JANUARY 2018
PUBLISHED SINCE 1898 | WRITTEN FOR BUYERS OF TRANSPORTATION SERVICES
SALARY SURVEY 2018 survey of the logistics professional
TRADE Cross-border shipping
BRIDGING THE GAPS Th N The New Ch Champlain l i Bridge B id project has encountered a myriad of transportation challenges
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CONTENTS
JANUARY 2018
DEPARTMENTS
10
5 | Editor’s Foreword Commute from hell 6 | In the news End of Cargojet-Air Canada partnership; New container facility in Quebec; Railway legend passes away 35 | Inside the Numbers Shippers ramping up freight projections
COVER STORY
37 | Coaching Corner New opportunities
BRIDGING THE GAPS
38 | The Bigger Picture Malware menace
The building of Montreal’s New Champlain Bridge has included more that it’s fair share of transportation challenges
Infrastructure Canada
14
The massive and complex project that is Montreal’s New Champlain Bridge has had to overcome several transportation challenges during its nearly three years of construction.
THE 2018 ANNUAL SURVEY
FEATURES
of the Logistics Professional
TRADE | 26
FOOD LOGISTICS | 22 How the digital economy is affecting food supply chains
30
NAFTA and cross-border shipping
RAIL INFRASTRUCTURE | 30 Canada’s short line railways face uncertain funding future
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EDITOR'S FOREWORD John Tenpenny January 2018 Volume 121 Issue No. 1
EDITOR John Tenpenny (416) 510-6880 john@newcom.ca RESEARCH DIRECTOR Lou Smyrlis lou@newcom.ca ART DIRECTOR Ellie Robinson ellie@newcom.ca CONTRIBUTORS Carolina M. Billings, Ken Mark, Carroll McCormick, Ian Putzger, Laurie Turnbull PRODUCTION MANAGER Kimberly Collins (416) 510-6779 kim@newcom.ca VIDEO PRODUCTION MANAGER Brad Ling CIRCULATION MANAGER Mary Garufi (416) 614-5831 mary@newcom.ca PUBLISHER Nick Krukowski (416) 510-5108 nick@newcom.ca PRESIDENT Joe Glionna CHAIRMAN & FOUNDER Jim Glionna VICE-PRESIDENT, OPERATIONS Melissa Summerfield
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 logistics trends and issues. It is published by NEWCOM MEDIA INC.
SUBSCRIPTIONS: Contact us at: mary@newcom.ca Tel: (416) 614-5831 Fax: (416) 614-8861 Website: canadianshipper.com (click on subscription button)
SUBSCRIPTION RATES: Canada: $65.95 + applicable taxes, per year; $107.95 + applicable taxes, for two years. U.S.A.: US$107.95 per year. All other foreign: US$107.95 per year. Single copies $8 except for the annual Logistics Buyers’ Guide (Aug) $60.95 + applicable taxes, (not including HST) plus $2.00 for postage. USA: US$68..95, Foreign: US$68.95 ISSN 2292-2490 (print), ISSN 2292-2504 (Digital), (Canadian Shipper.) Indexed by Canadian Business Periodicals Index. Printed in Canada. All rights reserved. The contents of this publication may not be reproduced either in part or in full without the consent of the copyright owner.
The nine circles of commuter hell
F
or those living in the Greater Toronto Area just the mere mention of traffic is enough to induce a migraine. The numbers astound. According to the 2016 census, Torontonians have the country’s longest commute, spending on average 34 minutes getting to work. In fact, they spend nearly eight minutes more than the national average and 16 per cent of Toronto commuters spend over an hour to get to and from work. A Canadian Automobile Association report released last year found the stretch of Highway 401 running through Toronto is the ninth busiest traffic artery in both Canada and the U.S. Worsening gridlock on the highways in and around Canada’s largest city is also taking a bite out of the region’s economic productivity. According to a new Toronto Region Board of Trade report, the sea of brake lights on the major traffic arteries along the Toronto-Waterloo corridor has become the area’s most pressing economic challenge, costing between $500 million and $650 million per year in added costs. “Our products are not reaching their destinations on time, which negatively impacts our productivity,” said Jan De Silva, president and CEO of the Toronto Region Board of Trade. “We want the Corridor to be a highly attractive and sought after business region, but if we don’t manage our competitiveness challenges, our economy— like our goods and people—will remain stuck in traffic.” The logistical malaise hits goods producing industries like manufacturing particularly hard, especially because of the Toronto area’s prodigious industrial output. Manufacturing accounts for about $64.3 billion of the region’s GDP and employs nearly 400,000 people, the report says. Overall, clogged roads disrupt one million tonnes—or $3 billion worth of goods— being trucked through the region each day. Businesses, however, must also take the added logistical costs into account, which have a negative impact on their competitiveness against suppliers in other areas, particularly when exporting. “Congestion also impacts our ability to move goods across the border and to global markets, De Silva added. “Trucks stuck on roads delay goods and parts shipments to markets across Canada, to the U.S. and overseas, impacting our integrated supply chains and limiting the ability to grow our economy through trade.” CS
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John Tenpenny, Editor john@newcom.ca www.canadianshipper.com January 2018 5
2018-01-12 11:37 AM
IN THE NEWS
Cargojet-Air Canada partnership comes to an end Canadian cargo operator plans to continue international flights on its own
Air Canada’s withdrawal from international freighter operations will not mean the end for main deck lift on some routes. Cargojet intends to go it alone and continue without its larger partner. Air Canada (AC) decided not to continue its scheduled freighter flights to Mexico City, Bogota, Lima and Frankfurt that it had started in 2016 in a partnership with Cargojet, which provides the Boeing 767 freighters and flight crews. Effective January 1, AC is no longer involved in the freighter business and concentrate on marketing the bellyhold capacity of its passenger aircraft, including the fleet of its low-cost offshoot Rouge. There have been allegations that AC’s pilot union was opposed to an extension of the partnership beyond the end of this year, but Vito Cerone, director of marketing and sales, Americas, said it was a commercial decision. The cargo division does have a dialogue with the pilots, but the decision was based on the fact that the airline is going to ramp up its passenger flights to Mexico City and Lima in the new year, adding ample belly lift, he commented.
AC’s departure will not leave a gap in the market, according to Jamie Porteous, executive vice-president of Cargojet. The Hamilton-based operator intends to start its own flights no later than March, he said. “We’re not going to start the week after the last Air Canada flight. In some places we want to establish relationships with GSAs and GHAs (sales and handling agents),” he said. Cargojet’s management has come to the conclusion that it can succeed on its own in some of the markets currently served in tandem. AC’s results and the loads carried on the freighters indicate that there is sufficient demand to continue, Porteous said. Moreover, it has been approached by other airlines about space on some flights but referred these enquiries to AC, which had enough freight of its own to entertain these requests, he added. Some of these will likely want space on Cargojet’s own flights, he said. The company has interline agreements with over 50 other airlines.
By Ian Putzger
While it makes most of its money providing linehaul for other operators, notably the express carriers, Cargojet is no stranger to marketing its capacity to forwarders. It has been running a weekly B767F flight from Halifax to Cologne in its own right since 2013, which is set to continue. Porteous expected a decision on the future routing of international flights some time in January. The Frankfurt service is likely to be scrapped, while Cargojet’s Cologne flight continues and may be upgraded to a second weekly frequency, possibly in tandem with another European destination, he said. It may be challenging to fill a Mexico freighter, so South America is the main focus for Cargojet’s plans, he stated. Despite the end of the joint freighter flights, co-operation between AC and Cargojet will continue, according to Porteous. This ranges from joint maintenance and procurement efforts to interline arrangements. “We have a good, strategic relationship with them. That’s not going to change.” CS
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IN THE NEWS
Port of Québec to build new container terminal $400 million investment is part of Québec’s Beauport 2020 project
The Québec Port Authority (QPA) has announced plans to build a new container terminal to boost its competitiveness with U.S. ports. Part of the Beauport 2020 expansion project, the $400 million container terminal is part of a greater initiative by QPA to create a new international economic hub geared toward logistics, distribution centers and new businesses for the area. In a speech to the Québec City Chamber of Commerce and Industry, QPA president and CEO Mario Girard stressed that the port has all the strategic advantages needed to carry out this major project. With its water depth of 15 meters and full intermodality, Québec City has a distinc-
tive advantage in the St. Lawrence–Great Lakes Trade Corridor. Girard pointed out that the opening of the new 15-meter-deep Panama Canal in 2016 and the emergence of next-generation ships requiring deep-water ports is completely changing the landscape of commercial shipping. This new 15-meter standard makes it harder for the St. Lawrence, as it currently stands, to compete with American ports in the container market. According to Girard, with its unique features, the Port of Québec has what it takes to build a container terminal that offers a competitive alternative in the St. Lawrence. The Port of Québec’s proximity to the big St. Lawrence–Great Lakes mar-
ket, with its more than 110 million consumers, makes it the perfect location for a container terminal. “We’ve got a tremendous opportunity here and we have all we need to succeed,” he said. “Our vision is simple and strategic: make Québec City a hub for maritime logistics on the continent. We’ll succeed by rallying around this promising project. And in this vein, I’m reaching out to all stakeholders in the St. Lawrence so we can all work together to promote the St. Lawrence. More than ever, we must join forces to make the St. Lawrence more competitive.” “Québec is a city whose history and development are closely tied to maritime economic activity,” added Québec City mayor Régis Labeaume in comments on Beauport 2020. “Developing the Port of Québec and improving the existing facilities are priorities for the region. Building a container terminal as part of the Beauport 2020 expansion project will have a major impact on the economy by creating a new continental deep-water logistics hub, which will be a major asset for the Port. The governments of Québec and Canada must offer their unmitigated support for the project so that Québec and Eastern Canada can compete with big U.S. ports and to make the Port of Québec Europe’s gateway to trade in North America.” The Beauport 2020 project entails a five-year redevelopment of the Beauport area, requiring $190 million in investments, with roughly 70 per cent coming from the private sector. The project aims to extend the wharf line, develop an area behind the wharf and rebuild and redesign the beach, among other rail, port and commercial service enhancements. CS
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IN THE NEWS
continued from p.7
‘The Best Railroader Ever’ Railway legend Hunter Harrison, who led turnarounds at CP and CN, dies at 73 Hunter Harrison, the plain-spoken, gruff American who rewrote the Canadian railroading book during his years heading both of this country’s largest railways, died. He was 73. CSX Corp., the American railroad Harrison began leading earlier this year, issued a statement on December 16, 2017 announcing his death. The company attributed his death to “unexpectedly severe complications from a recent illness,” the same reason offered when Harrison formally went on medical leave a week before his death. “The entire CSX family mourns this loss. On behalf of our Board of Directors, management team and employees, we ex-
tend our deepest sympathies to Hunter’s family,” CSX said in n the statement. “Hunter was a larger-than-life -than-life figure who brought his remarkable rkable passion, experience and energy gy in railroading to CSX.” Ewing Hunter Harrison was born in Memphis, Tenn., on Nov. 7, 1944, and nd began his railroad ad career in 1964 as a 19-year-old rail car ar oiler for the St. t. Louis-San Francis-co Railway whilee attending Mem-
Experience, Connections, Opportunities
8 January 2018 www.canadianshipper.com
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IN THE NEWS
phis State Sta University. His modest start gave no hint that he would eeventually serve as the CEO of four major railroads: Chicago-based Illinois Central Railroad, Montreal-based Canadian Na National Railway, Calgary-based Canadian Pacific Railway and Jacksonville, Fla., rai railway CSX Corp. Harrison joined the Burlington Har Northern Railroad in 1980 when it purNorthe chased the St. Louis-San Francisco Railway, and an he was eventually promoted to vice-president of transportation and service-pr vice design. de Harrison Har left Burlington Northern in 1989 to become chief operating officer at Illinois Central Railroad, rising to president an and CEO in 1993. There, he was credited wit with initiating scheduled service for freight, a revolutionary concept for the industr industry. In 11998, Canadian National bought Illinois Central—considered at the time
to be the most efficient railway in North America—and Harrison was appointed CN’s chief operating officer. He became CEO of CN in 2003, succeeding Paul Tellier, and served in that position until his retirement at the end of 2009. He moved to his estate in Connecticut, where he raised and trained horses for show jumping. In the fall of 2011, Harrison was approached by activist investor Bill Ackman, head of hedge fund Pershing Square Capital Management, and enlisted to help with a proxy battle at CP Rail. After winning the crucial vote at the annual shareholder meeting in 2012, Ackman appointed Harrison as CEO, replacing Fred Green. In early 2017, Harrison abruptly resigned from CP, five months earlier than scheduled. He gave up stock options and other compensation worth a total of $122.9 million to become CEO of CSX, a U.S.
