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Table of Contents

Vol. 60, No. 4 • AUGUST 2018

Features

WHAT COULD GO WRONG? Seven sourcing models to drive how you buy.

AUTOMATED EASE Getting the most from automated payables.

2 2

SURVIVAL TIPS Advice to keep your supply chain running.

SUSTAINABLE STRATEGIES The social impact of buying decisions.

THREE-PILLARED SUCCESS 3M Canada and sustainability.

UNDER THE SURFACE SCMA’s 2018 conference heads to St. John’s.

Also inside 4 5 7

UP FRONT BUSINESS FRONT

4 5 46

IN THE FIELD THE LAW

FINANCE CORNER

Connect With Us Online

Cover: Joel Robertson Photography

.ca

www.purchasingb2b.ca

Features

www.linkedin.com/company/ purchasingb2b

@purchasingb2b

facebook.com/ purchasingB2B

RECENT TWEETS June 14 was #NationalPurchaserDay! Here’s a look at some of the tweets we received, including the winning tweet from our National Purchaser Day Twitter contest, Lori Kilmartin. Lori Kilmartin: It’s #NationalPurchaserDay! How appropriate – I’m at #SCMA18 Be sure and visit the @purchasingB2B booth! Robert Brun: If we don’t have it, you don’t need it! Celebrating #purchasers today being #NationalPurchaserDay purchasingb2b @Electrozad

TECHNOLOGY AND BUSINESS MANAGEMENT How can you grow your business while managing risks and costs and boosting profitability? https://bit.ly/2JQ7FvT

Shauna Clark: June 14th is #NationalPurchaserDay! I’m enjoying connecting with fellow Purchasers and Leaders in the industry at #scma18 and visiting the @purchasingB2B booth! Sue: Happy 60th anniversary to PurchasingB2B and to all of Canada’s professional Purchasers. #NationalPurchaserDay DIGITAL EDITION Want to read PurchasingB2B on the go? Whether it’s on a tablet, smart phone or simply on your desktop or laptop, you can check out our digital edition. Simply visit www.purchasingb2b.ca/digital-edition. PurchasingB2B.ca | August 2018 |

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Up Front 302-101 DUNCAN MILL ROAD TORONTO, ONTARIO M3B 1Z3

www.PurchasingB2B.ca

Will beer save the planet?

udos to Iceland, not the country but a small British retailer, which has partnered with craft brewer Tiny Rebel to make a sustainable beer. Iceland is a Welsh supermarket chain that, along with Tiny Rebel, is taking surplus, unsold bread and creating a beer called Bread Board. Tiny Rebel’s website notes that the beer has “citrusy, tropical aroma and a bit of a bitter edge.” Yum. Iceland has also pledged to eliminate plastic packaging from its own brand of products by 2023, and will donate 10p from every bottle of Bread Board sold to the charity, Surfers Against Sewage. Sustainability is everywhere, which illustrates the consumer demand for environmentally friendly, socially responsible brands and products. And while not the only environmental concern, global warming gets much of the headlines. That’s not surprising. In 2016, we saw the highest surface temperatures since recording began in 1880. Technology—usually the 20th Century kind like the internal combustion engine or certain manufacturing and transportation methods—gets much of the blame for rising temperatures. But while not solving all problems, technology of the 21st Century kind can help lower GHGs and improve the planet’s environmental standing. How?

Social media: Good luck hiding anything these days. The 2013 Rana Plaza disaster in

Bangladesh grabbed attention largely through social media. Consumers can now discover exactly where a product is made, and how ethical the manufacturing process is, with a few clicks. This puts more pressure on companies to ensure everything is as ethical and sustainable as possible. Companies can spot risky suppliers more easily than ever. So can everyone else.

Sustainable logistics: As Google Canada’s marketing head Fab Dolan describes in our story

on page 42, UPS uses machine learning to ensure their trucks almost never make lefthand turns—that saves time and fuel, as well as avoiding the equivalent of 20,000 passenger cars. Many fleets use telematics to identify harsh breaking, speeding and other fuel-wasting habits. Automated, electric and connected vehicles hold the promise of reducing the environmental impact of moving goods and people.

Blockchain: The distributed digital ledger behind cryptocurrencies, blockchain technology

can enhance supply chain traceability. A product can be given a “cryptographic” identifier at the beginning of its international journey, which makes it easier to track. The product’s lifecycle is stored on a blockchain archive. This helps to ensure the product has been responsibly sourced. Walmart, for example, uses blockchain technology to track pork sourced in China. Blockchain records show where each piece of meat came from, along with where it’s processed and stored. Several other companies have begun using blockchain technology for similar purposes. The environmental issues we face seem daunting and overwhelming. But technology holds promise for helping procurement and supply chain make more sustainable and ethical decisions. That’s worth raising a glass of sustainable beer over.

PUBLISHER/ADVERTISING SALES

Dorothy Jakovina 416-441-2085 ext 111, djakovina@PurchasingB2B.ca EDITOR

Michael Power 416-441-2085 ext 110, mpower@PurchasingB2B.ca ART DIRECTOR

Barb Burrows

CUSTOMER SERVICE/PRODUCTION

Laura Moffatt 416-441-2085, ext 104, lmoffatt@iqbusinessmedia.com CIRCULATION

circulation@PurchasingB2B.ca IQ BUSINESS MEDIA INC. VICE-PRESIDENT: Steve Wilson, swilson@iqbusinessmedia.com PRESIDENT: Alex Papanou, apapanou@iqbusinessmedia.com EDITORIAL ADVISORY BOARD

Lori Benson, EY Procurement Leader, Enablement; Thomas Hudel, Manager, Purchasing and AP, Esri Canada Ltd. Wael Safwat, Procurement Director, Black & McDonald Sherry Marshall, Senior Manager, Meetings, Travel & Card Service, PwC Management Services Kiruba Sankar, Director, Corporate Social Responsibility— RBC Global Procurement Jeff Russell, Director of Procurement, Crane Supply For 60 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. PUBLICATION MAIL AGREEMENT NO. 43096012 ISSN 1497-1569 (print); 1929-6479 (digital) CIRCULATION circulation@PurchasingB2B.ca Mail: 302-101 Duncan Mill Road, TORONTO, ONTARIO M3B 1Z3 SUBSCRIPTION RATES Published six times per year Canada — 1 Year $ 99.95 CDN Outside Canada — 1 Year $ 172.95 USD Occasionally, PurchasingB2B will mail information on behalf of industry-related groups whose products and services we believe may be of interest to you. If you prefer not to receive this information, please contact our circulation department in any of the three ways listed above. Opinions expressed in this magazine are not necessarily those of the editor or the publisher. No liability is assumed for errors or omissions. All advertising is subject to the publisher’s approval. Such approval does not imply any endorsement of the products or services advertised. Publisher reserves the right to refuse advertising that does not meet the standards of the publication. No part of the editorial content of this publication may be reprinted without the publisher’s written permission. © 2018 IQ Business Media Inc. All rights reserved. Printed in Canada.

| August 2018 | PurchasingB2B.ca

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2018-08-01 11:24 AM

Business Front

Don’t Quit Your Day Job Is the labour market really as strong as they say?

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

By Michael Hlinka

y finger is very much on the pulse of two key sectors in the Canadian labour market. I’m a member of a Public Service Union and against my wishes there was a work stoppage last year that lasted for more than a month. In addition, I teach part-time through the University of Toronto School of Continuing Studies and the two courses I’m involved with are the Canadian securities course, the bedrock course for entry-level positions in financial services, and the chartered financial analyst program, the requirement for elite positions in the same industry. Last year’s work stoppage occurred under the aegis of a provincial government that prided itself as being “pro-education.” It’s hard to imagine a more sympathetic bargaining counter-party. Yet it was impossible to reach an agreement and after a five-week strike, we were legislated back to work. An arbitrator decided that a fair number was a 7.75 per

est number from Statistics Canada tells us that the unemployment rate in this country stands at six per cent, which is generally understood as being full employment. In the US, President Donald Trump loudly and proudly cites the four per cent unemployment rate as evidence that his policies are working. Yet as tight as the labour markets are, we’re not seeing significant wage increases. What’s going on? I recently encountered a very thoughtful essay on the website: www.seekingalpha.com that helps explain. Credit where credit is due: The writer is Eric Basmajian, someone whom I was not familiar with before reading How Tight Do You Really Think The Labour Market Is? I’ve already given away his thesis, but what is much more compelling is his evidence (These are American numbers, but my gut tells me that the Canadian ones would be similar). Basmajian looks at a metric that I’ve never seen before, and it’s the relationship between population growth and employment growth. Over the past 10 years, which is the period from the economic bottom to present, there have been more than 17 million new jobs created, which sounds like a big number. Yet over the same period, population growth has been 21 million. This is a disquieting statistic but there is a far worse “There seems to be a rush by both the one. When you look at the number of able-bodied people of working age in the US, only 60 per cent are actually working! Federal Reserve and Bank of Canada to There are always “good” reasons why some people are raise interest rates. This should not employed. If you are in medical school, picking up both end immediately.” important and marketable skills, then there’s nothing to be worried about. And clearly this pertains to some people, but cent increase over four years, which works out to an surely not a majority. It stretches credibility past the breaking point to honannual increase of 1.9 per cent. This is approximately estly believe that four out of 10 people of working age not working is an what the inflation rate is projected to be which means unabashedly good thing. that in real terms, we are standing still. Then there’s one more piece of evidence, capital market related, that I’ve got a related anecdote that pertains to entry-level both suggests and explains why wages are not increasing. Companies are positions in financial services. When I joined George spending more money than ever before on buying back shares, rather than Brown College in 2002, a former colleague who maninvesting in new plant and equipment. For about 40 years, share buyaged an investment-related call centre approached me. backs averaged two per cent of GDP and this has ballooned to six per cent. She was willing to offer students a part-time opportunity This is a telling sign that the for-profit sector doesn’t see great investment that guaranteed 30 hours a week, Thursday through opportunities. Sunday, at $17.50 per hour. After a long hiatus, she There are a couple of important implications to the realization that reached out to me two years ago with a “similar” offer. unemployment isn’t really low, it’s actually higher than historical norms. But this time no hours were guaranteed and the hourly The first has to do with interest rates. There seems to be a rush by both rate was $18.50 per hour…a meagre increase of 5.7 per the Federal Reserve and Bank of Canada to raise interest rates, even while cent over 15 years—which told me everything about inflation remains tame. This should end immediately and, in fact, I would how much slack there was in the labour market. urge them to recognize the error of their ways and reverse recent hikes. The reason why I’m relaying these stories is The second implication is more personal: Be very, very careful before because I’ve been hearing quite a bit lately about how leaving any current job, because the labour market isn’t quite as rosy as tight labour markets are in North America. The latyou may think! B2B PurchasingB2B.ca | August 2018 |

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Do you focus most of your efforts on the 80% of strategic sourcing spend that’s directly linked to production?

THE LAST 20%: The Direct Impact of Indirect Costs on the Bottom Line Complimentary Webinar

Probably yes. But competition, globalization and reduced margins mean you can’t ignore the 20% of tail-end spend—it directly affects the bottom line. How? Sales must generate $6 to $7 for every dollar that procurement saves. But it’s tough to optimize indirect expenditures without deep category expertise. Join Ayming’s experts as they discuss which indirect spend categories generate the most savings, how to address tail-end spend and how optimizing procurement can improve profitability.

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Finance Corner

A Beautiful Friendship Collaboration between supply chain and finance brings greater efficiency

Lisa Fenton is supply chain manager at Rapala VMC Corporation.

By Lisa Fenton

hen I first started in supply chain over 10 years ago there was little if any contact with the finance department. Finance was seen as a bookkeeping function as well as a strategic partner to the CEO. Supply chain was seen as a functional role and a cost centre. Supply chain has evolved to deliver significant and real value to customers and enhance shareholder value. I’ve learned the importance of presenting data in financial terms with a focus on being able to make the connection to revenue when communicating with finance. Supply chain professionals need to be educated in their role within their organizations. Supply chain can influence 60 to 70 per cent of a company’s spend. By focusing on increasing the ability to report and identify key metrics to management you raise your visibility. Supply chain can also advise how each potential scenario may impact the corporate-wide KPI’s assisting

information and financial flowing both downstream and upstream. On the demand side challenges include lack of understanding; resistance to change; costs and efforts; caution about mandated programs; release of data from banks; system integration costs and ability. Challenges on the supply side include development and support costs, security and credit constraints. Regarding technology, challenges include lack of automation, security and, out of the box solution packages and absence of legislation. Finance’s KPI’s include days sales outstanding, days of inventory, days payable outstanding and days of working capital. Finance has two major flows: invoices and payments and information transfer. Challenges in financial flow include: manual processes; lack of timely information; lack of employee empowerment and spend policy compliance; delays in invoice reconciliation and processes for setting optimal limits. On the non-financial side there may be a need for sustainability reporting for which supply chain and finance will need to put processes in place for meeting these new demands as well. Spreadsheets allow room for errors and present a challenge when trying to share data. By identifying and evaluating common causes such as uncertainties in inflow and outflows it is possible to gather detailed transaction information such as a date and time of receipt, “Supply chain has evolved to deliver supplier name, quantity received, PO number and so on to significant and real value to customers help find new integrated automation solutions for finance with new ways to streamline their processing. and enhance shareholder value.” Solutions to support a collaborative strategy could include automation and standardization such as e-payments, elecwith balancing supply, demand and finance. tronic invoices and electronic trade platforms. Problems can arise if finance and supply chain don’t Automation and standardization can facilitate benefits including cost work together early in the planning process. For examsavings; speed of settlement; improved cash forecasting; more efficient ple, it could affect yearly planning as the data would be reconciliation; fraud control; better supplier/customer relations; straightbased on what happened in past years and not created through processing to AP or AR and working capital improvement. based on what the operations team is forecasting will Integrated processes would facilitate advantages such as reduced costs; happen in the future. reduced bad debt; decreased costs; better allocation of human resources; Collaborating with finance helps provide insights better decision-making and fewer risks. Deciding to move to an integrated into the performance of the business and operations approach may involve a business case or may be required by your customcan assist with regular input while realizing opportuers or suppliers. Best-in-class companies perform gap analysis and take cornities for cost reductions. With today’s focus on KPI’s rective actions, improve inventory management capabilities and consider we now share data such as fill rates, product availabilissues during supply or demand balancing. ity, delivery times, inventory value, inventory turns and By working together, supply chain and finance are able to react, anticthe cash-to-cash cycle. Finance can assist with a highipate, integrate, collaborate and execute strategies into daily operations level view of when problems are starting to occur with while facilitating a cross-functional, end-to-end approach within their comKPI’s assisting as a dashboard. Collaborating enables panies overall strategic goals. an understanding of knowledge for better strategic An integrated approach can result in scalability, flexibility and process decisions. integration. Finance can then grow to add value activities and become a Supply chain has three major flows: material, business partner with operations. B2B PurchasingB2B.ca | August 2018 |

