian Shipper.

On October 1, 2014, the Council of Ministers Responsible for Transportation and Highway Safety endorsed three changes to the national Memorandum of Understanding on Truck Weights and Dimensions: (1) New standards for rear aerodynamic fairings (commonly referred to as boat tails) to improve fuel efficiency/reduce GHG; (2) An extended maximum B-Train length to allow for longer wheelbase tractors to accommodate environmental technologies like auxiliary power units and larger, more comfortable sleeper berths; and, (3) A tridrive tractor-semitrailer configuration to improve traction and productivity.

“The industry had been seeking these changes for many years and is now concerned over the length of time it will take some jurisdictions to introduce/pass the regulations needed to implement the continued

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INTERPROVINCIAL TRADE

continued from p. 13

MOU changes. History tells us we have reason to be concerned. Some provinces appear committed to moving quickly and some have introduced measures such as “deferred enforcement” or special permits to allow this equipment to be used in the interim. For many, if not most, we have no sense of what their intentions are. In addition, the B-train amendment does not include one of the key recommendations from industry that should have been included. It behooves all provinces to address both of these matters urgently,” she said.

One of the key means by which the carbon footprint of heavy trucks can be reduced is by allowing carriers to switch from conventional dual tires to the new generation of fuel-efficient wide base single tires (some of which are actually manufactured in Canada) without an axle weight penalty.

Ontario and Quebec equalised the weights between the two types of tires many years ago, but no other provinces have as yet done

so and continue to penalise the use of wide base single tires by only allowing them at lower weights than conventional dual tires.

This not only prevents the industry from reducing its GHG emissions, it also impairs the ability of Canadian carriers to comply with new federal GHG-reduction standards for heavy trucks being introduced in both Canada and the United States. It also puts Canadian carriers at a competitive disadvantage.

They want to be able to spec’ and utilise trucks for use in both Canada and the United States. By penalising the use of wide base single tires, Canadian carriers are forced to use dual tires for not only domestic shipments, but also for Canada-US shipments while US carriers are able to use wide base single tires at maximum US weights in both countries.

CTA is also calling for each province to introduce mandatory entry level training of truck drivers to a standard consistent with

the outcomes of the industry-developed National Occupational Standard (currently in the final stages of development).

Ontario recently announced its intention to introduce mandatory entry level training and the US Federal Motor Carrier Safety Administration is currently seeking a negotiated policy on this very issue.

“A national effort would be beneficial to all and we urge all Premiers to endorse the need to move to mandatory entry level training for truck drivers,” the CTA said. (At press time, Manitoba Trucking Association announced it had partnered with the Province of Manitoba to announce that New Generation Wide Base Tires can now be used at full RTAC weights on RTAC highways in the province.)

In Budget 2014, the federal government also committed to developing an Internal Trade Barriers Index to help identify measures that currently restrict trade.

“The index will allow us to better identify priority areas and help federal, provincial

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INTERPROVINCIAL TRADE

and territorial governments collectively focus efforts to eliminate internal trade barriers. A contract to develop the index was awarded in December 2014,” Minister Moore said.

When the AIT came into force, signatories agreed to adhere to six general rules, established to prevent governments from setting up new trade barriers and to reduce existing barriers. According to Moore’s report, a modern trans-Canada partnership should recommit to the six guiding principles outlined in the AIT. They are: • Non-discrimination: all Canadian persons, goods, services and investments should be treated equally • Right of Entry and Exit: persons, goods, services or investments should move freely across provincial or territorial boundaries • No Obstacles: government policies and practices should not create unnecessary obstacles to trade • Legitimate Objectives: exceptions must be for legitimate reasons and should have a minimal adverse impact on internal trade • Reconciliation: all trade barriers caused by differences in standards and regulations should be eliminated • Transparency: information should be accessible to all Canadians In turn, a new agreement could also cover aspects of trade relations that were not included at the time the AIT was created, ensuring that our domestic arrangements can keep pace with international arrangements.

Four additional principles to guide future negotiations have been proposed: • One Economy: Canadian goods, services, labour and investments should be treated as favourably as those from other countries.

• Full, Inclusive, Transparent Coverage: we should ensure the free trade of all goods, services, labour and investment.

• Align or Explain: we should work to align regulations, standards and practices across the country and explain when exceptions are necessary • Accountability: parties should regularly report to Canadians on the progress of modernization efforts.

There’s a broadly positive consensus in Canada about being more open to trade.

“We are trying to educate them as much as we can. Having a team that understands some of these regulations and challenges, and insight based on our experts. It’s

informing them about regulations, such as the challenge of shipping wine and beer interprovincially,” said Gaspar.

Earlier in 2014 a UPS Leger study showed more than four in five Canadian businesses

continued

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see global trade as a key competitive advantage for Canada. Approximately 84% believe trade diversification beyond North America is necessary.

Overall, businesses were more likely to

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INTERPROVINCIAL TRADE

continued from p. 15

exceed their growth benchmarks with a supply chain strategy in place (24.6%), rather than without (16.3%), UPS found.

Some 50% of businesses claim that a lack of talent and skills is having a negative impact on their business. This is one area where modifications to the Agreement on Internal trade could have an impact.

The leaders of Canada’s western-most provinces have long argued that the current rules were arcane and outdated, and severely limited the transport of a host of goods between provinces, so much so that it’s easier to ship goods out of Canada.

As such the governments of British Columbia, Alberta and Saskatchewan have created the New West Partnership Trade Agreement (NWPTA), an accord they say creates Canada’s largest, barrier-free, interprovincial market. The NWPTA came into effect July 1, 2010 and has been fully implemented since July 1, 2013.

Under the NWPTA, British Columbia,

Alberta and Saskatchewan are the first jurisdictions in Canada to commit to full mutual recognition or reconciliation of their rules affecting trade, investment or labour mobility so as to remove barriers to the free movement of goods, services, investment, and people within and between the three provinces.

The NWPTA builds on the Trade, Investment and Labour Mobility Agreement (TILMA) between British Columbia and Alberta and has the clarity Saskatchewan was seeking on public ownership of Crowns and the ability of municipalities to support economic development.

British Columbia, Alberta and Saskatchewan have also committed to: avoid measures that operate to restrict or impair trade between or through their territories, or investment or labour mobility between them, and to having an enforceable dispute resolution mechanism that is accessible by governments, businesses, workers and in-

vestors in order to ensure that each province lives up to its commitments.

British Columbia, Alberta and Saskatchewan have extended the streamlined business registration and reporting requirements established by British Columbia and Alberta to Saskatchewan, and eliminated residency requirements (already completed in British Columbia and Alberta).

This has made it easier for professionals and tradespeople to have their qualifications recognized.

As of July 1, 2010, businesses faced fewer difficulties recruiting needed workers from the other two provinces and gained access to more government procurement opportunities on an equal footing with suppliers from the other provinces.

As of July 1, 2012, a seamless business registration and reporting process was also put in place among the three provinces to allow businesses to operate in all three provinces without the added costs of estab-

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16 March/April 2015 www.canadianshipper.com

p12-17 CdnShipperMarApril2015 Interprovincial.indd 16

15-03-09 10:20 AM

INTERPROVINCIAL TRADE

lishing a second or third office, meeting duplicative registration and reporting requirements, satisfying unnecessarily different standards and regulations, or seeking additional permits to operate.

In 2014, the NWPTA agreed to reduce exceptions, to make trade in the New West even more open.

The Premiers are currently reviewing exceptions to determine if there are other possible improvements to liberalize trade, particularly in the area of occupational health and safety by March 31, 2015.

With the total cost of complying with government rules and paperwork reaching $37.1 billion a year in 2014, according to this year’s Canada’s Red Tape Report, in the smallest businesses, the average employee can spend more than a month each year (185 hours) just dealing with regulations.

The latest annual report from the Canadian Federation of Independent Business was issued in conjunction with

CFIB’s Red Tape Awareness Week campaign, held Jan. 19-23.

The onerous burden of excessive regulation is also deterring the next generation of entrepreneurs, as the report notes 42% of small business owners would not advise their children to start a business.

Although not all regulation is red tape, business owners say the regulatory burden could be cut by about 30%, or $11 billion a year, with no negative effect on health, safety and environmental goals of regulation.

B.C. is the only province or territory to receive an ‘A’ rating for streamlining red tape issues. It has reduced regulatory requirements by 42 per cent since 2001, which amounts to nearly 154,000 requirements off the books.

The CFIB grades the provinces, territories and federal government on their commitment to red tape accountability. The annual report card looks at measurement, public reporting and political leadership.

p12-17 CdnShipperMarApril2015 Interprovincial.indd 17

Quebec and Ontario achieved a B+ rating, and Saskatchewan earned a B grade.

Newfoundland and Labrador was given a C for its efforts. P.E.I.,Yukon,Alberta, Manitoba and Nova Scotia ranged from D+ to D-, and the Northwest Territories was given an F. New Brunswick was not included in the evaluation, as it is too soon to evaluate the new government’s performance on regulatory accountability. New premier Brian Gallant, however, has stated his government will help reduce regulatory burdens.