competitor, although he was later reimbursed by CSX. “Professionally, Hunter was unmatched in this industry. He will go down as the best railroader ever, plain and simple,” said Keith Creel, Harrison’s handpicked successor at CP Rail said in a statement. “What he has done at multiple railroads and for our industry the last 50plus years is incredible which includes bringing CP back to its rightful place among leaders in the Class 1 space in what some have called the greatest corporate turnaround in history.” Luc Jobin, the current CEO of CN Rail, offered his condolences to Harrison’s family and paid tribute to the railway executive. “Hunter was a giant of the railway industry for decades and a transformative figure at CN,” Jobin said in a statement issued Saturday. —Canadian Press CS
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BREAK BULK CARGO
BRIDGING THE GAPS The construction of Montreal’s new Champlain Bridge has included more than its fair share of transportation challenges BY JOHN TENPENNY
C
ount Daniel Genest among those who believe catastrophes come in threes. In his role as director, coordination for Signature on the Saint Lawrence (SSL), the consortium building the $2.15 billion new Champlain Bridge in Montreal, Genest has been intimately involved in helping the project overcome a myriad of transportation challenges. “What has been the biggest challenge on this project hasn’t ac10 January 2018 www.canadianshipper.com
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tually been the design or the construction, but the transportation of oversize pieces to the project,” said Genest during a wide-ranging interview with Canadian Shipper. In the space of less than a year his team had to deal with the loss of a critical transportation route, weight restrictions on provincial highways and a public sector strike that essentially shut down deliveries. The new Champlain Bridge project involves the replacement of the existing Champlain Bridge over the St. Lawrence River, with
Photo: Allen McInnis
2018-01-12 11:45 AM
BREAK BULK CARGO
After losing the use of the old Champlain Bridge (top right) due to weight restrictions, SSL, the consortium buidling the new bridge, switched from a primarily road transportation solution to a multimodal hybrid system using a mix of road, rail and marine to ship large oversized pieces, such as box girders (left, on truck), pylon and pier segments.
Signature on the Saint Lawrence
a new 3.4 km bridge (including a 0.5 km cable-stayed portion) that will have six lanes for vehicular traffic, as well as a segregated cycle and pedestrian lane. The project also includes construction of a smaller 470-metre bridge for Nun’s Island, and reconstruction and widening work on Autoroute 15 as well as improvement of the ramps leading from Highways 132 and 10 to the bridge. The new bridge will have a life span of 125 years. The bridge—scheduled for completion in December 2018— is expected to be used by up to 60 million vehicles a year that will carry an estimated $20 billion worth of goods. Construction began in June 2015 after SSL, a consortium of SNCLavalin, Hochtief, Flatiron, Dragados Canada and Grupo ACS, was awarded the contract by Infrastructure Canada to design, build, finance and maintain the new Champlain Bridge corridor. According to Genest, 50 per cent of the construction budget was subcontracted to large suppliers and fabricators, $750 million of which went to Quebec-based companies, including $250 million to structural steel manufacturer Canam Group. A bridge too old The first shoe to drop, in May 2016, was the limiting of loads permitted on the existing Champlain Bridge by the Jacques Cartier
and Champlain Bridges Incorporated (JCCBI). The Crown corporation advised SSL that oversized loads beyond 48 metric tonnes would not be allowed. Four months later the threshold was reduced further to 30 metric tonnes. “Our construction strategy had over 1,300 pieces coming in from various part of Quebec alone that were impacted by the weight restrictions on the existing bridge,” explained Genest. The 54-year-old Champlain Bridge is probably the most closely scrutinized bridge in North America, with round-the-clock surveillance. This includes 300 sensors detecting abnormal behaviour in the structure, that are able to send out alerts to engineers 24 hours a day. JCCBI’s efforts to maintain the structure consisted of installing a series of 100 steel trusses that shore up the exterior girders of the bridge, which had been badly weakened by road salt and corrosion. Hybrid solution SSL’s initial transportation plan was “pretty basic,” according to Genest, with bridge components from four main fabrication locations in the province (Quebec City, Trois Rivieres, Terrebonne and Drummondville) being delivered by road directly to the site using the old Champlain Bridge. “The best way to access the construccontinued www.canadianshipper.com January 2018 11
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Timeline for the new Champlain Bridge Work on the new Champlain Bridge, begun in May 2015, will span 42 months and end in late 2018. All roadwork, including the final connections between the existing highways and the new bridge, will be completed in the fall of 2019.
PREPARATORY PHASE
The new Champlain Bridge will be 3.4 km long, with a 0.5 km cable-stayed portion and have six lanes for traffic, as well as a segregated cycle and pedestrian lane.
June to November 2015 | Construction of three temporary jetties abutting L’Île-des-Sœurs, the Seaway dike and Brossard
WESTERN AND EASTERN APPROACHES Fall 2015 to Spring 2017 | Prefabrication of certain part Fall 2015 to Fall 2016 | Maritime excavation Winter 2016 to Spring 2018 | Installation of footings, piles and header joists Fall 2017 to Summer 2018 | Installation of superstructure and deck 2018 | Finishing work
CABLE-STAYED SECTION OF THE BRIDGE Fall 2015 to Summer 2018 | Main pylon Fall 2015 to Spring 2018 | Rear span toward the St. Lawrence River Spring 2017 to Fall 2018 | Main span straddling the St. Lawrence Seaway 2018 | Finishing work
TIMELINE FOR HIGHWAY WORK Highway 15 sector (Montreal) Summer 2015 to Spring 2018 | New Île-des-Sœurs bridge Fall 2015 to Fall 2017 | Highway 15 southbound 2018 | Highway 15 northbound Spring to Fall 2019 | Final connections
Highway 10 sector (South Shore) Fall 2015 to Summer 2016 | Temporary work Summer 2016 to Summer 2018 | Reconfiguration of access to the new Champlain Bridge
tion site of the New Champlain Bridge was to come in from the South Shore.” With a fixed schedule, the consortium had to go into “solution mode,” as Genest termed it, once they received notification of the weight restrictions on the old Champlain Bridge. “We went from a primarily road solution to a multimodal, hybrid solution that is a mix of marine, rail and road,” he added. “Initially, our first solution was to make greater use of rail. Having railheads in both Quebec City and Trois Rivieres integrated into the fabrication sites, we looked at what we could bring in by rail.” However, complexity was added to any solution because of the configuration of some of the pieces. “The pylon and pier segments are heavy, but not large in dimensions, so we had the option to transport them by rail or by barge or by truck,” said Genest. “When looking at rail, we also had to consider the box girders, some of which could not be transported on a rail car because of their size. “The idea was, let’s see what we can transport by road and complement that with a rail solution. Then we determined that the rail solution was not going to take care of all our problems, so we looked at a marine solution, which allowed us to address box girders of all dimensions, as well as pylon and pier segments.” Initially, shipping by rail exceeded marine and road transport, but due to the economics of shipping large pieces by rail, it was decided that putting six to eight of the box girders on a ship in Quebec City and delivering them to the Port of Montreal often made more sense than using six to eight rail cars, said Genest. “Now, the biggest percentage of our deliveries remain by road, with the second—by volume of activity—is by barge.” The most significant transportation hub at destination became the Port of Montreal, according to Genest. “There are two railheads in Montreal that we used, including one that is actually in the Port of Montreal, which became a transportation hub for us, where we were able to transload pieces onto marine barges for delivery to the construction site. “We also created a smaller transportation hub on the South Shore at the Port of Cote-Ste-Catherine and this smaller hub allowed us to address the components that were slated to be delivered to the east approach.”
