canadian shipper january/february 2015

JANUARY/FEBRUARY 2015

PUBLISHED SINCE 1898 | FORMERLY CANADIAN TRANSPORTATION & LOGISTICS

www.canadianshipper.comPHARMAPain points in healthcare supply chains

WESTERN INFRASTRUCTUREEmbracing the hub

BUYING TRENDS SURVEYWhat transportation will cost you in 2015

WHAT IT TAKES TO CRACK THE EU MARKET

BOON OR BUST

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High-effi ciency intermodal platform. Strategically located on the shortest route between Europe and North America’s industrial heartland. Offering access to 40 million consumers within one trucking day, and another 70 million within two rail days. No wonder the Port of Montreal is connecting with partners across the globe.

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GUTEN TAG

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www.canadianshipper.com January/February 2015 3

CONTENTS

JANUARY/FEBRUARY 2015

DEPARTMENTS

6 | ViewpointRecruiting women to work in supply chain: fighting the stigma.

Kuzeljevich appointed to Editor, Canadian Shipper.

8 | In the NewsStricter transport rules in place for lithium batteries.

52 | Inside the NumbersSupply chain positions – at all levels - must be made attractive to women. Here’s why.

53 | The Bigger PictureThe major news stories of 2014 will continue to impact on your operations in 2015.

FEATURES

A HEALTHY STATE | 26How SCM can improve Canada’s healthcare industry.

TAKING SHAPE | 28Western Canada’s provinces assess growing need for infrastructure improvements.

TRANSPORTATION HUBS | 30The case for Calgary.

COLD COMFORTS | 32The benefits of reefers for Western Canadian supply chains.

COVER STORY

BOON OR BUSTOur annual review of European

trade opportunities examines shortsea

shipping prospects and challenges,

and strategies for entering the

EU market as CETA goes forward.

14

continued

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A FINE BALANCE

Pharmaceutical shippers must work

around cost and compliance challenges

in the year ahead

22

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WHAT’S ONLINE


WEB TV Transportation Matters

HANDS-FREESt. Lawrence Seaway goes for hands-free mooring. Video courtesy: Cavotec Engineering. Used with permission of St. Lawrence Seaway Management Corp.

THE COMPLIANCE CATALYST | 34Technology that responds to the increased demands of regulation and cost control is surging.

HIGHWAY H2O CONFERENCE REPORT | 40 The St. Lawrence Seaway embarks on infrastructure improvements and new partnerships

TRANSPORTATION BUYING TRENDS | 46Our annual Transportation Buying Trends research, conducted nationally in partnership with the Freight Management Association of Canada, Cormark Securities and CITT, looks at what shippers across Canada project for increases to their freight rates, the penetration of surcharges and their concerns about capacity constraints.

continued

40

Find us on Twitter at:

@CanadianShipper | @LouSmyrlis | @JuliaKuzeljevic | @JamesMenzies | @FleetExecutive

BLOG BITS Search our blog archives at ctl.ca

Carolina Billings

How to slay a Dragon in Five easy steps.

Dan Goodwill

The Top Freight Transportation

Stories of 2014.

Some Takeaways from the

2014 Surface Transportation Summit –

Shipper-Carrier Collaboration.

Julia Kuzeljevich

Rail regs, service dominate headlines.

34

HANDS-FREE






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A s those of you who read this column regularly have come to know, I like numbers. Why? Because they point to the truth and serve as a call to action.

One of the areas where “the numbers” should be acting as a call to immediate action is the under-representation of women in supply chain at all levels. Considering that by 2017 there will be approximately 360,000 supply chain job vacancies nationally, according to the Cana-dian Supply Chain Sector Council, can we afford to miss attracting nearly half of the conti-nent’s source of human capital,leadership and ingenuity? A large proportion of supply chain jobs are found in manufacturing. Yet a Deloitte study of US manufacturing conducted a couple of years ago found that manufacturers struggle to attract female candidates. The De-loitte study, which included a survey of more than 600 women in manufacturing, found that only 1 in 5 thought manufacturing was doing a good job of representing itself to women.

For too long supply chain has suffered the stigma of being perceived as male-centric. More than half the women surveyed in the Deloitte study attributed the lack of interest among females to work in manufacturing to a perception of male bias-a perceived bias that starts at the very top where, as Corrie Banks, president, Triskele Logistics Ltd, points out: “Common thought has long since been leadership equals male.” In fact, the key attributes to success in a supply chain man-agement position are no different for men than women: professionalism, work ethic, education.

Another hurdle is retaining women in supply chain, particularly when considering perceptions surrounding current pay practices. Two years ago our Annual Survey of the Canadian Supply Chain Professional found that fifty-five percent of the female supply chain professionals responding to our survey did not believe they were receiving equal pay compared to their male counterparts for equal work in their organizations. Perhaps even more alarming was that 79% of male respondents to our survey believed that their female counterparts were receiving equal pay for equal work.

Research shows that organizations with diverse leadership are more profitable. A study by Catalyst, a nonprofit organization dedicated to expanding opportunities for women and business, found that Fortune 500 companies with high percentages of women officers had a 35% higher return on equity and a 34% higher total return than companies with fewer women executives. It’s time for supply chain to rid itself of the stigma of a male-dominance. For those interested, Cargo Logistics Canada Expo & Conference (Vancouver Convention Centre January 28-29, 2015) will feature a session addressing the pivotal role females play in answering to industry stereotypes and labour shortages in Canada.

Julia Kuzeljevich promoted to editorSpeaking of women in supply chain, it is with great pleasure that I announce the promotion of associate editor Julia Kuzeljevich to the position of editor. In this new role, Julia will have full responsibility for the day to day editorial direc-tion of Canadian Shipper and will also be increasingly involved in its long-term strategic positioning.

Over the past year Julia has been instrumental in the rebranding of this publication, work-ing closely with art director Ellie Robinson and our seasoned team of writers to provide a fresh new look and feel to Canadian Shipper. Publisher Nick Krukowski and I feel this is the best this publication has ever looked and read and Julia’s leadership had a great deal to do with that.

I’ve had the pleasure of working with Julia on this publication and within the Transporta-tion Media team for over 15 years now. In this time I’ve watched her grow into an award-winning writer and meticulous researcher, and take on more of a role speaking on industry issues. I look forward to continuing to work with her as she brings her talents and develops new ones in this leadership position.

THE VIEWLou Smyrlis, MCILT

6 January/February 2015 www.canadianshipper.com

January/February 2015Volume 118 Issue No.1

Let’s get rid of the stigmaSupply chain should not be perceived as a male-dominated profession

EDITORJulia Kuzeljevich (416) 510-6880

[email protected]

EDITORIAL DIRECTORLou Smyrlis (416) 510-6881

[email protected]

PUBLISHERNick Krukowski (416) 510-5108

[email protected]

ART DIRECTOREllie Robinson

[email protected]

CONTRIBUTING EDITORSCarroll McCormick, Leo Ryan,

James Menzies, John G. Smith, Ian Putzger, Ken Mark, Carolyn Gruske

MARKET PRODUCTION MANAGER

Gary White (416) 510-6760 [email protected]

VIDEO PRODUCTION MANAGERBrad Ling

RESEARCH MANAGERLaura Moffatt

CIRCULATION MANAGERBarbara Adelt (416) 442-5600 ext. 3546

[email protected]

EXECUTIVE PUBLISHERTim Dimopoulos

VICE-PRESIDENT PUBLISHINGAlex Papanou

PRESIDENTBruce Creighton

HEAD OFFICE: 80 Valleybrook Drive, Toronto, ON M3B 2S9

Canadian Shipper is written for Canadian transportation and logistics professionals who manage product flow from manufacturer to point-of- sale. Edit orial is focused on re porting, analysis and interpretation of Can adian log-istics trends and issues. It is published by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd.

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Arriving. Reducing. Processing. Improving. MOL is now inthe third year of publishing key performance indicators.Numbers can fluctuate for a variety of reasons but westrive to be your partner in performance. Review all of ourfresh KPI results at CountOnMOL.com.

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ASIA-U.S. WEST COAST 97%

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PERFORMANCEJUL. - SEP. 2014

NOVEMBER 2014

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TRUCK TURN TIMEIN-TERMINAL

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INTRA ASIA 39%

ASIA–EAST COAST SOUTH AMERICA 71%

ASIA-MEXICO/WEST COAST SOUTH AMERICA 88%

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Arriving. Reducing. Processing. Improving. MOL is now inthe third year of publishing key performance indicators.Numbers can fluctuate for a variety of reasons but westrive to be your partner in performance. Review all of ourfresh KPI results at CountOnMOL.com.

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ON-TIMEMOL VESSEL

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ASIA-EUROPE 21%

PERFORMANCEJUL. - SEP. 2014

NOVEMBER 2014

JACKSONVILLE 17 MIN.

LOS ANGELES 42 MIN.

OAKLAND 32 MIN.

TRUCK TURN TIMEIN-TERMINAL

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INTRA ASIA 39%

ASIA–EAST COAST SOUTH AMERICA 71%

ASIA-MEXICO/WEST COAST SOUTH AMERICA 88%

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New rules taking effect in 2015 represent a significant change in how lithium batteries will be regulated and will affect numerous domestic companies and all modes of transportation of lithium ion batteries in Canada and the US.

With lithium batteries powering so many critical items, from cell phones, lap-tops and cameras to implantable medical devices, power tools and vehicles, the rules are expected to have a significant impact on commerce.

In late December Transport Canada announced a suite of amendments to its Transportation of Dangerous Goods Reg-ulations (TDGR). The updates include a ban on transporting lithium metal batter-ies as cargo on passenger flights in Canada, as well as new labelling and Emergency Response Assistance Plan (ERAP) re-quirements for certain dangerous goods. The prohibition came into effect on Janu-ary 1, 2015, to comply with the ICAO ban. It applies to all shipments of lithium metal batteries as cargo on passenger planes within Canada. It does not apply to batteries already contained in or packed with equipment, but only to those pack-aged and shipped separately. The ban will not affect travellers’ personal devices such as laptops and smartphones, which use lithium ion batteries.

In 2014, the International Civil Avia-tion Organization (ICAO) adopted a ban on the shipment of lithium metal batteries as cargo aboard passenger aircraft. The main concern is that if ignited, they can cause any nearby batteries to overheat and catch fire as well. Most passenger airlines in Can-ada have already voluntarily banned lithi-um metal batteries as cargo.

“These updates are welcomed by stake-holders because they promote harmoniza-tion and the proper identification of dan-gerous goods. They will help improve public safety and reduce the risk of acci-dents while streamlining and clarifying regulatory requirements for shippers and

carriers,” said the Hon-ourable Lisa Raitt, Minister of Trans-port.

Other updates to the TDGR in-clude incorporat-ing Protective Direction (PD) 33 into the TGDR. Introduced in April 2014, PD33 ordered rail shippers of ethanol,

petroleum crude oil, gasoline, and other petroleum products to have an approved Emergency Response Assistance Plan (ERAP) in place to ensure proper emer-gency response in the event of an inci-dent or release involving these flamma-ble liquids.

Transport Canada held extensive con-sultations on the amendments with stake-holders from across Canada. The updates will align the TDGR with UN recom-mendations and other international norms.

The US has already banned the trans-portation of lithium metal batteries as car-go on passenger flights.

On August 6, 2014, the US Depart-ment of Transportation’s Pipeline and Haz-ardous Materials Safety Administration (PHMSA) published HM-224F in the Federal Register. Several years in the mak-ing, the ruling represents a significant change in how lithium batteries will be regulated when shipped by land, sea and air in the US. The ruling was also designed to

help bring lithium battery provisions in the US Hazardous

Materials Regula-tions (HMR) in line

with ICAO Technical Instructions, the International

Maritime Dangerous Goods (IMDG) Code and the UN Model regulations. While this means any company involved

in the transportation of lithium batteries in the US will have to re-

vise training programs and comply with new labelling requirements, the final rule on lithium batteries will simplify interna-tional shipping and help avoid frustrated shipments across borders.

The US Department of Transporta-tion’s HM-224F ruling takes effect Febru-ary 6. According to Bob Richard, vice president of regulatory affairs at Labelmas-ter, in many instances the rule makes it easier to ship because it is more aligned with international regulations.

“You don’t have to train to internation-al ground and air regulations,” he noted.

Richard previously worked with the Pipeline and Hazardous Materials Safety Administration (PHMSA) at the US De-partment of Transportation.

He is now responsible for providing dangerous goods regulatory assistance to customers worldwide.

The ruling means more simplified packaging and naming conventions, and many more shipments will be classified as dangerous goods.

“Under the former US rules you could have 12 batteries in a package, with no documentation, and just tight packag-ing. Now, even if you have one battery, you have to have specific marks, docu-ments, and packaging that meets a drop test,” he said.

Under the previous regulations in the 49 CFR, shippers needed to know the “equivalent lithium content” of the batter-

IN THE NEWS


LITHIUM BATTERY RULES COULD HAVE MAJOR IMPACT ON SUPPLY CHAIN BY JULIA KUZELJEVICH

©Oleksiy Lebedyev /Thinkstock

“The ruling means more

simplified packaging and

naming conventions, and

many more shipments

will be classified as

dangerous goods.”

p08-13 CdnShipper JanFeb2015_News.indd 8 15-01-15 2:24 PM


caption goes here


http://www.robert.ca

ies being shipped, which wasn’t always easy to determine. The new regulations replace equivalent lithium content with the more standard measure of watt-hours (Wh).

To align with international standards, PHMSA has adopted new proper shipping

names for lithium ion and lithium metal batteries and new UN numbers (identifica-tion numbers) as well. One way the new regulations have simplified the process is by using the same numbers for batteries “con-tained in” and “packed with” equipment.

