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March/April 2014 $8.00

Pick

to

vision A new approach to reality in distribution centres

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Inside 3 5 16 22 26 28 30 32 33 34

Taking Stock Supply Chain Scan Canadian Food Chain MODEX report Trade Data Pick to Vision Legal Link Learning Curve Materials Handling Last Word: Guest Editorial

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TAKING STOCK

www.mmdonline.com PUBLISHER/EDITOR-IN-CHIEF: Emily Atkins (416) 510-5130 EAtkins@bizinfogroup.ca ART DIRECTOR: Stewart Thomas (416) 442-5600 x3212 SThomas@bizinfogroup.ca SENIOR ACCOUNT MANAGER: Catherine Martineau (647) 988-5559 CMartineau@bizinfogroup.ca PRODUCTION MANAGER: Kim Collins (416) 510-6779 KCollins@bizinfogroup.ca CIRCULATION MANAGER: Barbara Adelt (416) 442-5600 x3546 BAdelt@bizinfogroup.ca

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Positive developments A

s if it’s not enough to have an editorial handover to start the year off right, MM&D now has another new development to share with readers. As of the middle of March we are the proud owners of a beautiful, clean and dynamic new website.

Our URL—www.mmdonline.com—has not changed, but the way it looks sure has. News stories are updated daily, as always, and occupy the space “above the fold”, on the homepage where they will get the attention breaking news deserves. When there are good pictures to share they will show up in a box on the left, while four other stories share spots to the right.

The second section is for features, both from the print magazine and online only. These are shown in a rotator, giving the homepage a lively appearance.

Below features you’ll find the latest product news, and beneath that is a space where opinions and editorial are displayed. The final section is for events, and below that, in every page, you’ll see the latest magazine cover, linking you to the digital edition.

For each section there is a link to the right that takes you to the section’s main page where you’ll find all the stories in that category. Along the left side of each individual story you’ll also see a list of subject categories and index tags. This new functionality allows you to click on a topic covered in the story to retrieve all our content that’s related. All the stories sharing that topic will be displayed on a single index page when you click a tag. It’s a great way to research a subject, company or individual.

The site is optimized for mobile and tablet viewing, so we hope you’ll take us along with you when you’re not at your desk or laptop. You can read the news, pore over the latest digital edition, check your salary against the salary calculator and even use the 3PL Finder tool, even subscribe—all when you are on the move.

As well, we are a stand-alone entity in our own right now—no longer a subsection of Canadian Manufacturing Online. We are very proud to have our brand identity back!

We invite you to see for yourself how great the new mmdonline.com looks and functions. Please drop in for a visit, and come back any time!

March/April 2014  Volume 59  Number 02 16

22

26

28

Canadian Food Chain

Under the big top

Trading data

Equipment focus

See how one company keeps containers clean

Modex 2014 reveals an upbeat industry

Printed in Canada Publications Mail Agreement #40069240, ISSN: 0025-5343 (Print) ISSN: 1929-6460 (Digital). We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage for our publishing activities.

MM&D is indexed in the Canadian Magazine Index by Micromedia Limited. Back copies are available in microform from Macromedia Ltd., 158 Pearl St., Toronto, ON M5H 1L3

How advance info helps Customs and trade bodies

www.mmdonline.com | March/April 2014

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The future of picking is in your eyes 3

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SUPPLY CHAIN SCAN

CROWN

SMARTWAY SURVEY

INCOTERMS

Lift truck wins design award, p10

GHG reductions in the Canadian transportation industry p6

Why we need them, p12

Global pallet demand to exceed five billion

By MM&D Staff

G

lobal sales of pallets are projected to climb five percent annually through 2017 to 5.1 billion units, an acceleration from the relatively sluggish pace of the 2007-2012 period.

“Pickup in manufacturing activity will spur acrossthe-board gains, especially in large, mature regional markets such as North America and Western Europe,” says Zoe Biller, an analyst with The Freedonia Group, Inc, a Cleveland-based industry market research firm.

Demand will advance 6.8 percent per annum in value terms to US$51.6 billion in 2017, stimulated by increases in unit sales, as well as by a shift in the product mix toward higher-priced plastic pallets.

The number of pallets in use will expand at a 4.6 percent annual rate through 2017 to 9.9 billion. Stock growth will be fueled by a larger global economy, requiring more pallets to accommodate greater shipping requirements, as well as increased utilization of pallets in developing markets. These and other trends are presented in The Freedonia Group’s new study, World Pallets.

In industrializing countries, pallet utilization is typically low relative to the size of their manufacturing, warehousing, and construction sectors.

Going forward, greater numbers of potential pallet users will strive to become more competi-tive on a global scale by improving operating efficiencies and reduc-ing product damage in shipments through the use of pallets.

The Asia/Pacific region, led by China, will post the strongest unit sales increases of any regional market, 4

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WORLD PALLET DEMAND (Million Units) % Annual Growth Item North America Western Europe Asia/Pacific Central & South America Eastern Europe Africa/Mideast Total Pallet Demand

2007 1356 1100 724 134 248 128 3690

2012 1290 1000 1125 149 261 155 3980

2017 1540 1150 1660 192 326 202 5070

2007-2012 2012-2017 -1.0 3.6 -1.9 2.8 9.2 8.1 2.1 5.2 1.0 4.5 3.9 5.4 1.5 5.0

2014 by The Freedonia Group, Inc.

averaging 8.1 percent per year through 2017. This region will also overtake North America to become the largest regional market by 2017, when it will account for one-third of the global total. Sales advances across the region will be spurred by climbing manufacturing activity and increased adoption of pallets by new users. China will experience the largest gains of any national market in the world and will account for over one-fifth of total global unit demand in 2017.

The vast majority of pallets are concon structed using wood or plastic.

Demand for plastic pallets will grow the fastest of any product type in most national markets through 2017.

Plastic pallets can be easily cleaned, lending themselves to use with food, beverages, and other products where contamination must be minimized.

They also last for many years and are resistant to damage during normal use. Additionally, their recyclability and ability to be made from recycled materials will be attractive to users seeking to raise the perceived environ environmental friendliness of their operations. However, because of their low cost, wood pallets will continue to dominate product sales in most areas, representing more than 90 percent of 2017 global unit demand.

MM&D | March/April 2014

14-04-16 3:30 PM

SUPPLY CHAIN SCAN

Fuel cell demo for reefer trucks Plug Power Inc has received $500,000 from the New York State Energy Research and Development Authority (NYSERDA) to demonstrate the viability of replacing diesel generators with hydrogen fuel cells for powering transport refrigeration units (TRUs) on truck trailers that deliver perishable goods.

The Plug Power TRU fuel cell will power a Carrier Transicold refrigeration unit for the Sysco Corp distribution centre in Long Island, NY, for 12 months. Hydrogen will be supplied by Air Products.

Successful completion of this trial is expected to open the door to hydrogen fuel cell expansion into the refrigerated transport market—employing clean energy to regulate cold temperatures for fresh and frozen foods, such as produce, dairy products, meats, ice cream and other items while enroute to grocery warehouses, distribution centres and retail destinations.

Most of the 300,000 TRUs in operation across the US today are powered by diesel, which is expensive and environmentally hazardous due to the emission of particulate matter and nitrogen oxides (NOx). In the course of one day, a typical TRU can consume about 10 gallons of diesel and emit 101 kg of carbon dioxide (CO2). This is in contrast to Plug Power hydrogen fuel cells, which have zero CO2 emissions, and release only a small amount of heat and water.

“The NYSERDA opportunity is crucial to Plug Power, as we move forward with development of fuel cell solutions for TRU deployments,” said Andy Marsh, CEO of Plug Power. “Along with a similar, recently announced TRU project funded by the US Department of Energy, this contract enables us to execute on our strategy to implement hydrogen fuel cells in markets adjacent to the material transport industry.”

BENCHMARKS Pointe-Claire, Quebec-based Hewitt Equipment Ltd has received one of the Mitsubishi Caterpillar Forklift America Inc (MCFA) 2014 Dealers of Excellence awards. These industry-leading dealers were awarded this honour for delivering the highest levels of customer satisfaction in their sales and support operations.

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Wheels Group Inc, a North American non-asset 3PL provider, has been designated as one of Canada’s Best Managed Companies, Platinum Status, for the 17th consecutive year.

Wheels first achieved Platinum Status in 2003. Platinum Status recognizes companies that have achieved Best Managed for a minimum of six consecutive years.

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CanPro Logistics opened March 24, 2014. Located near Highway 401, and close to Toronto’s Pearson International Airport, CanPro will provide a range of full truckload and less-than-truckload services including emergency, just-in-time, on demand and scheduled freight—for both regular and specialized equipment types

www.mmdonline.com | March/April 2014

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SUPPLY CHAIN SCAN

SmartWay shipper survey reveals commitment to GHG reduction

By Emily Atkins

I

n March, Garland Chow, associate professor at University of British Columbia’s Sauder School of Business made a cross-country tour presenting the results of the Green Shippers Survey sponsored by the SmartWay program and supported by SCMA. The SmartWay Transport Partnership is a partnership between public and private stakeholders with the shared goal of saving fuel and reducing greenhouse gases and air pollution from the freight transportation supply chain. Originally launched by the United States Environmental Protection Agency in 2004, SmartWay has been administered in Canada by Natural Resources Canada (NRCan) since 2012. The program is also supported by NRCan’s FleetSmart initiative, which offers additional information, resources and services designed to help companies save fuel.

The SmartWay program aims to provide a one-stop-shop tool to benchmark fleets, allowing for year-over-year evaluation of progress, providing a mechanism for companies to measure up against each other. It uses fuel, mileage and payload data about carriers to calculate emissions rates for eight distinct emissions categories. Shippers can use SmartWay emissions information to compare carriers for contracting purposes.

