Canada’s magazine for procurement and supply chain management professionals
THE CASE FOR INCLUSION Supplier Diversity and ROI at the 2013 National Supply Chain Forum in Calgary
Also inside: A view from the CPO’s suite ProcureCon Canada 2014 Contract Management Strategies PM 40069240 $18.00
The Future of Procurement PBB01_OFC.indd 1
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Canada’s magazine for procurement and supply chain management professionals
features 80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9
Dorothy Jakovina 416-510-6899, firstname.lastname@example.org Addressing issues affecting Canada’s public procurement professionals EDITOR
Michael Power 416-442-5600 ext 3259, email@example.com Fleet Management/CAR Editor
Emily Atkins 416-510-5130, firstname.lastname@example.org Art Director
Sandy MacIsaac 416-442-5600 ext 3242, email@example.com
Contents Vol. 56, No. 1 FEBRUARY 2014
11 Diversity and ROI Panelists weigh in on the business case for supplier diversity.
16 setting sail for success Highlights from the 2013 Aberdeen CPO Summit.
22 procurecon canada 2014 A sneak peek at highlights from the ProcureCon Canada agenda.
42 Value for money in contracts Tips for effective contract management.
Kim Collins 416-510-6779, firstname.lastname@example.org Circulation Manager
Barbara Adelt 416-442-5600 x 3546, email@example.com BIG MAGAZINES LP
Executive Publisher: Tim Dimopoulos Vice-President of Canadian Publishing: Alex Papanou President of Business Information Group: Bruce Creighton For over 55 years, PurchasingB2B has been a trusted source of information for Canadian purchasing/supply chain management professionals in the private and public sectors. Special features and supplements include Fleet Management, Canadian Automotive Review (CAR), PurchasingB2G, and Travel Management Canada. PurchasingB2B is published eight times a year, except for occasional combined, expanded or premium issues which count as two subscription issues, by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd. © Contents of this publication are protected and may not be reproduced, in whole or in part, without the written consent of the publisher or editor. NOTICE: PurchasingB2B accepts no responsibility or liability for claims made for any product or service reported or advertised in this issue. PurchasingB2B receives unsolicited materials including letters to the editor, press releases, promotional items and images from time to time. PurchasingB2B, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. SUBSCRIPTION SERVICES: To subscribe, renew your subscription, or to change your address or information, contact us at 416-442-5600 or 1-866-543-7888, ext 3258, firstname.lastname@example.org, or visit us at www. PurchasingB2B.ca. Subscription price per year: $99.95 CDN; Outside Canada per year: $172.95 US; Single issue Canada: $18 CDN. Annual Supply Chain Survey issue, Canada: $45; Outside Canada: $70 US. Taxes extra. From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374, Fax: 416-442-2200 E-Mail: email@example.com Mail to: Privacy Officer, 80 Valleybrook Drive, Toronto, ON M3B 2S9 Printed in Canada. ISSN: 1497-1569 (print); 1929-6479 (digital) Publications Mail Agreement No. 40069240 We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage
departments 4 Buylines
44 Le professionnel
6 Business Front
45 the Professional
7 Procurement Profile
46 The Law
8 Finance Corner
The Joy Of Conferences
he staff here at PurchasingB2B attend several annual conferences. Publisher Dorothy Jakovina and I hit up between six and a dozen events each year. Last year, I had a schedule at my desk listing all the conferences we had planned and remember the accomplishment I felt in taking the list down once I had finished with all the events. In 2013 alone, I visited Calgary, Ottawa, San Diego and Boston for conferences (as well as attending several in Toronto). This year, I’ve been to Vancouver and plan to go to Edmonton and Los Angeles for events. I often moderate panel discussions at these conferences. Doing so not only provides editorial content for the magazine, but I also get to learn about fascinating topics from the procurement field. Conferences are also a great way for us at PurchasingB2B to connect with you, our readers, and learn what you’re interested in, what challenges you face and the coverage you’d like to see from us. We have several reports in this issue from recent conferences. Our panel report on supplier diversity (see page 11) happened at the National Supply Chain Forum (NSCF) in Calgary last October. As well, our story on page 16 is a report from the Aberdeen Group CPO summit in Boston in the fall. We’ve included coverage from the CPPC conference last November in St. John’s, which you can read about in this issue’s PurchasingB2G section (see page 19). Our story on page 16 is a report from the Aberdeen Group CPO summit in Boston last October. Finally, we feature a preview of the ProcureCon Conference in Toronto, March 17-19 Conferences provide not only learning. For us, they’re also an opportunity to network, meet readers and make connections. We’re looking forward to that again this year. FEBRUARY 2014 | 3
Satellite contract for MDA
WEConnect Honours Supplier Diversity Efforts
acDonald, Dettwiler and Associates Ltd, a global communications and information company, has been selected for additional robotics work for the US Defense Advanced Research Projects Agency (DARPA) Phoenix Program. MDA has started work under the next phase of the Phoenix Program, with related contracts expected to total roughly US$10 million. Both MDA and SSL will do the work. Already a participant in the DARPA Phoenix program, MDA said it will provide a variety of servicing technologies and capabilities that build on MDA’s capabilities. Under the contracts, MDA is looking to develop advanced robotic tools, cameras, tool caddies and a new flexible, small robotic arm for the Phoenix mission. “We are pleased to be providing the critical robotics for the Phoenix mission” said Don Osborne, MDA’s vice-president responsible for this business. “The Phoenix mission aims to demonstrate several technologies and on-orbit operations.
BC Group Inc., a plastic automotive parts supplier, was recognized with a WEConnect Canada President’s Award for contributions to the progress being made in Canada in opening supply chains to women-owned businesses. The Tier 1 supplier to organizations like General Motors is both certified as woman-owned (WBE) and also demonstrates its commitment through its own supplier diversity program. WBE certification is an internationally recognized standard for businesses that are majority-owned (51 percent), managed, and controlled by a woman or women, and is recognized by multinational and government procurement programs as a way to expand supplier diversity. WEConnect has created six awards. A second President’s Award went to WEConnect Canada regional partner, Newfoundland & Labrador Organization of Women Entrepreneurs (NLOWE) for advancing local engagement of corporations in supplier diversity and specifically for helping the oil and gas industry expand their efforts.
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Other winners of the inaugural awards include: • WBE Winning Business Award Western Region: Imprint Plus • WBE Winning Business Award Ontario: Emergitel Inc. • WBE Winning Business Award Quebec: DOC & Associates Inc. • WBE Winning Business Award Eastern Region: Corona College
Tories Announce New Defence Procurement Strategy The Canadian Press
he equipment needs of the Canadian military will be assessed with a more skeptical eye under the federal government’s new system of defence procurement. The strategy, released February 5, also puts greater emphasis on arms exports by developing policies to “support international sales opportunities.” The plan, introduced by Public Works Minister Diane Finley and Defence Minister Rob Nicholson, is meant to fix years of botched military purchases. A series of delays and failed plans to re-equip the military have been a recurring embarrassment for the Conservatives. The auditor general’s 2012 assessment of the plan to buy 65 F-35 stealth fighters left the government’s reputation for good fiscal management in tatters, with allegations that Defence and Public Works low-balled the price tag. The inability to deliver long-promised supply ships for the navy, and maritime helicopters for the air force, have also caused political problems for the government.
The new strategy introduces an independent challenge function within National Defence that will question the need for each major capability. Affordability, especially in the face of declining defence spending, has been a key problem in many of the programs. The Conservatives have been repeatedly surprised by the price tags of some projects when it comes time to open the bids. Another cornerstone of the plan will be consultation with defence industry contractors before projects go out the door. National Defence will begin posting an annual list of its equipment needs, beginning in June. Tim Page of the Canadian Association of Defence and Security Industries said the posting will be a critical improvement for companies who often struggle to anticipate the priorities of National Defence. The new system will also see increased co-operation among Defence, Public Works and Industry officials under an umbrella secretariat at Public Works. The plan rejects creating an independent military procurement board, as other countries have done, and instead builds on existing structures and practices. The government will also become more involved in steering Canadian defence contractors toward individual procurements. Last year, former public works minister Rona Ambrose commissioned an outside report that recommended the government leverage planned defence spending as much as it can.
FSC Moves To Strengthen Aboriginal Rights
he Forest Stewardship Council (FSC) has adopted an initiative designed to strengthen Aboriginal peoples’ rights in Canada by applying free, prior and informed consent (FPIC) to FSC’s Forest Management Standards. More than 80 percent of Canada’s Aboriginal communities are located in or near forested areas, said FSC. As well, these communities are often the first and most affected by industrial forestry activities and can be the last to see its benefits. “The initiative will be conducted with the engagement of Aboriginal peoples and other stakeholders across Canada and will not only benefit Aboriginal peoples and communities, but will also provide forest management companies with clear direction and tools to help them apply the values of FPIC, “ says Francois Dufresne, FSC Canada president. FSC Canada will work to improve and strengthen forest certification requirements with the primary goal of increasing meaningful and tangible benefits of certification for Aboriginal peoples and communities in Canada. FSC Canada will work to adopt FPIC values and strengthen forest certification requirements in FSC’s Forest Management Standards in Canada.
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It’s About Hours Worked! by Michael Hlinka
don’t think that there is a more closely watched economic indicator than the unemployment rate. Statistics Canada here (and the Bureau of Labour Statistics in the US) release this number each month and any number of vested interests wait with bated breath. Politicians, in particular, are compelled by it. If unemployment is low, it means the party in power can take credit for doing a good job—even though their efforts are almost invariably meaningless in impacting unemployment. If it’s high, the opposition can go into attack mode, even though their ideas to fix the situation would almost invariably worsen it. Here’s what no one is talking about, except me. We should not be looking at unemployment. It’s borderline irrelevant. Rather, we should be looking at hours worked. I know we’re treading dangerously close to hardcore policy-wonk territory—but I can’t help it. In order to truly understand this issue, you’ve got to understand exactly how unemployment is measured. In order to be considered unemployed, you must be in the labour force. In order to be part of the labour force, you must either be working, or actively looking for work. If you’re unemployed and haven’t made an effort to find a job recently, you’re considered a “discouraged worker.” You’re not unemployed and you don’t figure into the unemployment rate. It gets worse. Let’s say that you’re on a payroll. It doesn’t matter whether you’re working 15 hours a week or 50 hours, you’re still considered fully employed. Another thing. You’re in school full-time so you’re not considered part of the labour force. You could be a full-time student and working 15 hours a week—or even fifty—and it doesn’t matter. My guess is that many of you are thinking: who were the idiots who decided that this makes sense? I can help you with that. It’s the political classes. They are the ones who stand to gain most when the numbers are fudged. They want it like that. This allows government— and I think the provincial one in Ontario is a wonderful example—to make itself look bet6 | FEBRUARY 2014
ter than it is by (for one thing) opening post-secondary programs and cramming students like cattle into programs in which there is no hope of employment after they’ve graduated. Let me cite Ontario once more: last year, about 12,000 teachers were graduated to fill the fewer than four thousand openings across the province. However, there is a better way to understand the state of the labour market. There’s a very simple metric that we could use to give us a true picture of the employment situation at a given time…and it’s total hours worked. We’d start by defining the working age population as those between the ages of 18 and 65. Very few people leave high school much before the age of 18 and 65 is the most common retirement age. Based on census data, we know how many Canadians are in that cohort. In 2011, 68 percent of the population was between 15 and 65. So let me estimate—just to make the point—that about 65 percent would be 18 to 65. That means about 22 million Canadians. A reasonable assumption is that a full-time workweek is 37.5 hours. Let’s say, on average, most of us put in 48 weeks of work a year. That means that if everyone were working full-time, there’d be about 40 billion annual work-hours annually across Canada. You see where this is going. We’d survey how many hours people actually worked, then express it as a ratio of potential work hours. This would capture what’s really going on in the employment market. It’s a meaningless distinction whether someone is pounding the pavement unsuccessfully to get a job, or just staying in bed all day because he or she is too beaten down. Bottom line: potentially productive hours are being wasted. It’s flat-out silly to say that someone who is working part-time is as fully employed as someone who’s working 10 hours a day, six days a week. And isn’t it a statement on the economy’s health if students who want to supplement their own education are toiling at part-time jobs? It’s vastly superior to measuring unemployment, as we understand it today. Say goodbye to the “unemployment rate.” Focus instead on the “hours worked rate.” There are good reasons why it shouldn’t be 100 percent. I want young people to train for necessary occupations like medicine and the trades. It wouldn’t take long until we understood what rate indicated a strong economy versus a weak economy and the measure would be much harder to game than the unemployment rate. Are we likely to see it anytime soon? Of course not! Whether it offers meaningful information or not, the unemployment rate, not hours worked rate, is here to stay. B2B Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.
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A Taste For Variety Geoffrey Parsons, Chief Procurement Officer, Deloitte
Q: How did you get into procurement? My path to the field of procurement was not my original career choice. I started as general manager for an electronics assembly plant in Nova Scotia that produced high reliability equipment for military and government supply contracts. From my early days in manufacturing, I began to focus more on quality, supply chain and procurement functions and positions that allowed me to pursue this interest. I decided to specialize in procurement and develop my skills in various aspects of strategic sourcing, procurement and supplier management.