While more rigorous requirements are probably a good thing, Richard said the ruling will have a major impact on returns shipments, which are always a challenge, especially when you’re dealing with people who are not frequent shippers, and don’t understand what could occur, he said.

“Companies struggle with this because when a customer or franchisee wants to return the batteries that person returning it is actually the shipper of record. If an incident gets attributed back to the dis-tributor or supplier it affects their reputa-tion. Companies are trying more and more to educate their customers. You wouldn’t believe how some returns are packed. It’s a lot of work to get those return shipments to be compliant,” he said.

No matter what direction a package travels in the supply chain, if it contains lithium batteries, the regulations will apply for proof-of-testing requirements, packag-ing, labelling and documentation.

In cases where consumers are sending products back to retailers or manufacturers, the consumers may not be aware of the new regulations. This means manufacturers should consider creating return-capable packaging for products containing lithium batteries or including a notice regarding the additional shipping regulations.

For cases where lithium batteries (or devices that contain them) are being shipped for disposal or recycling, the US final rule on lithium batteries adds a new section dealing specifically with this topic:

IN THE NEWS


“If an incident gets attributed

back to the distributor or

supplier it affects their

reputation. Companies are

trying more and more to

educate their customers. You

wouldn’t believe how some

returns are packed. It’s a lot

of work to get those return

shipments to be compliant”

Bob Richard, vice president of

regulatory affairs at Labelmaster

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IN THE NEWS


CS

small or medium batteries that would have been classified as fully regulated are now exempt when transported by motor carrier.

Richard is currently in the process of educating suppliers and dealers on the issues.

“We set up reverse logistics kits with

clear instructions. When performing au-dits, we go in and we look at markings on packaging, palletizing, training procedures. What SOPs are in place? What about warehouse management systems for high volume shipments, i.e. online orders that

are a mixed order, how do they know that there’s a difference between shipping bat-teries by themselves, or batteries with power tools that could cause an inadver-tent activation, or is the battery contained in a device? How do you deal with these different scenarios in an environment of low pay rates and high turnover? We try to standardize things, build in algorithms, make it simple for the employees. We find a lot of issues and we give a detailed list of fixes, and work with them to implement these fixes,” Richard said.

He said that given that the shipments are coming from places such as the Far East where regulators don’t necessarily have ju-risdiction over shippers, what happens is that the air carriers have been getting stricter on carriage rules.

“The International Civil Aviation Or-ganization is continually revising the regu-lations. But as a result, I’m just looking at a recent IATA addendum, and a number of airlines now won’t take lithium batteries on cargo aircraft either,” Richard said, citing a client who had to ship batteries via ocean to New Zealand, to get their product, a medical device, to market.

“This has huge ramifications to supply chains,” Richard said of the over zealous approach to restricting the shipments.

“I hope companies realize that they need to take note of these changes-don’t wait for the inspector to show up at their door. Canada and the US are targeting companies that are shipping these and these companies are high priority for enforce-ment. Letters of investigation are already being sent out by the FAA-you don’t want to wait that long-you want to get your op-erations into compliance,” Richard said.

“We try to standardize things,

build in algorithms, make it

simple for the employees.

We find a lot of issues and

we give a detailed list of

fixes, and work with them

to implement these fixes”

Bob Richard, vice president of

regulatory affairs at Labelmaster

T H E M A R K O F T R A D E E X P E R T I S E

Certified Trade Compliance SpecialistCTCS

For information about the CTCS Program, visit cscb.ca/ctcs or call 1-613-562-3543

The CTCS (Certified Trade Compliance Specialist) designation> recognizes the experience and expertise of international trade compliance professionals,> sets a standard for ongoing professional development in a field where change is constant,> supports a network for information sharing and collaboration.

The Canadian Society of Customs Brokers is proud to present the CTCS (Certified Trade Compliance Specialist) Designates of 2015

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T H E M A R K O F T R A D E E X P E R T I S E

Certified Trade Compliance SpecialistCTCS

For information about the CTCS Program, visit cscb.ca/ctcs or call 1-613-562-3543

The CTCS (Certified Trade Compliance Specialist) designation> recognizes the experience and expertise of international trade compliance professionals,> sets a standard for ongoing professional development in a field where change is constant,> supports a network for information sharing and collaboration.

The Canadian Society of Customs Brokers is proud to present the CTCS (Certified Trade Compliance Specialist) Designates of 2015

Alberta Merima Alicajic Trevor Bye Allan Corbett Jeffrey Fraser Colleen Jennings Cathryn Kirby Adshade Marcia Kobe Elaine Lamb Susan McDonald Sandra Teed Michael Theodore British Columbia Carol Brown Paul Courtney Allison Douglas Wyatt Holyk Jolanta Krasucka William Lee Chun Hui Eric Ma Maria Mate Marc McLean Ken Nord Patricia O’Malley Stacy Physick Cherie Storms

Margaret Tam Gail Wright Manitoba Wade Barr Bruno Biondi Darcy Calder Alan Dewar Donna Fetterly Nyree Menzies Valerie Michaud Barb Miller Kim Ross Hayley Dawn Shirtliffe Corey Tkach New Brunswick Shelley Gares

Newfoundland & Labrador Kelly Blenkinsopp Brian Collins Ronald Malone Michael Murphy Ontario Danielle Adair Jamal Ahmed Mehmood Ali

Gillian Allan Cynthia Annakie Fahmida Arab Deborah Axford Kathy Barzal Jennifer Beamish Sarah Berlato John Brooks Steve Bunda Kim Campbell Ganase Carlton Siew Chang Hannah Cheng Angela Collins Sue Compisano Hernan Cordoba Linda Cybulski Jennifer Deans Qi Deng Satnam Dhami Grace Di Marca Tanya Dietrich Karen Dingle Brianne Earish Matthew Earish Cynthia L. Elliott

Sean Everden Peter Xi Fang Emil Fiorantis Travis Fitzgerald Pamela Garrett Adriana Geleriu John Giroux Lynne Glass Charmaine Goddeeris Martha Goncalves Lisa Gouthro Sherry Graham Warren Green Ann Gruszecki Mary-Anne Hardy Saralee Harikrishin Christine Hartman Kyle Hartwick Vicky Nhon Huynh John G. Jakubowski Branislav Kecman Rufat Khanaliyev Lisa Knight Harmeet Kohli Carol Shu-Qin Kwok Jennifer Livick

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Brian Rowe Amanda Salmond Naeem Sardar Tammy Shaw Candace Sider Catherine Slater Denise Stalder Brian Staples Debbie Stevens David Stockwell Michelle Stokes (Bunbury) Susan Subryan Laura Swanson Simona Talasman Michelle Tamburro Raymond Tang Demi Todorov Karen Vallee Kimberly Van Runt Terri Walsh Ruth Webb Ping Ping Wen Jeff Willson Tara Wilson David Winkler Dian Wollison

Ivy Woo Quebec Melanie Bedard Karen Blouin François Dupuis Marc Filion Robert Gaboriault Richard Gervais Natasha Harper Claire Howarth Paul Hughes Pierre - Yves Lafrance Nadine Lépine Lorin Levine Margaret Emma Million Kevin Mooney Suzanne Perkins Ronald Racine Ginette Ste-Croix Sandra Walker John Weight A.J. (Tony) Yakubosky Monika Zanacan Michael Zobin SaskatchewanBarry Frain


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CETA AND SHORTSEA SHIPPING

As the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) en-ters a ratification stage expected

to stretch to 2016, all is certainly not quiet on the Canadian maritime industry front.

For sure, the ports of Montreal and Hal-ifax have quickly identified promising op-portunities for growth in North Atlantic trade as most customs tariffs will disappear on resource products and manufactured goods under free trade. The same percep-tion surfaces at such Great Lakes ports as Hamilton and Thunder Bay.

Representing ocean carriers, the Ship-ping Federation of Canada has unequivo-cally portrayed CETA as “a boon for Can-ada’s maritime industry” in a number of areas. “Not only will the agreement gener-ate additional trade in goods between the two continents, it will also create demand for related transportation services,” the Shipping Federation asserts.

However, the Seafarers’ International Union of Canada (SIU) late in 2014 esca-lated a campaign to “Stop CETA from sinking our ships” after earlier forming the Canadian Maritime and Supply Chain Co-alition and sending a bluntly-worded letter to Prime Minister Harper. In particular, SIU President Jim Given states: “This agreement will have a severe negative im-pact on Canadian Seafarers and the Cana-dian Marine industry as a whole by open-ing domestic trade to foreign carriers, doing away with our Cabotage Laws.”

Claims that CETA will not take business away from Canadian-flag vessels and crews are also strongly rejected by the Canadian Shipowners Association (CSA) representing domestic carriers, including Canada Steam-ship Lines and Algoma Central Corporation.

“While the CETA deal is good for the Canadian economy,” says CSA President Robert Lewis-Manning, “it cannot be al-lowed to jeopardize the Canadian shortsea

shipping capacity that the domestic marine industry, labour and the government have collectively developed to meet Canada’s unique domestic shipping challenges.”

Canadian domestic ship owners have, in the past few years, invested in 14 modern high-efficiency and eco-friendly vessels worth over $700 million, which are posi-tioned to play a part in the prosperity that CETA will bring, the CSA notes. The CSA fleet of 86 vessels carries some 53 million tonnes of cargo annually, primarily on the Great Lakes/St. Lawrence waterway.

The CSA expressed concern over an al-leged lack of transparency in the CETA negotiations and the fact that access to trades between Canadian ports may be given to EU carriers who employ interna-tional labour at much lower rates, do not pay Canadian taxes or employ Canadian workers and are not regulated to rigorous Transport Canada safety and operating standards for Canadian flag vessels.


CANADA’S MARINE INDUSTRY DRAWS BATTLE LINES

BY LEO RYAN

EUROPEAN TRADE

p14-20 CdnShipperJanFeb2015 Europe.indd 14 15-01-15 11:54 AM


CETA AND SHORTSEA SHIPPING

January/February 2015 15

EUROPEAN TRADE

continued

Photo by Sylvain Giguère

Canadian-flag shortsea shipping vessels are specially designed for Canada’s inland and coastal waters and to meet Canadian requirements.

“Unable to leave Canada and compete against cheaper international competition, the Canadian crewed, Canadian owned and regulated Canadian flagged domestic fleet will be hurt if Canadian cabotage rules are reduced to allow any international vessels access to Canadian markets,” Lewis-Man-ning told the House of Commons Standing Committee on International Trade. “Our mariners possess unique local knowledge that ensures that Canadian waters are safely transited, respected and protected. We need to ensure that these jobs remain in Canada.”

Countering some of the criticism, the Department of Foreign Affairs, Trade and Development Canada has affirmed that CETA will help the Canadian industry grow due to an increase in trade. In addi-tion: “CETA will ensure a level playing

field for Canadian shipping companies and existing safety, security and pollution-pre-vention regulations that apply to foreign vessels operating in Canada will continue to apply, as will requirements applied to foreign nationals working on these vessels.”

Two hot button issuesTwo of the most controversial features of CETA revolve around one provision that would allow any interested EU carrier to potentially offer a feeder service between Halifax and Montreal and another provi-sion opening the Canadian market to EU dredging service providers.

In a recent form, a federal document on the CETA accord makes the erroneous as-sumption that no Canadian shipowner cur-rently provides feeder services between Hali-fax and Montreal. For a number of years, St. John’s-based Oceanex has been transporting containers on this very same route.

In this regard, Oceanex sent a letter

“CETA will ensure

a level playing field

for Canadian shipping

companies and existing

safety, security and

pollution-prevention

regulations that apply

to foreign vessels

operating in Canada

will continue to apply,

as will requirements

applied to foreign

nationals working

on these vessels.”

Department of Foreign

Affairs, Trade and

Development Canada

Michael Broad, president,

Shipping Federation of

Canada

The Bermuda-flagged cargo ship Valencia

Express was the first ocean-going vessel to

reach Montreal directly in 2015.

Jean-Philippe Brunet,

EVP, Corporate and Legal

Affairs, Ocean Group


last fall to Ottawa against opening cabo-tage in CETA.

Subsequently, Transport Canada’s head of marine policy and regulatory affairs, Louise Laflamme, sought to put matters in a some-what different perspective. Addressing the Highway H2O Conference in Toronto in November, she said the provision was re-stricted to EU-registered carriers transport-ing international import or export cargo. “Domestic cargoes that stay in the Canadian market are not captured by CETA.”

The rationale for opening up the Cana-dian waterway dredging market to EU en-terprises is based on perceived insufficient capacity by Canadian suppliers alone.

Protesting strongly against this provi-sion has been Quebec City-based Ocean Group. Contacted by Canadian Shipper, Jean-Philippe Brunet, executive vice presi-dent, corporate and legal affairs, said that while Ocean Group appreciated Ottawa’s desire to develop new markets in Europe to increase trade, the opening of the relatively

small Canadian dredging market to Euro-peans will have a profound impact – nota-bly “altering the balance of power.”

“Companies such as ours have made ma-jor investments in order to meet the needs of governments and ports in Canada. For ex-ample, we invested 25 million dollars in 2011-2012 to build a trailing suction hopper dredge in Quebec. This dredge was built after we were awarded the maintenance dredging contract for the Traverse du Nord by Public Works and Government Services Canada.”

Brunet points out that the four largest dredging companies in the world are Euro-pean – and, between them, they share more than 80% of the world market. “In Canada, the few contracts of importance allow Cana-

dian dredgers to amortize the costs of their equipment which, in turn, limits the charges for the execution of smaller contracts.”

What Ocean Group especially deplores, Brunet stressed, is the fact that CETA “does not reciprocally open the European dredg-ing market to Canadian companies.”

