PurchasingB2B July/August 2013

Canada’s magazine for procurement and supply chain management professionals

JULY/AUGUST 2013

MARKET INTELLIGENCE Using information for negotiations in the public sector

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PMAC National Conference Report

Canada’s magazine for procurement and supply chain management professionals

Contents 80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9

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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 FLEET MANAgEMENT/CAR EDITOR

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

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

features

Vol. 55, No. 5 JULY/AUGUST 2013

p.10

6 ContraCt risk Lessons from CI Energy Group’s Supply Chain Contracts for Energy conference.

10 a Capital affair

p.15

The 88th Annual PMAC National Conference.

15 market intelligenCe Private-sector tools in the public-sector.

21 purChasing Cards A roundup of P-card offerings.

PRODuCTION MANAgER

Kim Collins 416-510-6779, kcollins@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 50 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.

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also inside

departments 4 Buylines

32 le professionnel

5 Business front

33 the professional

7 procurement profile

34 the law

13 23

In Front Of The Issue

M

Editorial

edia reports concerning conditions of suppliers overseas seem to pop up fairly regularly these days. At the time that PurchasingB2B was going to press, a labour rights group accused a Chinese company that makes iPhones for Apple Inc. of abuses, which included withholding employees’ pay and excessive working hours.

The group, China Labor Watch, said it found violations of the law and of Apple’s pledges about working conditions at factories operated by Pegatron Corp., of Taiwan. Apple also saw complaints about labour and environmental violations by another of its suppliers, Foxconn, last year.

For the most recent claims, Apple said it was “committed to providing safe and fair working conditions” and would investigate, as did the Taiwanese company’s CEO in a separate statement.

These are some of the risks of overseas sourcing. Despite best efforts, it can be tough to know what far-flung suppliers are up to. The risk of non-compliance is always there. Apple, along with Pegatron, are right to reassure people that they will investigate.

They may also want to take a page from Loblaw’s book. The collapse earlier this year of an eight-storey, shoddily constructed building in Bangladesh that housed factories for products from that company—along with Benetton, JC Penny and others—resulted in more than 1,000 deaths.

The event was a human tragedy and public relations disaster.

But Loblaw got in front of the issue. The company took responsibility for using the facility, sent representatives to Bangladesh and vowed to continue sourcing from the country.

It can be difficult to know what tier 2 and 3 suppliers are up to. But having a strategy in place to deal with such events is not only good policy but the right thing to do.

JULY/AUGUST 2013 | 3

Buylines

Ford Switches Up Procurement Staff

Bird Construction Inc. Lands New Contract Awards Worth $100 Million

ord Motor Company has announced several changes to its senior purchasing leadership team. Tony Brown, group vice-president, global purchasing, will retire and be succeeded

by Hau Thai-Tang, who will report to COO Mark Fields. Thai-Tang is currently vicepresident, engineering.

As well, Birgit Behrendt has been elected a Ford Motor Company officer and named vice-president, global programs and purchasing operations. Burt Jordan is elected a Ford Motor Company officer and named vice-president, global vehicle and powertrain purchasing and supplier diversity. Both will report to Thai-Tang.

Currently executive director, global programs and the Americas purchasing, Behrendt will have operational purchasing responsibility for all the regions of the world and for partnering with Ford’s suppliers to accelerate their integration into the early phases of the company’s global product development system, the company said.

Jordan will be responsible for all commodity-related purchasing and supplier sourcing.

ird Construction Inc. has been awarded several construction contracts totalling approximately $100 million. The projects involve both civil and building construction to serve industrial clients in northern Alberta, said Bird Construction. The awards will be added to the company’s backlog in the third quarter of 2013.

“These awards are the culmination of many months’ work by our procurement teams, and while the construction marketplace remains competitive, these projects will contribute positively to our financial results during their construction life,” said Tim Talbott, Bird’s president and CEO. Revenue from the projects is expected to be put in place by mid-2015.

F

Add www.PurchasingB2B.ca to your bookmarks

Here are some recent daily headlines from our website: • Snowden Mining Industry Consultants lands study contract for Brazil mine • Contract with Hydro Quebec hasn’t been misinterpreted: energy company • Loonie lower as commodities fall, markets look to heavy slate of economic data • B.C. Ferries sails toward construction of three new vessels for secondary routes • Group accuses Apple supplier in China of violating labour law, promises on working conditions We’d like www.PurchasingB2B.ca to be your daily source of industry news. Write to mpower@bizinfogroup.ca with your feedback.

4 | JULY/AUGUST 2013

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Council Aims To Simplify Sustainable Purchasing

M

embers of government, industry, academia, standards organizations and NGOs in the US have formed the Sustainable Purchasing Leadership Council (SPLC), designed to bring standardization in how sustainable purchasing is defined, guided, measured and rewarded.

During a webcast from Washington, DC on July 23, the council said it planned to help its members optimize their purchasing for maximum benefits.

SPLC’s founding members include, among others: Office Depot, FedEx, Dell, Waste Management, Ecolab, the cities of San Francisco and Washington DC, the states of California and Minnesota, Arizona State and Michigan State universities, UL Environment, and FairTradeUSA. The council said it would release tools for use by procurement and sustainability professionals within a few months, starting with a set of “principles for leadership in sustainable purchasing” that organizations can use to guide their own purchasing. The council also plans to release an analytics buyer guide and training curricula to help organizations measure the social and environmental impacts associated with spending. Other tools include action-planning guidance for redirecting spending to lower-impact solutions and solicitation-ready templates.

Organizations that begin using the tools will be prepared for the sustainable purchasing rating system the council plans to release in the next two years, said Jason Pearson, the council’s executive director. Modeled on the LEED program, the rating system will reward organizations for excellence in measuring and mitigating the impacts associated with purchasing choices.

SPLC builds on four years of work by the Green Products Roundtable, a multi-sector and multi-stakeholder forum convened by the Keystone Center in 2008.

PurchasingB2B.ca

Buylines

Adecco Wins 2012 Total Cost of Ownership Supplier Award

R

ecruitment and workforce solutions provider Adecco Employment Services has been awarded a 2012 Total Cost of Ownership Supplier Award from Celestica. Celestica’s awards program recognizes suppliers that support Celestica’s total cost of ownership strategy and demonstrate excellence in quality, delivery, technology, service, pricing and flexibility.

“We are pleased to recognize Adecco Canada with the Best Indirect Services Award,” said Paul Blom, Celestica’s chief procurement officer. “Throughout 2012, Adecco Canada provided outstanding support and service to meet the dynamic requirements of our business and to help us deliver speed and flexibility to our customers.”

The awards program evaluates and recognizes the top performers in Celestica’s global network of over 3,000 suppliers, the company said. Celestica’s total cost of ownership system focuses on evaluating supplier performance by measuring the total cost to produce, deliver and support products and services beyond the supplier invoice price.

Bitcoin Rebuttal To the editor, Although I was pleased to see Mr. Hlinka’s column discussing currency (The Bitcoin Phenomenon, June 2013) I was hoping to clarify a few points since I believe money/currency is one of the central problems we have in society today. First, money hasn’t been a belief system.

In the past, a commodity always backed it—in our case gold or silver. You could take your bank note and trade it in for gold, and coins were minted in gold and silver. Private industry did the minting. The government-monopolized power to print money and have it backed by nothing is new (the last 150 years). The monopolization, followed by legal tender laws, is the only way a fiat currency could work.

Jay Anderson B.Sc. Agribus., SCMP general manager

What Every Business Can Learn From Las Vegas

T

he first time I visited Las Vegas was in the late 1980s. It was a three-day junket in late October; my flight arrived Thursday and left Sunday. And I left with two distinct memories: the first was that I—and I know this may sound weird—couldn’t believe how clean the restrooms were. My second memory was that I had a good time but had absolutely no desire to return. This changed six years ago. I was dating a woman in Los Angeles and given our schedules, it was convenient to meet for weekends in Vegas… and after my return in 2007 I’ve fallen in love with the place.

If you were going to play word association with Las Vegas, the first thing that might come to mind is gambling. This was the foundation for the city’s spectacular growth. Legend has it that gangster Bugsy Siegel, driving east from Los Angeles, stopped along the roadside to relieve himself, looked at the mountains around him, and thought that if the Mob could only build some hotel/casinos that treated gamers fairly, they would have a license to print money. The formula worked very well for a while. Then other jurisdictions jumped on the bandwagon and by the early 1990s there were casinos in myriad American states and many thought that Las Vegas would become a dying city.

But it reinvented itself. If there is one common challenge that most businesses face, it is that changing circumstances—beyond their control—threaten their viability. If there is one constant in the world of commerce, it is change. Las Vegas understood that gambling alone would not sustain it. But there was still the wonderful PurchasingB2B.ca

Business Front

climate. It revamped its production shows to make them more interesting and accessible to international audiences. In the late 1980s, the city’s food was all about the buffets. Now, Vegas is a showcase for the world’s top chefs. Las Vegas has morphed into the biggest and best adult playground in the world, which is why I now come back at least twice a year.

Yes, Las Vegas gets the big picture right.

This is key for any business. But what continues to astonish me is…yes, how clean the rest rooms are. By the way, this isn’t insignificant.

If the restrooms were dirty, tourists would be predisposed to go back to their hotel rooms and this doesn’t generate revenue. To me, clean restrooms are a metaphor for attention to detail. Because if there is one failure I see across the business spectrum, it is companies failing to execute the small things flawlessly.

Vegas gets it—which is why any business can learn a great deal from this city. b2b Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.

JULY/AUGUST 2013 | 5

Contracts

Managing Contract Risk Strategy, best practices key in negotiating supply chain contracts, conference attendees hear

by Jessica Patterson

N

egotiation can be an art, and with best practices, reaching mutually beneficial terms is possible, experts told attendees during the CI Energy Group’s Supply Chain Contracts for Energy conference at the Marriott Downtown in Calgary June 17-18.

Attendees heard from business and legal professionals, contract and procurement experts on negotiation strategies and best practices, took part in workshops and interactive activities. Four key elements of negotiations include persons, price, property and time, presenter Doug Sanders, a partner with Borden Ladner Gervais LLP told a room full of attendees.

“You need to know who the parties are, what the price is, what the property is, and what the time for performance is,” he said.

“Most contract disputes revolve around one of those four issues. If you can get those four things right, the rest of the contract is probably not going to be much of an issue.”

“Certain aspects of contracts can be negotiable. Limitations of liability top the list, followed by indemnification, price, intellectual property and payment.”