Q: Describe a typical day at work. In addition to the role as chief procurement officer at Deloitte, I am also the leader of the business services team, which keeps me extremely busy and engaged with many aspects of Deloitte’s operations. With my CPO role comes a wide variety of procurement activities ranging from developing Deloitte’s strategic procurement plan to leading our procurement services team and negotiating complex contracts with suppliers. In addition to my procurement duties, I lead our business services team and deliver services to our internal firm clients. Q: What do you like most about your area? The most interesting aspect of my role and the areas I’m involved with is the diversity and variety of the activities and tasks. Deloitte’s internal professional services and management services provide unique requirements we work to address while striving to deliver exceptional service and value. Q: What event/highlight of your career stands out for you? The single event that stands out in my career was when I left the Maritimes and moved to Toronto to join the supply chain and procurement consulting practice at a professional services firm. I gained tremendous experience while being exposed to different client environments and numerous consulting engagements in the supply chain and procurement field. Working together with other professionals provided knowledge and the opportunity to
develop long-lasting business relationships and friendships with many of my colleagues. Q: What are your future professional/ education plans? I am committed to life-long learning and opportunities to enhance my skills and knowledge within my field. In my current role at Deloitte, I work with our member firms and other global leaders to exchange information and gain new knowledge and expertise while working with others in the field.
Q: Tell us something about yourself not related to your profession. I am a huge hockey fan and an active player who still finds the time to play twice a week in a couple of men’s leagues. I grew up playing hockey, had the opportunity to play at a competitive level during my university days and still have the passion to play after all these years. Although there are a few more aches and pains after playing, and the dream to win the Stanley Cup is long gone, there is nothing like playing a team sport with others who share the love of the game. Q: What advice would you give those new to the field or planning to enter it soon? Anyone who has an interest in the procurement and supply chain field should seek opportunities to work with as many individuals and on as many different projects and initiatives as possible. The enrichment gained from working with others is invaluable and nothing replaces actual hands-on practical experience to build one’s competencies and capabilities. B2B
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The Future Is In Finance’s Hands Procurement and supply chain management have much to learn from dealing with finance departments by Shawn Casemore
hile visiting organizations across North America I’ve noticed a trend. There is an increasing tendency for procurement and supply chain management functions to report into finance. Historically, the majority of supply chain roles reported into production or operations, with the minority guided by finance. Earlier in my career, I was involved in both structures and found pros and cons for each. I’ve seen more pros for the later. If you’re in this reporting structure or transitioning to it, you may have some biases. Here are a few that come to mind: • Finance only cares about cost and returns; • Finance are overly concerned with risk and not willing to try new things; and • Finance doesn’t understand the time constraints manufacturing or operations place on the supply chain. It’s logical to suggest that you’re already reporting into finance and have no concerns. That’s fine. But I’d guess you or your peers still carry some of the above biases (that may eventually influence perceptions), so take a moment to understand why more supply chain management roles are reporting into finance, and what finance offers that can help to progress the supply chain.
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Risk aversity When I was 25, I cancelled my first supplier agreement. It was an agreement set over a decade before I arrived at the organization, and with little documentation to support the terms exiting it was a bit dicey. So I drove several hours to the supplier site to meet and discuss my company’s desire to exercise it’s right to provide 30 days written notice of cancellation of the agreement. In hindsight, that was a rooky move that didn’t consider the significant risk I was taking. Finance is extremely risk averse, which can seem like a barrier to innovation, however this can offer a broader perspective on the severity and impact of a project’s risk, component or contractor relationship. Tapping finance can provide new ideas, tools and perspectives on how to make better decisions that incorporate risk.
Reputation Early in my career I worked with a colleague named Terry, a great guy who had been my company’s acting CFO for over a decade. If I could demonstrate a cost savings, Terry supported my decisions—from buying raw materials to resourcing janitorial supplies. I realized early on that Terry was trusted, retaining significant respect from the company’s president. He was privy to financial information and, as such, was a trusted advisor to the president. If Terry supported an initiative, the president supported the initiative and anyone who had doubts was cast aside. Forming a close relationship with finance can help to boost reputation and lead to increased acceptance of—and adaptability to—change.
Measuring impact I presume you’ve got an spreadsheet on which you track cost savings and cost avoidance. Have you ever been challenged on the impact changes have on total cost? Do you know what EBIDA is? Can you demonstrate annualized savings? Are you connecting ROI with supply or service contracts? It can often seem that finance speaks a different language, and they do. It’s the language of business. Outside of our often-sheltered world there are terms and considerations that C-suite executives use daily in supporting decision-making. By spending time learning about finance (and there is no faster way than interacting with and being mentored by a finance executive) we can expand our business knowledge. By doing so we can incorporate this language and approach into our daily activities, thereby increasing our credibility and the attention we gain from other senior executives. If you have a desire to move to the C-suite, you need to expand your knowledge and vocabulary. There is no better place to start than by learning more about finance. Finally, finance professionals are strategic. They’re trained to be so. Their decisions must be long-term and strategic if the business is going to survive. By aligning with and understanding more about finance the supply chain profession will become more strategic—a significant challenge when chasing every widget and supplier issue. If you’re reporting structure has changed to align you under a financial group, consider the points above and how they can improve your credibility, recognition and knowledge. If you want to progress in your career, this reporting structure is another rung in the ladder to your goal. B2B Shawn Casemore has nearly two decades experience in supply chain management leadership roles and operates the consulting firm Casemore and Co. Reach him at firstname.lastname@example.org or (519) 470-7697.
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Head Professional Development Directory Advertorial
What has the biggest impact on the profitability of your supply chain? YOU DO On top of negotiating Total Landed Cost, more and more purchasing pros are now managing the flow of goods or materials, and are sometimes even responsible for ensuring uninterrupted supply chain operations. That’s a lot of responsibility. And it can have a big effect on your bottom line. After all, studies prove that uninterrupted supply chains are more closely linked to financial performance than any other operational factor.1 What’s more, a recent study from MIT found that supply chain performance is more sensitive to mature skill-set and expertise of logistics-related supply chain professionals than any other operational factor – including commodity and fuel costs.2 There’s a lot of opportunity for profitability. But chances are if you’re taking on more responsibility for your supply chain, you’re doing so without the benefit of specialized, logistics-specific professional education. That might be intimidating. But CITT can help you. You can complement your purchasing knowledge with CITT’s expert-level, 5-course suite of specialized logistics courses The CCLP® (CITT-Certified Logistics Professional) online course of study will equip you with a depth of understanding that is more
complete and comprehensive than any other, similarly named set of byline industry courses offered anywhere in Canada. Take three core courses (Transportation Systems, Logistics Processes & Integrated Logistics) and pick two electives (from Logistics Decision Modelling, Transportation Law & Transportation Economics). After completing these courses, you’ll have the best technical foundation for profitably managing stable, reliable supply chain and logistics operations. Then you’ll be eligible to complete your professional certification from CITT and carry industry’s most widelyheld and relevant designation in logistics: CCLP. No other professional credential says “Logistics Expert” as decisively as CCLP Because supply chain logistics has become such a specialized and sophisticated field with the globalization of supply and value chains, crossfunctional certification is becoming increasingly more common among highly committed pros. And most certified procurement professionals qualify for advanced standing towards the CCLP designation. Visit www.citt.ca/logisticsprofitability for more information. Or contact us at email@example.com or 416-363-5696.
Add “Logistics Expert” to your professional credentials. And more profitability to your supply chain logistics. CITT’s spring semester starts April 24th. Register now at www.citt.ca to guarantee your spot. ® CCLP is a registered trademark of CITT 1 Henricks, K, Richard Ivey School of Business, University of Western Ontario, Singhal VR, DuPress College of Management, Georgia Institute of Technology. Supply Chain Disruptions and Shareholder Value, 2005. 2 Simchi-Levi, D, Kyratzoglou IM, Vassiliadis CG, Supply Chain and Risk Management: Making the Right Decisions to Strengthen Operations Performance, Study by MIT Forum for Supply Chain Innovation and PwC, 2013.
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Head Thought Leadership
The Business Case For Supplier Diversity Our panel of experts investigates the ROI of implementing diversity into the supply chain by Michael Power Charles Varvarikos is head, facilities sourcing, at RBC Bank. Varvarikos is an architect and works in the procurement department at RBC with a focus on real estate. His mandate also includes corporate social responsibility in the bank’s procurement area.
Cassandra Dorrington is president & CEO of the Canadian Aboriginal & Minority Supplier Council (CAMSC). CAMSC links Aboriginal and minorityowned businesses to Canadian corporations and works to identify and certify businesses as Aboriginal or minority owned, managed and controlled.
hen the concept of “diversity” is used in a business context, listeners might assume the discussion is regarding corporate social responsibility programs. While such programs no doubt provide organizations with value, their direct contribution to the bottom line might be seen as difficult to track on an organization’s balance sheet. Similarly, the term “supplier diversity” may produce thoughts of preferential treatment to underrepresented suppliers—businesses owned by Aboriginal, women, LGBT or minority members, among others—for the sake of driving corporate social responsibility goals. But a panel discussion held at the National Supply Chain Forum (NSCF) at Calgary’s BMO Centre from October 28-30 sought to test that assumption, as well as show supplier diversity’s positive impact on the bottom line. The panel, organized by PurchasingB2B magazine in partnership with the Canadian Aboriginal & Minority Supplier Council (CAMSC) included the following participants: Cassandra Dorrington, president and CEO of CAMSC; Charles Varvarikos, head, facilities sourcing, RBC Bank; Jenny Larocque, corporate development officer, Spirit Staffing; and GM’s supplier diversity manager Reginald Humphrey, who participated in the panel session from Detroit via Skype. PurchasingB2B editor Michael Power acted as moderator for the session. PurchasingB2B.ca
Reginald Humphrey is supplier diversity manager at General Motors. An 18-year veteran of the company, Humphrey has led its diversity program for a year-and-a-half. He is responsible for over 200 suppliers with about $3.1 billion in diversity spend. General Motors’ supplier diversity program dates from 1968.
Jenny Larocque is corporate development officer at Spirit Staffing, an Aboriginal, womanowned employment and training agency. Larocque has been employed there for the past seven years. She is involved in the Aboriginal community and understands the importance of a diverse supply chain. FEBRUARY 2014 | 11
Thought Head Leadership
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To begin the discussion, the group worked to define what’s meant by the term supplier diversity. Dorrington acknowledged that the expression can lead to “a blank stare” when mentioned within the Canadian marketplace. She stressed that supplier diversity didn’t represent a quota system, a charity or a “set-aside”. Rather, the concept was about utilizing new, under-utilized suppliers. “For us, it’s a proactive program or process set in place by an organization that ensures an inclusive supply chain,” she told the audience. “We’re trying to make sure your supply chain expands beyond what’s traditional, whether it be women-owned businesses, LGBT businesses, minority businesses, or Aboriginal,” she said. “It’s about being proactive enough to recognize there are suppliers out there who can meet the need.” Varvarikos agreed that inclusivity was key to supplier diversity. The concept, he noted, embodied equal opportunity for diverse businesses to get their goods or services in front of corporations looking to buy them. “Whether it be Aboriginal, women-owned, visible minorities, it’s about offering people opportunity to compete,” he said. At RBC Bank, he said, supplier diversity didn’t mean awarding business based on an organization’s diverse status. Rather, it meant offering opportunity and building value. Larocque agreed, noting: “As Spirit Staffing is a diverse supplier, we have to compete equally with other suppliers to get businesses.” Meanwhile, Humphrey said that supplier diversity strengthens GM’s value chain at the Tier 2 level as well as the Tier 1. It’s easy to forget that supplier diversity appears all along the value chain, he said. Essentially, including diverse suppliers allows GM to leverage underutilized companies in specific regions or within ethnic groups. “Supplier diversity is a unique network of corporate, it’s a unique network of suppliers and it’s definitely a unique network of how we work together,” he said. “I haven’t seen any other discipline in my career at General Motors where so many companies will collaborate to share best practices. Supplier diversity allows us to leverage these best practices and these suppliers to optimize our value chain.” The panel then broke down supplier diversity into its components, providing the audience with an image of what an organization’s supplier diversity program might look like. The metrics used to analyze such a program include everything from spend to hiring practices and the impact those decisions can make in the community, said Humphrey—although supplier diversity programs focus largely on contract awards, he noted. One of the first necessary steps when instituting a supplier diversity program is to understand fully an organization’s corporate strategy, Humphrey said, which helps the organization realize why such programs are important. For example, he noted, diversity drives
“How many opportunities are you affording people? How many successes are there? Are you giving out programs? There are so many different components you can add into a supplier diversity program.” ~ Charles Varvarikos
creativity and smaller entrepreneurs tend to be more agile and can sometimes react faster than larger organizations. “First, it starts with corporate strategy and alignment,” he said. “Then it comes to assessing your supply base, your needs, your supply and demand. And then it comes down to using the network to fulfill those gaps, performance issues, innovative technology issues that you want. Lastly, on the execution side, it’s allowing to share best practices on how you communicate those metrics.” As well, no organization should try to implement a full supplier diversity program in too short a time, Humphrey said. “The biggest mistake people make is trying to forcefeed a diversity program down a corporation’s throat,” he said. “Identify what’s important to your company today and how can the diversity network influence and enhance those already established goals and objectives.”
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mended organizations perform a baseline survey of suppliers to identify whether it already employs diverse suppliers, and if so how many. “It takes a while to get to that process,” she said. “There are some fairly straightforward practices regarding how to get there. But it starts with a willingness to say, ‘We want to be able to do it, where do we start?’”
What’s the ROI?