Commenting on the general thrust of CETA, Barry Prentice, professor of supply chain management at the University of Manitoba who closely follows trade and transportation developments, observed: “The issues cover pretty small niches in the overall scheme of things. I tend to be in favour of an environment of greater com-petition through deregulation that would include more liberalized cabotage.”


Leo Ryan is a veteran journalist who has reported on key transportation

and trade developments in Canada for more than two decades. A former

Montreal bureau chief for The Journal of Commerce, he specializes in port and

shipping issues and was awarded the Medal of Merit in 1992 by the then

Canadian Port and Harbour Association.

continued from p. 15

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EUROPEAN TRADE



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CRACKING THE EU MARKET

TRADE SPECIALIST DEFINES STRATEGIES FOR SUCCESS, BEFORE AND AFTER CETA

BY JULIA KUZELJEVICH

For shippers looking to break into, or expand their presence in the European market, what are the implications of the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA) and how will it affect Canadian companies doing business in the European Union?

Danielle Goldfarb, Associate Director of the Conference Board’s Global Com-merce Centre and one of Canada’s top experts in trade, discussed proven strategies for success in the European market, before and after CETA.

Goldfarb’s analysis looked at the experience of over 9,000 Canadian companies that were actively exporting to the European Union over a recent 15-year period, analyzing how exporting to the EU has affected Canadian company sales and profits, and how this compares with the performance of those that have exported elsewhere or not exported at all.

The negotiators of the Commission and of Canada finalized their work in early August 2014. The Member States and the European Parliament received the complete text on August 5. President Barroso, President Van Rompuy and Prime Minister Harp-er announced the end of the CETA negotiations at the EU-Canada Summit on 26 September. The European Commission and Canada are now conducting the legal re-view of the original (English) version of this text. It will subsequently be translated into the other official languages of the EU and Canada before being submitted to the Council and the European Parliament for approval.

“Now we are prepared to start a conversation on how do we best take advantage of the deal, and what is the overall trade picture for Canada,” said Goldfarb.

EUROPEAN TRADE



Canada has what Goldfarb describes as an export problem: essentially we’re exporting the same volume of goods we did in 2000.

“We have not grown our exports-it’s very important for Canada to develop these, and we need to think about where we’re going to expand our exports in the future. US trade overwhelms the rest of our trade, but we do see the picture changing dramatically in 2025.”

The European Union represents an im-portant share of Canada’s trade with non-US countries.

Looking at the numbers, much of the Canada-EU relationship is based on two-way investment. Some 3/5 of Canada’s fast-est growing exports are actually services, Goldfarb pointed out.

“They are not small dollar value ser-vices. It’s not just about selling products but about selling expertise,” she said.

The promise of CETA, the most expansive deal in existence for both parties, “allows Can-ada to keep in line with the US as well which is in the midst of negotiating its own trade deal with Europe. The deal with the EU allows us to access markets far beyond-i.e. Asia.”

Tariff removal will be significant in cer-tain sectors but these are not the most im-portant aspect of the deal, as most of these are relatively low.

More importantly, CETA should ad-dress non-tariff barriers that are a little bit more opaque.

“The deal itself actually has a provision for a Canadian body to assess whether it meets EU standards,” she said.

The deal also opens up a very large gov-ernment contract market.

“Examining the performance, success and failures in this market, we compared them to companies that were exporting elsewhere, and not exporting at all. For Ca-nadian exports as a whole, exports boosted overall sales and profit. We tried to isolate for exports to the US, and all else equal, exports boosted sales and profits,” said Goldfarb.

When it came to the EU, it was a more interesting, complex picture.

“We found that company sales did in-crease as a result of exporting. But we did not find a statistically significant impact on company profits in the shorter term. We measured this various different ways and each way we ended up with a similar result. But when companies were exporting to mature EU markets, sales did go up,” Gold-farb noted.

“We think what’s happening is that Cana-dian companies are learning by exporting into the EU market. When companies discover non-tariff barriers, and diversity in terms of the market itself, there are different kinds of demand, marketing, and the need to innovate for different parts of the market,” she said.

Canadian companies entering the US are not having to deal with a tariff barrier, and they are dealing with a more homog-enous set of preferences.

“Usually they can take one or two mar-keting approaches, while in the EU market they have to address various barriers that may not be unifom and a diverse set of preferences, hence the lack of short-term profit. So if the deal can reduce the impact of these non-tariff barriers then there is a chance these companies could see more short term profits,” Goldfarb said.

What are some of the strategies behind success in this market?

It doesn’t matter so much if companies are experienced in the Canadian market first.

It also didn’t matter if companies had gone to the US market first before going to the EU market.

“It was not a significant factor that boosted their sales. That’s a really important myth-buster. We also found that going to mature EU markets really did make a dif-ference as a whole. And that it greatly in-creased their chances of succeeding in the EU market as a whole. This was more im-portant for smaller companies, not so much for the larger companies. We were able to


continued

EUROPEAN TRADE



measure the rate at which companies en-tered into the EU market-if they intro-duced new products more frequently they had a greater chance of success. This was more important in the EU market than for emerging markets. Finally the number of EU market destinations was important, and that’s to be expected,” she said.

Smaller firms are shipping lower value stuff but they are growing much more rap-idly, while larger companies have not been seeing that much more sales growth. Small companies are also staying for almost as long as the larger companies in the EU market, Goldfarb commented.

Looking at the companies in the sample, manufacturing really dominates the picture in terms of sales growth and share of total exports to the EU, along with business ser-vices, finance and insurance products.

“All in all the deal is going to be what companies make of it.

The deal itself will remove tariffs, par-ticularly for smaller companies that can’t

invest in the EU mar-ket directly. But tariffs are really already low, and relatively transpar-ent and uniform. Can-ada’s trade is also going to be more affected by what happens with EU demand. We think what are more important are the other kinds of barriers that compa-nies face in Europe; the other kinds of bar-riers that are more significant, and less transparent,” she said.

Emerging EU markets “are not for EU beginners”, though.

“Our findings show that small compa-nies can be successful if they adapt to high-ly differentiated EU markets and if they do their homework before they go. We need to think beyond manufacturing in terms of services which are less visible. Innovation

will be key: companies will not benefit if they are expecting CETA to deliver gains without innovating and putting in the

necessary homework,” she said.At this stage, the deal does

have to get approval from Euro-pean Parliament.

It’s complicated by the fact that Canada took a really long time to negotiate the deal and in the

meantime the EU and the US are negotiating, and now whatever Canada and the EU negotiate becomes a template for US-EU negotiation.


continued from p. 19

Editor Julia Kuzeljevich

has been writing writing about

transportation issues for

15 years. Her meticulously

researched articles have garnered several

transportation and Canadian Business

Press writing awards.

EUROPEAN TRADE

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OVER THE LAST 43 YEARS, we’ve helped customers’ products go anywhere in North America, and we’ve been servicing Canada in Canada for over 20 years. Yet, somehow they’ve taken us even further. We’ve grown from a single room o�ce to a three billion dollar company while continuing to invest in infrastructure, technology and sophisticated reporting—because our business only goes as far as yours.

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PHARMA

PHARMACEUTICAL SHIPPERS MUST WORK AROUND

COST AND COMPLIANCE CHALLENGES

IN THE YEAR

AHEAD

A FINE BALANCE


©ARTQU/iStock/Thinkstock

p22-33 CdnShipper JanFeb2015_WesternInfrastr_Pharma.indd 22 15-01-15 2:04 PM

Canada boasts healthy biotech and life sciences clusters, which are increasingly active as foreign buyers and investors. Export

Development Canada has seen a marked increase in the export potential for Cana-da’s biotech and life sciences companies in the past five years, “and EDC has evolved some of our financing products to meet the unique needs of Canadian companies looking to grow in this lucrative niche,” said Carl Burlock, Senior Vice-President, Financing and Investments, EDC.

But regulatory challenges for the life sciences supply chain are at the forefront and are key.

UPS’ 2014 Global Pain in the Supply Chain survey, appearing for the 7th year in September 2014, examined the state of the life sciences industry, along with challenges, strategies and untapped opportunities.

Economic conditions still weigh on healthcare companies, particularly those in North America and Latin America. Cost management, driven by regulatory reform and profit pressures, remains a top supply chain issue. Yet the level of concern is declin-ing year over year, according to the survey.

Regulatory compliance remains the top business and supply chain issue. But a murky legislative outlook and differing regulations by country make the issue more complex.

Product protection, which comprises both product integrity and product secu-rity, has become a bigger challenge as prod-ucts become more complex and companies expand into emerging markets.

Concerns are particularly high in the Asia-Pacific region. Contingency planning is an area in which fewer than four in ten executives report success. Supply chain dis-ruptions have had the greatest supply chain

impacts in Asia-Pacific and Latin America. Col-laboration and partner-ships are top strategies to address challenges, such as complying with regulations, supply chain cost management, and global market access.

The survey suggests that technology investment is the top strategy to improve competitiveness and efficiency. Planned technology investments enable better product protection, visibility, and easier patient access through online order-ing. Growth and global expansion chal-lenges include a complicated regulatory environment and inadequate infrastructure in emerging markets. Companies are lever-aging partnerships to get ahead. New channel and distribution strategies bring new opportunities for companies—partic-ularly with anticipated growth in home healthcare. But the survey said that shifts in channel mixes are slow to materialize. In an interview with Canadian Shipper, Jim Ramsay, the Canadian Freight Forwarding Manager at UPS Canada, elaborated on the risk scenario and on issues for supply chain executives in this vertical.

“Regulatory compliance is continuing to change and there are differing regulato-ry regimes in different geographies. Strin-gent regulations are a good thing from a patient point of view. One of the big trends we see is that concern around this. The sec-ond big area is around product protection. There’s integrity of the product, which is important for the cold chain, and the sec-ond concern is around product security and the high risk around theft, tampering and counterfeiting,” Ramsay said.

“I’ve always been a big fan of countries

harmonizing as much as they can. The un-

fortunate reality is that we’re not completely h a r mon i z ed . Tha t ’s where you see the chal-lenges,” he said.

An example of this was reported in Canadian

Shipper last September. Health Canada asked pharmaceutical giant Apotex Inc., the largest Canadian owned pharmaceuti-cal company, to quarantine products for the Canadian market manufactured at the Apotex Research Private Limited (ARPL) facility in Bangalore, India, based on an import ban of products at the time from that facility by the U.S. Food and Drug Administration (FDA).

During the quarantine, Health Canada was to gather more information, includ-ing the reasons for the FDA’s actions and the potential impact of any issues it iden-tified on products for the Canadian mar-ket. While neither Health Canada nor the FDA requested a recall of any products from the ARPL facility, the quarantine ac-tion was enough to see Apotex Inc. seek arbitration through a NAFTA tribunal, which rejected Apotex’s claims that the FDA violated NAFTA by prohibiting im-ports of Apotex products from two plants in Ontario, Canada.

Apotex also released a statement setting the record straight about its two Bangalore manufacturing facilities, one of which manufactures raw materials (APIPL), and the other, finished products (ARPL).

“When raw materials or finished prod-ucts are imported into Canada, they must undergo a rigorous retesting process at a Ca-nadian facility before being distributed to the Canadian market. This secondary testing is

PHARMA




wards looking at companies willing to outsource to a 3PL.

“But it’s gaining momentum. We do see that the executives sur-

veyed have some concern around the economy, and

some concerns around meeting the regulatory re-quirements. 78% of the ex-ecutives indicated they were looking at new partnerships, 52% were outsourcing transporta-

tion management. In the Canadian context, two as-

pects are helping with the Ca-nadian supply chain. For products manufactured globally it’s about

helping people get the product into the country. Across Canada we have 11 dedi-cated healthcare facilities and offer final mile distribution, maintaining product in-tegrity at certain temperatures. Home healthcare is changing some distribution patterns. More is dispensed out to the indi-vidual,” he said.

The other aspect is looking at Canadian healthcare companies that are looking to grow.

“We have six million square feet of healthcare facilities worldwide to help companies access emerging markets. We are noticing there is far more due diligence in the analysis of speed for moving prod-ucts. There’s always a fine balance between the cost of carrying inventory and the cost of transport. As a result of that we’re seeing companies get down to more of a SKU level in deciding how to move things.

There is also more ocean-based product. (UPS offers the Temperature True Saver Solution for FCL transport),” Ramsay said.

David Fox, Vice President, and Head of Business Development, with DHL Global Forwarding Americas, said that visibility “is key for our customers. We try to under-stand their supply chain requirements. That means sitting down with their quality de-partment. We do lots of due diligence jointly and up front,” he said.

The company opened its Life Science Competency Centres recently in Toronto based on Toronto being a key pharmaceuti-cal market.

The centres offer the ThermoNet product and customized processes, with a dedicated staff.

“Canadian customers have been very receptive to it. DHL Global Forwarding has developed end to end temperature control through the life of the shipment. It has been well-received by customers and is GDP certified. We’ve also developed a web-based Life Track IT platform, specifi-cally designed for the life sciences, which gives milestone updates throughout the touchpoints. The web-based Life track so-lution has helped us with our growth and we’ve made a commitment that it be man-datory for all life cycle customers,” Fox said.

AIRLINES RESPOND TO PHARMA GROWTHAmeet Sareen, Manager Cargo Solutions, Air Canada Cargo, said that in the phar-maceutical industry there is always so much happening in terms of increase in


“You have to work as much as you possibly can

towards the gold standard of compliance so that

you won’t have to deal with as many of the

different regulations worldwide,”

Jim Ramsay, Canadian Freight

Forwarding Manager at UPS Canada.