Small businesses pay as much as four times more than larger businesses on regulation costs, the report said. CS Editor Julia Kuzeljevich has been writing about transportation issues for 15 years. Her articles have garnered several transportation and Canadian Business Press writing awards.

www.canadianshipper.com March/April 2015 17

15-03-09 10:20 AM

3PL SURVEY

SOURCING IT OUT WEIGHING THE BENEFITS OF OUTSOURCING, WITH RESULTS FROM OUR ANNUAL SURVEY OF CANADIAN THIRD PARTY LOGISTICS.

BY LOU SMYRLIS

18 March/April 2015 www.canadianshipper.com

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3PL SURVEY

continued from p19

This ground-breaking project is sponsored once again by Ryder Canada. Insights from this leading 3PL provider are included at the end of the survey.

Transportation is far and away the most common supply chain activity outsourced with 78% of respondents outsourcing outbound transportation and 64% outsourcing inbound transportation. Crossing the border has become increasingly complicated since 9/11 and that is reflected in the willingness to outsource this function with 49% of our sample indicating they do so while 54% outsource customs brokerage. Warehousing is also a function commonly outsourced with 43% of respondents indicating they do so while 28% outsource cross-docking activities.

Cost reduction remains the top supply chain challenge cited by the vast majority of survey respondents with 54% citing that as a challenge.

The need to enhance customer satisfaction was a distant second with 11% of respondents identifying that as a major challenge while 6% cited the need to improve supply chain management execution. Of those who do outsource, the majority (48%) said their outsourcing philosophy is to “review costs between ownership and outsourcing before making decisions” while a quarter of respondents said they “prefer to outsource non-core business activities wherever possible.”

Only 28% said they “prefer to own/ control functions in-house, but will sometimes outsource.”

The majority of survey respondents (83%) use multiple providers for their outsourcing needs. The ability to serve different geographic areas is the main reason cited for doing so (40%) while a quarter of respondents said using multiple 3PLs provided them with a greater range of expertise while 22% said it provided them with greater leverage on pricing.

Cost reduction is the main chalcontinued

Outsourcing philosophy Prefer to outsource

Review costs

non-core business

between

25%

ownership and

activities where possible

outsourcing

48%

before decision

Prefer to own/ control functions in

28%

house, sometimes outsource

Outsourcing strategies

16%

2%

Have outsourced in past and considering doing so again

Have outsourced in past but no plans to outsource in future

14%

4% Not currently outsourcing but considering doing so

64% of respondents

Have never outsourced and no immediate plans to do so Outsource some or all logistics functions and will continue to do so

E

Percent of logistics expenditures directed to outsourcing 81-100%

Less than 20%

33%

22%

61-80%

15% 13%

17%

21-40% 41-60%

20 March/April 2015 www.canadianshipper.com

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15-03-06 2:50 PM

n ng

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.

p18-23 CdnShipper MarApr2015_3PL Survey.indd 21

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3PL SURVEY

continued from p20

lenge for Canadian companies and outsourcing is showing clear benefits in helping companies reach that goal, according to the survey results. Forty one percent of survey respondents indicated their logistics costs declined as a result of outsourcing while another 16% indicated their logistics assets declined; 8% indicated their average order cycle length shortened and their overall inventories declined. Of those realizing outsourcing benefits, half of them realized costs savings of greater than 10% through outsourcing; 32% realized logistics assets declines of greater than 10%; and 29% indicated their overall inventories declined by more than 10%. Eighteen percent indicated their service has improved through outsourcing.

Yet as much as outsourcing is helping Canadian companies with their chief concern of cost reduction, there seems to be room for improvement.

When asked to rate the performance of their main outsourcing provider, survey respondents gave the lowest score (an average of 2.91 on a scale of 1 to 5) for their 3PL’s ability to be “proactive in seeking ways to reduce your costs.”

When asked for their top concerns with their main outsourcing contract, “cost creep and price increases once relationship has been commenced” was the top concern, cited by 30% of respondents.

On the positive end, survey respondents scored the performance of their top 3PL highly for “managing and servicing the account” (3.75 out of 5); “meeting promises on execution and performance” (3.68); and “reacting quickly to changes or problems” (3.66). They also scored them an average 3.63 out of 5 for being “price competitive.”

As the use of outsourcing becomes increasingly entrenched as a viable supply chain strategy, performance expectations can only continue to rise. Our long-term goal is to continue to analyze the evolution of outsourcing in Canada and its performance standards. CS

Main services currently outsourced

Outbound transportation

78%

Inbound transportation

64%

Customs brokerage

54%

Customs clearance

49%

Warehousing

42%

Freight forwarding

18%

45%

Shipment consolidation/distribution

Cross docking

28%

Freight bill auditing

10%

Selected manufacturing activities

9%

Main reason for using multiple 3PL providers Less reliance on any one provider

8% Serve different geographic areas

40% 22% Greater leverage on pricing

3% Compare service levels

25% Greater range of expertise

22 March/April 2015 www.canadianshipper.com

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3PL SURVEY

Rating of top providers (scale of 1 to 5)

3.75

3.66

3.68

3.63

3.53

Managing and servicing account

Reacting quickly

Meeting promises on execution

Being price competitive

Understanding intricacies of client business

to changes or problems

Top concern with 3PL relationships

10%

30%

Time and effort spent on logistics not reduced

Cost creep and price increases

15%

7%

Lack of continuous ongoing improvements in service

Lack of strategic management skills

13% Service level commitments not realized

5% 8%

Over promising on services due to competitive pressures

Cost reductions not realized

Main way outsourcing has improved logistics operations

41%

Logistics costs declined

Service has improved

16%

Logistics assets have declined

Average order cycle length shortened

4%

18%

8%

Overall inventories declined

www.canadianshipper.com March/April 2015 23

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15-03-06 2:50 PM

SPONSOR’S EDITORIAL

How Lean Principles Turn Outsourcing into a Win-Win: Stay in Control and Improve Continuously

By Guy Toksoy, Vice President / General Manager Ryder Supply Chain Solutions Canada

F

or any company looking to reduce costs, speed order cycles, improve process efficiency or enhance supply chain visibility, outsourcing can unlock unprecedented benefits. Why? Because qualified 3PLs offer a world of experience, talent, and technology that many companies don’t have in-house.

Roadblocks to outsourcing: worries about control and performance Many organizations stop short of outsourcing because they worry about losing control or whether the provider can actually drive business growth and reduce costs. Instead, they “hedge their bets” by working with multiple vendors, attempting to juggle and improve business performance at the same time.

Despite worries about control and results, two thirds of companies outsource logistics. So, if you know you want to streamline processes, accelerate growth and reduce costs, how do you overcome issues with control or performance? The key is to establish an understanding of success criteria, measurements and responsibilities upfront. Successful 3PL partnerships share two characteristics: active engagement by both parties in managing the business and well-defined key performance indicators with buy-in on both sides. Longer-term commitments help minimize risk and deliver higher levels of success.

Less is more Ironically, when companies minimize risk by spreading their business among multiple 3PLs, the result is less collaboration and innovation. By structuring contract terms for shorter-term commitments and lowering barriers to exit, companies signal to 3PLS that their levels of commitment and expectations are not in line with one another. Innovation only happens when goals are closely aligned, partners share a vested interest in success, and are truly committed to collaborating. Before establishing relationships with multiple vendors, balance your expectations, commitments, and the service complexity your business model requires.

Lean is the key The secret to overcoming these challenges and delivering long-term value? Partner with a 3PL with a proven record, solid customer references, and a culture of Lean improvement. Lean practices improve quality and productivity by taking cost and waste out of the equation.With Lean, every step in every process adds value. At Ryder, five guiding principles govern every activity:

1. People involvement 2. Built-in quality 3. Standardization

3. Short lead time 5. Continuous improvement

Involve people: In a lean organization, employees are trained to recognize and eliminate workplace waste and solve problems.

They’re also cross-trained so they understand how different jobs work together and can identify opportunities for improvement. Celebrating successes and rewarding great suggestions motivates people to do their best.

Emphasize quality: Start by mistake-proofing processes and engi-

neering supply chain tasks so that any worker can perform them correctly. Test processes and assign metrics for success. Document performance standards and address issues immediately if employees struggle to meet production goals or schedules. Always provide positive feedback when employees perform well.

Standardize best practices: In a lean facility, everyone is trained to follow documented best practices, using the same steps. Documenting one best way to perform a task and conducting regular audits ensures that work meets quality, cost, speed, and safety metrics.

Accelerate lead times: Lean operations reduce lead times in

many ways. In a lean warehouse, work flows efficiently from point A to point B. Big jobs are broken down into smaller ones.Work pace is planned and expectations clearly communicated. Inventory is matched to customer demand, without buffer stock. Distribution centers deliver just what customers need, on time.

Improve continuously: Small gains over time are actually more

effective than massive gains achieved at one time. Continuous improvement requires a structured practice for identifying problems, analyzing root causes, and implementing solutions that prevent issues from happening again.