“I haven’t seen any other discipline in my career at General Motors where so many companies will collaborate to share best practices. Supplier diversity allows us to leverage these best practices and these suppliers to optimize our value chain.” ~ Reginald Humphrey
Varvarikos noted that once an organization has a strategy in place, it’s time to put together a plan. The first step that RBC took was to identify supplier diversity experts. The bank reached out to organizations such as CAMSC for expertise, which included access to its database of diverse suppliers. As well, Varvarikos recommended tracking and monitoring supplier diversity efforts to help ensure a program is successful. “How many opportunities are you affording people? How many successes are there? Are you giving out programs? How many mentorships have you done in the last year or two? How are your surveys on those mentorships? There are so many different components you can add into a supplier diversity program,” he said. Dorrington stressed that organizations must provide top-down support for supplier diversity, and such programs can’t be a “one-man show.” As well, she recom-
The panel discussed the business case for supplier diversity. For the supplier, the advantages include building capacity and learning how to compete, said Varvarikos. For the buying organization, an inclusive supply chain means a more diverse pool of thought and talent. “By accessing diverse suppliers we access a lot of companies that are very innovative,” he said. “Some of them are smaller, but usually they’re more nimble because they can act quicker and we obviously do a lot of business with the giant companies as well. But a giant company can only move so quickly. When you have immediate business needs you go to your smaller suppliers and there’s a good opportunity to get something done quicker and quite innovative as well.” Supplier diversity offers a cyclical value chain, said Humphrey. As organizations do business with diverse suppliers, those suppliers become more sustainable and able to attract diverse talent. That translates into wages and expendable income, which in turn means increased buying power. “That buying power, for General Motors, means a lot,” he said. “It can lead to diverse products, to a diverse customer base. We need loyal customers that will align themselves with General Motors. If I’ve got a diverse company who has an embedded loyalty to General Motors because of the investment we put in them, now they’ve got wages. Now they can spend that expendable income. It becomes profit to General Motors and guess what? Now we’re able to reinvest in those same suppliers.” Humphrey noted a female, Native American entrepreneur in Detroit who put together a joint venture with a Tier 1 supplier to create an organization called Detroit Manufacturing Systems. That organization went from having 80 employees to over 700. The average time that the company’s employees had been unemployed was 14 months, Humphrey said. “They suddenly have pride, they have economic stability,” he said. “Now, they’re connected by loyalty to a company that gave them a fresh start.” Creating that wealth within a community (rather than supplier diversity simply being charity work) was an intelligent business strategy, said Dorrington. By way of example, she cited an organization that CAMSC worked with that was able to get a 25-percent cut in costs by bringing in a diverse supplier. That’s because the new supplier was able to offer the organization an innovative
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way of looking at a business situation. “That’s not to say it’s all about cost, but it’s all about the new innovation and flexibility that comes with introducing this into your supply chain,” she said. Laroque agreed, noting that supplier diversity results in long-term investment and growth, which creates value for the community. To sustain a competitive advantage, organizations must explore several resources, she said, and businesses can’t thrive while relying on a single approach. Diversity is a critical element in building an effective workforce and efficient supply chain. Strategically selecting diverse suppliers helps add value and create social benefits that support the demographic group of their workforce and customers. Diverse suppliers like Spirit Staffing can work with customers for tailored approaches to business needs, Laroque noted, agreeing that small businesses offered flexibility and were open to creative business solutions. “As an Aboriginal, womanowned business, it not only classifies us as a diverse supplier, but also enables us to supply a diverse workforce,” she said. “We’ve been a second-tier diversity supplier to an international oil and gas company working in partnership under their first-tier international supplier for the past eight years. We’ve contributed significantly in supplying an Aboriginal and visible minority focus contingent workforce and have been able to compete and perform alongside their first-tier supplier with great success.”
Supplier diversity metrics
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With any large corporate initiative, tracking progress is one of the key steps towards realizing success, and supplier diversity programs are no exception. The panel discussed metrics and how organizations can benchmark whether their supplier diversity programs are realizing a return on investment. For Varvarikos, the key is to look at trends regarding supplier diversity, which Canadian organizations have been able to do for about 10 years. While still relatively young compared to such programs south of the border, Canada has seen good progress towards a more diverse supplier base, Varvarikos noted. He echoed Dorrington in calling for baseline tracking of areas like diverse spend, opportunities available for diverse suppliers, how many diverse suppliers a company mentors and so forth. “It’s all about improving and carrying on year-after-year improvement, making sure the program works and that RBC is getting the benefit as well,” he said. “Are we saving money through it? What about the quality of our products and services? So there are any number of metrics you can use. It probably makes sense to start simple with a few metrics and then build them up as you get more sophisticated.” It’s also important to track success stories, said Varvarikos. For example, a woman-owned architec-
ture firm that attended an RBC mentorship workshop ended up on the bank’s bid list for architecture services, Varvarikos said. It’s a success story because while the firm plans to bid on a large RBC contract, it’s already done four projects for another Tier 1 supplier that the owner met at the mentoring workshop. A simple metric that organizations can use is looking at money spent at the Tier 1 and Tier 2 levels, added Humphrey. As well, companies can employ a snapshot of where the organization stands in terms of the lifecycle of current contracts. For example, if an organization has 200 suppliers with an average contract lifecycle of two or three years, it’s relatively easy to project what a supplier diversity program will look like in a few years. “Part of it is understanding your new business awards,” he said. “At GM, we not only track the number of suppliers—the spend—but we also track the new business awards every quarter so that we can understand the sustainable curve and what our program will look like in the out years, based on the average contract life cycle.” As well, organizations can integrate everyday corpo-
“As an Aboriginal, woman-owed business, it not only classifies us as a diverse supplier, but also enables us to supply a diverse workforce.” ~ Jenny Larocque
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rate metrics into supplier diversity programs, Humphrey added. His team at General Motors looks at diverse suppliers in terms of cost savings, quality, delivery and so forth. “We want to make sure that they’re getting the same level of exposure that some of their bigger, non-minority, non-diverse companies are getting.” Tracking the number of bids to which diverse suppliers have been invited allows organizations to see whether those suppliers are offering valuable goods or services, said Dorrington. From there, organizations can track whether the number of bids increases and if those bids turn into awards. “Dollar spend, that’s hard if you’re just starting out,” she said. “What are the steps you’ve done along the way in developing that community and developing the suppliers? That’s where we start to see some real success.” Organizations can define success in several ways, noted Larocque. “But once you actually have a program rolled out, you need to measure it by quantifying the data and then comparing it to your organization’s goals to ensure that you’re hitting those targets.”
“For us, [supplier diversity] is a proactive program or process set in place by an organization that ensures an inclusive supply chain.” ~ Cassandra Dorrington
Supplier mentorship Another way that organizations can get involved in supplier diversity is through mentorship, and both RBC and General Motors have such programs. RBC holds an annual event, with roughly 100 attendees, focusing on networking. The event features roundtable sessions, panel discussions and presentations on how organizations can best position themselves to compete, navigating around large corporations, establishing relationships and so forth. The bank also provides one-on-one mentorship, where it pairs RBC procurement professionals with diverse suppliers for a year. “It’s a reciprocal mentorship program,” he said. “Each person learns from the other. The RBC counterpart learns what the gaps are in our supplier diversity program and how we can improve it. The diverse supplier looks at how to be more successful when competing for business at corporations like RBC. Both programs have been quite well received and we’re looking to expand them further.” Laroque told the audience that she had recently been accepted to participate in RBC’s reciprocal mentorship program. The focus will be on evaluating RFPs and what larger organizations look for from suppliers. “From our perspective that knowledge is so valuable,” she said. “We’re a small supplier—we have the capabilities of competing alongside other agencies and other companies. And so just the learning from it is so valuable.” General Motors has a program called the diversified development program, said Humphrey. The program features a two-year timeframe with key components that include the executive director meeting quarterly with the owner and top leadership of the company to go through action items to ensure they get addressed. Suppliers graduate from the program after the two years. General Motors currently has eight suppliers enrolled in the program, Humphrey said. Dorrington recommended that organizations talk to diverse suppliers to ensure both sides are clear regarding expectations of the process. Typically, she said, suppliers are looking to build a relationship that results in a contract. Meanwhile, a corporation’s role is often to grow the supplier’s ability to bid, and these two differing viewpoints can lead to misunderstandings regarding the goals of a program. “Make sure there’s management of the expectations at the front end,” Dorrington said. “You have to say, ‘what do I want my program to deliver? Is it simply to grow the supplier’s knowledge or is it to grow the supplier?’ Those are distinctly different elements that you have to be aware of.” During the discussion, the panel produced a definition of supplier diversity, described the elements of a supplier diversity program and put forth the business case and best practices for implementing a program. Those looking to implement or expand policies should have ample new ideas to work with. B2B
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Future of Procurement
On Course For Success Boston summit highlights tools to navigate the role of chief procurement officer by Michael Power
hat gets procurement practitioners fired up in the morning? Louis Berard, senior research analyst, global supply management with Aberdeen Group, said the organization considered that question when approaching speakers for the 2013 Chief Procurement Officer Summit, held last October 29-30 at the Seaport Hotel in Boston. The event allows procurement executives to learn, network and develop a vision of procurement’s evolving role. To succeed, procurement needs to understand its spend, Berard said. The world is growing, he said, which leads to innovation. But business faces new challenges. Procurement practitioners must ask if they have visibility into supply chains and the talent to advance; all while facing corporate pressure to do more with less. “Everybody thinks they’re unique but really, we’re all facing the same challenges,” Berard said. “Sometimes you need to challenge the system to move forward. That’s what we’re going to do.” Success means navigating global change with a clear path, acquiring the right tools and skills and keeping communication open, he said. Conference speaker Tony Abate, chief procurement officer at Cigna, a Connecticut-based health insurance and health services company, took up the theme of charting a course during his discussion, Beyond Procurement: Managing Supplier Relationships to Build Competitive Differentiation. On a voyage, the
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traveller considers the right perspective, plan and crew, he said. That’s a challenge in healthcare, which sees a fluxuating government role, changing delivery systems and engaged consumers. The global rise of the middle class will present opportunities, he said, like lower prices, more affordable goods and more exports from here to emerging markets. But negative developments will include job losses as economies adjust, he added. “We’re in transition from the lower wage jobs that we moved to (other) countries to higher wage jobs,” Abate said. So should organizations globalize? Abate said it’s less painful to begin operations offshore than move them abroad later. Cigna works to compare business complexity with supplier maturity, targeting mature functions that are low in complexity. In 2011, the company developed strategies for each business area, Abate said. The result was a shift from a commercial to retail supply chain, resulting in more “entrepreneurial relationship” with suppliers. The company focused on three things: the right people, the right processes and the right technology. Cigna performed research and built relationships with the C-level in other countries to make it easier to get data. As well, those involved in any procurement transformation must be on the same page, Abate noted. “If you’re not aligned, it’s not going to work,” he said. Following Abate’s session, a four-member panel looked at ways in which the supply chain management practitioner’s role has changed over time—as well as risk mitigation strategies. The panel devoted time to outlining ways in which they’ve removed silos with the C-level. John Dillon, vice-president of supply chain management at Nordson, noted he attends meetings with the C-level, but that much of what was discussed remains unknown to operations managers. The company has created a process to align the operations teams so important information is integrated into development and operations plans. Dillon recommended that organizations develop a mission statement to boost customer collaboration. Nordson also asks
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customers about new products and how they will be used. Panelist Wade Winters, vice-president of supply chain at Au Bon Pain, described the risks involved in the food supply chain. Food-borne illnesses, for example, could devastate a restaurant’s business. Bad weather can lead to no deliveries. Winters recommended organizations develop disaster recovery programs to mitigate risks. “We’re all in the supply chain business, but we’re also all in the risk management business,” he said. Disclosure from suppliers can be a challenge and some suppliers are reluctant to open their books, said Winters. But key suppliers often cooperate. Working with those customers to discover what’s driving their costs can result in lowering those costs. The more you share, the more new approaches can be developed.
Leading from the centre Also presenting at the summit were Tom Hogan, senior VP and CPO at CBS Corporation and Ken Naughton, the corporation’s VP of spend analytics and sourcing strategies. The two spoke about the organization’s centre-led procurement function. Naughton noted that a challenge the broadcaster faced was supporting an environment in which business units remain separate in order to develop content. A related challenge was finding talented people who could thrive in that environment, he said. The group needed procurement practitioners who could collaborate across the organization. The group cast a wide net to find such talent, looking beyond sourcing practitioners. “It was worth being patient to get the right people and not settle for someone else,” he said. “I can’t stress enough the importance of casting a wide net.” Procurement at CBS houses four main areas: project management, travel, procurement/administration and analytics & strategies. Naughton, who heads analytics, began with roughly 30 accounts payable systems. The first step in simplifying the system was installing repeatable processes on spend analysis. Naughton said his group stays on top of supply market intelligence to discover what the market indicates costs should be. In one example, the team ran a seven-percent price decrease from a supplier through a should-cost model to find that a 10-percent increase was appropriate. The team also established a procurement council in 2008, al-
lowing CBS business units to talk about operational issues. Also that year, they began an e-sourcing system and a contract management tool, among other changes. The result was the corporation now has a centre-led sourcing function supporting all CBS divisions, engagement with the C-suite in various divisions and sees a large amount of savings. “The average project savings far exceeded what I projected coming into the company,” said Naughton. Another speaker, Eduardo Jonas of American Axle Manufacturing (AAM), also spoke about his organization’s move to a centreled procurement model. To support the transformation the company established “Pillars of improvement” like a centralized strategy, increased communication and other changes. Among the re-works that AAM developed is the use of a commodity database, Jonas said. Re-use of parts is common in the company’s industry, and the database helps the company think about several elements of the decision. AAM has also ramped up its focus on communication, Jonas said. The company holds global staff meetings that now boast up to 95-percent attendance. Regional staff meetings take place weekly, as well as annual procurement meetings in Detroit for purchasing directors. The company set up a supplier council that meets four times a year. The result has been the establishment of early sourcing and increased intra-regional support, Jonas said. “We get a better vision of what’s going on in our global organization,” he said. Among the other recent trends discussed at the summit was the changing landscape of the workforce, with one panel discussion focused on how managing the contingent
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Future of Procurement workforce was blending into traditional recruitment strategies. Pressure to do more with less means a larger contingent workforce, said panelist Dawn Evans, president of executive sourcing network SIG. Most businesses have policies for contingent workforces; but she noted those policies are rarely followed. The “war for talent” is complicated by workforce age differences and technological advances, she noted. Meanwhile, Regeneron Pharmaceuticals has almost completely outsourced the staffing function, said the company’s vicepresident of human resources and panelist, Ross Grossman. When he began his position, he said, the HR function was disorganized—so Regeneron bought a staffing company to improve the process. The main driver in that decision was the need to acquire resources. While Regeneron uses a handful of contingent workers, the organization usually searches for employees who are looking to stay for the long term. “There are people in every generation who want their jobs to have meaning,” he said. “Our Millenials are staying because they believe in what they’re doing.”
