PurchasingB2B December 2014

Canada’s magazine for procurement and supply chain management professionals

DECEMBER 2014

SUSTAINABLE ENERGY Strategies for a renewable supply chain at the 2014 CESCF in Calgary

Also inside: Power of Partnerships Raging Commodity Bull Culture of Sustainability PM 40069240 $18.00

Focus on Sustainability

Canada’s magazine for procurement and supply chain management professionals

features 80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9

www.PurchasingB2B.ca

Contents Vol. 56, No. 8 • DECEMBER 2014

10 E NERGY IN THE CHAIN The 2014 Canadian Energy Supply Chain Forum hit Calgary’s BMO Centre October 28-30.

PUBLISHER

Dorothy Jakovina 416-510-6899, djakovina@bizinfogroup.ca Addressing issues affecting Canada’s public procurement professionals EDITOR

Michael Power 416-442-5600 ext 3259, mpower@bizinfogroup.ca

13 SUSTAINABLE ENERGY A panel discussion on strategies for seeing ROI on sustainability initiatives.

FLEET MANAGEMENT/CAR EDITOR

Emily Atkins 416-510-5130, eatkins@bizinfogroup.ca ART DIRECTOR

Sandy MacIsaac 416-442-5600 ext 3242, smacisaac@bizinfogroup.ca

CIRCULATION MANAGER

Barbara Adelt 416-442-5600 x 3546, badelt@bizinfogroup.ca BIG MAGAZINES LP

EXECUTIVE PUBLISHER: Tim Dimopoulos VICE-PRESIDENT OF CANADIAN PUBLISHING: Alex Papanou PRESIDENT OF BUSINESS INFORMATION GROUP: Bruce Creighton For over 56 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.

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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.

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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

p.20

34 P ARTNER FOR PERFORMANCE Highlights from the 17th Annual SCMAO Conference in Mississauga.

PRODUCTION MANAGER

Karen Samuels 416-510-5190, ksamuels@bizinfogroup.ca

p.13

also inside

departments 4 What’s New Online

6 Ask The Expert

5 Business Front

7 Procurement Profile

Cover images Calgary photo: Darryl Renyk Photography Inset photo: Brett Gilmour Photography

18 21

Bad weather lessons

Editorial

I

’m not sure what the weather is like as you read this, but at the time of writing Toronto has seen its nightime tempuratures dip to lows of -10C or so. It took me 1.5 hours to drive home during some of that snowfall the other day, a trip that usually takes about 30 minutes. Buffalo, NY is buried under an epic and, tragically, deadly pile of snow. My brother and his family live in Yellowknife, so I check the weather there once in a while. I’m usually able to comfort myself that the lows don’t reach -27C at night, as it did in that city a few days ago.

I recall last winter, during the ice storm Toronto experienced, that it actually became a bit tough in my neighbourhood to go out and buy anything. Going grocery shopping was a challenge, and I remember some of the thoughts that ran through my head. What if the stores ran out of food? What if trucks couldn’t get to the stores? What if the power gets cut and all the food spoils?

Bad weather can drive up freight costs, mess with commodity markets and disrupt business continuity. It can make business travel difficult or impossible and force companies into crisis mode if their travellers are stranded someplace during a natural disaster of some sort. As an example, the eruption of Iceland’s Mount Eyjafjallajökull in 2010 springs to mind.

Nothing brings home the value of what procurement practitioners do—and of a properly managed supply chain—like the prospect of not getting what you want or need, at a price that’s reasonable, due to unforeseen circumstances or force majeure. So for this Christmas, I’d wish that the weather is not too harsh. If I’m to be grateful for anything, it’s that supply chain and procurement work as well for us as they do.

DECEMBER 2014 | 3

What’s new on

.ca We encourage you to visit us online to stay in touch with what’s happening in your industry!

Features

PurchasingB2G

www.PurchasingB2B.ca/features Three ways to reduce procurement risk Done right, sustainability and zero-deforestation policies lead to improved brand image and stronger business relationships.

http://www.purchasingb2b.ca/category/2-purchasingb2g/ For years, Toronto’s Humber College has worked to reduce their carbon footprint. Visit our website to read about their sustainability journey.

Travel Management Canada http://www.purchasingb2b.ca/category/5-tmc/ In the spring, Toronto’s Pearson Airport will feature a dedicated express air-rail link to the heart of the city’s business district. Find out more about the project on our website.

Read about the results of the 11th-annual Business Travel Forecast from American Express Global Business Travel, which gives pricing predictions for 2015.

Taking the top off A case study in dealing with records storage management issues.

Social Media

Follow us on Twitter for industry events, conference highlights and more. (@PurchasingB2B)

Upcoming Event http://www.purchasingb2b.ca/topic/events/ ProcureCon Canada 2015 March 30 - April 1, Hyatt Regency, Toronto, ON This interactive forum offers professional development, networking and peer-to-peer benchmarking. Return to your office with takeaways and strategies to advance your procurement practices.

2015 SCMA National Conference Canada’s premier event for supply chain management professionals is also its largest. The 2015 event will be held in Halifax, Nova Scotia on June 10-12.

CH AN G

E I S IN TH E A I

R…

2015

Connect with editor Michael Power and stay up-to-date with what we post online.

4 | DECEMBER 2014

Visit www.TravelProcurementSymposium.ca to view a photo gallery and highlights of the 2014 event and for speaker and sponsorship opportunities for the 2015 Travel Procurement Symposium.

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Business Front

The Raging (Commodity) Bull

by Michael Hlinka

M

any years ago, Mark Twain famously quipped: “The reports about my death have been greatly exaggerated”.

These words came to mind recently as a number of different commodities sold off, bringing both the Canadian dollar and Toronto Stock Exchange down with it.

Oil, which had been hovering around $100 a barrel for most of the summer, dropped sharply during autumn. At the beginning of 2014, copper was $3.35 a pound and year-to-date it was down about 10 percent mid-way through November. All this got some folks wondering whether the bull market in commodities is over.

Let me assure that it’s not—in fact, it has barely even started!

Before I go any further, one important caveat: I exclude gold from this discussion. There’s a simple reason for that. Gold, as an investment, is a vote for the power of superstition, nothing more and not less. I had a high school teacher back in the day that quite correctly pointed out that mankind has been subject to superstitious impulses for a long time and that was unlikely to change in the future. I’ll grant that, but I can’t reasonably guess at the future demand for the shiny metal—it’s a total enigma to me.

However, what I can predict with a great deal of certainty is the need for products like oil and copper as the developing world continues to grow. A bit of simple arithmetic makes the point.

There are 35 million Canadians. We consume 64 barrels per day per 1,000 people. There are 1.272 billion people in India.

They consume fewer than three barrels per day per 1,000 people.

A total of 2.24 million barrels of oil are consumed in Canada each day, while 3.8 million barrels of oil are consumed in India each day. Imagine if each Indian consumed even one-fifth of what the average Canadian does. That’s a surge of 12.5 million barrels of oil a day! As for copper, we’ve seen a clear trend in consumption over the past years. In 1980, about 10,000 metric tonnes were used globally and it was twice that amount last year. The growth has been steady and persistent: 2 percent compounded annually.

Let’s go back to Economics 101 and the relationship between supply and demand. Everything else being equal (which almost never happens in this world) if there is an increase in demand, there will be an increase in price.

But markets are dynamic. As—and this was particularly true in the decade of the 00’s—producers understood that what was going on in countries like China, Brazil and India was real, that is, these nations were embracing pro-growth economic policies, allowing markets to do their magic. There was the understanding that lots of money could be made slaking the developing world’s thirst for commodities. A huge amount of investment made in the producing regions of the world, including Canada.

Economics 101 provides another important lesson. We know we want to invest in a copper mine when copper is $3.25 a pound, and there are two alternatives. Each will cost us $100 million—which is the extent of our budget. Mine one has X thousand pounds and the cost per pound to extract is $3, while mine two also has X thousand pounds, but the cost per pound to extract is $3.50. Mine one it is!

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Several years go by. Demand for copper continues to increase. When copper is $3.25 per pound, we’re making an adequate return on investment with mine one. We just can’t afford to produce at mine two unless the price goes up, and this will happen as the demand effect overwhelms the limited supply on the market.

I’m simplifying, of course, because the interplay is more complex. Large capital projects, like mines, are only brought on-stream when revenue minus expenses covers all costs, both the variable and fixed ones, and an adequate profit is anticipated. But once a mine is operational, if prices go down, operations will continue as long as the price received exceeds the variable costs of production. This is one of the primary reasons why commodity markets are so volatile, swinging from boom to bust then back to boom soon thereafter.

“Gold, as an investment, is a vote for the power of superstition, nothing more and not less.”

And nothing goes up in a straight line.

Over the past 50 years oil has been extremely volatile. In 1964, it averaged $3 per barrel. By 1980, it had spiked to $37.42. By 1998, it was below $12. Then we saw runaway prices peaking at an average of $91.17 last year. But here’s the important lesson: over 50 years, oil’s nominal price increase is around 7 percent—which matches nominal economic growth. And it’s no exaggeration to say that as long as the global economy continues to expand, that reports about the end of bull market in commodity prices are greatly exaggerated!

B2B Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.

DECEMBER 2014 | 5

Ask The Expert

Sustainable Culture Supply chain’s role in leveraging sustainability ROI

By Peter Buscemi

I

n today’s business environment corporate social responsibility (CSR) and sustainable business practices continue to play a significant role within many industries. These practices are becoming just as ingrained into corporate cultures as safety and quality.