Transportation, and road transportation in particular, is a major contributor to GHG (greenhouse gases). Between 1990 and 2010 the total number of freight tonne‐kilometres increased by 54 percent in Canada’s freight sector, while GHG emissions from the

freight sector increased by 70 percent. Transportation (freight and passenger combined) contributed over 28 percent of Canada’s GHG emissions in 2010 The Green Shipper Survey polled shippers about strategies and opportunities for reducing GHGs. It asked about opportunities in managing purchased and private transportation; how important is CO2/ GHG reduction; what is the potential for carrier sourcing and supplier management to reduce GHGs; what factors motivate and enable green transportation initiatives; and, where is the industry heading?

The top three most implemented actions are: Consolidation of shipments and load maximization, with 64 percent having already done so and 13.08 planning to. Second was more direct shipments to reduce miles with 50 percent already committed and another 20 percent planning to. Third was route planning and trip scheduling to reduce miles travelled, with 50 percent already doing so and another 17 percent planning to. The full list can be seen in the chart below.

Continues on page 8

IMPLEMENTATION OF SUSTAINABILITY STRATEGIES IN TRANSPORTATION Air Emissions Sustainability Action Consolidation of shipments & load maximization Route planning and trips scheduling to reduce miles More direct shipments to reduce miles Improved pickup and delivery scheduling to reduce miles Increase utilization of fuel‐efficient modes (rail, sea, intermodal) Back‐hauling to minimize empty miles Transloading to minimize loads moved (use 53ft containers rather than 20ft or 40ft to gain efficiencies during transportation) Idle shutdowns/“no idling policies” for trucks that picks up/ deliver to reduce idling Joint process improvement with suppliers to optimize transportation movement Joint process improvement with customers to optimize transportation movement Transportation management software to maximize load and reduce vehicle miles Driver comfort stations (climate controlled stations at dock facilities for drivers so that they don’t need to idle trucks to stay warm/cold while at shipping and receiving dock) to reduce idling Include CO2 sustainability in sourcing carriers Encourage carrier suppliers to be CO2 sustainable Warehouse and plant location closer to suppliers to reduce vehicle miles Employees investigate CO2 reduction opportunities Provide power source for auxiliary unit in‐cab heaters for driver cabs to reduce idling 6

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Source: Garland Chow

Degree of Implementation Implemented

Plan to Implement

Don’t plan to implement

Don’t know/ Not Applicable

64.49% 50.47% 50.47% 47.66% 43.24% 37.38% 35.51%

13.08% 16.82% 19.63% 21.50% 15.32% 16.82% 10.28%

9.35% 13.08% 15.89% 13.08% 24.32% 15.89% 14.02%

13.08% 19.63% 14.02% 17.76% 17.12% 29.91% 40.19%

35.14%

11.71%

30.63%

22.52%

35.14%

15.32%

29.73%

19.82%

24.32%

17.12%

32.43%

26.13%

24.27%

14.56%

34.95%

26.21%

21.62%

6.31%

33.33%

38.74%

21.57% 21.57% 19.61%

23.53% 26.47% 7.84%

32.35% 28.43% 39.22%

22.55% 23.53% 33.33%

16.50% 11.71%

26.21% 9.01%

33.01% 39.64%

24.27% 39.64%

MM&D | March/April 2014

14-04-16 3:30 PM

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SUPPLY CHAIN SCAN Continued from page 6 When asked if emissions reduction was part of their corporate mission and vision, 46 percent agreed, with 29 percent disagreeing. Fully 46 percent said that senior management were committed to CO2 sustainability, while 30

percent said they were not. It’s clear that the bottom line is important—50 percent said that CO2 sustainability initiatives must have a return on investment. Only 20 percent disagreed with that statement.

The survey was conducted online, ending February 7, 2014 with 169 valid responses from firms or business units operating in Canada with primarily domestic transportation movements then. A full range of business types and sizes were included.

For more details on the survey and results visit the SCMA website at http://tinyurl.com/kgxzafd.

DONE DEALS Kuehne + Nagel has been selected as a global logistics partner by the Irish Dairy Board as part of strategic plans to increase production and break into new markets. The Irish Dairy Board (IDB), which already supplies butter and cheeses to over 90 countries, is preparing for expansion from 2015. The abolition of EU milk quotas that same year will see the IDB significantly increase its production, and it plans to take its leading products to new markets around the world. Under a new three-year agreement, Kuehne + Nagel will manage global transportation operations, including distribution of IDB products to over 90 countries by deep-sea freight.

C3 Solutions has formed a partnership with National Shunt Service Limited (NSSL) to promote its dock scheduling application, C3 Reservations. C3 Reservations is a software-as-a-service dock scheduling application which streamlines the scheduling process. NSSL is a provider of short-haul services in Canada.

XPO Logistics, Inc and Pacer International, Inc have entered into a definitive agreement for XPO Logistics to acquire Pacer, the third largest provider of intermodal transportation services in North America. The combined company will continue to trade on the New York Stock Exchange under the symbol XPO. The transaction is expected to close in the second quarter of 2014. Pacer facilitates approximately 10 percent of all US domestic intermodal freight movements, and is the largest provider of intermodal services between the US and Mexico.

Diversified Entities, LLC, a multi-temperature, bonded 3PL warehouse in Melrose Park Illinois selected Datex FootPrint WMS software to assist in streamlining warehouse operations. A public refrigerated warehouse and distribution centre for over a decade, Diversified Entities, LLC specializes in food product inventory.

Jamison RFID, a division of Jamison Door Company, a manufacturer and integrator of rugged, purpose-built RFID portals and communications enclosures, has formed a partnership with Quest Solution of Eugene, Oregon.

Quest is a provider in the technology, software, and mobile data collection systems market.

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Air cargo makes strong start in 2014 The International Air Transport Association (IATA) released January performance data showing a strong rise in airfreight growth compared to a year ago. Global freight tonne kilometers (FTKs) rose 4.5 percent compared to January 2013. This is a acceleration on the 2.2 percent year-on-year growth rate recorded in December, and is well above the 1.4 percent full-year growth reported for 2013 as compared to 2012.

Growth was solid across all regions, with Middle Eastern carriers growing the fastest (10.7 percent).

European airlines continued to benefit from Europe’s recovery from recession, posting 6.0 percent growth. Carriers based in the Asia-Pacific region, which account for nearly 40 percent of the global airfreight market, reported 3.8 percent growth. North American airlines reported the weakest rise in volumes, just 0.7 percent, reflecting subdued January business activity. However, the underlying trend of manufacturing in the US is positive, which should lead to an increase in exports. Capacity fell 0.9 percent.

“The improvement in demand is good news.

It is a step-up in pace from the mild strengthening that we saw towards the second half of 2013.

But there is also ample reason to be cautious.

Protectionist measures are part of the reason for a slower expansion of world trade than we would expect from current levels of industrial production. Companies continue to re-organize supply chains in their efforts to move manufacturing on-shore,” said Tony Tyler, IATA’s director general and CEO.

MM&D | March/April 2014

14-04-16 4:40 PM

Deval Handling Equipment Distributor for TCM & Barrett ttt products (by UniCarriers) for Canada Become a TCM/Barrett dealer: Inquire about the dealerships available in your area For the nearest Authorized UniCarriers (TCM/Barrett) ttt) dealer, visit our website www.tcmdeval.com, or contact us at 1-866-537-3750 7 7-3750

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SUPPLY CHAIN SCAN

TIACA warns about air cargo advance data

By MM&D Staff

R

aising the spectre of slowed international trade, the International Air Cargo Association (TIACA), urged considerable further research before advance data requirements for air cargo security screening.

In an address to the World Customs Organization’s (WCO) Annual Technical Experts Group on Air Cargo Security Conference in Brussels, TIACA Secretary General Doug Brittin cautioned Customs regulators against taking unilateral action to require submission of certain Customs information for all air cargo shipments, in advance of aircraft departure. He told delegates “we recommend that all regulatory parties coordinate this process through the WCO and that they consult more closely with industry before they move forward on establishing regulations”.

A similar process should be followed to establish common procedures for member states’ security regulators to ensure common cargo screening methods are in place after the analysis process is completed, he said.

While country-specific advance data programs have

been tested by Customs regulators—including ACAS in the US, PRECISE in Europe and PACT in Canada—and some results shared through the WCO and other venues, gaps in global standards remain.

Brittin said the air cargo industry fully supports the concept of advance data risk analysis, stating that many positive lessons had been learned in relation to the creation of data sets, data transmission, data analysis and the message ‘return’ process. However, he highlighted a series of challenges that must still be overcome.

These, he said, included the lack of compatibility between many carrier and forwarder IT systems, inaccurate or incomplete information, wide variations in the timing of data availability, and limited testing of forwarder capabilities, especially outside of the US. Brittin told the WCO conference that the air cargo industry still has a number of concerns about advance data analysis, notably systems and standards are not yet established, ‘operational’ testing is not yet sufficient in terms of getting messages to the freight dock in time, and airline and forwarder responsibilities and roles are not fully defined.

As the next step, TIACA wants Customs and security regulators to work with industry to ensure data elements, analysis and messaging procedures, screening and response protocols are all standardized. The Association says the best way to achieve this is by Customs regulators and industry working collaboratively through the WCO while security regulators work to develop common ‘targeted’ cargo screening and compliance standards.

A crown for Crown’s design Crown Equipment earned a GOOD DESIGN Award for its Crown ES/ET 4000 Series of stacker forklifts. The awards are presented by the Chicago Athenaeum: Museum of Architecture and Design and the European Centre for Architecture Art Design and Urban Studies.

Internationally renowned design institutions and associations have recognized Crown forklifts with more than 80 awards since 1965. This recognition marks the 13th GOOD DESIGN Award for Crown Equipment.

The GOOD DESIGN jury honored the Crown ES/ ET 4000 in the industrial category for high-quality design that reflects Crown’s understanding of the complex needs of forklift operators in daily work, as well as the company’s ability to provide solutions to improve the forklift-operator relationship.