Risk drives contract negotiations, and people often don’t realize they have a corporate party and individuals on the other side, Sanders explained. An individual’s motivation may differ from the corporation, since the corporation may have a different risk appetite or set of foibles around some contractual clauses. Identifying who is on the other side of the table is key, and can be accomplished through contract or litigation searches, checking news feeds, industry organizations, and even Google. Learning their objectives can inform strategic decisions.

Certain aspects of contracts can be negotiable. Limitation of liability tops the list of mostnegotiated clauses, followed by indemnifica6 | JULY/AUGUST 2013

tion, price, intellectual property and payment, Sanders noted, adding the list came from the International Association for Contract and Commercial Management’s annual survey of the clauses most negotiated in contracts. “The top-10 negotiated clauses, the things we spend a lot of time negotiating, aren’t necessarily showing up in disputes,” he said. “It doesn’t mean you don’t have to negotiate them.”

Managing risk Risk is part of contract negotiations, and there are only so many places risk can go, Sanders noted. “You can deal with it through insurance, you can deal with it by transferring it to another party, or deal with it internally,” he said. “Understand that contractors are not insurers. If you can’t insure a risk through a recognized insurance company that is licensed to provide insurance, why do you think you can get it through a contractor?”

Managing risk must be done throughout a contract’s lifecycle, said presenter Morwenna Lane, legal counsel for Suncor Energy Services. “Depending on what you’re buying or purchasing, or what services are provided, there are different risks and you need to address them accordingly,” she said. “What is the work, have you defined it, what’s the scope, and if you change the work, what are mechanisms built into the contract to deal with change to your contract through its lifecycle?”

Changes to the work and its scope are most often problem areas, bringing parties to court or in a protracted negotiation period, said presenter David Tupper, partner with Blake Cassels and Graydon LLP. Effective management can reduce risk and ensure productivity. Identify the process for delays, defective work, warranties and unforeseen events in your contract before issues arise. If companies use a tender-based system there can be additional risk in the procurement process, Tupper said.

“One advantage of entering into a tendering process, is that you inject that element of competition between bidders, which in theory will drive down the price, but the downside risk is that you’re subjected to additional obligations as the owner, bidding out the work, in order to meet the obligations you’re under,” he said.

Legal teams should brief the contract management and negotiation teams on what’s in the contract so everyone is on the same page, Lane said. “Put together a global document protocol, with all of those key clauses,” she said. “Put it into process, how you actively manage the contract.”

Ensure contractors know what’s in the contract, what rights and obligations they have and what notices are needed. Revisit contracts and educate appropriate parties, she told attendees.

Disputes take on a different form when dealing with international vendors. Language can be an issue and companies must understand how other cultures deal with contracts. Disputes and legal battles aren’t the end in contract negotiation, attendees heard. Rather, they’re the beginning. “Even in contract negotiation, you still have to prosecute a contract,” Sanders said. “On both sides, this is the start of a long-term relationship.” b2b PurchasingB2B.ca

Procurement Profile

Big City Purchasing Jeff Byrne, chief procurement officer at the City of Ottawa.

Q: Describe your educational background and work history.

I obtained my Honours Bachelor of Commerce in 1983 from Carleton University in Ottawa. My first job out of university was in human resources with Mitel (Business Communication Tools). Soon after, I landed a job in finance at the City of Ottawa and stayed there for three years until moving to Supply and Services Canada (PWGSC as it’s known today) where I spent 10 years in the professional services branch and with the Canada Communication Group. In 1996, I returned to the City for an opportunity to head the supply branch for both the City of Ottawa and the Regional Municipality of Ottawa Carleton and, eventually, the 10 other local municipalities that formed the new City of Ottawa. My career took a slight turn in 2004 when I joined the City’s human resources branch. I spent five years there, the last year as director. In 2009, I returned to finance and took on my current role as chief procurement officer.

Q: How did you get into procurement/supply chain management?

I would say it was by accident really. One of my first jobs after graduating from university was working as a contracting officer with Supply and Services Canada. The rest is history.

Q: What do you like most about your position?

I enjoy the personal interactions I have on a daily basis with clients and the supplier community. I also have a team of great people working with me.

Q: Why did you choose procurement?

I wouldn’t say it was a conscious decision. I got the bug early in my career when putting together business deals and dealing with the intricacies that come with legal agreements. I was also very fortunate to have a number of great mentors and opportunities that continued to pique my interest.

Q: What’s your current role?

I am the chief procurement officer for the City of Ottawa. I provide leadership and strategic direction to senior management in the development and implementation of procurement strategies and ensure that the City’s procurement is undertaken with a strategic corporate outlook, reflecting industry best practices to effectively meet the needs of the City’s business lines and the expectations of council. I lead a team of procurement professionals that procures more than $1 billion in goods, services and construction on an annual basis on behalf of the City of Ottawa, Ottawa Police Services and the Ottawa Public Library.

Q: What’s your proudest professional moment?

I’ve had many proud moments but I would say I get the greatest satisfaction when I see a member of my procurement team succeed and advance their career.

Q: What are your future plans?

I am working towards retirement and then hope to consult on a part-time basis.

Q: What advice would you give those new to the field or planning to enter it soon?

The profession is much more complex today than when I entered. Common sense should always prevail and taking the time to strategize early in the process is always worth the investment. b2b

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PMAC National Conference

A Capital Affair

PMAC heads to Ottawa for networking and education at national conference

by Michael Power

P

rocurement and supply chain professionals got to “capitalize” not only on education sessions and networking events but also Ottawa’s sights during the 88th Annual PMAC National Conference, June 12-14.

As always attendees had ample time to forge new contacts with their colleagues across Canada while renewing existing relationships. The conference also included PMAC’s annual general meeting—held June 12—during which members voted to amalgamate with Supply Chain and Logistics Canada. That affirmative vote was mirrored at Supply Chain and Logistics Canada’s annual general meeting, held the same day in Toronto (see page 33).

The same day, the conference kick-off took place at the Canadian Museum of Civilization. The event that launches the conference traditionally has been an evening of

“The leadership arena isn’t something that’s passive, it’s continuously active.” ~ Lieutenant-General Romeo Dallaire

Lieutenant-General Romeo Dallaire spoke on leadership during his keynote address.

10 | JULY/AUGUST 2013

dining and local entertainment and this year was no exception.

Attendees enjoyed a walking tour of the museum’s Canada Hall, featuring life-size settings of buildings and environments from the nation’s past. From there, delegates dined at the museum’s Grand Hall among the world’s largest indoor collection of totem poles.

The next day, bagpipes and RCMP corporal Craig Kennedy led the procession officially opening the proceedings. The procession, which included PMAC board chair Mike Whelan and president and CEO Cheryl Paradowski, wound through the Westin Ottawa Hotel’s Confederation Hall. The theme for this year’s event was: capitalizing on supply chain solutions.

Whelan welcomed delegates to the conference, noting PMAC was thrilled to join with “such a dedicated group of supply chain professionals.” He highlighted the conference’s theme. “In the shadows of Canada’s halls of power we’ll harness our own influence to capitalize on opportunities,” he said.

The value of leadership The conference also took advantage of its location to highlight the importance of leadership skills in procurement and supply chain. Lieutenant-General Romeo Dallaire, who gave the opening keynote address, said that leadership is a purely human endeavour rather than a technical skill or mechanical pursuit.

Dallaire, a champion of human rights and award-winning author and leader, rose to fame after leading the rescue of thousands of Rwandans in 1994, when he served as commander of a UN peacekeeping force. His book, Shake Hands with the Devil, describes his experience there.

In describing leadership, Dallaire recounted visiting a friend and CEO of a Montreal-based company. The friend routinely went on “walkabouts” among employees on the shop floor, Dallaire noted, speaking with as many as possible during a short time. Dallaire left his friend briefly to speak at greater length with some of the workers—much to his friend’s distress. Later, Dallaire explained to his friend the value of speaking in a more in-depth way with the workers. Doing so puts the leader in a more human light.

“The leadership arena isn’t something that’s passive, it’s continuously active,” Dallaire said. “It’s also got to be out there, it’s got to be anticipating. It’s got to be shaping the future and it’s got to be sensing what’s coming.”

That connection serves well on the battlefield, Dallaire said.

In Rwanda, several of his troops were killed and others seriously injured trying to contact extremist leaders. Before sending out a second group, Dallaire personally explained to the soldiers the mission’s importance, its benefits and life-saving potential. The mission succeeded the second time. True leadership, Dallaire noted, produces results beyond what’s thought possible.

PurchasingB2B.ca

Top: The conference wrapped up with a panel discussion touching on global economics, the labour market and tips for capitalizing on domestic and global markets.

Bottom right: Ralph Sanders (left) received the PMAC Fellow Award from Mike Whelan in recognition of his contributions to PMAC and the supply chain field. As well, Martin Michaud won the Outstanding Achievement Award.

Bottom left: Think like a fox or a hedgehog? Dan Gardner described why forecasters are often so wrong with their predictions during his lunchtime keynote address.

Think like a fox The conference boasted several other education sessions and keynote speakers. Ottawa Citizen columnist Dan Gardner, for example, quoted University of California psychologist Philip Tetlock while telling delegates that “so-called experts are no more accurate than a dart-throwing chimpanzee when it comes to accurately forecasting events in the future.” Gardner, author of Future Babble, discussed how and why futurist pundits so often get their predictions completely wrong.

For example, in 2008 the price of oil went over $140 a barrel and experts said it would soon hit $200. Meanwhile, it dropped to $30 a few months later. In 1967, experts said the USSR would have one of the fastest-growing economies in the year 2000. As history turned out, the USSR no longer existed then.

Gardner described two decision-making styles that Tetlock noted: thinking like a fox and thinking like a hedgehog. Hedgehogs, Gardner said, know one big idea, whereas foxes know many little things. Hedgehogs prefer thinking that leads to one clear, decisive answer while fox-style thinking can lead to a “on one hand, on the other hand” cognition style. “The fox prefers to look at the problem from multiple perspectives,” Gardner said.

Which tends to forecast more accurately? The fox usually predicts somewhat better since they can pull information from several sources and revamp their ideas. Gardner recommended learning to think like a fox. “Why? No matter what your job is, everybody has to get advice,” he said. “We all have to listen to other people.”

Changes in procurement Research done over a 24-year period showed developments in change management and the role purchasing and chief procurement officers. Fraser Johnson, professor of operations management and faculty director, MBA program at the University of Western Ontario, highlighted the findings during an education session called A 24-Year Perspective on Purchasing’s Roles and Responsibilities. CAPS Research began the project in 1987 by distributing a survey focusing on purchasing organizational relationships, said Johnson. Follow-up surveys were done in 1995, 2003 and again in 2011. The research addressed changes, how they’re occurring and how often. The methodology has been consistent since 1987, Johnson said, with surveys sent to large North American companies. The organizations were targeted in the manufacturing and service sectors.