Here’s an example: a joint study conducted

by Harvard University and London Business School determined that integrating sustainability into the core business strategy of organizations resulted in increased financial performance. Further research from Forrester Research indicated a 35-percent increase to the profits of large companies. Other benefits range from an increase in customer loyalty to a reduction in operational risks.

Supply chains globally are taking up the challenge to incorporate sustainability on a strategic level and adapting processes and practices into their day-to-day activities. This long-term perspective incorporates: Governance Like any strategic objective, C-suite support is paramount to launching sustainability objectives, pushing for continual positive results to dealing with the various barriers that are presented. The objective for senior management is to incorporate corporate social responsibility as a core value for the organization by managing the company from a strategic, operational, and reporting perspective. In many leading organizations, incentives are tied to environmental and social performance.

6 | DECEMBER 2014

Stakeholder engagement and collaboration Internal and external stakeholders are key groups in supporting sustainability ROI. Bringing supply chain professionals together and engaging suppliers and consumers allows for an open environment that can foster learning, voicing concerns and exploring new opportunities from different perspectives.

Collaborating brings confirmation that organizations are heading in a direction that supports communities, businesses and the environment.

A company in the gaming industry recently partnered with a local manufacturer to develop and build lottery terminal boxes locally.

These boxes were traditionally manufactured outside of Canada.

The sustainable impacts of this shift ranged from: Environmental: where the manufactured goods travelled a shorter distance as they were used locally.

Social: supporting local businesses that in turn support the community.

Economic: creating additional demand for materials and labor, which has a ripple effect for the economy.

Embedded into Culture: Although there is no clear path for embedding sustainability into an organization’s culture, senior management must foster an environment of openness and trust (formally and informally) which allows its employees to explore, innovate and execute sustainable practices.

Creating a culture that engages its workforce to make and support sustainable decisions goes beyond the organization. A utility company was able to save 1,200 days of travel (no driving or flying required) and approximately $8 million by investing in technology for online training. The facilitator and the students involved in the training were located in many different locations. The increased availability of education courses and seminar online allowed ample opportunities for the talent to develop their skills.

This initiative was developed in conjunction to the organization moving into its LEED Platinum building. With the positive momentum of the online training initiative, employees started utilizing the technology for day-to-day business by setting up video conferences with various stakeholders.

Results and Reporting: Measuring performance is key to understanding where an organization is today to where it will go in the future. Measuring key indicators such as waste reduction for disposal and vendor environmental performance allows supply chains to assess their buying habits to researching alternatives.

Taking the initiative to reporting its sustainable activities allows an organization to share its performance and impact with all stakeholders. It allows organizations to identify and address business risks and opportunities.

In another example, a Canadian university took transparency to a higher level by sharing its sustainability results on a monitor where the public walks into the institution’s new recreation complex. Further, being transparent can result in positive financial benefits. A cleaning products company, which was endorsed by the Sierra Club for its sustainable approach was able to capture 42 percent of its market.

In conclusion, with the ever-changing business environment, supply chain professionals need to continue to seek opportunities that net positive gains while they also lead the way in building and supporting a culture of sustainability.

B2B Winnipeg-based Peter Buscemi, SCMP, has over 20 years of supply chain experience and is currently working in the utilities industry. Reach him at pbuscemi10@gmail.com.

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Procurement Profile

Always Learning Emily Eyre, CPP, CSCMP, manager, purchasing services & sustainability, Humber College

How did you get involved in purchasing/ sustainability?

My career began as an inventory control manager. When the procurement manager left, my boss said that if I wanted inventory, I would need to order the raw materials. So I began taking courses from The Purchasing Management Association of Canada (now SCMA). I found my interest in procurement was stronger than counting inventory.

Q: What do you like most about your job?

I think procurement is a wonderful career, even though there are periodic challenges. Purchasing means you are always meeting with people. Internal clients as well as external companies and sales people. It also means you learn something new every day.

This is especially true here at Humber College as we buy for eight different academic schools for 170 full time programs, over 200 continuing education programs and over 1,400 courses, plus the various departments. We are continually buying goods and services we have never purchased before. We learn so many new things.

Q: How did you become interested in sustainability issues?

Sustainability at Humber is one of the five pillars of the corporate strategic plan and is taken very seriously by the college. I have been a member of the sustainability committee since I began here in 2008. In 2013, Humber achieved a silver STAR’s rating and is working towards achieving gold.

Q: What career highlight stands out most?

A highlight was being asked to be the chair of OCPMA (Ontario College Procurement Managers Association). To be respected

by my peers is very gratifying.

Q: What future plans do you have in the field?

Humber is about to launch an electronic bid process, and we are in the beginning kick off phase. We also have an electronic shopping cart solution on the radar and will pursue that when the resources required are freed up in our ITS department.

Tell us something about yourself unrelated to your profession?

We are fortunate to have eight grandchildren, and I relax by knitting many things for the family and friends.

What advice would you give to those considering a career in procurement who have an interest in sustainability?

I always recommend that people should volunteer within their own profession. It takes time and work, but the rewards of the networks you build, the additional experiences you gain and the personal selfconfidence you build makes up for the time spent. I have volunteered in many capacities with the SCMA and OCPMA over the years and the rewards have been many. I think that everyone should consider sustainability in their work and in their home environments—it is for the benefit of everyone.

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7 | MAY 2014

DECEMBER 2014 | 7

Head Professional Development Directory

byline

TO ADVANCE YOUR CAREER, LEARN FROM INDUSTRY EXPERTS. OUR PROGRAMS As the leading association in Canada for supply chain management professionals, SCMAO offers professional development and education connected to industry.

• Taught by supply chain practitioners Our instructors translate real-world experience into meaningful classroom discussion that you can apply at work.

• Supply Chain A-Z Whether you’re new to supply chain or managing at the highest levels, SCMAO offers programming to meet your needs.

• On-Going Support As a full-service association, SCMAO offers networking opportunities and career building events allowing for maximum career growth.

Certified Supply Chain Management Professional (CSCMP) Internationally-recognized, the CSCMP designation is the highest level of professional education in supply chain management in Canada.

Diploma in Procurement and Supply Chain Management Developed for skilled supply chain professionals at the intermediate level.

Supply Management Training A foundational education in tactical and operational knowledge.

Professional Development Seminars Keeping you informed of emerging trends and supply chain practices.

Corporate On-Site Training Customized and cost-effective training delivered conveniently in your own facility.

ALIGN YOURSELF WITH SUCCESS  LEARN WITH SCMAO For more information on our programs please contact the SCMAO office at education@scmao.ca or Christopher Lau at 416-977-7566 (ext 2145).

8 | DECEMBER 2014

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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, many 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 corporate 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 So 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 logistics designation program offered in Canada. Take our 5-course suite of specialized logistics courses and 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 widely-held 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, cross-functional 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 info@citt.ca or 416-363-5696.

Add “Logistics Expert” to your professional credentials. And more profitability to your supply chain logistics. CITT’s winter semester starts January 12th.

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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DECEMBER 2014 | 9

Canadian Energy Supply Chain Forum

Western Energy Over 800 delegates attend Canadian Energy Supply Chain Forum in Calgary

C

ollaboration is one of the keys to success in the supply chain and helps drive value for Canada’s energy companies—that notion was among the main themes to emerge from the Canadian Energy Supply Chain Forum (CESCF). Held at Calgary’s BMO Centre from October 28 to 30, 2014, the event is designed as the pre-eminent gathering place for buyers and sellers within the country’s energy supply chain to meet, connect, network and discuss issues and opportunities.

The value of collaboration was a theme throughout the conference. During the forum’s kick-off dinner on October 28, keynote speaker Robert Porter Lynch, consultant, coach, author and educator, highlighted its importance in business processes. To illustrate the point, Porter Lynch divided capitalism into three types: transactional, adversarial and collaborative. Economists tend to advocate transactional capitalism, he said, whereby a good or service is exchanged for money, noting the concept of supply chain comes from the idea of a transaction.

“Leaders change the rules of the game. How do we create competitive advantage? By moving from chains to networks.” —Robert Porter Lynch

10 | DECEMBER 2014

Adversarial capitalism, said Porter Lynch, has a much more combative view of the process: “Screw the other guy. I don’t care if you’ve invested a lot of money in your home and that’s going to be the key to your financial reward as you retire…I just care about how much money I’m going to make—that’s adversarial capitalism in a nutshell.”

Collaborative capitalism is what’s emerging in Alberta, he noted, and its benefits are extensive. “We have overwhelming evidence now that collaborative capi-

talism is going to be the future of capitalism because it creates the strongest competitive advantage,” he said.

For example, projects are more likely to be late through adversarial capitalism, Porter Lynch said. The impact of that can be devastating—between $10 and $30 million per day for oil sands projects.

But if trust is high, people talk to each other more, he said, while in adversarial environments there’s a 65- to 75-percent drop in value when people aren’t communicating. Employees operate in silos rather than creating networks. Transactional business is simply an exchange with no value creation. “That’s why projects go over time and over budget.”

Productivity Alberta, a not-for-profit organization that helps organizations address productivity gaps, has designed a system to assess the effects of trust and collaboration in the supply chain, Port Lynch said. The system uses a computer simulation using transactional, transparent and collaborative models (while intentionally excluding the adversarial type).

In the transactional simulation, fulfillment rates improved, Porter Lynch said. Meanwhile, costs to run the chain doubled using the transparency model. But with collaboration and trust as the basis, fulfillment rates jumped to nearly 100 percent and costs dropped by a factor of five.