Fall 2018 to Fall 2019 | Final connections
Just in time Beyond the weight restrictions on the existing bridge there were 12 January 2018 www.canadianshipper.com
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Signature on the Saint Lawrence
BREAK BULK CARGO
road restrictions that were enforced on the provincial road network and, in the spring of 2017, a three-week strike of Quebec government engineers. The strike created a huge backload because government engineers do the structural analysis that allow the issuance of special transportation permits required for oversized loads. “We had to adjust our solution along the way, going from essentially a just-in-time delivery strategy to having to implement intermediate storage, using facilities located between Quebec
π
City and Montreal,” said Genest. None of this was done overnight, though. “In response to all these issues, we created a very robust logistics management team, which enabled us to plan, contingency plan and set up a system that gave us tight control over all aspects of the logistics plan,” he says. “It took us a full 18 months to craft this new strategy and implement it.” Genest says that transportation and logistics was eventually removed from the project’s critical path as they were unable to deliver pieces in a timely fashion to the project. “The immediate impact of losing use of the existing bridge, the additional restrictions on the road network and the strike was the issue of inefficient pre-assembly of box girders and installation. “The new hybrid solution we implemented, with additional storage, generated delivery delays and in some cases unsequenced deliveries on site.” He cited the example of assembling three box girders, with one coming in by truck, one coming in by barge and the other coming in by rail. “We’ve been able to overcome these issues—delivery delays, unsequenced deliveries, inefficient pre-assembly/installation— and are now in a steady state of a continuous flow of pre-assembly and installation on site.” CS
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SALARY SURVEY
2018 SURVEY OF THE LOGISTICS PROFESSIONAL
A RISING TIDE LI
14 January y 2018 www.canadianshipper.com pp
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2018-01-12 11:46 AM
SALARY SURVEY
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LIFTS ALL BOATS Base salary increases
Size of increase
Survey Average
Survey Average
40% 37%
57% Increased
42%
8%
Remained the same 2.0% or less
2.1% to 4.0%
4.1% to 6.0%
5% 6.1% to 10.0%
8%
10.1% or greater
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R
esults are in for our annual Survey of the Canadian Supply Chain Professional, and as usual they shed some interesting light on the state of compensation and satisfaction in the industry. What trends can we see emerging from the survey this year? The biggest surprise was the fact that the mean gross salary for Canadian logistics professionals shot up 10% over last year. The mean gross salary reported this year was $99,902, with 13% of respondents—the same as last year— making a base salary of between $80,000 and $99,000, while 31% reported receiving a six-figure base salary, an increase of 8% over last year. According to the authors of the study, there were a pair of factors that contributed to the rise in salary. “This year we had a higher proportion of Executive Management titles who completed the survey,” said Gerald Bramm, president of Bramm Research Inc. “We also saw a substantial increase in respondents holding a P. Log designation. On average, these two respondent groups have a higher average annual income when compared to the overal sample. Taking together these variations in the sample versus last year could partially account for the relatively large mean salary increase.” Executive Management was listed by 22% of respondents, up 6.4% from last year and they brought with them a mean salary of $123,075. Correspondingly, there was a 16% increase in the number of respondents who held a P. Log designation, with a mean salary of $120,038. Overall average salary for men, who made up 74% of respondents was $105,931 (up 10%) and $83,881 (up 9%) for women. Company size makes a similar difference in base pay levels. Canadian Shipper readers working for companies with fewer than 100 people had a mean salary of $90,212, while the largest group of respondents (20%) earned a mean salary of $96,399 working for companies with between 100 and 500 employees. More than half (57%) of our respondents currently manage a budget, which for a third of respondents is between $1 and $10 million a year. A whopping 30% of respondents manage an annual transportation/warehousing and logistics budget of more than $20 million. Cost cutting is top of the agenda in terms of priorities for our respondents in the coming year. A vast majority of respondents (82%) are seeing continued pressure to cut costs in their operations, though nearly half (47%) indicated their
Base salary ranges Survey Average
Less than $40,000
1%
$40,000 to $49,999
3%
$50,000 to $59,999
4%
$60,000 to $69,999
7%
$70,000 to $79,999
10%
$80,000 to $99,999
13%
$100,000 to $119,999
14%
$120,000 and higher
17%
Mean salary by job function Customer Service
97, 994
Purchasing/procurement
105,262
Warehousing
101,699
Transportation
98,475
Inventory/Material Control
97,736
Information Technology
98,558
Project Management
105,756
Training and Development
103,253
Demand Planning/Forecasting
105,067
Customs
96,820
Order Fulfillment
95,865
Sales/Marketing
114,900
Other
98,368
16 January 2018 www.canadianshipper.com
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SALARY SURVEY
continued from page 16
company was planning major investments in technology sometime over the next 12 months. The supply chain recruitment and hiring process, according to 57% of our survey respondents this year, is expected to “stay the same”, meaning that it will be “somewhat problematic” or “take longer” (49% of respondents) or “very problematic” (37% of respondents) to fill vacant positions with suitable talent. Only 48% of respondents agreed that their compensation level has been keeping up with their job responsibilities over the last five years. Next year, 59% respondents anticipate a salary increase and most (84%) expect an increase of four per cent or less. Three-quarters of our respondents are not currently seriously looking for work with another company, but a quarter indicated they were. Some 56% of respondents are very or extremely satisfied with their current jobs. The top reasons that respondents are considering a position with another company are: better money ( for 57%), a better work-life balance ( for 33%), better career opportunities (29%) and geographic location (27%). Other reasons that led respondents to consider leaving were greater say in management decisions, reputation of firm, better rewards program, and more responsibility. Over three quarters of respondents have completed tertiary levels of education. Professional designations are highly relevant to their job performance, with the Logistics Institute’s P. Log designation is held by 36% of respondents, while 31% hold CITT’s CCLP designation. Respondents boast many years of supply chain experience, with 12% of respondents indicating they’ve amassed between 15 and 20 years’ experience, while 37% have 25 to 30 years of experience and a quarter (26%) have more than 30 years. The mean number of companies at which our respondents have been employed during their career is four, while the mean number of positions held during their career is seven Our respondents worked 47.4 hours per week, up 1.3 hours from last year, with 87% receiving no overtime pay. CS
Mean salary by number of people working in company Total Respondents (Survey Average)
$99,902
25 or fewer
$90,146
26 to 100
$90,278
101 to 500
$96,399
501 to 1000
$95,438
1001 to 5000
$104,198
5001 to 25,000
$99,387
More than 25,000
$123,145
Mean salary by education Some high school
$105,000
High school graduate
$102,344
Some community college
$83,624
Community college graduate
$88,363
Some University
$95,458
Undergraduate-Bachelor’s Degree
$110,926
Some post graduate education
$98,250
Post graduate degree
$113,279
Mean salary by years of experience in supply chain 2-5 years
5-10 years
10-15 years
15-20 years
20-25 years
25-30 years
30-35 years
$63,786
$72,841
$86,673
$108,185
$111,036
$97,687
$117,855
18 January 2018 www.canadianshipper.com
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SALARY SURVEY
Mean salary by company sector Total Respondents (Survey average)
$99,902
Manufacturing
$99,922
Transportation
$93,235
Third-party logistics
$113,221
Retail
$104,726
Other
$95,092
Top three reasons for considering a position with another company Better money
57%
Better work/life balance
38%
Geographic location
27%
Better career opportunities
28%
Better benefits
24%
Flexible hours
19%
Greater say in management decisions
15%
Reputation of firm
16%
Better rewards program
11%
More responsibility
11%
Industry of choice
8%
Smaller firm
3%
Larger firm
3%
Other
6%
Respondent Profile & Methodology Of the 379 supply chain professionals included in our sample, 52% defined themselves as being in the managerial ranks of their organizations and 66% said they were in transportation. Of the respondents, 60% indicated they manage at least one employee. The vast majority of respondents (92%) were over 35 years of age with the mean age being 51. Of respondent, 42% hold an undergraduate degree at either the University or college level. Respondents performed a variety of functions ranging from transportation (66%) and purchasing (45%) to training and development (48%) and warehousing (42%). The majority of respondents who are Canadian Shipper subscribers had transportation and supply chain responsibilities. The survey enjoyed wide geographic reach across Canada. While 48% of respondents came from Ontario, another 34% were from Western Canada and 14% from Quebec and the Maritimes. The respondents also represented a mix of small, medium and large enterprises with 53% working for large companies employing more than 500 while 28% worked for small organizations employing fewer than 100. Email invitations were sent to supply chain professionals across Canada from email lists provided by Canadian Shipper and our sister publication MM&D. The survey was handled once again by the research firm of G. Bramm Research Inc. After filtering out unqualified respondents and incomplete surveys, we compiled data from 379 respondents. This represents a margin of error of plus or minus 2.6 percentage points, 19 times out of 20. CS
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SALARY SURVEY
Geographic Distribution Quebec
9% Atlantic Canada
5% Ontario
48%
Manitoba/ Saskatchewan
5%
Alberta
13% Yukon/ Northwest Territories/ Nunavut
British Columbia
1%
16%
Size of Company
Highest level of education
1 to 100
University degree
28%
25%
College diploma/ CEGEP
17% 101-500
20% Post graduate degree
12%
Highschool or less 500 or more
50%
Some university
7%
23%
20 January 2018 www.canadianshipper.com
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FROM THE SPONSOR
ROADBLOCKS TO SUCCESSFUL HIRING As a recruiter I’m involved in the hiring processes of a large number of clients every day. Over the years I’ve been privileged to work with companies who have outstanding hiring practices; I’ve also seen companies that struggle mightily because of poorly planned or cumbersome procedures. People truly are the most important asset a company has, and the process by which new employees join the company is therefore critical. It can ensure the organization’s goals and targets are met or it can be a big factor in a lack of success. The following are five roadblocks that prevail in failed hiring processes. No concise position description The lack of an accurate and concise position description encourages failure from the get-go. Think of it through the eyes of the potential employee: If the company does not provide clear specifics and expectations around each position, how can they possibly attract the best talent? Potential recruits need to see well-defined expectations so they can judge whether they have the skills and experience to meet the company’s intended objectives. A clear position description removes any mystery and ambiguity and gives the potential employee the best opportunity to assess their own interest and ability to succeed in the position. The development of a concise position description is also a very healthy exercise that leads to increased productivity, greater teamwork and substantially higher employee satisfaction. A hiring process that drags on Sometimes companies have hiring processes that consume many months. There can be a number of reasons for this, including busy schedules that don’t allow for a tightly scheduled interview process, far too many interviews (I recently saw eight) or a lack of consensus among those involved in the hiring process. This does not communicate the right message to potential top-level candidates and quite frankly most will move on to another opportunity. However, it’s important to remember that companies are competing in the hiring marketplace with multiple opportunities in play. As a result they need to see that the hiring process is a direct reflection of their culture and their ability to make decisions. First impressions really do matter and potential employees can be won or lost at this stage.
