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Carriers weigh in on what’s giving them a lift

NOVEMBER 2013

AUTOMOTIVE

The demanding environment of automotive supply chains

Published Since 1898

What’s your crossborder strategy? A comprehensive look at trends, tools and infrastructure


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Features

Published Since 1898

Features 22. . . INDUSTRY SPOTLIGHT:

VOLUME 111

AUTOMOTIVE LOGISTICS 22 . . . CANADA’S TRADE CROSSROADS

VOLUME 116

The logistics North American automotive industryPacific is taking advantage The infrastructure for Canada’s Gateway of rising demand and a closer-to-home manufacturing base. is expanding to bridge the massive engine of the What does this mean for freight volumes and stakeholders United States and the burgeoning economies of Asia. in the automotive arena?

Published Since 1898 ISSUE NO. 9 SEPTEMBER 2008

ISSUE NO. 10

NOVEMBER 2013 www.ctl.ca

cover

GROUNDED!

25. . . HUMAN RESOURCES 28 . . . LOGISTICS HIGH As logistics becomes a strategic network, what demands does How school boards across the country are working with this place on requirements for supply chain professionals? groups like the Canadian Supply Chain Sector Council to Ryder Canada and Ryder System Inc. provide insight into provide career-oriented training at the high school level. the issue.

COVER

26. . . AIR CARGO

32 . .freight . ALLand CHECKED OUT demand for express Niche increased online

Balancing a secure supply chain and a world-air happy workforce delivery create growth in the air cargo cargo iscarriers more than a question of trust in today’s arena. discuss their strategies for increasingglobal market share.

Departments

Departments

4 THE VIEW WITH LOU 4 VIEWPOINT Economists predict a “vanilla economic forecast” for US growth. Are cuts in airfreight capacity temporary or a Time for Canada to expand its trade relationships around the world. sign of things to come? 6 IN THE NEWS 6Rodair IN THE NEWS focus turns to Canadian roots; maritime growth ahead, but Lufthansa picks up orphaned route after Air Canadato with surplus capacity, predictsfreighter EDC; update and correction backs out; Choice Oceanex increases capacity to St. Shipper’s Courier awards, Carriers of John’s; Choice. rail and truck tonnage drop over summer months; CN to upgrade intermodal 8 LEADERS facility in Prince George; and more. As the Canadian International Freight Forwarders Association celebrates 65 years of leadership, executive director Ruth Snowden 12 THE LEADING EDGE talks to CT&L about issues, goals and challenges Why companies with global supply chains require in a the year ahead. global Enterprise Resource Planning platform. 28 INSIDE THE NUMBERS A look into the career plans of supply chain professionals 38 THE BIGGER PICTURE 30 THE BIGGER PICTURE Strategies and tactics for reshaping How thinking strategically became a best-in-class approach North America’s supply chain.

What’s your strategy on crossborder trade? After a period of positive growth, the US airlines’ situation has

CT&Ldesperate. featuresThe a comprehensive at inland turned weak economy andlook the high price of hubs, short sea shipping, crossborder tools aviation fuel are setting theeffective stage for cutbacks rather than

and tips, as well as really manufacturing thatwhat’s are driving expansion. There’s no gentle waytrends to describe crossborder activity for shippers. .��������� pgs 12-20 happening to plans for increasing air freight capacity: they’re grounded. . . . . . . . . . . . . . . . . . . . . . . . . . . . page 16

Are you prepared for your next round of carrier negotiations? You need to be up on the latest transportation buying trends and benchmarks. You need our annual Transportation Buying Trends Survey. • Anticipated shipment volumes by industry • Rate increase averages by mode • Surcharge increases by mode • Capacity concerns by mode. All this key information and more can be yours, FREE of charge. Fill out our survey and you will receive the full results, free of charge. . . and you'll be entered into a special prize draw. Look for our e-mail survey.

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CONDUCTED IN PARTNERSHIP WITH CITA AND CITT CT&L SEPTEMBER 2008

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­

the view with Lou Volume 116 Issue No. 10 November 2013 EDITORIAL DIRECTOR

Let’s make new friends

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

It’s the best way to get past the “Great Okay”

S

itting in on the latest ‘All Eyes on the Economy’ session at the American Trucking Associations’ Management Conference and Exhibition in Orlando, I couldn’t help but feel a sort of relief that as a country we continue to reduce our reliance on the United States. ACT Research president Kenneth Vieth summed up the US economic forecast best when he told the popular session: “We came through the Great Recession and we are now in the Great Okay.” Vieth was referring to expectations for continued but less than spectacular growth in 2014 and 2015 for the US. Co-panelist Mark Vitner, managing director and senior economist at Wells Fargo, forecast GDP growth of 2.4% in 2014 and 2.7% for 2015. Such plain vanilla forecastLou Smyrlis, ing for our largest trading partMCILT ner can’t be good for Canadian exporters and certainly isn’t good for the Canadian carriers reliant on moving that trade stateside. But, despite a choppy economy this side of the border as well, there may be reason for more optimism as our reliance on the US market continues to be progressively reduced. Though the United States will – and should – remain Canada’s largest trading partner, the percentage of Canadian trade with the US has dropped to 74% from nearly 90% in the past decade and is expected to decline another 10% by the end of this decade. Diversifying our export markets makes a great deal of sense. The multi-billion dollar pact just agreed to by the European Union and Canada, integrating two of the world’s largest economies, is a good example. The deal makes Canada the only G8 country – and one of the only developed nations anywhere – to have preferential access to the world’s two largest markets, the EU and the United States, home to a total of 800 million people. The deal is expected to increase bilateral trade in goods and services by a fifth to 25.7 billion euros ($35 billion) a year, according to the latest EU estimates. According to a federal report, CETA could boost the Canadian economy by at least C$12 billion annually. The EU is Canada’s second-biggest trad4 4

ct&l november 2013

ASSOCIATE EDITOR

ing partner, with goods and services exports totaling C$40 billion and imports totaling C$52 billion in 2011. The Comprehensive Economic and Trade Agreement, CETA, goes far beyond the North American Free Trade Agreement and, much to the delight of supply chain professionals struggling with the red tape currently involved in EU trade, will eliminate thousands of tariffs. Once legal, 98% of EU and Canadian tariffs will be eliminated immediately. That includes 95% of EU tariffs on agriculture products such as grains, canola and fruit. Other tariffs and restrictions will be phased out over seven years. The agreement could come into effect from 2015, after EU governments, the European Parliament and the Canadian provinces give their blessing. As we reported in a previous issue, traditionally strong North Atlantic, general cargo trading partners such as Montreal and Halifax are well positioned to reap the benefits of increased trade with Europe, but so could other ports on the Great Lakes/St. Lawrence maritime corridor benefit from increased shipments across the Atlantic. Falling under the latter category would be such mainstream commodity ports as Quebec, Sept Iles, Port Cartier, and Hamilton. Bob Armstrong, president of the Chartered Institute of Logistics & Transport North America and of ATLAS Trade & Logistics Advisory Services Inc states “there is no doubt “ in his mind that imports and exports between Canada and the EU will grow, as has been experienced under the North American Free Trade Agreement for more than two decades. “The marine industry,” he says, “should be excited about the growth prospects of twoway trade as tariffs are reduced to zero and other barriers to trade are eliminated in the final drafting of this free trade agreement. Commodities from Canada such as iron ore and coal will have new markets in the EU and be a boon to marine operators.” Rail, airfreight, intermodal and trucking service providers also stand to benefit from increased trade. Given its proximity, the size of its market, and the wealth of its consumers, the United States will always be our most important trading partner. But it can’t hurt to have a few more close friends out there. CT&L www.ctl.ca