When using collaboration, the system changes from chains to networks, Porter Lynch said. “In the collaborative system, everybody’s talking to each other,” he noted. “They solved problems and figured it out themselves without any difficulty. And they created massive competitive advantage.”

To help move closer to the collaborative model, Porter Lynch challenged the audience to think of themselves as leaders rather than managers. “Leaders change the rules of the game,” he said. “How do we create competitive advantage? By moving from chains to networks.”

Energy sector outlook Energy is a global commodity that, according to most predictions, will continue to see growth in demand, said Terry Abel, director, oilsands, for the Canadian Association of Petroleum Producers (CAPP). Abel spoke to delegates as the second day of the conference kicked off, noting that Canada continues to position itself as an energy supplier of preference.

Many factors will impact that supply, Abel said, noting much of the oil sands supply for the next few years will originate from projects already under construction. As well, he said, price will continue to inf luence supply. “If we don’t get the price, we’re not going to get the revenue and we’re not going to be able to offset some of those higher costs,” he said.

Abel reminded the audience of energy’s importance to Canada’s economy. The industry represents 20 percent of

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the value of the Toronto Stock Exchange and $18 billion gets contributed from the industry to governments across Canada. Employment from energy—including indirect jobs—hovers around half-a-million, while the sector spends close to $74 billion. “It’s a big chunk of pie and something that’s going to continue for a long time,” he said.

Competitive bidding The forum later broke out into education sessions and one session, entitled How Strategic Is Your Strategy?, looked at the role of category management. Siobhan Chinnery, VP of corporate supply chain at oil field services company Sanjel Corporation, led the session.

When it comes to implementing category management, people are the key to success, Chinnery said. The supply chain function must work together and the entire organization must support the endeavor. “I really believe that everybody has to come together,” she said. “It’s entirely dependent on people and you have to have the processes, of course, but people will make it work.”

Chinnery drew a distinction between sourcing, which involves planning, and procurement, which she defined as actually buying the goods and services. Strategy, she said, is a careful plan executed to reach a long-term goal. But those plans can go off the rails and procurement professionals can end up with deals that don’t actually work for them. “You’re strategies need to make sense,” she said.

There are a number of reasons why category management can fail, Chinnery said. For example, that failure can be due to having the right people in the wrong job, or the right structure in place but the wrong people working within it. Confusion surrounds the definition of category management, Chinnery said, and many organizations implement it differently.

Defining spend categories—while important—can also be a challenge.

Implementing category management means change, and change is difficult, Chinnery said.

“I think the biggest [challenge] is that you can’t gain traction within the organization,” she said. “If you’re in an organization and you don’t have support from the top, and you don’t have support from the other leaders in the organization, you’re really going to have a hard time.”

But Chinnery also offered solutions for success, which included: building an effective team; deploying enablers, tools, processes and systems; managing the supply chain; applying common sense performance management; and building supply chain brand.

She stressed the importance of adhering to process and communicating as much as possible. She also encouraged the audience to share successes and celebrate small wins, as well as adhere to fact-based decisions.

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Risk Management Few discussions of supply chain are complete without touching on risk management and the CESCF was no exception. During a session entitled Managing Risk Within The Supply Chain, George Jergas, professor of project management at the Universit y of Calgary, told delegates that conventional risk management has produced a climate of risk aversion. The conventional method of dealing with risk is to put up barriers to change, Jergas said. But change is inevitable.

“You’re next project will change,” he said. “So what should you do? Live with it, embrace it and move on.”

Jergas noted several potential types of risk including corporate, environmental, environmental, operational and global, among others. Projects also experience “black swan” risks, meaning risk that have low probability but high impact.

To help mitigate those risks, Jergas called for the empowerment of the project manager role—elevating that position to “project executive officer” to give them more control over projects.

Jason Palmer, head of trade finance at Citibank Canada, discussed supply chain finance as a risk mitigation tool. Supply chain finance, he said, fosters collaboration between buyers and suppliers, Palmer said, defining the process as a web-based accounts receivable discount program. Through supply chain finance, banks provide the option of early payment to suppliers rather than waiting until day 59 of a 60-day payment term.

The buyer then reimburses the bank for that payment.

The value of supply chain finance to the buyer is liquidity, borrowing capacity and lower capital costs, Palmer said.

Overall, the forum offered best practices applicable not only to the energy sector but to any supply chain organization. It also illustrated the importance of the energy sector to the Canadian economy—a value that will surely continue into the foreseeable future.

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DECEMBER 2014 | 11

CONGRATULATIONS TO OUR 2014 GRADUATES

OF THE SUPPLY CHAIN MANAGEMENT PROFESSIONAL (SCMP) DESIGNATION PROGRAM Juline Akobundu, SCMP Mohammad Abul Ahsan, CSCMP* Rosekate Osayimese Akinreti, CSCMP* Clarke Anderson, SCMP Samira Armanfar, CSCMP* Dennis Au, SCMP Tamara Austin, SCMP Raja Ayaz, SCMP Ashkan Ayyubi, CSCMP* Joen Azarcon, SCMP Usman Bajwa, SCMP Nicole Battaglia, CSCMP* Bernard Bégin, p.g.c.a.

Daryl Behr, SCMP Johannes Jurgens Bekker, SCMP Carrie Bellamy-Sutherland, SCMP Riffat Ali Shahzad Bhatti, CSCMP* Courtney Bickell, SCMP Sheena Bonczak, CSCMP* Charlene Bowman, SCMP Sherry Lynn Boxall, CSCMP* Jennifer Bray, SCMP Stephen Bronneberg, SCMP Mathew Brown, SCMP Suzanne Brown, SCMP Lindsay Bruce, SCMP Belinda Brunet, CSCMP* Codrut Buretia, SCMP Joanne Janet Burke, CSCMP* Leah Burton, CSCMP* Phil Caperchione, CSCMP* Shane T. Castle, CSCMP* Peter Chan, SCMP Sanjay Chand, SCMP Daniel Chao, SCMP Yogendrasinh Brijpalsinh Chaudhari, CSCMP* Rachel Chen, SCMP YuZhuo Chen, SCMP Chi An Chen, SCMP Chun Hao (Baron) Chen, CSCMP* Jason Y. Chen, CSCMP* Jinyu (Ricky) Chen, CSCMP* Alex Chik, SCMP Nnenna Chukueke, SCMP Katie Chung, SCMP Darius Chung, CSCMP* Vance Clark, SCMP Dawn Conrad, SCMP Leeanne Tracy Croteau, CSCMP* Iris Dandoo, SCMP Chris Davidovich, SCMP Sarah Davis, SCMP Chris Davis, SCMP Lauren Dexter, SCMP

Edith Fatima Botelho Dias, CSCMP* Amy Dolomount, SCMP Lesley Dovichak, SCMP Arnold D’Souza, SCMP Joanna Mengjie Du, CSCMP* Nadiya Dubinina, SCMP Rebecca Duguay, SCMP Nazim Elmekki, SCMP Curtis Evans, SCMP Thea Felix, SCMP Lisa Fenton, CSCMP* Suzanne Ferenczi, SCMP Ron Fox, SCMP Colin Frederick, SCMP Daisy Fuentes, SCMP Kayley Fulton, SCMP David William R. Gillies, CSCMP* Matilda Gjini, SCMP Robert Daniel Goodsell, SCMP Victor Granados, SCMP Danny Greenfield, CSCMP* Yasser Hammoud, SCMP Zeeshan Hanif, CSCMP* Paula Hawkins, SCMP Vicki Hillie, SCMP Qin (Jamie) Hu, SCMP Shelly Huang, CSCMP* Luther Itael, SCMP John Janjic, SCMP Jingyan Jiang, CSCMP* Todd Johansen, SCMP Alex Kane, SCMP Nathan King, SCMP Ekaterina Korneyashenko, SCMP Jerry Kowalczyk, CSCMP* Bev (Beverly) Kowdrysh, SCMP Stephen Kushniruk, SCMP Cheu‐Oui Lam, SCMP Navdeep Lamba, CSCMP* Amanda Lance, SCMP Lisa Larson, SCMP Steven Laschowski, SCMP Olivia Laughren, SCMP Adam Lecznar, CSCMP* Rick William Leung, CSCMP* R. Bruce LeVan, CSCMP* Lynda Lewis, CSCMP* Anjela Li, SCMP Isabella (Yu Hong) Li, SCMP Wei Li, CSCMP* Roman Limon Bello, SCMP Katherine Litke, SCMP Li (Daisy) Liu, SCMP Scott Lovas, SCMP

Brant Lu, SCMP Qin (Linda) Lu, SCMP Millie R. Lynch, CSCMP* Craig MacTavish, SCMP Patrick Magee, CSCMP* Allan Mah, SCMP Naïm Manouchi, p.g.c.a.

Dilyan Marinov, SCMP Cindy Massey Straus, CSCMP* Gilbert Matembe, SCMP Thomas Mathews, SCMP Jean McHugh, CSCMP* Mary Meadows, CSCMP* Darryl J Melvin, CSCMP* John Mercer, SCMP Eva Michalowski, CSCMP* Ken Miller, SCMP Antwan Moawad, CSCMP* Deanna Laura Monaco, CSCMP* Ramses Munoz, p.g.c.a.