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A view to the future A CPO must know where the organization wants to be, said Len DeCandia, CPO for The Estee Lauder Companies. During his session, DeCandia stressed his employer’s reputation as a prestige beauty products supplier meant the unique supply chain challenge. The company had to move quickly and execute flawlessly; all while staying a “high-touch company.” Accomplishing that while managing costs represents a challenge as CPO, DeCandia said. The company has a talented and skilled staff, he stressed, including both computer-savvy Millenials and those who have been in the field for decades. To develop that talent, Estee Lauder has rotational programs so staff can go to different regions, categories or parts of the business. DeCandia noted that a CPO must also develop communication skills, honing the use of language used by internal business partners. The position also called for the ability to translate internal needs to a supplier base that’s most likely dealing with various buyers simultaneously. Quality remains the most important factor when dealing with that supplier base, DeCandia noted, since Estee Lauder’s suppliers must meet the high standards of the company’s customers. “We want them to be the best at what they do because that’s what our customers want,” he said. In conclusion, the summit offered forward-looking topics to set procurement practitioners on a course for success. Certainly, 2014 and beyond will be both challenging and rewarding for the profession. B2B
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Addressing issues affecting Canada’s public procurement professionals
Keeping Public Procurement Rock Solid
he Canadian Public Procurement Council hosted its annual forum in St. John’s, Newfoundland and Labrador, last November 3-6. The conference, which carried the theme “Rock Solid Procurement,” featured a mix of plenary and concurrent sessions. This issue of PurchasingB2G is the second installment of articles covering selected conference sessions. The first article details the potenital gap between cheapest cost and lowest price, and the meaning of total cost of ownership.
The second article describes how government e-procurement is heading to the cloud. This report looks at two concerns for public organizations when looking at cloud computing as an option: data security when that information isn’t stored on site, and regulatory compliance. A third and final article investigates how to use key performance indicators (KPIs) to continually improve methodology in a public procurement environment.
Best Price Versus Lower Cost
Tracking KPIs among the tools to help public organizations focus on the actual costs of goods and services by Denise Flint
discussion entitled Total Cost of Ownership (TCO): Strategies Beyond Pricing at the Canadian Public Procurement Forum 2013 drew a large crowd as panel members David Davidson, Bruce Gorman, Eddy Jin and Terry Kyritsis talked about the vast chasm that can loom between the cheapest cost and the lowest price and what the total cost of ownership means at their educational institutions. Jin, director of procurement services at the University of Toronto, opened the session by explaining that his department handles a budget of $2.4 billion and buys items for everyone from rocket scientists to molecular geneticists. Yet they don’t have a huge staff compared to other universities. The answer to handling the overwhelming demand on their services is through e-procurement. Making a purchase online can save several hours over the cost of a phone purchase, which results in huge productivity savings. As well, vendors are often happy to waive such costs as shipping charges for the convenience of having uniform order forms,
contracts and payment schedules. The result is enormous savings in both productivity and total price, significantly reducing the TCO. Gorman followed with a discussion of procurement practises at Memorial University of Newfoundland, which does not have a central procurement department. The university is highly decentralised and all faculties, schools and administrative units can create their own purchasing orders and control their own purchasing decisions. As well, the NL Public Tender Act defines the best bidder as the lowest bidder. The university is currently reviewing its purchasing policy to factor the total cost into its purchasing structure including transportation, scheduled maintenance, equipment calibration, extended warranties and training. Kyritsis, CEO of the Ontario Education Collaborative Marketplace, described cost and price as similar to an iceberg, with price (the amount paid to the supplier) being the relatively small section above the water and cost (internal practises, processes and requirements)
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being the much larger part hidden below. He illustrated his point with a description of the way sand is purchased for kindergarten play tables. Cheap truckloads used to be delivered to a central storage unit where it was bagged and distributed to schools across the province—a very time consuming and labour intensive process. Switching to direct delivery of smaller quantities to individual schools resulted in huge savings even though the apparent price was higher. Total cost of ownership is a philosophy, a methodology and a tool that must include acquisition costs, ownership costs and post-ownership (disposal) costs, Kyristsis concluded.
Davidson, CEO of Interuniversity Services Incorporated, reported that for every dollar spent by the 18 post-secondary institutions for whom his organization provides services they receive five to six dollars back in savings. “The total cost is the real cost and the lowest unit price is not the professional procurement way,” he told the audience. According to Davidson, the way to keep the focus on the real cost of procurement is through key performance indicators because decisions based on numbers are easy to defend. “It’s not about the quality of the pen—most suppliers get their stuff from the same manufacturers—it’s about the actual cost.” B2B
Benefits of the cloud Paradigm avoids upfront costs, boosts manageability and lowers maintenance by Denise Flint
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he cloud is coming, so get used to it. That was the basic message behind the talk by Sanjeev Juneja and Adam Fischer at the Canadian Public Procurement Forum 2013, held last November 3-6 in St. John’s, Newfoundland and Labrador. Juneja is the director of public sector sales and alliances for Ariba’s North American division and Fischer is the co-founder of OPTIS Consulting Network. Ariba is a software and information technology services company that helps businesses and organizations to facilitate and improve the procurement process, and OPTIS is a data management service for human resources, employee benefits and risk management. In the traditional model for managing computer resources, a company buys the software it needs and depreciates it over time. With the cloud model, multiple companies use a shared infrastructure and pay as they go, essentially trading in real server hardware for virtual hardware. The new paradigm is vaunted to help companies avoid upfront infrastructure costs, improve manageability and decrease maintenance. Users can benefit from existing technologies without having expertise in them, enabling them to focus on their core business instead of IT. Yet governments everywhere are slow to adopt the technology. Canada, in particular, lags behind Japan, the UK and the US where a cloud-based mentality is increasingly taking hold. Two factors contribute to this reluctance. The biggest one involves concerns about security. Without data being stored on site, how can governments ensure it’s properly protected? The other problem is regulatory compliance.
The federal and many provincial governments have policies preventing personal data from leaving Canada. Yet the actually hardware supporting cloud-based computing could physically reside anywhere in the world. Juneja insists that the security measures in place for cloud-based networks are as stringent as that of internal systems. Worrying about it isn’t realistic, he said. Although he admits there are concerns over privacy issues, he questions whether servers need to be in Canada in order to address the problem and since most clients aren’t individuals, personal privacy isn’t an issue. To put a case for the increased efficiency of cloud network support, Fischer used the example of a crown corporation in Western Canada that has $1billion in direct and indirect spending per year, 2,000 employees and 150,000 transactions per year. With a host of problems, including lengthy turnover times on invoices, their directive was to reduce P2P costs, pay suppliers on time and automate P2P transactions. Yet there was little executive support for change. Fischer said they had to change the culture of the organization and they had to do it fast before people were able to muster much resistance. When they were finished, 95 percent of invoices were paid on time—up from less than 60 percent and there was significant improvement across the entire procurement process. The corporation saved $1 million in the first year, a number that should grow over time to $5 million. “Stop saying ‘Are you guys going to do this?’ and move to ‘How are you going to implement it?’” Fischer challenged. B2B
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When Good Enough Isn’t Good Enough The case for key performance indicators by Denise Flint
ow do you measure process performance in a public procurement environment? It can hardly be compared to a manufacturing environment in which a specific product can be tracked and tested for flaws. Performance processes are administrative and not necessarily standardized and repetitive. And yet, without putting any measurements in place it becomes almost impossible to improve, —or at least to recognize when an improvement has taken place. And improvement in organizations is crucial because in many cases good enough simply isn’t good enough. Even working at 99-percent efficiency, the US Postal Service would lose 20,000 pieces of mail per hour and American hospitals would perform 5,000 incorrect operations each and every week. As well, there would be two bad landings a day at most major airports and 200,000 incorrect prescriptions that get filled every year.
“KPIs measure the business health of an organization, ensure that everyone is on the same page regarding goals and strategies and provide a focal point for enterprise-wide standardization, collaboration and co-ordination.”
Francois Emond, the executive director of the Canadian Public Procurement Council (CPPC), believes that he has the answer. In a session presented at the Canadian Public Procurement Forum 2013, Emond explained how to use key performance indicators (KPIs) in order to continually improve methodology in a public procurement environment. KPIs measure the business health of an organization, ensure that everyone is on the same
page regarding goals and strategies and also provides a focal point for enterprise-wide standardization, collaboration and co-ordination. Although KPIs are usually thought of as private business measures, they can also be used in the government. It’s possible to apply the notion of defects to services and administration as well as pens and machinery. “Remember, data is objective,” Emond stressed. “It will tell you what your performance is.” To that end, indicators can be used to identify and improve ineffective processes—those that don’t meet expectations; inefficient processes; those that are expensive or require a lot of effort; and non-existent processes, as well as to resolve quality problems. However, in order to improve, organizations must establish a baseline that will measure the performance, isolate the trouble spots and identify areas that are ripe for improvement. Emond used the Six Sigma methodology to illustrate how to make improvements. The process begins with defining a project and determining the priorities. A narrow, well-defined process is identified for improvement, which is then measured— what are the sources of variance and waste, analysed—what critical factors lead to the current performance, improved—implementing any corrective modifications, and controlled— maintaining the gains that have been achieved. This process is often referred to as DMAIC. The most important phase is defining the process to be improved, while the most neglected is control, Emond said. “You think you have accomplished something and then you move on,” he told the audience . “This leads to neglect.” Emond also warned against falling victim to the belief that the end result is for the benefit of the institution. Too often, he noted, indicators such as the number of purchase orders are used by those looking to measure efficiency. But those numbers mean nothing to what should be the real focus of the exercise. “This is not done for the organization,” Emond said. “It’s done for the client. And what are clients concerned about? ‘When can you do it?’ and ‘How much will it cost?’” Those are the figures that have to be improved. “Client satisfaction is the goal, not just internal efficiency.” B2B
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ProcureCon Canada 2014
ProcureCon Comes To Canada Conference brings together procurement practitioners for peer-to-peer learning
procurement event with a decadeand-a-half history is poised for its inaugural conference in Canada. ProcureCon Canada hits Toronto March 1719 at the Hyatt Regency Toronto. The focus of the event, which has been around for 15 years internationally, is on procurement practitioners learning from each other, said Sara Mueller, ProcureCon Canada’s program director. In putting together the event’s agenda, Mueller says she spent several weeks talking to procurement professionals to learn about their challenges, initiatives and objectives. “The whole event is very interactive in format, so that peer-to-peer learning is fostered,” said Mueller. PurchasingB2B is proud to be a leading media partner for the event. For more information or to register for ProcureCon Canada, visit www.procurecon.ca.
Opening Ice Breaker Discussion Finding, Attracting, and Retaining High Caliber Procurement Staff—New Strategies for 2014 – 9:05am Attendees will interact with those at their table and learn how they’re tackling staffing challenges.
Opening Keynote Workshop Procurement Transformation: Creating an Effective and Efficient Procurement Model – 9:35am This session highlights building a case for change; developing the right procurement model, finding the right people and more. Meet the New CPOs: Guardians of the bottom line – 11:20am Delegates will learn what separates outperformers from the rank-and-file, using industry leader insights; strategic sourcing savings strategies and more.
Implementing a Rock-Solid Fully Automated P2P Solution – 12:05pm Ensure you’re leveraging your procure-topay tools to drive efficiencies and better manage spend and vendor management. 22 | FEBRUARY 2014
Evaluating Addressable Spend by Seeing the Invisible – 1:50pm Public Mobile’s strategic sourcing director Eugene Fernandez shares best practices from the top 25 global supply chain organizations like IBM and Dell.
Building a Collaborative Approach to Mitigate Product Delivery Risk in a Global Procurement Organization – 2:35pm Learn how Pratt & Whitney Canada used ACE continuous improvement operating system to deploy a new transformational initiative. Determining If Outsourcing Your Procurement Function Is Right for your Organization – 3:20pm Blackberry’s Mathew Moore shares how outsourcing helped the company increase visibility and insight on spend and reduced cycles times. Closing Keynote Workshop Creating Competitive Advantage Through Your Third Party Expenditure and Key Suppliers – 4:20pm This workshop focuses on optimizing supply chains, transforming organizations to spend money wisely, driving procurement proficiency and more.