The 2011 survey saw 249 respondents and a response rate of 34 percent. The Canadian response rate was over 50 percent, with 65 Canadian firms surveyed among those 249 overall.

The survey investigated the organizational structure of respondents and whether they were centralized or decentralized.

Johnson said a hybrid structure was desirable, since it could incorporate advantages from both models. He noted that chief PurchasingB2B.ca

purchasing officers don’t usually control organizational structure—rather, CEOs decide how centralized an organization is.

The survey shows that organizations move “all over the place,” he said, shifting constantly between hybrid, centralized and decentralized structures. A total of 52 percent changed their organizational structure, with an even split between centralizing and decentralizing. “You see a significant number of firms changing,” he said, noting there are firms that don’t change much (although they remain the minority).

In terms of CPO responsibilities, there is a move towards strategic orientation of the purchasing function, Johnson noted. “Not only are their structures changing, but the responsibility of the purchasing organization is changing,” he said.

There’s also an increased use of teams within purchasing, he said. The data show reporting line changes more frequently than structure, Johnson noted, while the average tenure for a CPO is about 4.5 years.

Purchasing card trends Another session, entitled P-Cards and ePayables: Payment Strategies and Solutions, focused on the advantages to procurement and suppliers alike in using purchasing cards (pJULY/AUGUST 2013 | 11

PMAC National Conference

“Successful organizations are the ones that pay suppliers via a payables solution in, say, 10 days. They’re getting the benefit of a faster guaranteed payment and not having to sit around like in the old days” ~ Lynn Larson

Top: PMAC board chair Mike Whelan addresses delegates in the Canadian Museum of Civilization’s Grand Hall during pre-conference festivities.

Bottom: Delegates enjoyed the view during dinner from the Grand Hall, which features 49-foot high windows and a view of the Ottawa River and Parliament buildings.

12 | JULY/AUGUST 2013

cards) and ePayables. Those advantages include added efficiencies, reduced paperwork and getting rid of physical invoices, said Paul Cargnelli, head of commercial card sales, Visa Canada, one of the session’s speakers. Meanwhile, ePayables—also called electronic account payables and automated-payables, among other names—are often used for big-ticket items, Cargnelli said. They allow organizations to retain some control of the payment process through purchase orders and invoices, he noted.

A benefit of the systems is the possibility to extend days payable, which Cargnelli said appeals even to some larger organizations. Financial benefits include possible rebates from suppliers for early payments. Visa also has staff that work with its clients’ suppliers to ensure they realize the advantages of p-cards and ePayables.

“They reach out to suppliers and present the value proposition,” Cargnelli said. “They present it in a manner to which the suppliers are receptive.”

It’s a best practice for organizations using these solutions to pay suppliers quicker, said fellow panelist Lynn Larson, manager of education at the Minnesota-based National Association of Purchasing Card Professionals.

“Successful organizations are the ones that pay suppliers via a payables solution in, say, 10 days,” she said. “They’re getting the benefit of a faster guaranteed payment and not having to sit around like in the old days.”

The conference closed with a panel discussion focused on the future of the Canadian and world economies. That future was a mixed bag, said Paul Ferley, assistant chief economist, Royal Bank economics department. Interest rates will likely stay low and inflation isn’t expected to be an issue as it moves closer to two percent towards the end of next year. Household debt remains high, while growth is sluggish.

“This isn’t particularly strong growth but at least it’s positive,” he said.

While regulation is important, organizations struggle with the number of rules, said Sarah Anson-Cartwright, director of skills policy for the Canadian Chamber of Commerce. Many Canadian firms are small or medium-size, so “flexibility” on regulations would be beneficial. “They’re up against a plethora of rules and regulations,” she said.

Fellow panelist, Michelle d’Auray, Deputy Minister of Public Works and Government Services Canada, urged delegates to take advantage of trade agreements. Opportunities exist to look abroad for partners, she said, while government expenditures for large procurements will provide opportunities. But those companies should focus on innovation and R&D to compete.

“I think there are tremendous opportunities for companies,” she said.

PMAC will hold its 2014 national conference in Edmonton.

For more information, visit www.pmac.ca and go to the events section. b2b PurchasingB2B.ca

Addressing issues affecting Canada’s public procurement professionals

The Architecture and Anatomy of Template Design

by Paul Emanuelli

W

hen it comes to maintaining tendering templates, many institutions try to fend for themselves by �illing in gaps in their outdated documents with spare parts collected over the years from templates used by other institutions. This is a high risk practice that should be avoided. The increasingly complex legal landscape that governs tendering in Canada calls for the deployment of professionally designed and drafted templates that will assist in creating and maintaining proper version control over procurement documents. The following discussion addresses the dual aspects of proper template design: template architecture and template anatomy.

Architectural Concepts One of the critical features that distinguishes state-of-theart tendering templates from antiquated purchasing documents is the incorporation of proper design features based on the principles of modularization. Every solicitation document can be modularized into four core content categories: (i) a description of requirements that sets out what the institution wants to buy; (ii) performance terms that will govern payment and performance under the awarded contract; (iii) evaluation criteria that will determine which supplier will be selected for contract award; and (iv) tendering process rules that set out the process protocols from the time the opportunity is issued through to the contract award and debrie�ing stages. Many templates lack this clean four-pillar architecture, which creates incalculable inef�iciencies in the drafting process and signi�icant downstream interpretive risks. Professionally designed templates incorporate this four-pillar strategy so that the different components interoperate while allowing project teams to draft different components concurrently prior to �inal assembly. This helps maximize the use of limited drafting time.

Core Anatomy of Tendering Terms No matter which type of tendering document you are using, there are certain core requirements that are universal to all solicitation documents and should be included as base provisions. These core provisions include clauses covering the following: • placeholders for users to insert a brief description of the PurchasingB2B.ca

requirements and the terms and conditions that will govern the performance of the contract; • placeholders for the purchasing institution’s disclosure of material information and for the insertion of key dates, along with tender submission protocols; • provisions providing consents for the use of bidder information, as well as process protocols dealing with prebid communications, con�identiality, con�lict of interest, inappropriate conduct, disquali�ication, tender cancellation, de-brie�ings and bid disputes; • standard evaluation provisions for the screening of threshold requirements and the assessment of ranking criteria, as well as protocols governing contract award to the top-ranked supplier; and • legal disclaimers regarding work estimates, exclusivity and work volumes, as well as disclaimers stating that suppliers bear their own bidding costs.

In addition to the core terms, tendering templates also call for specialized provisions based on the speci�ic type of procurement format, which would include bid irrevocability and bid bond protocols along with the appropriate reserved rights and privileges for Invitation to formats, and “no claims” covenants, recti�ication processes and negotiation protocols for Negotiated RFP formats.

Professional Design While this list is by no means exhaustive, it provides a benchmark against which you can measure the content of your existing tendering templates in order to determine whether you can get by with some minor spot repairs or whether it’s time for a template overhaul. As purchasing professionals know, it’s hard to keep things simple when it comes to tendering templates. It takes experience and precision to balance the complexity of the tendering process with the need to maintain simplicity and ease of use for end-client departments. Purchasing institutions should therefore select the right design team when assigning someone to tool up their procurement playbook. b2b Paul Emanuelli is the general counsel of the Procurement Law Of�ice, which was recently rated by Global Law Experts as Canada’s top public procurement law �irm. He can be reached at paul.emanuelli@procurementof�ice.ca.

JULY/AUGUST 2013 | 13

Getting Help

Best practices to bear in mind when searching for consultancy services

by Michael Power

A

s the workforce becomes more �luid, hiring outside consultants has gained ground with Canadian organizations. Best practices can help public procurement organizations sourcing consultants on behalf of their organizations—or looking for purchasing or supply chain consultants themselves.

An early step is to de�ine the term “consultant” and distinguish between consulting and subcontracting, said Shawn Casemore, president of consulting �irm Casemore & Co. Contracting involves �illing the need for a skill with someone who can perform speci�ic tasks and provide additional “horsepower” to an organization, Casemore said.

Consulting refers to outside people who provide information, guidance, assessment or other services for a speci�ic set of challenges.

“A consultant is somebody who goes in and offers their intellectual property, advice or guidance relative to helping a client resolve an issue,” he said.

Typically, consultants are hired when there is a need to improve the way a function is managed or how it operates, said Arleen Chenoll of Advantage Services. Chenoll, who often works with the public sector, said this could cover processes, the need for improved information systems, the need to update policies and procedures or to demonstrate due diligence.

“At the end of the day, the key is that there’s a good business fit” —Arleen Chenoll

First, organizations should identify their needs, a project’s risks and the deadline, Chenoll said.

Projects can experience “scope creep,” she noted, meaning changes or continuous growth in what’s being done. Investigate a consultant’s previous work to determine whether there’s been scope creep in the past, how the creep was handled, whether there were disputes, if the budget was maintained and whether the organization would hire the consultant again.

“Most organizations will appreciate there may 14 | JULY/AUGUST 2013

be changes along the way with additional unforeseen costs, and they should therefore plan for some overage,” Chenoll noted. “You don’t want this to be a learning process for the consultant but rather a valuable experience for your organization.”

Organizations should also consider whether they’re looking for a consultant with niche experience or a broad scope of expertise, said Casemore. For example, if an organization hires a company to help with negotiation processes, determine whether a negotiations expert, supply chain expert, operations expert or someone else is most appropriate.

“To my mind it comes down to understanding what their objectives are,” he said. “Often, those objectives guide what we do.”

Ensure it’s clear who will work on a project and that they’ll �it well in the organization’s culture and team, recommended Tim Reeve, president of Reeve Consulting, a �irm that works with municipalities, provincial agencies, and the MASH sector—among other clients—in projects looking at sustainability as a strategic component of procurement and supply chain management. That helps ensure the consultants you meet the �irst time are the ones who end up working on a project.

“You buy the A team but you get delivery from the B team and that team just isn’t up to snuff— that’s often frustrating for clients,” he said.

Advantages of using consultants include costeffectiveness, �lexibility, a fresh perspective and access to outside resources. But clearly de�ining the work scope—with metrics surrounding completion—can help keep projects on track.

Ensure the consultant’s proposal and the final contract include a detailed project plan that outlines steps and activities to be undertaken, said Chenoll. That can include: dates for reporting completion of project parts; hours, days or months the work is expected to take; resources needed and proposed rates for external resources.

“At the end of the day, the key is that there’s a good business �it,” she said. “The consultant has researched your organization, asked the right questions, and you’ve provided key information to them and they understand your expectations and desired outcomes.”