Stepan Muranets, SCMP Andrew J. K. Murray, SCMP Susan Murri, SCMP Caroline Nichol, SCMP Carol D. Norrie, CSCMP* Marin Nosic, CSCMP* Tara Nunes, SCMP Michelle R. Nurse, CSCMP* Karen A. O’Brien, CSCMP* Adebukola Onasanya, SCMP Wilson Oteri, SCMP Megan Otteson, SCMP David Overland, SCMP Jillian Parisee, SCMP Kanti Patel, CSCMP* Ashish Pawar, SCMP Donalda Penley, SCMP Caroline Penrose, SCMP Valerie Ann Pereira, CSCMP* Marc Perreault, SCMP Deanna Pitirri, CSCMP* Hamed Pourchi, SCMP Marilia Prudente, SCMP Aneta Pytel, CSCMP* Nazia Quazi, CSCMP* Daniel Rafuse, SCMP David R. Rajwanth, CSCMP* Shankar Rao, SCMP Stephen Rasch, SCMP Azhar Rasheed, SCMP Jawwad A. Rashid, CSCMP* Erik Ratajczyk, CSCMP* George Read, SCMP Monique Rideout, SCMP

Michael Ritchie, CSCMP* Berkley Rogers, SCMP Teng Rong, SCMP Briana Rudolph, SCMP Sanjay Sahoo, SCMP Bassam Salem, CSCMP* Sarabjeet Kaur Saral, CSCMP* Jesse Saunders, SCMP Lee Anthony Scherbinsky, CSCMP* Ryan T. Scott, CSCMP* Jennifer Scott-Tinney, CSCMP* Erisa Seggumba, SCMP Jitesh Shah, SCMP Darcy Shannon, SCMP George S.S. Siha, CSCMP* Laura Simonsen, SCMP Terminder Singh, SCMP Alper Somyurek, SCMP Paul Spagnuolo, CSCMP* Oleg Sribny, SCMP Rachelle St. John, SCMP Paulette Stoddard, SCMP Pan Su, SCMP Matthew Sutherland, SCMP Matthew Swinarski, SCMP Maria Szilagyi, CSCMP* Shalini Talwar, CSCMP* Heather Tannash, SCMP Muhammad Saqib Tariq, SCMP Michael Taylor, SCMP Arseni Temirov, SCMP Craig Totten, CSCMP* Kyle F. Tout, CSCMP* Emad Uddin, SCMP Beckey Unrau, SCMP Amedeo Valentino, CSCMP* Maria Agnes Vandermeer, SCMP Antonio Vazquez, SCMP Fang Wang, SCMP Mabel (Zhihong) Wang, CSCMP* Brent Willett, SCMP Rose M. Williams, CSCMP* Wade Wilson, SCMP Denise Wilson, CSCMP* Min Wendy Wu, CSCMP* David (Wei) Xie, CSCMP* Vera (Shixia) Xu, SCMP John Yang, SCMP Li Yun You, CSCMP* Josephine Youdeowei, SCMP Luyang Zhang, SCMP Xiao Dan Zhao, SCMP Julia Xiao Ping Zhu, CSCMP*

scmanational.ca *SCMA's professional designation is CSCMP (Certified SCMP) in Ontario and SCMP in the rest of Canada and internationally.

Sustainable Energy

Head Thought Leadership

Strategies for seeing a return on investment on sustainability initiatives within Canada’s energy sector

by Michael Power

A Thought Leadership Editorial Report, brought to you by PurchasingB2B in partnership with

To learn more visit www.staplesadvantage.ca.

The following is an editorial report based on the panel conversation. The roundtable was co-moderated by:

Hugh Lawson, Director, Business Development, Staples Promotional Products

PurchasingB2B.ca

Michael Power, Editor, PurchasingB2B

Photos: Brett Gilmour Photography

Sustainability and procurement professionals met in Calgary on October 29 at the 2014 Canadian Energy Supply Chain Forum to participate in a Thought Leadership Panel Discussion.

Staples Advantage takes an approach to business that recognizes the close connection between the company’s success and the desire to make a positive impact on customers, associates, communities and the planet.

From Staples’ ethical and environmental sourcing policies to their commitment to diversity and charitable giving, the organization strives to be a supplier you can be proud to work with and who can help you achieve your own corporate sustainability goals.

Yvan Champagne, President, Blue Source Canada Susan D’Souza, Senior National Manager of Quality and Sustainability, Staples Advantage Siobhan Chinnery, Vice-President, Corporate Supply Chain, Sanjel Corporation Jeffrey Sundquist, Vice-President, International & Corporate Development, Absolute Throughput Solutions Inc.

W

hile sustainability practices in business were once viewed as a “nice-to-have” option for Canadian organizations, this is no longer the case. The concept has transformed from a feel-good bonus to a necessary pursuit for procurement and supply chain organizations. This is as true in the energy sector as any other industry.

But the term sustainability refers to more than simply the environment, and its related practices offer a genuine return on investment for companies that pursue them.

To look at sustainability issues within the business context and, specifically, the energy sector, PurchasingB2B convened a panel discussion at the Canadian Energy Supply Chain Forum (CESCF) in Calgary on October 29. On the panel were: Susan D’Souza, senior national manager, quality and sustainability at Staples Advantage; Siobhan Chinnery, VP of corporate supply chain at Sanjel Corporation; Yvan Champagne, president of Blue Source Canada; and Jeffrey Sundquist, VP of international and corporate development at Absolute Throughput Solutions.

Hugh Lawson, director of Business Development for Staples Promotional Products, introduced the topic and Michael Power, PurchasingB2B’s editor, moderated the session.

DECEMBER 2014 | 13

adoption of innovation “inThe the energy sector can be a bit of a challenge, largely because it’s a highly innovative industry, yet it’s a very risk-averse industry as well.

14 | DECEMBER 2014

”

—Jeffrey Sundquist

To begin the session, each panelist gave a brief presentation related to the topic. Champagne spoke first, noting that organizations in the energy business are also in the “environment business”. Environmental reputation matters, and the stakes are exceptionally high in Alberta.

Companies working in the province’s oil sands are under pressure to maintain a good image and to succeed they must be seen as thoughtful and respectful towards the environment. From a procurement standpoint, companies must pay attention to what other organizations they use as part of their operations, Champagne said. As well, companies that have achieved a lower environmental impact also gain competitive advantage, he told the audience.

“If you take good care of your environmental reputation, if it’s something that’s important and embedded in how you operate as a company, you’ll be more successful— but the inverse is also true,” he said.

Champagne referenced the concept of social license, meaning a local community’s acceptance or approval of a company’s activities. He noted it’s easier for organizations to maintain their social license than to win it back. “If you’re paying attention to sustainability, if you’re measuring your impact, if you’re putting in place good policies to ensure that you’re operating in the correct way, to minimize the opportunity or the possibility of having a spill or a negative outcome, it’s always better to be in that position than to be trying to scramble at the back end,” he said.

Next to speak was Sundquist, who addressed the “unprecedented scrutiny” that the energy services sector has been under in terms of its environmental impact. There’s a tightening of regulations while policy signals from government are somtimes lacking, he said. On sustainability’s financial side, the discussion is shifting from what it costs to act towards the price of inaction. “I think the implications of not doing things, or doing things properly, have increasing risk for industry,” Sundquist said. “One of the things that is kind of new for the energy sector is increasing scrutiny in the financial sector, and financial institu-

tions are under pressure from their stakeholders,” he noted. “When your risk management or your corporate social responsibility group within the bank are starting to question whether or not they fund oil sands-related projects— either through debt or equity—that becomes a major risk.”

The stakeholder population has also broadened, Sundquist said, and those stakeholders are intervening in oilrelated project—a development largely due to the mobilization and information sharing made possible by social media. As for challenges, Sundquist noted that governments are often reluctant to increase regulations around emissions management and water use because of capital flow to other markets that don’t have the same regulations. “I see that the adoption of innovation in the energy sector can be a bit of a challenge, largely because it’s a highly innovative industry, yet it’s a very risk-averse industry as well,” he said.

During her presentation, D’Souza noted that while sustainability has become a buzzword, implementing good business practices helps organizations not only do the right thing but also make a positive contribution to the bottom line while boosting employee engagement. Last year, Staples Advantage won five awards related to corporate social responsibility, a feat made possible by instilling sustainability into every department and function within the organization. “By doing that, you truly are getting the best return on sustainability, she said. “I call it the magic of sustainability: making sure that you’re able to engrain it in your organization so it becomes a key enabler for you to achieve your business goals.”

Chinnery spoke next, referencing the Global Reporting Initiative (GRI) and noting the importance of supply chain professionals becoming familiar with that rating survey.

For example, Suncor gets an A+ on the survey, she said. The auditing through the GRI is quite deep, with several questions related to supply chain, Chinnery noted, cautioning that an organization may not contact the supply chain function to answer those questions. “A lot of organizations

PurchasingB2B.ca

Image courtesy of Darryl Renyk Photography

will let the marketing group or the environmental group or somebody like that answer those questions, and there will be lots of questions,” she said.

Chinnery stressed the importance of knowing what suppliers are doing—whether they’re using child labour, for example—so that survey questions can be answered accurately. Social license is critical to supply chain because that department works to manage supplier risk, she said. And the longer the supply chain the greater the risk. It’s therefore crucial that supply chain professionals get engaged with their organization’s strategy around social license.

The panel moved on to focus on defining sustainability.

While the concept included the environment, it extended beyond that, the group agreed. D’Souza encouraged the audience to think about sustainability holistically, affecting not only the environment but also social issues and a company’s financial position. Only then can an organization maximize benefits from focusing on sustainability.