A lean culture offers tremendous rewards, but requires a significant commitment. Good news: getting lean doesn’t mean re-engineering operations. By working with a supply chain partner with a lean culture, you can tap the benefits of Lean without the upfront costs. A Lean 3PL has made the investments, hired the talent, and surmounted the learning curve so that you can reap the rewards of greater efficiency, quality, and the capacity to deliver outstanding value to your customers – without worrying about loss of control or performance issues. CS

24 March/April 2015 www.canadianshipper.com

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15-03-09 7:11 AM

‘

‘‘

CS

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p24-25 CdnShipper MarApr2015_RyderArticle.indd 25

15-03-09 7:11 AM

TECHNOLOGY

BY JULIA KUZELJEVICH

THE SHORTFALLS AND PITFALLS AROUND SUPPLY CHAIN VISIBILITY, AND HOW TECHNOLOGY AND BEST PRACTICES CAN LEND A HAND

E

26 March/April 2015 www.canadianshipper.com

p26-31 CdnShipper MarApril2015_Technologies.indd 26

ver more complex, global supply chains need near real-time visibility into the status of orders and shipments, to reduce inventories and optimize networks.

But global trading systems, which have different infrastructures, data definitions, and message formats, make this a complicated task.

Multiple status updates from multiple players can be difficult to receive and interpret.

Whether it’s looking at the aspect of location and the various codes for heterogeneous locations, or time differences, the challenge emerges around gathering and harmonizing these, said Stephanie Miles, Senior Vice President, Commercial Services, Amber Road. The company has established a global trading network connecting to hundreds of trading partners who can share information, distribute reports, and receive alerts on milestones that are critical to the timely delivery of goods.

While some applications focus on the “four walls” of the customer’s operations, and systems that are driven by internal processes, some rely on external data sources, and the ability to combine that with data within the four walls, Miles said.

The mistake people make is thinking they can force their “master concept” onto external trading partners. The issue is how to normalize the data.

Normalization is the process of reorganizing data in a database so that it meets two basic requirements: (1) There is no redundancy of data (all data is stored in only one place), and (2) data dependencies are logical (all related data items are stored together).

Perhaps one group uses one code for an item and a second group another. With normalization, the software recognizes that they are the same thing, Miles noted.

“Amber Road does a master reference database and develops algorithms that normalize the data so that when customers want to query the data they don’t have to ask for it, other than in their own vernacular,” she said.

For example, an end user querying a date/time event can view it in time localto-the-event or in the home time zone.

Thinking of the data in a linear fashion could cause mistakes, so it becomes a best practice to better understand a data source and its internal dependencies.

Having trading partners store data that they are not paid to manage is not a best practice, and it is difficult, in a global trade ©Devrimb/iStock/Thinkstock

15-03-09 10:24 AM

TECHNOLOGY

arena, with complex supply chains, to have complete commonality around business practices worldwide.

“Be realistic about your expectations around carrier business practices and the collection of data. Avoid one-off requests and ask for the industry standard. There are always nuances around data concerns. No system out there will resolve it all. The important thing is to capture and manage the exceptions, not just from a supply chain perspective, but understanding the nuances that are important to achieving a high level of data quality,” she said.

Supply chain visibility started with the simple tracking of logistics moves.

Nowadays applications let customers measure specific cycle times, take time out of their trade lanes, or look at their total landed cost.

Then there is exception management, carrier performance, and proof of delivery on outbound customer shipments, leading to the ability to electronically recognize revenue.

Without external supply chain information you cannot optimize or plan.

The benefits of having your own supply chain visibility solution?

If a customer just has a simple supply chain setup, said Miles, sometimes the partners can provide this visibility.

“But in global operations, there’s rarely one partner who can act as the ‘control tower’ as we can. A visibility solution and the gathering of data is valuable to addressing today’s operations constraints, such as labour or weather issues,” she said.

John Kelly, president of Transplace’s Canadian division, offered examples of situations where shippers commonly have a lack of visibility into their operations.

While shippers do spend on ERP, forecasting, inventory, and demand planning, etc. true visibility and how it all connects is lacking.

From a macro level, and visibility standpoint, a key enabler is a lack of infrastructure relating to the supply chain component, he said.

There’s often a disconnect between the C-suite and actual performance levels, and a big gap in training.

“People adopt technology, implement it, and don’t train. Why? Every customer is different. But they don’t necessarily see the scope of work required for what the

system needs to deliver,” Kelly said.

“We need a bottoms-up approach when looking at an application. If visibility is the key, where is it in the priority scale as opposed to other components? Where does supply chain visibility fit in to this?” he said.

Or, you have visibility, but it’s what you do with it.

“It’s making the right decision around what you’re seeing. So if you have a tool, you need to create parameters around the tool. It would seem like the tool is almost too rigid. The IT application should remove redundancies, but creating this visibility through an IT solution should not remove the ability to make common sense decisions,” Kelly noted.

A TMS can help see the transparencies in

The mistake people make is thinking they can force their “master concept” onto external trading partners.

The issue is how to normalize the data. the cost models. TMS applications done properly will look at mode conversion, and freight matching within the broader freight spectrum.

“The benefit of the 3rd party is that we’re ‘above the weeds’, but even in our own businesses you need to back away and not be mired in the company’s business,” Kelly said.

The IT component is the key driver-it’s the backbone. But if the IT component is not tight enough you will not be able to determine the proper order lead time in a restrained market.

Shippers will be better served by the technology if they get away from rate, and look at cost to serve.

This will require breaking some paradigm shifts.

“The customer is stuck in the paradigm of I have a truck, I have $1000 but this year I want to pay $925. But that $925 carrier may not hit the right service levels-it’s about the cost to serve,” he said.

Success is when you are both working towards the common goal of cost to serve: reducing cost on the shipper side, making a profit on the provider side.

“You should be trying to drive out your number of transactions, not your unit cost.

p26-31 CdnShipper MarApril2015_Technologies.indd 27

You have to have two parties that want to participate in driving the results. How? You deploy a TMS, you plan around corporate goals. The execution component is IT,” Kelly said.

The shipper-customer environment is moving faster. As the pendulum swings, instead of the customer coming to us telling us they’ve implemented such and such, we are telling them what they need to implement to stay successful. The 3PL relationship is becoming stronger, the level of product coming forth is stronger.We’re also looking at own internal tools and how to make them better, Kelly said.

When talking about the IT visibility standpoint, the Canadian market is very different from the US, in terms of cost to serve.

“In Canada it’s less simple. From an IT perspective, if you’re truly talking about managing through TMS at SKU level datacost to serve by region by case, by demographics-you need that to survive here. Full loads are not always the most economical and the most efficient. We can push that solution to the customer (two partials as a base load), picked up as a full load, with greater inventory diversion on our imports.

Our tools enable that,” Kelly said.

The visibility discussion has been “such a long burning issue. Forty percent of manufacturers still say they lack visibility in their supply chain. If you’re putting good money after bad, you’re not really going to get to know your system. Everyone assumes the technology is smarter. But you have to be able to play within the system without breaking it. Common sense needs to apply,” he said. CS Editor Julia Kuzeljevich has been writing about transportation issues for 15 years. Her articles have garnered several transportation and Canadian Business Press writing awards.

www.canadianshipper.com March/April 2015 27

15-03-09 10:24 AM

RETAIL FOCUS

A GROWING

FOCUS PARCEL CARRIERS MINE RETURNS FOR MORE ELABORATE OFFERINGS

BY IAN PUTZGER

F

edEx got itself arguably the best possible Christmas present for a parcel operator - a massive handle on product returns. In mid-December the integrator announced the agreement to acquire GENCO, a major specialist in the reverse logistics arena. According to FedEx, its acquisition handles in excess of 600 million returned items a year, serving seven out of the top ten retailers in the US. FedEx did not reveal how much it agreed to pay for GENCO, but analysts’ estimates put the transaction in the neighbourhood of US$2 billion.

The move reflects the growing focus on returns in the rapidly growing B2C ecommerce field.

“Returns is an issue for all our customers,” remarks Brian Bourke, vice president of marketing at SEKO Logistics. “They need good service, all the way from customer service at pick-up to replacement and putting products back on the shelf.”

Tim Sailor, principal of Navigo Consulting Group, describes B2C e-commerce as the new great battlefield for the large parcel carriers. “At some point everybody was chasing over-the-counter, non-discounted business. UPS bought Mail Boxes etc., FedEx bought Kinko’s.The next battle is over the e-commerce customer,” he says.

Returns are a rising concern and play a big part in the communication between retailers and their logistics providers, points out Ryan Persad, director of Purolator Logistics. “Ten years ago returns was not part of the conversation. Then most companies were not salvaging and reselling product,” he says.

Customer retention hinges on a positive 28 March/April 2015 www.canadianshipper.com

p26-31 CdnShipper MarApril2015_Technologies.indd 28

exper ience with returning items, he continues, citing research which shows that 85 percent of consumers would not buy again from a vendor whose returns process is not satisfactory and 89 percent would not order from merchants who charge them for returning goods.

“You cannot do a distance sale if you do not offer a reasonable return service, and ‘reasonable’ translates as free for the consumer’,” agrees Horst Manner-Romberg, head of German mail and parcel logistics consulting firm M-R-U. Inevitably the surge of on-line orders in the run-up to Christmas generates the most pronounced spike in returns. According to UPS, there is even a ‘National Returns Day’ (January 3), which was supposed to produce a return volume of about 520,000 parcels this year. On December 26 the integrator signalled that it was expecting to handle altogether 4 million return shipments in the Christmas holiday season.

More and more on-line shoppers send merchandise back. A UPS-sponsored study titled ‘pulse of the on-line shopper’ shows that in 2014 62 percent of surveyed consumers returned an item that they had purchased on-line, up from 51 percent two years earlier.

“Returns used to be less than 10 percent of sales, now they are about 17 percent,” says Persad.