“We’ve been using Crown ET 4000 stackers for nearly a year, and our operators are very positive about this truck, particularly its quality appearance, robust construction and optional electronic steering,” said Thomas Berns, head of logistics at Mellerud Chemie GmbH in Brüggen, Germany.

“The overall visibility is impressive, and the narrow

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chassis is perfect for block-stacking in our narrow aisles. Overall, the Crown ET 4000 is particularly suitable for our continuously changing tasks without forcing us to make any compromises.

Jim Kraimer, director of industrial design, Europe, Crown Equipment, added, “An integral part of our approach to design is understanding the forklift and operator relationship. This latest design award marks our continued investment in helping to ensure that our equipment makes forklift operators as comfortable and safe as possible, which ultimately leads to improved productivity and efficiency.”

Since 1950, the GOOD DESIGN Awards have been presented to the world’s most prominent designers and manufacturers for advancing visionary and innovative product concepts that marry form with function. In this year’s competition, more than 700 new products and graphic designs were selected from more than 38 countries.

MM&D | March/April 2014

14-04-16 3:30 PM

PROTECTS WITH HARDWOOD FROM 100% CANADIAN FORESTS.

CAN YOUR PALLET PROVIDER DO THAT?

STRINGER

CHEP

CAN!

Protecting your products throughout the supply chain requires a strong platform and an equally strong pallet provider. For 35 years CHEP Canada has helped manufacturers and retailers safely ship to over 10,000 locations across the country. Combine that with three proven pallet options, a dedicated service rep for your account, and the confidence that comes with a trusted business partner, and your choice is clear.

To learn how CHEP can help you, visit www.chep.com

CHEP CANADA CAN

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SUPPLY CHAIN SCAN GLOBAL FOCUS

Why do we need Incoterms?

They constitute a common language for international traders

by Christian Siviere

Envirotainer has opened a new competence centre, R&D and production facility in Rosersberg outside Stockholm. The new premises are more centrally located and in easy reach of both Stockholm and Uppsala. They represent an investment in the future, setting the foundation for a centre of expertise for cold chain and industry development.

Envirotainer is a global provider of temperature-controlled air transportation for pharmaceuticals. Through its network of partners, the company reaches more than 200 airports in more than 100 countries. Envirotainer’s headquarters and manufacturing are located in Sweden, but the company also has offices in Frankfurt, Dallas and Singapore.

“Since our expertise is an important part of our offer, we need premises that help us meet our customers’ growing needs for advanced transport solutions,” says Simon Angeldorff, CEO of Envirotainer. “In addition, two new climate chambers are being built at Rosersberg, where our team of cold chain experts can help customers plan thoroughly dependable transport for the often life-saving medications we carry for them.”

Boeing and AirBridgeCargo Airlines (ABC), part of Volga-Dnepr Group and Russia’s largest cargo airline, recently celebrated the delivery of the airline’s fifth brand new 747-8 Freighter.

With its delivery, AirBridgeCargo continues to follow its long-term fleet modernization strategy. The new aircraft will be used on ABC’s existing route network linking Europe, Asia and the United States via the airline’s hub in Moscow.

At present AirBridgeCargo’s fleet consists of 12 Boeing 747 (five Boeing 747400ERFs (Extended Range Freighters), three Boeing 747-400 Freighters and five Boeing 747-8 Freighters).

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I

n our global village, we could ask the question: why do we need Incoterms? With the increase in international commerce, more and more goods are traded worldwide and you could think it’s all getting simpler. But in reality there are different ways of doing business, local languages and customs, legal systems, trade barriers, all bringing challenges. Incoterms give us the advantage of predictability and as they are recognized around the world, they constitute a common language for international traders.

Just what are Incoterms? They are international rules defining the respective responsibility of seller and buyer concerning the supply of goods. They specify the division of risks and costs between exporter and importer and the great thing is: they have the same meaning worldwide!

And where do they come from? They were created by the International Chamber of Commerce in Paris in 1936 and the latest version, the Incoterms 2010, came into effect on January 1st, 2011. Since they have been revised on a regular basis, they have kept up with changes in international trade. When you think about it, Incoterms were created 20 years before containers even existed (the first ocean-going metal container was invented in 1956), so they had to be adapted to this mode of transport.

What do they look like? They are made up of the three-letter Incoterm itself, followed by the named

MM&D | March/April 2014

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SUPPLY CHAIN SCAN

LogiMat® Vertical Lift Module point (as precise as possible), for example: “FCA One Yonge Street, Toronto, Ontario, Incoterms 2010”.

What changed on January 1st 2011? The Incoterms 2010 can be used for international and domestic sales (previous versions only covered international transactions). We lost four terms (DES, DEQ, DAF and DDU), gained two new ones (DAT and DAP) and other changes are too technical to detail in this article.

What are the challenges? It is important to note that although Incoterms are recognized and used internationally, including in the United States, our neighbours to the south sometimes still use their ‘’Revised American Foreign Trade Definitions 1941’’ or the ‘’Uniform Commercial Code’’. These American rules have been superseded by the international Incoterms but some companies still refer to them and it can lead to costly misunderstandings. There are other challenges too specific to describe here.

Where can you learn about Incoterms and get reference material?

To stay up-todate with recent changes, several organizations, like CIFFA, offer seminars and webinars on this subject and reference material can be obtained from the International Chamber of Commerce in Paris or the Canadian Chamber of Commerce.

In conclusion, whether you are importing or exporting or both, in North America or abroad, it is very important to master the Incoterms and their interaction with the sales contract and the underlying contracts (shipping, insurance, Customs), in order to build an efficient and successful supply chain.

www.mmdonline.com

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AUTOMATE & INCREASE YOUR STORAGE CAPACITY

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14-04-16 3:31 PM

SUPPLY CHAIN SCAN MOVERS + SHAKERS Joyce Carter has been named president and CEO of Halifax International Airport Authority (HIAA), effective March 11, 2014.

“Joyce has exceptional senior management experience and an outstanding record of achievement. Since joining HIAA in 1999, Joyce has been an integral part of our airport community and HIAA’s growth and development,” said Peter McDonough, chair of HIAA¹s Board of Directors.

Coty Inc has appointed Mario Reis as executive vice-president, supply chain, effective May 1, 2014. Reis will join the executive committee and report to Michele Scannavini, CEO. He will be based in Geneva. Reis will replace Darryl McCall who will work on the transition to ensure continuity in supply chain performance before his retirement on December 31, 2014.

Reis has more than 30 years of experience as a business leader and supply chain expert. Previously he held several senior executive positions at Danone. Prior to that, Reis worked at Mars Inc and Bain & Co in various business roles from 1986-1996.

SeaLand, the newly founded intra-Americas regional carrier of the Maersk Group, has appointed its executive team. The new team includes:

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Alfredo Di Palma will join as chief commercial officer (CCO).

Currently, Alfredo holds the role of commercial manager in charge of Central America for Maersk Line.

Maria Batista has accepted the role of head of customer service.

Maria has over 20 years of experience with Maersk Line and Safmarine, including postings in Miami, Costa Rica, Toronto, Charleston and Charlotte.

Shane Sawyer has been appointed CFO. Shane, who currently leads the regional business performance function for Maersk Line in West and Central Asia, brings 12 years of experience with Maersk Line, including roles in Dubai, Malaysia, Singapore, Honduras, Panama and Costa Rica.

Thiago Covre will join the team as chief liner officer (CLO).

Thiago brings over 10 years of extensive knowledge in line management. His responsibility includes building a network based on innovative products.

Timothy Child will be responsible for overall operations as COO. Tim is a Maersk Line veteran, with a career spanning 25 years in areas such as trade management, capacity management, and external and inside sales.

All appointees will be on-board within the next two to three months, joining Craig Mygatt as SeaLand CEO.

Come visit our brand new website for all the latest supply chain news, features, products and more.

Same great URL— www.mmdonline.com —fantastic new look.

Optimized for mobile!

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PROFESSIONAL DEVELOPMENT DIRECTORY

Have You Signed Up? The Purchasing Management Association of Canada (PMAC) and the Supply Chain & Logistics Association Canada (SCL) joined forces to create the robust, highly focused Supply Chain Management Association (SCMA).

The Ontario Institute of PMAC is now known as Supply Chain Management Association Ontario (SCMAO).

WE’VE JOINED FORCES

Become part of a network of over 3,000 members in Ontario and 7,000 across Canada. Imagine how this professional network can help you reach your career goals!

Whether you are working in the industry or considering a career in supply chain management, with SCMAO membership the sky’s the limit!

To apply for membership visit www.scmao.ca

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Cleaning up Keeping reusable containers dirt- and germ-free is good business

by Kara Kuryllowicz

“C

leanliness is everything.” Three simple words drive every action at GTA-based BoxSys, where owner Maninder Swaich and her 26 employees clean approximately 36,000 reusable plastic containers (RPCs) and pallets daily for customers across four specific verticals: pharmaceutical, food, automotive and retail.

“This is our core business—it’s what we do 24/7,” says Swaich.

“Once customers’ RPCs arrive at our facility, we take control and assume full responsibility for managing and cleaning a valuable asset that can have a direct and dramatic impact on our customers’ bottom lines as well as their relationships with their clients/consumers and subsequently their corporate image and reputation.”

Over the past few decades, corporations have increasingly moved from single-use containers, usually cardboard, to high-density polyethylene and high-density polypropylene containers. While a single-use, cardboard container might cost about $2.80 and an RPC runs around $15, the RPC is typically used up to 600 times bringing the cost down to just a few cents per use.

“RPCs make good business sense—they cost far less per use and tend to better protect the product while taking less of a toll on the environment,” says Roly Scagnetti, new business development manager at BoxSys. For some time corporations have recognized the value in focusing on their core competencies while outsourcing specific tasks to thirdparty providers. Customers such as Apotex, Canadian Tire, Nestlé Canada, Grocery Gateway, WalMart, Magna and Matrix Logistics know that the structural integrity and cleanliness of the containers that carry everything from food products to car parts is of paramount importance. BoxSys has leveraged its expertise and experience to develop a unique set of Standard Operating Procedures for each industry sector, which it then modifies for each individual client.