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By Nick Seiersen

What could possibly

GO WRONG? Managing risk in today’s volatile supply chain

Failing to plan is planning to fail

Understanding what the right deal with the right supplier is represents the crux of success in this environment. Procurement has an opportunity to facilitate the discussion that will help the business define what exactly they want to achieve, what are the uncertainties in their plan and why a third party must be involved. They might simply be able to manufacture and supply goods more cost effectively than making them in house. Their staff may have better qualifications and equipment to perform certain services better and cheaper. They may have successful experience and staff in an endeavor you have never attempted. They may have implemented systems you cannot afford. They may have relationships to suppliers or competitors you cannot build. They may be willing to take on risk your organization does 8

not want to carry. Capacity, capability, appetite or any number of other reasons may play a role. Once you know what you want to do and what your partner must bring to the table, procurement can identify and qualify potential suppliers, and make sure they are interested in offering what you are seeking. Yet too few organizations have a robust approach to risk in this new environment. Most have a generic enterprise risk management framework that works fine for simple, arms-length transactions. While 91 per cent are planning to reorganize or reprioritize risk management, only 50 per cent plan to involve procurement. How many would think to involve their suppliers? Entering into the right deals with the right suppliers will go a long way to mitigating the risks. We use the seven sourcing models to drive how we buy. These models have each been defined across 11 characteristics, and research has found that relationships are far more effective when they are consistently implemented across 11 characteristics. So if you know what you want and why you want this particular specification, you can decide how best to find and enter into an agreement that represents the right deal with the right supplier. As long as you have a reasonable stance to risk sharing with your suppliers, standard contract templates usually work well for tactical procurements of goods and services. Service level agreements and performance metrics bring additional control as services become more complex, and some form of remuneration (e.g. gainshare) is import-

ant when you expect the supplier to drive improvements in your operations. We recommend a specific risk mitigation plan for every major deal. Such a plan spells out who bears what risk so that each party can implement appropriate management of residual risk. That stacks the odds in your favour that you will indeed deliver the right deal with the right supplier. When collaboration is required to achieve exceptional results, one of the foundations is deep inter-organizational trust. It is built on simple faith that trading partners are who they purport to be, have the abilities they boast, and can sustain quality and service. But it goes much farther. Inter-organizational trust exists because individuals within each organization trust peers within the other organization. This trust must be developed, and must be put to work through the relationship governance structure and process. When the stakes are truly transformational and strategically imperative, the relationship engages senior management to ensure the initiative stays on target and issues are resolved promptly and effectively. These two disciplines are frequently missing in the typical procurement approaches. Yet they are imperative for procurement to earn a seat at the table when strategically important trading relationships are on the agenda. B2B

Nick Seiersen is president and CEO of Seiersen Enterprises Inc.

upply chain professionals continue to be on the front line of a very tough set of challenges—new legislation aimed at controlling trade flows and terrorist activity, along with heightened expectations in corporate responsibility and results drive expectations of great predictability. But the world seems to become more volatile—natural disasters, terrorist activities, business disruptions, trade spats, congested infrastructure, volatile prices, new products and new channels to name a few. Today’s supply chain manager is caught between the rock of building trust through predictability and the hard place of uncontrollable and unpredictable constant change. Just to make things more complicated, companies are buying more and more complex services. Risk is a fact of their life. How to surf on the good outcomes and minimize the bad outcomes?

| August 2018 | PurchasingB2B.ca

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ADVERTORIAL

Are You Optimizing Your

INDIRECT SPEND? Despite its importance to the bottom line, many companies fail to manage indirect spend properly. Utilizing a team of dedicated experts helps organizations to benefit from optimized indirect expenditures.

s a procurement professional you realize the importance of indirect spend. Stiff competition, globalization and reduced margins mean that organizations can no longer ignore the 20 percent of spend that’s not directly linked to production and their core products and services. You’re not alone. Too often, indirect expenditure is one of the last areas that companies look at when improving how they manage spend. Given how varied and complex spend categories are, it can be tough to optimize them without deep expertise in each subject area.

Indirect spend can affect a multitude of categories touching on the daily operations and profit margins of areas including: telecommunications • fleet management • insurance • waste • courier, logistics & freight services • security • marketing, print & packaging • property & rent • energy • facility management. While challenging, optimizing that spend means some real benefits to the bottom line. In fact, each dollar that procurement saves represents hard savings that can require the addition of another $6 or $7 in sales. So why do companies so often turn to indirect spend last when looking to cut costs? • Services, technologies and prices change constantly and keeping up is tough without dedicated resources and expertise. • Analysing non-core services can tax a team, while understanding each spend category is difficult and time consuming. • It’s difficult to compare services and providers objectively, as providers frequently reinvent their

services and change terminology. • Paying for services tailored to actual requirements is tricky when those services aren’t mapped out. • A lack of visibility into data makes it tough to analyze usage. • Companies usually interact much less frequently with indirect suppliers than they do with strategic vendors. Staffing constraints can also present challenges. Direct procurement plays a pivotal strategic function in production and companies most often assign it to a procurement professional. This leaves limited time and resources for indirect expenditures. The answer to this problem lies in dedicating experts to optimizing indirect spend, for example by hiring a consulting agency, says Glenn Kerrick, President, Ayming North America. “When dedicating experts to focus on indirect procurement, savings of up to 40 per cent can be achieved using industry knowledge and benchmarks to effectively map usage patterns and streamline costs,” says Kerrick. “Even companies that are convinced their indirect costs are optimized have still realized additional savings of 15-to-20 per cent when entrusting a dedicated resource to analyze their expenditures.” Focusing on indirect costs while reducing waste and inefficiencies can impact the bottom line significantly. Doing so means that you can redirect the cash saved on indirect expenditures into more strategic pursuits. This will directly boost profit margins, increasing profitability without affecting your company’s core products or services. These and other tangible, long-term benefits are available to companies when they take the time to optimize their indirect spend.

Today’s hyper-competitive and globalized environment means that getting a handle on indirect expenditures is more important than ever, says Glenn Kerrick, President, Ayming North America:

Companies can no longer afford to ignore this key area of procurement. Through a review of indirect spend categories, organizations can identify which of those categories have the most potential for significant savings.

Ayming is an international business performance consulting group backed by 30 years of proven results. The company has realized $291 million per year in purchasing savings.

ayming.ca | T: 1-866-931-0166 | E: info@ayming.ca | LinkedIn: Ayming | Twitter : @ayming_na

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THE VALUE OF

sustainable spending The Municipal Collaboration for Sustainable Procurement releases its 2017 State of the Nation Report

A network of 19 leading public sector organizations has just released a report on how they used their spending power in 2017 to influence more responsible and sustainable practices in the marketplace. “Sustainability is a shopping priority,” says Victoria Wakefield, UBC’s manager of purchasing services and member of the Municipal Collaboration for Sustainable Procurement (MCSP). “The days of lowest cost are over, and the conversation now is about best value—for our health, environment, and communities.” Established in 2010, the MCSP supports Canadian public-sector institutions to work together to set and achieve sustainable purchasing goals. According to the report, there are some significant trends to watch. Social purchasing is a hot topic for the public sector: organizations are looking at how their service contracts can provide community benefits and work opportunities for groups with barriers to employment. Network members are transforming their procurement systems to deliver on corporate sustainability goals, investing in more human resources and training programs to bring sustainability requirements into their contracts. They are also developing innovative partnerships with academic institutions and social enterprises to design new approaches and engage supplier communities. “It’s been an exciting year for our members, who’ve made leaps forward to embed social, environmental and ethical thinking into their purchasing decisions,” says Tim Reeve, President of Reeve Consulting, which serves as the secretar-

iat for the network, “Most of an organization’s social and environmental impacts lie in their supply chain. Focusing on procurement is one of the most powerful ways to deliver on sustainability. It’s also good business—our members have seen immense strategic value from sustainable purchasing.”

strategy to address poverty in the city. With similar goals, Simon Fraser University has shown leadership in ensuring equitable pay and job security for its food service providers and janitorial staff hired under third-party contracts. In late 2016, SFU released a Request for Proposal (RFP) seeking a forward-think-

The days of lowest cost are over, and the conversation now is about best value—for our health, environment, and communities. —VICTORIA WAKEFIELD, UNIVERSIT Y OF BRITISH COLUMBIA

The City of Vancouver, one of the founding members of MCSP, is a case in point. Faced with an affordability crisis and ranking as Canada’s most expensive city, in September 2016 Vancouver City Council committed to becoming a certified Living Wage Employer. After a rapid eight-month implementation, City service contracts now require in-scope contracted employees and their subcontractors to be paid at or above the current living wage. Vancouver’s leadership has resulted in wage increases in vulnerable sectors like security, janitorial and graffiti removal and has given more profile to the Living Wage movement as an important

ing food services provider who could deliver high quality, healthy foods for its diverse community and also transition existing dining services staff, members of UNITE HERE Local 40, to similar roles with the same or higher pay and seniority under the new contract. The first collective agreement between UNITE HERE 40 and Sodexo was reached in March 2017, securing job continuity, inclusive of wages and seniority, for all 174 existing dining services staff. Furthermore, Sodexo has agreed to recognize the worker’s union, and to honour their existing healthcare and pension benefits. SFU is pursuing a similar staff continuity requirement

PUBLIC PROCUREMENT

By Barb Everdene

| August 2018 | PurchasingB2B.ca | PURCHASINGB2G

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PUBLIC PROCUREMENT

for its janitorial contract (168 staff). By demonstrating its feasibility and success, the university has set a new industry best practice and has received multiple inquiries from peer institutions interested in replicating it. On the green side, the University of British Columbia used social procurement to transform its research footprint this year with the Green Labs Program. Research activities are resource intensive: the 400 labs across both campuses account for 49 per cent of campus energy use, 24 per cent of campus water use, and they generate 96 per cent of its hazardous waste. With financial support from suppliers such as Fisher Scientific and VWR International, UBC set up cross-functional teams, mobilized a network of sustainability coordinators, and created resources (including an update to the Sustainable Purchasing Guide originally created by Wakefield) to help labs green their operations. “There is still much work to do but the Green Labs Program has put resources in place to get us where we want to go,” says Wakefield. “We built those resources into our supplier agreements to empower our research community to measure, manage and develop more sustainable solutions.” As well, 2017 also saw the University of Alberta roll out a Sustainable Swag Purchasing

Guide to encourage departments across the institution to embrace purchasing ethical and eco-friendly promotional items. An initiative of the Offices of Sustainability and Alumni Relations, with support from the U of A’s Sustainability Scholars program, the guide covers the business case, questions for suppliers, a supplier directory and an easy-to-use tool to compare prospective suppliers’ performance on sustainability. “There are many ways to do sustainable procurement,” Reeve says. “Our members are looking for opportunities to make a difference in their unique business lines and communities.” The report highlights case examples of other innovative sustainable procurement initiatives—how Simon Fraser University considered job security in their dining and janitorial Services contracts; how the City of Victoria and the City of Surrey approached conversion of their streetlights to more energy efficient LED technology; and how the University of Alberta is promoting the purchase of responsible promotional items with their new Sustainable Swag Guide. The report also profiles the City of Calgary for launching a supplier leadership questionnaire and the City of Winnipeg for achieving Fair Trade Town certification.