PurchasingB2B.ca

Thought Head Leadership

Market Intelligence The art and science of using information to improve negotiations in the private sector

by Michael Power

Lisa McLaughlin Material control manager, Home Hardware Stores, Ltd.

Terry Kyritsis President and CEO, Ontario Education Collaborative Marketplace

Rod Sherkin President, ProPurchaser

Boris Tsinman Joint director of procurement and supply chain, Lakeridge Health and the Rouge Valley Health System

Peter Buscemi Strategic procurement specialist, Manitoba Hydro A Thought Leadership Roundtable Brought to you by: Procurement professionals from the public and private sectors came together at the Westin Ottawa Hotel on June 11 to participate in a Thought Leadership Roundtable

Stephen Davies President, Alba Consulting

focusing on market intelligence and private-public sector negotiations. The discussion was a thought leadership partnership between PurchasingB2B magazine and ProPurchaser.

Combining market intelligence and proven negotiating tools, ProPurchaser delivers what you need to know before a purchase order is issued, helping to reduce raw material costs, improve profitability and boost competitiveness. For more information on their services, visit www.ProPurchaser.com. The following is an editorial report on the roundtable conversation.

PurchasingB2B.ca

Edward Jin Director of procurement, University of Toronto (participated via conference call) JULY/AUGUST 2013 | 15

Thought Head Leadership

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or procurement professionals, information about the products they buy—market intelligence—goes hand-in-glove with negotiations. They must track market forces, develop in-depth knowledge of commodity prices and keep an eye on labour costs. In a private company, this intelligence can give procurement the knowledge needed for negotiating the price it should be paying. But what about the public sector? Are public sector professionals taking full advantage of this information? If not, where should they look for such data.

To grapple with these topics, PurchasingB2B partnered with ProPurchaser for a roundtable discussion at the Westin Hotel in Ottawa to explore how public sector procurement can use market intelligence to improve negotiations. The discussion set out to illustrate tools that help procurement move from gathering information to using that intelligence to seek the best price openly and transparently.

Participating in the discussion were: Terry Kyritsis, president and CEO of the Ontario Education Collaborative Marketplace; Stephen Davies, president of Alba Consulting; Rod Sherkin, president of ProPurchaser; Boris Tsinman, joint director of procurement and supply chain for Lakeridge Health and the Rouge Valley Health System; Lisa McLaughlin, material control manager for Home Hardware; and Peter Buscemi, strategic procurement specialist at Manitoba Hydro. As well, Edward Jin, director of procurement at the University of Toronto, joined the conversation from Toronto via conference call while PurchasingB2B editor Michael Power moderated the session.

The group first worked to define “market intelligence”. For Tsinman, the term meant procurement’s knowledge of the product. “You have to really know the product, the services or the price at which you’ll be buying,” he said. “Market intelligence means gathering information from different sources in order to identify opportunities for procurement or for supply chain negotiations.”

The terms involved understanding who provides goods and services, what the current conditions are as well as the end-user’s situation, said Kyritsis. “When do they need it? How do they use it? What are the opportunities to align the supply with the consumption so you can come up with the best possible value?” he said. “The key component here is information for decision-making.”

Knowing global markets and what’s happening among vendors helps capture valuable information, said Sherkin. “The vendor community, if it’s a global market, are they already in other markets from yours that are starting to take on their capacity, which can then assist you when you’re negotiating?” he said. “It’s understanding what’s going on in the world.”

16 | JULY/AUGUST 2013

Sending out RFP’s allows the public sector to tap into what’s going on in the market, said Edward Jin. The formal RFP process therefore allows for the mining of information. “I think that may be a slight difference in terms of how the private sector may have to do things,” Jin said. “We naturally ask the market to provide us all sorts of intelligence.”

Price adjustment clauses

Despite differences between how the public and private sectors gather and use information, they also share methods. Tools such as price adjustment clauses—when one or both sides in negotiations can regularly petition for an adjusted price—were not uncommon among roundtable participants.

The Ontario Education Collaborative Marketplace currently has 52 agreements, Kyritsis said, with 51 of them using such clauses. With technology changing often, adjustments are necessary not only on prices but also components of the specs for computers, laptops or tablets, he noted. “There has to be a win-win,” he said. “In our case, there has to be a winwin-win, because we’re in the middle and we want to make sure our suppliers are continuing to be viable and providing good service. We want to make sure our customers—school boards, colleges and universities—get the best possible value.”

Buscemi and Tsinman also noted their organizations used such clauses. Tsinman said the healthPurchasingB2B.ca

“When something is out of whack you just pick up the phone and find out the reason.” ~ Lisa McLaughlin

care sector, which buys everything from fruit to MRI machines to asphalt shingles, deals with a breadth of commodities. Tsinman deals regularly with many companies and often digs into those contracts. His organization removes escalation clauses and replaces them with a consumer price (CPI) adjustment.

Adjustments must be made when purchasing goods from the US and Europe due to currency fluctuations, Tsinman said. If the dollar goes up, the price of an imported good is adjusted accordingly.

“If the dollar goes down five percent we’ll adjust it back down. Otherwise it’s an uneven playing field.”

McLaughlin said her organization works to learn suppliers’ cost structures and main cost drivers while keeping in mind that what goes up comes down. “When propylene goes through the roof and drives all of your costs significantly higher than you thought, you know that it’s going to drop. So you get your supplier to roll their prices back. It’s a constant dance of give and take, of making sure everybody is as transparent as possible and that you’re getting the best deal for your money.”

To benchmark those prices, Home Hardware uses three data sources for each item. For example, information from ProPurchaser, a chemical trade magazine and a third independent benchmarking tool should all rise and fall in unison, she noted.

“When something is out of whack you just pick up the phone and find out the reason.”

PurchasingB2B.ca

Approaching suppliers themselves for data is also important, noted Kyritsis, who said his organization routinely does so before sourcing. The organization spends time upfront learning about a supplier’s business, as well as that of their customers. “Our customers are all in the business of education and they all do things differently, for very good reasons. One measure doesn’t fit all. We do a lot of that work up front, both from the suppliers and our customers, before we start to put pen on paper to write the specs of an RFP.” Public sector practitioners should avoid limiting research to one or two suppliers, said Buscemi. That can mean the risk of incorporating a technology or product while shutting out other opportunities. “If you’re tightening your specifications to that product, it’s going to limit your other markets and may force you into a single source situation that may cause challenges down the road.”

The University of Toronto has two “buckets” of goods and services, said Jin: one that covers non-specialized products and another covering specialized products researchers need, including items such as rocket launching services. The procurement team has begun a new program introduced in 2010 called the negotiable RFP (NRFP).

Negotiations in that program include asking the supplier about their pricing model, their profit model, what their logistics is like and what their JULY/AUGUST 2013 | 17

Thought Head Leadership costs and overhead are. His team looks at that information when the price of a product changes, Jin said. The process allows the university to negotiate the final details prior to award.

“It allows us accommodation to utilize the market for the market intelligence,” he said. “The NRFP has the wonderful nuance to allow us to refine the conditions before we partner with any supplier.”

Sherkin noted the similarity between the University of Toronto’s NRFP model and other pricing models. ProPurchaser has about 11,000 simple models on its website, mainly built by those in the private sector, he said. If an organization is buying a fluorescent light fixture, for instance, the purchaser would look at the price of items such as steel for the housing, copper for the ballast and perhaps glass. Those figures are combined with the supplier’s profit and overhead.

“For most things that are physical that you buy— chairs for board rooms and playground sets if you work for a school board—those things are easy to model,” Sherkin said. “We’re finding, by far, the most popular tool on our website are those models which seem similar to the NRFP concept where you can go back to a supplier and say “hey, steel is down 20 percent this year and that’s 10 percent of your cost. I want a two percent reduction on the price of your whole. You’re still making the same margin, the same absorption of overheads.”

Kyritsis noted that the Ontario Education Collaborative Marketplace had taken commodity price information to suppliers, especially when reviewing

pricing. When a supplier asks to increase a price due to such fluctuations, Kyritsis said they ask for documentation and research how the commodity price has changed. “We may agree with them, we may disagree, or we may land on a different price altogether,” he said. “If the commodity has gone down we’ll try to negotiate those prices down.”

Developing proper relationships with suppliers is key for such discussions, said McLaughlin. Once that trust is established, a supplier may suggest a price decrease based on changes to commodity prices.

“Picking up the phone and letting us know that the feed stocks have dropped and we’re going to roll prices back—when that happens you’ve identified a preferred supplier,” she said.

While building relationships with a supplier is important, they can be challenged if another supplier offers much lower prices, noted Kyritsis. Public sector procurement may have to defend their decisions to elected officials.

“You get into a situation where an unsuccessful bidder will approach the Prime Minister, the Premier or the Minister of Health or Finance and you end up spending your time trying to defend the right thing,” he said. “Those are the challenges that, perhaps, you don’t have to the same degree in the private sector.”

Stephen Davies also stressed supplier relations.

One large company allows him to check their supplier invoices during audits. “That’s come about through the relationship,” he said. “In saying that, because of the relationships we have and all the different suppliers, I’ve never, ever had to do that— I’ve never felt the need to do it.”

Price modeling

“Market intelligence means gathering information from different sources to identify opportunities for procurement or for supply chain negotiations.” ~ Boris Tsinman 18 | JULY/AUGUST 2013

While he was a procurement professional, Sherkin said his team built costing models—with percentages for commodities, labour, energy and transportation—knowing they were slightly inaccurate. They’d then ask for feedback from suppliers, who would correct the model by providing accurate percentages.

“We wound up with a model that was simple, but more importantly, it was shared and owned by both parties,” Sherkin said. “We weren’t imposing it because the supplier contributed. It took a lot of the acrimony, hassle and time-wasting out of negotiations.”

Tsinman tries to calculate the complete cost of taking a raw material and producing a product. For healthcare, procurement considers costs associated with transportation, mining a raw material (like polymer for gloves), manufacturer profit margins and so on. An organization’s internal costs, overhead costs from government ministries and other addedons must also be considered.

Buscemi stressed looking at the overall situaPurchasingB2B.ca

tion—including associated costs—rather than simply the price tag. Focus first on the best value for the organization, he advised. “That’s where we can start getting into the bigger picture rather than just a smaller picture,” he said.

That transparency into what suppliers’ true costs are provides the foundation of trust between buyer and seller, Sherkin said. Once the price is set—for example through a previously agreed upon pricing model—both sides realize they’re getting the best value. They’re then free to focus on other areas of the business or relationship. “If you want to get to these situations where you’re working with excellent suppliers and you’re working on exciting new developments, you need to have the pricing nailed down,” he said. “You don’t have to worry about it; it’s on automatic pilot.”