“Not only for your business, but making the best impact out there beyond your four walls, when you partner with your customers and suppliers as well,” she said. “The more you align with them the bigger the impact you have collectively.”

Chinnery also stressed not only the environmental aspect to sustainability but also the importance of putting money back into communities, such as by using local suppliers. “The third is social,” she said. “That’s the whole human rights issues. Are your workers safe in the supply chain world? Are we using safe suppliers out there?”

Sundquist pointed to the importance of building a

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strong community that can be successful, as well as maintaining an organization’s reputation and ensuring the business is as free from peril as is practical. “You’re never going to mitigate all risks, but we have to increasingly do more due diligence on mitigating other risks to be sustainable,” he noted.

Policy decisions are often made around election cycles, Sundquist said. It’s therefore challenging to enforce stronger regulations surrounding water use, air and land management as well as other areas.

Champagne noted that the social, economic and environmental aspects comprising sustainability are a natural fit for one another. For example, organizations that pay attention to energy usage operate at a lower cost. As well, a company that protects its reputation and cares about how it operates will improve as an organization. “I don’t think that one is more important than the other,” he said. “Having said that, based on the type of company you are, the type of service or products you offer, one leg of the stool is more important. If you don’t have that large of an environmental impact, it might be that the social piece is more important.”

I call it the magic of “sustainability: making sure that you’re able to engrain it in your organization so it becomes a key enabler for you to achieve your business goals.

”

—Susan D’Souza

DECEMBER 2014 | 15

If you take good care of your “environmental reputation, if it’s something that’s important and embedded in how you operate as a company, you’ll be more successful—but the inverse is also true.

”

—Yvan Champagne

Perks and challenges

16 | DECEMBER 2014

The panel looked at both the benefits for incorporating sustainability as well as barriers to doing so. In terms of benefits, D’Souza noted cost savings as a major incentive. Companies that implement sustainability initiatives create less garbage and therefore incur lower disposal fees. Companies that pay attention to greenhouse gas emissions can save on fuel if they travel shorter distances. As well, getting customers on board is crucial. “Those are the customers that you’re going to attract away from your competition who were lagging in that respect, as well as retaining existing customers,” she said. “They’re the ones who got you there in the first place.”

Champagne noted the value organizations gain from preparing a sustainability report, which he categorized as “a large-scale internal due diligence process.” Such reports allow organizations to look at GHG emissions, energy consumption, labour practices as well as operating practices and standards. “All sorts of opportunities are identified for reducing emissions, reducing waste—and it ends up reducing cost,” he said.

For Sundquist, the issue of whether to engage in sustainability practices comes down to corporate survival: “If you don’t have your eye on the ball you’re going to put yourself in harm’s way,” he said.

In terms of barriers to sustainability, a gap often arises between corporate imperatives and actually implementing strategies, said Sundquist. Frontline staff can lack incentives, such as scorecards, to implement new processes. “The ones who are charged with and evaluated on keeping the cash machine going aren’t

necessarily incented to try new things,” he said. “Embedding innovation, or embedding new processes into compensation and evaluations, is the way forward. Or, the lack of that is one of the barriers.”

Sundquist also saw the senior management of many organizations as committed to sustainability. For example, the annual reports of publicly traded companies often feature several sustainability initiatives—but how that translates throughout the company is another issue, he noted.

Also key was engaging the hearts and minds of employees on sustainability issues, noted Chinnery. Although an organization might have an excellent report to go by, the strategies in that report can fail if employees aren’t engaged in the process. “Employees need to be the ones that are making those changes every single day that are driving you in the right direction,” she said.

D’Souza noted that when it came to employee engagement, “culture eats strategy for breakfast.” It’s imperative to communicate to employees both successes and shortcomings, since they’re the ones who will work to improve areas that need it. One technique Staples Advantage uses to get buy-in from across the organization is to look for triple wins, D’Souza said: “things that affect the community in a positive way, help the environment, but also our bottom line; also, helping our customer’s on their sustainability journey as well. And working with our suppliers on top of that is key.”

She recommended tailoring a sustainabilit y strateg y to fit the nature of an organization’s business. For her company, 93 percent of the organization’s carbon footprint is associated with suppliers, while only 7 percent comes from within their walls. So sustainabilit y strategies therefore focus primarily on that 93 percent, she said.

But while winning over employees is important, Chinnery cautioned that any strategy should be led from the top. She noted an example in which a company announced that it planned to avoid fuel from Canadian oil sands but was later forced to reverse the plan. A call from one of Chinnery’s colleagues to the company revealed the plan was hatched by a junior employee and was allowed to proceed by an inattentive chief procurement officer.

“Yes, it’s great to get those hearts and minds encouraged and part

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of the strategy, but make sure they don’t go running off in wrong directions,” she said.

While many organizations have invested in understanding their own carbon footprints, the next step is to understand the footprint of suppliers, said Champagne. Companies in the gas business should understand their suppliers’ operating practices, such as what fuel their drilling subcontractors use, whether they’ve switched to compressed natural gas, how they deal with frack water and so forth. “If we start heading into an environment where we have sustained lower energy commodity prices, I think you’re going to see more attention brought to that,” he said.

Once sustainability initiatives roll out, metrics can measure the progress from those initiatives, the panel noted. Sanjel asks sustainability questions of its suppliers and scores their answers, Chinnery said. “If we’re managing our suppliers well, we’ll be tracking those KPIs—it’s an integral part of supply chain,” she said. For example, the company has KPIs associated with chemicals, as well as an internal scoring or rating system. Each of Sanjel’s products or chemicals gets scored based on environmental impact, and the company constantly seeks to work with chemicals that have lower scores.

What gets measured gets managed, and what gets managed gets improved upon, said D’Souza. Metrics must also be transparent to stakeholders, including customers, employees and suppliers. Staples Advantage consolidates that information in its CSR report where those stakeholders have easy access to it.

“It’s important not just to brag about the things that you do well, but also try to identify areas of improvement and have an action plan, simply to address them as important.”

PurchasingB2B.ca

Champagne brought up emissions intensity as a key metric, which refers to calculating the emissions per unit of output. For oil, that would mean emissions in greenhouse gases per barrel of oil produced. Energy companies operating in Alberta must work to lower their emissions, he said, for example through carbon capture and storage. But little victories can also add up.

“Little pieces of the supply chain make the difference and can mean the difference between whether oil produced in Fort McMurray has the same intensity as a conventional crude produced somewhere else,” Champagne said.

Summary

The panel touched on a variety of issues related to sustainability, helping to point the way for organizations looking to improve their sustainability performance. Truly, a commitment to sustainability among organizations can yield a return on investment down the road.

B2B

It’s great to get those “hearts and minds encouraged and part of the (sustainability) strategy, but make sure they don’t go running off in wrong directions.

”

—Siobhan Chinnery

DECEMBER 2014 | 17

Addressing issues affecting Canada’s public procurement professionals

Public Buying and the Public Gaze Practitioners, experts and consultants met in Montreal October 27-29 for the 2014 Canadian Public Procurement Council Forum. Participants attended seminars, swapped best practice ideas, built networks and grabbed brief glimpses of Montreal during the few breaks in a packed agenda.

The event’s theme, United Under Public Scrutiny, encapsulated the pressures facing governmental procurement personnel in an era of tightening budgets and increasingly complex work environments. We’ve highlighted a couple of presentations that caught our interest.

Lessons From The Charbonneau Inquiry Quebec’s investigation into irregular contract awarding and management practices

By Peter Diekmeyer

A

ny government procurement conference held in Quebec was bound to address the Charbonneau Commission, an inquiry set up in 2011 to suggest measures to identify and reduce corruption in public construction contracts.

Sébastien Laprise, a partner with Langlois, Krönstrom, Desjardins, provided an overview of developments in the province since 2009, when irregularities were discovered in the awarding and management of certain contracts. These led to new legislation and the launch of the commission itself, which has so far received more than 70 briefs and interviewed countless witnesses.

“Crooked officials, collusion among suppliers who cooperated with them (as opposed to reporting them) and flawed oversight mechanisms enabled widespread corruption to proceed and prosper undetected.”

18 | DECEMBER 2014

Despite more than 100 days of hearings the commission has yet to deliver a final report. However the process is advancing with interested parties scheduled to submit additional briefs. It remains unclear what suggestions, if any, will be made to improve rules relating to contract management policies, supplier undertakings, eligibil-

ity and administrative oversight.

Laprise reviewed key recommendations made so far by numerous interveners including the Canadian Public Procurement Council itself, and of key lessons learned. One crucial point to remember is that Quebec already had in place many of the checks and balances that would normally have prevented, detected or avoided much of the nastiness that was uncovered. This included relatively comprehensive legislation such as The Cities and Towns Act, the Municipal Code and the Act Respecting Contracting by Public Bodies.

However, numerous municipalities in the province were hit by what Laprise calls a “perfect storm.” A combination of crooked officials, collusion among suppliers who cooperated with them (as opposed to reporting them) and flawed oversight mechanisms enabled widespread corruption to proceed and prosper undetected.

For example, a City of Montreal database set up to provide users information regarding what previous construction projects had cost so they had a benchmark, was itself corrupted, as the price comparisons used were from the city itself, where officials were taking bribes to overlook overcharging. The result was that the high prices paid became built into the system.

A strong ethical culture is key As a result, many of the suggestions picked up by the Charbonneau Commission will likely relate to the ethics and training of procurement officials.