By Ross Reimer
Inexperienced interviewing skills Occasionally I’ve seen companies delegate the initial interviews – by telephone or in person – to the most junior people in their organization. In some cases a person who’s worked in the industry for two or three years is discussing a senior-level position with a potential candidate with 25 years of experience. I’m not sure it’s a fair request for companies to make of a junior person. I’ve personally interviewed people who’ve been turned away that I believe would have been excellent candidates had they been interviewed by the hiring manager. I realize time is precious but given the importance of hiring the right people, it would be time well spent. Waiting for the perfect 10 We all want to find outstanding people for our organizations, but waiting for perfection can be disastrous. Obviously a hiring scorecard needs to be in place and top candidates should score very well, but companies that wait for perfection often pass over excellent potential employees. If you look within your own organization at your current top performers across a wide variety of positions you’ll realize that none of them would score perfectly in all areas, and yet you prize them as the best in your business. Hiring managers need to keep this in mind to be successful. Underemphasizing cultural fit Every organization has a distinct culture. Whether large or small, multinational or local, companies develop a culture that reflects the values and personalities of leadership. When companies don’t clearly understand their own culture, or under-emphasize its importance, hiring mistakes are inevitable. A candidate’s specific skills and experience may align very well with your organization’s requirements, but if they lack a cultural fit, the hire will turn out to be painful. As a recruiter and talent scout, one of the most important aspects of my job is to ensure that cultural values line up when matching candidates with my clients. I have the unique privilege of interacting with a wide variety of companies in the transportation and supply chain industry. Observing their hiring processes has taught me a great deal and in my opinion, companies that have best practices at this stage have the most engaged and satisfied employees – and the best bottom lines. CS
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FOOD LOGISTICS
BEST BEFORE The demands of the digital economy are being felt in the already complicated food supply chain BY KEN MARK
M
any executives today believe that the digital economy—buying and selling online—will destroy conventional retail. They fear that the devastation hammering department stores and shopping malls will also wipe out supermarkets and other grocery retailers. However, the food sector’s saving grace is that, unlike other merchandisers, it supplies consumers with fresh meat, seafood, fruit and vegetables. Unlike hard goods and clothing, the food we eat requires highly specialized logistics services including temperature and environmental controls, special packaging and handling in order to distribute fresh, safe-to-eat products to retail outlets. The food delivery supply chain just added another link after Target. agreed to pay US$550 million for grocery delivery start-up 22 January 2018 www.canadianshipper.com
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Shipt Inc. The acquisition follows the lead of Amazon and WalMart, which introduced the service provided by industry leader, Instacart. Its personal shoppers purchase goods from a list of selected stores which it delivers to a specified address. Since mid-November, Loblaws, Real Canadian Superstore and T&T store customers can request Instacart services. Shipt typically sells items at a small mark-up to in-store prices and charges a delivery fee for orders under $35. Today, the grocery food supply chain no longer ends in warehouse or store but in a shopper’s home. Conventional food retailers are under constant pressure to find suitable solutions. Amazon.com recently acquired upper-end food retailer Whole Foods for US$13.7 billion in cash. Not to be outdone, Amazon’s Chinese alter ego, Alibaba Group Holding Ltd. agreed to pay US$2.88 billion for a 36 per cent stake in China’s
Photo: Instacart
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FOOD LOGISTICS
Ontario-based grocer Farm Boy is deploying a new supply chain management system to help drive future growth.
second-largest big-box retailer, Sun Art Retail Group Ltd. Such acquisitions further fuel the notion that the future of food retail will be a mix of in-store and online sales. Speaking of Alibaba, Korean Airlines (KAL) as part of its weekly 18-hour charter, Boeing 777F service from Halifax Stanfield International Airport (HSIA) to Inchon, South Korea, recently delivered a load of fresh lobster from Nova Scotia’s Gidney Fisheries in Centreville to China for Alibaba’s Singles Day sale—their version of Amazon’s Black Friday event. The rise in global food demand turns up the pressure on logistics professionals to develop effective solutions to handle the expanding universe of product delivery points and processes. Closer to home, major U.S. retailers. have increased the pressure on manufacturers and carriers by charging them fines for late and incomplete deliveries. According to a recent Wall Street Journal story, The Kroger Co. is fining suppliers $500 for every order that is more than two days late to any of its 42 warehouses, and Wal-Mart, in August, started charging suppliers monthly fines of three per cent for deliveries that don’t arrive exactly on time. Late deliveries run into real money. The U.S.-based trade organization, the Food Marketing Institute, estimates that food retailers lose US$75 billion a year because items are out-of-stock or unsalable for other reasons. That amounts to about 10 per cent of annual industry-wide grocery revenues at a time when the sector’s sales margins are shrinking and sales growth continues to slide. So far, such penalties have not shown up in Canada, says Toronto-based Deloitte partner, Ryan Ernst “Since retail supply chains are often complicated, usually retailer have acknowledged these and included grace periods for late or lost deliveries without penalties. They are now introducing a flow model and automated warehousing systems to move products through the system more smoothly. “Many of those tools and systems and solutions rely on modern track ‘n trace systems based on emerging block chain technology that provides a shared and verified view of the location of
goods as they pass through the supply chain. “As well, there are other tools that provide real-time data on the location and status such as the temperature of products throughout the supply chain. In addition, dynamic routing systems that rely on the latest analytics solutions involving algorithms to create more accurate inventory orders.” Ernst also foresees that electronic vehicles and driverless trucks will help increase fuel efficiency and road safety and cargo security that will reduce overall transportation costs and hassles. But bringing such innovations to market will take time. In recent news, PepsiCo Inc. has reserved 100 of Tesla’s new electric Semi trucks. In Canada, Loblaws has pre-ordered 25 of the vehicles, with transport company Titanium and fleet services provider Fortigo also placing orders. As well, other game-changing systems are edging closer to reality than we realize. Electronic Document Data Integration (EDDI), is an emerging technology that enables smartphones to generate and share “Smart Documents.” These contain complex data required for customs filings and shipping records. By initiating an automated and globally secure workflow, they simplify the exchange of crucial data relevant to importers, exporters, carriers, freight forwarders and government regulators. John Welsh, president and CEO of Toronto-based Omni EDDI Inc., says Smart Documents are like blockchain technology without the latter’s size limitations. They overcome that weakness by creating a “link-chain” whose transactions are traceable, transparent, repeatable and irreversible without requiring agreement and authorization of involved parties. “We have selected a Caribbean country to test drive EDDI to help boost its economy by increasing trade opportunities and creating high-paying technology jobs,” says Welsh. “Our client’s Agricultural Ministry is eager to expand its fisheries exports. To do so, we will introduce a harvest-monitoring system through a smartphone app. It will enable fishermen at sea to photograph the catch, generate documents and send the data, directly to government regulators. “Captured data includes GPS catch location, types of nets and their gauge, species caught and water temperature. By distributing such data to multiple recipients using different systems, EDDI can satisfy both domestic and foreign governments’ including Canada’s that the harvested fish satisfy all their food safety standards and environmental regulations.” As a result, governments can confidently import the fish after seeing certificates that meet all domestic and international agreements. Without such certificates, Canada will not import the fish. More important, EDDI is an outsourced solution that eliminates the need for any in-house IT infrastructure or staffing. Such “tap-the-app” data tools pop up in other solutions. Ottawa-based Farm Boy is one of Canada’s fastest growing grocery chains with 24 fresh market stores in the province. But it is poised to expand into highly competitive Greater Toronto Area market. One of the keys to its future success is deploying a supply chain management system from Finnish-based Relex Solutions. Says Shawn Linton, Farm Boy’s vice-president, supply chain & I.T., “Inventory management is key to enabling us to fulfill our corporate strategy in which freshness is king and the product best before date is the law. Since we are fanatics about best before dates on a box of crackers, we buy stock with store-shelf freshness in mind not just lower cost. continued
Photo: Farm Boy
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24 January 2018 www.canadianshipper.com
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FOOD LOGISTICS
continued from p.23
At Halifax Stanfield International Airport, fresh lobster is loaded onto a Korean Airlines Boeing 777F, which runs a weekly service to Asia.