Tsinman warned against assuming a contract can be filed away and forgotten once the ink dries.

Managing the contract during its lifecycle is also important. “The truth is, if you don’t manage the contract you’re going to lose every penny you think you saved,” he said. “We’ve got a very strong emphasis on contract management, which means being involved at every stage.”

One challenges in terms of employing business intelligence lies in employee education, said Kyritsis. Procurement professionals must be trained to interpret and use business intelligence, as well as be savvy with the technology needed to take advantage of business intelligence. “The challenge for me is, how do we build the expertise to take advantage to make those right decisions?”

Many procurement organizations have moved towards doing more with fewer staff, said Tsinman. That has meant skill levels among recent recruits don’t always match what’s needed to properly employ market intelligence. “Are we getting enough educated staff to take advantage of commodity pricing or business intelligence?” he asked.

“I have a hard time finding qualified people.”

Proper education involves ensuring procurement has a seat at their organization’s top tables, said Davies. A hospital may decide to reduce costs.

The institution’s executive then tells materials management “you weren’t at the table, but we want to cut five percent.” The director is then able to get dressings at, for example, $4 rather than $5.

“Materials management then comes out with a really good variance at the end of the year but nursing has been hit because they need to change the dressing three times a day rather than once. So if procurement isn’t at the table there’s an issue for the organization. That’s what I think has been left out for years.”

Organizations would benefit by not viewing procurement as a cost centre, Davies noted.

PurchasingB2B.ca

“If a commodity has gone down, we’ll try to negotiate those prices down.” ~ Terry Kyritsis

“Maybe that’s the institute doing some more ROIs and getting the ability to be at the top table where you can see quite clearly how being able to explain to the people within a department what’s happening is worth more than keeping them in the basement and drilling down from there.”

Buscemi agreed procurement needed a profile within organizations. As markets become more global, procurement will see more constraints— whether political, financial or environmental. “As supply chains we have an opportunity to step up and assist our organizations reach their goals and bring value back to our organizations.”

McLaughlin agreed procurement impacted profit margins. She reiterated the importance of speaking up so organizations realized that every dollar purchasing saves goes to the bottom line. “We also have that great opportunity to educate our suppliers to how we want to conduct business to bring objectivity and transparency to the table—and that’s pretty important.”

The roundtable investigated if public procurement could benefit from tools like indexes and pricing models. It appeared the public sector could indeed use them, but with caution and transparency. Sherkin concluded the discussion by noting that it was heartening to hear public sector people say they could use such tools, although it’s tougher, more complicated and political. “I’m sure that’s true,” he said. “If it were easy you wouldn’t be b2b there. But it sounds like it’s possible.”

JULY/AUGUST 2013 | 19

ADVERTORIAL

A window into suppliers’ costs ProPurchaser offers market intelligence to arrive at the price you should be paying Since 1999, ProPurchaser has provided clients with marketplace intelligence for successful negotiations.

Rod Sherkin President, ProPurchaser

We realized early on that procurement is an underserved profession when it comes to information as well as the tools and best practices needed to use it properly. Unlike other industries, purchasers have traditionally lacked online information sources that provide marketplace intelligence so crucial to proper negotiations with suppliers.

With many years of senior purchasing executive experience under our belts, we realize that salespeople are often better prepared for negotiations than procurement people.

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At ProPurchaser, our goal is simple.

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When commodity prices go up suppliers will often—quite rightly—ask for a price increase to cover the extra costs.

But usually they don’t call when their costs go down. That’s perfectly natural, and competent supply chain professionals realize suppliers must make a profit. No one wants to be less prepared than the person at the other side of the negotiating table. But you can be just as prepared, and the Internet is the ideal vehicle to get you there.

ProPurchaser helps you track your suppliers’ raw material costs so that when those costs go down purchasers can proactively seek the right price. You’ll know what your suppliers pay, and that intelligence will help you negotiate what you should pay.

For more than a decade, thousands of users have benefited from the value of our services. That value has allowed us to develop lasting relationships with Fortune 500 companies, as well as leading industry organizations.

Our tools and services benefit both private and public sector procurement professionals, and any organization that deals with price adjustment clauses in their contracts can enhance their negotiations.

ProPurchaser.com tracks transaction prices for over 500 commodities and other important cost drivers, and puts this information at your fingertips. It also features a simple but surprisingly effective ‘should-cost’ modeling tool that helps purchasers push back against unwarranted price increases. These are just two of the many tools and resources ProPurchaser offers.

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www.ProPurchaser.com/pb2b We’ve given numerous organizations a window into the true costs their suppliers are paying.

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Services

Card Carrying Convenience A look at the purchasing card market and what’s available

US Bank

Visa

MasterCard

U.S. Bank Purchasing Card reduces the costs associated with processing requisitions, purchase orders, and cheque requests while simplifying the procure-to-pay process, the company says. Organizations can also use Access Online Payment Plus, which leverages virtual card accounts for transactions with greater control requirements. Each Payment Plus account can be set for a specific amount, supplier and time period.

These solutions help reduce paper while streamlining everyday tasks, said U.S. Bank. www.usbankcanada.com

Visa’s purchasing card is geared towards companies with $10 million in sales revenue and greater. For smaller companies (below $10 million in sales) Visa suggests a commercial card or one card solution that combines both. The Visa commercial card program reduces the need for requisitions, purchase orders, invoices and cheques. This helps to lower costs, speed the delivery of goods and services and free up time. The Visa commercial card program can lower internal transaction costs by as much as 76 percent, the company said. www.visa.ca

The MasterCard purchasing card integrates enterprise resource planning systems so transactional data is automatically downloaded into ERP systems. The card allows organizations to restrict how, when and where cards can be used, the company said. The card features the ability to change purchasing authorization and spending criteria quickly and provides customized reports for daily, weekly or monthly purchasing information. Additional benefits include the ability to utilize MasterCard’s online reporting solutions like MasterCard Smart Data Online. www.mastercard.ca

Citi

Scotiabank

Citi purchasing cards help streamline purchasing, ensure compliance with organizational policies, better understand spending patterns and negotiate with vendors globally. The Citi One Card is a payment solution combining corporate and purchasing card functionality in one card, the company said. Citi’s virtual card account enables organizations to generate unique virtual card numbers and set spending and reconciliation controls on each virtual card. This can be streamlined through an API integration that enables an automated card payment process.

This solution safeguards against unauthorized spend and can be used for a range of purchases.

Scotiabank’s commercial card program suits customers with sales over $10 million per year, spending starting from $3 million charged to company credit cards, decentralized buying authority, a large number of suppliers and dispersed operations.

Scotiabank benchmarks a program’s performance regularly. Programs are customized to integrate with existing and future processes. Organizations can monitor cardholder spending by comparing purchasing activity to business rules and implement controls to the cardholder level. Scotiabank’s commercial card professionals manage accounts from initial consultation through implementation.

American Express Corporate Purchasing Card With the American Express corporate purchasing card companies can set spending limits at the supplier, industry, commodity, transactional and employee levels. They can select a solution matching how they prefer to work, including individual cards, supplier cards, department cards or accounts payable cards. Companies will get a streamlined purchasing process for low dollar, high volume transactions. The card provides access to millions of suppliers worldwide. There’s a supplier management team to help with the enrollment, adoption and support, the company said. www.americanexpress.com/canada

www.citi.ca

PurchasingB2B.ca

www.scotiabank.com

JULY/AUGUST 2013 | 21

Fleet management is our whole world.

For 65 years, ARI’s world has revolved around providing smart solutions for fleets of all kinds.

Whether big or small, car or truck; regional, national or global, ARI’s complex fleet management expertise is unsurpassed. From best practice assessments to lifecycle analyses, sustainability studies, and predictive modelling, ARI’s advanced tools and experienced fleet professionals make a world of difference.

Learn how our flexible strategy can be part of your world: 1-800-361-5882

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CAF 2012 Fact Book.indd 1

7/25/2013 10:30:05 AM

05 AM

IN THIS EDITION 24 KEEPING TABS

Big data means big opportunity

26 ROAD TEST

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28 26

Ford’s C-MAX Energi has plenty of juice

28 WATCHING FROM THE SIDELINES Technology to monitor the small fleet

30 PROTECT YOUR FLEET Security options

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.

Diesels offer lower TCO

A new study found that diesel vehicles saved owners between $2,000 to $6,000 in total ownership costs during a three- to fiveyear period when compared to similar gasoline vehicles.

The University of Michigan conducted the study: Total Cost of Ownership: A Gas Versus Diesel Comparison.

“The estimates of savings for three and five years of ownership vary from a low of $67 in three years to a high of $15,619 in five years, but most of the savings are in the $2,000 to $6,000 range, which also include the extra cost that is usually added to the diesel version of a vehicle,” the study reports.

“Fuel efficiency has always been a major attraction of clean

It’s not me, it’s you Nearly two-thirds of the problems experienced in the first 90 days of new car ownership are related to the vehicle’s design, as opposed to components that malfunction. For example, the component may be working as designed, but owners deem it a problem because it may be difficult to understand or operate. This is one finding of the JD Power Initial Quality Study for 2013.

Because design problems are not the result of a breakdown or malfunction, just nine percent of these problems are taken to a dealership within the fi rst 90 days of ownership. And, when owners do take their vehicle to a dealership for a design-related issue, the problem is fi xed only 13 percent of the time. In contrast, 28 percent of owners who experience a defect or malfunction with their vehicle within the fi rst 90 days of ownership take it to a dealership, and 42 percent of the time the dealership is able to fi x the problem.

“Automakers are investing billions of dollars into designing and building vehicles and adding technologies that conPurchasingB2B.ca

diesel vehicles. Because diesels are 20 to 40 percent more fuel efficient than gas cars, drivers save money with diesels even when diesel fuel prices are slightly higher than gas prices,” said Allen Schaeffer, executive director of the Diesel Technology Forum.

The report analyzed the Total Cost of Ownership (TCO) for clean diesel vehicles and comparing their TCO to their gas vehicle counterparts. The study developed three- and five-year cost estimates of depreciation by modeling used vehicle auction data and fuel costs by modeling government data. The study also combined these estimates with three and five year estimates for repairs, fees and taxes, insurance, and maintenance from an outside data source. sumers desire and demand, but the risk is that the vehicle design, or the technology within the vehicle, in some cases may not meet customer needs,” said David Sargent, vice president of global automotive at JD Power. “Keep in mind that automakers are trying to design vehicles that appeal to a broad array of consumers, and what works for the majority may not work for all. The successful companies will be those automakers that fi nd a way to give customers the technology they want while at the same time making it sufficiently intuitive so all customers fi nd it easy to use.”