PHARMA

not an option, but a legal mandate for all pharmaceuti-cal companies shipping prod-ucts and materials into Canada that provides an added level of precaution before the product reaches pharmacy shelves. This allows Health Canada to re-main confident in the safety and effectiveness of imported products, and subsequently avoid any significant disruption in supply for patients.” stat-ed Dr. Jeremy B. Desai, Apotex Presi-dent and CEO.

“It is also important to note that al-though that mandate requires confirmatory testing on at least one lot per year, per dos-age, Apotex goes above and beyond this re-quirement and retests every lot of finished product supplied to the Canadian market. For that reason, Apotex is absolutely confi-dent in the safety and effectiveness of all of our products throughout the entirety of our manufacturing and testing processes, regard-less of where it was manufactured.”

According to UPS’ Ramsay, “You have to work as much as you possibly can towards the gold standard of compliance so that you won’t have to deal with as many of the dif-ferent regulations worldwide,” he said.

“The one other thing that surprises me in the survey is the slow rate of change to adopting technology, and the change in the way of managing it. A lot of those same themes from 2011 came back in 2014,” Ramsay said.

He recommends taking a ‘don’t wait, keep moving forward’ approach on phar-maceutical supply chain strategies.

“If you don’t, somebody else will. Make investments with the appropriate diligence and analysis,” Ramsay said.

While executives say contingency plan-ning is part of their thought process, Ramsay noted, “this is more of a risk mitigation fac-tor, and primarily around natural disasters. We do some work with companies who have their main/primary distribution site and we will set up a satellite one. We’re see-ing more of an interest in collaboration and on developing partnerships. Sometimes it could be between similar industries or com-plementary products,” he said.

Co-location is also more of a trend to-



requirements, changes in regulations and higher expectations from everyone in-volved in the cold chain.

“The pace of change is fast and regula-tions are becoming more stringent. We aim to keep up with the change and stay ahead of all developments. When it comes to maintaining the quality of the shipments, contingency plans, corrective and preven-tion programs are becoming very critical in cold chain partner evaluation and selection. The trend continues on the chain of cus-tody: every step in the cold chain process must be compliant. We want to be sure that we comply with our role in the cold chain process and we have our own measures to ensure we are compliant. We give impor-tance to prompt, timely and concise com-munication with our customers,” he said.

Sareen noted that when taking decisions on which parties to work with, shippers are taking careful notes in evaluating all the play-ers that are going to be involved in the cold chain. Shippers need to gain a level of confi-dence that they are achieving an adequate level of compliance from all parties involved.

Airline compliance and training pro-grams are developed taking in consider-ation the IATA Chapter 17 guidelines.

In terms of technical trends, and what airlines are doing to differentiate them-selves from the others while meeting compliance requirements, Air Canada Cargo recently approved several GPS de-vices for carriage.

Shippers increasingly would like to use these devices, providing them with real time tracking, visibility and temperature condition of their shipments, Sareen said.

“Getting these GPS devices approved for carriage on Air Canada aircraft is a time consuming and stringent process. We have been working with our people on the maintenance and engineering side of the airline to get these devices approved. At this point, we have only approved the carriage of certain GPS devices, for cus-tomers that are interested in using them. Going forward, we see several applications and usage opportunities for these devices. We are in the process of mapping out how we will take these to the next level. Will we record data and take it to the custom-ers? Will these be used for our own inter-

nal use? Right now industry is happy that the carriage of these GPS devices will be allowed on Air Canada,” he said.

In addition to GPS, Air Canada Cargo is working on enhancing passive packaging solutions.

“In the latter half of 2014 we announced the usage of DuPont Tyvek Air Cargo covers, designed and developed to help passive ship-ments fight extreme weather conditions, espe-cially heat and solar radiation. We have been testing these over the last little while, and we have decided to go ahead and launch these as part of our passive packaging program. We are always looking at ways to improve our passive and active product offering. On the commer-cial front, we have recently simplified our lease rate offering, and on the operational side, we are looking at process improvements for the handling of active containers (Envirotainer and CSafe), including the actual handling of them, as well as positioning and repositioning them effectively,” Sareen said.

In terms of best practices for pharma shippers and questions they should be ask-ing of their providers, Sareen noted that over the years the expectations and practices have not only improved, the expectations have also gone up and it’s very critical to have these expectations set from the get go.

“It’s important that there be clarity in communication, and that maximum amount of information be shared amongst the parties involved. The shipper needs to provide as much information as possible to freight forwarders and airlines ex-pect as much information as pos-sible from the freight forwarders, so we can meet the expectations of the shipment, be it temperature expectations or any others that the shipper desires. External tempera-tures may (or may not) have an impact on the inside temperature of the container. There are several different types of containers avail-able and depending on the time of year, ambient conditions and temperature control require-ments, one type might be better suited than the other. It’s critical to select the correct container type for its mission,” he said.

There is also a trend in ad-

vance bookings which gives the airline some additional time to make the neces-sary arrangements to get the containers ready in time for the shipment.

“What is also becoming more impor-tant is the shippers looking for data/infor-mation on the state of their shipment. They expect information about the condition of the shipment at the key touchpoints, i.e. temperature, voltage, battery level, dry ice, and ambient conditions as well. We often have forwarders looking for this informa-tion from the airline, as this validates the compliance to the conditions set for the shipment. We are also exploring ways to pro-actively provide this data/information to our customers,” he said.

With the GTA becoming a key hub for pharma shipments, last September saw Lufthansa Cargo officially celebrate the certification of its Toronto (YYZ) Cool TD (time-definite) station. Toronto’s training and audits were already fulfilled by this September, said Jörg Bodenröder, Director of Lufthansa’s Cool Competence Centre in Frankfurt.

The Toronto station “joins the outstand-ing crew” of certified Lufthansa Cargo Cool Stations worldwide, Bodenröder comment-ed, adding that the Cool TD service is a timely response to the growth of pharma products worldwide, which have proved more resilient against negative economic

trends and volatility in airfreight.Following the certification to

the Toronto station this year, Luf-thansa Cargo will follow up next

year with a quality audit, he added.Mathias Csaszar, Senior Prod-

uct and Solutions Manager, Luf-thansa Cargo, said that airfreight is a volatile commodity but that the com-pany estimates 4% annual growth.

“We are sure it will remain volatile but the pharma segment shows steady growth.”

Toronto is the 6th Lufthansa Car-go station certified around the world.

“Why certify? Toronto has strict local health requirements, is the 5th most im-portant station in our network, has a high-ly professional staff, and state of the art in-frastructure. Most of the requirements were already in place,” Csaszar said.

PHARMA


CS



In a presentation to the Chartered Insti-tute of Logistics’ GTA region chapter last fall, Jim Eckler, President, Eckler As-sociates, discussed the issue of “unsus-

tainability within the healthcare industry.”Healthcare costs are rising at double the

rate of inflation, and 25% of healthcare spend is supply chain related. The health-care industry also represents 12% of GDP in Canada, Eckler noted.

“Healthcare is the largest industry in the country, and there are fundamental issues of sustainability. There are some significant suc-cess stories and solutions. When we talk about the healthcare industry what are we talking about? Wholesalers, distributors, medical equipment, service providers, hospitals, pri-mary care facilities, governments, insurance companies, etc. At the centre of this are the patients. When it takes that much money there not much left for other spending,” he said.

Healthcare has the most complex organi-zational structure of any Canadian industry.

“After 12 years in the healthcare sector I have yet to be able to point to anyone who knows it all. Supply chain plays a much bigger role than most realize, con-suming 25% of hospital costs, the biggest element next to labour costs. It’s incredibly immature from a supply chain standpoint.

Most decisions are made either by physi-cians, (who have their favourite products), and low level clerks. As medical technology has im-proved and demand grows, supply costs are growing at more than double the inflation rate. The science of medicine has been transplanted into the device so to speak,” Eckler said.

of value analysis teams (VAT) to make decisions on best product pur-

chase decisions, on each procurement initiative, and on the use of outsourcing are becoming more prominent.

Eckler gave the example of a case study where several British Columbia hospitals outsourced their back offices to a shared services organization, Health Shared Ser-vices BC, whose services included supply chain management.

While it involves some change man-agement and negotiation, it’s yielding some very significant successes in British Co-lumbia, with the advantage of more coor-dinated responses to increasingly frequent drug shortages.

In Ontario there are nine shared ser-vices groups, Eckler said, and these groups are also making great inroads in Alberta and Saskatchewan.

High quality supply chain leadership and capture of economic leverage are advantages.

“We are starting to see more vendors in the healthcare field getting more involved in the project. System sustainability is achievable but it will require great efforts to turn the ship,” Eckler said.

PHARMA


He said that Canada’s largest and most critical industry could be “heading towards failure.”

With physicians acting as powerful stakeholders in the supply chain process, there’s the added complexity that they are not rational decision makers.

“They insert this thing called ‘saving a patient’s life’. It doesn’t follow standard SCM practice but a more complex deci-sion making process dependent on trusting relationships,” Eckler said.

Clinicians, vendors and administrators make up a “love triangle” and research shows that trust is not evident.

“There’s need for an orchestrator to man-age the groups. There is some movement afoot- we’re starting to see certain groups es-tablish greater centralization, with hospitals collaborating on standards, protocol, and on leveraging buying power. There’s also been significant improvement on the upgrading of skills. We also see the slow, somewhat spotty movement of supply chain management up the corporate ladder,” Eckler said.

Doctors are starting to realize they must work together to ensure the sustain-ability of the systems and as such the use


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WESTERN INFRASTRUCTURE


The future shape of Western Canada’s extensive transportation and logistics infrastructure lies mainly in the hands of decision makers at municipal, provincial and federal levels of government.

Members of the recently established New West Partnership Trade Agreement (NWPTA) and a restructured Pacific Gateway Alliance (PGA) have joined the club. The former brings together the govern-ments of British Columbia, Alberta and Saskatchewan to create Canada’s largest, barrier-free, interprovincial market. They are Cana-da’s first jurisdictions to recognize or reconcile their rules affecting trade, investment or labour mobility.

In contrast, the Pacific Gateway Alliance is a unique partnership of transportation industries and governments that will oversee the $21 billion expansion of port, rail, road and airport facilities in British Columbia.

At the recent Trade Infrastructure Summit in Regina, the two organizations asked the Calgary-based Canada West Foundation (CWF) to prepare a report due out in mid-2015 to help the NW-PTA assess the region’s long-term infrastructure needs.

These include: • Road and rail access to new resource plays such as natural gas for LNG in northern regions• Safety, reliability, bottlenecks, capacity constraints, road/rail con-flicts on major east-west national roadways such as Highway 1 and Highway 16 • British Columbia gateway ports for Western Canadian exports and Asian imports. • New roads and bridges to facilitate international trade

Says Carlo Dade, the CWF’s Trade and Investment Policy direc-tor, “Western Canada’s transportation infrastructure is faring well – we are moving goods to market. The only major problem we have

now is not enough pipelines. But the biggest one we will face is our ability to move products to the 3 billion people in the world who are about to join the middle class. The major issue is the constrained reality of our railways. It’s the struggle between carrying wheat and other grains vs. other commodities - pulp and paper, timber, miner-als, potash as well as manufactured goods including heavy equipment and airplane parts. Recent backlogs resulting from last year’s harsh winter point to a possible dysfunctional future,” he said.

Thank to its location, British Columbia serves as the main plat-form for the Asia Pacific Gateway and Corridor and the heart-and-soul of Canada’s strategy to serve expanding Pacific Rim markets. We have recently ratified a free trade agreement with South Korea and are actively discussing similar plans with Japan as well as with 11 other countries in the proposed Trans-Pacific Partnership.

BC’s major harbours, Metro Vancouver and Prince Rupert as well as Vancouver International Airport and its regional counterparts will play strategic roles as points of departure for exports and of entry for imports with our Pacific trading partners. Equally impor-tant are the province’s inland logistics facilities and transportation network. They enable timely, low-cost and efficient cargo move-ments to and from neighbouring provinces and the rest of Canada.

Thankfully, the province is up to the task. Its latest achievement is the recent completion of the new Roberts Bank Causeway Over-

Western Canada’s provinces assess growing need for infrastructure improvements

TAKING SHAPE

©Richard Jemison/iStock/Thinkstock

By Ken Mark

A convoy of trucks from CentrePort-area companies participated in the grand opening of CentrePort Canada Way on Nov. 22, 2013, becoming the

first cargo carriers to drive down the new $212-million expressway that connects Manitoba’s inland port to the highway network.

Photo by Tom Thomson





tawa. The entire project’s estimated completion date is the fall of 2018. The P3 approach was also used for five legs of the Calgary and

Edmonton ring roads construction yielding estimated savings and value of nearly $2 billion to taxpayers.

In November 2013, Manitoba officially opened CentrePort Can-ada Way, a new 9.1-kilometre, $212 million, four-lane divided road-way through CentrePort tying together all of Winnipeg’s major transportation and logistics assets. These include Highway 1, three rail carriers, i.e., CN Rail, CP Rail and the BNSF, an international trucking centre as well as James A. Richardson International Airport. The project adds more muscle to CentrePort Canada’s unique strength as our only inland, free trade zone and tri-modal logistics hub. The estimated value of Manitoba’s annual trade with its western neighbours is $15 billion.

To increase that figure, the province plans to lengthen Centre-Port Canada Way by 15 km, extending the four-lane divided ex-pressway to eliminate a longstanding bottleneck. This and future lo-gistics undertakings will benefit from new revenue from the one-cent-on-the-dollar increase in the PST dedicated to building Manitoba’s core infrastructure.

Also in the works is the new CentrePort 267 ha. (660-ac.) com-mon-access rail facility. Says Diane Gray, president and CEO Centre-Port Canada Inc. “We have received word that the province will des-ignate us as a special planning area. That will help us fast-track future projects. That benefits the surrounding region since we now account for 70% of the province’s truck and transportation activities.”