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

Nick Krukowski  (416) 510-5108 nick@ctl.ca ART DIRECTOR

Mary Peligra mpeligra@bizinfogroup.ca CONTRIBUTING EDITORS

Carroll McCormick, Leo Ryan, James Menzies, John G. Smith, Ian Putzger, Ken Mark MARKET PRODUCTION MANAGER

Gary White (416) 510-6760 gwhite@bizinfogroup.ca

VIDEO PRODUCTION MANAGER

Brad Ling

RESEARCH MANAGER

Laura Moffatt

CIRCULATION MANAGER

Barbara Adelt  (416) 442-5600 Ext. 3546 badelt@bizinfogroup.ca EXECUTIVE PUBLISHER

Tim Dimopoulos

VICE-PRESIDENT PUBLISHING

Alex Papanou PRESIDENT

Bruce Creighton HEAD OFFICE: ­ 80 Valleybrook Drive, Toronto, ON M3B 2S9 ­ ­ CANADIAN TRANSPORTATION & LOGISTICS 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 ­ BIG Magazines LP, a division of Glacier ­ BIG Holdings Company Ltd. ­ SUBSCRIPTIONS: Contact us at: mmarasigan@bizinfogroup.ca­ Tel: 416 442 5600 ext. 3548. Fax: 416 510 6875. ­ Website: ctl.ca (click on sub­scription button) SUBSCRIPTION RATES: Canada: $64.95 + applicable taxes, per year; $105.95 + applicable taxes, for two years. U.S.A.: US$105.95 per year. All other foreign: US$105.95 per year. Single copies $8 except for the annual Logistics Buyers’ Guide (Aug) $59.95 + applicable taxes, (not including HST) plus $2.00 for postage. USA: US$107.95, Foreign: US$107.95 ISSN 1187-4295 (print), ISSN 1923-368X (Digital), (Can­adian Trans­port­ation & Logistics.) Indexed by Canadian Bus­iness Period­icals Index. Printed in Can­ada. All rights re­served. The contents of thisSmyrlis, publication may not be reproduced either in ­ Lou part or in full without the consent of the copyright owner.

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in thenews Rodair turns focus back on Canada By Ian Putzger

It's back to the roots for the Canadian contingent of transatlantic forwarding venture Bellville Rodair International (BRI). As Bellville International is headed down the aisle for a marriage with OIA Global, Rodair has trained its sights on the Canadian market. Bellville International, the UK-based holding company for BRI in Europe, the United States, China and Brazil, has agreed to a takeover bid from OIA, Financial terms of the transaction were not disclosed. The deal forms a logistics firm with 51 offices in 21 countries. It also brings an official end to an innovative venture between two mid-sized forwarders that straddled the Atlantic. On the basis of shared philosophies and a similar approach to business, Bellville and Toronto-based Rodair had elevated their co-operation into a formal joint venture with a management board that consisted of executives from both sides. Together they built up a thriving network with branches in the Americas, Europe and Asia. However, by mid-2011 it had become evident that, for all their fundamental cohesion, the founders were looking in different directions for the future course.

EDC report on world trade by sea suggests growth with surplus capacity, weak pricing

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"The world has changed significantly over the last couple of years," says Jeff Cullen, president and CEO of the Rodair Group. "One moment one of our customers is manufacturing in China, next year he may shift it to Cambodia or Mauritius, and maybe he will shift somewhere else a few years later. I do not have the global infrastructure to chase these global changes." While the Bellville management favoured a tie-in with a stronger company with deeper pockets, for him the conclusion was to concentrate more on the Canadian side of the business. "With our presence in Canada, we can take care of the inbound move for our retail customers, regardless from where it is shipped. I want to be the Canadian solution for their supply chain," he says. Between September 2011 and the summer of 2012 Cullen divested himself of his interest in BRI and withdrew from the management board, leaving his British partners in charge of BRI. The commercial operation has continued, though. At this point about 80 percent of Rodair's business is international and only 20 percent domestic. Cullen aims to reverse this – without abandoning the international component. He sees room to grow 500-600 percent on the Canadian side over the next five years. By the same token, Cullen plans to boost Rodair's specialty segments – particularly the fashion and retail sectors – without turning his back on general cargo. "We will just not chase new business in general cargo. And our moves will be tied into Canada. We will no longer chase traffic between France and China for an international customer." To expand Rodair's capabilities in Canada, Cullen is looking to add infrastructure – notably distribution centres – as well as special logistics services. In part, these will come through strategic acquisitions, he reveals. Earlier this year Rodair acquired a small logistics firm that specialises in the fur trade, a move that has led to a surge in fur exports to Asia, Cullen says. He sees strong interest in the Canadian market among retail and fashion companies, pointing to Nordstrom and Target as well as the acquisition of Saks by Hudson's Bay. To reinforce its position in the US-Canada sector, Rodair may form a partnership with a US-based player. Cullen is open to future co-operation with the OIA-BRI camp, emphasizing that the parting with his British partners was wholly amicable.

Seaborne movements of goods, a great bellwether of global trade, are rising again at long last, said Peter G. Hall, Vice-President and Chief Economist with Export Development Canada, in his October 10 report on world trade. “In the pre-crisis period, freight rates spiked on two separate occasions, exposing the pressures that growth in world trade were putting on existing shipping capacity. Crisis saw those rates plunge in 2009, only to revive as public stimulus pumped up the economy. That didn’t last long, and sluggish growth, together with delivery of a deluge of new ships, saw rates plunge.” Hall said that container shipping giant Maersk’s prediction of an upsurge of trade growth in 2014 “carries a lot of weight – the www.ctl.ca

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company single-handedly carries 15 per cent of all seaborne containers. It is backing up its prediction by taking delivery of the first of ten triple-E container ships, the largest container vessels yet, with a capacity of 18,000 twenty-foot equivalent units (TEU),” he said. While the Baltic Dry Index has been surging in recent weeks, currently more than double its mid-summer level, the current reading is now level with late-2011 rates, and the current trajectory is saying something about bulk freight movements globally. The trend is all classes of vessel, from Handysize to Capesize. “Although recent movement is the best news in a long while for the industry, it still leaves freight rates well below normal, and a fraction of the late-cycle heights. The industry may have to be satisfied with lower overall rates, while grateful for recent growth,” said Hall. With new orders now being delivered, excess shipping capacity is expected to be the norm for a number of years to come, moderating the predictive power of shipping activity. “Current shipbuilding suggests that the industry will likely face surplus capacity – and by extension, weak prices – for a number of years to come. What’s bad for the industry could be good for trade flows, though, as there will be plenty of capacity to absorb the coming trade cycle. We can only hope that this time around, global port capacity will keep pace,” Hall said.

COURIER AWARD WINNERS

ERROR IN SHIPPER’S CHOICE AWARDS While going through the results of our Shipper’s Choice Awards (September issue), we spotted an editorial error with the Couriers results. The error occurred while transcribing the results received from the third-party research firm employed for the project and as a result several couriers who scored above the benchmark of excellence were wrongly left off the list of winners. We greatly regret the error and are republishing the results of those companies who were left off the list. In addition, not only did Cardinal surpass the benchmark, but as this is the 5th-consecutive year that it has done so. Cardinal is also among the coveted Carriers-of-Choice award winners. Also, International Truckload Services has now qualified for ‘Carrier of Choice’, having received the Shipper’s Choice Award for 5-consecutive years. For more industry news, sign up to receive our e-newsletter at www.ctl.ca.