Overall, the Canadian public sector made big strides this year towards making sustainable spending business as usual. All of these activities, as well as ongoing support from the MCSP network, are setting public organizations up to lead by example and help drive the market shift to sustainability. The Municipal Collaboration for Sustainable Procurement (MCSP) is a member-based network of Canadian public-sector institutions working together to deliver better services and achieve better value through sustainable purchasing. Its member organizations meet virtually several times per year to share information, collaborate on tool development and exchange lessons learned related to mitigating risks and improving social and environmental outcomes by considering sustainability risks in the procurement process. Contact Tim Reeve at tim@reeveconsulting.com if you are interested in learning more about the MCSP. B2B

Barb Everdene is an associate at Reeve Consulting

PURCHASINGB2G | PurchasingB2B.ca | August 2018 |

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By Michael Power

A new horizon

Continuous sourcing can help companies manage the hotel RFP process

otel sourcing represents one of the largest, most important categories for travel managers and procurement professionals tasked with buying for a company’s travel program. Traditionally, the sourcing process for this area happens once a year, in the organization’s third quarter. But today, the world of travel management is different than it once was. Prices can change rapidly, as can an organization’s needs and the availability of hotel rooms. To take a look at the industry, the Association of Corporate Travel Executives (ACTE) along with HRS, recently conducted and released a study called A New Horizon in Hotel Sourcing. The two organizations polled ACTE members around the world last winter to gauge their satisfaction with sourcing and rate audits, along with finding out how travel managers stay up to date with their programs. It turns out that 51 per cent of travel executives changed their hotel negotiation strategies in the past three years. Hotel sourcing represents one of the most prevalent pain points within corporate travel programs, said Greeley Koch, ACTE’s executive director and it’s a situation with no magic bullet that can be a solution. The goal of the study is to educate the industry on hotel sourcing options and help them figure out what works best for their programs, he said. The study also looked at a new approach to the hotel sourcing process called continuous sourcing. Continuous sourcing is a new and dynamic approach to the traditional hotel RFP that introduces “realtime awareness of rate trends,” according to the study. The process also lets corporations stay on top of hotel rate fluctuations. Those corporations regularly engage with their preferred hotel suppliers, leverage benchmark rates and advance rate shopping data to ensure their travellers are getting the best negotiated rate. The goal of the study, said Koch, is to 14

give a clear picture of what the goals and benefits of continuous sourcing are to the organizations that use it. “There are a number of misconceptions surrounding continuous sourcing, so we wanted to provide information on this specific option,” he said. Among study respondents, travel executives ranked cost reduction (65 per cent), improving traveller satisfaction (57 per cent) and increasing program flexibility (43 per cent) as their main motivators for considering continuous sourcing. Traditionally, hotel sourcing is a timeconsuming process repeated each year with lots of manual pieces involved, Koch said. Global programs also have cultural nuances to consider. The process can end up being a “hotel-by-hotel” negotiation— even with major hotel chains.

maximize savings and gives travellers the information and resources they need. “Continuous sourcing can equalize the workload by providing more focus on those markets that maintain the highest volume—what consumes a travel manager for three to four months can be offset with efforts throughout the year,” he said. Organizations looking to change their hotel sourcing process, for example by implementing continuous sourcing, should start with understanding their current usage, said Koch. He recommends identifying primary, secondary and tertiary markets and the strategy for each in year one. This sets up an organization to save time in subsequent years. “Highest volume markets are likely to require a set rate, whereas your secondary markets would be better served nego-

Continuous sourcing can equalize the workload by providing more focus on those markets that maintain the highest volume. — GREELEY KOCH “For companies with changing needs throughout the year, such as an acquisition where an annual process is used, there is often a gap in a particular location,” Koch said. “That means the company is not leveraging new spend to maximize savings opportunities.” Continuous sourcing, however, incorporates regular rate audits and analysis (monthly or quarterly) on hotel bookings and monitoring business changes that could impact where a program might need to add new properties. This practice ensures that companies get the best rates throughout the year and negotiated rates are honored, Koch said. If an organization must make changes to its program, those changes are recognized closer to when they happen rather than at the end of the year. This helps to

tiating discounts from the best available rates,” Koch said. “Consider multi-year discounts to reduce the annual workload.” He also recommended implementing audits not just against agreements, but against actual spend. Then analyze that data throughout the year to identify any shifts in markets that can be immediately resolved, rather than waiting until the following year. While the process may seem time consuming, Koch pointed out that laying the groundwork helps to identify areas that need more attention and focus. “Travel managers can look for additional resources through their supplier relationships such as the TMC, hotel focused specialist or consultancy, as well as industry associations and speaking to those who have implemented the process,” Koch said. B2B

| August 2018 | PurchasingB2B.ca | TRAVEL MANAGEMENT CANADA

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automated

EASE

Payables automation can control spending, optimize cash flow and ensure timely payment of suppliers

By Michael Power

ALL PHOTOS: JOEL ROBERTSON PHOTOGRAPHY

Cameron McPhail

Rob Wilkinson

Vice-President & Director, Commerial Card Sales Scotiabank

Vice-President, B2B Moneris Solutions

Rita Orsatti

Priom Howlader

A Thought Leadership Roundtable brought to you in association with:

Visa Canada and PurchasingB2B brought together experts in commercial cards, accounts payable and accounts receivable in Toronto on May 17 for a thought leadership roundtable focusing on payments automation. Visa is the world’s leader in digital payments. Its mission is to connect the world through the most innovative, reliable and secure payment network—enabling individuals, businesses and economies to thrive. Their advanced global processing network, VisaNet, provides secure and reliable payments around the world, and can handle over 65,000 transaction messages a second. Visa’s relentless focus on innovation is a catalyst for the rapid growth of connected commerce on any device, and a driving force behind the dream of a cashless future for everyone, everywhere. As the world moves from analog to digital, Visa is applying its brand, products, people, network and scale to reshape the future of commerce. For more information visit: visa.ca.

Manager, Accounts Payable Mount Sinai Hospital

Rob Nicholson

B2B Acceptance Visa Canada

Formerly Sr. Manager, Scotiabank Commercial Card Implementations, currently Sr. Director, Visa Canada

Paul Cargnelli

Head of Commercial Sales Visa Canada

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n May, PurchasingB2B held a roundtable panel to discuss payment automation and the role that commercial cards play in that process. We brought together Rita Orsatti, accounts payable manager at Sinai Health System, Mount Sinai Hospital in Toronto; Cameron McPhail of Scotiabank; Rob Wilkinson of Moneris; Priom Howlader, formerly of Scotiabank; Paul Cargnelli, Visa’s commercial sales lead; and Rob Nicholson, also with Visa.

The rationale

The group began by discussing what’s behind the push to move away from traditional payment options like cheques towards other options, including card payments. What factors do organizations consider when choosing a payment method?

“WHY NOT HAVE MORE OPTIONS AVAILABLE TO HELP YOU IN YOUR PAYMENTS MODERNIZATION JOURNEY SO THAT YOU CAN PICK THE BEST PAYMENT OPTION FOR THE SUPPLIER AND THE BEST ONE FOR THE COMPANY?” —CAMERON MCPHAIL

Cost, speed and certainty of pay along with the ability to integrate payment are all factors, said Nicholson. “We’ve positioned card payments for years as a cost-effective form,” he said. “On the acceptance side, it’s got a different cost equation built into it and those things need to be addressed. So, it would be efficiency, it would be interoperability and it would be cost— those are the big considerations.” Streamlining processes and spend visibility are other considerations, said Howlader. There are many real-time functionalities unavailable on other payment types so payment certainty also factors in, he noted. “On the acceptance side there’s always the challenge when it comes to cost, but there’s a lot of other uniqueness that we could bring in terms of data, integration, the visibility of payments, the context of payments coming together can help a lot of that,” he said. Finance looks for cost savings and to do more with less, said McPhail. They want to align payables with other departments. Few companies have investigated an overarching payables strategy that includes looking at the supplier base and what payments can be targeted to the organization’s advantage, he said. “We’re trying to offer companies additional options around payments, because cards aren’t right for every type of payment, they have to be targeted very specifically,” McPhail

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| THOUGHT LEADERSHIP

said. “But why not have more options available to help you in your payments modernization journey so that you can pick the best payment option for the supplier and the best one for the company?” Accounts receivable looks for the same things as accounts payable, said Wilkinson. Companies want efficiency, automation, data and to integrate that data into their systems. “If I’m looking for working capital benefits, attacking receivables and accelerating cash into the organization is another strategy as it is to extend payables on the other side,” he said. “We’re two sides of the same coin.” Orsatti noted that the predictability of payment that automation offers helps with cash forecasting. The organization knows that a statement is due on a certain date. The money comes out on a specific date so there’s time to build the transaction into forecasting. AP lets organizations strategize which types of purchases to allow for different employees, like business travellers. “When you’re looking at data and talking about taking data in, a lot of times you can still have your purchase orders and all the controls and approval work flows that come through,” Orsatti said. Getting buy-in

The group agreed that there are plenty of benefits to automated payables. But whom should organizations consult internally?

Since it affects working capital, it’s ultimately a financial decision so involve your organization’s VP of finance or CFO, said McPhail. But it also affects processes and payables, the ability to generate revenue through rebates paid back to the company, suppliers and other areas.

The adoption of automated payables is all about data, McPhail said. In presenting the ROI to a company, Visa explains the concept and benefits. But they don’t know what those are until they see the data, so a client must provide their full accounts payable file. Visa can then advise on which suppliers to target with a card program based on the likelihood they’ll accept cards. Visa can also identify which suppliers are participating in automated payables programs with other buyers—that’s the first supplier group Visa works to get on board. “It’s a data-driven exercise,” McPhail said. “We can predict with pretty good certainty what the revenue impact—what the working capital impact—will be for the client. We can tell them about supplier acceptance. Currently, nationally it’s running at 48 per cent of suppliers, 33 per cent of spending. It helps answer the question that always comes up from customers, which is ‘I don’t think my suppliers are going to take this.’” Automated payables are also a working capital opportunity, said Wilkinson. Since the bank is lending the money, a

“YOUR SUPPLIER BASE CHANGES ALL THE TIME SO YOU WANT TO MAKE SURE THAT YOU REFRESH THAT AND ENROLL WHO YOU CAN.” —RITA ORSATTI

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buyer can maintain or extend the days payable outstanding (DPO) while accelerating payment to the supplier. There’s certainty of invoice approval and payment that works just as well on the receivable side, Wilkinson said. “We can’t escape the fact that a supplier is paying a fee for card acceptance. You try to optimize the fee as much as you can and certainly for some transactions any fee isn’t going to be acceptable,” Wilkinson said. “But there’s a broad range of transactions where there’s good value exchange, especially if I’m getting my money sooner if I have more predictability around cash. If I’m leveraging reporting that allows me to easily reconcile my invoices, all of those things packaged together is what moves a supplier to ‘yes,’ along with the fact that they’re making the customer happy because that’s their customer’s preferred method.” Suppliers

What company would best be suited to automated payables? Several panelists agreed that any company with payables could qualify. Companies looking to drive down costs could be candidates, said Nicholson. Those that are process-driven, like manufacturing companies or those with Six Sigma, could also introduce automation. “Within that you’d find companies that are focused in the areas of trying to innovate and change the way they do business,” Wilkinson said. Visa focuses on organizations whether they currently accept cards or not, said Wilkinson. Automation provides value around reporting, risk or liquidity so those factors will still resonate. With some solutions, such as straight through processing, there’s no need for a terminal device in the transaction. “In fact, you’re not even touching your transaction. So, ‘card acceptance’—we use it in quotes—is becoming easier,” he said. The initial payment that gets made by card is important, noted Howlader. For example, the supplier base must be educated about the process and the payment method to help ensure it’s a good experience. “That first payment is critical,” Howlader said. “Making sure that that

goes well and the experience is smooth will then drive future relationships. That’s how you really drive a successful program.” Ensuring a successful program means working towards that success even after the program has been implemented, the group agreed. The AP department must understand that it’s their responsibility to help drive the process, said Orsatti. Without that commitment, the program won’t succeed. The first interaction, or the first time someone calls with a problem, must be a good experience. “It’s about making that conversation and that experience for them very positive, so that they’ll continue and they won’t lop off the program, because you have a reason to want to keep them on there,” she said. Maintaining and growing a supplier base that accepts automated payments is important to the ongoing care of a program, said McPhail. Suppliers can leave a

program for many reasons so it’s important to replace them, he said. Those that said ‘no’ to card acceptance at one point may accept them later. As a business grows, so does its supplier base, noted Orsatti. A company that adds 10 new suppliers over a few months could potentially enroll those businesses in an automated payables program. “Your supplier base changes all the time so you want to make sure that you refresh that and enroll who you can,” she said. One reason that suppliers may be interested in enrolling is to maintain a relationship with a buyer, McPhail said. But there are other factors, including an early payment advantage. Most Visa clients move from a 30-day cheque payment, which translates to roughly 42 days, to payment upon invoice approval. That equals about 10 days for most companies. “So what’s that, 32 days, maybe 30 days extra in terms of working capital for the suppliers?” Another advantage that cards offer sup-

“THAT FIRST PAYMENT IS CRITICAL. MAKING SURE THAT THAT GOES WELL AND THE EXPERIENCE IS SMOOTH WILL THEN DRIVE RELATIONSHIPS. THAT’S HOW YOU REALLY DRIVE A SUCCESSFUL PROGRAM.” —PRIOM HOWLADER

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| THOUGHT LEADERSHIP

pliers is that it’s easy to quantify the cost of the process, noted Wilkinson. A CFO can check the P&L line at year’s end showing exactly how much the company spent processing card payments. “What you don’t have in you’re P&L is how much was spent reconciling cheques, how much was spent dealing with working capital or whatever the other metrics are,” he said. Security

Despite the term “card”, McPhail stressed that payables automation involves a virtual card with no actual plastic used. After it’s determined which suppliers will participate in a program they get an email to collect their card number securely. When payments begin those suppliers receive approval instructions to charge invoices from the buyer. The card is dormant until the supplier receives those instructions, which protects against fraud. “As soon as payment is taken the card gets shut off again. So, it’s only open for that window where the payment is made,” said McPhail. “In fact we’ve basically had negligible fraud on these.” A reconciliation is then filed—all through an online Visa product, he said. That fraud security is a definite plus for buying organizations, agreed Orsatti. Fraudsters sometimes take a bunch of card numbers and try to charge small amounts to it. If the fraudster discovers that the number is “live,” then they’ll charge more. But this is impossible through Visa’s automated payables solutions. “Because that’s not the exact amount the transaction is always declined,” she said. “So you have literally no fraud, which is great.” Traditional cheque payments are exposed to other fraud risks, said Cargnelli. Statistics show that it’s more common to have fraud on cheques than on cards. “And generally the amounts are actually larger,” he said. “The cheques can be intercepted and it happens more frequently than one would think.” Challenges

The group discussed challenges that companies face in adopting payables automation, as well as solutions. Traditionally, card payments see the supplier exe-

“IF YOU TAKE WHAT WE’RE DOING WITH PAYMENTS AND YOU PLUG IT INTO THE INNOVATION IN AR AND AP, YOU’VE GOT SOMETHING REALLY POWERFUL.” —ROB NICHOLSON

cute the transaction, usually through a device, Wilkinson said. But e-payables have largely moved it to a buyer-initiated world, with the buyer pushing out a payment transaction. “Straight-through processing is giving the supplier the ability to have the transaction,” Wilkinson said. “It’s still a card transaction processed on their behalf. In our case those transactions are routed through Moneris and we simply deposit the money in their bank account and provide them the remittance details. We eliminate that call to action and transform the payment into what I would describe as a straight-through processing experience. Straight-through processing is removing the touch points.” The variety of ways in which issuers do virtual cards can be challenging, said Howlader. Asking the supplier, for example, to enter a password to access the card securely has been a friction point. People can get confused about how to perform some steps like logging into a site, Howlader noted.