Some estimates put return rates as high as 25 percent. Manner-Romberg cautions that there is considerable variation between different segments. While shoes and garments typically show high return numbers, other sectors like cell phones or consumer electronics have low return rates, he notes.

In any case, return logistics have become part of the logistics contract for etailers’ business.“Returns have to be part of an overall inventory picture,” says Sailor.

“Returns are not going to be the driver in the contract, but they certainly can be a differentiator.”

The most critical element is to make the return process easy for the consumer, lest the e-tailer loses him for good. On the outbound side, operators offer a variety of delivery options.This cannot be duplicated for the reverse flows, although there is the possibility of a driver picking up a return item when delivering a new one, MannerRomberg points out. Usually consumers drop off their returns at depots or postal outlets, he adds. Operators like UPS have an advantage with their footprint of retail stores and drop boxes. continued p30

15-03-10 7:21 AM

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15-03-09 10:24 AM

RETAIL FOCUS

continued from p28

The channels for outbound flows often do not work in the opposite direction. “A lot of customers think you can use the outbound platform, but not really,” says Persad.

In some cases geography is a major determinant. One of Purolator’s customers is an Ontario-based maker of golf equipment.

About 80 percent of its golf clubs are sold in BC and Alberta, so it makes no sense to funnel returns back to Ontario, Persad points out.

Given e-tailers’ strong emphasis on keeping costs low in the returns process, most of this traffic moves in consolidations.

The second essential requirement is visibility. “Building solutions that have an IT component for visibility is key,” remarks Persad, adding that Purolator usually sets up solutions that give clients visibility across

the supply chain,” remarks Persad.

Clothing like golf shirts also needs work - at least a check for physical damage, followed by steaming the item, folding and packing it. A service deal with footwear distributor Josef Seibel calls for Purolator to pick up returns from various Costco outlets, move them to logistics facilities located in Dorval and Richmond, BC, check for defects and give each shoe a quick clean and wipe before packing the pair for re-sale.

“In clothes the fulfillment rate is higher than with spare parts,” remarks MannerRomberg. Overall returns are moving increasingly to individual solutions for online retailers, he adds.

In the main the rapid growth in on-line shopping has played out in domestic markets,

cated logistics solutions. Instead of going back, products may end up being re-sold to other parts of the world This is where the acquisition of GENCO promises rich pickings for FedEx. The former runs a proprietary ‘Marketplace’, which acts as a wholesaler of retail returns and surplus inventories. It sells returned and surplus goods to discount retailers, who buy liquidated products in bulk for resale. A chunk of this goes to markets like China or India, which can feed into FedEx’s traffic to these markets.

The evolution of returns services has opened lucrative doors for logistics providers, comments Manner-Romberg. Rather than having to offer returns services at or below cost to win the outbound traffic of a

In the main the rapid growth in on-line shopping has played out in domestic markets, but international purchases over the web are on the rise. This will force logistics providers to up their game in parcel return flows. the country. This is partly to optimise the flows of returns to their respective destinations, partly to allow the e-tailer to credit the consumer earlier, he notes.

Cost considerations may suggest basic return models, but the different nature of the goods involved dictates different requirements for return flows. In some cases goods are not supposed to be fed back into the selling cycle. “If you bring back a $2 or $5 item, you will probably dispose it, but not a $1,000 bag,” remarks Jeff Cullen, CEO of forwarder Rodair International.

“With electronics you may have a $700 order.You do not want that floating through your supply chain. Also, you want to credit the customer faster,” observes Sailor.

The predominant factor in determining the best return solution is the average order value of a commodity, according to Sailor.

“If you have a higher order value, you want more of an end-to-end solution. And you want to make it easy for the customer to return the item,” he says.

Returning electronics often involves inspecting faulty products and running basic diagnostics before sending them back.

“We try to take the inspection further up

but international purchases over the web are on the rise. This will force logistics providers to up their game in parcel return flows.

“International returns are difficult.

Most companies do not have great international return solutions,” comments Sailor.

“If you have returns from Canada to the US, we have to consolidate them and take them through customs,” notes Persad. To avoid this, US retailers have begun to establish return distribution centres in Canada, he observes.

One example is rechargeable batteries. In the past Purolator would move these into Canada from the US and funnel back returns across the border. Today they are flown in from China, and Purolator puts on labels that include return addresses - in BC for consumers in the province and Alberta, while returns from Ontario flow to a facility in Toronto.

To create a return solution to an offshore facility logistics providers need scalability, Persad points out.“You need to have multiple return locations. Having only one is going to drive the cost up,” he says.

Increasingly clients look for alternatives to returning rejected merchandise back to their shelves, which calls for more sophisti-

retailer, they have been able to broaden their offerings and tap into additional revenues, he says.

“Usually parcel companies get a good price for returns, albeit not as high as for outgoing traffic, as they usually move slower, but many parcel firms have turned this into a fulfillment service. It is an additional revenue source for them,” he comments.

Are there limits how far return logistics services can go? Persad draws the line at services that require certification from government authorities like Health Canada.

“That is risky to take on. Most logistics companies stay away from it,” he says. “The customer sends out a technician or inspector who can take care of this, but we will do all the solutions.” CS 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.

30 March/April 2015 www.canadianshipper.com

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RETAIL FOCUS

Automated parcel lockers can be set up at locations such as this Mississauga, Ontario service station.

turn. Simplifying and automating reverse logistics for on-line purchases alone may persuade more retailers, carriers and consumers to jump on board.

Most important, such benefits help wring out costs from B2C home deliveries.

UPS estimates that labour and fuel cost reductions alone from cutting one minute from a driver’s time per day saves the firm US$14.5 million per year. Of course, all this money flows directly to the bottom line.

Business partners hosting locker sites benefit from higher customer traffic. For example, consumers picking up parcels at a gas station are also likely to fill up before they leave.

In addition, lower freight rates may offer retailers more price flexibility. They can lower the minimum purchase levels for free delivery kicks or remove the charges completely. As well, they will achieve higher customer service and satisfaction levels thanks to hassle-free, last-mile deliveries not to mention simpler returns processes.

Oddly enough Central and Western Europe postal authorities are currently the world leaders in locker deployment. That’s no surprise for the logistics-savvy postal agencies in Western Europe-Germany, the Netherlands, France, the United Kingdom and Scandinavia. They launched banks of lockers to handle soaring parcel volumes resulting from the skyrocketing growth of on-line shopping.

Martin Graham, Toronto-based president of the Metro Supply Chain Group Inc. estimates that the UK, home to some of the world’s most active on-line shoppers, now boasts about 1,100 banks of lockers. (His firm is assisting InPost Canada with its launch.) According to a recent survey, in Britain close to 15% of overall retail sales are made on-line. In the U.S. it’s 9%, and Canada it is 6%.

In preparation for the 2014 Christmas holiday volume, Finland’s national postal operator, Itella, installed 150 new terminals.

Its network of automated parcel collection sites now total 460. Its research shows that 27% of its consumers use parcel lockers and that about 10% of all consumer packages are now delivered to lockers. Itella began piloting lockers in 2008.

But in Central and Eastern European countries such as Poland, Estonia and Latvia etc. the driving force behind launching lockers was simply to overcome their basic lack of parcel delivery staff and infrastructure.

In contrast, North American post offices-the USPS and Canada Post- are only just starting to play catch up. The USPS has recently launched its gopost initiative with test sites in New York City and Washington DC. After registering on the USPS gopost website, applicants receive an account number, access card and a PIN for opening lockers.

Rather than their using their home address when ordering on-line, they enter the loca-

tion of the parcel locker together with their account numbers. After the order is delivered to the locker location currently in post offices, users receive an email notification.

They can retrieve their parcel in much the same way InPost Canada customers will as described earlier. Despite its recent strategic shift to delivering parcels, Canada Post has so far not issued any major public statements about introducing lockers.

Lockers come in different flavours. In contrast to Jasinski’s agnostic approach, other secular or in-house systems exist.

These include Amazon’s extension of its Amazon Prime delivery system and WalMart’s ‘grab and go’ on-line service. These systems focus on faithful customers since the lockers are restricted to holding products they sell. In addition,Wal-Mart lockers are often located inside their stores or malls, which limit consumer access.

Although Amazon lockers were launched a while ago, there are reports that many potential partners are reluctant to have them near their own outlets for fear of losing customers to them. Similarly, some carriers are also wary of Amazon “muscling in” on their turf by developing their own competing delivery systems such as drones.

In the US, there is a growing trend among big-city apartments, condos and co-ops as well as office buildings to install lockers for receiving tenants’ parcels. Demand snowballed after occupants’ on-line purchases swamped front

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RETAIL FOCUS

desk staff’s ability to handle, store and secure the growing avalanche of deliveries.The solution was to install lockers where carriers including USPS could leave parcels safely.

Says Arik Levy, San Francisco-based Drop Locker Inc. CEO, “I started Laundry Locker Inc. in 2005 as a better way for consumers to pick up their dry cleaning and laundry. We have used that experience to expand into all parcel deliveries.”

That decision caught the wave of the USPS’s recent move to expand its Sunday deliveries of Amazon parcels to 20 cities. Despite his future plans for temperature-controlled lockers that can handle groceries, Levy says he is not currently looking at the Canadian market.