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freight forwarders

LEADERS The Canadian International Freight Forwarders Association celebrates 65 years as an association this year. From its original founding in 1948, and with a mission to represent and support members of the Canadian international freight forwarding industry in providing the highest level of quality and professional services to their clients, CIFFA has increased its efforts in advocacy and education. Executive Director Ruth Snowden spoke with Canadian Transportation & Logistics about changes and ongoing issues for the association. By Julia Kuzeljevich

CTL: In your 30-plus years of being involved in the freight forwarding industry, can you speak to some of the changes you have witnessed during that time? Snowden: Today we sit at the table with regulators. Then, being an international freight forwarder was all about serving the customer. Now it’s about serving the customer while satisfying the regulator. Today, there are four programs for freight forwarders leading to the Advanced Certificate, as well as four very comprehensive textbooks, with online and print content. Now, the CIFFA certificate program is included in the curricula of several colleges – in the George Brown International Business Post Grad course and in the Seneca Customs Brokerage and Freight Forwarding Diploma, as well as in private career colleges like TriOS. CTL: Where do you think the association is headed in terms of your goals and priorities for the year ahead? Snowden: CIFFA is all about focusing on the freight forwarder and we expect slow and steady growth in our membership. CIFFA today represents 250 companies, and we expect to have a net gain of six to eight new ones per year. The interesting thing about the change in the industry and the association is the new emphasis on building strength from within. Our board determined a few years ago that we needed to increase the professionalism of the industry. We have raised our membership criteria. One of the focuses is an increased requirement for training. Every CIFFA member has to 8

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have someone trained to the level of a CIFFA certificate or comparable level from a college-that’s because the industry has changed so much and you just have to know more. CTL: The advocacy role, one of CIFFA’s main pillars, has also increased. What is going on in that regard? Snowden: Something else we’re going to be focusing on is this emphasis on representing the industry to carriers, to government. There’s a lot more regulatory change coming down the pike. We go out and meet with carriers and regulators, ask questions, present that stakeholder input. Hopefully at the end of the day, some of these programs are designed so that we can do the work, move the freight for the customers, which is the ideal at the end of the day. CTL: CIFFA just hosted its 65 anniversary gala, and Roads, Rails, Runways conference, in partnership with the Edmonton International Airport and city of Edmonton. Why Edmonton and what are you hoping will emerge from that event? Snowden: When Edmonton International Airport approached CIFFA with the offer to host a 65th Anniversary conference, some of our Board Directors and I were skeptical. However, I’ve had the opportunity to visit Edmonton twice recently – and I must say that there is a real energy in that city and especially at the airport. CIFFA is all about bringing opportunity to our membership – and ROADS.RAILS.RUNWAYS (was) an excellent opportunity for forwarders (and importers, exporters, project cargo guys and www.ctl.ca


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carriers) to experience first hand what is happening in the west. You know, a lot of us in Montreal and Toronto keep looking at our familiar business model, our traditional customer base – and to be honest we don’t always see the growth opportunities. In Edmonton, we see the possibilities in the north and the west. CTL: Given the complexity of regulations

under which industry is working, can you describe some of the challenges still ongoing for your membership, in the regulatory realm? Snowden: We are in the midst of a very complex, game changing eManifest initiative with CBSA. We have been up front and center and vocal with the CBSA in the design since 2008 and now with the implementation. eManifest is ACI on steroids

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plus changes to your operating system, plus changes to how you do business. We’ve faced some challenges-it’s the first time the freight forwarders have been recognized under the Customs Act as a person under the law. We’ve started some voluntary implementation, and as you would expect in such a major program we’ve got some implementation issues. How do we transfer liability from the rail to the freight forwarder? These things haven’t been addressed yet. But we’re optimistic that over the next 12-18 months this program will come in. The reason that CIFFA supports it on behalf of the freight forwarders is that it will allow us to go paperless on the inbound deconsolidation so it’s really important for us. We are identifying issues with CBSA on an ongoing basis and trying to work through and find solutions. The agency is very good about sitting down and working with us. We’re never happy with the speed and not always happy with the answers but CBSA has done a very good job of outreach and trying to get things right. CTL: What about cargo security and some of the issues around container examinations? Snowden: The big issue around container examinations cropped up around the spring/summer of 2009 when Customs introduced a fumigation test during examinations of ocean containers. They just introduced the change (with no collaboration) and we had disastrous results where the containers just sat for months waiting for examinations-it was hugely expensive. We’ve made great progress since then. The CBSA has invested in new technology that we hope will reduce container examinations. It’s not fixed yet. CIFFA doesn’t feel the individual importer should be paying the cost of Canada’s security. We feel that is a cost that should be borne through the tax system. I will say the CBSA do recognize that container examinations in particular can be improved. I think we will get some good success there. CTL: Air cargo security is also a hot topic for forwarders-how are they ramping up for a stricter mandate on screening? Snowden: We’re expecting regulatory change this year but there have been delays so we don’t expect to have 100 % screening for air cargo really before 2015. So where airlines have invested in screening equipment and third parties/independent screening companies have inwww.ctl.ca


freight forwarders

vested in highly expensive equipment there’s really no mandate to screen so that (investment) was perhaps a little premature. It’s been challenging I think.” CTL: What is your impression of efforts to harmonize programs and standards, whether cross-border or internationally? Snowden: Looking at the Beyond the Border initiative, I’m optimistic that Customs and Border Protection and CBSA can work together on something as simple as harmonized data elements. Any moves that we can make as a country towards harmonization with the US in particular are a good idea and as far as global security goes harmonization of security is good. Airlines and forwarders serve all these markets and cannot deal with all the different regulatory requirements. We have to be able to train our employees that this is the data you have to send, this is when you have to send it, and let governments manipulate it how they would. There’s been a big discussion about a modal shift from air freight to ocean freight. I think the air cargo market has been difficult-whether that’s because there’s been a modal shift to ocean freight or truck freight, or whether it’s because the cost of money is cheap right now so you can have inventory sit on the ocean as opposed to having to fly. You still see a lot of complexity in the marketplace with ocean freight with introduction of surcharges/ special fees. The complexity in the administration of managing that ocean mode has really changed a lot since the 1980s. Freight forwarders have to have whole departments for managing quotations. CTL: What is your approach now, and what do you foresee as being your approach to meeting the needs of your membership? Snowden: CIFFA has designed and delivered one day management workshops for freight forwarders, importers, customs brokers, anyone who will be impacted by eManifest. We take what we’ve learned through the advocacy and we train everyone else on these changes. So we stay relevant and I think this is one of the hardest things for an association. I think by creating these new training programs for which we have to seek input from government and from customs brokers then we can deliver that value to our members. We have training on air cargo security (Cargo security coordinator) but as Transport Canada introduces shippers into the secure supply www.ctl.ca

chain equation, CIFFA has now said we’ll develop the training for them to take out to our customers. It involves everybody, and that’s where I see our value and our growth over the next few years. Our original charter was to represent the international freight forwarder in the Parliament of Canada… back in 1948 when ‘global logistics’ wasn’t even a concept. I work closely with the Board and with the

President. Relationships are critical and I am proud of the work we have accomplished building bridges. CT&L Associate editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.