All these project updates indicate that the future of Western Cana-da’s logistics facilities and transportation network is in safe hands.

pass. It will improve container-handling volume as well as increase rail capacity while enhancing the safety and fluidity of traffic to and from the Deltaport Container Terminal in Delta, British Columbia.

The project is the centrepiece of the Deltaport Terminal, Road and Rail Improvement Project (DTRRIP), a near-term plan to re-duce delays and inefficiencies in rail and truck operations. It will boost Deltaport’s cargo-handling capacity through upgrades to ex-isting port infrastructure.

Since trucks carry the majority of goods to and from the con-tainer port, BC is busy modernizing its highway network that runs through some of Canada’s most challenging terrain. Current projects include widening Highway 1 (the TransCanada Highway) between Kamloops and the Alberta border to four lanes. Despite sharp curves, steep grades and narrow bridges in many sections of the existing roadway, the region features more kilometers of two-lane highway than currently exist between the B.C.-Alberta border and Ontario.

In Prince Rupert, the Fairview Container Expansion project will add an on-site storage capacity of 25,000 TEUs by the end of 2015. In addition, Phase 2 will also quadruple the port’s total annual capac-ity from 500,000 TEUs to 2,000,000 TEUs.

After doubling its size and passenger volume over the last 15 years, Calgary International Airport has become Canada’s third busiest in passenger traffic. To accommodate future growth, on June 28, it opened a fourth 4270-m. (14,000-ft.) runway - the longest in Canada – for an estimated total cost of $620 million. In addition, a new inter-national passenger concourse is scheduled to open in 2015. Taken to-gether, the projects will rank as the largest ever in Alberta history.

On the cargo side, construction is underway for a 1,9602.5 sq. m. (211,000-sq. ft.) facility to support a major 3PL service provider plus a further 9,290 sq. m. (100,000 sq. ft.) warehouse development. CP Rail will also build a new and expanded intermodal facility located on a nearby 97-ha. (240-ac.) site.

In addition, since 2005, Alberta has invested $12.5 billion in major capital road projects including the Edmonton (Northwest An-thony Henday Drive), and Calgary Ring Roads, Highway 881 to Fort McMurray and Highway 63, the main route into the nearby oil sands activities.

The completion of the Edmonton Ring Road - Canada’s first, free-flow orbital road - will further boost supply chain connectivity by providing users with uninterrupted access to and from all the major economic generators in the region.

Says Brian Dumsday, manager, Logistics for the Edmonton Eco-nomic Development Corp., “Port Alberta has been repositioned to coordinate transportation system developments, to make of Alberta’s industrial supply chain more efficient and to enhance international trade opportunities. The main focus is on advanced manufacturing in the oil and gas, food processing and biotechnology sectors,” he said.

In Saskatchewan, all eyes are focused on the new 688-ha. (1,700-ac.) Global Transportation Hub. It is strategically located adjacent to the CP main line, close to Regina International Airport and be-tween two national highway system routes - Highway 1 running east and west linking the city to Calgary and Winnipeg and Highway 11 running north to Saskatoon and Edmonton.

Last fall’s opening of an overpass next to Pinkie Road and Hwy 1A marked a major milestone in the Regina Bypass Project. It was a P3 (public-private procurement) project that included $200 million from Ot-

Ken Mark is a veteran technology expert,

who has covered supply chain management

since it was called distribution and has

documented its legitimization as a

critical business function. He holds

an MBA from York University.

CentrePort Canada is in the process of developing a common-use rail facility

and adjacent industrial park on 700 acres in order increase rail connectivity.

CentrePort is the only inland port on the prairies with access to three class I

railways: Canadian National, Canadian Pacific and BNSF.

CS



Calgary, Alberta-based Van Horne Institute held a conference in No-vember (2014) to look at the Cal-

gary Region as a transportation hub.According to President and CEO Peter

Wallis, in conversation with Canadian Shipper, the Van Horne Institute has long been active with industry in developing and coordinating, at a post secondary level, educational opportunities for the transpor-tation industry.

“As a partnership we work closely with the University of Calgary. We connect in-dustry with the academic community to do research and education. We have set up a supply chain and logistics school at the University of Calgary’s business school, (taken during the last two years of the Business Commerce degree). That is devel-oping a nice cohort of students every year. When you look at the demand for supply chain and logistics professionals every year there is a huge delta between jobs available and those being trained. The Canadian Supply Chain Sector Council has put out a few reports on that,” he said.

The Van Horne Institute’s Women in Supply Chain initiative aims to reach young women who are looking at embark-ing on a career in supply chain and logistics.

“We are finding more and more wom-en are achieving senior roles-not just in transport but at oil companies, Shaw com-

munications, etc. and we have been inviting senior leaders in all these areas to come speak to an audience of primarily young women,” Wallis said.

On the public policy research side the institute is also examining issues around in-frastructure (physical and human or policy infrastructure of Canada).

Former Cabinet Minister the Honour-able David Emerson has been given the task of heading the review of the Canada Transportation Act and to report back to the Ministry.

“The last time the legislation was re-viewed was in 2000. He has been asked to look at the grain carriage issue and all of Canada’s transportation legislation,” he said.

Based on a study of transport policy embraced by other countries, the Van Horne Institute developed a white paper on infrastructure banks and congestion management, i.e. tolling.

“We took it across Canada and got the views of stakeholders on the issues outlined in it. We don’t have, in this country, infra-structure banks, as they do elsewhere in the world, and in the US at both the federal and state levels. That’s clearly one of the op-tions open to the government of Canada-these are legal vehicles developed by gov-ernments to set up these banking structures and get a return on their money. Payment for infrastructure comes in different ways-it

could be through borrowing, through tolls, and through appropriations, which is why we don’t get a lot of infrastructure built.

“We try and bring out research that has relevance to transport, widely writ. My broad overview is that the Calgary region has the critical mass to be considered one of the two major distribution centres in Canada, after Mississauga,” said Wallis.

The city boasts two major intermodal yards, and a large number of companies around Calgary have established distribu-tion centres.

“Walmart has a distribution centre here that services all Walmart stores from the Ontario/Manitoba border, to Vancouver Island, to Yellowknife. From that distribu-tion centre one or two trailers a day go out to a large number of Walmart stores. Walmart also established a cold storage dis-tribution centre in the Calgary region, and they supply to those stores from that par-ticular DC,” Wallis said.

“Once everything gets into Calgary, it is cheaper to distribute out of that network,” he added.

Three quarters of Calgary’s popula-tion is now subject to or benefitting from distribution centres-and from a transportation fluidity perspective the city also now has a ring road. The fourth quarter of it will be developed by First Nations groups. The city is also working

TRANSPORTATION HUBSTHE CASE FOR CALGARY



© jewhyte/iStock/Thinkstock




closely with West Coast marine ports.In his presentation at the conference

Reg Johnston, of RJ T&L Consulting and the Calgary Regional Partnership, con-cluded that Calgary is a hub, based on its links to Port Metro Vancouver, Canada’s busiest port, and to Prince Rupert Port Authority.

Local TEUs for rail are at least 809,400 and growing, he noted, and Calgary air-port’s 2013 annual tonnage was 122,000.

Calgary is one of two Canadian air-ports with dedicated freight service to Asia and Europe.

Shaun Hammond, Assistant Deputy Minister, Safety, Policy and Engineering Di-vision, Alberta Transportation, presenting an overview of Western Canada’s inland hubs, noted that going forward there is a need for a systems approach that can address the weak points in the chain and address congestion in both the road and rail modes.

Solutions would be needed for road/rail logistic choke points at tidewater destinations and that could capitalize on north-south and east-west network options to overcome weather and other event-related disruptions.

The development of the Western Canada Supply Chain to 2030/2050 could poten-tially see a corridor based on interconnected hubs, with multiple entry points for shippers. The hubs would enable unit train build and have coordinated logistics to ease congestion on rail into the lower mainland and through multiple routes into the US network.

The Calgary Regional Partnership, and the city of Calgary, which is part of the CRP, have also made an application for designation as a Foreign Trade Zone.

“The concepts there are quite simple: you can collectively use the legislation that is cur-rently available on the books which allows you to hold off any payment of duty. When you look at the fluidity, the amount of ware-housing centres, etc. that have developed, ‘in-land port’ is a designator that truly reflects the reality of the Calgary region,” Wallis said.

“The ethos of Calgary region is to take a systems approach. It has to be as robust as it can be, and the ring road will be impor-tant to this,” he added, noting that the con-cept of an inland port in British Columbia is also being looked at, as a connecting point for shipments that can’t be staged at the Port of Vancouver.

“What do we need to allow future leg-islation to embrace? We should make sure our legislation is capable of not frustrating (infrastructure) development. The provinc-

es will have input into Emerson’s review process, and the review will be a great op-portunity for collaboration and coopera-tion-certainly both will be reflected in Emerson’s work. I’m happy we have a fed-eral review for input-it’s where the prov-inces have to go to address provincial is-sues,” said Wallis.



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Can the use of reefers in cold chain lo-gistics offer more access to global markets? According to research au-

thored by Dr. Jean-Paul Rodrigue, PhD, of Hofstra University, and released by the Van Horne Institute this January, the North Amer-ican refrigerated ISO maritime container (reefers) industry is growing in importance.

The report, “Reefers in North Ameri-can Cold Chain Logistics: Evidence from Western Canadian Supply Chains”, says that cold chain logistics account for an ev-er-growing share of the refrigerated cargo volumes being transported around the world. Particular attention is placed in this study upon Western Canadian supply chains, which allow exporters of perishable goods such as meat to expand their access to world markets, particularly in Asia.

In Western Canada, Port Metro Vancou-ver handles the majority of the regional and national cold chain reefer traffic. The port accounts for roughly half the Canadian reef-

er trade. Produce, meat, fish and poultry ac-count for 92% of all reefer imports, while meat, fish poultry and prepared food prod-ucts account for 95% of all reefer exports.

The overseas market serviced by the reefer trade represents an opportunity and a challenge for Canadian producers, the re-port said. The opportunity is to expand Canada’s export markets.The challenge is to locate buyers for such products that can be carried in a reefer container, to which a high degree of cold chain logistics manage-ment can be applied to ensure that the products reach their destination in prime condition with an extended shelf life.

With the utilization of the ISO reefer container, the cold chain industry is work-ing extremely efficiently aided by technol-ogies, assets and operations that are increas-ingly reliable. An ISO container can transport about 25 tons of cold chain goods into international markets, extending the shelf-life of the products transported de-

pending on their nature. According to the study there has been a modal shift in cold chain distribution since it is now possible to ship chilled food by reefers that previ-ously could only have been carried by air freight and thus at a prohibitive cost.

A large share of the cold chain trade in Western Canada is destined to the United States and Mexico. This traffic takes place in refrigerated trailers hauled by trucks or trains.

While the study did not focus on this as-pect of the cold supply chain, it did focus on the utilization of ISO refrigerated containers used by maritime shipping companies to move cargo on their deep sea networks. This is an important segment of the total refriger-ated container market, and is emphasized in this report because the use of ISO refrigerat-ed containers is expanding with the develop-ment of market opportunities that are bound to expand with a growing demand for food, and in particular, meat, in global markets.

For Western Canada, this market opportu-nity is primarily in the Asia Pacific region, a market that is now within operational range for chilled exports. This is particularly the case when loading of the product takes place at the source. Canada is known as a quality food pro-vider and source loading enables greater integ-rity and a higher level of quality to be delivered by the cold chain. The refrigerated goods mar-ket remains highly competitive, particularly since American cold chain exporters have ad-vantages derived from their ability to offer higher volumes, good hinterland connectivity, and the availability of a wider range of mari-time services from their ports. In addition Ca-nadian exporters enjoy a slight time advantage, which could be enhanced if Prince Rupert starts to handle ISO refrigerated containers. In such a case, the time advantage could be one or two additional days of extended shelf-life of the product at destination.

An overview of the ISO reefer logistics industry in Western Canada identifies two distinct chains:

Import based reefer logistics are primarily adopted by large retail firms, particularly in the grocery sector. For such chains, most maritime ISO reefers are transloaded at Port Metro Van-couver into domestic reefers and then shipped by truck or by rail to regional distribution cen-tres. This market is directly related to the popu-lation density. Limited changes are expected in this sector since it is linked to long term demo-graphic and macroeconomic processes. It was however, observed through interviews, that consumers can change their preferences rather quickly, and since cold chain food products in-


COLD COMFORTS

The benefits of reefers for Western Canadian supply chains


©Irina Drazowa-Fischer/iStock/Thinkstock



volve discretionary purchases, demand will fluctuate with cycles of growth and recession in the economy.

Export-based reefer logistics are domi-nated by the large meat processing plants that generate enough volume from one lo-cation to warrant dedicated rail or truck ser-vices to the closest port for overseas exports. Small exporters are able to obtain individual reefers on a regular basis because they are seen to be servicing niche cold chains and cold chain markets. These reefers often need to be trucked from either Vancouver or from an inland storage area such as Calgary or Winnipeg. This sector is still in development with untapped export opportunities.

Many stakeholders indicated, through interviews, that there is a lack of reefer containers in Western Canada, particularly in the Prairie Provinces, with Alberta being identified as the most obvious case. This lack of containers is due to scale of opera-tions and operational conditions, and not evidence of a market failure. Large import-ers and exporters are able to secure the ISO reefers they require for their activities through various long term arrangements with shipping companies, rail operators and truck operators. The situation is more chal-lenging for small exporters who can ac-count for just a few reefer loads per week and therefore do not generate enough vol-ume to justify dedicated services as refer-enced earlier. Since import reefers are usu-ally transloaded at the Port Metro Vancouver or shipped by rail to Winnipeg and Toronto, reefers that are in demand in the Prairie Provinces must be repositioned to those points over some distance. The shortage of reefers is related to the state or volume of export opportunities currently available in parts of Western Canada, par-ticularly in Alberta and Saskatchewan. The British Colombian and Manitoban markets are comparatively better served since they have a more extensive reefer export base.