Although lockers have not yet been formally launched in Canada, Jasinski is already looking ahead. He says,“Lockers are not just a B2C fulfillment tool- they also offer B2C solutions. One is to serve as more convenient critical parts storage sites closer to where repair staff are working. Since lockers can be filled each night, maintenance workers can enjoy ready access to what they need and when they need it without having to go to different sources to pick up items or carry them around for long periods of time before actually using them.

“Or companies can keep high-demand items in strategic ‘pop up’ tool lockers which can be refilled as needed. Such arrangements make repairs faster, cheaper for companies, more convenient for repair staff while boosting customer service and satisfaction levels.

“This also reduces real estate expenses by eliminating smaller in-house tool sheds in favour of renting strategically located public lockers.

Similarly, lockers can serve as a useful pipeline to so-called knowledge workers.

These include telecommuters, executives, sale reps, “road warriors” etc. working away from the office. They all can access documents, tools, equipment etc. from lockers closer to where they will be meeting with clients, colleagues and others. And since lockers are secure, mobile workers can ship items back to the office or elsewhere without having to go to a courier office and line up.

Martin Graham foresees that lockers could ultimately transform logistics by unifying all inventory regardless of its status or location into a single deployable asset.

Armed with such dynamic fluidity, firms

can rely on strategically located lockers as the final node in their inventory grid. From there they can leverage a two-way delivery link with customers, colleagues and employees to move products faster, more conveniently and at lower cost.

By then, lockers will be a soaring supply chain success. CS

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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Ken Mark is a veteran

www.canadianshipper.com March/April 2015 35

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GREEN SUPPLY CHAINS

MAKING BUSINESS CENTS GREENING THE SUPPLY CHAIN CAN BE GOOD FOR THE BOTTOM LINE

BY CAROLYN GRUSKE

T

he prospect of greening an entire supply chain may seem like a daunting task, but by breaking the action down to small, easier-to-handle components, three very different Canadian organizations have demonstrated ecological and financial rewards can go hand-in-hand.

With a client list that includes names like Apple, CIBC and Encana, Teknion Ltd. is a Toronto, Ontario-based manufacturer of customized, high-end office furniture and interiors. Headquartered in Vancouver, B.C., Lush Fresh Handmade Cosmetics is a cosmetics company that not only operates 216 stores, but also manufactures its own products using fresh, natural ingredients. Although known as a seller of outdoor equipment, Mountain Equipment Co-op (MEC) in Vancouver, B.C. isn’t a traditional retailer even though it operates 17 stores in six different provinces. As its name implies it’s a co-operative with more than four million members. It also produces its own line of gear.

Yet despite the very different business types, these three organizations have leaders when it comes to demonstrating that being sustainable can be good for the bottom line.

“Obviously it’s worth it. If I didn’t think it was worth it, I wouldn’t be driving this through my department,” says Mark Wagner, vice-president of materials, purchasing and facilities at Teknion.

One characteristic common to all three organizations is a belief in the value of communication. All three insist that sharing best practices is good not only

for their own businesses, but for business and the environment in general.

LUSH In order to green its supply chain, Lush took the step of rethinking the design of its production facilities, says Katrina Shum, Lush’s sustainability officer for North America. She explains that during this past year, the company has built parallel production rooms at each of its Toronto and Vancouver plants. That way both locations can produce the same type of products.

Now, instead of shipping soap, for example, from a lone plant on one side of the country to a store on the other side, shipments originate closer to their eventual retail destinations, reducing the number of miles the goods need to be transported and the corresponding emissions created when those goods are shipped.

Not only have the redesigned production facilities affected the company’s outbound operations, they have altered Lush’s list of suppliers as well, says Shum.

“In some cases, we are looking for some of the packaging and paper materials and trying to source them closer to each of the factories. Also, there may be separate vendors that are significantly closer to either Toronto or Vancouver, especially for things like fresh produce. Those types of items are sourced closer to the factory. It is only some of the longer lead items that come from further away.”

Even for those longer-lead types of items, Lush has been looking to find closer suppliers. Many of the company’s cleansers and lotions are sold in black plastic continued p38

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GREEN SUPPLY CHAINS

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GREEN SUPPLY CHAINS

Recycling and using recycled material is an ingrained part of the company’s corporate values. Lush even helps its customers recycle by offering a return-to-store program for the blackpots, awarding them a free face mask for every five pots they return. ©Lush

containers with screw-on lids that come from an overseas supplier. Currently, Lush has a pilot project underway to obtain 100% recycled Number 5 Polypropylene containers from a supplier just outside of Vancouver.

“A lot of our paper and gift materials have been sourced locally or within North America, which has taken a lot of time from our buying team in terms of identifying those relationships and finding the suppliers, especially when we are looking for things with 100% recycled content,” says Shum.

Recycling and using recycled material is an ingrained part of the company’s corporate values. Lush even helps its customers recycle by offering a return-to-store program for the black pots, awarding them a free face mask for every five pots they return. At this time, the returned pots are recycled into new items, once the new Canadian supplier is fully onboard, it will use the plastic in the creation of new black pots.

A large number of Lush employees are involved directly in ecological programs. It employs regional sustainability stewards, and each retail shop has a point-person in charge of green initiatives. As the sustainability officer, Shum is responsible for looking at Lush’s environmental impact in five separate areas: energy, water, waste, transportation and buying, and she works closely with what she describes as a “strong ethical buying team” which works not only with suppliers and vendors but also with the charity pot team. The company earmarks a SLush fund to finance programs and producer communities around the

world with the goal of developing a “regenerative supply chain.”

While Lush has taken many steps towards sustainability, Shum knows her job is far from finished.

“Right now, we’re measuring benchmarks of where we are and setting some clearer targets around those. We’re in the process of doing that,” she says. “The first step is understanding what our footprint is right now.”

MEC With the word co-operative right in its name, it makes sense that Mountain Equipment Co-op relies on the sharing of information and best practices in order to become more sustainable.

MEC is well aware that textile manufacturing puts considerable strain on the environment, and it is working with other clothing and footwear producers and retailers to lessen the negative effects associated with making attire. As a member of the Sustainable Apparel Coalition, MEC, along with companies such as Nike, Columbia Sportswear, Burberry, Levi’s, H&M, and Wal-Mart, has access to a decision-making tool known as the Higg Index that helps businesses “design a more benign product from the beginning,” says Tim Southam, public affairs manager for MEC.The index takes into account a variety of factors ranging from how sustainable the material is to how the final goods are packaged and shipped.

Another evaluation tool being used is bluesign, a Swiss-developed system for

evaluating and eliminating chemicals before they are used in the production of textiles. MEC measures the number of its products in relation to both the Higg Index and bluesign. According to Southam, in 2013, MEC produced 658 styles with preferred materials (as classified

by Higg) and 71 per cent of its apparel and sleeping bag materials were bluesign-approved (and the goal is reach 100 per cent).

MEC’s logistics and Customs manager, Ryan Yeung says the co-op also relies on organizations, programs and organizations like SmartWay and the Pembina Institute (a Canadian think-tank that verifies sustainability and environmental calculations) to ensure that it is accurately measuring and reporting data, including emissions, in its accountability reports.

Working with suppliers and shippers to reduce transportation emissions is an ongoing process, says Yeung. MEC has all but eliminated the use of air freight, it typically opts for slow steaming ocean routes, and tries to use intermodal for between 90 and 90 per cent of land-based shipping.

“There is always stuff we can do, even small things like asking to consolidate orders—asking vendors if they’ve got a backorder to roll it into the next big order. The repeating theme is it needs to make business sense for us as well. We tell vendors not to ship a small backorder via UPS— that’s going to cost us a lot of money, and it’s bad for the environment,” says Yeung.

“Collaborating with other like-minded organizations to get at some of the larger problems like climate change and energy use or how products are made is helpful,” says Southam. “You really have to approach these things with others. MEC can’t do that by itself. We’re not big enough, and I don’t believe any one company is big enough to do that by itself. We’re all better to be working with others.”

Even on its own, however, MEC is constantly looking for things it can do to diminish its environmental impact. For example, it devised a way to ship garments in a way that reduces the amount of packaging required. Rather than wrapping each item individually, MEC now requires suppliers to use the sushi roll approach—roll the item up and tie it with a string.

“It saves a huge amount of plastic on an ongoing basis, and eliminates it from the supply chain,” says Southam. “And the garments are no worse the wear for it.”

Even actions to improve MEC’s busi-

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GREEN SUPPLY CHAINS

ness processes can be viewed in terms of environmental benefits, says Yeung. Becoming a CSA importer, for example, means “we get our stuff faster, we spend less hours shuffling paper, and it’s probably more green because we don’t need to print out stacks and stacks of B3s anymore.”

TEKNION Offering customized products means when Teknion places an order its supply chain needs to react quickly.

“Our average lead time is three-to-four weeks. That’s very, very short,” says Wagner.

“If I’m lucky, that allows me, on the procurement side, maybe five-to-ten business days to bring the raw material in, then our plants manufacture and ship.”

Given the compressed timeframe, Teknion doesn’t have time to verify suppliers’ green credentials after the fact. Instead, the office furniture manufacturer vets potential partners early.