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crossborder trade

Hub-spoke inland ports boast

multimodal offerings Winnipeg’s Centreport is a key intersection for trade By Julia Kuzeljevich

W

innipeg’s CentrePort, with its hub-spoke position in the middle of the North American continent, and Saskatchewan’s Global Transportation Hub, are two of Canada’s inland ports looking to grow as key intersections for Canadian trade. Situated at the eastern end of the Asia Pacific Gateway, and at the very western end of the Atlantic Gateway, CentrePort is the only inland port in Canada to offer direct access to tri-modal transportation options including road, rail and air cargo. The Province of Manitoba and CentrePort Canada signed a land transfer agreement this 12

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September that will give the inland port corporation better means to develop 747 acres located within its footprint, the majority of which has been designated for the construction of a common-use rail facility and adjacent industrial park. “The goal is for the facility to be accessible by all three Class I rail carriers and we have been working with the industry on our development plans,” says Diane Gray, president and CEO of CentrePort Canada. “There is a real opportunity for this facility to be a differentiator for CentrePort among North American inland ports, and this collaboration between government, CentrePort and industry will allow us to move forward with our plans.” CentrePort is deeply involved in the Winnipeg Chamber of Commerce’s “Bold” campaign initiative, which seeks input from the broader community, business, labour, and post secondary institutions, on ideas that help to put Winnipeg on the map. The Chamber is one of the founding members in many of the inland port initiatives. “We see opportunities for companies with both import and export supply chains. We have the ability to grow as a staging area for the north in fresh and frozen food products, and as mining developments take place in the north there’s also the potential to stage for these. We’re looking at capitalizing on our geographic advantage,” says Gray. The port also offers investors single window access to Foreign Trade Zone benefits, notes Gray, and is the only inland port in Canada to do so. “What we offer with the federal government of Canada is single window access to Federal foreign trade zone products. This approach allows for the ability to not only be responsive to information requests but allows for the group (CentrePort, the province of Manitoba, and the city of Winnipeg) to go for specific opportunities that could be brought to that province. It’s been a very positive experience for us,” says Gray, noting that the port has also approved new bonded customs warehouse facilities. In 2012, CentrePort partnered with Invent IOT Technology www.ctl.ca

Map: Courtesy of CentrePort Canada Inc.

in a pilot project that aims to ensure the quality, integrity, origin and safety of Manitoba and Canadian agriculture products being exported from central Canada to consumer markets in inland and western China. They launched a cargo security system and trading platform that uses Radio Frequency Identification Technology (RFID).The new system was used to export Manitoba’s first-ever containerized shipment of homegrown soybeans to China for distribution. “This initiative was launched largely in response to a business case in China-there were a couple of factors that our partners in China had brought to our attention, some of it related to cargo theft and traceability, some around being able to track and trace the entire supply chain from origin in Canada to end receiver in Canada,” says Gray. The second part of the business case is driven by the amount of food counterfeiting and concerns over food safety in China. “In China you are likely to find products ‘made in Canada’ that ct&l november 2013

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have actually not been made here. That has led to fair bit of concern over health and safety. Chinese importers identified to us that by attaching an identity preservation (RFID) mechanism to the product they would be able to guarantee the product. It’s a system we’re looking at with our partners

in Canada and we think there’s an opportunity to be able to enhance the value chain of Canadian products and ultimately create a product niche in China,” says Gray. In the fall of 2012, CN Railway opened a 100,000 square foot training centre in Winnipeg that will host 250 to 300 employees

each week towards the company’s revamped training initiative. In terms of road infrastructure, CentrePort Canada Way, a new four-lane divided expressway standard providing road access to CentrePort, and to national and international highways, is nearing completion. The $212.4-million project, funded by the governments of Canada and Manitoba, is the largest highway capital project in Manitoba history, says CentrePort. Regina-based Global Transportation Hub (GTH) is also just completing a $32.8 million infrastructure project, which is based on its Concept Plan. It delivers close to four kilometers of roadways and asphalt paving, water and sanitary sewer lines, site grading and storm channel construction. “Through this new alliance program, the GTH and brokers can leverage the combined expertise of our teams to attract clients looking to drive transportation, logistics and supply chain business outcomes,” says Rhonda Ekstrom, Vice President of Business Development for the GTH. GTH developed a strategic alliance program with commercial brokers in the province of Saskatchewan, with the goal of constructing a working relationship based on industry best practices. “Already in operation is the one million square foot warehouse and distribution centre that is owned by one of our anchor clients Loblaw, which has invested about $250 million in the project,” says Blair Wagar, Chief Operating Officer of the GTH. Another anchor client is Canadian Pacific (CP) Rail, which is nearing completion of a 300-acre Intermodal Facility (IMF), which will increase its capacity for container lifts from about 40,000 to over 250,000 lifts per year. CP has invested about $50 million at the GTH. Overall private investment is about $340 million to date. Bill No. 81, a bill introduced in the Saskatchewan legislature last year, moves the control of the development and operations of the Global Transportation Hub (GTH) from municipal to provinCT&L cial jurisdiction. Associate editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.

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www.ctl.ca


crossborder trade

Customs Compliance:

10 Tips to a Successful Customs Process Under today’s strict customs environment, compliance and accurate information remain the key elements of a successful importing profile. Remaining diligent, taking reasonable care, and being accountable are crucial to developing a trouble-free customs process. Here are 10 more tips the experts at Livingston International believe will help ensure you remain compliant. 1. Be Aware – Prior to placing your purchase order, determine whether the goods have any restrictions or specific government requirements [marking, labeling]. 2. Communicate Invoice Requirements to Vendors – Provide your vendor with clear instructions on how to prepare customs paperwork to ensure your documentation consistently includes a clear description of all shipped goods, part number/SKU number, verified tariff classification number, and applicable terms of sale. 3. Be Proactive – Provide shipment details to your broker as early as possible – especially for new products – to ensure that the broker has adequate time to contact you if they have any questions or concerns. 4. Be Prepared with Required Permits – If your goods are subject to any other federal government regulations, ensure that the neces-

www.ctl.ca

sary permits and licenses are provided for clearance of your goods prior to importation. 5. Take Advantage of Trade Agreements and Reduce Duties – If your goods qualify for a preferential trade agreement, ensure that you have a valid certificate from your vendor at the time of importation to take advantage of duty reductions or elimination. 6. Reconcile – Upon receipt of your shipment, reconcile your goods with the purchase order and the commercial invoice, and be sure to notify your customs broker if there are any overages or shortages. 7. Review Your Customs Entries – Identify any errors or discrepancies in your entry to ensure your Customs declaration is accurate. Pay special attention to tariff, value, origin, and pieces/weight. 8. Conduct Internal Audits – Verify whether all receipts have been customs-cleared and pay particular attention to courier shipments that are often received at reception rather than receiving. 9. Correct Errors - To stay compliant, identify any errors against the original entry and submit adjustments to the CBSA within 90 days. 10. Keep Your Records – Maintain all pertinent books and records – from procurement to payment – for seven years (six years, plus current).

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crossborder trade

small ports;

large opportunities Smaller ports on Vancouver Island target shortsea opportunities By Leo Ryan

rather than the single deep-sea dock at Duke Point operated by DP World in a service connecting with Vancouver’s Centerm container terminal. Then Duke Point can concentrate for the coming years on its current strength: breakbulk. About $3 million of the estimated $9 million total cost of the project will go towards the purchase of a used mobile container crane similar to the one installed last year at ThunNanaimo Port, Nanaimo, B.C. der Bay. “We are looking for a used hile Port Metro Vancouver model that does not have too many hours (PMV) has long constituted on it, and there are some available around Canada’s biggest maritime gate- the world,” Dumas said, adding that prime way in trade with Asia, smaller ports on goal is to operate a multi-task terminal that Vancouver Island are eyeing opportunities could also handle project cargo and heavy for a greater piece of the action. These in- lift components destined for mining develclude Nanaimo and Port Alberni, mainly opments in western Canada. forest products specialists, which recently He said that the crane at Duke Point, received federal funding for shortsea ship- which has handled project cargo, is getting ping projects that would notably improve old and should be replaced in the not toocontainer shipments to regional customers. distant future. Cargo throughput at these ports was reDumas indicated it was also “critical” to spectively 3 million tonnes and 1.6 million expand the dock at Duke Point. He estitonnes in 2012. mated it would entail an investment of “Like such ports as Thunder Bay and about $30 million to extend it from 600 feet Trois-Rivières, we are a smaller port trying of berth to 1,000 feet. to re-invent the wheel, expand our revenue “We hope to have the mobile containstreams and feel we are ideally located to act er crane operational at Assembly Wharf as a kind of annex to some of the activities at next spring,” Dumas said. “This will take Port Metro Vancouver,” Bernie Dumas, pressure off the Duke Point facility which president and ceo of the Nanaimo Port Au- can only handle one ship at a time and has thority (NPA), said in an interview. presented berthing challenges. When we Nanaimo is situated 26 nautical miles have a lumber ship loading at Duke Point, from Vancouver. Barges make the trip in barges have to wait. Eventually, funding three to four hours. has to be found to finance a second berth Through Canada’s Asia-Pacific Gate- at Duke Point.” way and Corridor Initiative, the federal Presently, Duke Point is handling sevgovernment announced this past summer eral hundred containers each week. These it will contribute up to $4.65 million to are chiefly exports of lumber and logs revamp the Nanaimo Assembly Wharf from Vancouver Island firms as well as area near the downtown core. The latter bottled water from a company 130 km will handle barge container shipments north of Nanaimo.