Opening Keynote Determining Key Elements to Build—And Realize the Benefits of—Sustainability in Your Organization – 8:45am Learn how Shaw Communications built sustainability in many of Canada’s leading organizations, including Bombardier Aerospace and Ford. CASE STUDY: Streamlining Your Procurement Process To Achieve Better Business Results – 9:05am Canada Post’s Bill Michalopulos discusses transforming a procurement model to procure-to-pay, identifying business results from the transformation, the importance of change management and more.
PANEL: Determining The Most Effective Procurement Tools to Reach the Market and Create Efficiencies in Your Organization – 9:25am Panelists share tools for success so delegates can decide which tools will enhance their sourcing and data analytics capabilities. Uncovering Travel Management Opportunities within your Hotel Program – 10:05am Discover hidden risk and savings potential in your hotel program, learn to identify the right hotel partners/suppliers and maintain costs.
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10:55am – Interactive Roundtable Discussions PANEL: Optimizing Spend Analysis and Visibility to Maintain Cost Reductions – 11:55am Learn to measure if you’re truly saving money; analyzing the cost of service quality, productivity, labour savings, record keeping and more. Implementing Effective Corporate Governance to Ensure Success in a Global Approach to Procurement – 1:35am Hanesbrands’ Joe Vaughn shares accomplishments like establishing a corporate governance model to define how your company procures, incorporating ethics standards and training and documentation and understanding commodity trends. Avoiding Common Contract Pitfalls to Achieve Greater Savings – 1:55 Learn a new perspective on contract management to set your firm up for success.
Contract Lifecycle Management To Achieve Compliance Success – 2:15pm Key learnings include: assessing how you’re monitoring contracts for compliance; automating contract creation and finalization; organizing, locating and reporting on contracts and more. Implementing Strategies to Manage Global and Domestic Supply Chain Risk – 2:35pm Hear strategies to manage everyday and exceptional risks to reduce vulnerability and ensure continuity. Thriving in a World of Trade Actions and Antidumping Regulation – 2:55pm Learn how to manage trade actions and antidumping regulation so you always have quality inventory. 3:45 pm – Concurrent Tracks
5:05 pm – Interactive Roundtable Discussions With Afternoon Speakers
Leadership in the Supply Chain – 8:30am SunRype’s Warren Sarafinchan discusses driving supply chain change to be successful even during challenging periods. Partnering with your Suppliers to Bring Innovation to your Company and Remain Competitive – 8:50am Learn to select and engage suppliers that can offer innovation and move your company forward. PANEL: Driving Sustainability in Procurement and Supply Chain – 9:10am A panel discusses how to maximize sustainability and how sustainability programs increase profitability. PurchasingB2B.ca
Setting the Foundation for Long-Term Success and Strategic Expansion: The Road from Tactical to Strategic Procurement – 10:20am Victor Dixon, VP of supply chain at Composites Atlantic, and his team focus two years out and on where they want to create success.
PANEL: Having the Latest and Greatest Centralized Contract Documentation in Place to Protect Your Company – 10:40am Panelists discuss optimizing their contract documentation and reporting. Executional Excellence: Setting The Supply Chain Management Organization Up For Success – 11:20am Learn steps to create executional excellence and tools for a sustainable structure and practices. 11:40 am – Interactive Roundtable Discussions
Exploring How Tech-Driven Companies can Best-Leverage Their Spend As Technology Quickly Evolves – 1:45pm Michael Johnson of Shell Canada shares strategies for negotiating large-scale contracts to develop and deliver technology.
Running Away and Joining the Circus: A Procurement Tale on Establishing Value Added Service – 2:05am Cirque du Soleil’s Nadia Malek talks about centralizing procurement processes, overcoming challenges of procurement policy implementation, tracking and improving procurement processes and more. Establishing a Supplier Diversity Program to Reap the Benefits of Working with Diverse Smaller Organizations – 2:25pm Learn the benefits and challenges of diverse suppliers, as well as components of a supplier diversity program. 2:45 pm – Interactive Roundtable Discussions with Afternoon Speakers 3:15 pm – Conclusion of ProcureCon Canada 2014
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In this edition 26 FLEET PROFILE
Filling holes in Montreal
28 LAUNCH CONTROL
New cars show the strength of the auto sector
32 CROSSOVER HITS
The newest hot vehicle segment in Detroit
36 TRUCK STARTS
Ford’s aluminum F-150 and the GMC Canyon
38 Road Test
Three executive cars Fleet Management is a special section of PurchasingB2B magazine, running in the January-February, March-April, May, July-August, October and November-December issues. It is an important resource for Canadian procurement professionals who recommend, select and manage fleet vendors and service providers. Editorial inquiries: Emily Atkins, 416.510.5130, firstname.lastname@example.org. Advertising inquiries: Dorothy Jakovina, 416.510.6899, email@example.com.
Hyundai appoints Romano
Nissan tests autonomous drive
Donald Romano has joined Hyundai Canada in the newly created position of chief operating officer. Romano’s key responsibilities will be sales, marketing, parts, service, product and strategic planning, and public relations. He will report to Steve Kelleher, president and CEO. With the addition of Romano, Kelleher will spend more time managing the organization’s overall strategic direction as well as leading the company’s IT, legal, human resources, and finance departments. After entering the automotive industry with Nissan North America in 1985, Romano joined Mazda Motor Corporation in 2000. He progressed through a number of sales and marketing positions before becoming the managing director and president of Mazda Canada in 2006. In 2010, his responsibilities at Mazda expanded. With the added title of Chief Marketing Officer, he led the company’s marketing activities across North America. In 2012, Mr. Romano became the senior managing director and chief marketing officer with ALJ International.
Nissan Motor Corporation has carried out the first public road test of Autonomous Drive on a Japanese highway. A Nissan LEAF electric vehicle equipped with the technology took to the Sagami Expressway in Kanagawa prefecture, southwest of Tokyo, with the prefecture’s governor, Yuji Kuroiwa, and Nissan vice-chairman Toshiyuki Shiga, on board. The vehicle operated fully automatically on the highway. “Nissan seeks a safer, more comfortable and environmentally friendly mobile future,” Shiga said. “Through these tests on an expressway, we hope to further advance our technological development, with the goal of soon implementing Autonomous Drive vehicles. When starting a new project, serious effort is required to gain an understanding of all the variables involved. We were able to conduct this important testing on the Sagami Expressway thanks to the strong support from Kanagawa Prefecture.” The milestone event in the development of next-generation mobility took place near the Sagami Robot Industry Special Zone, an area being revitalized with the help of the local government. The public road test conducted in the special zone will help Nissan to develop Autonomous Drive towards its goal of being ready with commercially viable vehicles by 2020.
Madden in at PHH Arval PHH Arval has appointed Scott Madden vice-president of business development for Canada’s central and eastern regions. Madden joins PHH Arval with more than 20 years of transportation and logistics experience. He most recently served as a manager at Purolator. His responsibilities there included PurchasingB2B.ca
sales strategy, customer and vertical market segmentation, contract negotiation, sales operations and implementation. Madden began his career at FedEx Canada, where he held positions in operations and sales. Madden graduated from McMaster University with a Bachelor of Arts. FEBRUARY 2014 | 25
By Kara Kuryllowicz
Going hole hog
Montreal’s pothole patching crews use specialized equipment
anadians in colder climes have long had issues with potholes, but as global warming alters weather patterns, the peculiar mix of deep freezes and balmy thaws has exacerbated the problem. Asphalt, a mix of gooey bitumen, oil byproducts, gravel and curatives, repels snow and rainwater but once it loses its structural integrity, snow and rain seep in through the cracks. As the water beneath the surface contracts and expands through the freeze-thaw cycles, it pushes out dirt and gravel to eventually create a divot and then a pothole. Last year, between December 7 and 17 alone, Montreal crews filled about 5,000 potholes. But in early January further weather weirdness had car owners calling 311 to report growing craters, leading city workers to a second round of repairs. The city typically fills between 35,000 and 50,000 potholes annually both manually and with the help of two contractors and their equipment: Environnement Routier NRJ Inc and Jean-Paul Trahan. “We fill potholes year-round, but the volume increases during the winter and the spring when we have the worst potholes, which when they’re at least two feet in diameter and six inches deep, can damage a vehicle’s suspension, tires or wheels,” says Champagne. “We call on the contractors and their specialized equipment when we have to repair 5,000 to 10,000 potholes in one or two weeks.” Which is best, a manual or machined repair in terms of durability and efficiency? “It’s difficult to track because there are so many and we don’t tend to revisit the intact repairs but one of our assessments did show us the machined repairs usually last at least until spring and up to half last at least two years,” says Champagne, noting that the weather conditions during the repair and the integrity of the surrounding pavement affect the results. Machined repairs are more efficient because a single operator handles the repair from start to finish and simply drives the entire unit from pothole to pothole. A manual repair can require a crew of five or six people, who have to exit the truck to load and unload materials and equipment for each hole. However, it does provide more flexibility in complex situations. NRJ currently owns and operates five of Schwarze Industries’ Roadpatcher machines, which automatically repair potholes and other road defects. The machine blows compressed air into the hole to remove as much dust, debris
26 | FLEET MANAGEMENT | FEBRUARY 2014
The patching machine needs only one operator who drives it from pothole to pothole.
and water as possible. To create a binding surface to which the asphalt fill will properly adhere, an asphalt emulsion is sprayed into the hole. The Roadpatcher accurately controls the aggregate through a positive-flow conveyor system while the asphalt is applied with a spray ring. The unit’s boom has a tube stabilizer that allows the operator to precisely control and place the patching material. “A few years ago, we hired a lab to calibrate the machines for us and develop an asphalt recipe that suited our weather conditions,” says Steve Bastien, assistant general manager at Environnement Routier NRJ Inc. “You need to tailor the machine and the asphalt mix to the environment.” The Roadpatcher units, which cost about $200,000 apiece, have a lifespan of 10 to 15 years if diligently and rigorously maintained, which is crucial since they toil primarily through Montreal’s cold winters. The focus is on daily fluid and pressure checks, lubrication and of course, a walk-around to ensure everything is as it should be. Operators even verify the accuracy of the thermometers to ensure the emulsion is at the manufacturer-specified temperature. “Because our Roadpatchers are at work in the extreme cold, we customized them to perform and last through Montreal winters by installing a heating element around the spray nozzle and insulating the pipes that carry the asphalt emulsion to the front of the Roadpatcher to keep the mixture hot enough,” says Bastien. Each machine requires a single operator to direct the machine to the potholes. On a frigid winter day with a biting wind, the operators certainly appreciate the Roadpatcher’s cab which lets them monitor all functions from within. “It’s more comfortable but most importantly, it’s safer, because they’re protected from the traffic,” says Champagne. The more experienced Roadpatcher operators train the employees who are new to the Roadpatcher. In addition to learning how to operate the Roadpatcher, they’re also taught how to clean, maintain and troubleshoot it. “We know that what we’re doing is effective because we use our GPS systems to take us back to the potholes we’ve repaired and year after year they’re still in place,” says Bastien. B2B PurchasingB2B.ca
Story and photos by Emily Atkins
Launch Control LA and Detroit shows reflect robust car biz
ore than 22 vehicles saw world debuts at the LA Auto Show in November, that along with numerous North American reveals, made the event a real showcase for the auto industry’s current success. World debuts included the Nismo Juke RS. Mercedes-Benz had the brand’s North American introductions of the GLA 250 and the S63. Porsche revealed the Macan, the highly anticipated SUV crossover vehicle. BMW, Chevrolet, Ford Honda, Hyundai, Jaguar, Land Rover, MINI, Subaru and Toyota rounded out the list, all with global introductions. Here are some of the highlights:
Chevrolet Sonic Chevrolet announced two new sedan options to its Sonic lineup in 2014—the performance-inspired RS and the style-conscious Dusk. The Sonic RS sedan joins the RS hatch in the lineup and is powered by the Ecotec 1.4-L turbo motor rated at 138hp with 148lb-ft of torque. Chevy claims that unique transmission gearing in the six-speed manual, or a 3.53 final drive ratio for automatic-equipped models, along with a sport-tuned suspension and lowered ride height, enhances the car’s performance feel.
Subaru WRX The 2015 WRX boasts a brand new 2.0-litre horizontally opposed direct-injection turbocharged (DIT) engine, a stiffened body and chassis, and a new six-speed manual transmission. There’s also an automatic with the “Sport Lineartronic” transmission that offers an eight-speed manual shift mode. The WRX’s DIT engine claims improved performance over the outgoing model, producing a maximum 268hp at 5,600rpm and 258lb/ft of torque from 2,000 to 5,200rpm.
Kia K900 Kia took the wraps off its new flagship K900 rear-drive sedan. The all-new 2015 K900 is poised to challenge the full-size rear-drive luxury sedan segment, and will be offered with a V6 or a V8 motor. The range-topping V8, equipped 28 | FLEET MANAGEMENT | FEBRUARY 2014
with the VIP Package, will add additional amenities including reclining outboard rear seats. The K900 Premium V6 will launch with an available Luxury Package and Technology Package. The K900 is expected to go on sale during the first quarter of 2014, and pricing was not yet available.
Hyundai Elantra Coupe The updated 2014 Elantra Coupe now has a standard 2.0-litre Nu Gasoline Direct Injection (GDI) engine, which adds 25 more horsepower (a 17 percent increase) and 23lb/ft of torque from the prior model year’s 1.8-litre engine. In the Elantra Coupe, this power plant produces 173hp at 6,500rpm and 154lb/ft of torque at 4,700rpm.