“We have a comprehensive pre-approval process we put in place a number of years

back, which deals with multiple areas from the management to the engineering department at the vendor to the sustainability programs they have within their organization. From the green side, we really upped the ante by making it a much heavier weighted area within this audit.” According to Wagner, there were two good reasons for taking this step: customers putting more sustainability requirements in their RFPs and Teknion’s owners wanting to be good corporate citizens.

One of the requirements Teknion wants to see is formal programs in place. Suppliers need to be ISO 14000 or QS certified. And if they’re too small to make participation in those programs practical, the suppliers must demonstrate compliance with the goals and practices of those types of certifications and prove they have things like recycling programs in place. Teknion has a habit of sending officials on supplier visits to help develop sustainability programs, but also to check that the promised practices are actually taking place.This is especially true for suppliers

in the Far East. “It’s not that we don’t trust people, but I want to be able to put my hand over my heart and say, ‘yes, I know these companies are compliant on the environmental side, and on other things too, like child labour. Obviously we won’t deal with any of those organizations, and the best way to do that is show up with one or two days’ notice and say, ‘we’re here,’” explains Wagner.

Even vendors who provide the company with office supplies like pens, batteries, photocopy paper or building equipment like lightbulbs have to have recycling programs in place to collect the items once it is time to dispose of them. Wagner says things like the pen recycling program, which prevents the writing implements from winding up in landfill, help instill the message to all of its employees that Teknion takes recycling and sustainability seriously.

One area where the company has expended a lot of effort to make itself more sustainable is packaging. With local vendors, it prefers to use returnable packaging such as

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GREEN SUPPLY CHAINS

metal bins or steel racking, eliminating the need for expendable dunnage.

More distant suppliers who still use wooden pallets are given engineering drawings and specifications to create pallet sizes that match the ones Teknion uses, thereby allowing the imported pallets to go into the company’s pallet inventory. On the outbound side, Teknion has incorporated corrugated honeycomb pallets, which not only cost less, but are 100% recyclable by the customer. “If you think of an office building in downtown Toronto, they aren’t accustomed to receiving wooden pallets for product.They didn’t really have a disposal method in place. Getting rid of honeycomb pallets is like getting rid of corrugate,” explains Wagner.

Teknion has also moved away from stocking an assortment of standard-size boxes, which often needed to be padded out with things like air pillows before shipping, and instead uses a box-maker to create custom-sized boxes out of recycled corrugate.

“Now I’m making a smaller box that fits the order, or a larger box rather than two smaller boxes because it’s more economical to make one larger box and it takes up less space on the truck, so I’m burning less fuel to deliver it. There is less of an issue at my customer’s.

It’s a win-win-win,” say Wagner, adding that even with the cost of buying the corrugate, Teknion has realized a savings of $100,000 per year by making its own boxes.

Another area where Teknion managed to save money while making a change that benefits the environment was in transportation. The company has been adding more and more “milk runs” to its network. “A large percentage of our suppliers are local to us in the GTA, but that became a challenge in multiple respects because we had so many trucks coming to our doors.We tried to define delivery times and have windows, but that was very, very difficult because of rush orders and other reasons. So what we’re doing now is setting up milk runs. Instead of allowing the vendor to FOB Teknion (“Free on Board Shipping Point.”), we’re now coordinating pickups so I have one truck show up to my dock, which in some cases, can take four or five trucks off the road and replace it with one, which we think is a great green initiative,” says Wagner.

Teknion began using milk runs in southern U.S. states to collect fabrics from textile mills, and although it was more difficult to implement them in Canada,Wagner says the effort to organize them and to negotiate

price reductions (to account for the eliminated shipping costs) has paid off.

Overall, he says the company’s efforts to be sustainable are good for customers, good for Teknion’s bottom line and good for company morale.

“If two things are the same price point, or almost the same price, I don’t think

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there is anybody out there who wouldn’t choose the more environmentally friendly product….So if Teknion is in the position where we can provide that solution at a cost neutral, there is that competitive advantage. And net, at the end of the day we’re doing what’s right ,so we can feel good about it.” CS

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CASE STUDY

GOOD-BYE PAPER DAY & ROSS AUTOMATES PROCESSES

BY CAROLYN GRUSKE

T

he end is finally in sight for Day & Ross Transportation Group as a four-year-long information technology implantation is nearing completion. By the end of February, all of the company’s freight and same-day operations across Canada will have been moved away from manual reporting and paper-based processes to automated, computer-based route planning, exception reporting, and driver communications.

The Hartland, New Brunswick-based company has been equipping its terminals and drivers with technology from Waterloo, Ontario-based Descartes Systems Group Inc. In particular Day & Ross is implementing Descartes’ Route Planner and its Mobile applications. The project rollout has taken a bit longer than initially expected, but that’s all right with Dave Rea, vice-president of information services at Day & Ross, as it soon became evident that what the company needed wasn’t just the quick application of some new software. Day & Ross’ processes and systems needed a full overhaul.

C

N b a

W o w T

continued p44

TF 42 March/April 2015 www.canadianshipper.com

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CASE STUDY

continued from p42

© Stefano Lunardi/iStock/Thinkstock

It was all a very paper-based, data-entry kind of activity and the Descartes System has allowed us to really automate the entire process right from pickup through to delivery.

“We started using the Descartes System about four years ago with a prototype that we put together and ran in Atlantic Canada and we had some challenges, mostly process problems, because we were going from a paper-based approach to the technologybased approach and we had some issues with change management and connections in our backend,” explained Rea. “It was mostly a people problem, and a problem in our own backend systems, which are somewhat older. It wasn’t a Descartes problem.

“We ran through that and basically decided that we would be wise to get all of our process and change management issues sorted out and then roll it over across the country.

I’ve been rolling it out across Canada in both of those divisions for about a year now and I have three more terminals to do.”

The somewhat older technology Day & Ross relies upon are RPG programmed IBM AS/400 systems, which Rea describes as being “actually older than our children. It’s a bit painful, but that’s the state of it,” he said.

“There are two primary systems that these divisions use. One is what I would call a manifesting/invoicing system. It allows us to record any pickup, any delivery, and through all of recording those events and accessorials like tailgates or waiting times.All of that goes into creat44 March/April 2015 www.canadianshipper.com

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ing an invoice which is sent to the customer.We also have another system, which allows us to dispatch the trucks and record where they’re going-a transportation management system as it were. Both are of the same era.”

While the backend systems have an influence on the company’s operations and its ability to adopt up-to-date software, its processes played an even larger role.

“I find that our business is very paperbased and there’s always the signing of manifests and paper.That’s what we used to do-bring that paper back to the office, scan it in. They would just centralize a data entry location and use that sort of process to create the order, which would then follow through the life of the shipment. It was all a very paper-based, data-entry kind of activity and the Descartes System has allowed us to really automate the entire process right from pickup through to delivery.”

Rea said originally all order taking and driver communications happened through the company’s call centre. Customers would phone in with order details, then calls would be placed to drivers’ cell phones with the pick-up information. Moving from that type of hands-on, people-based system to a fully computerized one required Day & Ross to reconsider all of its business prac-

tices before automating. In particular the company needed to harmonize its procedures while taking into account regional differences and expectations.

“We have a consistent process at a certain level all across the country.There is a degree of differences in the way different markets operate and different customers’ expectations as well as market practices. It took a while, but we chose to not rush, even though that was a little more expensive because we were very cognizant of how this has an impact on our service levels because it’s pretty easy for this to have an enormous impact on our service levels.We knew we would learn as we went across the country.”

As an example of how operations work differently in different parts of the country, Rea compared Atlantic Canada with larger urban areas. Outside of Halifax or Moncton, he said the density isn’t there to support multiple routes.

“Ninety-nine percent of the drivers that we have are owner/operators with their own trucks and they have assigned areas or routes that they follow. When you get to a city like Toronto or Montreal or Edmonton or Calgary it’s a little bit different because there’s density issues that you have to deal with.”

Additionally he said the way freight moves across and in various regions affects how the business operates.

“There are slightly different payment practices across the country and the flow of freight tends to be a little bit different. In Ontario and Atlantic Canada there’s a certain amount of freight (that)kind of just flows into those particular markets and in between those markets whereas out west there’s a lot flowing in and so the effect on linehaul is a little bit up and down in the volume of work.All of those things affect your activity on the dock and how busy you are. The processes tend to be subtly different, and it’s enough to make a difference when you’re rolling out technology like this-you just have to be cognizant of it.”

Having updated processes and procedures in place meant that Day & Ross could implement the Descartes solutions.

Now, as soon as a customer places an order (either by phone or by self-service website), it is handled without human intervention by Route Planner.

“That request is recorded and sent automatically through the data networks to a device the driver has, which says, ‘Please go continued p46

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CASE STUDY

continued from p44

here and pick this up.’ From soup to nuts we’ve automated the process.”

Drivers receive routing and pickup or delivery information on Intermec CN70 ruggedized handheld devices, which can also be used to capture signatures at loading docks. Communications with the devices is handled by Descartes’s GPS-based Mobile application. Both Descartes applications rely upon information stored in a Microsoft SQL Server database. According to Rea, the process of rolling out the software went relatively smoothly.

“I wouldn’t say that there were no technology problems because there were some tweaks that had to be made to support functionality.”

pretty typical reactions. That was why we wanted to focus on the change management issues because we just don’t tell them, ‘Do this.’ It doesn’t work that way.”