Any perception that export opportuni-ties are missed in Western Canada because of the lack of reefers needs to be analyzed more closely.

As an overarching comment, it can be stated that cold chain technological develop-ments and supply chain improvements are providing new opportunities for current and potential exporters. While the nature and re-quirements of the established NAFTA mar-ket for refrigerated goods are generally well known, the overseas market serviced by the reefer trade represents not only an opportu-

nity, but also a challenge. This challenge is to find buyers for products that can be carried in ISO reefer containers, coupled with the de-gree of cold chain logistics management that insures that the products reach their destina-tion market in prime condition with an ac-ceptable shelf life. While the usage of ISO reefers is relatively new for imports and ex-



ports into Western Canada, there is significant opportunity to be derived from the expan-sion of this trade technology. There is a need for policy makers to better understand the industry, notably in terms of the markets that are and can be served by ISO refrigerated containers, coupled with a better understand-ing of the related cold chain operations. CS

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Compliance is a major catalyst for better supply chain visibility-having a clear and traceable in-dication of events along the

chain is becoming not only a competitive

advantage but a necessary requirement. It can also drive down costs.

The demand for technology that meets regulatory compliance requirements is surg-ing, leading companies like Waterloo, Ontario

REGULATIONS


THE COMPLIANCE CATALYSTTECHNOLOGY

IN SUPPLY

CHAIN

RESPONDS TO THE DEMAND OF REGULATIONS


©ArtyCool/iStock/Thinkstock

p34-39 CdnShipper JanFeb2015_RegCompliance.indd 34 15-01-15 1:04 PM


based Descartes, to show a fiscal third quarter net profit rise of 91% year on year on revenue growth of 11% to US$43.1 million.

How are compliance requirements driving the technology that is used, and also procedures and processes?

Descartes CEO Edward Ryan has said that customs regulation “is a principle driv-er for our customs and compliance solu-tions,” and an influence on the company’s content solutions and mobile resource management solutions.

Customs regulations such as tariffs and taxes are driving growth, as is demand for security and for electronic filing systems.

Descartes has made a number of acqui-sitions in 2014, including that of e-customs Inc., a provider of electronic security and fiscal customs filing solutions in the UK, whose cloud-based solution, Webdecs, pro-vides both shippers and logistics service providers with a wide range of customs capabilities to comply with UK fiscal filing and security filing requirements.

On December 8, 2014, Descartes also announced its acquisition of Pen-tant Limited, a UK-based cer-tified Community System Provider (CSP) offering cus-toms connectivity and import/export inventory control solu-tions for ocean, truck and air cargo. Prior to this Descartes acquired Airclic Inc., a provider of mobile solutions that help companies reduce the cost of delivering goods by automating traditional paper-based processes.

In order to reduce truck driver wait time at Customs, between Canada and the US, Livingston International just launched a tracker app, which is designed to give drivers information on the clear-ance status of their shipments as quickly as possible. Both the US Pre-Arrival Pro-cessing System (PAPS) and the Canadian Pre-Arrival Review System (PARS) have been optimized for mobile on Liv-ingston’s Tracker app, so that drivers can

be kept informed of their shipment’s sta-tus no matter where they are.

Livingston’s Speed Scanner function-ality also enables truck drivers to use a simple barcode scan to check shipment status, with no need to type in barcodes, said the company.

For shipments without a barcode, the driver simply keys in the shipment infor-mation to find the shipment status. There is no longer a need to phone a dispatcher and wait for them to check the status, Liv-ingston said.

The app also features “set and forget” functionality for shipments entering Canada, so truckers can get PARS ship-

ment alerts with the click of a but-ton. Carriers can also opt for SMS and/or e-mail shipment updates.

Solutions providers are in-creasingly anticipating govern-

ments’ next regulatory moves in order to expand their service offerings.

“With governments dictating rules of engagement for shippers, there are certain requirements we now have to ensure are in our systems,” said Mike Chapman, Vice President Sales at Transplace Canada.

“I guess it all depends on what stage each organization is in. Transplace already has its own Customs Portal up and running on the US-Mexico border. In Canada, we are seriously going to look at partnering with a customs company or acquiring one,

to fulfil what we call our diamond for North America. Within our own TMS coming into Canada, we put questions in for newer ship-pers. Many US-based shippers just think they give us their load and they don’t have to do any paperwork. Many of them are coming north for the very first time. We will then put them in touch with a customs company. That’s why our aim is to to acquire a customs company,” he said.

Companies are having to adapt to more and more changes, such as increased self as-sessment of goods crossing borders to speed up the process.

The company is also getting ready to onboard a new TMS which will provide

better visualization for Transplace inter-nal teams about broker info, client info, and declared values.

“We’re having to do a more labour-in-tensive checklist. We’re in the midst of on-boarding our new dispatch system by the end of second quarter 2015,” he said.

At press time, DHL Global Forwarding, the air and ocean freight specialist within Deutsche Post DHL, announced itexpect-ed a ‘substantial’ increase in its portfolio of customers adopting its International Sup-ply Chain (ISC) supply chain management service by the first quarter of 2015.

A cloud-based collaborative global plat-form, it offers shipment tracking, expedited management of purchase orders, real-time visibility of operational changes, enhanced customs visibility, end-to-end standardized

REGULATIONS


FOUR KEY PERFORMANCE CRITERIA ARE USED BY ABERDEEN TO DISTINGUISH BETWEEN “LEADER” AND “FOLLOWER” ORGANIZATIONS

⇨ Inbound

perfect orders

⇦ Outbound

perfect orders

⇩ Change in total landed costs

per unit shipped over the

past year, with leaders

having a 900 basis point

cost advantage over

followers

⇧ Out of stock frequency

(measured as a percent

of out of stock inventory

to average on-hand

inventory change vs.

prior year.)

continued p36




logistics execution, and early intervention of discrepancies in any stage of shipment.

With the retail sector being the earli-est adopters of ISC’s service and cloud platform, there has also been a recent influx of interest among customers from the technology, automotive, life science, chemicals, and engineering and manu-facturing sectors.

“The marrying of the company’s ISC and customs expertise offers customers an end-to-end solution with greater control over their supply chain and guidance on regulatory compliance,” said Jose Maria de Orduna, head of Operations and Value Added Services, Americas.

DHL Global Forwarding’s ISC team

developed its supply chain management service platform to be more flexible in its system configurations, streamlining of pro-cesses, improvement of efficiencies, and vis-ibility from the moment a purchase order is issued to delivery of the goods.

A major impetus is the US’ “Single Window” International Trade Data System (ITDS) initiative, for which DHL’s Cus-toms Brokerage teams are working to assist importers and exporters to become aligned, the company said.

On Feb. 19, 2014, the Single Window was announced by executive order to streamline the export/import process for America’s businesses with a deadline of Dec. 31, 2016 for completion. Businesses will now have to file documentation with one government agency instead of filing with up to 47 separate agencies.

With the advent of the Single Window, importers and exporters doing business in the U.S. or with the U.S. are going to need guidance on this new electronic interface that will be carried out in phases by the U.S. government.

DHL Global Forwarding has launched free monthly 60-minute customer webi-nars in the U.S. earlier this year geared to-ward various customs and trade topics in order to ease transition.

While technology promises better compli-ance, the aim to achieve better visibility end to end also promises better cost control. A July 2014 report by Bob Heaney, Research Direc-tor Supply Chain, Wholesale and Retail Prac-tices with Aberdeen, looked at best practices and the potential improvements in revenue and profit margins that can be derived from enhanced visibility, improved intelligence and control of logistics costs.

Control towers are getting a lot of atten-tion in terms of their promise to provide this control to organizations and their stakeholders.

In ‘Supply Chain visibility and segmentation: a view of the control tower approach’, the

control tower is defined as a set of inte-grated processes and technologies that sup-port a seamless flow of product from source to end consumer, regardless of global com-plexity, or sales and logistics channel pref-erences of customers

“Supply chain visibility under a control tower approach involves tight synchroniza-tion of supply and demand, as well as the or-chestration of the three flows of commerce-the movement of goods, information, and funds-across end-to-end logistics activities, from raw material to the delivery to the end customer. The increase in the number of sup-pliers, customers, carriers and transport and logistics modes and channels, changes the importance of collaborative synchronization between all parties in the multi-tiered global supply chain,” said Heaney.

What are the key drivers for focusing on improving visibility in the context of complex global transport and logistics networks?

“The increased complexity and multi-party nature of global supply chains has led to longer lead times, more in-transit and multi-channel inventory, and the need to control downstream and upstream logistics. This, in turn, has contributed to increased supply chain management costs. It is not surprising that, in light of global economic turmoil,

many companies have turned to their supply chain organizations in search of ways to cut costs, while enabling faster and more efficient responses to changing customer demands across all logistics channels,” said the report.

Reducing costs by driving down ex-cessive inventory, both staged and in-tran-sit, and proactively responding to inbound and outbound events, has become critical for companies in today’s supply chain en-vironment.

The report ranks top performers as those who use a control tower approach to leverage their internal capabilities, but also leverage their supplier and manufacturing partners and collaborative optimization

technologies.The new logistics formats re-

quire understanding new B2C as well as B2B requirements. This in-

volves linking financial and cost to serve components with visibility events.According to Aberdeen’s study of

Chief Supply Chain officers, the top busi-ness pressures facing the 161 companies studied are: the impact of increasing supply chain complexity and rising supply chain management costs. Key areas of change highlighted were the more challenging and complex e-commerce and multichannel or cross-channel demands impacting 87% of respondents.

Leaders had 95.4% of orders delivered to customers complete and on time out-bound, 94.6% of orders received from sup-pliers complete and on time, a 0.5% de-crease in total landed per unit costs in the past year, and a 7.5% decrease in the fre-quency of out of stock inventory in the past year.

Automation followers, however had 86.4% of orders delivered to customers complete and on time outbound, 84.8% of orders received from suppliers complete and on time, +8.5% increase in total landed per unit costs in the past year, +0.9% in-crease in the frequency of out of stock in-ventory in the past year.

“These gaps in performance are signifi-cant, particularly in today’s global market, where 88% of companies are involved in global supply chains and address B2C and B2B channels,” the report noted.

Accruing landed cost updates as an or-der or shipment progresses is another ex-ample of linking financial and cost to serve

REGULATIONS


continued from p35

While control towers don’t promise control of everything,

what you do with the data you can capture can

provide a better handle on things.

continued p38





AIR CARGO


components with visibility events.When considering B2B and B2C con-

vergence capability, the best in class are:48% more likely to collaborate with

the customer on a strategic level, 83% more likely to better understand tradeoffs between service level and inventory man-agement, 86% more likely to have closed look integration of supply chain planning and execution, 83% more likely to seg-ment the demand forecasts based on key product-customer characteristics, and 67% more likely to provide accurate views of inventory and ensure that availability to promise is extended across multi-echelon inventory whether at stores, DCs, suppli-ers or partners.

Top performers use a Control Tower Ap-proach to leverage their internal capabilities but also leverage the strength of their sup-plier and manufacturing partners and col-laborative optimization technologies.

With 85% of survey respondents indi-cating that they plan to increase their cur-rent level of end to end supply chain visi-bility, companies are now trying to look further upstream into their supply chains to address those visibility “blind spots”.

Having access to cost and event data and collaborating with the customer is es-sential to managing the B2B volume de-mands and supporting the customer’s e-commerce business, said the report.

The five key best practices for B2B and B2C “reengineering” include access up-stream and downstream demand-fulfilment models, consider the demand side require-ments up front, re-engineer and streamline B2B and B2C fulfilment processes, and link demand and fulfilment process with inte-grated systems.

In a presentation at the recent CITT Canada Logistics Conference in Calgary, Ryan Bloor, Global Logistics Director, and Oliver Heath, Logistics Advisor, both with Celestica, examined the use of control tow-ers in the logistics industry.

Celestica, a six billion dollar manufac-turing and supply chain services company, has for the last several years put more focus on TMS, planning, supply chain and freight network optimization.

The end-to-end visibility of the control tower, supplier to customer, on a single platform, enables improved cost and ser-viceability, and quick analysis of data.

While control towers don’t promise control of everything, what you do with the data you can capture can provide a bet-ter handle on things.

“The transportation control tower does equal collaboration,” Bloor noted.

Taking the systemic view, the control tower acts as a platform sitting on top of some of the key platforms you may have in your organization, for example on top of the TMS.

The control tower can provide some key KPIs, Bloor said, including pickup no-tification, transit time, shipment status, or-der delivery, etc.

“An ERP is great at saying here is what is happening within the four walls, but what is happening outside? So you have ERP elements, compliance data, and carri-er elements, rolled into the control tower platform. The KPIs can be customized by region or site. In the manual world of order lifecycle process, we strive to automate this data via control tower,” Bloor said.

Where many companies will employ a third party on their freight audit process, in the control tower world, the order cycle goes as follows:

The order is created in the ERP, the shipment is created in the TMS, the auto tender goes to the LSP, the tracking is in the TMS, the freight audit is in the TMS and payment in the ERP.

All of this information, including any communication back to the ERP, gets fed up into the control tower. Reporting of this takes place in the control tower.

You can do your audit on an exceptions basis at this point, noted Bloor, and differ-ent KPIs can be designed to provide real time data, and to have more control of the elements you potentially can’t control.