PurchasingB2B.ca

For example CPPC recommendations include increased emphasis on professional certifications such as Certified Professional Public Buyer and Certified Public Procurement Officer, as well as security clearances or background checks.

Better oversight, including internal audit procedures and increased staffing will also help. The City of Montreal’s recent naming of an inspector general is a step in the right direction. An overhauled price comparisons database set up on a provincial and possibly a national level would go

a long way toward identifying irregularities.

The biggest takeaway is that no amount of formal rules and oversight can take the place of a strong ethical culture throughout an organization. “When a small number of people deliberately set out to falsify documents, commit bribery and cover up theft, it can be exceedingly difficult to detect, even with good controls in place,” said Laprise, quoting an SNC Lavalin official. “This has proven to be true at corporations around the world.”

B2B

Best Value Procurement Spreads to Canada

BVP systems suit complex projects but can be applied to any project or need

By Peter Diekmeyer

O

ne of the forum’s most innovative panels was on best value procurement (BVP), which, as the name implies, consists of prioritizing a solution that provides best overall value over others that may cost less. Paul Dugan, manager of purchasing services at the University of Manitoba, led a panel on the technique, which is popular in the US, but less well known in Canada. “Best value procurement is highly suited for the public sector and can substantially improve productivity,” says Dugan. “Those not implementing it are leaving millions of dollars on the table.”

Developed by the University of Arizona, BVP systems have been around for almost two decades and can be applied to any organization, structure, project or need. Traditional RFPs are forgone in favour of general requests that ask suppliers for advice on how to meet an identified need. Vendor proposals are assigned points based on factors such as price, past performance and delivery. Suppliers are also asked to identify risk elements up front and thus assume greater responsibility for any resulting cost overruns.

Proposals are anonymous so as not to prejudice evaluation staff.

Dugal, along with panel members Peter Jeffs, a procurement manager at the University of Western Ontario, Mary Aylesworth, director of procurement services at Simon Fraser University and Mike Drane, director of procurement at Dalhousie University, lauded their respective organization’s partnerships with the University of Arizona, which provides consulting services on implementing BVP systems.

According to Drane, universities that have long been leaders in innovation were, not surprisingly, one of the first sectors to seize on the opportunities stemming from best value procurement, which developed in the construction industry.

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Initial assessments indicated that BVP initiatives at Dalhousie are working well so far, said Drane, noting that numerous contacts were not awarded to the low-cost bidder.

Aylesworth had similar experiences, noting that although BVP is not a panacea, there tend to be fewer deviations and order changes because more contract elements are spelled out in advance. This saves money down the line. Costs to suppliers are also reduced due to the system’s obviating the need for traditional requests for proposals, which can cost thousands of dollars to prepare, said Aylesworth.

According to Jeffs, best value procurement systems are best suited for complex projects that have a large service element. If details are not spelled out clearly in advance, traditional contracts can leave suppliers opportunities to run up extra charges. However BVP has also been used at the University of Western Ontario to commission a relatively simple $50,000 room upgrade.

Jeffs rates Western’s initial efforts at adopting best value procurement positively. “We have assessed five pilot projects and they all scored high,” said Jeffs. “However to implement the processes properly you need support not only from the top of any organization but also in from related departments and interest groups.”

Jeffs also noted that the use of anonymous bids is particularly helpful. “In several cases we awarded contract to firms, who at first glance, we had not believed were capable of coming through.

In short, best value procurement is fair, open and transparent. What’s not to like?”

Peter Diekmeyer is a freelance writer based in Montreal.

For more coverage of the CPPC Forum in Montreal, see the February, 2015 issue of PurchasingB2G. DECEMBER 2014 | 19

STANDARD ALL-WHEEL DRIVE ISN’T SO STANDARD.

An easy way to limit your expenses is to make sure your employees drive quality cars. If you opt for the brand new and redesigned 2015 Subaru Legacy and its legendary All-Wheel Drive system, they will. They’re also going to be able to count on renowned safety features, high residual value, and great fuel efficiency.

To consult our Fleet ordering guide or for more information

fleet.subaru.ca or call 1-877-293-7272

IN THIS EDITION

DECEMBER 2014

24

24 T RUCK KING

See which Heavy Duty pickup is crowned

32 FIRST DRIVE

2015 Ford Expedition

32 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, eatkins@bizinfogroup.ca. Advertising inquiries: Dorothy Jakovina, 416.510.6899, djakovina@bizinfgroup.ca.

Text prevention technology TextBuster is a device that prevents drivers from accessing text, email and Internet functions while driving. It does not interfere with inbound and outbound calling. The firmware technology behind TextBuster sends a blocking signal to the user’s phone automatically, every time the user enters the vehicle.

It includes two components, the mobile app, which is a free download, and a small “brain box” that is mounted under the dash, out of the way.

It will not interfere with any other hands-free or Bluetooth

items in the vehicle. It is a patent-pending device that will disable the data functions to the driver’s phone only while inside the vehicle.

Ohio-based Access2Communications, a manufacturer of automotive electronics, developed the distracted driving device with the hopes of significantly reducing the number of preventable distracted driving fatalities on a global basis.

TextBuster also provides tracking data via its account manager panel, where users can track trips, route coordinates and receive vehicle speed alerts via SMS or email.

New cars vulnerable to hacking Cybersecurity has emerged as a key growing concern in the automotive industry as researchers across the world have demonstrated threats and risks by presenting alarming scenarios like hackers taking control of the car and turning off engines, headlights, disabling brakes, and taking over steering control.

Though, there has been no reported real-life incident related to automobile cybersecurity to date, the value proposition is huge as it risks the safety of passengers.

There are over 50 vulnerable points in a vehicle, including tapping into personal identity information. Moreover, by 2020, more than 90 percent of cars sold will be connected to the cloud.

As telematics and infotainment PurchasingB2B.ca

continue to penetrate the industry, hacks are increasingly becoming more realistic.

“Securing the car from cyber and data hacks is one of the hottest topics in the connected car market,” said Frost & Sullivan Research Manager Praveen Chandrasekar. “Currently the value chain is focused on security solutions such as firewalls, communication gateways, etc based on unmet needs. This focus will continue, and the industry will begin making technology security such as vehicle-to-infrastructure (V2I) communication (V2X) a priority.

OEMs will also start implementing security at different layers within the car.”

Frost & Sullivan’s on-demand webcast on hacking the car can be seen here: http://bit.ly/1svX6ln.

DECEMBER 2014 | 21

Electrify Your Fleet Vancouver conference offers practical advice for fleet managers The f leet manager has several choices in light-duty vehicle propulsion technology, and the broad segment called electric vehicles (EV)—which includes battery electrics and plug-in hybrids—is becoming a more compelling proposition by the month.

But finding the right fit for an EV in the f leet can be a daunting task.

At the recent Electrify Your Fleet conference in Vancouver, hosted by Clean Energy Canada, local f leet managers were given the opportunity to learn more about the current state of electric vehicle technology and infrastructure from several experts in the field.

Although there is no government rebate now offered on the purchase of an electric vehicle in British Columbia, the province is one of the leaders in EV adoption in f leets, with the likes of BC Hydro, the Government of BC, and the City of Vancouver having dozens of electric cars and vans on the road.

Christina Ianniciello, of the BC Ministry of Energy and Mines, pointed out the benefits of running EVs in BC, one of which is that BC has the largest difference between electricity and gasoline prices in North America.

Barriers to f leet adoption She also addressed the barriers to w ider EV popularity, including affordability and range anxiety.

That latter concern can be answered w ith either increased batter y capacity through new technolog y, or lots of public charg ing stations. BC leads the countr y in the installation of public chargers at the time of w riting.

The issue in Canada is that most public charging stations are Level 1, 120-volt units, because that’s the electrical system in use here. And they don’t charge big batteries very quickly.

Charlotte Argue of the Fraser Basin Council told the attendees about an initiative called E3Fleet, the E3 standing for Energy-Environment-Excellence. The website, www.e3f leet.com, has a wealth of information for the green-conscious f leet manager, including handy information tool kits for such things as Lifecycle Cost Analysis.

The City of Vancouver, with a mayor and council who seek to make the city the greenest in the world, had equipment manager Amy Sidwell on hand to talk about the city’s adoption of electric vehicles. Of the 22 | FLEET MANAGEMENT | DECEMBER 2014

Image: Emily Atkins

By Gerry Frechette

Level 2 and 3 charging stations are still rare 1,100 light-duty vehicles in the f leet, 31 are electric at this time, but that percentage will grow, as the plan is to have 115 EVs by 2020. The city currently has 24 Level-2 (240-volt) charging stations.

An assessment of the City of Vancouver’s EV program to date shows some success, with an 87 percent reduction in maintenance costs, 370 litres of fuel savings per vehicle, and almost 10 percent reduction in emissions over 2007 levels.

On the other hand, challenges remain, including that EV range is still lacking for double-shifting or out-oftown use, Level 3 (DC) chargers are not yet installed, maintenance technician training is ongoing, and towing procedures are not widely known.

Where EVs fit in the f leet The view from one of America’s greenest states—Oregon—was shared by Ashley Horvat from Oregon Electric Highway. She presented a useful list of where EVs might be a good fit for a f leet: • Increased opportunities for light-duty vehicles • Predictable routes • Short, regular trips • High utilization • Quiet operation and no idling • Lower emissions and sustainability Electric vehicles have come a long way technologically in the past few years, but they still have a way to go to become the preferred choice for the f leet operator. The next great advance to drive acceptance and sales of EVs will be batteries that will accept a greater charge in a shorter period of time. The proliferation of charging stations will help mitigate their current shortcomings.