Even with the costs associated with revising old procedures, buying new servers, deploying software, hiring an extra IT person, Rea said the company is seeing results that make the investment worthwhile. Day & Ross has created efficiencies in the system, relocated personnel from terminals to a centralized call centre location, and moved a number of customers to the selfservice, Web-based options.

The one area where the company hasn’t seen much of an effect yet is in route optimization. Rea said the size, density and ge-

Day & Ross invested a lot of time introducing nearly 1,000 drivers to the new system and explaining how it works and why it’s an improvement over the old ways of doing things.

One of the technical issues that needed to be addressed was ensuring that drivers would always have a way to be in touch with dispatch, even in areas where coverage is limited, such as in warehouses that may interfere with signal reception, Rea said.

“I hadn’t really thought about what a challenge that would be, to have to be in 100% percent communication with the drivers and have the system be a 100% available so they can do their job,” he said, explaining that Day & Ross has made it a point to brief drivers about what steps they can take (waiting for a better signal, going outside to eliminate building interference and resorting to paper forms if necessary) if they are cut off from their terminals while on the job.

Along with giving drivers instructions about what to do if the technology doesn’t co-operate, Rea said as part of its change management approach, Day & Ross invested a lot of time introducing nearly 1,000 drivers to the new system and explaining how it works and why it’s an improvement over the old ways of doing things.

“Owner/operators are independent business people and so they want to know,‘is this going to make my life easier? Is it going to make it harder? Is it going to speed things up? Is it going to slow it down?’ ‘What’s going to happen to my pay?’You get all of the

ography of Canadian cities don’t create a lot of opportunities for improving routing.

The software, however, made some changes to the time drivers spend behind the wheel.

“What you can do is you can plan your day a little better because the drivers tend to know this is the work list for the day. It makes it possible for the drivers and for the dispatchers to plan the day a little more,” he said.

The one catch, however, with automating such core aspects of Day & Ross’ business, however, is that if something happens to the system, there is a major disruption to the business.

“In the past we depended on cellphones and scanners, but if the paper didn’t go through and was interrupted for four or five hours, it wasn’t the end of the day, but today that’s not so. If this technology doesn’t work, for any reason, then we grind to a halt pretty quickly so it’s a missioncritical system. I have the master backup for the systems and a support structure with people where if I can’t figure out what the problem is then I get in touch with Descartes or some other experts that are available to me to sort this thing through.”

Rea is philosophical about the prospect of downtime. His attitude is that everything can break down, including trucks. He said that the system has gone down before—he

estimates it happens about once per year— but there are procedures in place that dictate what steps to take to keep operations running. One of the most essential ones is communicating with the terminals to let them know what is going on.

“If it’s going to get fixed in five minutes then they’re not going to do very much, but if it’s going to be an hour then they will switch over to their disaster fallback procedure, which is using cellphones.”

After the main part of the Descartes deployment is finally completed Rea expects to have his hands full with new IT projects. He said he’s considering adding on the Appointment Scheduling module and then branching out to some bigger infrastructure projects, including replacing the old backend technology and updating the company’s enterprise resource planning (ERP) system. Rea has also purchase a model tool set that will allow him to build a transportation management system for the dedicated division. He would also like to make some improvements to the call centre functionality, greatly expand Day & Ross’ ability to offer its customers self-service options and increase the company’s online e-commerce presence.

Large IT projects, like the ones Rea is contemplating require a major commitment of time, resources, funds and personnel, but they are necessarily investments for companies like Day & Ross.

“I think that the big national and regional players take technology very seriously, and I say that because I meet them at various industry events and we talk. I think you need to use technology not just for the sake of technology, but because it really can add productivity to your processes. Also, I think the customers are demanding better awareness and visibility of what’s going on,” said Rea. “I would also add that many of the things the transportation companies can do to make themselves more productive and provide better service is not rocket science. There’s a lot of technology available that’s not complicated and not necessarily expensive, and that’s not a subtle message to my boss.”

He noted, however, that there is a divide between how easily large trucking companies adopt technology versus small- and medium-sized carriers.

“I think actually it’s tough for small companies, not because technology is expensive. It’s because it can be a bit of a challenge to implement it and adapt your processes.” CS

46 March/April 2015 www.canadianshipper.com

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CARGO LOGISTICS CONFERENCE

STAYING FLUID CAN INTERMODAL SUPPLY CHAINS GET MORE RELIABLE?

BY JULIA KUZELJEVICH

J

anuary’s Cargo Logistics Conference, which took place in Vancouver, featured a panel of logistics service providers who met to discuss the need to drive more reliable intermodal supply chains. The panel was moderated by Ruth Snowden, Executive Director of CIFFA. Wolfgang Freese, president, Hapag Lloyd (A) Inc., mentioned the severe weather- related delays of the first quarter of 2014 and the labour challenges at West Coast ports throughout the year.

“Let’s keep in mind we are speaking of origins.We have seen a lot of weather-related issues, typhoons. The ability to stay fluid through the key logistics points is the major challenge.We cannot prepare for each and every eventuality, but we can preplan contingencies. We have to provide a timely headsup. We have to make sure we communicate constantly with the partners,” Freese said.

What’s the role of a port in establishing realistic expectations for Canadian traders?

According to Tony Boemi, vice president, growth and development, Montreal Port Authority, ports have changed over the years.

“Most ports are very diversified. We get involved in environmental issues, we have marketing teams-we have to generate revenues that will allow us to re-invest in infrastructure. We interact with governments because they have to build the infrastructure leading up to the ports. We also educate in the context of our markets,” he said.

About 13% of the port’s traffic now is Asian trade, Boemi added.

“We take our profits and reinvest in infrastructure. This is the role of a port today.

We’re involved in so many different aspects of the business,” he said.

Jean-Jacques Ruest, CN’s EVP and chief marketing officer, noted that winter seems to be more forgiving this year so far.

He noted that the focus in the early part of 2015 was certainly on labour negotiations.

As Canadian Shipper was going to press, CN had negotiated a tentative labour agreement with the Unifor union, representing 4,800 CN employees in four bargaining units at CN – clerical/intermodal; mechanical; CNTL truck owner-operators; and excavator-operators, with details of the

tentative agreement being withheld pending ratification by Unifor members. CN had ealier negotiated a tentative labour agreement with the Teamsters Canada Rail Conference (TCRC) union that represents approximately 1,800 of the company’s locomotive engineers in Canada. ​​​Canadian Pacific and the Teamsters Canada Rail Conference (TCRC) agreed to enter into binding arbitration, putting an end to the work stoppage by CP’s locomotive engineers and conductors in February.

“This decision ensures both sides will get back to the table, and gets us back to moving Canada’s economy forward,” said E. Hunter Harrison, CP’s Chief Executive Officer. “While we would have preferred a negotiated settlement, this is the right thing to do at this time.”

An arbitrator will be appointed by the federal government. On February 14, CP announced a tentative four-year agreement with its Unifor employees. Details of the tentative agreement were being withheld pending ratification by the Unifor membership.

When asked how Kuehne + Nagel es-

48 March/April 2015 www.canadianshipper.com

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CARGO LOGISTICS CONFERENCE

physical movement is not the issue.The challenges are typically the reliability of data to book it and meet the expectations on routing guides and delivery expectations. Compliance issues and paperwork at origin are also an issue,” Freese said, noting the variance of customs issues in foreign to foreign freight.

continued

Cargo rai

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There can be applicable duties that change in dynamic, sometimes while the cargo is en route, and before the goods are impounded at destination.

What’s ahead for intermodal cargo, and what are some of the key messages around the future of it?

©George Doyle/Stockbyte/Thinkstock

tablishes expectations with its clients on intermodal marine services, Brian Martin, Vice President, Sales and Marketing, Kuehne + Nagel, Canada, said that “we are customers, but we are absolutely also business partners on many fronts. The integration is incredible, and the lines are blurred between customers and vendors. As an extension of those businesses Kuehne + Nagel is not in a position where we define service levels and transit times.We are 100% dependent on our asset partners, so we are constantly in communication with them. We are always looking for what’s happening in the supply chain, and the level of phone calls and e-mails is constant. How are we managing customers’ expectations when we’re at the mercy of our suppliers? We are all trying to strive for the same thing: manage cash flows correctly, and commit to ontime performance,” Martin said.

This involves educating customers on what is realistic and what not.

“In marine transport ‘lean logistics’ concepts are counter-current, such as when the freight is on the ship and there’s 20 days at sea. Our job is to help you engineer solutions. It’s well beyond sailing,” he said.

Examining how the railways could help provide fluidity in the network and also help drive profits, Ruest said he wished that rail could help shipping lines develop a round trip costing model that would make sense.

“There’s more interest for the shipping line to bring boxes inland. It’s in our interest to create a supply chain that works for our ocean partner, so that the inland supply chain is not a burden,” he said.

Freese added that Hapag Lloyd has a few unfulfilled wishes from 2014.

“We need port infrastructure improvement. It’s not all about draft-there’s more to it. We need more space in the terminals to buffer this. We also wish that our intermodal and transport partners were not burdening themselves,” he said.

He cited the increased use of LASH vessels to store containers because there is no room on land.

“If you’re losing steaming time it makes a huge difference,” Freese said.

He noted that foreign to foreign freight, also called “triangular freight”, is paid for in Canada but never touches the country. The evolution of supply chain and lean is taking hold in foreign to foreign freight, and lean logistics is pushing the enablers of this solution.