“Owning your RPCs is one thing, but when you decide to manage that asset in-house, you’re essentially getting into a different business and incurring the related costs such as real estate, equipment, testing and payroll, whether or not the volume warrants it,” says Swaich. “We partner with our customers and review and adjust their SOPs together.”

Brian Petrie, now central procurement manager, Canadian Tire, has been working with BoxSys since the company first started in 1997 as a washing and asset management expert, because it made sense to rely on a single company rather than two separate firms to source, wash and repair its RPCs.

BoxSys owner Maninder Swaich

“At Canadian Tire, our focus is on ensuring the products on our shelves meet our customers’ needs,” says Petrie. “We’re not interested in washing and managing the RPCs because that’s not our core business.”

Every week, Canadian Tire relies on approximately 100,000 RPCs to carry its goods from four warehouses to more than 491 Canadian Tire retail locations and 90 PartSource stores across the country.

During peak seasons, such as the fall, this number can be as high as approximately 135,000 RPCs per week.

“If we don’t have an ample supply of RPCs, it can cripple us,” says Petrie. “I love the fact that I can absolutely rely on BoxSys to wash, repair and pack up a full trailer load, 2,400 RPCs, in a day and a half.”

Six years ago, Jagdev Bahra, manager, logistics, processes and projects, at Canadian-owned pharmaceutical company Apotex Inc decided to commit the 1,000-plus pallets required by Apotex Inc each week to a single supplier, rather than washing a small percentage of its pallets in-house and outsourcing the rest to several providers.

“Our expertise lies in the production of generic pharmaceuticals— it’s more cost-effective and a better use of our resources to turn pallet management over to an expert in that field,” says Bahra.

Every week, the 1,000 40- by 48-inch plastic pallets must be washed to eliminate cross-contamination between Apotex’s four

A special supplement brought to you by

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MM&D | March/April 2014

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Ontario sites that need the service. While there is little real dirt, even the smallest amount of dust that would typically be created by the finished pharmaceuticals themselves must be washed away.

“We needed a supplier that would work with us to understand our industry’s specific requirements and fully grasp the regulations around things like waste water,” says Bahra.

In the early days of the relationship, both Apotex and BoxSys faced unanticipated challenges but as far as Bahra was concerned, BoxSys handled it well.

“BoxSys is a smaller, owner-operated firm with a flat management structure,” says Bahra. “Apotex, despite its size and scope, is very entrepreneurial, and we want partners that think like us. At BoxSys, there isn’t any bureaucracy—they’re not obliged to go through various steps and approvals—they just do what they need to do to solve your issue.”

Demand for BoxSys services are such that in May, the company is moving from its 18,000sqf leased space to a 50,000sqf owned facility nearby. While it is currently running a single, automated washing line and one manual cleaning area for oversize and unusually shaped containers, the new space will allow BoxSys to add a second, more automated washing line to increase efficiencies, contain costs and accommodate greater volume from new clients.

“After I hired an outside consultant to audit and assess our business, I was informed that we were running below our potential because we lacked the space we’d need to take on new clients,” says Swaich.

“That’s when I started looking further ahead to a bigger future.”

BoxSys can accommodate containers as small as about 12 square inches to as large as four feet square. The containers range in colour from basic black to cherry red and brilliant blue. Some containers have hinged lids and others are open. Certain containers are essentially shallow, oversize trays with precisely molded compartments that secure and protect parts from jostling, rubbing and potentially damaging one another while in transit.

Today, BoxSys has nearly two decades in the business and a relatively new owner and CEO in Swaich, who bought the firm from the original owner in 2008. Swaich was hired the year after the company launched to input the production numbers. Initially, Swaich saw her admin position as a temporary summer job. But over the years, as she acquired new skills and responsibilities, the challenges kept her at BoxSys. In her roles as quality auditor and ISO coordinator, she became an integral part of the firm. In October 2008, Swaich, who was then operations manager, got a bit of a surprise. BoxSys would close forever that November and Swaich and the rest of the BoxSys employees had just one month to find other employment.

“The owner was more than ready to retire, the economy was poor and he’d been unable to find a buyer for BoxSys or its equipment,” remembers Swaich, who wondered where she’d take her 10 years of hard-won experience. “As I walked through the plant, I looked at how many employees, including me, would lose jobs. I knew what our equipment could do and the fact it was now destined for the scrap metal heap was really sad.”

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As the second-in-command at BoxSys, Swaich knew the industry well and recognized BoxSys’s enviable position as the only RPC management option in the GTA. As she puts it now, “I didn’t want to see a business with 10 years of success just disappear!”

Learning that the lease had expired gave her pause, but she persevered. “I knew I could run the business because I’d already been in charge of operations,” says Swaich.

Swaich was determined to recreate her job and keep everyone else on the payroll. The new location needed some work but it got done due in large part to her employees’ deep commitment to making it happen. When asked why they were painting alongside the professionals hired by Swaich, one of the older employees replied, “They way they’re painting our plant—it won’t be ready for us!”

“The fact I haven’t gone out for an RFP on our RPCs since 1997 indicates I’m very happy with my partnership with BoxSys,” says

BoxSys cleans up to 36,000 RPCs each day

Petrie. “When Maninder bought the business and took over as president and CEO, it was comforting and it further built my confidence in the company. My first choice was to stay with BoxSys over going back into the market.”

When Apotex’s Bahra learned that BoxSys had recently been purchased by Swaich, a former employee, he wanted assurance that he could continue to have a long-term relationship with BoxSys under a new owner. He didn’t want to go out to an RFP because he knew that 20 percent of respondents would be newer firms or start-ups, who may not go the distance.

“I’d known Roly for years and he had complete faith in Maninder’s abilities,” says Bahra. “The best supplier may not be the biggest or have the most equity and assets, but they have the flexibility and awareness to deliver the personalized, dedicated customer service that really sets them apart.”

What does that really mean to Bahra? A few years ago, when faced with an issue that needed immediate resolution, he called Swaich at home.

“The fact I had her home number speaks volumes as does the fact she solved the problem in just 20 minutes,” says Bahra. “Year after year, BoxSys proves their commitment to me and to Apotex.”

The plant operates Monday to Saturday, 7am to 11pm and can

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add a shift if required. Experience has proved customers’ businesses are cyclical and that demand ramps up with new product launches. In some cases, BoxSys knows that an uptick is imminent and can plan ahead, but Swaich and her employees are always prepared to accommodate emergency and rush orders.

“It’s what we do to help our customers run their businesses and it’s a part of our regular service—we don’t charge a premium—we just get it done,” says Swaich.

As would be expected, because the food industry’s standards are the most demanding, the new location will have a separate, second line dedicated exclusively to food containers. BoxSys complies with the ISO 9001-2000 standard, which is a hallmark of the consistency and reliability that ensure quality. As importantly, BoxSys meets the standards set by the Canadian Food Inspection Agency and has developed a 20-plus series of steps that address everything from employee training to line speed, water temperature and pressure. The steps also detail the use of approved detergents, sanitizers and chemicals for washing the containers, the plant floor and the trailer interiors.

The company is moving to a larger facility in May.

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Clean RPCs and lids are randomly tested daily for TPC (total plate count) and coliforms at BoxSys’ on-site laboratory and regularly verified at an independent, external laboratory. BoxSys’ production objective is less than 10 Colony Forming Units (CFUs) of bacteria, yeast or mold or less in 98 percent of the samples tested, but the industry standard is 50 CFUs. “When we put consumers’ health and safety on the line, we’re also putting our customers and our own reputation on the line so our operators manually check critical control points such as the water temperature and pressure as well as the chemical levels every 30 minutes although the industry standard is every 60 minutes,” says Swaich. “Our quality-control inspector also has the authority to stop the production line if we’re not meeting the necessary standards.”

Each pallet of washed goods carries a Pallet Inspection Tracking System (PITS) form so that BoxSys managers can identify the root cause of issues, then develop and implement corrective actions as required.

“Our customers are welcome to walk through the plant any time, but we also provide inventory status reports on a daily or weekly basis as specified by the customer,” says Swaich.

BoxSys staff, who have years of industry experience, work closely with customers and act as consultants when they see fit. For example, BoxSys recommended a meat processing client switch from wood

to plastic pallets which have proved more durable as well as easier to sanitize.

“Customers trust our experience,” says Swaich. “For example, while they’d like to save time and money by skipping the four-sided shrink wrap, they understand it keeps the RPCs and pallets pristine while they’re in transit.”

As required, BoxSys, which provides cradle-to-grave service, will order new RPCs and send RPCS that are past their prime to plastic recycling facilities. BoxSys receives the payment from the recycler, but applies a “material credit” to the RPC owner’s account.

Employees in quality, inspection and rotational production positions receive four months of apprenticeship training and are reviewed every four months. Annual employee bonuses, which are paid at Christmas, are tied to performance and targets.

Swaich is proud of the fact 16 BoxSys employees have been with the firm for more than 10 years while 14 have over five years with the firm.

“Our customers benefit because we have established a trust level and our teams regularly deliver good results,” says Swaich.

“Customers also know that they can always reach me directly when necessary—that accessibility and personal attention are differentiators and can ensure peace-of-mind. They know that I really do take our ability to meet their expectations very personally.”

YOU PERFECT IT. WE’LL PROTECT IT. Buckhorn offers an unmatched selection of reusable packaging solutions designed to protect your products and increase your profitability.

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News

Partnership has economic, environmental advantages Maersk Container Industry (MCI) and Primaira LLC have formed a partnership that will benefit producers who transport fresh produce and fresh-cut flowers.

Denmark’s MCI offers the Star Cool Integrated reefer container, a container solution that weighs less, carries more and consumes less energy than other containers.