The study fi nds many problems relate to the driver interface, which includes voice recognition or hands-free technology, Bluetooth pairing for mobile phones, and the navigation system. According to Sargent, some of these problems may be avoided by the salesperson explaining how to use the technology, and others may be remedied with software changes. However, features that are difficult for owners to operate, hard to understand, or inconveniently located likely will remain a problem for the life of the vehicle.

JULY/AUGUST 2013 | 23

By Peter Nogalo

Keeping Tabs Big data means big oppportunity

W

ith information streaming in from any number of sources, fleet management is as much about managing data as it is about managing vehicles. As the volume, variety, and velocity of that data increases, so too do the demands for something, anything, that can help make sense of it all.

Over the past several years, as that information has grown exponentially, our very understanding of the industry has changed in a fundamental sense. Fleet management is, in fact, a big data business, with all the opportunities and challenges that come with that.

And the challenges are plenty. Information comes from a variety of disparate sources, and includes virtually everything that touches the operation of a fleet, such as OEM specifications, supply chain status, leasing, fuel, maintenance, parts, licensing, violations, collisions, remarketing, and, of course, driver information.

Regardless of the industry, perhaps the greatest “big data” challenge, beyond its sheer volume, is to develop methods that will “normalize” the information coming from hundreds, if not thousands of sources. This has to be done in a way that can provide clarity and insight, all to help make informed decisions.

Compiling all that data from a fleet of 100 or even several thousand vehicles, and presenting in a way that makes sense and has value, has always presented a challenge. With the advent of telematics technology, that has only grown. Today’s in-vehicle devices can ping data about once a minute, transmitting a staggering amount of information on driver behaviour and the vehicle’s general operation.

The ability to transmit data in real-time is huge. It allows for a near-immediate view of what is happening on the road and for action to be taken if needed. All this clearly necessitates systems, and storage, not to mention strategies to manage this new-found information and functionality.

In the past, providing comprehensive analysis or benchmarking across thousands of vehicles was an incredibly manual process, if it could be done at all. For those who have made the investment, today’s business intelligence tools can not only report on what was previously impossible, but can actually be predictive in their analysis.

Why does any of this matter, particularly for supply chain professionals? Well, the simple answer is money, and how to make best use of it.

Being able to immediately drill down fleet expenses 24 | FLEET MANAGEMENT | JULY/AUGUST 2013

Given the value that can be driven from effective big data management, it should and likely will become an increasingly relevant discussion during the fleet management procurement process. to the division, vehicle class, model, vendor location, or even part component is incredibly powerful, in not only identifying but also controlling costs, and will ultimately lead to lower total costs of ownership.

Through predictive analysis, we can actually identify problems before they happen and make decisions accordingly. Being able to predict when a major component may fail, for example, or to identify other maintenance patterns or trends, empowers the fleet manager to act proactively.

How about being able to immediately locate the closest, most competitive maintenance vendor with fastest turnaround times, before having a vehicle repaired?

Similarly, being able to correlate all relevant environmental information such as fuel economy and emissions, coupled with analytical modeling around trip optimization, can provide fuel and emissions reduction strategies that were virtually unthinkable even a few years ago.

Given the value that can be driven from effective big data management, it should and likely will become an increasingly relevant discussion during the fleet management procurement process. Currently, questions around data are generally relegated to issues of storage, security, privacy, and disaster recovery. That’s akin to buying a new car and being primarily concerned with where to park it. The vehicle, or in this case the data, is the real asset. How can hundreds of thousands of data fields be harnessed to predict and drive future savings?

That’s just one question to ask and just one of the opportunities of today’s big data. b2b

Peter Nogalo is Marketing Manager for ARI. ARI manages 150,000 vehicles across Canada and introduced ARI analytics in 2012 to help manage clients’ big data requirements.

PurchasingB2B.ca

Including those not yet asked.

2014

+ performance

5

Roomy 5-passenger seating capacity

Transmission

CVT Lineartronic 5

+

110 %

satisfaction

1

X-ModeTM System 4

Enhanced control of the road with the push of a button

Choose PZEV technology, the affordable eco-friendly alternative without the compromise.

subaru-pzev.ca

+ wider 15mm + taller 20mm + longer 35mm

2,115 L

cargo capacity

Fuel consumption 2 6.2L / 100km

(highway) for the 170 hp., 2.5 litre version.

3

250 x

Subaru BOXER Engine

Innovation meets technology.

The Subaru BOXER® engine produces dynamic low-end response. Available on the 170 hp/2.5L or 250 hp/2.0L turbocharged versions.

Fonction 6 SI-DRIVE Hands-free system

7

680 kg

2014 FORESTER

To consult our Fleet ordering guide or for more information please visit www.fleet.subaru.ca or call 1 877 293-7272 for the National Fleet Sales department.

1. Only on Limited models. 2. Fuel consumption figure rating posted by Natural Resources Canada of 6.2L/100 km (highway) for a 2014 2.5i Forester equipped with continuously variable automatic transmission and a 60L fuel tank capacity. Fuel consumption figure should only be used for vehicle comparison purposes. Actual fuel consumption will vary based on driving conditions, driver habits and vehicle load. 3. Available on the 2.0XT model. 4. Automatic transmission only. 5. Not available on the 2.5i (EJ1-X0) model. 6. Available on the 2.0XT model. 7. Ratings of “Good” are the highest rating awarded for performance in five safety tests (moderate overlap front, small overlap front, side, rollover and rear) conducted by the Insurance Institute for Highway Safety (IIHS) (www.iihs.org). To earn a 2013 Top Safety Pick+, a vehicle must receive a “Good” rating in at least four of the five tests and a “Good” or “Acceptable” rating in the fifth test. Technical specifications are subject to change without any prior notice. Vehicles shown for illustration purposes only.

THE ANSWER TO ALL YOUR QUESTIONS

By Tony Whitney

Energi To Spare The C-MAX has been available in Europe for 10 years.

F

ord’s C-MAX range of compact multi-purpose vehicles has been available in Europe and other markets since 2003, but this interesting Ford product is only a recent arrival in Canada, launched for the 2013 model year. It fills a significant gap in the Ford lineup and adds interest to a vehicle segment that’s not particularly well served in North America.

This second-generation C-MAX competes with rivals like the Mazda5 (which shares a similar platform), the Kia Rondo, the Chevrolet Orlando and several other products. The C-MAX does not have the sliding rear doors of the Mazda5, nor its three-row seating, but remains a vehicle of great versatility and considerable fleet potential, with both versions offering outstanding economy.

In world markets, the vehicle is offered with several power options including gasoline and diesel models.

In Canada, Ford has aimed straight at the heart of the hybrid market by listing not only a conventional hybrid, but a plug-in hybrid too. There is no gasoline-only or diesel version for our market right now and no sign of one on the horizon.

26 | FLEET MANAGEMENT | JULY/AUGUST 2013

Ford’s C-MAX hybrid gives users a lot of run for their money

This road test was with a C-MAX Energi plug-in hybrid. There are two trim levels for the hybrid vehicle—SE and SEL—but the Energi plug-in comes only in SEL trim. This is a nicely styled four-door, five-place vehicle with a big rear hatch and a rear seat that folds flat so large loads can be carried when the need arises. There is a certain price to be paid on the cargo front thanks to the battery location, but it’s not too bad. It’s compact and easy to park, making it great for urban use, yet it’s very roomy inside and business users get most of the benefits of a larger van in a smaller package.

The nose treatment is a grille much like the one on the Fusion sedan. There are sporty-looking bulges around the wheel arches, though this is by no means a sporty vehicle. The wheels, with their cast alloy rims, fill these arches nicely and there’s no hint of those stance-ruining gaps some vehicles are cursed with. In all, it’s a fine looking rig, even if it is a little on the tall side.

Both C-MAX models use next-generation Ford powersplit technology and the company claims the vehicles offer electric mode at higher speeds than any

other hybrid—135 kmh for the Energi with its 195-hp engine. Ford is aiming to match or better the economy levels of most rivals in the hybrid class. As with other hybrids and plug-in hybrids, the C-MAX uses a combination of gasoline engine and electric motor.

Using a dash-mounted EV button, the driver can select one of three modes offering various levels of fuel conservation. The C-MAX can be operated either as all-gasoline (when a charge is needed), all electric (when the battery is topped up) or “normal” which brings in the hybrid system that switches from gasoline to electric automatically as dictated by conditions.

The gas engine is a 2.0-litre, fourcylinder which combines great economy and commendable refinement with a worthwhile amount of power and torque. Lithium-ion is used for the battery system and the batteries in the C-MAX are 25 to 30 percent smaller and 50 percent lighter than the nickelmetal-hydride units used in first-generation hybrids. The C-MAX uses a continuously variable transmission (CVT) and it certainly functions with great smoothness, even under hard acceleration.

PurchasingB2B.ca

The vehicle can be plugged into a standard 120-volt household outlet for charging, or use one of the increasingly common public charging stations, which provide quicker charges from a 240-volt supply. Many fleet operations have had charging stations around for years, but they’re easy enough to fi nd around towns and cities. Many municipalities offering these chargers don’t demand a fee for using them either.

There’s a smartphone app available to help drivers fi nd charging stations, which comes in handy when in unfamiliar territory. Regular charging is the secret to getting the very best out of a plug-in hybrid.

While many would-be buyers might think all the technological effort has been directed to the novel drive train, this is far from the case. The version we tested was loaded with all kinds of features that may not be available in rival vehicles, including a navigation system, a rear camera, an automated parking system and even a power rear liftgate. Of course, packing in all these options does run up the price a little (not to mention the weight), but you’ll end up with one of the most full-featured hybrids on the market and after all, you’re not going to be spending much on fuel. Considering how well the

C-MAX Energi is fitted out, it might even deserve to be called a “compact luxury vehicle”.

It’s comfortable for everyone on board and would be a great choice for long road trips. Fuel-stingy it may be, but it’s fun to drive and the torque from the electric motor adds some useful power on hills. It also handles reasonably well without being a “performance car” and with a full suite of state-of-the-art electronic braking and stability aids, it should be exceptionally safe. The instrument panel is contemporary, with multi-colored readouts to help you keep track of what the electric motor and gas

engine are up to. It’s very easy to keep a constant track on fuel economy and the tendency is for the driver to get the best out of the vehicle, even if only for bragging rights on fuel consumption. As with all recent Fords, the fit and finish is first-rate, with excellent interior ambiance and plenty of soft-touch materials.

This C-MAX variant is far from cheap for a compact, but when it comes to operating expenses, the savings will be significant. In fact, Ford claims the vehicle can save over $7,000 in fuel expenses over five years compared to an average new vehicle. That could be the clincher for many buyers. b2b

Multi-coloured displays make interpreting data on the motors easier.