“The advent of straight-through processing is going to help get rid of that— and on top of it, keeping that functionality and that protection that we get through the exact payment matches as well,” he said. McPhail added that several issues surrounding the processing and acceptance involve the receivables process with suppliers. For example, several transactions worth $10,000 may get processed, but if the supplier only accepts transactions of up to $100,000 and a buyer has an invoice for $300,000, what do you do? Or, the supplier’s invoice may be set to $50,000 but don’t realize it. Or, perhaps a multinational company has invoices from 10 locations that look like they’re from one supplier. Data analysis becomes important, McPhail said. “We’ve been doing this now so long and Visa’s got such a good database in place, we can oftentimes anticipate where there’s going to be issues with a supplier because it’s been run before,” he said. “We can plan to either deal with it or push

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“TRADITIONALLY IT’S ALWAYS BEEN ABOUT PRICE. BUT THERE ARE SO MANY OTHER BENEFITS TO AN ORGANIZATION BEYOND PRICE.” —PAUL CARGNELLI

it back to phase three and deal with the low-hanging fruit.” Implementation

The group also addressed implementation. Howlader stressed getting a mandate from the top of an organization. Stakeholders must understand that it’s a strategic initiative with financial and process savings benefits, he said. It also brings in a new technology component. The organization must generate a new payment file that will take all the approved POs and invoices and give the bank the needed information. From there, identify the suppliers you want to pay. “You have to make sure that the timing is right,” he said. “You don’t want to reach out to the suppliers and get their buy-in and then, on the technology front, it takes you another month or two because then you lose momentum,” Howlader said. There are several payment methods and cards types, so understand how a card program fits into your payment strategy, said Orsatti. Internal communications

during the implementation process is also important. Let buyers know they may get calls or emails from suppliers regarding the card program, she advised. “You have to be a champion,” Orsatti said. “If you’re that champion you have to go to that internal stakeholder and say, ‘just have them talk to me, I’ll have a conversation with them.’ You have to be prepared for all of that as well, not just the technical stuff.” Howlader noted that having a champion is crucial to ensuring the buyer can handle inquiries from vendors. “They might not be equipped to answer all those questions that come up,” he said. “‘How much is this going to cost me? How dos this process work? How often am I going to get paid?’ Those are the things that we need to help educate everyone on.” The card issuer also brings value, said McPhail. The company works with clients to review suppliers to decide which among them would fit the profile for automated payables. For example, among 1,200 suppliers, perhaps 400 could be tar-

geted because the invoices are a suitable amount, 150 of them already accept cards from other buyers, and so on. From there, Visa works with the client to design a plan for approaching those suppliers. The Visa enrolment team has a formula that involves informing suppliers of the program by email, printed letter and by phone. Large numbers of suppliers are informed in batches of roughly 300 over a 10-week period. The client is told each week how many suppliers said ‘yes’ or ‘no.’ “It’s a fairly formalized process,” McPhail said. “Visa sets up a separate 1-800 callback number for every process we’re doing, every enrolment process, so suppliers could call in as well.” Along with supplier outreach material, Visa also produces internal material for clients to announce the program and provide best practices. For example, it’s critical to include language in the RFP specifying card as the preferred payment method, or that electronic payments are required, McPhail said. Cargnelli agreed that educating stakeholders was crucial to ensuring a program’s success. “Traditionally, it’s always been about price,” he said. “But there are so many other considerations that are benefits to an organization beyond price. Those have to be factored in. That’s why it’s important to get different stakeholders within the decision-making process.” Final thoughts

We also asked panelists for closing thoughts. McPhail voiced surprise that more companies aren’t looking at cards seriously. “There’s value for the overall organization,” he said. “I’m just stunned at how many companies have not progressed in looking at this. It’s under 10 per cent penetration in Canada.” Wilkinson said he was excited at the direction of card and payments. The focus now, he said, is: “How do we enable payments efficiently for buyers in an automated way controlled by AP? How do we partner to enable the supply chain to ideally accept those payments in a way that works best for their business? I feel like we’re at a point of seeing this take off and we’re pretty far down the path.” Howlader also noted his excitement

| August 2018 | PurchasingB2B.ca

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| THOUGHT LEADERSHIP

over the industry’s future: “To me, there are ways to make people’s lives simpler and give them access to that data and access to the funds faster.” What’s happening with payments is exciting given developments in AP and AR generally, said Nicholson. “If you take what we’re doing with payments and you plug that into the innovation that’s happening in AR and AP, you’ve got something really powerful.” The last word went to Cargnelli: “Straight through processing, that’s the new frontier that will be an inflection point for us in terms of really expanding the marketplace…the market is really embracing these concepts and so I think we have nowhere to go but up.” B2B

“HOW DO WE PARTNER TO ENABLE THE SUPPLY CHAIN TO ACCEPT THOSE PAYMENTS IN A WAY THAT WORKS BEST FOR THEIR BUSINESS? I FEEL LIKE WE’RE AT A POINT OF SEEING THIS TAKE OFF.”

For more information about Visa’s products and services visit www.visa.ca.

DATE:

Thursday, September 27, 2018 |

—ROB WILKINSON

TIME:

12:00PM EST |

https://bit.ly/2KYFbV6

Improving Your ROI by Leveraging New Commercial Card Payment Options Many Canadian companies realize the benefits of commercial cards. Across the country, organizations have embraced cards as a payment option and experienced the benefits of doing so. But are you wondering how the various forms of commercial cards fit into your payment strategy? Are your suppliers also questioning if welcoming cards is the right decision? Join us for this complimentary webinar as Visa’s expert team will demonstrate how you and your vendors can both benefit from card acceptance.

A solution for all your business needs

www.visa.ca

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By Paul Struthers

TIPS

Survival

n a time when uncertainty has become the constant, businesses are questioning the future of their supply chains. With major economies like the USA and the UK revisiting longstanding trade agreements, deals that once seemed watertight are threatened. Change in the political climate has created a sense that we’re on the verge of a realignment of the balance of global trade—one that will lead us into a world of dynamic and complex supply chains. Over the past 50 years, globalization has transformed world trade. Consumers can now access products of a greater variety, at lower costs, and with a level of convenience that would have been unfathomable to past generations. In 2017, US imported goods were worth almost $2.3 billion, with almost every country in the world listed as a trading partner. Canada is a major exporter to the US According to the Office of the United States Trade Representative (USTR), US goods imports from Canada totalled $300 billion

ing jeans might import cotton from a market where cotton is the least expensive, then have the pants sewn in a country with the cheapest labour. For the consumer, this means the lowest cost; for the business, this means the best margin. Over half the world’s trade is in intermediate products used in the manufacture of goods for end consumers. By navigating trade links and moving the burden of complexity into technology, businesses create efficiencies that would have been impossible previously. But globalization’s rewards come with risks. A hurricane in Vietnam or power cut in China could cost a Canadabased business millions of dollars, shutting down operations for weeks. In 2017 a cyber-attack on European ports caused delays to sea freights worldwide, impacting many businesses far from Europe. Political instability adds further complications, and planning for uncertain political climates will also become more necessary. According to the SCMA, over

Change in the political climate has created a looming sense that we’re on the verge of a major realignment of the established balance of global trade. in 2017. US imports from Canada are up 170 per cent from 1993 (pre-NAFTA) and accounted for 12.8 per cent of overall US imports in 2017. Even modestly sized businesses no longer rely on one major supplier. Instead, they are doing business with a greater number of smaller international suppliers to maximize savings and flexibility. The average person might buy a product manufactured in China, via a US-based online marketplace, with parts produced in Taiwan, containing metals mined in Russia and refined in a factory in India. This “Amazon effect” has significantly lowered prices, but it has also increased complexity. Take retail. A denim business produc22

800,000 people work in the supply chain sector in Canada with an estimated value of $162.1 billion—this number is expected to rise. The Skilled Immigrant InfoCentre (SIIC) sees the supply chain sector as one of Canada’s fastest-growing industries, with tens of thousands of jobs expected to open up through 2025. Businesses must become nimbler and react quickly. Whether it’s increased tariffs, stricter border checks or increased health and safety regulations, businesses that plan effectively will be better equipped to handle disruptions. The right approach includes planning supply chains and ensuring they have the best supporting technology. Rather than being pessimistic about how

changes will affect business, remember that disruption often comes with opportunity. Businesses that prepare themselves will gain a competitive advantage. Changes in tariffs and trade deals may add to bottom lines—as well as take away from them—but these advantages are dependent on having the infrastructure to make the most of them, both in terms of technology and human capital. The benefits of having an agile supply chain also go beyond efficiency-savings, firefighting or stepping in where something goes wrong. With the rise of conscientious consumerism, businesses that provide insight into their supply chains can benefit. Businesses that authenticate where their products are sourced will thrive in an environment where people are interested in ethically sourced goods. Change is never easy. When it comes to business functions like the supply chain that play a pivotal role in the efficiency and profitability, the stakes are even higher. But by focusing on the potential opportunities, businesses can position themselves for success. We can speculate about what the new economic landscape will look like, but the truth is that no one can be truly certain about what is going to happen until it’s happened. Furthermore, there’s little anyone can do about the uncertainties in life. What we can be certain about is that the future will favour agile, fast-moving businesses that are prepared for everything the world throws their way. To thrive in this new economic climate, businesses will have to effectively analyse the landscape and engage with the opportunities. Ultimately, the businesses that focus on understanding the opportunities and making the most of them will position themselves for greater success. B2B Paul Struthers is EVP & Managing Director of Canada, Sage

Securing your business against political uncertainty

| August 2018 | PurchasingB2B.ca

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AUGUST 2018

26 THE 2018 ECORUN

Real-world fuel economy data.

28 THE REVOLUTION WILL NOT BE LINEAR

How technology is shaping fleets.

30 A DIFFERENT KIND OF SPEND CATEGORY

Understanding the economics of fleet.

32 NISSAN KICKS

Value propels this new subcompact offering.

34 A LIFE IN FLEET

Ray Brisby wins Excellence in Education award.

Fleet Management is a special section of PurchasingB2B magazine. It is an important resource for Canadian procurement professionals who recommend, select and manage fleet vendors and service providers. Editorial inquiries: Michael Power, MPower@PurchasingB2B.ca, 416-442-2085 x110. Advertising inquiries: Dorothy Jakovina, 416.441.2085 x 111, DJakovina@PurchasingB2B.ca.

Mazda Canada celebrates 50 years

The Institute of Highway Safety (IIHS) and the Highway Loss Data Institute (HLDI) have credited Subaru’s EyeSight driver-assist system for reducing collisions involving pedestrians. A new study from the HLDI, an associate organization of the IIHS, found that Subaru’s safety system reduced the rate of probable pedestrian-related insurance claims by 35 per cent, singling out EyeSight for its ability to detect pedestrians and other vehicles. The EyeSight advanced driver-assist system provides several safety-related functions. These include adaptive cruise control, lane departure warning, lane-keep assist, lead vehicle start assist and forward collision warning. The system also includes pedestrian detection, allowing it to apply the vehicle’s brakes automatically if it senses a collision with a pedestrian is imminent. The HLDI study commended the location of EyeSight’s two stereoscopic cameras, which are mounted high behind the windshield, for lowering repair costs. The study also lauded improvements made to EyeSight since its introduction approximately five years ago, including the switch from black-and-white to colour cameras and longer and wider detection ranges. For 2018, the Impreza, Legacy, Outback and WRX models each earned the TSP+ award from the IIHS when equipped with EyeSight and LED steering-responsive headlights. The 2018 Crosstrek and Forester received the TSP award when equipped with EyeSight and LED steering-responsive headlights.

Mazda Canada celebrated a milestone in July when it hit its 50th anniversary. Mazda Motor Corporation established its first Canadian office on July 19, 1968 in British Columbia and the company used the same date this year to honour the occasion with a celebration at its Richmond Hill, Ontario offices. Several generations of MX-5s were on display at the event, as well as the 2019 MX-5. When the company established itself in Canada, it represented Mazda’s second overseas subsidiary, having set up offices in Australia the year before. Mazda wouldn’t set up shop in the US until two year after opening its Canadian offices. At the time, Mazda sold only two vehicles here: the R100 rotary powered coupe, and the B-Series compact pick up truck.

Employees, customers, media and others celebrated Mazda’s 50 years in Canada at the company’s offices in Richmond Hill on July 19.

FLEET MANAGEMENT | PurchasingB2B.ca | August 2018 |

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Study recognizes Subaru EyeSight

2018-08-01 1:52 PM

Auto insurers see lower satisfaction rates: J.D. Power Customer satisfaction with Canadian auto insurance companies has declined during the past year, mainly due to rising consumer expectations and a lack of proper communication on rate action. Overall satisfaction dropped six points to 778 (on a 1,000-point scale), down from 784 a year ago, according to the J.D. Power 2018 Canadian Auto Insurance Satisfaction Study. The study finds that consumers are setting a high bar for auto insurers. The study noted. Expectations that have been influenced by digital service providers have ushered in an era in which success requires providing products and services to consumers that are relevant, personalized, easy and timely. The study also identifies the importance of communication when making premium changes. Insurers’ not communicating premium increases to their customers exacerbates the issue. Satisfaction among customers who were not notified of a premium increase is 70 points lower than those who were notified. Lack of communication about a price decrease also has a negative effect on satisfaction, a decline of 55 points. Customers who say their insurer failed to communicate a rate action are significantly 24

less likely to recommend their insurer, renew the insurance or continue to work with their current agent or broker. Key findings from the 2018 study include: • At least half of customers prefer to conduct the interaction with their insurer through a digital channel. • Preventing a problem from occurring is the most important KPI in the study. Solving a problem on the first contact helps insurers recover from a negative customer stance.