W

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Most of these containers arrive empty in Nanaimo, but Dumas is hoping to convince retailers like Walmart and Canadian Tire to move some containers (which arrive by ship at PMV) direct to central Vancouver Island outlets directly via Nanaimo rather than being routed to Calgary for stuffing and destuffing for re-distribution back to Vancouver Island communities. On the western end of Vancouver Island, the remote Port of Alberni has received funding of up to $225,000 for a container transshipment and shortsea shipping feasibility study. “The basic premise would be to attract a percentage of the approximately 20 million TEUs sailing within reach of the Alberni Inlet along the Great Northern Pacific Sailing Route destined for Vancouver, Seattle-Tacoma, Portland, Los-AngelesLong Beach and points in between,” notes David McCormick, director of business development of the Port Alberni Port Authority. “Containers would offloaded in the Alberni Inlet at a new, modern container facility, sorted and barged directly to their specific distribution hubs in the Fraser River, for example, or directly to the next transportation mode, such as rail, in the logistics chain.” According to international development consultant, Nigel Atkin, who lives in the region, “all is possible in the next 20 years. People should realize that Vancouver Island alone is almost as big as England! Many of the urban density issues can be mitigated. A lot of pressure and congestion problems can be taken off the Lower Mainland. It makes economic and environmental sense with inCT&L frastructure upgrades.” For more than two decades veteran journalist Leo Ryan has reported on key transportation and trade developments in Canada. A former Montreal bureau chief for The Journal of Commerce, he specializes in port and shipping issues and was awarded the Medal of Merit in 1992 by the then Canadian Port and Harbour Association. www.ctl.ca


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crossborder trade

US manufacturing renaissance will

boost freight volume By Dan Goodwill

E

very year RBC Dominion Securities Inc. assembles a group of investors and invites Jim Allworth, Co-Chair and Portfolio Strategist to address the group. This year’s session was particularly noteworthy in that Allworth painted a rather optimistic picture of the medium term prospects for the US and Canadian economies. The Saturday Globe & Mail newspaper for that week also carried a feature article with the headline “A Recovery in Red” as did an April Time magazine feature (How ‘Made in the USA’ is Making a Comeback).These forecasts have significant implications for freight volumes dur-

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ct&l november 2013

ing this three year period. Here is some of what they had to say. The Great Recession has produced four years of below normal economic growth. The United States, the world’s largest importer and largest economy, has been growing at 2 percent per annum as compared to its normal 4 percent. This has pulled everybody down. Allworth cited a recent economic report of the US Congressional Office, a non-partisan group of economists, with a reliable track record, that is now predicting economic growth of 3 – 4 percent during the period 2014 to 2016. This growth is being driven by several factors. The countries with low wage levels (e.g. China) boosted wages last year. This is making the US more attractive from a cost perspective and shifting some manufacturing back to the United States. The process of extracting shale oil and gas through fracking is having a very positive impact on the supply of energy in the United States. As a result of technological improvements, the US is using 2 million less barrels per day than it did a few years ago. Through fracking, the country is prowww.ctl.ca

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crossborder trade

ducing 2.5 million barrels per day of new energy. In total, this is a swing of 4.5 million barrels per day. The US is expected to be energy independent within 6 to 10 years. This year housing starts are expected to reach 1.5 million units compared to a level of 700,000 to 800,000 over the past four years. New houses mean new appliances, carpets, furniture and other products. American companies are sitting on hordes of cash and are looking for positive signs that it is time to re-invest. Consumer optimism and improving jobs numbers are signs that the economy is on the mend and it is time to get back in. In a recent Bloomberg article, former President Bill Clinton wrote that manufacturing is critical to the country’s ability to “build a balanced economy with good jobs.” It accounts for over 80 percent of our exports and 90 percent of our patents and R&D spending according to the U.S. International Trade Commission and the De-

partment of Commerce. As such, he said, it’s a job multiplier – every new manufacturing job creates an additional 4.6 jobs to support it. He said for high tech manufacturing jobs, the supporting jobs rise to 16. Of course, more jobs = more purchases = more freight. While the GDP growth numbers have not looked too robust this year, they have

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been dampened by the Sequester, the reduction in government spending. The elimination of the Sequester and an uptick in private sector jobs should propel the growth number to higher levels than we have seen for several years. Allworth suggested that the Canadian economy will speed up to keep pace with the US economy. This time it will be a growth in manufacturing jobs in Eastern Canada as compared to energy related jobs in the west. He also predicted that the major European economies will begin to perform better. He cited the economies of Germany, France and Italy as countries that will improve their economies in the coming years. Of course, an economic improvement in the US will drive changes in other areas. Allworth expects to see the American dollar strengthen against the Canadian dollar. He is predicting a 0.92 – 0.93 dollar within a few months. The quantitative easing program will diminish. Interest rate hikes will create inflationary pressures. If these rosy forecasts are accurate, this would provide a much needed lift to the freight industry. As we move into the second half of 2013, it will be interesting to see if other economist share the positive outlooks in the three publications cited.CT&L Dan Goodwill has more than 20 years of experience in the logistics and transportation industries in both Canada and the US. He has held executive level positions in the industry, including president of Yellow Transportation’s Canada division, president of Clarke Logistics, general manager of the Railfast division of TNT, and vice-president of sales and marketing at TNT Overland Express. Goodwill is currently a consultant to manufacturers and distributors. He can be reached at dan@dantranscon.com.


automotive logistics

Southbound

and down Rising freight volumes, shifting strategies, vehicle complexity drive automotive logistics By Julia Kuzeljevich

D

emand for new automobiles has seen the North American market emerge from its recessionary slump, with plants producing in large amounts to meet pent-up desire for new products. According to the Center for Automotive Research 2013 U.S. vehicle output is expected to reach 11.0 million units, and 11.5 million by 2015. “OEMs are trying to understand their capacity utilization. There is huge demand for automotive now but that is good and bad news. While capacity in the sector is picking up, after several years of downturn, the issue becomes about balancing capacity and demand boils down to better forecasting,” said Adebayo Onigbanjo, marketing manager, North America and