“Relex software helps us calculate the top level of safety stock— item quantities on hand. It deploys algorithms to calculate proper amount to meet future customer needs. Historically, most shortages are caused by suppliers’ miscalculations or other human error. Less than 10 per cent comes from system errors. Our entire business model is based on keeping an adequate quantity of fresh food products in store to meet expected consumer demand.” Such an approach enables Farm Boy to build and maintain consumer loyalty. It also strengthens the bottom line since strict adherence to its business plan results in less waste from discarding stale products or selling them at discounted prices. Proper inventory management is also key to ensuring steady price points for customers as well as predictable revenue, costs and profit streams for food retailers which have traditionally struggled with low profit margins. Farm Boy introduced Relex in 2016 for basic food items. Next on the list are produce, fresh meat and seafood. The store does not carry space-devouring, low-return household products such as detergent and paper towels. “People can buy them online,” says Linton. Farm Boy currently has a modest online presence for specialty items such as party platters and a mobile app for salad club members. But its future plans include introducing click-and-collect services, since more and more shoppers dislike lining up at checkout counters to pay for their purchases. Linton is enthusiastic about Relex’s “plug and play” approach. “It’s a lot like today’s carriers one day outsourcing deliveries to a service provider which actually operate and maintain driverless vehicles. The carrier has no capital tied up in equipment or repair and maintenance costs, which the service provider looks after. Nor do they have to worry about hiring or supervising drivers and mechanics. They just have to keep customers happy and earn enough money to pay the monthly service provider bill.” Things are moving quickly but those vehicles are not quite on the roads yet. As Canadian consumers increase their appetites for Peruvian “superfoods” such as macca root, quinoa, camu camu and other dried fruits, the products still need to make the long trek up to Canada. For the past five years, North York-based Flo Trading has been importing such items after overcoming a handful of transportation and logistics challenges. These include proving that the imports meet all current international organic food quality standards. As well, to increase their acceptance by Canadian shoppers, Flo Trading ensures that such products also meet
Photo: HIAA
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various food product fair-trade standards. At trade shows such as the annual Alimentaria in Lima Peru, the largest food show in Latin America, and the Grocery Innovation Canada show in Toronto, many of the Peruvian food exhibitors are run by entrepreneurs. In addition, most of the growers are indigenous farmers with small personal plots of land. But by joining together with others to form cooperatives they can supply enough produce to satisfy overseas markets. Flo Trading supplies the produce in bulk to food processors as well as offering private label packaged goods to independent food retailers. Such products are shipped in containers by sea from Callao, Peru’s major port through the Panama Canal to U.S. ports such New York and Philadelphia. The ocean voyage averages about 25 days. The recently widened Panama Canal cuts at least two days off the trip. From the U.S. ports of entry, the containers travel to Canada by truck or train. However, Flo Trading president, José Labra prefers the longer and slightly more costly deliveries via the port of Halifax. “Shipments take about a week more than going through U.S. ports. But it is more convenient when they come through Halifax. U.S. Customs and food inspection officials often take more time to clear goods.” The smoother entry of Peruvian goods into Canada may result from our free trade agreement with members of the Pacific Alliance—Mexico, Colombia, Peru and Chile. In the other direction, Canada exports are mainly grains such as wheat and lentils. José Luis Peroni, director for the Trade Office of Peru, based in Toronto, says his country is looking to expand its food exports to Canada. “One of the high-end, fresh fish food items we will continue to promote is paiche (pronounced pie-CHEE).” Shipments arrive on Air Canada Cargo flights direct from Lima, he says. As long as people continue to eat, there will be grocery stores. But to survive, they must first develop profitable in-store and online sales concepts and formats to meet ever-changing consumer appetites and buying habits. CS
Ken Mark is a veteran technology expert, who has covered supply chain management since it was called distribution and has documented its legitimization as a critical business function. He holds an MBA from York University.
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U.S. TRADE
STANDSTILL Despite the possible disintegration of NAFTA, Canadian shippers and carriers are hopeful that cross-border traffic will continue to flow BY JOHN TENPENNY
W
hich is slower: the Windsor-Detroit border crossing, or the NAFTA talks? While it seems both are moving at a glacial pace at times, there is no doubting the importance placed on both issues by those in the transportation and logistics industries—
on both sides of the border. With President Trump’s seeming insistence on scuttling the 23-year-old agreement, there are those on the ground who are hoping to improve the transportation of goods at border crossings by applying data science to make accurate predictions of wait times for trucks.
A recently launched project involving amongst others, the Council of the Great Lakes Region (CGLR) and the University of Windsor’s Cross-Border Institute (CBI), will use big data to aggregate and analyze weather, traffic, and border wait time data so that better real-time decisions can be made in moving perishable and time-sensi-
26 January 2018 www.canadianshipper.com
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U.S. TRADE
tive goods through the Great Lakes supply chain and across the Canada-United States border. It is the first collaboration under the CGLR’s Great Lakes 4.0 initiative. The region, encompassing two provinces and eight states, represents roughly $6 trillion in economic output every year, which would make it the third largest economy in the world, behind the U.S. and China. It is also responsible for 50 per cent of the total value of all goods traded between Canada and the U.S. every year. “Being able to get information about how traffic and weather can impact delays is important because it is difficult to find it in any one place,” says Mark Fisher, president and CEO of CGLR. “Our goal is to create a tool, not just for trucking companies, but for anybody in the logistics business that needs to have better intelligence in terms of what’s happening between point A and point B.” CBI is teaming up with mobile application developer Inovex Inc. to access the cloud analytics platform at research and development consortium SOSCIP, the first research-dedicated cloud environment in Canada. The team will develop a smartphone application that can predict crossing times ranging from intervals of 15 minutes to two hours, and deliver notification of border delays, road closures, and/or accidents to shippers, dispatchers, drivers, receivers and other supply chain participants so they can adjust their shipment schedules and travel plans. “We think this application will be transformational for the transportation/logistics/warehousing industry,” says Fisher. NAFTA uncertainty In the wake of NAFTA negotiations that seem to be heading towards dissolution of the agreement, many shippers and carriers are doing their best to plan for an uncertain future. “Business will adapt, but they need certainty,” says Tiffany Melvin, president of the North American Strategy for Competitiveness (NASCO) network. “I’ve talked to some companies that receive foreign investment and are being told that right now, because of the uncertainty, critical funds will be sent to other locations where they have operations— outside of North America—because of the uncertainty in the North American market. Damage is being done now. “Everyone is hopeful that NAFTA can be modernized. But our members are in solid agreement that some of the proposals put forward by the U.S. are not to the benefit of North American competitiveness on a global scale. “There has been some really good work done in the areas of border facilitation, regulatory cooperation, customs automation, e-commerce and digital trade—critical components of a modernized NAFTA—and some are concerned that with the more recent extreme negotiating positions introduced by the U.S. government that they’re ‘throwing the baby out with the bath water.’ “Many are hoping for the best, but fearing the worst, which leaves industry in a horrible quagmire of ‘What do we do?’”
A Shipper’s Perspective While many in the transportation industry are losing sleep over the real possibility that the U.S. will pull out of NAFTA, Dave Cox, president of Polaris Transportation Group, has been buoyed by what he's seeing and hearing. “We don't think the NAFTA talks have had a negative impact on cross-border traffic, in fact, if anything, it has become stronger in the last 18 months,” he says. “We’ll take it as it comes, but there is nothing to be concerned about at this point. At the end of the day, goods are going to get to market.” In fact, according to Cox, interest in shipping into Canada has been picking up steam over the past 12 months. “The headlines are certainly around a restructuring of NAFTA,” he says, “but at industry events we’ve noticed a real appetite for shipping to Canada. Whether it be U.S. 3PLs or shippers, they want to learn how to enhance and optimize their path to the Canadian marketplace.” In order to feed those potential customers, he says technology will be the key. “From my perspective, the supply chain is becoming digital and that’s where our focus is—being part of the digital community—and exploring things such as robotics and blockchain. I see quicker, faster, secured digital transactions and that’s fascinating to me.
“We’re the largest privatelyheld cross-border carrier in Canada, crossing over 300,000 times a year, so what we do today works great. What we do in six months, one year or five years has to be vastly different. The way for us to compete in North America is using technology.” Growth for Polaris, both organically and through acquisition continues and shows no signs of slowing down, says Cox. “We’re going to continue to be ‘acquis-itive’ in North America. Ownership of trucking and logistics companies is aging and looking for a succession answer. At the same time, customers are asking us to get into more businesses to help them navigate the complexity of their supply chains, which is one reason we’ve recently expanded into warehousing, something we hadn’t been involved in before. “Organically, we’ve made investments into our own thirdparty logistics business so we could handle more of our customer’s freight and increase our menu of products and services available. “We’ve also been making further investments in our Cleveland terminal for people looking to do distribution into Canada or the U.S. and quite frankly it’s easier for them to get their goods to Cleveland and let us handle the rest.”