CAA report IDs ways to reduce road congestion

But much has changed over those five decades, said David Klan, senior director, sales, marketing and regional operations at Mazda Canada. “Over these past five decades the Mazda brand has grown into a strong, respected brand here in Canada,” Klan told the crowd gathered at the company’s Richmond Hill office. There are now 164 dealer partners across the country. “We’re very proud David Klan, Mazda of what we’ve accomplished together,” Canada’s senior director, he said. sales, marketing and The company has now sold over regional operations. 2 million vehicles since 1968, he noted. Mazda has also become the most awarded car company in Canada, according to the Automotive Journalists Association of Canada (AJAC). It has also been ranked a top GTA employer for three years. Over the past 50 years, Klan said, the company has held to an unwavering belief: “A vehicle is not simply an appliance that gets you to point A to point B—driving enjoyment is essential to Mazda and it’s really part of our DNA.” Yasuhiro Aoyama, global head of sales, marketing and service, was also at the event to congratulate Mazda Canada for 50 years in the country. “This remarkable history cannot be achieved without strong support from people like all of you who are here today,” he said. Mazda wants drivers to enjoy both cars and the driving experience, Aoyama said, noting that he’s looking forward to the 75th anniversary, 25 years from now.

A new report, Congestion Solutions, from the Canadian Automobile Association (CAA), identifies multiple ways to ease the gridlock on our roadways. The CAA commissioned transportation consulting firm CPCS to examine ways to ease congestion. The report is a follow-up to Grinding to a Halt, Evaluating Canada’s Worst Bottlenecks, released in 2017, which showed that Canada’s worst bottlenecks are as serious as those in major US cities such as New York and Los Angeles. Beyond the lost time and productivity, Canadians burn an extra 287 million litres of fuel per year in bottlenecks, generating an additional 58 million kg of CO2 air pollution. Congestions Solutions finds that on a global scale, Canada performs in the middle of the pack in acting to reduce congestion. The report identifies innovative tools and technologies to relieve bottlenecks in other countries, and in some cases within Canada, that could be implemented more broadly. The top three things that governments, private sector and Canadians can do to help relieve traffic congestion are: • Making existing roadways work better: These smaller solutions include re-timing traffic lights, better managing the response to breakdowns and collisions, implementing speed limits that adjust to traffic flow and regulating traffic volume entering highways. • Better information: The Government of Canada or the Council of Ministers of Transportation could help identify and share good practices. • Focus infrastructure dollars on worst bottlenecks: Urban congestion can also be combatted through investments in ride-sharing, carpooling, bike sharing and bicycle infrastructure. B2B

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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2018-08-01 1:52 PM

A friendly tip, don’t be Bill. A friendly tip, don’t be Bill. Pinpoint areas of cost escalation and what to do about them—ahead of time.

SeenItComing.ca

B2B_Aug2018_ad pages.indd 25

2018-07-31 11:59 AM

By David Miller

The 2018

AJAC EcoRun

Furthering fuel efficiency on the East Coast

hether you’re driving a city car, large sedan, SUV or pickup truck, everyone wants to save a little on gas. That’s what makes fuel economy one of the most important factors for new vehicle purchases. Luckily, automakers have been improving their craft year-afteryear thanks to a number of advanced technologies, weight-saving measures and alternative powertrains to create more fuel-efficient products with an eye to reducing the global environmental carbon footprint. To showcase the latest and greatest fuel-efficient vehicles available to Canadians, the Automobile Journalists Association of Canada (AJAC) hosts an event called EcoRun. It’s an eco-friendly run that has AJAC journalists drive a variety of new vehicles in a fuel-efficient manner in order to provide real-world fuel economy data for the public. It’s a way of using certain driving techniques to teach consumers how they can get the most savings out of their vehicles and by doing so, showcase which vehicles are the best at it.

New Brunswick gets into the green scene

Now in its seventh year, the EcoRun chose New Brunswick, the first time it had been to Atlantic Canada. A year ago, this wouldn’t have been possible, but New Brunswick has the most rapidly growing infrastructure, subsequently becoming Canada’s first fully electric province. Infrastructure has been built up including a plethora of Level 3 chargers as part of its eCharge network that involved FLO, an EcoRun partner. 26

Given that no east coast province offers any electrification incentive to its inhabitants, it’s an unusual decision, but one that the province has embraced from a business and political level with local adoption and tourism at top of mind. “We are very proud to spearhead the very first EcoRun in Atlantic Canada,” said Gaëtan Thomas, president and CEO, NB Power. “By having a network of fast chargers throughout our province, it gives electric vehicle owners the peace of mind they need by reducing range anxiety while travelling.” As the EcoRun and electrified vehicles as a whole have evolved, range anxiety have become less of an issue. With its continuously growing infrastructure, New Brunswick provided the perfect backdrop for a drive along the southern parts of the picturesque province with stops in Moncton, Sussex, Snider Mountain, Saint John, New River Beach, Saint Andrews and its capital of Fredericton. Structure and format

Automakers entered a total of 19 vehicles for this two-day drive along public roads with the consumer or fleet business in mind. The field consisted of pure electrics, conventional and plug-in hybrids, diesels, hydrogen fuel cells and the highly efficient internal combustion engines. Outside of having these cars on display, the aim is to see how these vehicles make out compared to the official automaker fuel economy ratings provided by Natural Resources Canada (NRCan). Each journalist was assigned six vehicles to pilot over six driving legs, and those results would make up the final EcoRun

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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2018-08-01 12:00 PM

New Brunswick provided the perfect backdrop for a drive along the southern parts of the picturesque province, with stops in Moncton, Sussex, Snider Mountain, Saint John and its capital Fredericton, to name some.

fuel economy statistics. Therefore, part of these results do come down to the individual drivers themselves, as a new set of drivers might have performed better or worse, and that’s what truly makes it a real-world test—it’s all about the averages. In order to keep drivers from mashing the accelerator, the EcoRun has its own journalist competition as they vie for the honour of winning the Green Jersey, sponsored by the Canadian Fuels Association. The Green Jersey has been in effect since the EcoRun’s second year with Motoring TV’s Jim Kenzie being the only two-time winner, so the battle to outduel Kenzie was a talking point throughout. Every year, there are plenty of takeaways from the EcoRun. This year, it was the total combined fuel economy number of the participating vehicles that included seven CUVs/SUVs that averaged 4.86 L/100km compared to NRCan’s 6.45 L/100km, for a difference 1.59.

It’s always hard to compare results from each year, as the combined fuel economy rating is dependent on the vehicles entered, the route chosen and the people who drive them. But if we take a look at the results from the Ottawa to Quebec City run from 2017 where only five CUVs/SUVs were entered at a combined NRCan rating of 6.07 L/100km, the AJAC journalists only managed to reduce that number by 0.84 L/100km to an average of 5.23. That means that even though the EcoRun had two more utility vehicles for 2018, it managed to have 0.37 L/100km less than the combined total of 2017. It’s an astonishing feat and a tribute to both the drivers and mainly the automakers that keep making these vehicles more efficient. As for the individual chariots themselves, leading the pack in fuel economy disparity (EcoRun numbers versus NRCan) was the 2018 Mazda6 2.5-litre SkyActiv-G with cylinder deactivation technology. Its official combined rating of 8.0 was demolished by an average score of 5.3 with two separate legs registering an incredible 4.7. It’s possible that these legs were more highway than combined, but the highway total is only slated at 6.7, so even then it remains mind-boggling. The closest gas car to compare the Mazda6 to was the 2019 Volkswagen Jetta. It averaged 5.3 L/100km as well, another impressive accomplishment, but its NRCan combined rating was 1.0-litre less at 7.0. Other vehicles that did admirably included the 2018 Ford EcoSport, a new subcompact crossover to the Canadian market. It officially averages a combined 8.4 L/100km and that was reduced to 6.0 on the event with its lowest driving leg bringing it a 5.3, securing the Green Jersey for Saskatoon’s Jim Kerr.

If you wish to compare apple-to-apple vehicles, the EcoSport can be compared to the new 2018 Nissan Kicks that averages 7.2 L/100km and managed a 5.9 on the event with its lowest leg being a 5.0. Whichever way you slice it, both vehicles were exceptionally fuel-efficient and great new entries in the Canadian marketplace. Electrified vehicles strut their stuff

New Brunswick’s charging capabilities were the ultimate decision point to come to the province, and that’s due to the 10 plugins on the event: two pure electrics and eight plug-in hybrids. Logistically, it’s challenging and that’s where the EcoRun partnerships with NB Power, FLO and NB Community College come in. The EcoRun organizers were able to hook up temporary stations throughout the journey via FLO with the assistance of NB Power and plug them into the existing infrastructure mainly found at the NB Community College campuses in Saint John and Saint Andrews, as well as a stop at Snider Mountain Ranch.

The pure electrics get plenty of the attention, and the Chevrolet Bolt and Nissan Leaf proved their worth by combining the lowest fuel economy of 1.8 Le/100km. Those numbers aren’t surprising as they emit the least amount of pollutants while eliminating the need for gas. What’s more impressive than its fuel economy numbers are its increases in range with the Bolt able to go 383-kilometres (not having to charge at all on the second day of driving) and the Leaf jumping up to 242. As a whole, the plug-ins and conventional hybrids were the second most fuel-efficient group with the Honda Clarity plug-in leading the way with an average of 2.5 L/100km and the largest EV range of 70.3-km, followed by the Toyota Prius Prime (2.9) and Hyundai Ioniq plug-in (3.0). The plug-in SUVs were led by the Mitsubishi Outlander PHEV at 5.6 L/100 km and the Mercedes-Benz GLC 350e at 7.0. The results

The EcoRun is all about statistics and crunching through that data to find the information you’re after. There are too many vehicles to go over and analyze in this article, but you can check the entire box of statistics for each and every vehicle on the event. Depending on the drivers and routes, the results will vary based on ones fuel-efficient driving habits. If you accelerate gently, drive the speed limit, coast to a stop and anticipate traffic, each and every person on the road can save money on gas or not have to spend at all with a pure electric, and that’s what the EcoRun proves in the end. Regardless what you end up purchasing, everyone can contribute to bettering the environment and no one can argue against that. B2B FLEET MANAGEMENT | PurchasingB2B.ca | August 2018 |

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2018-08-01 12:00 PM

m E tec an a

By Michael Power

Non-linear Revolution

Element event focuses on how technology is shaping the fleet ecosystem

echnology developments are reshaping fleet manage- Artificial intelligence (AI) and predictive analytics are performing ment, with the industry at the cusp of seismic change. But tasks that once needed human intelligence, Cunningham said. until those changes are fully realized, fleet managers are Machine learning—a specific application of AI—has computers in an in-between period. They must manoeuvre through accessing data and learning for themselves. this phase while also dealing with the challenges that accompany Other trends that Cunningham touched on included on-demand this shift. and shared mobility services. The world is moving from owning With that overarching theme, Element Fleet Management held things to using them as a service. Meanwhile, autonomous vehicles its annual ride-and-drive event in Mississauga, Ont. in June. The (AVs) are a reality. Perhaps not yet level-five AVs that may one day event brings together the company’s senior leaders and industry see vehicles that don’t have a steering wheel or driver, but Element experts to discuss issues facing fleets, as well as to test-drive offer- customers have begun ordering level-one AVs. Even now, compaings from OEM and speciality suppliers. nies like Waymo, Tesla and GM are testing AVs on public streets. The company has begun a new phase of its history, Chris “None of these things are evolving independently,” Cunningham Gittens, Element’s president of Canadian said, adding that the goal was to tie all these operations, told an audience at the event. A trends together. “Going a little further, what refreshed board of directors and enhanced about autonomous vehicles that drive themtechnology offerings have provided a solid selves to shops while we’re sleeping?” she said. foundation for the company, Gittens said. What can be done now? Connected vehiWe’re on the For example, Element’s Xcelerate, an anacles are the foundation for these changes lytics-driven fleet management system, has during the awkward in-between time the front lines of a seen improvements. “These are significant industry is going through, Cunningham said. enhancements that have not been available in “Soon, every vehicle will be a connected vehitransportation the fleet industry before,” he said. cle and every fleet will be a connected fleet,” Customers are also looking at fleets, as revolution—but it’s she told the audience. well as “mobility management” as a whole, Element is moving beyond predictive ananot linear. differently, said Natalie Sievert, Elements’ lytics to explore AI and machine learning, vice-president, commercial. The term “conwhich Cunningham said could provide autonected vehicles,” which once meant GPS matic insights. The trend is towards connected systems, has a broader meaning. Element’s data visualization with real-time access to —MICHELLE CUNNINGHAM, connected vehicle capabilities can send alerts data, for example unit breakdowns of driver ELEMENT FLEET MANAGEMENT about breakdowns before they happen. The info updated in real time. When a vehicle’s company’s platform has been redesigned so that data is custom- oil pressure is low or it needs the tires or the breaks replaced, ized, among other developments. these maintenance stops can be planned for and added to drivers’ schedules or routes. The goal isn’t just to connect vehicles, Changes afoot she said. It’s to connect drivers, fleets and other parts into a larger There’s a sense in fleet of great changes looming, said Michelle ecosystem. Cunningham, senior vice-president, product and marketing, at Cunningham likened autonomous vehicles to a child going Element and the event’s keynote speaker. Fleet professionals must through the toddler phase: they can move around unsteadily navigate the changing environment during what Cunningham but also sometimes fall. Like the toddler AVs will see progress, called the “in-between time” that the industry is experiencing. she said. One of the goals of autonomy is to work towards zero Old technologies and ways of doing things are disappearing and accidents. Many vehicles now boast AI-assisted steering, braking, being replaced by new versions. “There’s never been a more excit- parking and other functions. It’s therefore ironic that distracted ing time in our industry,” she said. “We’re making critical chicken driving has resulted in an uptick in automotive deaths recently for and egg decisions on electric vehicles and electric infrastructure.” the first time in decades. “We’re living in interesting times,” she Cunningham began her presentation by discussing the technol- said. The industry may see stumbles and roadblocks in its progogy trends that are affecting fleet organizations. The Internet of ress but change continues. “We’re on the front lines of a transporThings (IoT) has meant far more devices connected to the Internet. tation revolution—but it’s not linear.” B2B 28

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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2018-08-01 12:02 PM

WHEN IT COMES TO YOUR FLEET,

PLAY IT SAFE. Toyota Safety Sense™ (TSS)1 is an advanced suite of innovative safety features designed to help protect drivers, passengers, pedestrians (TSS-P only) and people in other vehicles from harm. And it comes standard on virtually all models –– so you can rest assured your employees are in good hands.