Primaira LLC, a Boston, Massachusetts-based technology company, provides the Bluezone fresh preservation technology. The two companies are partnering to develop an air-cleaning system in Star Cool Integrated refrigerated containers.

The companies say tests and trials of the Bluezone technology have shown that it efficiently eliminates moulds, fungi and bacteria. Bluezone uses an ozone concentration 300 times higher than what is already on the market, and can effectively remove ethylene.

Both MCI and Primaira say that while they’re still working on the final design, so far the partnership is showing economic and environmental advantages that don’t currently exist in container transportation. The results show that together the technologies can extend the shelf life of fresh produce and fresh-cut flowers.

Bluezone also complements MCI’s well-known CA and AV+ systems, increasing the geographical reach of containerized transport and preserving the quality of fruit and produce.

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Cool solution Prescott, Ontario-based Kriska Group has signed a hardware and services agreement to equip its entire fleet of refrigerated trailers with the ibright refrigerated telematics system from Reefer Sales & Service, the largest dealer of the ibright product in Canada. International Telematics, based in New York City, provides the ibright solution.

Kriska says it selected ibright because its customers were asking about cold chain security and concerned about temperature abuse and tampering.

The ibright platform allows both Kriska’s employees and customers to see in real-time where their freight is; the current temperature and temperature history of the load; when and where the trailer was open; and, the health of the reefer including fuel levels. They will also be able to remotely change the reefer settings.

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WE INVITE YOU TO THE MUST-GO EVENT FOR SUPPLY CHAIN PROFESSIONALS THE APICS MONTREAL TEAM IS PLEASED to present you its 3rd Supply Chain Trade Show.

This event will be showcasing the latest trends in storage and handling equipment, technology, transportation, services, etc.

3RD EDITION SUPPLY CHAIN TRADE SHOW

May 29, 2014 from 1pm to 6pm

at Palais des congrès de Montréal

INVITED SPEAKERS

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JOINING THE

Modex 2014 showcases a vibrant industry

By MM&D Staff

I

f the show floor at the 2014 edition of MODEX was any indication, prospects for the materials handling business are very good. Attendance was up and dealmaking was in the air as buyers and exhibitors from around the world flocked to Atlanta, Georgia for the semi-annual show and conference.

The expo is sponsored by MHI and is designed to showcase equipment and systems solutions as well as learning opportunities that span the entire supply chain, from material handling to logistics across manufacturing, assembly and distribution.

The expo attracted 23,000 key decision-makers in virtually all manufacturing, logistics, distribution and supply chain industries. The expo featured almost 800 exhibitors, over 225,000 square feet. Reflecting the global nature of the expo, over 100 countries and six continents were represented at this year’s MODEX. “Attendees were manufacturing and supply chain professionals with very specific objectives and buying plans in hand. They know that investing in the latest supply chain innovations is the key to building and maintaining their competitive advantage,” said George Prest, CEO of MHI. “MODEX truly lived up to its motto, the greatest supply chain show on Earth. Attendees were impressed with the wide range of material handling, logistics and supply chain equipment and systems solutions and education offered, and exhibitors were very impressed with the quantity and quality of attendees,” he said.

MHI announced the winners of the 2014 MHI Innovation Awards at the show. The award educates and provides valuable insights on the latest manufacturing and supply chain innovative products and services. Intralox won the Best New Innovation award for their OMNI-DIRECTIONAL Sorter, and Product Protector LLC won the prize for Best Innovation of an Existing Product with their Product Protector.

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Along with the healthy traffic on the show floor, MODEX featured a supply chain conference that included three keynotes, from Gil West, executive vice-president and chief operating officer at Delta Air Lines, William Strang, president, of the Americas – Operations Group with TOTO USA, and former Walmart CEO Lee Scott. During the March 19 keynote, George Prest and Scott Sopher, principal with Deloitte Consulting LLP’s Supply Chain practice released the findings of The 2014 MHI Annual Industry Report Innovations That Drive Supply Chains. (See sidebar story, next page) The MODEX Supply Chain Conference also included 150 educational seminars outlining leading trends, best practices and state-of-the-art equipment and technology solutions. In addition, MODEX 2014 partnered with several industry organizations that co-located events with MODEX 2014 including the Georgia Logistics Summit. Webinars of MODEX 2014 educational seminar sessions are available online at www.MODEXShow.com/seminars.

MODEX Classroom Day introduced over 300 highschool and university students and educators to career opportunities in material handling, supply chain and logistics through hands-on learning and networking with industry professionals. This year’s Classroom Day combined an interactive educational session with a dynamic guided tour of the MODEX expo.

MODEX Industry Night at the Georgia Aquarium was an exciting and entertaining networking event with over 1,500 attendees and exhibitors in attendance.

On the show floor

Intelligrated Intelligrated and software subsidiary, Knighted, showcased new fulfillment execution software, fulfillment technologies and automated material handling equipment that delivers the speed and accuracy retailers require to satisfy e-commerce and omnichannel fulfillment demands.

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The 2014 MHI annual industry report Innovations that drive supply chains (The following is excerpted from the 2014 MHI Annual Industry Report)

Automated material handling technologies on display include the latest Intelligrated conveyor and sortation solutions, including the new motor driven roller (MDR) transfer conveyor. The section facilitates a 90-degree change in direction of cases, polybags and totes to satisfy the product handling demands of e-commerce and omnichannel fulfillment operations.

The Intelligrated MDR transfer conveyor

The MDR transfer has drive rollers with integral 24-volt DC motors for individually powered zones and multiple transfer belts with adjustable band spacing to maximize product control and operational flexibility needs. The innovative design maintains a constant product height increasing power efficiency, item control and throughput rates.

Ideal for close operator interaction, the bi-directional MDR transfer offers quiet operation and run-ondemand features that use up to 50 percent less energy than traditional conveyors. Improved controls and efficient designs allow quick startup, simple belt replacement and easy maintenance for maximum uptime.

Intelligrated’s visitors experienced live demonstrations of new picking technologies and Knighted fulfillment execution systems, a new software model that delivers real-time optimization of labour, processes and automated equipment.

Intelligrated also showcased its resident maintenance programs that place qualified technicians on site to keep automated systems running efficiently, for operations looking to extend the life of equipment with guaranteed uptime and lower maintenance costs.

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upply chain executives understand the need to capitalize on powerful new technologies and business innovations that can help address and manage the increasing complexity of today’s global supply chains. In the past, companies tackled supply chain challenges primarily by focusing on internal cost reduction and improved operational efficiency. However, those traditional approaches are losing their effectiveness as supply chains become longer and more intricate, with more inter-connecting links, higher stakeholder expectations, and more sources of risk. This increasing complexity is forcing companies to rethink their approach to supply chain improvement.

In late 2013, MHI and Deloitte conducted their first MHI Annual Industry Report survey. The topic of this survey was “Innovations that Drive Supply Chains” and the goal was to provide an up-todate perspective on emerging supply chain trends. The survey included more than 450 respondents from large and small companies across a wide range of sectors, including: Retail and Wholesale, Consumer Packaged Goods, Automotive, Consulting, Life Sciences and Healthcare, Transportation and Warehousing, Material Handling and Supply Chain Equipment and Related Services. The vast majority of respondents were senior executives, with more than half being C-level executives, Managing Directors, Senior Vice-Presidents, Vice-Presidents, or Directors.

According to our survey, the top two strategic priorities for supply chain executives are Supply Chain Analytics and Multichannel Fulfillment.

Supply chain analytics. Analytics tools and techniques harness data from a wide range of internal and external sources to produce breakthrough insights that can help supply chains reduce costs and risk while improving operational agility and service quality. At many companies, the supply chain function is a step or two behind the commercial side of the business when it comes to capitalizing on the power of analytics.

Multichannel fulfillment. Today’s consumers want to shop for what they want, where they want, when they want—and then have all of their purchases delivered quickly and consistently, whether their timeline is next day or even same day. Although many retailers now do a decent job on the front end handling orders through their various channels— retail, wholesale, and online—many are still struggling to adapt their back-end fulfillment processes. The survey also revealed two major Continues on page 24 23

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SSI Schaefer: At the SSI Schaefer booth visitors saw various technologies, including the Logimat automated storage and retrieval system. Logimat has trays on both the front and back of the unit, moving inside an enclosure via an elevator that delivers them on demand to the open picking window. Schaefer calls it “in principle an automated tool drawer cabinet.”

The Pick@Work system also on display combines ergonomic workstations with pick-by-light technology. The unit leads the employee step-by-step through the work process via instructions displayed on screen.

It can guide assembly of tiny (batch size one) and small series (batch sizes up to 300) and/or assembly at a pick speed of up to 600 lines per hour.

The SSI Schaefer Autocruiser

A third technology shown was the Autocruiser, which is a scalable transport solution to meet the gap between forklift transport and conventional conveyor technology. It can handle 10 to 500 moves per hour for items up to 30 kg.

Engineered Lifting Systems: ELS showed how its Destuff-IT unloader allows for fast, ergonomic trailer unloading operations. The end-of-conveyor solution speeds up manual unloading or loading processes, and prevents worker injuries by making bending, twisting and repositioning of conveyors unnecessary. Improved productivity means fewer employees, lower costs and potentially even fewer dock doors needed in a facility.

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Continued from page 23 barriers to development and adoption of supply chain innovations.

Talent shortage. To capitalize on the latest innovations, companies need supply chain talent with the right skills, experience and mindset: people with deep business and supply chain knowledge who are also willing and able to apply new tools and methods. Unfortunately, finding qualified workers is already at a crisis point with baby boomers starting to retire and a scarcity of younger workers to replace them. And with the supply chain field expected to add 1.4 million new jobs by 2018, the issue will likely only increase in intensity.

Continued focus on cost reduction. Over 70 percent of respondents say that “controlling costs” is a top priority, making it the number one focus area for supply chain executives. However, this singular focus might now be working against them, choking off investment in essential innovations that are the key to longterm growth, performance and efficiency. Although most respondents expect to increase their supply chain investments over the next three years, in many cases it will be just enough to get by and not nearly enough to drive disruptive innovation and competitive advantage.