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ct&l november 2013

Latin America, for Zebra Technologies, which recently released a rack & container management solution for automotive manufacturers. Truckload, LTL, and intermodal carriers are playing a larger role, and there is also increased vehicle complexity so cost management is key, he added. “If you consider the OEMs left in Canada, and the tier ones and twos feeding those plants-the transportation is managed by 3PLs feeding into those OEMs. Many of these suppliers are cross border shipping into Canada-the freight volumes have increased in proportion to the output of the OEMs in Canada,” said Guy Toksoy, Ryder System Inc.’s vice president, supply chain solutions for Canada. www.ctl.ca


automotive logistics

“What we’ve seen over the last five to ten years and what has accelerated over the last four years is that those Canadian suppliers are moving south as well, into the US or beyond into Mexico,” he said. Mexico is one of the top 10 auto manufacturers in the world and continues to grow. UPS has just announced the expansion of its UPS Preferred™ Less-Than-Container Load (LCL) expedited ocean freight service by offering access between Asia to three destinations in Mexico: Monterrey, Mexico City and Guadalajara.  “We continue to see retail, industrial and automotive companies looking for additional freight transportation options allowing them to increase their speed to market without dramatically increasing their transportation costs and without having to sacrifice product visibility,” said Keith Andrey, vice president, UPS ocean freight services. Penske Logistics has been operating in Mexico for 17 years and currently employs more than 1,000 associates in the country serving a variety of manufacturers within the automotive sector. Over the next 6-12 months the company is looking at doubling its associate numbers in Mexico based on new business opportunities awarded, said Michael Casidy, who has just been appointed to the newly created position of Managing Director of Mexico, where he will be responsible for leading and growing logistics business in the country. Casidy said OEM’s are producing more assemblies today than in the past and continue to look for more ways to reduce their costs and improve profitability. “The days of manufacturing plants housing weeks of material is shrinking as they want to convert most of the inventory storage to manufacturing space, reduce inventory carrying costs, and decrease their transportation costs. OEM’s have been reaching out to 3PL’s to handle all of their transportation requirements so they can focus on manufacturing and quality,” he said. Transportation from the U.S. and Canada heading south into Mexico is continuing to grow with the expansion of production by current automotive manufacturers and new automotive manufactures moving into Mexico, noted Casidy. As a result, rail and intermodal could see the biggest growth opportunities as they are considered the safest way of shipping parts into Mexico. Many automotive manufacturers in Mexico are working with their current offshore suppliers to build an infrastructure in Mexico closer to the actual manufacturing sites. This will greatly reduce logistics, inventory carrying, and warehousing costs. For instance, if a supplier moves from overseas to an area close to the manufacturing plant in Mexico, then the auto manufacturer won’t have the burden of 20 to 30 days of inventory either in the transportation pipeline or in a sitting in a warehouse. Transportation costs are reduced as well as additional warehouse costs greatly reduced or eliminated,” he said. A transmission or engine may be easier to produce “but has more parts than it has ever had. Each vehicle coming off the line could have something different about it. So it’s about being able to get the most out of the assets that you have to support,” said Onigbanjo. Addressing the complexity is what the OEMs are doing to sepawww.ctl.ca

rate themselves, he noted. “Part of it is going to tier one suppliers to say ‘we need to do this much, so you need to respond to that.’ As a result we’re seeing a lot of automation.” Zebra Technologies’ recent release of its Rack and Container manufacturing execution system (MES) was specifically designed for automotive manufacturers to track the location, status, condition and history of each reusable rack and container within the automotive supply chain. The system leverages not only RFID, but a combination of RFID, real time locating systems (RTLS) technologies and visibility software, said Onigbanjo. “Racking systems have purely been a ‘locate’ type of application. With the increased complexity and multiple racks, now you need to know which rack you are using for what. You can track, look at the history, and give status info and this gives you a direct impact into your production before you start your stamping, and also the ability to know where the damaged racks are. When purchased, racks come in in trickles, so you’re able to know how many are in a batch and to account for this. Now, as they manufacture the racks they attach the tags onto them, and when the tags come in they literally light up. The rack is almost like wifi-the rack gets in, the tag is configured and shows up onto the system,” he said. According to the Joint Automotive Industry Forum (JAIF), the automotive industry spends millions of dollars addressing problems associated with lost and damaged racks and containers, which are re-used across the automotive supply chain to critical transport parts and assemblies. In 2010, JAIF found these costs associated with rack and container issues to be so significant that the organization issued international radio frequency identification (RFID) guidelines to help the automotive supply chain better leverage technology to enhance container visibility. “The beauty of this application is it’s riding off our existing infrastructure. From time to market it’s just another application for OEMs and we can apply the business rules that the OEM provides. We are engaged in trials of the application. We started supporting this with active RFID and passive as well for use in totes, for example. Overall it’s getting the OEMs to see the value of not only just AUTO ID but how can you start taking motion data and historical data to start showing patterns. If you build out a pattern showing the time it takes for a process, what will that mean for them in terms of how many times a day they complete that process? What can we add, what is missing. Understanding the data that you get from that business allows you to fix issues. If the data points out that you have thousands of racks just sitting in one location, is that a problem? That’s where we see ourselves-providing the trend analysis as well as the Auto ID Metrics,” said Onigbanjo. With increased visibility in the supply chain comes the pressure for instant results. And this can affect 3PLS in terms of how their operations meet the demand. “Gone are the days when people would ask for rush. The connotation of rush is now meaningless. The clients, as well as their clients, expect things overnight.And with increased visibility, there is pressure for instant results,” said Barbara Jordan, site manager for DB Schenker’s automotive DC. With a new system in place at their ct&l november 2013

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head office, one of Schenker’s key clients has increased their visibility and “this creates a new set of inquiries which pushes things back on us. We find as 3PL we get a lot of direct questions from the clients’ client. With a more visible system in place the barriers and hierarchy have broken down. It’s a more flattened platform in terms of accessing information,” said Jordan. For the 3PLs, this means an increased

responsibility for client satisfaction. “This results in a need for a Customer Service Representative to be in place while the clients’ clients are working so we can make ourselves accessible and available. We also had to go back to the drawing board with new sign-off procedures and workflows for the new system. Conversely, the client is saying they want to reduce or keep our head counts as they are be-

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ct&l november 2013

cause they want to keep the budgets down,” said Jordan. As a result of the client’s “go-live” with the new technology, they also increased their volume of air/ocean inventory stock as a backup strategy. “With information flows so direct, the demands on 3PLS will increase, with clients asking more for less. As you can imagine with a new system it’s a teething phase but we’ve been proactive in terms of keeping customer needs met. We’re working closely and heavily with carriers and clients so customers are not seeing any of the issues behind the scenes,” added Jordan. “I think having contingency plans vs. keeping as low of an inventory level as possible is a delicate balance that companies have to consider on a day to day basis. The patterns are controlled by OEMs and managed by 3PLs to make sure we are able to respond to the disruptions but you could have plans to respond to disruptions which involves carrying additional safety stock or alternate stocking locations. If you have suppliers bringing components in, a border closing has a tremendous impact but not a controllable one. Having a domestic location for supply would help. Proactive monitoring of weather, border, and delays becomes paramount,” said Toksoy. Some OEMs more flexible in making line setup changes to respond to delayed components. “That’s just all collaboration between carrier and OEMs,” he said. “We’ve been strategically planning our Mexico strategy for the past several years due to our business growth with manufacturing customers in Mexico. We have an extraordinary talented base and are working at deepening our bench strength to further stay ahead of our growth in Mexico. The key to our continued success is to ensure we have outstanding talent ahead of our need. Another key to our success is our working with our current automotive customer base on their growth opportunities so we can proactively plan and grow with them. We have on-site personnel housed at each of our automotive manufacturing customer locations. Our new structure in Mexico will ensure we have the leaders in Mexico to continue and CT&L oversee this growth,” said Casidy.  Associate editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards. www.ctl.ca


human resources

The New Supply Chain

Professional Michael Cole, Senior Director of Human Resources, Ryder Canada Melissa Boobyer, Enterprise Engineering Recruiting, Ryder System, Inc.