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2018 TOP SAFETY PICK Corolla, Prius, Prius Prime, Highlander, RAV4 (with specific headlights)

2018 Canadian Black Book

BEST RETAINED

VALUE

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OVER 85% OF TOYOTAS

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sold in Canada in the last 20 years ARE STILL ON THE ROAD TODAY 3

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fleet.toyota.ca 1. Drivers should always be responsible for their own safe driving. Please always pay attention to your surroundings and drive safely. Depending on the conditions of roads, vehicles, weather, etc., the TSS systems may not work as intended. Please see toyota.ca, your local Toyota Dealer or Owner’s Manual for details. 2. 2018 Canadian Black Book Best Retained Value Award winner – (Sub-Compact Car, Compact Car, Mid-Size Car, Full-Size Car, Small Pick-Up, Full-Size Pick-up, Minivan, Mid-Size SUV, Overall Brand – Car, Overall Brand – Truck/Crossover/SUV) category. Based on value retained from original MSRP for 2014 model year vehicles as published by CBB, as of January 1, 2018. See CanadianBlackBook.com for complete details. 3. Based on IHS Markit Vehicles in Operation as of June 30, 2017 for Model Years 2008 to 2018 vs Total New Registrations of those vehicles.

2018-07-18 12:03 PM B2B_Aug2018_ad pages.indd 29

2018-07-31 11:59 AM

Katherine Vigneau, CAFM

traditional

NOT YOUR

CATEGORY SPEND

Buyers must navigate organizational divisions of responsibility and understand the economics of fleet

any organizations, whether corporate or public, need vehicles and equipment to support their operations. On the surface, acquiring and managing these vehicles should be a simple function. After all, most of us have bought, insured, operated and disposed of our own cars. The truth is, that decisions you make for your personal fleet of one or two vehicles do not necessarily translate on a larger scale. Procurement specialists who are assigned to the fleet category are soon confronted with information and questions illustrating that fleet is not your traditional category spend. A few main challenges face fleet buyers—navigating the organizational division of responsibilities and understanding the economics of fleet. Over the past 30 years, the titles and associated responsibilities of those responsible for fleet procurement evolved from “buyers” to “sourcing managers” to “category managers.” In the past, many organizations assigned purchasing by vendor instead of commodity. Technological advancements have made more data available. This data, coupled with vendor scorecards, allow companies to understand the full scope of spend within categories across multiple vendors and for consolidation of spend—not just around price but also quality of service. As a result, organizations can employ category management that involves the holistic oversight of vendors, spend, policies and practices within the framework of an overall procurement

and stakeholder partnership. Category management requires a strong category team with clearly delineated responsibilities. Every organization needs to determine the players involved in managing the category and what the levels of responsibility are. This can be challenging but can be simplified by using the RACI (Responsible, Accountable, Consulted, Informed) matrix. This matrix seeks to identify all of the tasks involved in a specific function (such as vehicle acquisition) and the level of responsibility of involved stakeholders.

FLEET

making the final vehicle selection, the fleet manager is both responsible and accountable, the end user is consulted and all other parties are informed. A clear understanding of roles can greatly assist organizations in purchasing vehicles. The second challenge for vehicle procurement is understanding and adhering to the basic economics of fleet. The two biggest costs of operating a fleet are depreciation (a fixed cost) and fuel (an operating cost). The other major operating cost to consider is maintenance. As a fleet ages, depreciation costs decline because the cap-

PROCUREMENT

RISK

USER

Acquire fleet vehicles Needs analysis R I I I C Develop RFP

A/R

Provide vehicle spec

Evaluate bids

A/R

Select vehicle A/R I I I C Driver training

Policy amendments

Receive vehicle R I I I C Inspect vehicle

The example above is a RACI matrix for fleet acquisition. It lists the main tasks at left and the stakeholders at the top. Then, for every task, it specifies who is operationally responsible, fiscally accountable, who needs to be consulted and who should be informed. For example, when

ital cost of the vehicle falls. At the same time, the operating costs increase because fuel mileage worsens and there are more repairs. What fleet managers seek to identify is the point where the operating and capital costs are the lowest as this is the opportune time to replace that vehicle.

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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2018-08-01 12:04 PM

Economic Theory of Vehicle Replacement

COST

TOTAL

CAPITAL

OPERATING

TIME/USAGE

Lowest Annual Cost = Economic Replacement Point

The graph above captures this optimum replacement point. The theory is straightforward and proven. All too often, however, fiscal influences cause decision makers to question this model and seek to delay fleet replacement to “save money”. This is when fleet expertise is required to educate those deci-

PRICE? CHECK. DURABILITY? CHECK. WARRANTY? CHECKMATE.

sion makers about the problems of delayed replacement. They are not just financial. Delaying replacement also means not bringing new technology and safety equipment into the fleet in a timely manner. It can also mean extended downtime and reduced service levels. This is particularly risky for critical equipment like emer-

gency response vehicles and snow removal equipment. Imagine delaying replacement of the snow removal fleet and getting record snowfalls the following winter. The downtime of the aging equipment might delay snow clearance and a city core may not be cleared for several days. Presenting a realistic scenario is often helpful in getting them to realize the risks of delayed replacement. Other issues associated with keeping vehicles past the optimum replacement point are reduced safety and innovation. Older fleets are riskier, largely because manufacturers are constantly improving the safety equipment of newer models. The introduction of other innovations, such as better mileage and telematics, is postponed when an organization keeps older vehicles. B2B Katherine Vigneau, CAFM is Director of Professional Development, NAFA— Fleet Management Association

We don’t provide the best warranty in the game because we have to – we do it because we can. An unmatched combination of quality and durability means you can rest assured that you’re making the best decision when you make it a Mitsubishi.

ONTARIO RESIDENTS Get $7,000 off an Outlander PHEV with the Ontario government EV rebate on in-stock vehicles that are registered, plated and delivered by September 10. Hurry in!*

Eclipse Cross Outlander PHEV

Plug-In Hybrid Electric Vehicle

Visit mitsubishi-motors.ca/fleet for more information on how you can add a Mitsubishi to your fleet. * Government EV rebate of up to $7,000 available for eligible vehicles and subject to change at any time. Incentive application must be submitted within 90 days of vehicle registration and plating. Rebate is not administered by Mitsubishi Motors. Rebate would apply to the negotiated price including applicable fees and taxes. Other conditions apply. See dealer or provincial government to learn more and how you can apply. www.mitsubishi-motors.ca. ** Whichever comes first. Regular maintenance not included. See dealer or mitsubishi-motors.ca for warranty terms, restrictions and details. Some conditions apply.

FLEET MANAGEMENT | PurchasingB2B.ca | August 2018 |

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2018-08-01 12:04 PM

By David Miller

PERFECT TIMING A look at the 2018 Nissan Kicks

here’s a famous saying, “to strike while the iron is hot.” For today’s auto industry, that refers to the crossover/ SUV boom that has shifted plenty of resources to the utility vehicle side, and in some cases, exclusively in that direction. For Nissan, crossovers have propelled its growth to an all-time monthly Canadian company sales record of 14,932 units, lead by the Rogue and Qashqai. Nissan has taken on these favourable crossover conditions and played the market well with its second new nameplate introduction in back-to-back years. For 2017, it was the Qashqai, and now the Japanese brand gets smaller with a new subcompact crossover labelled the Kicks. The Kicks—a concept that’s Brazilian-inspired and built in Mexico—somewhat takes over for the Juke in Canada, but is not a like-for-like replacement. It enters a growing list of subcompacts that include the Ford EcoSport, Honda HR-V, Mazda CX-3, Hyundai Kona, Toyota CH-R and Chevrolet Trax.

Standing out from the crowd

With an eye to attracting a younger demographic, Nissan made sure to make the Kicks a fun and vibrant compact. Even though the Juke and Kicks may both have quirky names, the Kicks doesn’t take on a quirky shape; rather fitting quite well with what buyers are looking for in this fast-growing segment: expressive design, impressive technology, some roominess and great value. The most noticeable feature on its exterior has to be its twotone colour scheme. My tester was of the orange and black variety, and in my opinion, the sharpest of the five total combinations. In addition, single colour options for the less adventurous types are available and actually come standard for the base models ($150 extra for two-tone on the S trim). The two-tone look adds some flair that works well with Nissan’s trademark V-motion grille and boomerang headlamps and taillights for that curvy and expressive style that screams for some attention. When situated comfortably in its “zero-gravity”, Nasa-

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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AS TESTED Price: $17,998-$22,798 Engine: 1.6L four-cylinder Power: 125 hp, 115 lb.-ft. of torque Transmission: Continuously variable transmission (CVT) Rated Fuel Economy (L/100 km): City 7.7/ Hwy 6.6

inspired seats that come heated in the second-tier SV trim, occupants will enjoy a well-equipped and open cockpit environment that centres around its colourful seven-inch touchscreen. The Kicks’ seating position is unexpectedly high for its size due to its tall roof which will be appreciated by six-feet-tall passengers in the front and rear. For its segment, it has best-in-class front seat legroom at 1,110mm and ample space behind those seats totalling 915 litres and an impressive 716 litres for its trunk. A leather-wrapped flat-bottomed steering wheel is a nice edition for its top-of-the-line SR trim, but that’s nothing compared to an eight-speaker Bose Personal Plus audio system mounted in the driver’s headrest aimed towards its targeted younger buyer. It’s the first of its kind to be set up by an automaker where occupants can adjust the sound through the infotainment unit to either be spread from door-to-door or just to the driver’s ears. It may not work perfectly for all music, but when you find the right tune, it allows the driver to enjoy a unique and gratifying listening experience. It’s a mover and shaker

The Kicks gets moving from a 1.6-litre four-cylinder that produces 125hp and 115lbs-ft. of torque mated to a continuously variable transmission (CVT). Nissan has kept costs down by simplifying the buying process for consumers with no manual transmission offering, nor all-wheel drive. Every Kicks is set-up with front-wheel drive and if you want more than that, simply upgrade to the Qashqai. Performance numbers will be higher with other competitors, but on this drive program in Montreal, the Kicks did an admirable job navigating within the city centre and along the countryside. It charged along in a quiet and calm manner showing off its rapid and direct manoeuvring skills when faced with curvy roads. Only briefly on the highway when in need of acceleration did the Kicks show a little power deficiency, but otherwise it came across as a nice travelling companion with an expertise in the handling department. The drive was effortless thanks to its 1,200kg. curb weight. That power-to-weight ratio and its improved CVT contributes to a combined 7.2 L/100km with a best-in-class highway rating of 6.6, that I was able to lower at one point to 5.9 during the drive.

Kicks drivers enjoy a well-equipped and open cockpit environment that centres around its colourful seven-inch touchscreen.

The trunk boasts an impressive 716 litres of space.

The 2018 Nissan Kicks arrives in Canada at a time when crossover is king. With Nissan sales already at an all-time high, the Kicks provides one of the most affordable offerings at a starting price of $17,998. The highest SR trim doesn’t cost much more, topping out at $22,798 which includes the Bose personal sound system, a 360-degrees Around View Monitor with Moving Object Detection, other advanced safety technologies, roof rails and leather throughout. Even in its base package, value is what will propel the Kicks to be one of the more popular subcompact crossover options in the market. Just make sure to get the two-tone version in order to stand out from the crowd. The Kicks’ handling, roominess and charm will do the rest. B2B

FLEET MANAGEMENT | PurchasingB2B.ca | August 2018 |

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2018-08-01 12:04 PM

By Michael Power

A life in

FLEET

Ray Brisby, left, receives NAFA’s Excellence In Education Award from the organization’s president Bryan Flansburg.