continued www.canadianshipper.com January 2018 27
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U.S. TRADE
continued from page 27
the consumer, which may cause consumption to go down. “We’re not going to stop doing business just because NAFTA changes, but it may increase costs.” The idea that termination of NAFTA would make consumers the biggest net losers was highlighted by a recent study from BMO, entitled “The Day After NAFTA.” BMO said a NAFTA termination means that growth in Canada's real gross domestic product would be between 0.7 per cent and 1.0 per cent lower than would otherwise be expected over a five-year period. Additionally, consumer prices in Canada would be expected to rise roughly 0.8 percentage points, due to a weaker exchange rate and modestly higher tariffs. BMO said it based its report on a “badbut-not-worst-case scenario” where all the NAFTA parties revert to WTO-level tariffs. In that situation, BMO said it expects Canada would reject U.S. demands
The uncertainty is prompting some Canadian firms to consider moving part of their operations to the United States, according a recent survey by Export Development Canada. With this country sending 75 per cent of all goods to the U.S., Canada could be badly hit if Washington walks away from NAFTA. One way to cushion the blow is to set up shop in the U.S. EDC said 26 per cent of firms surveyed “indicated that they are moving—or are considering moving—part of their operations inside the U.S. border in response to the elevated uncertainty regarding U.S. trade policy.” “There is a lot of uncertainty and that’s causing anxiety and difficulty in business planning,” adds Ruth Snowden, executive director with the Canadian International Freight Forwarders Association (CIFFA). “At the end of the day, if the ramifications of NAFTA increase the price of goods it’s just going to get passed on to
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for the NAFTA dispute resolution mechanism to be scrapped or weakened. The bank said other “sticking points” in the renegotiations could be U.S. demands for a sunset clause and the termination of supply management in Canada's agricultural sector. According to Snowden, Canadian forwarders are concerned, in particular, if automotive manufacturing moves to the U.S., along with changes to auto rules of origin. “It’s not just the cross-border trucking trade that we’re worried about,” she says. “We also move a lot of auto parts inbound from Asia and Europe for further manufacturing here and then for shipping to the U.S., which could impact Canadian automotive manufacturing plants adversely. “If we’re not manufacturing here in Canada, then we’re not going to be importing parts, so our international ocean intermodal, for example, could be impacted negatively.” She also wonders about the impact of the proposal to increase Canada’s de minimis value to $800, matching the U.S. Currently it stands at CDN $20 and has not been raised since 1985. “Part of the forwarder community thinks it will be good, with increases in ecommerce and a better flow of goods across the border,” says Snowden, who personally has reservations about the idea. “Who’s going to pay the HST on all of those goods?” she asks. “That’s a lot of money that wouldn’t be paid to the government and I’m not sure where that money is going to come from.” Do no harm While the NAFTA agreement seems to be on its last legs, Melvin says many are still holding out hope that something can be worked out. “A lot of people feel that Trump has wanted out of NAFTA for a long time and is using his hardline negotiating positions to make it impossible for Mexico and Canada to meet his demands, giving him a reason to withdraw. Everyone is hopeful that someone or some group can ‘get to him’ to make him soften his positions and understand how critical NAFTA is to U.S. jobs— both current and future—and U.S. product competitiveness on a global scale.” Withdrawal from NAFTA is not as simple as it sounds either, says Melvin. “Many experts agree that the best outcome could be a zombie NAFTA—
28 January 2018 www.canadianshipper.com
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U.S. TRADE
that no agreement is reached and they pause for the Mexican Presidential election and U.S. midterms and then resume negotiations after the elections. Others agree that if Trump does pull out of NAFTA, that there will be a lot of legal issues that could prevent the actual withdrawal from taking place for a long time. The result of that would be a zombie NAFTA, as well.” In the meantime, there are many things that can be addressed in terms of modernizing the systems, technology and the policies that both countries use at the border that will have an enabling effect in terms of moving goods more quickly across the border, says Fisher. One is the recently adopted multimodal pre-clearance agreement. This will allow all customs officials to work in a more integrated way, which will hopefully speed up the movement of people and goods, but also mean having shipments inspected once and providing dual approvals. The process involves U.S. Customs and Border Protection officers working on foreign soil to make admissibility decisions, rather than upon arrival at the U.S. port of entry, and vice versa for Canada. Clearing people and cargo in advance is designed to relieve pressure on ports of entry that are often congested during peak traffic periods because of limited physical space or personnel. “We think that NAFTA 2.0 presents an opportunity for everyone involved to think about that next generation trade agreement/economic platform that will allow us to bring all of our economic strengths and assets to bear to be the most competitive and productive region and continent in the world,” says Fisher. “Our economies and supply chains are so intertwined that the U.S. would be doing more harm than good in pulling out of NAFTA.” Melvin agrees. “I think our supply chains are fairly entrenched, we’re integrated, we make things together—and I think we’ll continue to do so, I just think [withdrawal from NAFTA] will hurt us with increased costs and many of the products we make together will be less competitive on a global scale. “Many companies have told us that they were North American companies before NAFTA and they will North American companies after NAFTA.” CS
To find out more or to participate in the Council of the Great Lakes Region’s data science research initiative— Great Lakes 4.0—contact Mark Fisher at C G mark@councilgreatlakesregion.org
L
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COUNCIL OF THE GREAT LAKES REGION
ALABAMA
TENNESSEE D A I L Y
OHIO
D I R E C T
KENTUCKY
INDIANA
S E R V I C E
YOUR CROSS-BORDER SPECIALIST
1 . 87 7.74 0 . 3 9 4 0
GXTS.COM
LTL | DEDICATED | TL | DIRECT | EXPEDITED | DRY VAN | CONSOLIDATIONS www.canadianshipper.com January 2018 29
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RAIL INFRASTRUCTURE
COMING UP SHORT Lack of funding for Canada’s short line railways remains an issue for a sector that transports over $20 billion worth of freight each year BY CARROLL McCORMICK
H
ow many railway companies operate in Canada? Hint: more than four. In fact, depending on the year, there are around 60 railway companies in Canada, most of which are small, privately owned railways called short lines. There is the 132.5-mile long Tshiuetin Rail Transportation Inc. that straddles Labrador and Quebec, tiny Trilliun Railway Co., with its 50 kilometres of track, in Ontario’s Niagara Region, 14 short lines in Saskatchewan, the washed out and currently shut down, 627-mile long line belonging to OmniTRAX’s Hudson Bay Railway Company (HBR)—the list goes on and on. In 2015, according to a report (Review of Canadian Short Line Funding Needs and Opportunities) prepared for the Railway Association of Canada (RAC) by CPCS Transcom, short lines amounted to 20 per cent of our railway transportation network, by kilometres, accounted for seven per cent of our rail sector reve-
nues, employed 3,000 people directly, and carried over 135 million metric tonnes of freight each year. RAC president Michael Bourque notes that nearly 20 per cent of all our railway traffic begins on short lines, making them important tributaries that feed freight to our Class 1, a.k.a. mainline railways: CN and CP. The sectors they serve include “... agriculture, forestry, fertilizer, potash, refined petroleum products, automotive manufacturing and the transportation sector,” to quote the testimony of Lee Jebb, vice president, Cando Rail Services, at a June 15, 2017 meeting of the Standing Senate Committee on Agriculture and Forestry. Short lines shift tonnes of freight from trucks, serve remote areas that the trucking industry would be hard-pressed or unable to reach, and, according to RAC, moving just 10 per cent of freight from trucks to short line railways would reduce GHG emissions by
30 January 2018 www.canadianshipper.com
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RAIL INFRASTRUCTURE
The Great Sandhills Railway operates 123 miles of track west of Swift Current, in Saskatchewan and Alberta, formerly CP lines known as the “Empress Short Line.”
close to 500,000 tonnes—the equivalent of removing more than 3.6 million trucks off the road. But despite all this, short lines collectively, lead a more-or-less hand-to-mouth existence. CPCS reports that their operating expenses as a share of revenue average about 89 per cent. And since many short lines set up shop on old track that ceased to serve the interests of the mainlines, many are in dire need of expensive infrastructure upgrades. To illustrate, look at their capital expenditures as a percentage of total revenues: By 2013 they rose from consuming most of the revenues, to hitting 117 per cent of total revenues, according to the CPCS report. Short lines are typically unable to invest beyond basic maintenance and therefore cannot afford the beefed-up infrastructure that would allow them travel more quickly (some are restricted to 10 mph), attract more business, or align their load-carrying capac-
Photo: Ted Rafuse
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ity with that of the mainlines. Born behind the eight ball, most of them are locked in a losing battle with entropy. Short lines and their owners are well respected in the rail industry, and are counted on by their clients. “Our customers include the likes of JRI, Toyota, Magna, Mosaic, PotashCorp of Saskatchewan, Agrium, Resolute Forest Products, Domtar, West Fraser, Imperial Oil, Shell, Federy Co-op, CN and CP, along with many other names that you would recognize,” said Jebb in his 2017 testimony. “[This] is a very successful sector. Short lines are incredibly entrepreneurial, able to leverage community relationships, and they are not given the credit they are due,” says Michael Gullo, director of policy economics and environmental affairs, RAC. Unfortunately, he notes, “The investments short lines can make are being made to hold the line, with limited ability to grow infrastructure to expand business.” Some short lines have received government money, such as the Huron Central Railway, HBR (both of which are again in crisis and asking for more), but in general, Canadian short lines have a tough time tapping infrastructure funds. Two provinces—Saskatchewan and Quebec—do have funding programs for short lines. The Short line Railway Sustainability Program (SRSP), a 50-50 costshared infrastructure grant program funded by the Saskatchewan Grain Car Corporation and matched by short lines that meet eligibility requirements. In Quebec, a funding program created in 2007 offered up to $30 million for track capacity/speed upgrades, improved safety/efficiency, reduction of greenhouse gases and intermodal projects, but according to the CPCS report, short lines since capital costs were reimbursed upon project completion, like the Central Maine & Quebec (CMQ) were reportedly unable to access funding due to their inability to get commercial financing, despite qualifying for funding. The federal New Building Canada Fund (BCF) also presents challenges for short lines. At an April 13, 2016 Transport Committee meeting, Frank Butzelaar, president and CEO, Southern Railway of British Columbia, was quoted as saying: “The challenge the short-line railways have is that although investments in short-line railways are eligible for the build Canada fund [sic], you need to have government sponsors. You need to have a government that’s backing the program and is prepared to go in with you on it. As far as I’m aware, no short-line railway has ever been successful in finding government partners for their projects.” CPCS also noted in its 2015 report, “Only two short line projects were funded under the previous Building Canada Fund (BCF, 2007-2012), equivalent to less than 0.07 per cent of total BCF funding.” The failure to get stable funding has not been for lack of trying, or for lack of examples elsewhere. The highest-profile recommendation for stable short line funding comes from none other than the 2015 Canada Transportation Act Review (Pathways: Connecting Canada’s Transportation System to the World, Volume 1). David Emerson writes: “Recognizing that short line railways serve an important function in Canada’s national rail network and support resource and manufacturing industries, along with remote communities, the Review recommends: • modifying eligibility criteria for federal infrastructure programs to allow short line railways to apply for funding directly, www.canadianshipper.com January 2018 31
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RAIL INFRASTRUCTURE
continued from page 31
“[This] is a very successful sector. Short lines are incredibly entrepreneurial, able to leverage community relationships, and they are not given the credit they are due. Unfortunately, the investments short lines can make are being made to hold the line, with limited to expand business.” Michael Gullo, director of policy economics and environmental affairs, RAC
Since 2014, CMQ has used tons of ballast on its 481 miles of track to increase train speed from 10 to 25 mph.