“Carriers are capable of moving it, so the

www.canadianshipper.com March/April 2015 49

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CARGO LOGISTICS CONFERENCE

dency continues with oil (prices dropping), and the trend towards bigger ships, this may initiate some sort of change measures that need to be taken,” he said.

The Port of Montreal has a ten-year plan with intent to build a brand new cruise terminal.

“It’s a pretty hard sell for seasonal business,” Boemi said. “In terms of our projects you will see increased port capacity and additional truck gates to improve the fluidity, with direct access from Highway 25. You’ll see 7000-plus TEU ships at the port. When you look at the current Port of Montreal we will probably max out by 2020, 2021. We have a project in hand, and a piece of land for a brand new container terminal,” Boemi said.

He also anticipates that the Suez Canal will be a real benefit.

“Transshipments are about 30% of our business now-as long as they keep building these bigger ships and they can’t get to the end markets, this will continue to benefit us,” Boemi said.

According to Martin, “the actual physical movement of freight has not changed considerably but you are challenged to respond to multiple needs with customers who have no patience. You also want unlimited elasticity in your supply chain with no restriction or friction. The reality is that there are conflicts, whether labour issues in Canada, issues on mega ships, port congestions, and conflicting events in the supply chain. I spend a lot of time trying to help you understand the practical limitations in the supply chain.The carrying cost of capital is linked to the interest rate. There is a wonderful argument to choose multiple players or providers. For example in the airfreight scenario-in some cases for some retailers it makes sense to use it for introducing product and then sea freight for replenishment,” Martin said.

Freese said that the future is positive.

Worldwide, the middle class is growing and with it commodities.

“Looking at the challenges if the ten-

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How will the landscape be different going forward?

“There is definitely a major need for infrastructure. We often talk about how we need to create ground capacity to handle buffer from ship/port issues. It is a constant challenge as to how we maintain fluidity.

Some of it is obviously from public money.

We will also need private money to come in in a big way,” Ruest said.

The use of destination trains, he said, would lead to the need for more inland capacity.

“On the Canadian West Coast over the next ten years we need to find ways to use the capacity we already have, and make better use of containers,” he added.

According to Freese, commenting on the congestion issues at US West Coast ports and any effects these have had in Canada, “we also have seen an increase of volumes into the US. Traditionally a lot of US importers have been using both West Coast and East Coast ports. I would even go as far as saying we saw some increases.

There are still some huge volumes moving, but Canadian interests have been maintained,” he said.

“There has been some chaos since the October labour union strike, driving contingency planning,” Martin said.

Unfortunately the reality is that a frequent by-product of this planning is increased false bookings by consumers, he said, just to try and find capacity and buffering.

“The consumer is rightfully expecting divergency solutions. In some cases the options are limited. The reality is that the freight moves. If you look at a 2-3 year time frame, the level of service the Canadian shipper is receiving is still extremely high. The reality is the options are there-in some cases 4-6 business days to come up with contingencies, but I think the service levels are still extremely high in Canada,” Martin said.

“We benefitted from some of the cargo being diverted. When you look at how the cargo is changed in terms of reaching markets, mitigating the risk is always beneficial,” Boemi said. CS Editor Julia Kuzeljevich has been writing about transportation issues for 15 years. Her articles have

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50 March/April 2015 www.canadianshipper.com

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INSIDE THE NUMBERS

PRICE PRESSURE With freight volumes holding steady and

modal shifts when pricing got too high for

freight to an alternative mode. The drop in

shipper concerns about available capacity

shippers who had options with their freight.

energy pricing, however, is easing current

mounting across most modes, this would

For example, back in 2008 when transporta-

pricing pressure for Canadian commercial

normally create significant upward pressure

tion pricing hit a peak, one half of Canadian

transportation and keeping mode shifting

on pricing. In the past it has also led to

shippers were shifting at least some of their

levels relatively low for a growing economy.

Canadian shipper freight volume projections for 2015

Canadian shipper perceptions on capacity by mode (scale of 1 to 10)

Down more than 20%

2%

6.06

Down 10-20%

of shippers

Down 5-10%

2%

5.57

2%

5.46

Very tight capacity

5

Balanced capacity

0

Very loose capacity

5.32 4.80

4.77

About the same

37%

Up 5-10%

LTL

42%

10

Up 10-20%

Intermodal

Truckload

Rail

Air Marine

13%

Up more than 20%

2%

$ Percentage of Canadian shippers expecting rate increases by mode

Canadian shipper views on level of competitive activity between modes Well above normal levels

62%

64%

9%

Above normal levels

of shippers

41%

39%

15%

Around normal levels

31%

52%

20%

Below normal levels

7%

Well below normal levels LTL Truckload

Intermodal Rail

Air

2%

Marine

No opinion

15% Percentage of shippers reporting higher rates & surcharges affected modal selections

34% of shippers

39% of shippers

44% of shippers

50% of shippers

40% of shippers

38% of shippers

44% of shippers

TR

Truck New

43% of shippers

37%

of shippers

39% of shippers

MOTOR

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

52 March/April 2015 www.canadianshipper.com

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THE BIGGER PICTURE

TWO NEGATIVES DON’T EQUAL A POSITIVE IN LOGISTICS Congestion and labour at US West Coast ports were cumulative issues *Editor's Note: At press time, The Pacific Maritime Association and the International Longshore and Warehouse Union had just announced a tentative agreement on a new five-year contract covering workers at all 29 U.S. West Coast ports, with the agreement subject to ratification by both parties. In the following commentary columnist Laurie Turnbull mapped the origins and progress of the conflict prior to the long-awaited resolution.

The various origins of the congestion and related labour issues at U.S. west coast ports aren’t hard to spot; unfortunately, they are cumulative, with conflicting results. For example, growing international trade volumes in the WTOdriven (World Trade Organization) global economy, and larger container ships, coupled with port-side infrastructure ill-equipped for increased container volumes, and little space available for port expansion, were bound to result in port congestion. Add to this situation the decision by ocean carriers to stop providing truck chassis for port container movements, and you have a spark that lights the fuse for a volatile situation.

How far apart were the sides? Too far, if recently stated positions from both sides were any indication. Reports of labour slowdowns by unions and eliminating work shifts by the PMA (Pacific Maritime Association), the group responsible for negotiating with the ILWU (International Longshore and Warehouse Union), indicate how entrenched the parties

were. Undoubtedly both sides felt their viewpoints had validity, but labour slowdowns and reductions in available working hours will not produce efficiencies in container handling or customer service. Two negatives don’t equal a positive in logistics. Longshore unions in the U.S. and Canada have a vested interest, and obligation, to make the system work. But port authorities also have an obligation to develop a workable system; circling the wagons against the very people driving the wagons is not a sustainable approach. Negotiating is not a strategy, it’s a symptom of a bigger problem, namely that the strategy is not working.

One of the few positive developments in the struggle was the establishment of the so called “gray pool” of truck chassis.This amounts to a shared pool of truck chassis that dray operators can draw upon to move containers in and out of the ports to alleviate congestion. This was a move in the right direction, and a good example of how strategy can be applied to problem-solving. It’s also indicative of the strategy applied by shipping lines who decided some time ago to get out of the chassis business. At one time, providing truck chassis was likely seen as a natural extension of the ocean shipping business, a value-add if you will.

Shipping lines had a vested interest in expediting the movement of port-side containers to assist their import-export customers in meeting sailing schedules, and maximizing vessel load plans. But the realities of trade, and competitive market forces,

have a way of changing viewpoints. Providing, maintaining and accounting for truck chassis is an expensive business. In hindsight, one can appreciate the strategy of shipping lines announcing their intention to exit this business as a way of reducing costs and focusing on their core competency, which is port to port transportation, not port to inland terminal.That role is better fulfilled by port authorities, freight forwarders and drayage companies.

In the global environment, transportation is a critical resource for all stakeholders. Port authorities and longshore unions are all front-line workers in this endeavour. But at the end of the day, all stakeholders, those who work at the ports, and those who use them, are impacted equally.

We are all consumers, and as a result we will all eventually be impacted by the inability of port authorities and their partners, shipping lines, unions and drayage companies, to handle and deliver goods in a timely and cost effective manner.

What does this mean in real terms? When confronted with an empty shelf in a grocery or department store, today’s con-

sumer is just as likely to buy another product as come back on another day for their original choice. That substitution decision represents much more than lost incremental profit for the producer/importer, it represents the risk that the consumer will prefer the substituted product over the original, equating to a loss of repeat sales. That’s the connection between logistics and commerce.

If the groups charged with the responsibility of making the port system work can’t accomplish the task, then the customers who use the system will make substitution decisions of their own. They’ll either start using other ports (incremental profit loss), or start producing goods domestically (loss of repeat sales). The answer to this problem won’t be found in a negotiating strategy that focuses on the merits of individual positions, but rather one that focuses on the bigger picture, a collaborative solution that meets the desired outcomes of all stakeholders. Primarily, those customers that use port facilities to support global trade for competitive market advantage. CS

Laurie Turnbull, CITT, P.MM is a supply

A

chain consultant with Cole International, a leading Canadian logistics company providing Customs brokerage, warehousing and worldwide transportation services. He can be contacted at laurie.turnbull@cole.ca.

54 March/April 2015 www.canadianshipper.com

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