Ray Brisby, CAFM, fleet manager for the Calgary Fire Department, receives NAFA’s Excellence In Education Award

fter decades of engagement with the world of fleet and mechanics, Ray Brisby, CAFM, fleet manager for the Calgary Fire Department, has received the Excellence in Education award from NAFA. The veteran City of Calgary employee received the award at the organization’s Institute & Expo (I&E) in Anaheim, California last April. Brisby was the only Canadian to receive an award this year at the annual conference. Getting the recognition through the NAFA Excellence In Education award made him feel “truly humbled” to be named alongside some of the greatest and most influential fleet managers in the world who have been previous recipients, Brisby said. “Being presented with NAFA’s Excellence in Education Award was a great honor,” Brisby said. “Those of us who dedicate our time to NAFA serving on various committees, and there are dozens of folks who do this every year, do so not for rewards or recognition but because we are passionate about the fleet industry and we want to develop relationships with other fleet managers so that we can share knowledge and ultimately help shape the industry for the future.” Brisby began his career after finishing a certificate program in diesel mechanics from the Southern Alberta Institute of Technology (SAIT) in the early 1980s. At first, he worked in the private sector and earned a Journeyman trade license

as a heavy-duty mechanic, but was eventually hired by the City of Calgary to work in the heavy equipment shop of the Mechanical Services Department (MSD). When the MSD Heavy Equipment and Truck Garage divisions were merged in 1995 (eventually becoming fleet services), Brisby advanced to a lead hand role— and then shop foreman—before moving into a managerial position in 2001. He worked as a maintenance controller, then team coordinator, before being appointed

Brisby has long been involved with NAFA and the organization has acted as an integral part of his professional development. He joined the organization in 2001 and began working through the courses, exams, and case studies necessary to earn the professional designation of Certified Automotive Fleet Manager (CAFM). As a not-for-profit association, NAFA relies on volunteers to help develop and deliver their educational programs, says Brisby. So when the organization decided to hold

Many experts predict that the technology and mobility revolution we are entering may be as significant to society as when we moved from relying on the horse and buggy for transportation to the automobile. —RAY BRISBY fleet maintenance manager in 2006. In 2013, he was selected as the Calgary Fire Department’s first-ever dedicated professional fleet manager. “During my career I have also continued to develop my education by not only earning my CAFM designation from NAFA but also by completing the Ivey leadership program at the University of Western Ontario, an applied management certificate from SAIT Polytechnic, an accounting certificate from McGill University, and a masters certificate in municipal leadership from York University,” Brisby says of his professional and educational development.

a fleet management seminar in Calgary in 2010, and since he had his CAFM designation, NAFA asked Brisby to help facilitate some of the seminar content. Exhilarated by this first teaching experience, and realizing that it was an excellent way to stay on the cutting edge of fleet management, he began offering his time volunteering with NAFA. “As the years have gone by I’ve taught over 80 individual classes at all levels, from the Essentials of Fleet Management seminars, to CAFM curriculum boot camps and their Masters of Fleet Management workshops,” Brisby says. “I’ve also served on several NAFA committees responsible for working

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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Brisby became the Calgary Fire Department’s firstever dedicated professional fleet manager in 2013.

with scholars and top industry experts to develop and refresh education materials and curriculum, as well as helped to guide program direction as a member of NAFA’s Board of Directors and their Education and Credentialing Oversight Board (ECOB).” Being involved with NAFA has certainly benefited him during his career in fleet, Brisby says. The organization is the world’s largest association for fleet professionals and the only one that offers a university accredited professional designation in fleet management. His involvement with NAFA’s educational offerings has allowed Brisby to continue his own learning while also developing relationships and sharing knowledge with the world’s top fleet managers. The typical background of a fleet manager most often includes a trade, vehicle maintenance, or a business background such as accounting, procurement or engineering. Since all of these competencies are involved in fleet management, NAFA’s

education and certification programs operate around a framework that teaches fleet managers the fundamentals of each discipline required to manage the fleet assets and mobility needs of their organization as effectively as possible, Brisby notes. “I believe the programs offered by NAFA are very valuable because fleet management is a rather unique field that requires a very diverse skill set and NAFA’s education is targeted directly towards developing these skills,” he says. A few decades working in and teaching about fleet has afforded Brisby with a front-row seat to developments and changes in the world of fleet and mobility. It has also given him a clear view of some of the trends on the horizon. The biggest shift in fleet management Brisby sees is towards a greater focus on mobility. That means, fleet managers are becoming more likely to hold responsibility for the movement of people and goods, rather than the traditional function of looking after rolling stock assets, Brisby says. This mind-

set shift will see many fleet managers using new technology and all sorts of alternative modes of transportation in a far more efficient and environmentally friendly way. There will be far less reliance on actually owning vehicles and all the complexity, cost and risk that accompany that ownership. “This promises to be an exciting yet challenging time for fleet managers as many experts predict that the technology and mobility revolution we are entering may be as significant to society as when we moved from relying on the horse and buggy for transportation to the automobile,” Brisby says. During his free time, Brisby enjoys working on projects in his garage, where he has restored several old motorcycles and snowmobiles. “I also enjoy spending as much time as I can with family and friends at our cabin near Burntstick Lake Alberta, hunting and fishing, or exploring the backcountry on my snowmobile or ATV,” Brisby notes. B2B

| August 2018 | PurchasingB2B.ca | FLEET MANAGEMENT

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By Larry Berglund

SUSTAINABILITY

STRATEGIES T

he Federal Competition Act states that small, medium enterprises (SMEs) should have equal access to public sector spending. This is a worthy objective. However, is it a realistic one? The more common strategy is to consolidate the spending requirements by commodities and award to the lowest priced, qualified supplier. This strategy makes it difficult for SMEs to compete against multinational corporations. The SEs, or the social enterprises, are another potential supply base that struggles to be heard in the market. They too have been sidelined due to procurement policies and practices that largely exclude their participation due to perceived capacity requirements. This is not a new message. A decade ago Madam Justice Denise Bellamy directed her comments to supply chain decision makers as follows: “For government, effective procurement should be measured by social, environmental, and other benefits to the community. Balancing price with these qualitative dimensions is at the heart of effective best-value procurement in the public sector.” Stakeholders expect value for money. However, why do the out-of-pocket costs take precedent over the total cost of goods or services? One of the main reasons has been that traditional training for supply chain professionals has not stayed current with the emergence of social procurement. This author is pleased to say that the Supply Chain Management Association (SCMA) has this year updated its Ethical Behaviour & Social Responsibility work38

Social enterprises are a relatively untapped local supplier base that is trying to do business with you.

shop to include social procurement as a core subject. While going green is good, it is not enough to be considered sustainable. Sustainability in procurement requires environmental, social and governance policies to be implemented in a comprehensive manner. Social enterprises operate as nonprofit organizations and act as the bridge between people facing employment barriers and the workplace. The under-employed may have one or more barriers to employment, but also have the desire and valuable capabilities. They simply need the opportunity.

Social procurement is a strategy that can be deployed by all buying organizations. This is where the spending can be directed at social enterprises that represent a targeted group of individuals who are facing a form of employment barrier. When an organization hires people with employment barriers through a social enterprise, a lot of goods things are put into motion. This is referred to as social impact—it is a measurable improvement in the living standards in a community. This improvement is demonstrated in improved physical and mental health; increased local spending; reduced shelter costs; reduced crime-related costs; reduced reliance on social subsidies; increased employability; increased self-esteem; and taxes being paid by employees. A 2017 study in Canada revealed a social return on investment when hiring people with employment barriers of $4.31 for every dollar invested! The considerable benefits of improved mental and physical health for people facing employment barriers cannot be overstated. More evidence of social procurement strategies affecting local spending is in the research conducted by Tony Pringle. This document revealed that a local SME would recirculate 20+ per cent of its revenue locally. This compares with only 13 per cent where a multinational chain is involved. Recirculate means that increased local employment contributes to local restaurants, arts, charities, sports, entertainment and taxes by SME staff when they are gainfully employed. Community benefit agreements have

Sustainability in procurement involves environmental, social and governance policies

| August 2018 | PurchasingB2B.ca

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S are a loca is tr proven to be effective. EllisDon Construction has partnered with the social enterprise Embers (Vancouver) to hire workers with employment barriers, creating jobs that add millions of dollars as a social return on investment. EllisDon has found their social procurement strategy is addressing the labour shortage in the construction industry and contributes to building social capital. The redistribution of revenues locally therefore, is worth multi-millions of dollars due to the economic multiplier effect. EllisDon works on public and private sector projects. Extrapolating these findings can lead to the conclusion that government purchasing policies would benefit from an evaluation that weighed the factor of social economic benefits. An analogy can be made to the cost of preventive health care funding versus health care treatment. Paying for prevention is generally far lower than paying for treatment of advanced diseases or illness. Similarly, providing funding for youth programs likely decreases their odds of participating in criminal activities. Both have costs attached but it is the long-term

outcome where we are trying to have a positive effect. We can save money today, but that may only delay much higher costs later. It is estimated that it costs $150,000 per year to incarcerate an individual in Canada with a 60 per cent probability of being a repeat offender. We can’t afford not to look at where procurement can affect social returns. Our evaluation criteria need an update. Are there options that public sector buyers could consider? The unbundling of large contracts into smaller agreements to specifically attract SMEs and SEs is one option. The Brazilian government has mandated its buyers to replace imported goods with domestically sourced products, even where a price premium is expected. India wants 30 per cent of government contracts to be awarded to SMEs. In 2012, Scotland introduced a Community Benefits Agreements strategy for its governmental buyers to increase local opportunities for SMEs. Why? To look beyond the out-of-pocket costs and look at the social economic benefits associated with the supporting of local businesses. The City of Toronto is rolling out

its social procurement model. ISO 26000 provides a social procurement blue print. The Federal government’s Bill C-344 is another indicator that procurement needs to deliver on a broader definition of value. Sustainable procurement can mean many things to different organizations. The big takeaway is that going after the lowest out-of-pocket costs has very limited gains. Social procurement isn’t just a theory—it is delivering on value in the market today. Social enterprises are a relatively untapped local supplier base that is trying to do business with you. By working with social enterprises, we can advance the agenda on sustainability. This isn’t possible simply by watching what others are doing—it takes professional fortitude with professional responsibility to make it happen. What’s in your policy? B2B

Larry Berglund, SCMP, MBA, is a supply chain management author, manager, business trainer, academic and consultant.

PurchasingB2B.ca | August 2018 |

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By Mark Jacob and Jeff van Geel

SUSTAINABILITY 3M Canada uses a three-pillar approach for procurement sustainability

rom a supply chain perspective, sustainability demands and expectations continue to be at the forefront of many companies, and 3M Canada is no exception. Sustainability is not new to 3M. We have a program called Pollution Prevention Pays (3P) that began over 40 years ago with the goal of eliminating or reducing pollution in 3M products and processes at the source. These efforts are generally the result of employees suggesting improvements based on a personal responsibility rather than job requirement. We have been listed on the Dow Jones Sustainability Index for 18 consecutive years, since it’s inception in 1999. When it comes to sustainability in the 3M Canada supply chain, we use a three-pillar approach to procure materials: environmental stewardship, social responsibility and economic success. In the environmental stewardship pillar, employees apply a “7R” approach to make our raw material and packaging materials more sustainable. These include: remove, reduce, reuse raw materials and packaging supplies where appropriate: recycle (increasing the recycled content of materials and making things easier to recycle), renewable (increasing the use of renewable resources), read/ research and revenue. In purchasing, we work with suppliers to help make this happen, focusing on new materials and technologies that they have developed, or that they’ve had developed for them. For example, we worked with one of our corrugated packaging suppliers to integrate their lightweight paper liner technology into our corrugated shipping boxes and slip sheets. This liner technology uses less paper fibre to make the same board strength of corrugated containers, and results in a reduction of overall weight of our corrugated packaging materials by three to seven per cent. 40

Part of our social responsibility pillar includes ensuring our raw materials and packaging supplies are sourced in a responsible manner, or responsible sourcing. We have a supplier responsibility code that outlines our supplier expectations and requirements in terms of labor and human rights, environment, safety & health, ethics and management systems. Using a risk assessment approach, various suppliers are assessed against these requirements. Corrective actions are identified and followed up to ensure critical findings are addressed. Social responsibility, from a purchasing perspective, also means being compliant to not only government regulations, but also to 3M internal policies and customer requirements.

business requires and what 3M suppliers have to offer. We also invite our community partners to participate in the fair, including local municipal government, the local conservation authority and various NGOs. We want to work with these groups to help them convey their sustainability efforts and requirements to our suppliers and our employees, while giving our employees a first-hand opportunity to discuss our sustainability needs with them. This year was our second year inviting local high school students and teachers to preview the event before it was opened to our own employees. We wanted to provide these students an opportunity to meet our suppliers and community partners to

We have a tremendous responsibility in sourcing and packaging to help ensure our planet is around for future generations. The third pillar is economic success. We need to maintain a strong business financially, and continue to promote growth— both for our own employee’s sake, as well as our shareholders’. It’s all in the execution

One of the major challenges we face in terms of implementing the three-pillar approach with our suppliers is execution. Below are a few ways we tackle this: We host a Sustainability Vendor Fair on or around Earth Day (April 22) each year, where we invite suppliers to our head office in London, Ontario to showcase some of the products and services they have that will help improve sustainability generally, as well as our own sustainability portfolio. The Fair is open to 3M Canada employees and encourages discussion around our three pillars— often resulting in a discussion on what 3M

discuss how we need to work together to improve sustainability. Students bring a fresh perspective to the event—their questions and comments are sometimes things we don’t think about in our own sustainability work. They are the employees of the future, ones who will be making decisions and leading projects that will be addressing sustainability challenges in the years to come. It is crucial that we include them in our sustainability improvement process. Over 330 employees and 40 high school students and teacher attended this year’s fair. It was a win for all involved. 3M Canada President, Mojdeh Poul also shared her thoughts with our suppliers, community partners and students during the event. “We all need to work together to solve problems in sustainability,” she said. “These problems seem simple on the outside but are often very complex in nature.”

| August 2018 | PurchasingB2B.ca

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Suppliers

As well, 3M Canada hosts a Supplier Summit each year, organized by 3M Strategic sourcing & packaging solutions manager Jeff van Geel. We meet face-toface with key suppliers to discuss purchasing topics, including 3M’s sustainability goals and requirements and ways in which we can work together to improve our sustainability portfolio. Last October, our 3M Canada business group hosted a Sustainability Summit that saw 50 Canadian business leaders attended a workshop to share sustainability priorities. We have several key suppliers who are knowledgeable about sustainability, and 3M sourcing and packaging invited them to participate in the summit. Having input from these experienced suppliers was invaluable to the discussion. The 3M Canada strategic sourcing and packaging solutions group also hosts a supplier awards event annually that celebrates suppliers that have helped us in the categories of: technology; quality; responsiveness; delivery; cost and sustainability (TQRDCS). Suppliers who win the 3M

Sustainability Award must show they have helped improve 3M’s sourcing and packaging sustainability portfolio, taking into consideration our three-pillar approach. To strengthen the social responsibility pillar of sustainability, our team dedicates volunteers for a number of local community programs, one of which is called Start2Finish. This program addresses the need for literacy and physical activity among economically challenged children in the community. Our team dedicated three volunteers on a weekly basis during the past school year to support this program. Other community programs include tree planting with the municipality, United Way 3M Harvest Lunch which kick starts the United Way fundraising Campaign in London and the Salvation Army Christmas Hamper program. Our team also gets involved with fundraising. In summer, a team of 16 strategic sourcing and packaging solutions employees organize and execute a charity barbeque at our head office in London. Proceeds from this event go to support GenNext and 3MGives, both

of which then support the United Way GenNext Backpack Drive, United Way StairClimb and the Salvation Army London Christmas Hamper Program. Our employees also fundraise for the United Way by participating in their annual stair climb. The pressures of sustainability in the supply chain are not diminishing, but rather the opposite. They are increasing rapidly. 3M Canada is committed to improving our business, our planet and everyday life. It’s the essence of our mission statement. We have a tremendous responsibility in sourcing and packaging to help ensure our planet is around for future generations. It’s not just a good thing to do—it’s our duty! B2B Mark Jacob is compliance & sustainability leader at 3M Canada.