Photo: CMQ
Photo: OmniTRAX
ability to grow infrastructure The community of Churchill, MB has been cut off since OmniTRAX’s Hudson Bay Railway was severely damaged by flooding in May.
without a government sponsor; • creating a federal-provincial short line infrastructure program in order to support (through contributions, grants, or low-cost, long-term financing) capital infrastructure investments.” On whether Bill C-49, at second reading in the Senate as of mid-December 2017, incorporates any of these recommendations,
Gullo answers, “No, but the government has launched the Trade and Transportation Corridors Initiative that may benefit short lines. In addition, the new Railway Safety Improvement Program (RSIP) is now accessible to provincial short lines. This was not the case under the Grade Crossing Improvement Program.” CPCS, in that report it prepared for
RAC, recommend that “Transport Canada build in a dedicated short line rail grant component into its existing capital funding program(s) ... should be in the amount of $200-$300 million over five years and be accessible to all short lines (including those that are provincially regulated).” And, that “Canada establish a tax credit program for capital investment in short line infrastructure, mirroring the [US] federal Railroad Track Maintenance Tax Credit (45G Tax Credit) program, which includes provisions to assign tax credits to qualified short line shippers and contractors.” How did this go? “These recommendations have not been adopted, except in making the new RSIP available to provincially regulated short line railways,” Gullo says. The CMQ railway, born of the bankrupt Montreal Maine & Atlantic short line railway after Fortress Investment Group bought it in May 2014, operates a 481mile long line—241 miles in Quebec. The MMA track was in such poor shape that for 230 of its miles, trains were restricted to 10 mph—hardly a winning sales pitch to businesses. With the help of a grant from the U.S. Department of Transportation TIGER Program, which, in 2017, had US$500 million available for infrastructure funding, CMQ invested nearly $30 million in track
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RAIL INFRASTRUCTURE
and infrastructure in its first three fiscal years. The investments have, among other things, allowed CMQ trains to provide faster and more frequent service, match the 286,000-pound maximum per-carload that mainline railways can carry, and exploit new business opportunities. There are many federal and state funding and tax programs that short lines in the United States can tap, such as that 45G tax credit, which, for instance, permits shippers to use the credit when it invests in short line infrastructure. “We have nothing like this,” Gullo says. The American Short Line and Regional Railroad Association writes of 45G, “This tax credit helps over 550 short line railroads preserve nearly 50,000 miles of track that otherwise would have been abandoned.” Gullo comments, “It is kind of a shining example of a refundable tax credit.” Yet according to Ryan Ratledge, president and CEO, CMQ, and an active RAC member in the search for funding solutions, our own federal government is cool to the idea of a tax credit. “As part of our proposal to the federal government, we thought that asking for a tax credit was better than an outright grant. We received feedback from the Feds that we’d be better off asking for an outright grant than a tax credit. As a railway association ... we have made proposals as a short line committee as part of RAC, to give the federal government a way to fund—tax credits or outright grants. We have been working with them for two years.” Meanwhile, short line track continues to deteriorate in what one observer calls a “death spiral” of lessening ability to capture new business opportunities and earn more money to afford track upgrades and get new business. New safety regulations pull the noose even tighter around the necks of short lines. For example, at that 2016 Transport Committee meeting, Perry Pellerin, chairman, Saskatchewan Short line Railway Association, referenced issues such as the requirement to curb cab noise ($20,000 per locomotive), the need to idle trains ($150,000 more per year in fuel costs), “skyrocketing insurance premiums,” and certain “catastrophic” rate issues. There are solid arguments for why short lines are just as deserving of gov-
ernment support as any other Canadian freight transportation mode. “There is certainly an education and awareness piece missing, where people do not understand the value of short lines,” Gullo says. CS
Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade. He is based in Quebec.
www.canadianshipper.com January 2018 33
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2018-01-12 11:47 AM
REPRESENTING CANADIAN SHIPPERS FOR 100 YEARS • • • •
What’s keeping you up at night? Fuel surcharges? Transportation strikes? New laws and regulations?
GOVERNMENT HAS A BIG IMPACT ON FREIGHT TRANSPORTATION FMA maintains a relationship with government, carriers and other stakeholders and facilitates communication and information exchange with members across Canada. FMA HAS 3 MAIN ELEMENTS TO ITS MANDATE: 1. Government Relations – advocacy on policy, legislation and regulation 2. Providing networking opportunities 3. Information dissemination
Membership is a sound investment for efficient logistics. Contact us to find out how you can help shape the future of the freight transportation industry. FOR MORE INFORMATION CONTACT FMA: (613) 599-3283 | kelsey@fma-agf.ca | www.fma-agf.ca
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2018-01-12 11:47 AM
INSIDE THE NUMBERS WITH LOU SMYRLIS, MCILT
UPWARD BOUND Canadian shippers are ramping up their freight volume projections
Freight volume trends in 2017 Down more than 20%
A strengthening economy in combination with shrinking inventories have Canadian shippers looking to increase their freight volumes in 2018, according to our latest annual Transportation Buying Trends research. Forty six per cent of Canadian shippers experienced freight volume growth in 2017 and 43% expect to continue at the same pace in 2018 while 51% expect even greater freight volume growth. TL and LTL trucking look to be the greatest beneficiaries.
1%
of respondents
Down 10-20%
7%
Down 5-10%
8%
About the same
38%
Up 5-10%
22%
Up 10-20%
15%
Up more than 20%
9%
Not sure
2%
Sectors represented Freight volume expectations in 2018
Freight forwarder
Third-party logistics
Retail Wholesale
Down more than 20%
4% 7%
9%
19% of respondents
Resources
3%
Down 10-20%
1%
Down 5-10%
3%
About the same
43%
Up 5-10%
35%
Up 10-20%
13%
Up more than 20%
3%
Not sure
2%
Distribution
21%
37% Manufacturing
1%
of respondents
Size of company – annual revenue Expect to increase use of mode NA Over $2B
Less than $5M
6% 6%
$500M-$2B
9%
$5M-15M
17% of respondents
9% $15M-$30M
11%
$100M-$500M
24%
6% 11%
27%
Rail
of respondents
TL
37%
LTL
35%
Private fleet
16%
Courier
29%
Marine
27%
Air cargo
19%
Intermodal
33%
$30M-$60M
$60M-$100M www.canadianshipper.com January 2018 35
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CTCS
Certified Trade Compliance Specialist
THE MARK OF TRADE EXPERTISE The CTCS (Certified Trade Compliance Specialist) designation > recognizes the experience and expertise of international trade compliance professionals, > sets a standard for ongoing professional development in a field where change is constant, > supports a network for information sharing and collaboration.
The Canadian Society of Customs Brokers is proud to present the CTCS (Certified Trade Compliance Specialist) Designates of 2018 Alberta
Merima Alicajic Trevor Bye Allan Corbett Maria Eugenia D’Aloia Jeffrey Fraser Colleen Jennings Ilona Julia King Cathryn Kirby Adshade Marcia Kobe Elaine Lamb Susan McDonald Rose Penner Mark Southworth Steve Spoljarevic Sandra Teed Michael Theodore British Columbia
Fahad Basar Carol Brown Cindy Christensen Paul Courtney Allison Douglas Taryn Hannah Crystal Higgs Wyatt Holyk Wei (David) Hu Karin Janssen Jolanta Krasucka William Lee Chun Hui Eric Ma Maria Mate Marc McLean Amanda Miles Tracey Mitchell Jonathann Morco Ken Nord Patricia O’Malley
Melissa Paskaruk Annette Rowan Calie Schumacher Cherie Storms Gloria Terhaar Gail Wright Michael Fraser Wright Melissa Wright Manitoba
Wade Barr Bruno Biondi Alan Dewar Donna Fetterly Nyree Menzies Valerie Michaud Barb Miller Alison Myskiw Kim Ross Hayley Dawn Shirtliffe Corey Tkach New Brunswick
Shelley Gares Yves Menon Maureen O’Donnell Janice Percy Alex Piedrahita Newfoundland & Labrador
Kelly Blenkinsopp Ronald Malone Michael Murphy Nova Scotia
Laurie Pasher Debbie Stevens Joseph Verhaeghe Ontario
Kathleen Acchione Danielle Adair Jamal Ahmed
Mehmood Ali Gillian Allan Catherine Anchor Cynthia Annakie Fahmida Arab Mohammad Arif Jodi Armstrong Deborah Axford Lisa Ball Kathy Barzal Jennifer Beamish Sarah Berlato John Brooks Steve Bunda Kim Campbell Ganase Carlton Marcos Cervantes Laflamme Hannah Cheng Joseph Ciulla Angela Collins Sue Compisano Hernan Cordoba Linda Cybulski Sandy Dack Qi Deng Satnam Dhami Grace Di Marca Kathrina Dibueno Tanya Dietrich Karen Dingle Olivier Donze Brianne Earish Matthew Earish Charmaine Easton Cynthia L. Elliott Sean Everden Peter Xi Fang Emil Fiorantis Wa (Grace) Gao
Pamela Garrett Adriana Geleriu Negedeyesus Gessese Elena Ghimbir John Giroux Lynne Glass Martha Goncalves Sherry Graham Warren Green Ann Gruszecki Manpreet Gupta Mary-Anne Hardy Kyle Hartwick Sherry Heitmeyer Sara Hiebert M Dianne Hill Nancy Horner Vicky Nhon Huynh Nicole Irwin John G. Jakubowski Ayesha Javed Mithula Jegatheeswaran Branislav Kecman Mary Kennette Rufat Khanaliyev Yoon Kim Christina Kinder Tomoko O. Kitai Lisa Knight Harmeet Kohli Carol Shu-Qin Kwok Christine Leavoy Megan Leemans Brad Lehigh Chunmei Li Jianling (Lisa) Li Jennifer Livick Iris (Wen) Long Elizabeth Lorincz
John Lowe Christine Macri Rajesh Mamtora Rowena Manzano Philip W. Mason Raad Mathyos Colin Maxwell Lorella Mazzotta Vickie McInnis Charmaine Miller-Baxter Heather Missouri Usha Mistry Jennifer L. Mitchell John Moccia Penny Moulton Karin Muller Kristy Mulvihill Tammy Nanticoke Sumaira Nazir Sandra Odorico Adefoluke Odunlami Sherry Parker Rakesh Patel Lindsay Pauls Alice Peres da Silva Virginia Petrenciu Katie Petteplace Vassili Popov Antonella Proietto John Quirke Sonia Ramroop Kristin Renaud Gina Robertson Joseph Rose Mariana Rosu Brian Rowe Labinot Sadiku Amanda Salmond Dhivakar Santhanamoorthy
Carmelita Santos Naeem Sardar Tariq Shaikh Tammy Shaw Candace Sider Catherine Slater Helen Song Jerry C. Spooner Harjinder Sra Brian Staples David Stockwell Michelle Stokes Susan Subryan Laura Swanson Simona Talasman Michelle Tamburro Raymond Tang Jeannine Taylor Demi Todorov Jonathan Torres Sonja Tremmel Karen Vallee Margaret Valtas Kimberly Van Runt Carole Van Wyck Carrie Vitti Terri Walsh Ruth Webb - Macleod Meredyth Welsman Ping Ping Wen Rajeev Wijesinghe Jeff Willson Tara Wilson David Winkler Dian Wollison Ivy Woo Amanda Yachuk Jane Young Mary Ann Zamora Grepe
June Zheng Wei Zhuang Quebec
Melanie Bedard Karen Blouin Carmen Dumitrache François Dupuis Marc Filion Robert Gaboriault Natasha Harper Claire Howarth Paul Hughes Pierre - Yves Lafrance Nadine Lépine Lorin Levine April Martinez Alexandra Mierla Margaret Emma Million Kevin Mooney Suzanne Perkins Ronald Racine Ginette Ste-Croix Sandra Walker David Wallace John Weight Lynn Wilding A.J. (Tony) Yakubosky Monika Zanacan Michael Zobin Saskatchewan
Barry Frain Australia
Peter McRae United States
Timothy Wing
For information about the CTCS Program, visit cscb.ca/ctcs or call 1-613-562-3543
36
January 2018
www.canadianshipper.com
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2018-01-12 11:48 AM
COACHING CORNER
When it comes to new opportunities, you’re in the driver's seat It is not hard to recognize the signs of someone who has hit the proverbial wall and after the holidays and in the dead of winter things may look bleak. Most of the time the signs are quite clear: disenchantment, boredom, lack of pride in the product or service being delivered, change in performance or commitment to corporate goals, absenteeism, verbal frustration, to name a few. Q: I am having a hard time getting back to a routine after the holidays. Not sure if it is the winter blues, but I’m just not feeling motivated. What can I do?