SPECS AT A GLANCE...

BODY STYLE: Four-door, compact van ENGINE: 2.0-litre, 4-cylinder plus electric motor TRANSMISSION: Continuously variable (CVT) PERFORMANCE: Zero to 100 km/h in approx 9 secs FUEL ECONOMY: 4.3-litres/100 km city; 4.7-litres/100 km hwy. (normal mode) PRICE: Basic C-MAX Energi SEL $36,999.

Energi SEL as tested: $41,549.

PurchasingB2B.ca

JULY/AUGUST 2013 | 27

By David Taylor

Watching From The Sidelines Technology to monitor the small fleet

D

epending on the size of your enterprise, you may have several vehicles on the road to meet your venture’s demands. To this point, you may have thought you have a pretty good handle on your vehicles’ total cost of ownership. Maintenance, preventative and otherwise, plus insurance makes up a large portion of fi xed vehicle expenses. Fuel costs can be unpredictable. All you know is when the bills come in for gasoline or diesel these costs are continuing to rise.

There are solutions. It is possible to examine driver habits and vehicle usage in an inexpensive manner that will provide relevant data that can make a difference to your organization’s bottom line.

Earlier this year, the Automotive Journalists Association of Canada (AJAC) took 22 fuel-efficient vehicles on a three-day eco-friendly drive from Ottawa to Montreal.

The vehicles represented a wide range of size, price points and styles. The event intended to show consumers that eco-friendly doesn’t only mean driving a small plug-in electric car. Two of the events’ partners were FleetCarma, a division of Cross Chasm Technologies Inc, a Canadian company based in Waterloo, Ontario and Stantec, headquartered in Edmonton, Alberta whose Learning Products and Solutions Group is run from Ottawa.

Prepared By: davidtaylor@rogers.com Logging Period: 7/3/2013 to 7/3/2013with Megan Allen, Fleet Management connected Fleet: David's Kia Rio Description: 100 vehicle analyst, and Eric Mallia, general 100, (2013 technology Kia Rio) Driving Summary DISTANCE

DRIVING ENERGY

17

13.8

km

Daily Average

Fuel Usage

Eco Driving Score

2

99

17 km 17 km

L/100 km

L

13.8 L/100 km

0 km

393 km

0.0 L/100 km

934.4 L/100 km

Daily Distance Benchmark

Energy Benchmark

TIME

IDLE SUMMARY Driving Idling Resting

1

3

hrs

ON

Idling Driving

Idle Time

hrs

% Idle Time

Idle Fuel Use

41

1

0 hrs

%

L

OFF

1 hrs

41 %

0 hrs

156 hrs

5%

Daily On Hour Benchmark

91 %

Percentage Idle Time Benchmark

GHG EMISSIONS

Upstream (Gas)

0 kg

Total

Intensity

6

339

kg

Tailpipe

5 kg

g/km

339 g/km g 0 g/km

1,048 g/km

GHG Emissions Benchmark

A typical test result from the logger.

28 | FLEET MANAGEMENT | JULY/AUGUST 2013

manager of FleetCarma, and Darlene Monkman, team leader, learning products and solutions group, of Stantec for help conducting an experiment.

Stantec, specifically with their online test of driving habits, www.ecodrivingonline.ca, would provide simple yet common sense advice to assist in reducing fuel consumption. FleetCarma, www.fleetcarma.com, supplied a small device—a data logger that easily plugs into the OBDII port of most vehicles—which would provide the all-important data. We used a C5 device, which is the lower-end offering, containing a micro SD card that records driving data.

Installation was a breeze and after the fi rst day, we eagerly pored over the uploaded results. Our test vehicle was a 2013 Kia Rio5 SX. That day, the car made seven trips, travelling a cumulative 17 kilometres of in-town driving. Two litres of gas were used representing 13.8L/100km. But the big surprise? The car idled (engine running, in park) for 41 percent of the time it was on the road. Idling consumed one of the two litres of gas. Ten seconds of idling uses more fuel than restarting the vehicle.

Employees who drive company vehicles will, for the sake of convenience, head to a coffee shop drive-thru.

In the event they do this several times a day under the misguided notion of saving time, the fuel costs for no engaged use rise. Then, as we have all seen, that same driver may pull up in the parking lot and talk with a dispatcher to get details of the next job while drinking their double-double, and all the while the vehicle is idling. Conclusion? Idling is an added expense which may be avoided or at best, reduced.

Megan Allen describes FleetCarma as an affordable solution for any business fleet who may not have the budget for telematics contracts. “Pricing varies depending upon the unit functionality as well as the analytical features required. We work with a manager to determine which features will give the most value. Pricing includes the cost of the unit, and then a monthly subscription plan that handles the back-end analysis and upgrades.”

FleetCarma may alert an owner to opportunities to save, short- and long-term. Combine those learnings with Stantec and NRCan driving tips for additional ways to save money.

Better driving habits do not happen overnight. You cannot make someone drive better—but you can ask—as long as the reasons are stated clearly and make sense.

Over time, a difference will be noticed on the ledger, and that will translate into dollars saved. b2b PurchasingB2B.ca

By Kara Kuryllowicz

Protect Your Fleet

Vehicle tracking options help prevent theft and mitigate risk

C

hances are the individual who stole the load of laundry detergent or the SUV with AWD is part of a large, sophisticated organized crime ring with connections reaching well beyond Canada to West Africa, the Middle East and Eastern Europe.

According to the Insurance Bureau of Canada (IBC), auto theft costs Canadians $1 billion annually, when you include the cost of health care, court, policing, legal and out-of-pocket costs such as deductibles. Meanwhile, a recent study sponsored by the Canadian Trucking Alliance and others concluded that cargo crime costs about $5 billion.

Low-value consumer products such as t-shirts and consumables such as laundry detergent are popular targets because they are seen as relatively risk-free—easy to unload and tough to trace. Yet although it’s often perceived as a victimless crime, cargo theft puts truck drivers and other employees at risk. It also affects the productivity, efficiency and earning ability of the drivers and their companies, while shifting revenues from

“Auto theft costs Canadians $1 billion annually. Cargo crime costs about $5 billion.”

30 | FLEET MANAGEMENT | JULY/AUGUST 2013

legitimate businesses to criminals and reducing tax revenues. As importantly, the cash derived from vehicle and cargo theft is typically used to fund illegal activities such as drug and gun smuggling.

“We believe that cargo theft is on the rise, but it’s tough to track accurately because the reporting tends to be inconsistent,” says Garry Robertson, national director, auto theft and vehicle services at IBC. “About 90 percent of the time, the tractor and trailer are recovered quickly but the cargo is typically sold within hours of being stolen to maximize cash-flow and minimize the risk.”

Surprisingly, up to 20 percent of the stolen cars, SUVs and pickups were easy picking for thieves because drivers left the keys in the ignition while in a coffee shop or at an ATM. Robertson suspects the figure is much higher, because drivers are unlikely to admit that.

Simple and obvious theft prevention strategies include locking the vehicle, tractors and trailers, parking them in well-lit spaces or enclosures, blocking them in with a barrier such as another vehicle and even fifth wheel locks that won’t allow the trailer to be hooked up to a tractor.

Yet because thieves are increasingly determined and creative, drivers and corporations are stepping up to protect their assets with devices that track the vehicles to expedite and boost recovery rates.

LoJack, which partnered in January this year with TomTom, a supplier of location and navigation, is integrating TomTom’s Webfleet telematics solutions with LoJack’s Stolen Vehicle Recovery Network technology. The new product will launch in Ontario and Quebec in

the late summer and early fall.

Currently, LoJack offers three self-powered, post-theft tracking devices available directly from LoJack or its dealers: the basic unit at $599, the Alert unit with a key fob at $999 and the most rugged C unit for commercial applications and more extreme conditions for $699. The unit must be installed by a LoJack technician who will conceal it in one of 40 strategic spots. Post-purchase there are no subscription fees, but the units must be replaced every seven years.

In 2012, 24,000 vehicles were stolen in Quebec and 23,000 vehicles taken in Ontario. In the past five years, LoJack claims it has recovered more than $350 million in assets in Canada and helped arrest more than 500 criminals. If the vehicle is not recovered within 48 hours, LoJack will cover the cost of the device.

OnStar Stolen Vehicle Slowdown uses GPS technology to pinpoint the location of the vehicle and provide it to authorities. It can then remotely block the ignition, making it impossible to restart the vehicle once it’s turned off. If the vehicle is moving, an OnStar advisor can work with the police to send a signal to the vehicle, forcing it to gradually and safely slow down.

OnStar services require the vehicle’s electrical system (including battery), wireless service and GPS satellite signals to be available and operational to function properly.

OnStar’s Stolen Vehicle Slowdown is included as part of the Safe and Sound package which is available for $24.95 per month. On average, OnStar responds to more than 300 Stolen Vehicle Slowdown requests a month in North America. b2b PurchasingB2B.ca

T H E A L L- N E W 2 0 1 3

UP TO 59 MPG. FUEL ECONOMY NUMBERS THAT ADD TO YOUR BOTTOM LINE. ¤

The all-new Dodge Dart is here, and it delivers fuel economy numbers that please, with up to 59 MPG HWY,¤ and three engine options that offer 160+ horsepower. It’s compact on the outside, but has the interior room of a mid-size sedan, including in-seat storage, and an oversized glove box, so your passengers ride in more comfort.

Add in class-leading safety* with over 55 standard and available features, and you’ll get peace of mind on every ride.

It’s no wonder why so many businesses are adding the most technologically advanced car in its class* to their fleet.

fleetchrysler.ca

¤

1 800 463-3600

2013 Dodge Dart AERO – Hwy: 4.8 L/100 km (59 MPG) and City: 7.3 L/100 km (39 MPG). *Based on 2013 Ward’s Upper Small sedan costing under $25,000.

le professionnel

Par Cheryl Paradowski

MC

Une décision historique pour l’ACGA

L

e 12 juin 2013 s’inscrira assurément dans les annales de l’ACGA – le jour où nous avons voté pour la fusion avec l’Association chaîne d’approvisionnement et logistique Canada (CAL) pour créer l’Association de la gestion de la chaîne d’approvisionnement (AGCA). Bien que la préparation de l’entente ait commencé il y a environ un an, le processus est en cours depuis beaucoup plus longtemps et témoigne de l’évolution de la gestion de la chaîne d’approvisionnement.