The value of combining these data sources goes back to the big picture, where 85% of companies cite global transporta-tion activities, compliance requirements, the need to better understand their freight spend, and the need for optimization.

With globalization and compliance ma-jor factors, language capabilities are also now becoming more of a requirement.

Many KPIs can be made available that deal with carrier service. Companies oper-ating without one use manual rate quoting, manual routing guides, phoning for ship-ment status, and manual bills of lading.

Acting in the realm of transportation

optimizer, the control tower can provide proactive notification of premiums and who is responsible (this KPI tends to come up a lot in terms of understanding where the non-compliance is, Bloor noted).

On average, control towers also allow a 7-day shorter cash to cash cycle than com-panies without.

They improve the time to problem reso-lution, and the real time exception notifica-tion means you’re more responsive. But con-trol tower access can be given to your organization internally and to your custom-ers so they can now see in real time.

With inaccurate information, more companies tend to hedge, creating the risk of more inventory in their supply chain.

The make vs. buy decision“A control tower is not a big decision but certainly an important one, and one with many elements. There are pros and cons to it. There is complexity involved and if your organization sees value in the bene-fits I went through you’re going to need to cut through that complexity. You’re ei-ther going to have the skill in house or you’re hiring it or buying it from a man-aged service,” said Bloor.

There are reasons for both outsourcing and insourcing-if you decide to implement a managed service project for a control tower, setting the baseline is important-your partner is going to be on the hook for delivering “X”, he said.

When it comes to the process flow dur-ing implementation, Heath noted that the strategy process typically runs 6-8 weeks, the design 6-8 weeks, covering processes and implementation 6-8 wks, then the pi-lot stage, then live.

LSP to TMS connectivity is required to implement a fully functioning EDI con-nection to and from the control tower.

There are electronic connection alter-natives for each of the EDI messages such as web services thru XML, said Heath.


REGULATIONS continued from p36

CS

Editor Julia Kuzeljevich

has been writing writing about

transportation issues for

15 years. Her meticulously

researched articles have

garnered several transportation and

Canadian Business Press writing awards.





http://www.rubbermaidcommercial.com

HWY H2O REPORT


The St. Lawrence Seaway is examining multiple avenues for growth, looking to forge strong relationships with various partners. The recent HWY H2O conference was the per-fect opportunity to shed light on some of these.

Project cargoMarc-André Roy, a partner with management consulting firm CPCS, which specializes in infrastructure projects, talked about project cargo trends.

He said that import/export opportunities in the Alberta oil sands and the Cleveland-Europe Express could have significant potential for the Seaway.

“We have recently looked at all the oil sands projects in some stage of consideration. When we looked at them to determine the project cargo potential, we looked at 38 that are the most likely to happen. These alone are likely to generate 12,000 expected oil sands modules,” Roy said.

These modules are prefab sets of pipes and tubes, manufactured in Asia. Increasingly they are getting bigger in size, and with labour in Alberta scarce, the development and use of more of these modules is growing.

Some 75% of these modules will move to Western Canada via the Port of Houston.

“The shippers, forwarders, and engineering, procuring and con-struction companies are comfortable with this routing. The issue with the modules and project cargo pieces is the huge cost of things when the various parts of these huge projects don’t arrive on time. What’s the play for the Seaway? Great Lakes routings are more like-ly used for project cargo originating in Europe, though we have seen packing lists for project cargo originating in China and destined to Alberta via Duluth,” said Roy.

Common challenges include the Seaway’s seasonality, its limited backhaul opportunities and a host of charges, such as pilotage.

There are also land transport constraints that come into play after transport on the Seaway, such as rail clearance limits of 15’ from Thunder Bay to Alberta. With the Trans-Canada running to Mani-

LOOKING AT CARGO OPPORTUNITIES ON THE ST. LAWRENCE SEAWAY


MARKETPOTENTIAL

A view of the locks

on the St. Lawrence

Seaway. Courtesy

SLSMC

p40-45 CdnShipper JanFeb_SeawayReport.indd 40 15-01-15 11:57 AM


HWY H2O REPORT


toba just two lanes, truck permitting in Manitoba is reportedly dif-ficult. However, shipping project cargo via the Great Lakes to the Midwest is cheaper than routing cargo via Houston, Roy noted.

“Across the States, oversize, overweight truck permitting is com-plicated, whether it’s an issue of axles, time-of-day, and escorts re-quired. That is an advantage for the Seaway and Canadian corridors in general just because it’s not the same “patchwork” of permits. In order to ‘bust Houston’ you would need to market the Seaway routing, and there are some long-standing relationships that exist there,” he said.

The Cleveland Europe ExpressThe first sailing of the Cleveland Europe Express was in April 2014 and initially envisaged 75% containers against 25% breakbulk. Roy described the venture as one that is trying to break the chicken and egg problem.

“One of the nice things is you deal with one group vs. multiple entities on one bill of lading. In actuality it’s been 25% containers, 75% breakbulk. The market is reportedly growing, but the ship is not full. The second monthly sailing is to start in the spring of 2015. Shippers are asking for more frequency. Can this service be a catalyst for other liner services into the Lakes? We’re trying to go for a snow-ball effect. It remains to be seen whether there are other potential opportunities in petroleum and for more containers,” he said.

Worth its saltThe severe winter of 2013/14 depleted all available salt inventories in North America, and resulted in somewhat of a turning point for the industry.

According to Mark Thiele, CEO of Mid-American Salt in Fort Wayne, Indiana, "Logistics became a huge part of what we did. We found creative ways to secure and deliver our product. Suppliers were shipping unfilled orders two months after the season ended," he said.

The company started as a regional supplier in Indiana, and last winter it found itself resorting to a market priority list, first serving state DOTs, then cities and counties, followed by commercial con-tractors.

“The challenge for 2014/15 is securing the salt,” Thiele said. “North American salt is simply not available for that third tier. We’ve been work-ing hard since March to find knowledgeable logistics partners to help us handle the logistics. The Seaway has become a valuable resource to us. We are bringing eight vessels into the Great Lakes, coming into several ports. That salt is landing in a terminal and has to be moved to many different locations," Thiele noted, adding that MAS is now importing a lot of high quality salts out of Africa, Europe, and South America.

An international contender A partnership between the Port of Oswego, Ford Motor Co. and Novelis is seeing the Port of Oswego become a genuine interna-tional contender as the first US port of call and deep water port on the Great Lakes. The project involves exchanging steel for aluminum on the Ford 150 light truck. Ford has invested $350 million on three production lines of aluminum sheets, recycling and scrap production.

The largest wholly owned Novelis facility in North America pro-

POTENTIAL

continued





duces a more varied product portfolio now than at any time in recent history, said Chris Smith, Plant Manager, Novelis Inc. in Oswego.

The inputs that come by water are ingots, coming primarily from Canada (Alouette), he said.

With government and automakers having settled on new Cor-porate Average Fuel Economy (CAFE) regulations, to take effect in 2017, 7/10 new pickup trucks in North America will be aluminum-bodied with aluminum comprising more than 75% of the pickup truck body and closure parts.

Aluminum sheet demand will grow from 200 million pounds today to 4 billion pounds by 2025.

“We expect and welcome more announcements across industry regarding further capacity additions, underscoring aluminum’s per-manent place in this high growth end market. In the last three months, three competitors have announced similar aluminum pro-cessing lines that are being created. The Oswego Port authority will be key to us in future,” said Smith.

Grain shipments risingDarryl Markle, export manager, with Parrish & Heimbecker, said that agriculture has become a huge growth sector for Canada, and with that, the Seaway has become “a critical part of our business. From a grain standpoint without the Seaway we wouldn’t have near-ly the success we have today.

For over 100 years, Parrish & Heimbecker has been involved with the grain trade, and was born from the need to move grain from Western Canada to Eastern processors.

“We provide terminal capacity and manage inland delivery from primary producers. We manage food security programs, and we’re the second largest flour milling company in Canada. Shipping is the most critical component of our business. We provide the global mar-ket with an integrated supply chain. We take what customers over-seas want and bring it back to our farmers,” he said.

With over 40 million tonnes exported last year, and exports dou-bling in the last 10 years, said Markle, vessel shipping “has become the cornerstone of our program. Maintaining a competitive shipping network is critical for the future. Nothing moves on just one mode

of transportation-we are an integrated, secure supply chain.Because of geopolitical issues in Russia and Ukraine almost two

million tonnes in additional exports were shipped out this year.“Our core market is in Europe and with that some of our com-

petitive risks-it’s an increasingly competitive global market. We have to make sure we are not making ourselves uncompetitive through regu-lations, and the increased competitive cost of movement. One of the key reasons Canada is the world class shipper to Europe is because we have an advanced supply network and we do what we say we are go-ing to. Our customers have increasingly become more aware of our Eastern Canada shipping network so the risk of disruption to this supply chain is something we have to watch for,” Markle said.

Crude movesExamining the prospect of crude oil movements to international markets via the Great Lakes, Richard “Hardy” Sawall, Director, Busi-ness Development, with US Oil, said that multiple new origins for crude have upset long established product flows.

“We’ve been looking at this for over two years,” he said.The biggest opportunity is not so much with US crude but with

heavy Canadian origin crude which could be railed from its Cana-dian origin to terminals on the Great Lakes, with the second leg on a Seaway vessel to deep water ports on the east coast of Canada.

There is a lack of pipeline capacity to handle the new supplies. Can the Great Lakes be used as a way to get to international

markets?US Oil is considering the Jones Island terminal at the Port of

Milwaukee, Wisconsin, for this move.The Jones Island terminal has 310000 bbls (barrels) of storage.

Jones island would receive crude via rail and crude would then be delivered via seaway vessel to a deepwater terminal on the Atlantic Coast that could aggregate volume.

NuStar Terminal in Point Tupper, NS, and the Port of Belledune, NB are being considered, but anywhere Montreal and East could work, Sawall said.

“Seasonality on the Seaway is a limitation. There are $16-18 barrel throughput costs from origin to the deep water ports. This is competi-tive with rail direct as well as pipeline. We have an educational headwind in terms of trying to get people interested in this,” Sawall said.

Western Canada Select (crude) is typically diluted with up to 30% condensate so if you are piping it this must be separated out. Some analysts have shown that shipping raw bitumen in this manner is considered less energy-intensive than via pipeline.

With a cost of $6-7/barrel by rail from Alberta to the Great Lakes, then $6-7 a barrel by short sea shipping, then another $2 a barrel through deep water by supertanker then overseas, “those economies of scale get really serious once you get to deep water. I think that what will drive this to completion are international buyers from the Far East and challenges with pipeline products. Indian buy-ers are getting crude primarily from Saudi Arabia. As a captive mar-ket they are getting charged a higher price. There could be a 3-5 year window on this opportunity. Canadian producers are starting to make more oil than they can get out of the region,” he said.


HWY H2O REPORT

“One of the key reasons Canada

is the world class shipper to Europe

is because we have an advanced

supply network and we do what

we say we are going to.”Darryl Markle, Export manager,

with Parrish & Heimbecker

CS

We Deliver. Award-winning media for Canada’s supply chain professionals.

Visit us at CanadianShipper.com to subscribe today.



The 10th annual HWY H2O con-ference, held November 19 and 20 in Toronto, examined trends driv-

ing cargo growth opportunities along the St. Lawrence Seaway.

Aron Gampel, VP and Deputy Chief Economist at Scotiabank, commented on the global economy, saying “The economic models don’t work anymore. We’re forced to use them and adjust them but they don’t provide all the answers in a very complicated world, so we’re forced to forecast often.”

Gampel said that financial market vola-tility is in, and stability is out.

“After a prolonged period financial mar-kets were just going one way: up. In the last couple of months we’ve had a period of tre-mendous volatility-the markets can go up, down and sideways. Global growth will be generally slow but steady, with periods of strength followed by periods of weakness. The end result is we really don’t have enough aggregate demand to sustain global economic growth. Economies like Canada’s will just see moderate growth. Structural is-sues, like debt and demographics, will keep us slow for the foreseeable future,” he said.

Gampel said that Canada would have to rely more strongly on trade to offset weak-ening economic demand. He said a 7% rise in export volumes is expected next year, but imports will be slower going forward.

Geopolitical risks in the international context will continue to impact world economies, “raising a level of uncertainty and volatility and undermining confidence.”

“We’re in the sixth year of a recovery-the slowest recovery in the post WWII era. It’s sluggish largely because it’s concentrat-ed in the advanced economies which were ground zero for the recession.

This time around the problem was a debt buildup in the advanced economies and the ensuing repercussions. Reducing these high levels of debt keeps the advance economies in the slow lane. Everyone suf-fers the aftershocks and is in different stages of recovery mode,” he said.

Addressing prospects for the Seaway’s

major partners, Europe and the US, Gam-pel said that Europe is undergoing short term stimulus, but faces long term austerity.

The US is also employing short-term stimulus mechanisms but has left long term debt for future governments. The issue wasn’t as problematic the last few years but now as the US economy is starting to revive the per-formance difference between the US and the EURO is creating tremendous pressures.

“The US is winning the growth war for the time being. The problem in Eu-rope is not the peripheral economies but the big economies that are dragging down the economy. At a time when the US is begin to wean off its ultra low interest rate environment, we need to see more policy accommodation, not just because the Eu-ropeans are tough but that the global en-vironment is so slow. The decline in oil prices means cash flow improvements, but you don’t want to see them go too low and hurt oil producing nations, like Cana-da, Mexico and the US. currencies. We have to see the adjustments factor through in helping economies, but you can’t allow them to go too far-they’ll have much more implications for the global financial market,” he said.