A: Like most things in life when you find yourself in a particular emotional or intellectual space it is the result of both internal and external factors, which is another way of saying that things that you can and cannot control are always at play in determining your reality. Everything on the outside is just that, external, temporary. If you do not like the view, change direction. Small steps lead to giant leaps and waking yourself up is the first step. Here are seven tips, that in my opinion, can jump start anyone looking for a fresh start and a New Year is the perfect time to start. Ask yourself a different question. Tony Robins says that every day, all day we unconsciously ask ourselves the questions that define our interpretation of reality: Why me? What are they talking about? Where are they going? Why are we doing this again? What is their problem? Pay attention to the questions you ask yourself. If they have a negative undertone give them a positive spin. Instead of , “Why is this happening?” Ask yourself, “What about this can be good?” I believe that when you change your vocabulary, you can change your life. Redefine you goals. What and who is important to you? What are you greatest needs or desires? Write down the first ©iStock
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five things that come to mind. Be honest with yourself. After you identify the, think of the cause and effect. Focus on the actions that you will need to take in order to attain what is the most important to you and how that fits with your current job. Remember, your current job is just your starting point—your “you are here” point. Become a builder. Take a page from the construction industry. How do you build or create something? First, you come up with a concept, do research, draw up plans, and identify the materials and re-
“The only limit to your impact is your imagination and commitment.” — T. Robbins sources you’ll need. Then you create a time line and a budget before breaking ground, making sure to build a strong foundation while you follow the plan. Like a builder you focus on the present, taking it one step at a time—sometimes messy, sometimes dirty—and with hard work and commitment you will reach your goals. Find inspiration. Find someone that has achieved what you aspire to. Find out more about them and if it is someone accessible, be bold and ask for a brief meeting or correspond with them, being honest about your intentions and respectful of their time. Most successful people I have met feel great responsibility and have great respect for anyone willing to work hard to get ahead. Don’t be shy, if you are lucky enough to find a real life mentor and you’re able to secure a meeting, be prepared: don’t ask for a job or look for shortcuts. Tell the world. Get excited about yourself and your goals. Let your goals become a prominent part of your life. Do something that impacts those goals every single day.
By Carolina Billings, CPCC, CHRL, MA-IS
Network, network, network. Find kindred spirits that are a positive influence and who will share their knowledge and experiences. I read once that the best way to learn is to teach. Tell anyone that will listen about the work you are doing, what you have learned, why it means so much to you, and what you are hoping to accomplish. You just may find yourself a champion for your cause. Make sure to back up your talk with action every step of the way. Challenge yourself. Challenge and discomfort are mutually inclusive. To challenge yourself at anything new is to grow. In order to get to second base you must leave first base. To sail the ocean you must leave the shore. In order to reach your wildest dreams you must have some wild dreams to begin with. Sharpen the Saw. The seventh habit of Highly Effective People. In one of many books dearest to my heart, Steven Covey taught us to: In one of my favourite books, The Seven Habits of Highly Effective People, Steven Covey defines the seventh habit: “Sharpen the Saw means preserving and enhancing the greatest asset you have—you. It means having a balanced program for self-renewal in the four areas of your life: physical, social/emotional, mental, and spiritual…As you renew yourself in each of the four areas, you create growth and change in your life.” Here is wishing you an amazing 2018. CS Carolina M. Billings is Partner & CEO of a business consulting group and has 15+ years of experience in the fields of Business Development & Branding, Human Resources and Finance. She champions leadership initiatives as well as empowering and coaching/mentoring others to lead. For more information please visit www.thewellnessgroup.ca or email Carolina@thewellnessgroup.ca www.canadianshipper.com January 2018 37
2018-01-12 11:48 AM
THE BIGGER PICTURE
MALWARE MENACE 2017 will undoubtedly be remembered as a banner year for trade disruptions, whether due to political and technology-related reasons, or natural causes. While all three presented major challenges in 2017, technology risks, specifically cyber security, represented the biggest problem in terms of its potential impact on global supply chains. Beginning with reports in June that the world’s largest container shipping company, Maersk Line, fell victim to the NotPetya computer virus, the supply chain community began to realize that the scope of ‘risk management’ had been dramatically elevated. Maersk Line handles close to 20 per cent of world container trade and the NotPetya virus disrupted the company’s shipment-reservation capabilities and port operations, costing the company hundreds of millions of dollars in lost revenue. More importantly perhaps, for a singularly service-minded organization like Maersk, was the impact on millions of global customers, directly and indirectly. When Maersk’s computer systems became infected, a domino affect ensued. Maersk is a strategic supply chain partner for thousands of organizations, a critical link in global supply chains that connect suppliers, intermediaries and customers in a complex web of outsourced elements based on forecasting, inventory planning, lead time calculation, and transportation functions. Bricks and mortar
customers, those who shop in traditional retail stores, would soon see the impact of this cyber attack, evidenced by “out-of-stocks” and rising prices. Even online shoppers, those attracted to promises of free next-dayshipping, were not immune since the traditional supply chain process provided by Maersk is one of the primary links in providing inventories to domestic locations which in turn become the local origin point for many next-day shipments, free or otherwise. Unlike political uncertainties, or those related to natural causes like hurricanes, cyber attacks can strike without warning, impacting operations on a global scale in real-time. This reality presents a startling level of risk for today’s supply chain manager. How does an organization protect itself from a potential threat that can literally put it out of business overnight by cutting all technology links between the organization and its customers and suppliers? Hundreds of thousands of organizations in a diverse range of industries have spent much of the past 20 years adopting ERP systems designed to integrate their activities with those of customers and suppliers. Malware like NotPetya puts those investments at significant risk. And while IT managers will be tasked with trying to prevent cyber attacks, supply chain managers will be tasked with restoring
38 January 2018 www.canadianshipper.com
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By Laurie Turnbull
performance and customer satisfaction if, and when, they fail. Malware is insidious by nature, with those who design it continually looking for, and apparently finding, new variants. Like many viruses, NotPetya doesn’t discriminate, affecting computer capabilities of companies last year in a wide range of industries, from food to pharmaceuticals, in addition to transportation companies. Challenges for the coming year(s) are significant, with many wondering what the next malware variant will look like. Beyond the obvious questions around how companies can protect their data, there are also a number of less apparent questions that bear exploring. How does this new risk category affect insurers? Are these insurable risks? Is there remedy in continuity clauses? How will premiums be affected? Do cyber attacks warrant a revision of the organization’s contract of sale, master purchase agreement, or terms of sale? Does the increasing sophistication of malware warrant a review of decisions to adopt cloud technology applications, or trends towards the use of blockchain technology?
Opening a dialogue with the organization’s key supply chain partners, including freight forwarders, customs broker, insurance agents, and legal representatives, is a good starting point. Consider their advice in terms of how the organization defines risk, ownership of goods in transit, and transfer of risk between buyers and sellers. The escalating number, sophistication and severity of cyber attacks would seem to indicate there is little chance of eliminating this threat in the near future. The challenge for supply chain managers is developing a strategy to mitigate the impact on the organization’s customers and supply chain partners. The transportation industry takes this threat very seriously; by year-end reports appeared that leading maritime organizations had approached the International Maritime Organization (IMO) on the subject of developing an ISOstandard for protecting software on ships from malware. If successful, this will certainly help companies like Maersk avoid similar service disruptions in future. For the rest of us however, an “off the grid” solution in the New Year may be worth considering. CS
Laurie Turnbull, CCLP, hMSc is a Professor, Supply Chain Management-Global, at Conestoga College Institute of Technology and Advanced Learning. He can be contacted at lturnbull@conestogac.on.ca..
©iStock
2018-01-12 11:49 AM
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40 January 2018 www.canadianshipper.com
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2018-01-12 11:49 AM