Three emerging innovation areas are not yet top of mind for executives…but may be soon.

Sustainability. Four out of five respondents say supply chain sustainability is at least “moderately important.” However, over 60 percent of respondents admit to significant capability gaps that may be preventing them from implementing and fully benefitting from sustainability initiatives. Leading companies are adopting a holistic approach as they start to recognize sustainability is as much about increasing the value of their overall brand as it is about the ROI of individual projects.

Mobile and machine-to-machine (M2M) technologies. Companies of all sizes are beginning to apply these technologies to their supply chains—but at this early stage the large majority (70 percent) report significant capability gaps. Looking ahead though, 73 percent of companies plan to continue investing in this area, and nearly half expect their investments to increase over the next three years.

3D Printing. Additive Manufacturing—known as “3D Printing”—is getting a lot of attention as a technology that could transform supply chains by localizing production and enabling just-in-time manufacturing. However, there is a big gap between future vision and current reality. According to our survey, only 17 percent of respondents view 3D Printing as a strategic priority, while 70 percent say they are not sure about its future impact. That said, the technology has clear potential and companies should follow it closely and be prepared to invest quickly as it matures and additional applications become available.

This report takes a closer look at these strategic priorities, major barriers and emerging innovation areas, and offers data-driven insights on how they are shaping supply chains of the future.

For more information or to download the entire report visit: www.mhi.org/publications/report

MM&D | March/April 2014

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E-manifest

explained Information flow key to product movement

By Lynn Wark

A

nyone associated with today’s shipping industry will tell you it’s a highly complex and competitive market, making for an extremely dynamic journey for those of us who have made international trade our mission. Having worked in this industry for 30 years, I can tell you about the importance technology plays in maintaining a competitive edge, along with its increasing contribution to facilitating global trade now and in the future. That is why Canada’s international logistics industry has a lot to reflect upon on the 10th anniversary of the Canada Border Services Agency’s (CBSA) Advance Commercial Information (ACI) initiative.

Launched in the spring of 2004 with the reporting of inbound ocean freight shipment detail, ACI allows the CBSA opportunities to screen shipments for health, safety and security risks prior to their arrival.

ACI accomplishes this, in part, by requiring carriers to electronically transmit marine cargo data to the CBSA at least 24 hours prior to loading cargo on vessels at the foreign port. Two years later, the CBSA expanded ACI’s scope by requiring air carriers and freight forwarders to electronically transmit conveyance, cargo and other cargo data to the agency before shipments arrive at Canada’s borders. The final modes of transport pending implementation of ACI reporting requirements are highway and rail.

Enter eManifest Implementation of eManifest, the third phase of ACI, will provide the CBSA with additional shipment data detail for risk assessment purposes, establish advance electronic requirements for all modes of transportation, and enhance current processes for ocean and air. eManifest will require carriers, freight for26

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warders and importers to electronically transmit advance cargo information to the CBSA within mandated time frames. In support of eManifest, Customs sufferance warehouses will be required to transmit electronic cargo arrival notices to the CBSA when goods arrive at their facilities. Once fully deployed, eManifest will provide the CBSA not only the visibility of additional shipment data but also the tools to effectively support an electronic commercial environment for processing shipments.

The Canadian government has specified that eManifest will feature: • An enhanced automated risk assessment, supported by business intelligence technology and data warehouse; • An eManifest portal reporting option; • An integrated passage system for the incorporation of transponder technology, and advance electronic information from highway and rail carriers, freight forwarders and importers.

Once eManifest is fully deployed, each eManifest stakeholder will be required to provide the CBSA with detailed shipment data, which will be compared to the entries of all involved parties to verify the information is consistent.

eManifest Rollout The CBSA will implement eManifest in three phases with a scheduled completion in 2016. The first two phases will establish requirements for electronic pre-arrival information in the highway and rail modes, make enhancements to existing ACI requirements in the ocean and air MM&D | March/April 2014

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modes, and give the CBSA the power to develop administrative monetary penalties (AMP) for noncompliance with eManifest requirements.

The final phase of eManifest, expected to be introduced sometime between 2015 and 2016, will require Canadian importers to electronically submit importer advance trade data (ATD) to the CBSA within the prescribed mode-specific time frames.

According to the CBSA, ATD requirements will build upon existing electronic data interchange (EDI) sets, which align with the World Customs Organization and US Customs and Border Protection.

Providing ATD information to the CBSA is a new step that importers will need to incorporate into their import processes for shipments into Canada.

Some considerations include: • Transportation and logistics practices with vendors, carriers and freight forwarders to meet • eManifest reporting timelines; • Identification and authorization of a third-party service provider as needed; • Purchase orders, contracts and service agreements should be reevaluated to confirm all parties to the shipment are meeting the obligations set out by the CBSA. Regulatory requirements for ATD include the following data elements: • Buyer (purchaser) name and address • Cargo Control Number • Consignee name and address • Country of origin/state • Country of export/state • Commodity HS code • Exporter name and address (if different than seller) • Importer number, name and address • Manufacturer name and address (Last entity that manufactured, assembled, produced or grew the commodity or the name and address of the supplier in the last country from which the finished goods left when the country of export is a country other than the US Mexico, Puerto Rico or Canada.)

• Seller (vendor) name and address It is important to note that importer ATD filing does not replace the obligation to obtain a Customs release. Shipment information will still be required to be transmitted within the time frames under the release of commercial goods requirement.

Also included in the final phase of eManifest implementation are changes to the following five regulations made under the Customs Act: • Reporting of Imported Goods Regulations • Customs Sufferance Warehouse Regulations • Designated Provisions (Customs) Regulations • Transportation of Goods Regulations • Presentation of Persons (2003) Regulations (consequential amendments) www.mmdonline.com | March/April 2014

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Benefits on the Horizon As with any type of investment of this magnitude, immediate benefits to trade may not be realized for some time. Costs associated with transition from a paper-dominated environment to an electronic process will centre primarily on computer platform development and enhancements as well as training and communication.

The possible benefits of eManifest to industry include: • Shipments clearing Customs in a timely manner as a result of assessing risk prior to shipment arrival at the border and eliminating possible bottlenecks; • Added operational efficiency due to close alignment with the US electronic manifest process; • Elimination of paper preparation and storage; • Reduction in the use of paper and ink.

• Possible benefits to the CBSA include: • Information from all appropriate parties for risk assessments purposes prior to shipment arrival; • Standardized application format across all modes of transportation; • More effective tracking of in-bond freight movement; • Greater transparency of import transactions; • Enhanced ability to identify unmanifested and high-risk cargo; • Centralization of targeting activities; • Decreased processing time at the border.

The CBSA reported in the Canada Gazette Notice of February 15th, 2014, Regulations Amending Certain Regulations Made Under the Customs Act, that the full implementation of the proposed eManifest initiative is expected to result in a net benefit of $470 million ($377 million to the businesses and $93 million to the federal government), realized over a 12-year period beginning PRE-ARRIVAL REPORTING TIME FRAMES ESTABLISHED BY THE CBSA Ocean Air Rail

24 hours prior to the loading of goods on board Four hours prior to arrival, or at time of departure At least two hours before the train is expected to cross the border

Highway At least one hour prior to arrival

in 2014. CBSA attributed the expected savings to reduced delays at the border and efficiencies gained from replacing paper with electronic transmission.

Ultimately, border security is the CBSA’s primary focus, and eManifest is a process to help Canadians achieve a more secure border. Canada can benefit from technology-driven security and risk-based screening, promoting legitimate trade and focusing resources on higher-risk cargo. It gives me great satisfaction to participate in this growth and foster global trade. MM&D Lynn Wark is Vice President and Regional Officer of FedEx Trade Networks Transport and Brokerage (Canada), Inc. 27

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Pick to

By Justin Doan

W Justin Doan

e live in a time where the ability to bridge our physical reality and the virtual world is making us more efficient decision makers. From the Google Glass Project to Oculus Rift’s virtual reality gaming headset, we are constantly surrounded with new ways to access information faster and smarter in order to make the right decision.

While many of these technologies are being built with consumers in mind, some may prove to be more valuable when applied to specific industries. Let’s take the Google Glass—camera-enabled, head-up display (HUD) headgear for everyday life—and put it in a food distribution centre. This new technology could help improve productivity by offering a true hands-free technology with a natural way to gain crucial data.

The evolution of picking technology First, let’s go back in time to when picking methods were purely list-based. During that period, an operator had his “shopping list” and fulfilled it as his shift progressed. This method is low risk, low cost and gave the worker some foresight on his pallet build.

Unfortunately, this approach yields a lower pick rate since it requires one hand to hold the list—resulting in a longer cycle time and low pick accuracy, not to mention the fact that a list can’t give feedback to your warehouse management system (WMS). This method is best suited for distribution centres with low volumes that cannot afford to implement new technology. As time went on, pick lists evolved into labels, which slightly improved accuracy.

With the rise of information technology, a new type of picking method emerged in 1987: the radio frequency (“RF”) pick by Shirk and Bredenbeck, which served as an automated documentation system. This new approach gave the employee a portable scanning device, initially in the form of a scan gun, to quickly scan information on the product and/or case she was picking, and to display different data on her work order.

The RF pick significantly improved order accuracy.

This method, however, still resulted in a low pick rate since the operator has to hold the gun in one hand or 28

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continuously walk back and forth to acquire the gun.

The advent of more compact arm-mounted units eventually helped increase the productivity of these particular tools, freeing both hands to pick.

In the early 1990s, the pick-to-light method was introduced as a solution to the “cluttered hand” problem. With pick-to-light, the worker visually scans for lit-up locations that show the number of cases to be picked, picks the product, and confirms the pick by pressing a lighted button. This “hands-free” method naturally boosted pick rates and accuracy from list picking, but still contains a number of drawbacks.