Lorsque j’ai été engagée à l’ACGA à titre de présidente et chef de la direction (il y a trois ans déjà!), j’ai été ravie de constater que la profession était en pleine transformation. L’évolution a eu lieu à la fois sur le fond (le passage d’un objectif tactique à un objectif stratégique qui s’est concrétisé avec l’adoption du nouveau titre de p.g.c.a.) et sur la portée (le passage d’une approche cloisonnée axée sur l’approvisionnement aux responsabilités individuelles et aux attentes des employeurs représentant toute la chaîne d’approvisionnement). Je crois que la fusion avec CAL est une étape importante dans la concrétisation de ce changement.

<< Nous avons été heureux de constater que les membres des deux associations ont participé activement à la prise de décisions. >>

32 | JULY/AUGUST 2013

Nous avons été heureux de constater que les membres des deux associations ont participé activement à la prise de décisions. Au moment d’annoncer le projet, nous avons créé certains mécanismes de communication, notamment l’avis préliminaire et des foires aux questions, une adresse de courriel réservée aux questions sur le processus, des webinaires pour les deux associations, des discussions sur les médias sociaux et plusieurs événements locaux et régionaux pour favoriser le dialogue. Les membres des deux associations ont eu recours à ces outils afin de prendre une décision éclairée. Étape finale du processus de fusion, le vote du 12 juin constitue en fait le début de la prochaine étape qui consiste à mettre en application la fusion avec le lancement de l’AGCA le 3 septembre prochain. Une fois de plus, les membres de l’ACGA et de CAL ont participé activement à un aspect de cette étape en votant pour le nouveau logo de l’AGCA. Plus de 2300 membres ont voté, soit environ le tiers de nos membres, ce qui témoigne de façon éloquente de leur allégeance à la nouvelle association.

Voici le nouveau logo choisi par plus de 70 % des membres qui ont voté :

Au cours de l’été, certaines activités liées au lancement de l’AGCA seront de nature administrative et juridique, ce qui nécessitera une moins grande participation des membres. Un groupe de travail sur l’intégration, qui réunit en parts égales des employés et des bénévoles des deux associations, a été créé pour s’assurer de régler tous les détails. Comme nous l’avons précisé

dans les premières annonces, nous conserverons la structure de l’ACGA fondée sur les corporations et ces dernières participeront activement à la transition des données sur les membres de CAL. Les deux associations ont déjà prévu tenir plusieurs activités à l’automne de même que des activités phares au cours de l’année dont nous devrons assurer la gestion efficace et pour lesquelles nous devrons transmettre l’information pertinente à tous les membres de l’AGCA. Pendant l’été et jusqu’à la fin de l’année, nous préparerons également un seul congrès national qui mettra à profit les deux événements historiques.

Nous solliciterons de nouveau la pleine participation des membres dès le lancement de l’AGCA le 3 septembre.

Pourquoi? Nous espérons pouvoir compter sur tous les membres de l’AGCA pour appuyer nos efforts de communication à l’échelle locale et nationale en informant leurs collègues et leurs employeurs du changement; pour inviter leurs collègues qui travaillent dans tous les domaines de la chaîne d’approvisionnement à participer à l’AGCA; et pour aviser leur corporation du type de programmes et d’activités dont ils ont besoin en vue d’améliorer leur rendement en tant que spécialistes en gestion de la chaîne d’approvisionnement. Transposons l’énergie, l’intérêt et la participation dont nous avons fait preuve pour choisir le nouveau logo afin de faire de l’AGCA l’association en gestion de la chaîne d’approvisionnement la plus importante au Canada, une association également capable de faire figure de chef de file sur la scène mondiale. Il est bien connu que l’on tire d’une association ce que l’on y investit. Profitez de cette période de transition et de transformation pour laisser votre empreinte unique sur votre association. b2b PurchasingB2B.ca

the professional By Cheryl Paradowski

TM

Historic decision for PMAC

W

ell, June 12, 2013 will definitely go down as a milestone in the history of PMAC – the day we voted in favour of amalgamation with the Supply Chain and Logistics Association of Canada (SCL) to create the Supply Chain Management Association (SCMA).

While the agreement itself was about a year in the making, the outcome has really been in progress much longer and is representative of the evolution of the field of supply chain management.

When I first joined PMAC as president and CEO (can you believe it’s been three years already?), I was excited to encounter a profession that was really transforming itself. The evolution encompassed both depth (the change from a tactical to a strategic focus in the field of practice, which was largely actualized in the introduction of the SCMP designation) and breadth (the change from a silo focus on purchasing and procurement, to individual job responsibilities and employer expectations that represented all of supply chain). I believe that the amalgamation with SCL is a big step in the actualization of this change in breadth.

We were really encouraged to see that members of both associations were actively involved in the decision-making process. A number of communication mechanisms were established when the plan was announced, including the preliminary notice and FAQ’s, a dedicated email address for questions about the process, national webinars for both associations, discussions through social media channels and a number of local and regional events where time was set aside for dialogue. Members of both associations made active use of all these opportunities and ensured that their ultimate decision was an informed one.

While the vote on June 12 was the final step in phase one of the amalgamation process, it is really only the beginning of PurchasingB2B.ca

the next phase, which is actually putting the amalgamation into practice, resulting in the planned launch of SCMA on September 3, 2013. Once again, PMAC and SCL members have already been actively involved in one aspect of this phase, which was to vote on the new logo for the SCMA. Over 2300 members took part in that voting process - that’s about a third of our joint membership and a fabulous demonstration of ownership of the new association. Here is the new logo that was the choice of over 70% of those who voted:

Some of the summer activities related to the launch of SCMA will involve administrative and legal work that will provide fewer opportunities for direct member involvement. An Integration Task Force has been struck, involving an equal representation of staff and volunteer leaders from both associations, to ensure that all the i’s are effectively dotted and the t’s crossed. As was communicated in the initial announcements, it is PMAC’s legacy institute infrastructure that will continue, and therefore the institutes will also be actively involved in the transition of SCL membership data. Both pre-existing associations also have a number of activities already planned for the fall and/or recurring signature events throughout the year and we need to make sure that they are all effectively managed and that information is shared with all SCMA members. Preparing a single national conference that builds on the best of both historical events will also get underway over the summer and proceed throughout the balance of the year.

“We were really encouraged to see that members of both associations were actively involved in the decision-making process.”

The need for direct member engagement comes back into full force as soon as we launch SCMA on September 3. What does that entail? We hope we can count on all members of SCMA to support our local and national communications efforts by letting your colleagues and employers know about the change; to invite your colleagues who work in all aspects of the supply chain to become involved in SCMA; to let your local institutes know what kind of programming and activities you need to enhance your performance as a professional in supply chain management. Let’s take the energy, interest and engagement that went into the vote on the new logo and translate that into truly making SCMA the premier association in supply chain management in Canada; an association that will be capable of providing leadership on the global stage as well. It is a common axiom that you will get out of an association what you put into it. Consider taking advantage of this time of transition and transformation to leave your personal mark on your association. b2b JULY/AUGUST 2013 | 33

The Law

Force Majeure in Commercial Contracts Resist the temptation to treat these provisions as boilerplate

by Doug Sanders and Bill Woodhead

R

ecent �lash �loods in Alberta and Ontario demonstrate the importance of ensuring that commercial contracts include provisions clearly allocating risk for events of force majeure. These provisions should not be overlooked as they can, and do, vary signi�icantly from contract to contract.

There is no standard force majeure clause.

The scope of each force majeure provision is dependent upon the speci�ic terms of the applicable contract. In some contracts, the force majeure provisions may even be included within another contractual concept such as “delay” or “excusable events”.

Despite the lack of a standardized force majeure clause, contractual force majeure provisions can provide relief for events which are considered to be outside the reasonable control of the contracting parties, such as “acts of God” and for which insurance is not typically available at a reasonable cost. Force majeure provisions are drafted to either provide a speci�ic list of events or a broader inclusive description covering all events beyond the reasonable control of the parties.

When reviewing a contract, it’s important to resist the temptation to treat the force majeure provisions as boilerplate language or to assume that the types of circumstances that would trigger a force majeure claim are so remote that they will simply never happen. The Alberta and Ontario �loods demonstrate that unforeseen events do occur, and when they do, having carefully thought-out provisions that are project and industry speci�ic will help to ensure a commercially reasonable outcome. A well-drafted force majeure provision will usually identify: • triggering events; • what impact must those events have on the party who invokes the clause; • the impact to the contractual obligation of the parties; and • relevant notice obligations.

The identi�ication of the triggering events should be carefully considered within the context of the project or industry to which the contract relates. The triggering events should be

34 | JULY/AUGUST 2013

tailored to the types of situations that may be encountered, and which party is to accept the risk. Some triggers are more contentious than others, for example, �loods, earthquakes, �ires, acts of war, terrorism and sabotage (for which the claiming party is not responsible) are often included, while other circumstances, such as labour disputes, strikes and lockouts, may or may not be included as events of force majeure.

Generally, in order for a party to be entitled to claim force majeure relief, they must show that the occurrence of a de�ined triggering event impacted their ability to perform obligations.

It’s important to consider the scope of the required impact, as it can vary from a simple requirement that performance be impacted by the triggering event to a requirement that the occurrence of the triggering event render performance of the entire contract impossible, or somewhere in between.

Although successfully invoking force majeure will typically entitle the impacted party to some form of relief, the scope and nature of that relief varies from contract to contract. While contracts will often provide for schedule relief to offset the delay caused by the party’s inability to perform, an impacted contractor or supplier may or may not be entitled to recover costs, such as stand-by charges for idled equipment and labour, incurred during the course of the force majeure event. Prolonged events of force majeure may not be contemplated in the contract and parties may not be entitled to termination if an event of force majeure continues for a signi�icant time period. It’s important to ensure that force majeure provisions identify what costs, if any, a contractor or supplier is entitled to and how long an event of force majeure must persist before giving either party a right of termination.

Force majeure provisions also often include notice requirements upon the occurrence of an event of force majeure. Notice provisions usually require the party intending to rely on the force majeure provision to give notice of the event within a speci�ied period of time. If notice isn’t given within that time, relief may be forfeited. Where a contract speci�ies an exhaustive list of force majeure events, it’s important that the party claiming relief carefully reads the contract before sending notice to ensure the event falls within the enumerated list and it’s described accordingly in such notice.

When preparing or reviewing commercial contracts, the force majeure provisions shouldn’t be overlooked or underestimated. Force majeure is a key component of the overall allocation of contractual risk. b2b This column is provided for general information only and may not be relied upon as legal advice. Doug Sanders (left) is a partner in the Vancouver of�ice of Borden Ladner Gervais LLP. Reach him at dsanders@blg.com.

Bill Woodhead (right) is an associate in the Vancouver of�ice of Borden Ladner Gervais LLP. Reach him at bwoodhead@blg.com.

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