T

he supply chain industry has changed considerably over the past decade and we are now at the pinnacle of that evolution. Logistics has moved from a set of fragmented tactical functions to a strategic network that connects all of these functions together. This has led to an increase in the diversity of roles and positions that are available in the supply chain profession. In fact, according to recent industry reports, there are currently about 26,000 supply chain jobs in Canada and that is projected to grow to 66,000 over the next several years. There is a growing appreciation in the marketplace that having an efficient supply chain drives significant competitive advantages for businesses. In addition, the last few years have seen a great deal of volatility and variability in global supply chains as a number of major natural disasters have seriously impacted the industry. This has helped move visibility of supply chain functions from the warehouse floor to the boardroom. As a result, there is growing demand for, and great interest in, top supply chain talent. The educational community is stepping up to meet this demand. Colleges and universities are developing new programs that include both undergraduate and graduate degrees in supply chain management. It’s not uncommon for a traditional business degree curriculum to also require supply chain themed courses. Some universities even offer dual degree programs. In Canada, there are approximately 50 different supply chain programs at universities across the country. The growth of supply chain courses and degrees at major post secondary institutions is also helping to increase awareness about supply chain management as a profession. However, internships in the supply chain field, continue to be few and far between, and are highly competitive. As the state of logistics continues to evolve, so do the skill sets required of the modern supply chain professional. Interestingly enough, the three most important skills needed in the era of the new supply chain are also the three that are the hardest to find: communication; leadership; and technological savvy. The cross functional nature of the field means people skills, like leadership

www.ctl.ca

and communication, are key. In addition, supply chain activities are heavily dependent on information technology, even more so than ever before. The ability to work with and integrate a wide variety of technology systems is an in-demand skill set. Logistics professionals also regularly find themselves in situations where they have little or incomplete data available to help them solve complex problems. Therefore, analytical decision making skills and the ability to deal with ambiguity are also important. Regulatory complexity is a factor in today’s modern business environment that adds another layer of challenges. Regulations that impact critical supply chain activities – from customs security, transportation safety, to food safety – mean that supply chain management can no longer be viewed as a peripheral responsibility. The new supply chain professionals will need to have skills that enable them to navigate this regulatory environment and advise senior leadership of its impacts. The good news is that all of these skills are transferable from other industries. Supply chain talent continues to come from all areas – manufacturing, services, natural resources, and logistics providers themselves. If the industry is going to keep up with this growing demand, it will have to continue to educate a younger generation and raise awareness about career opportunities in supply chain management. Employers need to offer more internships and co-op programs to give more people on the job exposure. In addition, as a collective group we need to change the perception that this is a male dominated profession and make an concerted effort to recruit from a diverse pool of candidates. There is also an opportunity to change the view that logistics just means warehousing and trucking. This can be a very exciting time to choose a career in supply chain management because transportation and logistics is a growing industry with solutions that are in high demand around the world. Today’s supply chain professional is meeting the needs of critical business objectives that are helping drive competitiveness, innovation, bottom line financial performance, and sustainability.  CT&L

ct&l november 2013

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air cargo

looking for a

Lift

Air Cargo carriers discuss growth trends, challenges By Julia Kuzeljevich

R

elationships are important in the air cargo business, as they are in any type of business. But as air cargo carriers from Canada and abroad met recently to discuss trends and business growth opportunities at the Edmontonbased Roads, Rails and Runways conference, hosted by Edmonton International Airport and CIFFA , it became evident that there is always room to grow opportunities. “We have relationships with freight forwarders all over the world but we also have a lot of long term relationships with smaller forwarders that maybe don’t have the branding behind them. We have lots of interline agreements too. We talk to our freight forwarders all the time and we try to develop long term relationships with each of them. We have that attitude of constantly wanting to redefine ourselves,” said Simon Pantin, Director, Global Network Development, for Amerijet International Inc. Niche cargo is something many carriers identified as an area that has great potential, especially in regions like northern Alberta where opportunities to service the oil sands sector are growing.

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Having served the oil and gas industry for a long time, Pantin said the airline has a good knowledge of transporting the tools and equipment, which tend to be recycled. “We understand the urgency and how those things go,” he said. Challenges to cargo airline growth, said Pantin, lie in finding sustainable two way traffic. “We are very encouraged to see some of the growth in industries like perishables. Some markets will be predominantly import or export. We understand that but for us it’s important to find the right mix,” he said. Lorraine Bonner, vice president, scheduled service and cargo, with Canadian North, said that as a means of diversifying their business the airline has entered the charter market into Alberta’s oil sands region. Beyond carrying some 30,000 passengers per month directly into the oil sands sites, the airline deals with challenges such as fuel availability, which can be an issue in the north in addition to weather. Maintaining flexible capacity is another issue in terms of www.ctl.ca


air cargo

reaching some of Canada’s northernmost, isolated communities who have sealift only once a year. “Day-to-day provisions are a critical lifeline for the north. Another challenge is thin markets, and one way traffic,” she said. Canadian North plans to run a 737-300 combi for 2014. “We will have the ability to be full freighter, full passenger or quick change to passenger/cargo combi,” said Bonner. FedEx has invested in the Edmonton market with a wide-body all-cargo daily A-310 and services the Calgary market separately. “Today, it is very important for air cargo carriers to choose their markets wisely,” said Kevin Ferrier, Managing Director with FedEx Canada, which boasts 690 aircraft as the largest all cargo air fleet in the world. “Ocean shipping is inextricably tied to air cargo now,” he said, noting the capacity growth in ocean, but also the current culture of instant gratification which underpins the need for express aircraft. Fuel costs are a continuous issue for the company, which is looking at the use of biofuels, natural gas in its truck fleet to help mitigate costs. “Commodity airfreight has been stagnant and is volatile to economic trends and supply chain interruptions. There are more small shipments coming from the point of production to the end user, for example in the case of Asian manufacturing shipments that bypass warehousing. Low cost shipments can go ground freight or express, and we hope to take advantage of this sweet spot,” he said. “No matter what’s happening in our industry now it won’t be the same in ten years,” said Ferrier. “We’re looking for places to fly, just as every carrier is right now,” said Jerry Chavez, executive director, North America, for AirBridge Cargo/AirCargo Americas, which is part of the Volga Dnepr Group, the largest operator in Russia for the outsized and heavy weight market. “Air Bridge was created as a bridge between China and Russia. We were transforming from a point to point carrier to a network carrier by establishing Moscow as our central hub,” said Chavez. “By 2016 our plan is to be a pure Dash 8 operator,” he added. Cynthia Joy, Director, Business Development & Marketing, with Air Canada Cargo, noted that as a belly carrier Air Canada Cargo has no actual dedicated aircraft. “We do operate over 192 aircraft and Air Canada express operates 168. The company has 56 wide bodies scheduled to over 175 destinations on five continents, with a road feeder network reaching over 155 destinations worldwide and served by 305 scheduled trucks and unlimited adhoc trucks on demand. The company is also undertaking a major expansion of its international services to Europe from Toronto, Montreal, Vancouver and Calgary. As part of the Summer 2014 schedule, Air Canada will also deploy larger aircraft from its international wide body fleet on flights from Calgary to London Heathrow and Frankfurt, as well as from Montreal to Brussels and Geneva in order to meet travel and cargo demand during the peak summer season. Joy said the carrier will be able to offer 50 % more cargo capacity in the next five years. “How we’re going to obtain that additional cargo is via five additional B-777 aircraft. Four of the aircraft arrived in 2013 and one is scheduled for early 2014. In addition to this the carrier will add 37 B-787 aircraft, with www.ctl.ca