To implement such a system is quite expensive (about $300 per pick location), requires a reliable information system to support it, and mandates that you can’t have more than one order in each section. Given these limitations, pick-to-light tends to be a viable option mostly for unit-pick environments.

By the end of the 20th century, voice recognition technology or “pick to voice” became a functional option.

This particular solution works well in distribution centres with a large number of items spread out across the warehouse because it gives employees time to confirm their pick and listen for the next location. This hands free method allows the operator to converse with the WMS and obtain key information (eg, location number, quantities, product descriptions) about his order.

Implemented in the right environment, this technology provides an efficient process, with minimal errors.

The downside is that the system and hardware can be expensive. Also, in a sound intensive environment (ie, one with blowers, fans, etc), the picking process could be disrupted by noise interference, forcing repeat communications to fulfill one order. Voice processes can also become a bottleneck when used in a high pick-density situation. Further, the operator does not have visibility into the remaining cases to be picked; she is essentially picking blindly, which makes pallet building more difficult, increases the amount of cases requiring re-handling, encourages fatigue and reduces the effective pick rate.

What’s next?

What does the future hold for picking technology, and where should distribution centres strive to be?

MM&D | March/April 2014

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vision

A new approach to reality in distribution centres

After analyzing the industry’s technology track-record, it’s clear that hands-free methods prove most successful in terms of pick rate and accuracy. In an ideal world, distributors would benefit from a new method that incorporates the accuracy of RF-picking with the hands-free, organic feel of pick-to-voice. Adding head-up display (HUD) to either technology could be enough to fulfill this tall order.

At first glance, the idea of combining HUD picking with older technologies might seem new or sexy. But considering HUD’s accuracy and efficiency benefits, it’s a simple way to realize the best of both worlds.

Consider an example of how moving from a wristmounted device to an HUD can improve operations: arm units only offer a few square inches of display space, often limiting the amount of information that can be shown, and resulting in cluttered screens. To get access to all of the information needed, the operator may need to scroll through multiple screens, taking up even more time. The operator also needs to move his arm to bring the display in focus; most of the time this can be done simultaneously with other actions, but in some cases this can detract from overall productivity.

With the HUD display, an operator has continual access to what is the equivalent of a 15-inch display that follows your every move, providing as much or as little information as needed. The information can be tailored to suit the individual needs of the operators.

For example, an inexperienced employee may be shown more information than a seasoned employee. Saving a few seconds here and there might not seem that significant to the bottom line, but once you start multiplying those seconds by thousands of picks on a daily basis, and hundreds of employees, the monetary advantage of HUD integration becomes obvious.

HUD can equally elevate the power of voice-picking operations. HUD technology can alleviate the two main concerns about voice-picking: the time needed for the system to communicate the information to the user (it sounds like an automated phone menu) and the “blind” picking issue. The operator would have his assignment and shift performance displayed in real-time. It would show him visual cues like GPS direction for the best way to get to his next location (eg, avoiding busy aisles), staging dock information, www.mmdonline.com | March/April 2014

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vehicle battery levels and other useful metrics.

Implementing an HUD in your operations gives employees vital information to allow them to make decisions faster, while keeping both hands free.

Beyond making the individual operator more productive, having headgear equipped with a miniature camera improves communication between team members. These cameras could be used as barcode scanners to confirm UPC or product locations, or even to report damage. It would give supervisors access to hundreds of pairs of eyes, creating a real-time feedback loop on the state of the distribution facility.

A not too far-off future The idea of such an avant-garde project is very tempting for any tech enthusiast, but each new technology implementation has its challenges. Given the newness of HUD technologies like Google Glass, we don’t yet have all the answers or hardware required to introduce it (without hiccups) into the distribution world—but it is only a matter of time before we do. The current displays will need to be stronger to withstand industrial environments (eg, extreme temperatures, high humidity). And, as with most new gadgets, there will be a significant training period required to ensure all employees use the tools safely and correctly. Until that time, we can prepare ourselves by creating the right way to display the information and establishing standard operating procedures (SOPs) for how to integrate HUD with existing infrastructure.

There’s a plethora of questions we could debate on HUD technology. Is this really the next big thing in picking technology? When ready, will this technology deliver on its promise to revolutionize distribution centres? Will the advantages outweigh the costs? Will we be able to design a proper user interface that will be efficient for the warehouse environment? Is it even safe?

It’s simply too premature to answer many of these questions. For now, given the tremendous advantages of HUD technology that we do know, we cannot ignore the potential benefits it would bring to the distribution environment.

MM&D Justin Doan is a consultant and industrial engineer in West Monroe Partners’ Montreal office.

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LEGAL LINK

Communicate clearly “What we’ve got here is failure to communicate.”

— 1967 film, “Cool Hand Luke”

T Marvin Huberman

he recent British Columbia Court of Appeal decision in Pageant Media Ltd v Piche is a cautionary tale illustrating the need for clear communication when entering into a contract, especially on behalf of a corporation.

To avoid personal liability, employees, agents, officers and directors who are acting as representatives of a company MUST identify the company as the contracting party. Otherwise, third parties are entitled to assume that these people are contracting on their own behalf rather than as agents for the corporation.

In Pageant Media, the defendant, Chris Piche, the president and chairman of CWC Gaming SA, a limited liability company incorporated under the laws of Costa Rica, was found personally liable under a contract with the plaintiff company, Pageant Media Limited, to provide advertising services in its magazine, “eGaming Review”.

The main issue before the Court was with whom the plaintiff entered into that advertising services contract; with CWC Gaming SA or with Piche personally.

The lower court decision The defendant argued that he should not be personally liable since he contracted on behalf of CWC Gaming SA, a limited liability corporation, when he signed the contract, although the purchaser in the contract was identified as “CWC Gaming” without specifying that it was a limited liability company. He further contended that, although he never told the plaintiff that CWC SA was a limited liability company, and that the correspondence between the parties did not use the corporate designation “SA” or “Ltd” or “Inc”, the plaintiff knew, or should have known, that it was dealing with a limited liability company.

The defendant brought a summary judgment application for dismissal of the plaintiff’s claim, and the plaintiff brought a counter-application for judgment against the defendant for $28,880.30.

The motion judge heard both applications and found the defendant personally liable under the advertising services contract with the plaintiff. The judge held that there was “a duty to advise the plaintiff that they were dealing with a limited liability company” and that this duty was not fulfilled because the contract, correspondence, invoices, and even the defendant’s business card all referred to CWC Gaming or CWC, and not to CWC Gaming SA, being the appropriate designation for a limited liability company from Costa Rica.

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The court of appeal majority decision The majority of the BC Court of Appeal concluded that the burden of proof to show that Pageant Media contracted with Piche’s company, CWC Gaming SA, and not with himself personally rested with Piche.

Indeed, Pageant Media was not required “to lead evidence that it did not know it was dealing with a limited liability company except in response to Piche’s evidence to the contrary.”

The majority justices further concluded that: “The obligation to disclose that one is acting on behalf of a corporate principal exists whenever one seeks to rely on that limited liability; it is only the content of the obligation that may vary with the circumstances. For instance, that obligation may be met on the face of the agreement itself...”

The Court then held that the evidence presented by Piche failed to satisfy the burden of demonstrating that Pageant Media knew or ought to have known that he was acting solely as an agent for a limited liability company. In consequence, he was found personally liable.

Points to communicate clearly When a person signs a contract as an agent for a limited liability company, he or she has the onus to advise the third party of this fact, in default of which that person when sued may not be allowed to hide behind “the corporate veil” and is very much at risk of being personally liable.

Make it clear on the face of the contract when signing on behalf of for example, “ABC Distributors Ltd” that only the limited liability company will be liable and that there is no personal liability.

Indicate on all relevant contractual documents, correspondence, invoices, cheques, and business cards, that the entity with whom the third party is dealing is a limited liability corporation whom the individual is representing as its agent, and not in his or her personal capacity.

Pay close attention to pertinent statutory provisions that govern the subject contract which may be analogous to, for example, Sections 10, 11 and 21of the Ontario Business Corporations Act, R.S.O. 1990, c.B.16 at www.canlii.org.

MM&D Marvin J. Huberman, LLM, (www.marvinhuberman.com) is a Toronto trial and appellate lawyer, mediator and arbitrator.

MM&D | March/April 2014

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14-04-16 3:56 PM

LEARNING CURVE

Grains and trains C Tracy Clayson

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anada, which boasts a $5-billion grain transportation business and is the world’s largest canola and second largest wheat exporter, had a bumper crop in 2013 with a 76 million-tonne crop of wheat, canola, barley and other grains. This was 40 to 50 percent higher than in 2012.

That’s the good news. The bad news is Canada is currently suffering from an enormous transportation challenge.

According to industry publication Grainews, grain handlers have continued to be frustrated by the lack of supply chain effectiveness to move their product in a timely fashion. With empty ships waiting at ports, demurrage charges applied to farmers have exceeded $25 million.

The lack of sufficient rail service has had a negative impact on Canada’s overall exports potential. A recent decision by the US and Japan to source grains from elsewhere due to Canada’s lack of supply shows the situation is dire.

For farmers, the huge crop expansion, instead of producing higher financial gains, has created a huge financial and cash flow crisis due to the significant transportation backlog and an inability to cash in when grain prices are strong.

Attempts have been made to tackle the issue.

Government intervention, in the form of support from the Canada Transportation Act, forced Canada’s railways to respond to what members of the Western Grain Elevators Association describe as a “transportation mess”.

Criticism by the grain industry of both rail lines has focused mainly on the impact of cost cutting and reduction of fleet, services and personnel, with complaints that the railways delivered 51,000 fewer than ordered rail cars as of mid-February.

In March, Transport Minister Lisa Raitt announced the government had issued an order in council to force Canadian National (CN) Railway and Canadian Pacific (CP) Railway to move 500,000 tonnes of grain each week, about double the current volume.