Toyota Highlander Hybrid Toyota launched the all-new third-generation gas-electric mid-size hybrid Highlander SUV. The exterior has grown in length by approximately three inches from the previous version, while width is increased half an inch. On the tech side, a newly designed 4.2-inch colour LCD provides information including an Eco driving indicator and energy monitor, and is available on XLE and Limited models. This Multi-Information Display is linked to the 8-inch touchscreen navigation system, and will display turn-by-turn directions immediately in front of the driver. The third-row seats will be 60/40 split bench for up to three passengers and added storage flexibility and convenience. Rear cargo space behind the third row has also increased.
Mini Cooper The new Mini, available in March 2014, offers two newly developed power plants. The Cooper has a 3-cylinder engine with a peak output of 134hp. The 4-cylinder engine in the Cooper S makes 189hp. A 6-speed automatic transmission is optional for all engine variants. The new car is a little longer than its predecessor and offers an additional 50L of cargo capacity. The John Cooper Works concept version was revealed at the Detroit show. PurchasingB2B.ca
Mini Cooper, John Cooper Works edition shown in Detroit
The BMW i3 electric vehicle was available for test drives in LA. This is a futuristic car, with full carbonfibre construction, materials chosen for their ecofriendliness and a no-frills experience. It is, however, superb to drive. With all the instant torque of an electric drive car and feather-light construction, the i3 is supremely quick off the line. This power is well managed by BMW’s renowned handling. The i3 is destined for arrival in showrooms in the spring.
Nissan Sentra Nismo Concept
Honda FCEV Honda’s next generation fuel cell-electric vehicle launching in 2015 will feature the world’s first application of a fuel-cell powertrain packaged completely in the engine room of the vehicle, allowing for efficiencies in cabin space. The next generation Honda FCEV is anticipated to deliver a driving range of more than 300 miles (480km) with a quick refueling time of about three minutes.
Honda Civic Canada’s perennial best-selling passenger car is building on its 2013 refresh with enhancements that include a new optional CVT, optional display audio with 7-inch touchscreen, better engine performance on all models except the Hybrid, and available lane departure warning, blind spot display and smart entry with push-button start.
Nissan Sentra NISMO Concept Among the Sentra Nismo Concept’s many departures from a production 2014 Sentra are its race-inspired exterior with enhanced aerodynamic performance, Nismo-tuned suspension, steering and transmission and motorsports-style cockpit. Under the hood, the concept adapts a 1.8-litre direct injection turbocharged engine producing more than 240hp and 240lb/ft of torque, mated to a 6-speed manual transmission. B2B PurchasingB2B.ca
Subaru WRX FEBRUARY 2014 | 29
Breaking Down Your Fleet Spend. Knowing your fleet costs is the first step in controlling them. espite being a significant annual expenditure,
“Only by identifying each element that goes into the fleet
many organizations still struggle to get a clear
spend, can you focus on containing the individual items
handle on just what goes into their fleet spend and how
as well as overall costs,” says Peter Nogalo, marketing
best to manage it, let alone contain it. As Canada’s largest
manager at ARI.
provider of fleet management services, ARI collects operating and expense information on over 150,000 Canadian vehicles, and over 950,000 across North America.
From that, ARI has been able to develop a
profile and breakdown of the typical Canadian fleet spend, which includes depreciation, fuel, maintenance, license and taxes, interest, tires, management fees, and accidents.
Typical Fleet Spend
Depreciation Depreciation is really just the fixed cost of owning or leasing vehicles. Whether it is leased or owned, it is essentially your fixed cost of ownership from the time the vehicle is purchased until it is sold. “Many organizations focus on the up front costs when looking at depreciation, but actually what happens on the back end can have as much or more impact on the total depreciation,” says Nogalo. Determining market conditions and what a used vehicle will be worth several years out can be challenging, says Nogalo. “This is where the role of your fleet management company becomes critical. While it may seem like there is some sort of alchemy involved, at ARI we actually use historical, regional, published and internal benchmarks to determine the future value of the vehicle and set depreciation rates accordingly.’
Fuel and Maintenance Fuel has historically been the second largest fleet expense, but over the past few years it has actually challenged depreciation for top
“Only by identifying each element that goes into the fleet spend, can you focus on containing the individual items as well as overall costs.” spot. “The situation with fuel has been very interesting,” says Nogalo. “Of course, we all know that higher fuel costs are the new normal, but the fact that depreciation costs have not risen
Fleet Management Fees While often the focus of sourcing professionals, fleet management fees typically make up less than 3% of the total fleet spend. In many ways, fleet management fees
is what’s also affecting that balance.
are one of the most interesting line items, says Nogalo.
According to Nogalo, the used vehicle market has been at
“In some ways, they receive disproportionate attention,
historic highs over the past several years, which has taken the pressure off of depreciation. “The more a vehicle is
and other ways not enough.” At such a small percentage of the fleet spend, the attention should be focused on
worth on the backend, the less your depreciation will be.”
what value is being delivered from those fees.
One piece of good news on the fuel front is the introduction
“At ARI, we have focused on the 97% of fleet costs that
of new, much more efficient technologies. While you can’t control the cost of fuel, you can control how much of it
can be managed down. Our role is to work with our clients to identify potential cost savings through process
you use, at least to a certain extent, says Nogalo.
improvements and best practices. We report on those
“By replacing older, less efficient technology with newer
are often more than the fees themselves,” says Nogalo.
models, you can benefit from a strong used vehicle market; reduced maintenance expenses on newer, warranted vehicles; and reduced fuel expenses, not to mention improving the overall environmental performance of your fleet,” says Nogalo.
targets and return the savings back to our clients, which
About ARI ® ARI is the largest vehicle fleet management provider in Canada, and second largest in North America. ARI operates in Mississauga, Laval, Ottawa, Calgary, Edmonton, and Burnaby. ARI manages over 950,000 cars, trucks and equipment globally, including 150,000 in Canada. This year marks ARI’s 65th anniversary in providing fleet management solutions.
Once again, your fleet management partner should be able to help you with a comprehensive fleet replacement schedule that includes a lifecycle analysis, standardization options, fuel usage and green performance, as well as all associated costs and potential savings.
For a comprehensive analysis of your existing fleet spend or to learn other best practices to drive down costs, contact ARI at 1-800-361-5882 or visit www.arifleet.ca
Story and photos by Lesley Wimbush
Infiniti Q30 Concept
Compact crossovers take centre stage at NAIAS
f 50 is the new 40, is the crossover the new sedan? With the auto manufacturing sector making a strong recovery, new vehicle sales are on the rise. And while the compact car segment, with a healthy 22 percent, continues to hold the largest share of the market, the compact crossover’s popularity has exploded. With over 250 percent growth in the last decade, it’s the fastest growing segment in the market. Aimed at young couples or “empty-nesters” looking to downsize from large sedans and SUVs, the compact SUV is red-hot and showing no signs of leveling off. It’s not surprising then, that virtually every major manufacturer had their own diminutive crossover on display in Detroit. Even the luxury automakers have joined in, attracted by the 17 percent market share created by the mainstream players.
Not that long ago the idea of luxury automakers building SUVs and crossovers was considered blasphemy. But other premium automakers have realized that Porsche made a boat-load of money with the Cayenne—the vehicle which almost single-handedly pulled them through the economic implosion of a few years ago. So, when Porsche’s compact Macan debuted recently in Los Angeles, it was met with enthusiasm, instead of the outraged betrayal Porsche loyalists showed the Cayenne. While Chrysler, GM, Ford, Honda and Toyota still dominate the compact crossover market, the recent inclusion of premium brands made this one of the most interesting segments to observe at NAIAS. Here are a few of our favourites:
Volvo Concept XC Coupe A three-door crossover hatchback, the Concept XC Coupe is more than a design exercise, it represents the fresh new direction Volvo is enjoying under new leadership. In matte and glossy white, with soft grey vinyl cladding and orange trim, the XC Coupe paints a striking picture. Huge, 21-inch rims and a streamlined rooftop cargo container proclaim its sporty intentions, but there’s no information available yet on what the powertrain will be. While it’s unlikely this attractive crossover will ever see production, many of its elements—the squared-off grille, T-shaped LED lights and signature C-shaped taillights—will likely appear on the next XC90.
Volvo Concept XC Coupe 32 | FLEET MANAGEMENT | FEBRUARY 2014
Continued on page 34 PurchasingB2B.ca
Mercedes-Benz GLA45 AMG
Mercedes-Benz GLA45 AMG Based on the new GLA250 crossover, this is the latest product to roll out of Mercedes-Benz’s AMG performance division. Underneath the racy, carbon-fibre clad exterior is a single engine offering: a 2.0-L four-cylinder that puts out 355hp and 332lb/ft of torque. The same turbo-charged mill found beneath the hood of the CLA45, it’s now the most powerful production four-cylinder ever produced. The seven-speed automatic transmission switches between Manual, Sport and Efficiency Modes. Mercedes-Benz’s ESP stability control, with a sport mode that lets the enthusiast fulfill a need for “spirited driving” without the nanny system intervening, is standard equipment. 34 | FLEET MANAGEMENT | FEBRUARY 2014
Although it’s been available in other world markets since 2012, the Q3 made its North American debut in Detroit. Audi is looking to attract its share of the compact SUV customer base with this fully loaded, sporty crossover. Blending “coupe-like looks with the utility of an SUV”, the Q3 features a 200-hp TFSI four-cylinder engine and available Quattro permanent all-wheeldrive. With the competition in this segment heating up, Audi is offering an extensive list of standard features to set it apart from its rivals.
Infiniti Q30 Concept Is it a hatchback, a coupe, or a crossover? Infiniti, Nissan’s luxury division, is letting you come to your own conclusion. Whatever it may be, the Q30 attracted its share of attention on the Detroit stage. Just as Nissan did with the Juke, Infiniti is hoping the Q30 will appeal to “younger buyers who prefer cars that aren’t easily categorized”. It’s a polarizing vehicle, with lines and sharp edges inspired by the Essence and Emerg-E concepts wrapped in eye-catching coppery-pink sheet metal. Rumour has it the Q30, scheduled to roll out in 2015, could very well be the first product of the Renault-Nissan and Mercedes alliance and, as such, may share parts with the German luxury brand. B2B PurchasingB2B.ca
Story and photos by Howard J Elmer
That’s not heavy, it’s an F-150 Notable new truck launches at the Detroit auto show 2015 Ford F-150 For 2015, Ford’s best selling truck will feature an aluminum body. Yes, above the steel frame, almost every single panel and body component is made of aluminum. At the same time, under the hood, Ford pushes its EcoBoost engine to a new low—displacement that is—with a 2.7-L engine. The aluminum body is a first, and the obvious benefit is weight at around 700lb less than the current steel version. But what else does this change? Ding and dent resistance improves, as does corrosion protection. This weight loss should also translate to fuel savings with the current crop of engines. However, with a new, smaller EcoBoost under the hood, the fuel economy improvement should be multiplied. One other fuel-related initiative will be the addition of standard stop/start technology. While we don’t have any official numbers from Ford yet, we can look at the current 3.5L EcoBoost with an average of 12L/100km consumption and extrapolate downwards to come up with a possible average for the new 2.7L. That number could be 9L/100 km, and that does not factor in the weight savings or the stop/start function. That fuel number is in diesel territory and may well explain why Ford is leading with its EcoBoost technology. Of course, cost is another question that currently has no answer other than to state the known fact that EcoBoost is more expensive to build than a naturally aspirated engine. But then, diesel is more expensive to build than gas as well, so it may all end up being a wash. Either way, it appears that Ford’s engine strategy, unlike its competitors, does not include diesel in its half-ton pickups any time soon. The next question that arises among buyers with any new engine may well be more important though. How good is it 36 | FLEET MANAGEMENT | FEBRUARY 2014
2015 Ford F150
going to be? Ford has set out to answer that question too— almost before it’s asked. This past November, a disguised 2015 F-150 was raced in the Baja 1000 desert classic. It used the new frame, underpinnings and the 2.7L EcoBoost engine. It completed the race, while many hand-built trucks did not. PurchasingB2B.ca
On the business end Ford introduces a new system called BoxLink. This is a combination of brackets and cleats that will secure items like loading ramps, a cargo box, storage bins and bed dividers in the bed—as well as new (and much better) tie-downs. Also out back, the Ford signature tailgate step has been modified to swallow all the moving parts into the gate. The fold-up handle-bar is no longer exposed on the tailgate; it now slides inside. This now makes the gate smooth once again, a preferred state for pushing and pulling heavy cargo across it. The truck will be available going into the third quarter of this year. Until then, rest assured that Ford will continue to drop new information at timed intervals leading up to the launch.