In the meantime, the f leet manager has lots of resources available to assist in determining if an EV is the right vehicle for the mission, and the Electrify Your Fleet Conference was a good place to learn about them.

Further info can be found at http://pluginbc.ca/ and www.emotivebc.ca.

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MEET THE TEAM BEHIND YOUR TEAM. Behind every Ford vehicle are experienced men and women who understand the challenges of managing a fleet. Whether it’s having the right vehicle for the job, helping keep fuel and maintenance costs low, or helping ensure your employees are safe and productive, Ford Fleet is the team behind your team.

Contact us at focfhq@ford.com or 1.800.668.5515

Vehicles may be shown with optional features. Š2014 Ford Motor Company of Canada, Limited. All rights reserved.

2015 Truck King Drags GMC Sierra crowned the HD Winner

By Howard J Elmer

W

ho rents a drag strip; borrows seven-ton fifth wheel trailers and has five respected automotive journalists race one-ton trucks head to head?

We do. The eight annual Canadian Truck King Challenge did just that (and much more) to clearly show the truck-buying public which is the best of the best for 2015.

This year three HD pickups from Ram, Ford and GMC ran head-to-head at the Grand Bend, Ontario MotorPlex drag strip while towing 15,000-pound trailers as just one part of two intensive days of Truck King testing. The outcome?

The GMC Sierra 3500 beat the Ford and Ram in each heat.

It would also go on to win the title.

But, back to the drag strip. A curious fact emerged during this testing. On paper the GMC boasted the least horsepower 24 | FLEET MANAGEMENT | DECEMBER 2014

and torque among the competitors. Yet it won each race.

We ran it several times–with the trailer and without. And the Sierra pulled away from its competition each time. That’s the difference between real-world testing and paper tigers.

Here’s the quickest quarter miles from each truck taken from multiple runs: GMC: 16.098

seconds when running empty.

21.932 seconds with trailer attached.

FORD: 16.542 seconds when running empty.

23.303 seconds with trailer attached.

RAM: 16.927 seconds when running empty.

23.581 seconds with the trailer attached.

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The Trucks RAM 2014 3500 Longhorn Crew Cab, 4WD, 6.7L Cummins diesel - DRW Horsepower: 385 Torque: 850 Transmission: 6-speed auto Rear End: 3.73 Payload: max 7,390 lb Tow limit: max 5th-wheel: 30,000 lb Base Price: $ 79,295.00 As Tested: $85,920.00

The trap speed for all three trucks (at the quarter-mile line) was always plus/minus one MPH of 80 MPH. Trap speed with trailer attached, again for all three trucks, was also plus/minus one MPH of 60 MPH. GM’s HDs are not new to the Truck King podium–the 2013 Chevy Silverado HD took the title, but failed last year mostly due to its dated interior. This year that’s changed with a significant interior refresh.

However, what really put it over the top are new electronic systems for 2015 that can only be felt, not seen. And those can only be really appreciated when towing.

After eight years of our testing trucks most readers are familiar with our methods, and while locations sometimes

GMC 2015 Sierra Denali 3500, Crew Cab, 4WD, 6.6L Duramax diesel - DRW Horsepower: 397 Torque: 765 Transmission: 6-speed auto Rear End: 3.73 Payload: max. 7,374 lb Tow limit: max 5th-wheel: 23,200 lb Base Price: $68,645.00 As Tested: $86,725.00 FORD 2014 F350 Lariat, Crew Cab 4WD, 6.7L Power Stroke diesel SRW Horsepower: 440 Torque: 860 Transmission: 6-speed auto Rear End: 3.55 Payload: 4,440 lb max Tow limit: max 5th-wheel 26,700 lb Base Price: $62,099.00 As Tested: $ 80,144.00

Continued on page 28 PurchasingB2B.ca

DECEMBER 2014 | 25

Advertorial

Fleet and Procurement What Soucing Professionals Need to Know . . .

W

hile representing a significant annual spend, fleet has historically been far removed from procurement. Over the past several years, this has begun to change, with procurement professionals becoming more involved with fleet management throughout the sourcing process. And while standardized strategies can bring some clarity to the fleet procurement process, there are a number of considerations to manage when sourcing for the right fleet management partner.

As a leading fleet provider in Canada, ARI has worked closely with hundreds of procurement professionals. Part of that involves sharing just what makes fleet so different.

“While every supplier likely says ‘but our business and

segment is different,’ I truly believe that with fleet there are some unique considerations,” says Peter Nogalo, Marketing Manager at ARI. “We’re talking about hundreds, sometimes thousands vehicles, across dozens of suppliers, whether they be manufacturers, fuel companies, maintenance vendors, technology providers, and of course fleet management companies.”

The Trend Towards Outsourcing Not surprisingly, procurement’s involvement with fleet coincided with a general trend towards fleet outsourcing.

“Well over a decade ago, companies began to focus on

What to Ask Your Fleet Management Partner Business Value: Analytics:

Do you have big data management tools to help better predict my fleet spend?

Sustainability:

Can I really save on fuel, mainteance and acquisition costs, and still be green?

How can I manage down fleet costs, while ensuring business value and a total cost of ownership approach?

Innovation:

What fleet innovations has your company introduced?

Sust

Advertorial

Business Value

Innovation

Analytics

tainability

what they do best, and in most cases, that does not involve managing vehicles,” says Nogalo.

As organizations began to look for outside expertise, it was natural that procurement would take a leading role in managing that process.

The Pursuit of Business Value The advent of procurement may have been met with some initial suspicion, both internally and on the supplier side, says Nogalo, but this has since changed.

“Looking at total costs and the push towards true business value by procurement professionals has really changed the game,” says Nogalo. ‘It has allowed companies like ARI to better explain the true value of what we offer.”

For example, fleet management fees typically make up less than 3% of the total fleet spend. At such a small percentage, from a business value perspective it is often more strategic to focus on what value is being delivered from those fees.

“At ARI, we have focused on the 97% of fleet costs that can be managed down. Our role is to work with our clients to identify potential cost savings through process improvements, best practices and most recently through predictive analytics. We report on those targets and return the savings back to our clients, which often exceed the fees themselves,” says Nogalo.

Downtime

What to Know With so many moving parts, fleet can be complex, says Nogalo, particularly for people who are new to it. Like with any product or service, it is critical to engage with user groups and experts within the organization.

When sourcing for a fleet management partner, another challenge can be in how best to standardize the process while still measuring true business value.

“There is always the challenge of comparing apples to apples, especially when managing a leasing and services contract,” says Nogalo.

Beyond the actual services provided, as important is how they are delivered. What investments have been made in leading edge reporting and analytics tools? How is downtime measured? Are there truck and equipment experts on staff?

Is there a record of delivering quantifiable savings to clients?

In fact, what do current clients say about the partnership?

These answers can help procurement professionals find the right fleet partner to drive total business value.

About ARI ® ARI is a leading provider of fleet management services, and operates in Mississauga, Laval, Ottawa, Calgary, Edmonton, and Burnaby. ARI manages over 1,000,000 cars, trucks and equipment globally, including 165,000 in

For a comprehensive analysis of your existing fleet spend, contact ARI at 1-800-361-5882 or visit www.arifleet.ca.

The Scores Truck King 2015 Styling/ Appearance

Occupant Environment

GMC 3500

RAM 3500

FORD F350

Exterior

7.8

8.14

7.06

Interior

8.24

8.18

7.06

Quality

8.48

8.38

8.1

Driver Position/Ergo

8.08

7.98

7.36

Visibility

7.22

6.8

7.4

Room/Comfort/Access

7.76

7.52

7.78

Con/Entment Features

7.6

7.6

7.36

7.6

7.02

5.94

Throttle Response

8.04

7.04

8.2

Engine

8.28

7.66

8.12

8.6

7.38

7.8

Ride

7.56

7.4

7.1

Steering

7.92

7.66

6.7

Handling

7.74

7.26

7.04

Braking Feel

7.88

7.04

7.74

8.48

8.02

7.64

Payload

7.82

6.44

7.1

Towing

8.26

7.38

7.66

Empty

7.38

6.76

6.92

150.74

141.66

140.08

Noise/Vibration/Harshness

Performance

Transmission

Vehicle Dynamics

Personal Subjective Value

Main test Values

Total

Continued on page 30 28 | FLEET MANAGEMENT | DECEMBER 2014

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change, the methodology remains the same.

We use multiple, qualified automotive journalist judges who drive the trucks back to back, in the same conditions, on the same day.

We always start with empty loops, then we add payload and finally towing (with the payload removed).

Over the years we have always kept track of our fuel consumption during each of these tests; however our pencil and paper calculations were replaced last year with electronic data readers that take the information directly from the trucks’ computers.

These readers are plugged into the OBD port on each truck and record speed, distance, time and even hard acceleration and braking events.

Needless to say, this is much more accurate in determining fuel consumption. This was our second year using the readers–they will be standard testing equipment during all Truck King events from now on.

Once again, we spent two days driving around southwestern Ontario.

The first day we ran the trucks empty from Toronto (200km) to London.

Next we loaded up at Patents building supply of London. Supplier IKO has helped us out for several years preparing pallets of shingles for payload. In this case each pallet weighed 4,080lb exactly. The dimensions of each pallet were 4-feet wide, 4-feet high and 5-feet long. After loading we took the shingles for a 200km ride, switching up trucks every 30 minutes.