Jeff van Geel is manager, strategic sourcing and packaging solutions at 3M Canada.

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By Michael Power

THE emerging FUTURE SCMA Conference 2018, held this year in St. John’s, focused on technology and the supply chain’s future.

Cyber security

The conference’s education line up kicked off the following morning with a keynote presentation by Ray Boisvert, provincial security advisor and associate deputy minister, Ministry of Community Safety and

Correctional Services. Supply chain professionals can use innovative technologies to improve the way they do their jobs, Boisvert said. But he sounded a cautious note throughout the presentation while urging attendees to safeguard their companies and supply chains through cyber security measures. “Threat actors” can disrupt a company’s business anytime and from anywhere, Boisvert said. Criminals have become increasingly skilled and 70 per cent of Canadians say they have been affected by malware. Ransomware has also become very profitable for criminals and every 20 seconds somebody is affected by it. People are now more mobile than ever—a factor that increases cyber risk. “We don’t think about how much technology has transformed our lives,” Boisvert said. “We’re now in the digital age, completely and wholly.” Regardless of what business you’re in, you’re now in the IT business, Boisvert stressed. Technology holds promise, but it also follows the law of unintended consequences. While artificial intelligence is advancing rapidly, Boisvert warned against “unleashing the demons” through the transformation. The interconnectedness of these technologies is what he worries about the most—“A single point of

failure can bring down the entire system,” he told the audience. While technology brings with it risk, the good news is that understanding those risks and planning for trouble can help head it off. “I love technology and I embrace it, but it’s consequential,” Boisvert said. He encouraged organizations to consider the risks and realize that cyber security is everyone’s job. That includes all employees. And those employees must realize they too carry a responsibility to protect the company. Good cyber hygiene is important, for example by not performing sensitive online transactions at a coffee shop with an open network. Expect the unexpected and always have a plan B—and even a plan C—in place. The key is to know how you’re going to respond, Boisvert said. “Cyber resilience is around being prepared.” Trade concerns

Among the other conference keynote speakers was The Globe and Mail‘s senior political correspondent and columnist John Ibbitson, who spoke on a range of topics including trade and tariffs. During his presentation, Ibbitson pointed to China as the main focus of the US’s trade woes, and wondered why US President Donald Trump’s administration has targeted US allies like Europe, Canada and

Photo: Dorothy Jakovina

rocurement and supply chain professionals descended on St. John’s, Newfoundland and Labrador in June for the Supply Chain Management Association’s (SCMA) National Conference 2018. Hundreds of practitioners attended the conference to network, socialize and learn about the issues affecting the supply chain management field. Using the slogan “Exploring Beneath The Surface,” the conference included a kick-off event, the “Rally in the Alley,”—a pub crawl along George Street sponsored by Staples Business Advantage featuring music, drinks and food—as well as education sessions, keynote speeches and an awards gala evening. Also, during the annual gala evening, SCMA announced three recipients of the Fellow of SCMA designation, the highest honour the association can bestow. This year, Patrick Etokudo of Enbridge, Geoff Frodsham of Princess Auto Ltd. and Douglas Harrison of VersaCold Logsistics were the recipients.

| August 2018 | PurchasingB2B.ca

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Japan with tariffs. “On the face, it makes no sense,” he said. Regarding NAFTA, he predicted the conclusion of talks to extend to next year. The best approach for Canada in the negotiations was likely to make a last, best offer that includes concessions on dairy, rules of origin and a sunset clause of perhaps 10 years. If the US turns down that offer then Canada can be certain they’re looking to dismantle the Western Alliance, Ibbitson said. That has the potential to start a trade war similar to the one seen in the 1930s. At the same time, the drama surrounding the NAFTA negotiations has produced political unity in Canada as all parties have rallied around Prime Minister Justin Trudeau’s response to tariffs. “It’s very nice. It won’t last,” Ibbitson said. He was less certain about the the Keystone Pipeline, although he said trade issues between the US and Canada made the case for more horizontal trade arrangements. Regarding the Trans-Pacific Trade deal, Ibbitson said he’d like to see it up and running soon, if only as a message that Canada is ready to trade with others.

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Ibbitson ended his presentation on a positive note for Canada’s future. While birth rates and populations are falling, immigration doesn’t represent the solution to that situation. Citizens in many countries that need immigrants feel those immigrants should adopt the host culture. But those host cultures never really accept the newcomers. The solution is multiculturalism, which asks very little of its citizens beyond obeying the laws. While many might consider that a lax way to run a country, Ibbitson trumpeted it as a fabulous method. “If we keep multi-culturalism going we can be the most successful country on the planet,” he said. Redefining business

The focus on technology continued during the conference, with Fab Dolan, marketing head for Google Canada, discussing how emerging technologies can redefine business. Dolan noted that several companies, from SpaceX to Netflix have already disrupted many industries. “There’s something going on here and the innovation that’s happening is changing the nature of

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business,” he said. Historically, companies have innovated around a business model and tried to defend that model against competitors. But that’s increasingly changing, said Dolan. Tesla doesn’t even file patents because the automaker sees no advantage to it. Other changes have influenced these developments, for example a rise in connectivity means more data, falling data storage costs and faster computing times. The convergence of technologies is making possible these advances, Dolan said. For example, UPS uses machine learning so that their trucks almost never make lefthand turns, which take longer. “These are transferable to so many different fields,” Dolan noted—and to prepare for the future, we must think technology through to “second-order effects”. The SCMA National Conference 2018 covered a rich variety of topics and education sessions, bringing innovation and technology to the forefront. Attendees were truly able to “explore beneath the surface” of developments in supply chain management. B2B

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In the Field

Digital Transformation Companies can’t leave procurement out of the technology revolution

Alexander Rinke is CEO and co-founder of Celonis

By Alexander Rinke

hanges brought by disruptive technologies have long-term effects. The digital revolution impacts all industries, and companies face pressure to keep up. While companies focus on improving the customer-facing business, procurement is treated as an afterthought in digital transformations. But organizations can no longer afford to leave procurement out. By following these three steps and investing in technology, procurement can begin a digital revolution.

and team members. But these are themselves manual undertakings loaded with potential bias. The digital revolution has produced automated solutions to uncover exactly the type of inefficient manual activities that slow down processes. One such technology is process mining technology, a Gartnerrecognized category of big data analytics software that helps businesses highlight process deviations and pinpoint inefficiencies within their core operations. Process mining solutions take the subjectivity out of identifying manual process steps, acting as a divining rod for automation initiatives. Once procurement has a solid grasp on how to remove repetitive tasks, the next step is evaluating processes for automation readiness and to reduce Uncovering and eliminating manual rework process complexity. Automating procurement processes saves time and When a procurement process deviates from its design, money and adds value as well as improving employee wellbeing. Menial missteps must be corrected by people. Issues like price tasks can free up time so employees can focus on work that adds value. discrepancies between buyers and sellers can take thouWhen considering automation, procurement leaders must work handsands of hours per year to correct. The effects are even in-hand with IT to ensure that any solution chosen takes a holistic, guided more insidious when accounting for the days tacked approach. The fastest path to success requires identification of which proonto a procure-to-pay process. With procurement on curement processes are ready to automate, simplification of processes the front end of the supply chain, a failed order means before automation rollout and continual monitoring of automation scripts. delayed production and added customer waits—while By taking the requisite time to properly analyze processes before automation, and investment in technology like process mining, procurement will be met with more valuable purchases and “Procurement must have transparency long-term cost savings.

into business processes to identify which processes would benefit from automation and why.”

burdening talent with a load of repetitive activities. Process improvement and talent enablement is impossible without full transparency into where these activities are happening and why. Through transparency, leaders have greater insight into where the manual effort is heaviest, and greater understanding of the true cause. If talent is bottlenecked by manual work (or worse, rework) within a procurement process, the solution lies in using transparency to uncover the root causes of those bottlenecks. Most teams can feel when they’re burdened, but they typically don’t have a clear understanding of what’s slowing them down. Integrating digital solutions for greater transparency is essential for procurement’s digital revolution. Eliminating repetitive tasks

Areas of high manual work have traditionally been identified by interviews and workshops with process owners

The automation path

Robotic process automation (RPA) is one example of technology for mitigating the manual effort of transactional activities, but most procurement teams don’t know where to begin. A recent Hackett Group report revealed that RPA is on the verge of growth and will increase from three to 38 per cent mainstream adoption in the next few years. But companies often move too quickly, setting themselves up for unimpressive ROI and headaches. Before implementing RPA, procurement must have transparency into business processes to identify which processes would benefit from automation and why. If a process is already flawed, RPA will only speed up poor business processes. The costly nature of an RPA implementation means there’s little room for error, and process complexity is an automation killer. Process mining technology can act as a “full body scan” for businesses, analyzing and visualizing business processes to ensure they’re following an efficient and compliant path before RPA implementation happens. Procurement’s time is better spent on innovative approaches to improving value than on executional tasks. Through technologies like process mining and RPA, procurement can prioritize the biggest problems first, instead of putting out fires with rework activities. Digitization equals empowerment, and high-performing procurement teams are hedging against risk and empowering talent by embracing technology. B2B PurchasingB2B.ca | August 2018 |

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The Law

Frontier Justice Does a recent court case mean the end of Contract A?

Paul Emanuelli is the general counsel of the Procurement Law Office.

By Paul Emanuelli

or those still using Contact A tendering formats, the June 2018 Yukon Court of Appeal decision in Mega Reporting Inc. v. Yukon (“Mega Reporting”) serves as a last call to finally part company with the unclear Contract A rules and join the growing ranks of institutions using flexible, lower-risk tendering formats. Mega Reporting, which dealt with a flawed evaluation process for court reporting services in a Yukon government Contract A RFP process, is another case where the courts could not agree on applying the ground rules for Contract A liability. In fact, forty years after the original 1978 trial dispute that led to the Supreme Court of Canada’s 1981 R. v. Ron Engineering Contract A precedent, the rules around Contract A lost profit damages remain more uncertain than ever and, win or lose, leave Contract A users fully exposed to lengthy lawsuits.

the experiment in attempting to limit litigation and reliably protect against lost profit awards by adding liability disclaimers to Contract A tendering formats has failed. To recap, in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) (“Tercon”), the BC government banked on a disclaimer to try to shield itself from liability after it awarded a contract to a non-compliant bidder. In its 2010 precedent-setting decision, the Supreme Court of Canada established a three-part test for enforcing liability disclaimers: (1) Did the disclaimer apply to the breach? (2) Was the disclaimer unconscionable? (3) Are there public policy reasons against enforcing the disclaimer? Unfortunately, the Supreme Court couldn’t agree on how to apply its own test and rendered a 5-4 split decision. The ruling majority sided with the original trial judge and determined that the BC government should be liable for $3.3 million in lost profits, finding that the disclaimer was not drafted clearly enough to shield the government from liability. The four-judge minority went the other way, as had the three judges on the BC Court of Appeal, ruling in favour of the clause and against liability. In summary, 13 judges over three levels of court considered the same clause and divided 7-6 on whether it should shield the govern“The rules around Contract A lost profit ment from liability within Contract A. Notwithstanding damages remain more uncertain than ever these results, some institutions dismissed the problem as a and, win or lose, leave Contract A users wording issue that could be cured by drafting better disclaimers within their Contract A documents. fully exposed to lengthy lawsuits.” Mega Reporting has put an end to that wishful thinking. In this case there was no issue with the wording of the However, there is an alternative. In 1999, the disclaimer. Rather, the trial court struck down the clause on public polSupreme Court of Canada brought some order to the icy grounds under part three of the Tercon test and awarded lost profits. litigious tendering system in M.J.B. Enterprises Ltd. v. The Yukon Court of Appeal then reversed the trial decision, ruling that Defence Construction (“MJB”). This decision confirmed disclaimers should only be struck down on policy grounds in extreme sitthat purchasing institutions can avoid the fixed-bid uations where harm to the public good is “substantially incontestable”. So Contract A process and run tendering procedures while the courts agreed that the clause was clear enough to apply under under traditional contract law rules where bids remain part one of the Tercon test, they could not agree on whether it should apply negotiable and losing bidders have no right to sue for under part three of the test and, for good measure, also failed to clarify lost profit damages. That precedent should have ended whether the clause was unconscionable under part two of that test. This left the lost profit liability debate years ago. many unresolved issues for a potential appeal to the Supreme Court and, Unfortunately, while an ever-increasing number of win or lose, further exposed Contract A users to more protracted litigation. institutions left Contract A lost profit claims behind As these cases prove, institutions that rely on Contract A disclaimers by adopting flexible, lower-risk negotiated RFP forremain at the mercy of the courts, who, forty years after the trial decision mats, other institutions persisted within the flawed that first led to Contract A, are still working out the bugs in the Contract Contract A operating system and have unnecessarily A liability analysis. In the interim, for those interested in avoiding lengthy exposed themselves to protracted litigation and lost litigation and the risk of lost profit damages, the Supreme Court offered profit damages. This has cost hundreds of millions in another solution in 1999 in MJB when it unanimously ruled that we can court-awarded damages and countless more in out-ofavoid the Contract A tendering system in its entirety by using more flexiB2B court settlements and legal fees. As explained below, ble tendering formats. The verdict is now in on the better option.

| August 2018 | PurchasingB2B.ca

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