So, what else is in the new truck? How about a 360-degree camera view system? Using several exterior cameras, a bird’s eye view of the truck is shown on the centre console screen with real-time images of what is around the truck. All around the truck! This is wonderful for parking, backing up, hooking trailers and navigating into loading ramps. PurchasingB2B.ca
The GMC Canyon (twin to the Chevy Colorado shown at the LA Auto Show) was the first introduction at Detroit this year. And, while identical under the skin, GM does work hard at creating a separation of the brands. Both these trucks are mid-size and they have a mission; reinvigorate the segment that over the last decade has virtually collapsed. The new Canyon will come in three configurations—an extended cab with six-foot box and a crew cab with either a five or six-foot box. There will not be a regular cab. Standard engines in the Canyon will be a base 2.5L I-4 and a 3.6L V6. Both will be matched with a six-speed automatic transmission. Also, the V6 (and with the tow package) will pull 3,039kg (6,700lb). Even the base I-4 promises to deliver lots of jam with an estimated 193hp and 184lb/ft of torque. In a surprise move, GM also announced an innovation that is more than one model year away—a small diesel engine option. In the 2016 Canyon/Colorado a Duramax 2.8L I-4 turbo diesel will be available. Another first for the North American mid-size market, and for GM. B2B FEBRUARY 2014 | 37
By Emily Atkins
Executive cars that deliver the whole package Choosing an executive car priced between $60,000 and $100,000 is harder than you’d think. There are lots of choices in the price range, and many are truly excellent cars. The following is a small cross-section of the ones we like. BMW 435i X Drive Coupe This is the car in the group for the driving enthusiast. The manual transmission in this coupe is as smooth a stick as you could imagine, making it a joy to drive even in heavy, slow traffic. If you like to drive manual, but hesitate because of a nasty commute, this car could change your mind. It doesn’t hurt that it’s gorgeous on the outside, boasts 4-wheel drive, and is superbly comfortable inside, with seats that feel like a warm hug, and amenities to spare. One quibble is the elbow-impinging centre armrest. When you drive with your seat low to the floor, it does get in the way of the shifting arm elbow—a small pet peeve. 38 | FLEET MANAGEMENT | FEBRUARY 2014
Although it’s only got two doors, access to the rear seats is reasonably easy, and four big adults can ride in comfort. Visibility is great all the way around, and the car is quiet and well-mannered on the highway. It’s not supremely powerful, but the torque is evenly dispersed, making the car respond crisply to throttle inputs at all speeds. The electronic interface is not the most intuitive, but it does deliver a lot of features, along with a superb sound system. The 435i X-Drive punches above its weight in terms of value for money. Not a rocket-ship, but fun to drive, luxurious and a definite head-turner.
BMW 435i X Drive Coupe
BMW 435i X Drive Coupe As tested: $64,650 Specs: 3L, 6 cylinder, 300hp, 6-speed manual Rating: 8.5/10
Mercedes-Benz E-550 4Matic This big, boxy machine is something of a stealth racer; its looks make you think Grandpa, but when your foot hits the right pedal hard you’ll be feeling more like a teen hot-rodder. The car has a split personality. It’s perfectly happy to putter sedately around town, ferrying family or clients in quiet elegance. But the 402hp 8-banger under the hood is more than ready to delight. It spools up with a beefy growl, and in sport mode the automatic has quick, smart shifts; you’ll leave other sedan drivers dust-covered, with puzzled looks on their faces as you shoot by. Continued on page 40 PurchasingB2B.ca
Mercedes-Benz E-550 4Matic
Range Rover Sport HSE For a big sport ute, the Range Rover Sport is a well-mannered, highly competent road master, with obvious rough terrain cred. This vehicle got through the Toronto ice storm last December without so much as a moment of wheel spin, and that’s with
Ice Queen: The Range Rover Sport HSE performed beautifully through the Toronto ice storm in December. 40 | FLEET MANAGEMENT | FEBRUARY 2014
The four-wheel drive adds to the pleasantly nimble As tested: $81,500 handing. But this car’s not just Specs: 8-cylinder, 402 hp, 7-speed automatic about performance. Inside, Rating: 8/10 it’s understated and uncomplicated. The driver’s seat is comfortable and has active bolsters that move to support you as the car turns. This takes a little getting used to, but would be nice for high-speed maneuvers. There’s plenty of room in the rear seats, and the cabin is well endowed with storage space, including clever bins under the front seats. On the downside, controls for the navi, sound system and car settings are less than intuitive and seem overly complicated. The push-button ‘mouse’ on the console is also prone to being bumped by an elbow, occasionally causing a glitch in navigation or entertainment programming. Mercedes-benz E-550 4Matic
to keep up with freeway traffic. It’s got great all-round visibility, and if it did not have the rear camera, it would still back up and park easily. The interior is beautiful with two-tone leather, a panoramic sunroof, folding armrests for the front seats, and plenty of space for passengers and cargo. Seating is very comfortable, and the Range Rover Sport HSE ergonomic set-up As tested: $78,990 works well. It’s a tall Specs: 6-cylinder supercharged 3-L, 340hp vehicle, making entry and exit quite like Rating: 8/10 getting into a pickup, which could be a concern for those with mobility issues. Operations from the driver’s seat are good. The interface is relatively intuitive, with logical steering wheel controls. The computer is slow, however, and left this driver wondering more than once if a command had registered. Several really great details more than made up for this—for example, the temperature controlled box between the front seats, the lighted receptacles for USB and aux cables and the very intelligent automatic high beams. B2B
maneuvering through and around slick streets choked with downed trees. Although it’s hard not to fall in love with a vehicle that delivers in tough circumstances, the Range Rover deserves respect any time. On the highway it handles extremely well, with enough power and responsive steering
SAVE THE DATE!
September 18-19 Fallsview Casino Resort, Niagara Falls, ON
A NEW event featuring insights, tools and strategies to optimize travel and meetings spend!
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PurchasingB2B magazine, in partnership with the Global Business Travel Association (GBTA), is pleased to present Travel Procurement Symposium â€”a high-level event that has been developed specifically to address the needs of Canadian senior procurement and supply chain management professionals with responsibility for their companiesâ€™ meetings, events, and business travel spend. This symposium features up-to-date insights, tools and strategies to optimize travel and meetings spend while aligning procurement with overall business performance. The event brings together buyers and suppliers in the procurement and business travel spaces, and offers both groups the opportunity to network with peers and leading industry experts.
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Delegate registration opens May 2014
To get involved, please contact Dorothy Jakovina, Publisher firstname.lastname@example.org 416-510-6899
Value For Money in Contracts Tips for ensuring effective supplier performance by Larry Berglund
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requent instances occur within contracts where disputes arise over the quality of the materials or service performance. Invariably, the relationship between the owner and the contractor deteriorates with the result being that the owner will not receive full value for money. Execution of a contract doesn’t give license to the owner to demand services that were not contracted, or for the supplier to provide inferior product or unsatisfactory service. It’s essential that the RFP include language that facilitates management of the contract, the terms and performance metrics that are usually developed collaboratively between the owner and the successful proponent before the contract’s execution. The key to maintaining a successful relationship is to meet to review performance, identify deficiencies and seek improvement. This implies that all parties can contribute to ongoing improvements. One contract management weakness is that the owner lacks a structured process to identify deficiencies. This activity is directly correlated to the responsibilities for contract management and without a formal supplier evaluation process the ability to measure value for money is forgone. In future competitions, the owner may fall victim to the lowest bidder—who may qualify for price-based contracts arrived at through competitive processes that meet minimum or lesser requirements. Supplier performance evaluations should be a shared responsibility between the end user and the procurement or designated contract staff. Verbal complaints or undocumented perceptions about poorly performing suppliers won’t cut it and aren’t defensible in avoiding an award to a poor performing contractor. Without an evidence-based defense, the poor performer is being treated unfairly and may have a right to recourse if unsuccessful in a competitive bid due to a lack of a record. Conversely, suppliers who are performing well have their performance record lost in anecdotal comments. The lack of a formal evaluation process and record on file defaults in favour of the poor performer. The situation continues un-
til the service provider hits an unacceptable level and remedial actions are necessary. This adds to administration costs and doesn’t address core problems. Replicating successful contracting processes leads to best practices in contract management. Supplier evaluations Supplier evaluations on contracts are related to expected level of services within the RFP or in the contract and the perceived level of services received by the organization. The perceived level of services equates to the assessment of the services after they’re performed. The expected level of services equates to the pre-contract evaluation and any subsequent meetings to clarify those services. The latter is analogous to the hiring of a prospective employee. The employee’s resume and references give the employer an expected competency level. Employers assess the value of that performance through evaluations. The reason for the discrepancies between the expected and the perceived level of services should be determined as part of the continuous improvement process. Where a perceived service exceeds the expected service level, this too is an important lesson from a supplier evaluation. It’s the relationship between the expected (desired) level of services and the perception of the services received that needs to be assessed in the supplier performance evaluation. Not all evaluations should be conducted in the same manner. Based on contract type, the performance evaluations should address the nature of the goods or service and the inherent risks. Several contract types exist, including: • One-time services, i.e. need to having a document translated; • Multi-year delivery of services, i.e. need to have painting contractors available to meet ongoing service requests; • Multi-year outsourcing of services, i.e. need to have IT support available to manage technology upgrades; • Short-term project services, i.e. need to have facilitation of training programs; • One-time goods acquisition, i.e. need to buy an electron microscope; and • Multi-year goods delivery, i.e. need for office supplies and related equipment on an ongoing basis. Each contract type implies different criteria and outcome measurements and therefore different contract management tools or focus areas. All contracts share the common component of the perceived level of satisfaction to be assessed at the contract’s end. Although there are differences in the types of contracts, there are common best practices for managing them. Nevertheless, this doesn’t presuppose that every evaluation should encompass the same degree of detail. Rather, evaluations differ given the variety of factors impacting procurement, like the circumstances under which the goods or services were acquired. This could include time frame, emergent situation, compatibility risks, project cost, or availability of alternatives in the market. Service contracts may result from a successful competitive
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process or, where justified, a direct award. One-time, short-term contracts tend to be less problematic from a managerial perspective than multi-year agreements. However, all contracts require management of the terms and conditions specific to the nature of the goods or services, or unique to departmental requirements that the parties must comply with during the contract term. Key responsibilities in successful contract management include: • Compliance with the contract terms and conditions by all parties; • Satisfactory contractor performance during contract term; • Owner received value for money; and • A post-contract evaluation summary was conducted and stays in the file. The performance of the contractor during the term of the contract should be monitored for: • Identification of problems or deficiencies as per the statement of work; • Remedial actions taken where necessary; • Interpersonal skills and relationships of contractor resources; and • Failure to meet terms and conditions. Contractors should be advised during the contract regarding whether their performance is meeting expectations—not only after the fact. After the contract’s completion, an evaluation should be conducted as to the contractor’s performance in meeting the expected outcomes and their relations with organization staff. Post-contract evaluations and reviews are conducted to: • Ensure goods or services were provided as per the contract terms and conditions; • Ensure end user needs were met; • Identify areas of improvement in procurement; and • Assess if the contractor would be re-considered for similar services. The contract manager should follow up directly with end users and/or the RFP team lead to discuss the contract/project file, and speak with the supplier to identify areas for improvement. Post-contract evaluations are a commitment to continuous improvement, which is a best practice. The performance evaluation forms a part of the contract file for future reference. Learning outcomes from the evaluations provide an iterative process contributing to the benefits of the owner and supplier. Supplier performance evaluation and ROI As advocates of supplier performance evaluations we share the following advice, comments and recommendations: • A formal and comprehensive evaluation requires a wide variety of perspectives from stakeholders to be objective. The cost to conduct supplier evaluations during and post-contract is low compared to the benefits. • The results should be shared objectively with the supplier being evaluated. Where areas for improvement are noted, this can complement continuous quality strategies; and where a strong performance is assessed, this too contributes to replicating this ongoing level of performance. Supplier improvements don’t just benefit one customer. They also provide the multiplier effect where the resolutions can be applied to many customers. Early detection and remediation of issues reduces the overall costs to all parties. This leads to improved performance and longterm competitiveness. The parties have a stronger understand-
ing of expectations and commitments to the contract’s spirit and intent. The opportunity for leading suppliers to reference successful contracts with potential clients garners better evaluations. Owners receive value with higher end user satisfaction. Supplier Reward Programs Suppliers want information regarding their ranking within the overall score determined from the metric assessments. The scores give a percentage in relation to the overall points. Where a supplier gets a very high ranking, rewarding them with a “preferred” or “exceptional supplier status” certificate provides a stronger motivation to maintain that rank. This contributes to increased competition to vie for this recognition.
“The key to maintaining a successful relationship is to meet to review performance, identify deficiencies and seek improvement. This implies that all parties can contribute to ongoing improvements.” The big payback to the owner is to be the “customer of choice.” In a recent provincial RFP the successful bidder immediately asked for a debriefing (debriefings are usually associated with unsuccessful bidders) since they knew their proposal’s solutions were likely not ranked the highest in every category in the bid document. Before implementation, the supplier wanted to know where they could focus improvement at the contract’s outset. This led to a strong working relationship between the parties where the perceived services were greater than the expected services. These guidelines provide a subjective means of assessing performance. A final score should be reached by consensus and averaged by the number of staff completing an evaluation to mitigate bias. The post-contract evaluation process should include end users, procurement, legal, finance or accounting staff, or other stakeholders to assess perceptions at project completion. This forms a part of the contract record and can be used when evaluating future proposals. B2B
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Par Cheryl Paradowski
Le plus grand rassemblement canadien de spécialistes de la chaîne d’approvisionnement aura lieu à Edmonton
Le congrès national annuel de l’AGCA regroupera 500 professionnels de la GCA pour discuter des questions émergentes et des innovations du domaine.