The next morning saw us hooking up fifth-wheel travel trailers at our other partner’s place of business–CanAm Ttrailer Centre. We hitched them to three similar fifth-wheel RV trailers.

These weighed in at around 14,500lb each. We then spent the day doing a 300km tour with the judges, which included a three-hour stop at the drag strip in Grand Bend.

As always, each judge (five for this competition) scores each truck independently and the final outcome is an average.

B2B 30 | FLEET MANAGEMENT | DECEMBER 2014

Canadian Truck King Challenge Fuel Consumption Analysis Data gathered during testing September 18 & 19, 2014 TRUCK

Empty Highway

Payload (4,000 lb) City/Highway Mix

Towing (15,000 lb) Highway 90%

2015 GMC Sierra 3500 3500 6.6L 13.5L/100km Diesel

15.7L/100km

23.55L/100km

2014 Ford F350 Lariat F350 6.7L 14.17L/100km Diesel

16.3L/100km

23.69L/100km

2014 Ram 3500 Longhorn Crewcab 3500 6.7L 14.95L/100km Diesel

17.2L/100km

27.14L/100km

*The fuel consumption numbers as shown have been reviewed and confirmed by the FleetCarma team.

This real-world energy test utilized the MyCarma/FleetCarma monitoring process. All vehicles were equipped with cellular on-board loggers capable of measuring real-world fuel consumption. All results were measured using a FleetCarma C5 logger. These units plug into the OBD port of the vehicles and obtain both standard and proprietary signals required for energy analysis. The specific setup and configuration was done on-site by a FleetCarma support technician.

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INTRODUCING THE BIG NEWS IN SMALL CARGO VANS. All-new for 2015, the Ram ProMaster City is the cargo van that’s ready to take your business into the tightest of urban environments. But don’t let its city-perfect size fool you. It packs big power in an available 2.4L TigersharkTM MultiAir® I-4 engine with class-exclusive nine-speed automatic transmission.* It also carries big loads thanks to its generous cargo capacity (3729L), payload (854kg), and cargo width between the wheel wells (1229 mm). And its 180-degree-opening 60/40 split rear doors means unloading on a busy street is no longer a big deal. It all adds up to more capability than any competitor vehicles in its class.* So if you want to give a big boost to your urban operations, look into the all-new Ram ProMaster City, a small revolution in cargo vans.

fleetchrysler.ca *Based on Class 1 Small Cargo Vans. Excludes other vehicles designed and manufactured by Chrysler Group LLC.

1 800 463-3600

FIRST DRIVE: 2015 Ford Expedition

Story/Photos by Lesley Wimbush

O

first Ford model to offer a continuously controlled damping ur route through the mountains features plenty of suspension system with three drive modes: Comfort, Sport serpentine loops where the only barrier separating and Normal. us from tumbling several hundred feet downward is Independent rear suspension not only provides a supple a thick barrier of kudzu. ride experience, it reduces intrusion of suspension compoWhile a full-size SUV wouldn’t be my first choice with nents into the rear cargo space—which Ford claims is now which to tackle an Appalachian switchback, the refreshed Ford Expedition is surprisingly agile given its enormous size. best-in-class The Expedition maintains conservative styling, while Aside from its improved athleticism, the new Expedition offering a few exterior updates, including a redesigned front also makes a compelling choice for fleet usage, offering three end with available projector headlights and LED fog lamps. full rows of seating accommodating up to eight passengers– With the addition of a new Platinum trim level comes new and now a more economical powerplant.

“Brunello” leather upholstery with tuxedo-stripe accents and A scant ten years ago, the full-sized utility vehicle segment commanded a large share of the market, their popularity reflect- French stitching. The centre stack has been redesigned to accommodate SYNC with the MyFord Touch 8-in touchscreen. ed in the fact that almost every top manufacturer boasted at There’s a new instrument cluster with the central speedometer least one V8-powered behemoth at the top of their lineup. flanked by two information displays. A backup camera now Although it has dwindled to a scant two percent market comes as standard equipment, while other available new share since its heyday, thanks to rising fuel costs, an uncertechnologies include: push-button start, parking sensors, Sony tain economy and the more widespread availability of crossovers of varying sizes, Ford calls it a “lucrative segment” 12-speaker audio system and heated second row seats.

While the cabin features an abundance of hard plastics, it’s they have no intention of abandoning. decently constructed and the seats are all-day comfortable.

The refreshed Expedition returns for 2015 to a single It’s extremely quiet, thanks to extra sound deadening and powertrain: a 3.5-litre EcoBoost V6 generating 365hp and acoustic, laminated glass.

420lb. ft. of torque matched to a six-speed automatic transFor a large vehicle, the Expedimission. Not only is the new tion feels quite responsive, thanks engine smaller, lighter and more in part to the adaptable suspenfuel-efficient, its power output is sion, but also due to a new higher than the previous V8’s electronic steering system that’s 310hp and 365lb. ft. of torque. neither too heavy during parking Official fuel ratings are 16.4L/100 maneuvers, nor too light at speed. km city and 11.3 km on the With 4,173kg max tow capacity, highway.

Expedition claims best in class The Expedition is available in towing with properly equipped two wheelbases: regular, at 119 vehicles . inches, and Expedition Max at Available later this year, 131 inch, with three-row seating.

Expedition will start at $47,399 for Although it’s available in both The centre stack has been redesigned to accomthe base, up to $68,899 for the RWD and 4x4 in the US, Canamodate the 8-inch touchscreen range-topping Expedition Max dian models are strictly 4x4 only.

The Expedition becomes the Platinum.

B2B

32 | FLEET MANAGEMENT | DECEMBER 2014

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SCMAO Conference

Collaboration Is King Partnering for better performance was the theme for the 17th-annual SCMAO conference

By Micheal Power

J

ennifer Botterill knows how to bring her best. As a 15-year-old, her dream was to play for Team Canada at the Olympics —a dream she shared with father over lunch. The three-time Olympic gold medalist and Olympic silver medalist with the Canadian Women’s hockey team recalled the conversation during her keynote speech at the 17th-annual Supply Chain Management Association Ontario (SCMAO), held in Mississauga, October 24-25.

“Why not you?” came her father’s response.

Later, as a Team Canada member, she and her teammates brought their best to their routine at training camps and on the ice. She encouraged delegates to do the same, recalling advice from her head coach while she attended Harvard University, who encouraged the team to focus on the role each member had.

You can’t always choose that role, she said, but you can choose how you play.

34 | DECEMBER 2014

The value of change Following Botterill’s keynote, delegates chose from several education sessions, with procurement transformation the focus of one such session, hosted by Roger Ladoucur and Bill Michalopulos. They described where the corporation stands with its procurement-to-pay function. A total of $4.2 billion goes through the procure-topay process, Michalopolus noted, and the system is highly automated. As well, 99 percent of spend is paid through controlled, standardized methods. “All companies depend on third parties to be successful,” he said. “We’re the link—we’re the people who make that happen.”

Before the transformation, there was low visibility into decision making and significant maverick buying, said Ladoucur. No link existed between sourcing and accounts payable and the process was manual, with office furniture and complex IT purchases costing the same. Supplier relations were fragmented.

The corporation worked to reduce costs and procurement cycle time, Ladoucur said, as well as to consolidate the vendor base, increase client satisfaction, integrate accounts payable and procurement, foster ongoing cost reductions and to outsource

some procurement like fleet and other non-core items. “At the end of the day, all that was to demonstrate procurement-to-pay value,” he said.

Canada Post did a skills gap analysis, said Ladoucur, and the organization outsourced niche procurement projects. Rules around non-compliant purchasing were introduced to deal with maverick buying. As a result, Canada Post saw a “significant reduction” in maverick buying, noted Michalopulos. Accounts payable now reports to procurement. Processes can always be improved, he said, highlighting the need for training and investment in people. And while technology is important, it’s just one device in the overall transformation. “It’s there, use it, but it doesn’t provide the change—it just gives you the tools,” he said.

Legal and business requirements for contracting took centre stage during a session run by Richard Venerus, principal at RV & Associates, who addressed contracting’s legal and business requirements. A balancing act exists between doing contracts well and adhering to a business deal that keeps risk at bay while getting the job done fast. Organizations should therefore tap their people as a resource, he noted.

But those organizations can end up with groups of people performing tasks independently, Venerus said. That can lead to contracts done in an unplanned, tactical fashion. An organization may lack the skills to maintain contract quality, Venerus said, while mistakes can appear even in a good contract when employees are in a rush to put it together.

Venerus drew a distinction between contracting and contract management, noting contracting refers to preparing the contract and contract management focuses on supplier performance while using the contract as a tool to get the best performance possible. In contract management, it may be necessary to deal with dispute resolution or a claim, compliance and other issues. Meanwhile, contract administration, a third term, means measuring the performance of the contract management function itself.

Many organizations don’t assess contracts, Venerus said, opting instead to start working on it immediately. While many people do a risk assessment, it’s important to look also at how long the process will take—a factor few consider. The benefits of an assessment include better ID priority items on a risk adjusted basis, ability to allocate the right combination of skills and experience, as well as the right time and effort spent on each contract, Venerus noted.

The theme of collaboration, both within and outside of supply chain organizations, remained throughout the two-day conference. The event lived up to its slogan of Partner for Performance.

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Looking for more SCMAO Conference coverage?

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