the first to be delivered in March. “By summer 2014, three aircraft will be in operation with gradual delivery of the 34 remaining aircraft in the next few years,” said Joy. Air Canada Rouge, which was launched in July 2013, expands the network further. “Capacity on this is managed and distributed by Air Canada Cargo and booked by customers on 014 AWB. The plan is that they will eventually take over all our B767s and 319 sun destinations,” she said. In terms of future route developments for Air Canada Cargo, no new route destinations have been announced and these are limited by airline deployment based on passenger demand, Joy noted. ‘We’re focused on additional aircraft capacity and using Canada as a hub between Europe, Asia and South America. Even though we’re big in Canada we’re a small player in the rest of the world-this gives us the opportunity to be more agile and to prove ourselves to our customers,” said Joy. Strategies to improve the flow of goods and information for first mile/last mile, said Joy, involve really trying to improve the accuracy of data. “We’re constantly reviewing our processes to find out how we can do things better. The new air waybill is taking on traction,” said Joy, but seamless adoption “has lots to do with customers’ own systems and there is only so much we can help with that,” she said. The approval of a multilateral e-AWB (air waybill), a move supported by nearly all airlines and forwarders and agreed to this spring by IATA (International Air Transport Association) and FIATA, (International Federation of Freight Forwarders Associations), will see a standard format for a multilateral electronic AWB, eliminating the need for individual AWB agreements between airlines and forwarders. Transport Canada’s Air Cargo Security Program, launched in 2010–11, will be fully implemented by 2015.  By February 2015, air carriers must be responsible for ensuring that 100 per cent of air cargo departing Canadian airports will be secured. To meet these targets efficiently, air carriers, freight forwarders and shippers will all need to play an active role in securing air cargo, the government has said. “As a belly carrier we’ve had 100 % screening since last January. Our customers were well aware of it so when it started everything was up and running. I would say we have not seen anyone turned away because we’ve had to do the 100 % screening,” said Joy. “We’ve actually seen some benefits from the stricter security requirements as some customers have shifted from belly to dedicate all cargo flights. We see an increase in business as a result,” said Cargojet’s executive vice president, Jamie Porteous. Cargojet will be adding a 767-300 and B-757 freighter to its fleet, and Porteous said that most of the airline’s customers have entered into long term contracts, including one with the Bank of Canada into Mexico for polymer bills. Cargojet is also the only operator of a biweekly dedicated freighter into Bermuda, he said. “We operate on a shared basis with Lot Polish airlines taking seafood into Brussels and on to Cologne. We have also entered into 50 odd international alliances and partnerships with other carriers to handle their domestic cargo requirements in Canada. We are always looking at new opportunities that must achieve CT&L sustainability to be profitable.”  ct&l november 2013

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inside the numbers

Contact by recruiters over past year

Less often 19%

Take this job and?

More often 32%

No difference 49%

Perceptions of current job market compared to five years ago

Fewer jobs 12% No difference 23%

More jobs 65%

What’s driving the career plans of supply chain professionals Unlike the infamous country song, supply chain professionals seem to enjoy their jobs enough that the majority plan to stay either in the same job with the same company or be in a different job with the same company, the latest research shows. Almost 7 in 10 respondents to our annual Survey of the Canadian Supply Chain Professional saw themselves staying with the same company over the next two years. Only 21% saw themselves moving to a supply chain position with another organization. For those who do plan on moving on, little opportunity for advancement with their current company was cited as the main reason followed by higher compensation and the simple need for change. Interestingly, a perceived lack of appreciation by management of supply chain roles by their current company was among the top five reasons for moving on. The national survey is conducted in partnership with our sister publications Purchasing B2B and MM&D and the Supply Chain Management Association. 28

ct&l november 2013

Career plans for next two years Working in the same job 36% Getting promoted within same organization 33% Working in supply chain in another organization 21% Changing careers 3% Self-employed 2% Retiring 5%

Top reasons for moving to another organization Higher compensation Little opportunity for advancement with current company Need a change More opportunities to advance in another organization Lack of appreciation by management of supply chain roles

49% 55% 46% 45% 34%

How found current supply chain job In-person networking Online job site Recruitment firm Classified ads Word of mouth Employer web site

21% 15% 11% 11% 15% 12%

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clc pb2b ad full page.indd 1

9/27/13 2:47 PM


the bigger picture

a change in thinking Strategic thought process is now a “best in class” approach

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

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trategic thinking is now considered a best practice in supply chain management, and improved operational efficiencies have enabled cargo transportation to become one of the main components of this process. Buyers and sellers are increasingly thinking strategically by looking at the role global sourcing plays in competitive advantage, and carriers have responded by attempting to understand their needs in terms of service expectations. This change in thinking hasn’t been easy for the transportation industry, and has often come up at significant expense (which isn’t always immediately recoverable). Carriers have seen dramatic changes in shipping patterns, from domestic to international, LTL to FTL, rail to marine shipping, and expedited airfreight, often dependent on their customers’ pursuit of consistent product availability and sustainable profit margins. Organizational market strategies have evolved from manufacturing to importing, with corresponding shifts in the location of decision-makers as importers, wholesalers and retailers adopt different views of transportation and the role of warehousing and distribution, while embracing global sourcing and emerging trends like e-marketplaces. Through it all, cargo transportation has been a staple, a service that connects buyers, sellers, shippers, receivers and customers. In fact, one might argue that, by its very nature, cargo transportation is a strategic service, with industry members able to support shifting demand patterns through a variety of service levels and equipment types in every mode of transportation, all the while competing in a largely deregulated marketplace. As buyers and sellers have adapted their business models to strategic platforms, the transportation industry has responded accordingly, sometimes reactively, sometimes proactively, but always providing service where sufficient demand exists. Throughout this evolution, the role of transportation carriers has undergone several changes; in fact, carriers have often competed to elevate their status in this regard, from supplier, to preferred supplier, to logistics partner. Whatever the name, the transportation industry at large has come to understand that successful relationships require an understanding of their customers’ strategic objectives. Cargo transportation is no longer a static service that can survive on its own without customer interaction, and more importantly, participation. Carriers have learned the value in knowing the 4 “W’s” in their customers’ business plans: “who” are

they shipping to, “what” is being shipped, “when” is it being shipped, and “where” is it going? This information, at minimum, is essential for carriers to perform well on a tactical level, to adequately plan labour and equipment resources in order to provide the desired level of service on a daily basis. Strategic thinking, however, introduces an additional component into the shipper/carrier relationship, “why”. Increasingly, buyers and sellers want their suppliers to understand “why” they do the business a certain way, why they change their product offerings, suppliers, marketing plans or freight policies for example. This requirement may truly reflect the capabilities of a strategic partner, but it is a challenging role to fill for carriers who may have hundreds, if not thousands, of customers, all with different needs in terms of supplier resources and flexibility. More importantly, it also underscores the obligation of shippers and receivers to understand the tactical elements particular to supply chain management. In terms of global sourcing for example, an importer might make a strategic decision to source goods from a low-cost vendor in a foreign country; to ensure success in that relationship, the importer will have to give consideration to various tactical elements, such as qualifying vendors, evaluating quality standards, capacity, and availability of backup sources of supply. The same is true when dealing with transportation suppliers. Enlisting the services of a global freight forwarder may represent a strategic transportation decision, but there are also many tactical elements to this relationship that buyers and sellers should be aware of. These include an awareness of the terms and conditions of the bill of lading, carrier minimum liability, the opportunity to declare higher product values, and the importance of cargo insurance. Simply indicating “prepaid” or “collect” on a bill of lading does not reflect the extent to which shippers should be aware of their rights, and obligations (many of which have been codified into law). Payment terms are not a substitute for Incoterms, UCC FOB terms, or contracts of sale, nor do they infer a process for the disposition of freight claims and the rights of the carrier for salvage. While strategic thinking is often a successful business strategy, performing tactically is essential for developing relationships with transportation suppliers to overcome the many challenges in international trade. CT&L www.ctl.ca

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