If they fail to meet the targets, they will face daily penalties of up to $100,000.

But Mark Hallman, director of communications and public affairs at CN, has defended his company’s service, citing an increase of 12 percent more grain car shipments above the five-year average and blaming abnormally cold weather for much of the slowdown in shipments.

For safety reasons, the railways reduced

the number of cars their locomotives pull in winter to 70 percent of what they move during warmer months.

A recent Globe and Mail report did show CP was idling 400 locomotives and 2,700 cars due to cost cutting under the leadership of CEO Hunter Harrison.

Ed Greenberg, spokesperson for CP, complained the railways are unfairly taking the blame for everyone in the supply chain. And in a March 31, 2014 story in the Calgary Herald, CP’s CEO Claude Mongeau argued the speed and lack of consultation before the government changed the rail transportation system could result in “unintended consequences”.

Mongeau said CP continues to make “significant progress” to reach its goal of transporting close to 5,550 gain cars per week, but can only meet its commitment “if other key players in the supply chain are equally held to account for their performance.”

But Wade Sobkowich, executive director of the Western Grain Elevator Association, said grain companies are already held accountable for their performance by tariffs, which allow the railways to penalize them if they are unable to load or unload rail cars within a specific time. Sobkowich suggested railways be subjected to fines payable to grain companies and passed on to farmers if they can’t deliver rail cars on the days they promise.

CN Rail CEO Hunter Harrison, in an open letter to the public on March 6, wrote “…we should all focus on commercial solutions to maximize overall capacity in the grain supply chain.

“This is especially important if these larger crops become the new normal as has been suggested. If this is true, a system grounded in commercial principles, not regulation, is required to address the capacity constraints and the significant investments required, including replacing Canada’s aging grain hopper fleet.”

There seems to be no simple solution. Agriculture Minister Gerry Ritz has promised to keep closer tabs on the rail lines, focusing on increased reporting, from quarterly to monthly performance results, but increased vigilance may not be enough.

Whether the answer is more or less industry regulation, finger-pointing is certainly not bringing the players in the supply chain together. We need less rock-lobbing and more discussion around this issue.

It’s time to work toward solutions. After all, better movement of grain benefits everyone.

MM&D Tracy Clayson is managing partner, business development of Mississauga, Ontario-based In Transit Personnel. tracy@in-transit.com MM&D | March/April 2014

14-04-16 3:29 PM

MATERIALS HANDLING

Is there a drone in your warehouse?

W

hile warehouses are an important supply chain link, they offer specific problems for the use of drones. A properly designed and built warehouse is vertically crowded; racking and other overhead obstructions in functional areas leave limited room to maneuver.

Drones also face problems because a number of the vertical obstructions—such as fork trucks with elevated masts—are mobile, not fixed. This means you cannot create a three-dimensional map of the fixed obstructions to avoid collisions. While the technology for this has been around for a long time in two dimensional space (think self guided vehicles as an example) three dimensional spaces is a much more complicated situation.

There is also the problem of traffic rules. Who gets priority—the drone or the forktruck?

Power and lifting capacity also limit today’s drones, as activities like case-handling would require larger drones. Bigger drones magnify the issue of maneuvering room.

In spite of these hurdles, a number of warehouse applications are viable for drones today, although they are in peripheral, not mainstream, warehouse activities. As drone vehicle capacity increases and control finesse expands these will increase, but today we will concentrate on activities that can be handled by existing technology.

Starting at the inception of a warehouse, even before construction, a number of operations are practical.

Take the purchase and sale of land or existing buildings.

Use of a drone in real estate offers a number of possible advantages. It provides a unique aerial view of a site and surrounding real estate. For an existing building, it can help provide an assessment of the exterior and even interior, if it is unoccupied. Some of the information can be quite valuable in real estate negotiations.

Think of the value of preliminary roof or warehouse floor inspection of an existing building, for example.

Once a property is purchased there are a number of potential applications in the assessment and design phases. These could start with surveying and preconstruction engineering activities. For an owner or his engineering representatives it will also provide a means to monitor and review construction progress.

Once the warehouse is constructed and operating, a number of functions are reasonable candidates for drone use. The most obvious one is perimeter security, www.mmdonline.com | March/April 2014

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particularly for larger facilities. Thieves are very good at spotting fixed cameras, but a drone provides mobile surveillance that can cover blind spots, like the roof, at night.

It also provides a capability to monitor activies like shift change for employees. This will help deter one of the major concerns of inside theft, as goods illegally removed from the inside often have to be transported to an employee vehicle. Other illegal activity in employee parking lots, like drug dealing, can be deterred.

Loading dock exteriors can be also monitored for dock allocation and related activities, as well as dock security and safety. For larger facilities, there are a number of trailer yard activities that can be monitored or controlled.

Maintenance of both facilities and grounds can be simplified by a drone. Often activities like a roof inspection after a wind storm or roof drain inspection are neglected, because of the time and effort required.

Especially for larger facilities, a drone can greatly speed up the process.

Inside the warehouse use of drones is more difficult, but not impossible. Loading docks are less restricted overhead than other parts of the building, so this is a logical place to start. Most lift truck activity has limited vertical elevation in this area, giving the drones potentially more airspace.

Two other warehouse functions offer potential for drone use. Inventory counting may be an interesting area to start with if only case counting is needed. An obvious area is large-volume, deep-lane block storage which is both difficult and dangerous to count by conventional means. A drone could easily fly in, and using an RF scanner could have the count quickly.

Finally, drones maybe beneficial for accident prevention and emergencies. An example is a pallet hangup at upper push-back rack levels, or in emergency cases like a fire and post-fire assessment. While this column has only scratched the surface, it is obvious that the uses will expand in coming years with increased drone capability.

Old timers like myself remember a warehouse management technique referred to as “managing by walking around”. Drones also offer the potential to reinvent this management tool.

MM&D

Dave Luton

Dave Luton is a consultant in the greater Toronto area. dluton@cogeco.ca 33

14-04-16 3:29 PM

GUEST EDITORIAL

The logistics tipping point O Aaron Lalvani

ver the past 20 years I have seen many changes within the logistics landscape, from the impacts of deregulation to the growth of 3PLs and transportation brokerages, and the technological advancements made by many trucking organizations. There is no doubt that transportation providers, for the most part, have become sophisticated, purpose-driven and solutions-oriented.

Industry experts have said outsourcing would not succeed because the asset-based carriers had control of the marketplace through their ownership of the fleets. Does this idea still have any weight behind it?

What does the future hold for the industry? Who will be the winners and losers? Can there be equilibrium between price and capacity in a competitive environment for the trucking sector?

I want to approach this article with dialogue in mind. My intention is to engage the industry in a constructive dialogue to move the pendulum as close to equilibrium as possible. I do, however, want to challenge old notions and status quo mind-sets around the shipper-carrier relationship.

Eric Gignac, VP at Guilbault, told me he believes the trucking industry, to a great degree, allowed the way for 3PLs and broker firms to be so prevalent. He believes carriers just didn’t meet customer expectations with respect to systems and fulfillment.

Cambodian Market “Collaboration” and “partnership” between shipper and carrier are not always synonymous with mutual benefit within the logistics environment. At conferences, in the trade media, and in online forums when this topic has come up, it seems to divide opinions and a lot of rhetoric occurs. Why do these discussions cause such a reaction? Let me challenge this on two fronts—the relationship is price-driven and carrier agreements can be terminated quickly without repercussions for the shipper.

In 2009 I went to Phnom Penh, Cambodia, to teach English. One afternoon, we went to a local market to purchase souvenirs. It is under a tarp sheltering hundreds of stalls filling two city blocks. The foot traffic resembles the 401 in Toronto’s rush hour. At one stall I noticed a traditional Khmer shirt and pointed it out to my friend. In seconds two young women hovered around me. “You buy!” one young woman said. I told her, “No, thanks.” The other woman started showing me shirts, asking me to try them on. They didn’t stop pushing product on me. “No” was not an acceptable answer to these entrepreneurs. The conversation moved immediately to price.

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At that point I noticed several stalls around me with the same shirts. “Let the negotiations begin”, I said to myself. I am sure these entrepreneurs did relatively well in the end, but I leveraged everything I could to get the best deal for myself. They, too, negotiated hard, but the dialogue moved away from any product or service differentiator simply to price. The best price for both parties had to be negotiated if a deal was to close.

Price will drive buyers and sellers to either make a deal or walk away. Whether in the Cambodian markets or behind a boardroom table in North America, price is a huge motivating factor, and that fact will never change. So how do carriers deal with this reality?

Should they let market pricing determine their selling price? Do they understand their cost structures and turn unprofitable deals down? Do they curtail services and upgrades to equipment and IT infrastructure?

Perhaps the answer is somewhere in the middle.

Conversely, do shippers have to adapt to a new model of freight procurement and pricing to maintain the viability of the rolling stock that moves their goods to market?

Price and capacity equilibrium In an industry where suppliers have multi-million dollar assets (in tractors and trailers), and overheads, such as fuel and maintenance, IT tools, sustainability initiatives endorsed by shippers, and so on, where is the convergence of price with capacity going to end? In a regulated market with new hours of operation rules, harsh winter conditions pushing maintenance costs to record levels, and drivers who are demanding more pay, trucking firms curtailing fleets or rationalizing service regions, how will the market respond? Will there be a general rate increase higher than budgeted for? Will carriers purposely de-market poor performing lanes? These are questions shippers need to contemplate as they build future logistics budgets and network plans.

I believe we are on the edge of a transformation in the industry’s mindset from traditional procurement strategies, to how transportation providers will service shippers’ needs in the long run. I call on both sides to challenge the status quo and build networks that are profitable to all. In the end, our ultimate customers must benefit from this change—without them in mind it is a futile exercise.

MM&D Aaron Lalvani is president of the Lalvani Group, offering lean manufacturing, supply chain management and logistics consulting.

Aaron@lalvanigroup.com.

MM&D | March/April 2014

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