’ai peine à croire que le prochain congrès se tiendra dans quelques mois seulement, soit du 11 au 13 juin, à Edmonton, sous le thème Ressentir l’énergie! L’Alberta est devenue un joueur dominant sur la scène mondiale en matière d’énergie, ce qui a contribué à l’établissement d’une chaîne d’approvisionnement en énergie très sophistiquée. Nous vous invitons à vous joindre à vos pairs du secteur de l’énergie et des autres industries pour vous renseigner sur les solutions qui pourraient fort bien vous aider à relever vos propres défis en approvisionnement. Ferio Pugliese – Président, WestJet Encore En 2007, notre premier conférencier, Ferio Pugliese, a été classé parmi les 40 dirigeants de moins de 40 ans les plus prometteurs au Canada par Caldwell Partners et depuis, son étoile a continué de monter. Il occupait en 2007 le poste de vice-président directeur, ressources humaines, culture et services en vol de WestJet, mais il a depuis été promu au poste de président de WestJet Encore, un transporteur régional à faibles coûts en service depuis juin 2013. WestJet figure constamment parmi les employeurs de choix au Canada. Les deux dernières années, l’entreprise a été couronnée « Meilleur employeur canadien » par Randstat, à la suite d’un sondage auprès de chercheurs d’emploi et d’employés. Les spécialistes de la chaîne d’approvisionnement qui gère du personnel seront certainement inspirés par les programmes de gestion des employés de WestJet. Les participants au congrès seront également inspirés par le récit des défis qu’il a relevés en lien avec le lancement du transporteur régional et des leçons qu’il en a tirées.
Kimberley Amirault-Ryan, Ph. D. – Psychologue sportive en chef, Comité olympique canadien, Jeux olympiques d’hiver de 2014 à Sochi Les honneurs sont aussi le lot de notre deuxième conférencière, Kimberley Amirault-Ryan. Elle fait partie de la liste
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Power 50 du Globe and Mail, du Top 40 Under 40 du magazine Avenue et de la liste des Canadiennes les plus influentes selon l’Association canadienne pour l’avancement des femmes du sport et de l’activité physique. Mme Amirault-Ryan travaille dans le domaine du sport professionnel depuis 2001. Elle est la toute première femme à occuper le poste de conseillère en rendement auprès des Rangers de New York, des Knicks de New York, des Blue Jackets de Columbus et des Oilers d’Edmonton. Elle travaille avec des équipes olympiques depuis 1998, dont les équipes canadiennes de hockey féminin, de ski de fond et de patinage de vitesse, qui ont toutes remporté des médailles d’or. Depuis 2010, elle est psychologue sportive en chef pour le Comité olympique canadien. Nul doute que Mme Amirault-Ryan sera en mesure de nous enseigner à motiver nos propres équipes!
Mark Anielski – Auteur lauréat et économiste Notre dernier conférencier, Mark Anielski, est un expert en économie durable. En 2011, il a remporté le John Cobb Common Good Award pour son travail visant à remettre en question le modèle économique dominant et à redéfinir son rôle au sein d’une nouvelle civilisation, un travail associé au développement d’un système de comptabilité du PIB vert pour des gouvernements municipaux chinois. M. Anielski est aussi l’auteur du livre The Economics of Happiness: Building Genuine Wealth pour lequel il a remporté une médaille d’or aux Nautilus Book Awards de Los Angeles, dans la catégorie Affaires responsables, ainsi qu’une médaille de bronze aux Axiom Book Awards de New York dans la catégorie Économie. En 2008, le magazine Alberta Venture a nommé M. Anielski parmi les 50 Albertains les plus influents. Il est aussi un des membres fondateurs du premier programme de MBA spécialisé dans les pratiques commerciales durables et éthiques du Bainbridge Graduate Institute.
M. Anielski présentera son nouveau modèle économique fondé sur la « richesse véritable », expliquera comment les gouvernements et les entreprises l’utilisent afin de créer une économie du bien-être, et démontrera comment l’appliquer dans votre propre vie.
Tissez votre réseau professionnel et apprenez auprès des meilleurs spécialistes canadiens de la chaîne d’approvisionnement Comme par le passé, de nombreux ateliers permettront aux spécialistes d’améliorer leur connaissance du domaine. Les sujets traités comprennent la gestion des stocks, la durabilité, les marchés publics, le droit de l’approvisionnement, les relations avec les fournisseurs, la résolution de conflits et plus encore. Le comité organisateur du congrès a aussi mis au programme des événements de réseautage pour que les participants puissent se rencontrer dans une atmosphère détendue. Le coup d’envoi du congrès se déroulera au Fort Edmonton Park, où les visiteurs pourront faire un saut dans quatre périodes historiques des années 1846 à 1929. Rencontrez des chercheurs en gestion de la chaîne d’approvisionnement du monde entier Pour la première fois, le Symposium sur la gestion de la chaîne d’approvisionnement se tiendra durant les deux jours précédant le congrès national de l’AGCA, soit les 10 et 11 juin et au même endroit que celui-ci. Ne ratez pas cette chance de rencontrer des chercheurs en GCA de partout au monde. Un tarif spécial est offert aux participants qui assistent aux deux événements. J’espère avoir l’occasion de vous rencontrer à Edmonton et je vous invite à vous inscrire dès que possible pour profiter des meilleurs tarifs! Pour obtenir plus d’information ou pour vous inscrire, visitez le site du congrès (scmanational.ca/fr/evenements/congres-national) ou celui du symposium (scmanational.ca/fr/ evenements/symposium). B2B
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THE PROFESSIONAL By Cheryl Paradowski
Canada’s largest gathering of supply chain professionals will take place in Edmonton
SCMA’s Annual National Conference will bring together 500 of the country’s top SCM professionals to discuss emerging issues and learn about innovation in the field
can hardly believe that our next conference is only a few months away! I’m certainly looking forward to it, June 11-13, in Edmonton, Alberta. This year we’re asking attendees to Feel the Energy in Edmonton. Alberta has really emerged as a dominant global player in the energy sector and this has sparked the evolution of a sophisticated energy supply chain to support it. We’re inviting you to come and learn from your peers in the energy sector, and from those in other industries as well, because their solutions might very well help you overcome your own supply chain challenges. Ferio Pugliese – President, WestJet Encore In 2007, our first keynote speaker, Ferio Pugliese was recognized by Caldwell Partners as one of Canada’s Top 40 Under 40 and as predicted, his star has just continued to rise. Most recently he was Executive Vice-President, People and Culture at WestJet where he oversaw all aspects of WestJet’s core people management programs. Ferio has since been promoted to President of WestJet Encore, a new low-cost, regional carrier that commenced operations in June of 2013. WestJet has been perennially named amongst the most desirable employers in Canada, winning top honours for the past two years as Canada’s Most Attractive Employer in a survey of Canadian job seekers and employees by Randstad Canada. Any supply chain professionals who manage staff will be sure to find his insights about the people management programs at WestJet very helpful. Attendees will also draw inspiration from the challenges he has faced in launching a new regional carrier and the leadership lessons that he has learned along the way. Dr. Kimberley Amirault-Ryan – Lead of Sports Psychology, 2014 Sochi Winter Olympics, Canadian Olympic Committee. The accolades just keep coming for our second keynote speaker, Dr. Kimberley Amirault-Ryan. She was listed in The
Globe and Mail’s Power 50, recognized in Avenue magazine’s Top 40 Under 40, and by the Canadian Association for the Advancement of Women and Sport and Physical Activity as the Most Influential Canadian Woman in Sport and Physical Activity. Dr. Amirault-Ryan has worked in professional sports since 2001 and was the first female Performance Consultant for the New York Rangers, the New York Knicks, the Columbus Blue Jackets and the Edmonton Oilers. She has worked in Olympic sport since 1998 and has worked with the Gold Medal winning teams of the Canadian Women’s Hockey Team, the Canadian Cross Country Ski Team, and the Canadian Speedskating Team. Since 2010 she has been the Lead of Sports Psychology for the Canadian Olympic Committee. There is no doubt that Dr. AmiraultRyan will be able to teach us how to motivate our own teams from her experience working with world-class athletes. Mark Anielski – Award Winning Author and Economist Our final keynote speaker Mark Anielski is an expert in sustainable economics. In 2011 Mark won the John Cobb Common Good Award for his “world leadership in challenging the dominant model of economics and rethinking its proper role for a new civilization”, during his work developing a Green GDP accounting system for China’s municipal governments. Mark is also an award winning author. His book The Economics of Happiness: Building Genuine Wealth won the gold medal in the Nautilus Book Awards in Los Angeles, in the category of Conscious Business, as well as a bronze medal in the New York Axiom Book Awards in the category of economics. In 2008, Alberta Venture magazine named Mark one of the 50 most influential Albertans and he is also a founding faculty member of the first MBA program dedicated to sustainable business practices and ethics at the Bainbridge Graduate Institute.
Mark will also discuss a new and practical economic model he has developed called Genuine Wealth and will share how governments and businesses are using it to build a new economy of wellbeing; and how you can apply it in your own life.
Build your professional network and learn from Canada’s best supply chain professionals As in the past, the conference will offer numerous sessions for professionals to enhance their knowledge of supply chain management. This year’s schedule will include important topics such as: inventory management, sustainability, public procurement, procurement law, vendor relations, conflict resolution and much more. The 2014 SCMA National Conference Committee has also planned formal networking events for attendees to connect in a relaxed atmosphere. For those who can’t wait to find out, the conference kick-off event will take place at historic Fort Edmonton Park, where visitors are introduced to four historical periods between 1846 and 1929. Meet with an international audience of leading supply chain researchers For the first time, the International Supply Chain Management Symposium will be held in the two days preceding, and in the same location as the SCMA National Conference, from June 10-11. Don’t miss this unique opportunity to meet with leading supply chain researchers from around the globe. Special pricing is available for those looking to register for both events. I look forward to meeting you all in Edmonton, and I encourage you to register as soon as possible to ensure you receive the best rates! For more information or to register, please visit our conference website: scmanational.ca/nationalconference; or the symposium website: scmanational. ca/symposium. B2B
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The Law Live
Good Faith In Procurement Contracts
Parties may be obligated to act in good faith during a contract’s negotiations, performance and enforcement by Marvin J. Huberman
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s there a general duty of good faith, independent of contractual duties, in Canadian contract law? Probably not—at least not yet. However, the courts can imply a duty that the parties to a commercial contract—including procurement agreements—deal with each other in good faith in certain circumstances. For contracts, the concept of good faith is used as a standard of conduct. It means behaving decently and avoiding bad faith. It may also mean acting honestly and exercising a discretion or power on proper grounds. A contract’s parties may be obligated to act in good faith when negotiating, during contractual performance and during contract enforcement. A rationale for imposing a duty of good faith is that it satisfies the parties’ expectations and supplements their agreement to better reflect expectations of written terms and the context of their relationship. In Transamerica Life Canada Inc. v. ING Canada Inc., the Ontario Court of Appeal noted that Canadian courts historically have been conservative in recognizing a duty of good faith in contracts. As well in Canadian Pacific Hotels Ltd. v. Bank of Montreal, the Supreme Court of Canada held there are three situations where contractual terms will be implied: 1. Based on an established custom or usage where the term is implied as a matter of presumed intention; 2. A s a matter of presumed intention where it’s necessary to give business efficacy to a contract; and 3. A s an incident of a particular class of relationship. In deciding whether to imply a contract term, the court isn’t trying to improve a contract. Rather, the court interprets the actual contract. It’s concerned with determining the parties’ intentions and to the express contract terms to see if the proposed implication is necessary and consistent with what’s agreed on and the nature of what, if anything, should be implied. In M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., it was submitted that a
bidding contract included the implied term that the contractor promise to accept the lowest compliant bid. The Supreme Court held there was an implied term that only a compliant bid would be accepted. But since the bidding contract contained an express privilege clause providing that the lowest bid wouldn’t necessarily be accepted, the court held there was no implied term. Generally, a term won’t be implied if it’s inconsistent with the contract’s existing wording. The M.J.B. Enterprises Ltd. case illustrates this. An owner must comply with the terms of individual bid contracts and with an overarching duty of procedural good faith when evaluating and accepting (or rejecting) a tender. But where a privilege clause forms a term of the bid contract, an owner is under no contractual duty to award the construction contract to a particular tenderer, since the privilege clause in the bidding contract shows a contrary intention. Despite the courts’ cautious approach, the doctrine of good faith in contracts is developing and the courts will use it in appropriate circumstances to secure a contract’s performance and enforcement or to ensure the parties don’t behave in a way that defeats the contract’s purposes. The Ontario Court of Appeal has referred positively to Professor John McCamus’s comments in his text The Law of Contracts where he puts good faith in contract performance cases into three groups: 1. W here there’s a duty to cooperate in achieving the objectives of the agreement; 2. W here there’s a limit on the exercise of discretionary powers provided for in the contract to the extent that the discretion must be exercised fairly and having regard to the interests of the other contracting party; and 3. W here a party is precluded from acting to evade contractual duties, such as by engaging in conduct not strictly prohibited by the letter of the terms of their agreement but that has the effect of defeating rights under the agreement. As the law develops and evolving procurement methodologies emerge, there will be more cases where duties of contractual good faith performance or enforcement are imposed. This may be contained in a contractual term—express or implied, even from traditions and standards of a particular industry, or by operation of law. Parties should be prudent and remain consistent with a duty to act in good faith. Depending on circumstances, a court might imply such a duty. B2B Marvin J. Huberman, LLM, (www.marvinhuberman. com) is a Toronto trial and appellate lawyer, mediator and arbitrator.
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Subject to additional terms and conditions found at saveonenergy.ca. Subject to change without notice. A mark of the Province of Ontario protected under Canadian trade-mark law. Used under licence. OM Official Mark of the Ontario Power Authority.
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