HWY H2O REPORT


From a Canadian perspective, “we are still quite optimistic about the outlook be-cause we see the economy coming back and coming back much stronger. The balance sheets have been turned around. The US economy is in a much better position to generate self-perpetuating momentum. Canada has been diversifying its markets in trade deals with Europe, South Korea, and the Trans Pacific Partnership. Many coun-tries are moving toward bilateral relation-ships. With Canada being so diversified there are tremendous markets for minerals, agri-culture, foods, etc. The Europeans are look-ing to Canada as a resource provider, under-standing that Russia may not be the best long term bet. Europe will get its act to-gether. It will get the powers needed to gen-erate stronger growth going forward. In Eu-rope, many of the peripheral countries have gone through a five year period where they tried to improve their own competitiveness.

While you don’t have a lot of domestic demand they have been trying to increase sales internationally.

Eastern Europe and Asia Pacific markets are not as bright as they once were. Every-one is going to be focusing on the US mar-ket,” Gampel said. CS



©treety/iStock/Thinkstock

Plan for market volatilityECONOMIST TELLS HWY H2O CONFERENCE ATTENDEES BY JULIA KUZELJEVICH




BY LOU SMYRLIS

Eastern Canada

3%

Central Canada

68%

BY REGION

Western Canada

29%

Respondents

3PL

21%

Resources

8%

Manufacturing

33%

Distribution

17%

Retail

11%

Wholesale

5%

Freight forwarder

6%

BY SECTOR

What transportation will cost you in 2015, according to our survey

Are you properly prepared for your next contract negotiations with transportation providers? Do you know how

capacity constraints and the growth of the North American economy will affect pricing? Our annual Transportation

Buying Trends research, conducted nationally in partnership with the Freight Management Association of Canada,

Cormark Securities and CITT, is designed to help place you in the driver’s seat.

Over the next few pages we include highlights from our latest survey, completed in late 2014, for the TL, LTL, rail, intermo-

dal, marine and air modes. Read on to see what shippers across Canada project for increases to their freight rates, the pene-

tration of surcharges and their concerns about capacity constraints.

2015 Transportation Buying Trends

p46-52 CdnShipper JnaFeb2015_BuyingTrendsInsideNumbers.indd 46 15-01-15 2:16 PM


BUYING TRENDS


TL Freight Shippers

Decrease

13%

TRUCK LOAD

31%

Down 0-5% 5%

Up 5% + 5%

Not sure

Flat 18%

Up 0-2% 39%

Up 2-5% 18%

Border Security 11%

Fuel 97%

Other

Border Delay 17%

Detention 31%

Currency 8%

% expect this mode to have highest pricing power in 2015

Increase

33%

Stay the same

55%

Not sure

0%

ANTICIPATED CHANGES IN USE OF MODE

PROJECTED CORE TRANSPORTATION PRICING

(excluding fuel surcharge)

SURCHARGE PENETRATION

3% 13%

CAPACITY CONCERN 6.06

LTL Freight Shippers

Decrease

2%

Down 0-5% 3%

Up 5% + 3%

Not sure

Flat 26%

Up 0-2% 37%

Up 2-5% 24%

Border Security 21%

Fuel 100%

Other

Border Delay 14%

Detention 14%

Currency 11%

LTL

19%


Increase

42%

Stay the same

56%

Not sure

0%





14% 8%


2015 Transportation Buying Trends

TRUCKLOAD

LTL

Loose capacity Balanced Very tight capacity

Loose capacity Balanced Very tight capacitycontinued



BUYING TRENDS


Intermodal Freight Shippers

Decrease

3%

INTERMODAL

4%

Down 0-5% 0%

Up 5% + 0%

Not sure

Flat 34%

Up 0-2% 19%

Up 2-5% 22%

Border Security 5%

Fuel 83%

Other

Border Delay 5%

Detention 32%

Currency 0%


Increase

24%

Stay the same

71%

Not sure

3%





17% 25%


Rail Freight Shippers

Not sure

3%

Down 0-5% 3%

Up 5% + 0%

Not sure

Flat 40%

Up 0-2% 7%

Up 2-5% 13%

Border Security 0%

Fuel 83%

Other

Border Delay 0%

Detention 28%

Currency 6%

RAIL

6%


Increase

22%

Stay the same

76%

Decrease

0%





17% 37%

5.57CAPACITY CONCERN RAIL



INTERMODAL



BUYING TRENDS

Marine Freight Shippers

Decrease

6%

MARINE

17%

Down 0-5% 3%

Up 5% + 3%

Not sure

Flat 45%

Up 0-2% 13%

Up 2-5% 23%

Border Security 14%

Fuel 91%

Other

Border Delay 9%

Detention 27%

Currency 41%


Increase

27%

Stay the same

48%

Not sure

2%





9% 13%

CAPACITY CONCERN 5.32MARINE



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BUYING TRENDS SOCTOBER 14, 2015 MISSISSAUGA CONVENTION

CENTRE

PLEASE PLAN ON JOINING THE COUNTRY’S TOP TRANSPORTATION &SHIPPING EXECUTIVES

FOR A DAY OF EDUCATION & NETWORKING

MOTORTRUCK FLEET EXECUTIVE, CANADIAN SHIPPER, AND DAN GOODWILL & ASSOCIATES PRESENTS

HOW DOES YOUR SALARY MEASURE UP?

Visit the Canadian Shipper Online Salary Calculator! www.canadianshipper.com

BROUGHT TO YOU IN PARTNERSHIP WITH

Air Freight Shippers

Decrease

12%

Down 0-5% 3%

Up 5% + 1%

Not sure

Flat 43%

Up 0-2% 10%

Up 2-5% 20%

Border Security 14%

Fuel 91%

Other

Border Delay 5%

Detention 9%

Currency 9%

AIR

2%


Increase

27%

Stay the same

53%

Not sure

9%





9% 20%

CAPACITY CONCERN 4.80AIR




SOCTOBER 14, 2015 MISSISSAUGA CONVENTION

CENTRE

PLEASE PLAN ON JOINING THE COUNTRY’S TOP TRANSPORTATION &SHIPPING EXECUTIVES

FOR A DAY OF EDUCATION & NETWORKING

MOTORTRUCK FLEET EXECUTIVE, CANADIAN SHIPPER, AND DAN GOODWILL & ASSOCIATES PRESENTS


14.9% per year


STOP THE STEREOTYPING

INSIDE THE NUMBERS

Supply chain positions – at all levels - must be made

attractive to women. Here’s why. There is a serious

shortage of workers in supply chain and this shortage

is expected to grow over the next five years,

according to the Canadian Supply Chain Sector

Council and The Van Horne Institute. Yet women

remain significantly under- represented in supply

chain management positions. With the number of

new and vacant positions supply chain will be facing

as retirements increase substantially, can we afford

not to make supply chain more attractive to women?

Learn more at: womeninsupplychain.org

Number of new and vacant positions annually in Canada

Number of Canadians employed in some

aspect of supply chain (as of 2010)

804,305

65,979

Anticipated number of new and vacant positions

annually in Canada

356,747

8.4% per year

Tactical occupations

Managerial occupationsManagerial

positions expanding the fastest



$$$$$

THE BIGGER PICTURE


1. The Economy – Two Steps Forward/One Step BackUS GDP grew by over 3% in 2014, its best showing in sev-eral years. A rise in employ-ment levels, coupled with an increase in consumer spend-ing, helped lift the American freight market. The long, slow post Great Recession recovery finally kicked into a higher gear, driving an upswing in freight activity.

However, November data highlighted a slowdown in the pace of recovery across the US manufacturing sector. At 54.7, down from 55.9 in October, the seasonally adjusted Markit Flash US Manufacturing Pur-chasing Managers’ Index (PMI) indicated the weakest overall improvement in business con-ditions since the snow-related setback in January.

2. America – the Super Energy PowerAt press time, crude oil was priced at ca.$50.00 US a bar-rel. While bad news for the energy producers, this is good news for truckers and ship-pers. Heavy-duty vehicles represent 4% of registered ve-hicles on the road in the U.S. but 20% of on-road energy use and greenhouse gas emis-sions. The movement of crude oil by train has become a major source of revenue for the rails. Taken as a whole, this is a good news story for the economy and freight transportation.

3. Truckers made Big Purchases of Class 8 TrucksPreliminary Class 8 net orders for 2014 were up 70% year/year. The most recent preliminary monthly Class 8 order number was also the highest since Janu-ary on an unadjusted basis, and was the best order month since April 2011.

4. The Winter Storms of Quarter 1, 2014 – Climate Change comes to the Freight IndustryParts of America experienced their worst winter in 30 years. The severe weather took its toll on the US’s economic recovery and on the transportation sys-tems that move goods through-out the country. Rail operators, intermodal drayage and trucking companies, airlines and marine operators all faced service failures and bottlenecks. These problems were exacerbated by chassis shortages (see below) and other problems. What did we learn from the nasty storms of 2014 and will the freight infrastructure be better prepared in 2015?

5. Tight Capacity Became the Norm in Many Parts of North AmericaWarnings of a tightening freight capacity have been heard for a number of years. After the rocky, wintry start in quarter 1 2014 and a second quarter freight surge to offset the freight backlog, coupled with the challenges faced by in-termodal providers, this produced a noticeable tightening in freight

capacity. The tight capacity was fuelled by several other factors. The leading check on capacity was driver shortages. This has been a familiar theme in previous years. This year it became more pronounced.

6. The Incredible Choking SoundIn 2014, gridlock, delays and labour problems disrupted the flow of freight at Port Metro Vancouver, the Port of New York and New Jersey, the Port of Virginia on the east coast and the ports of Los Angeles and Long Beach on the west coast. In addition mid-western ter-minals, most notably Chicago, contributed to the congestion and delays. In addition to the weather, these terminals faced chassis shortages and disloca-tions, yard congestion, turn time problems, appointment scheduling problems, limited driver availability to perform drayage work and driver wage issues. The combined costs of these infrastructure problems are in the hundreds of millions of dollars.

7. Intermodal conversions slow downConversion of over the road

truckload shipments to inter-modal service has been a con-sistent part of the Top 20 story in previous years. Many current truckloads should be moving via intermodal service, provid-ed there is sufficient capacity available. Because of the capac-ity constraints noted above and the resulting deterioration in services levels, the rate at which intermodal is taking market share from the highway slowed down in 2014.

8. HOS have significant impact on trucking company productivityThe Hours-of-Service (i.e., HOS) rule change implement-ed by the Federal Motor Car-rier Safety Administration on July 1 of 2013 did not appear to accomplish the objectives of creating a safer, healthier, and more enjoyable environment for the industry or for the scarce driver resources in the U.S. In December, two provi-sions of the 2013 changes to hours-of-service regulations for truck operators were sus-pended at least until Sept. 30, 2015, and FMCSA will be re-quired to further study the rules and their impact before the rules can take effect again.

THE TOP FREIGHT TRANSPORT STORIES OF 2014Among the major news stories in the world of freight transportation in 2014, the following struck me as being the most impactful.

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9. Driver Wages – “Show me the Money”This was the year many truck-ing companies threw money at the driver shortage problem. In the battle to retain existing driv-ers and recruit new ones, carri-ers increased driver pay by the highest amount in decades. While many people thought that increasing driver pay would solve the driver shortage prob-lem, it didn’t. The issues are far more complex than just lifestyle but include HOS, congestion and many of the other produc-tivity-reducing activities.

10. Higher driver wages and tight capacity – a Recipe for Higher Freight RatesThis was one year in a series of years when freight rates are on the rise. Many carriers are fo-cused on allocating their capac-ity to the best paying customers. With the challenges facing the intermodal industry, this re-duced the leverage available to shippers in playing the modal switching game. For shippers needing good service, they had to “pay the piper.”

11. The US Currency Strengthened as the Canadian Dollar Sank in ValueAs the year unfolded, the US dollar rose against other curren-cies. The drop of the Canadian dollar to $0.85(press time) US sparked a 70% year/year growth in export truckloads. It quickly and profoundly changed the north/south flow of goods across the Canada/US border.

12. The M & A movement continued in the US and CanadaIndustry consolidation contin-ued on both sides of the border. In Canada, the largest truckload conglomerate, TransForce made an offer to purchase another

large trucking conglomerate, Contrans for $495 million. If ap-proved this would place many of Canada’s major truckload prop-erties in Ontario and Quebec in the hands of one company.

Mullen Group Ltd. and Kris-ka Holdings Limited signed a letter of intent (“LOI”) in which Mullen Group and Kriska Holdings have agreed to create Kriska Transportation Group Limited (“Kriska Transporta-tion”) which will be a new growth orientated transporta-tion and logistics company based in Prescott, Ontario. The deal is quite different from the usual M & A deals and will be inter-esting to see how it unfolds.

13. Let’s Work TogetherMore and more carriers and shippers are embracing this last frontier of efficiency, collabora-tion. Shippers are increasingly collaborating with each other to combine volumes, increase lever-age and drive efficiencies. Carri-ers are collaborating amongst themselves more frequently to balance lanes and improve prof-its. Shippers and carriers are col-laborating to share information, improve planning, and ensure adequate supplies of equipment.

14. Dedicated Transportation continued to make sense for Shippers Seeking CapacityRather than rely on the capacity available in the for-hire trans-portation industry, dedicated transportation continued to be an attractive option for compa-nies that do not have a core competence in managing freight transportation and that wish to ensure consistent capacity. What

many shippers realize as well is that by going the outsourced route, they can achieve econo-mies that they were not capable obtain on their own.

15. Freight Brokers – being in the Right Place at the Right TimeFreight brokers, whether tied to an asset-based transportation company or purely non-asset based, were able to benefit in 2014. For shippers, freight bro-kers represent a mechanism to find capacity and pricing op-tions that they cannot find themselves. This was a year when freight brokers expanded their service footprints (e.g. LTL service) so they could de-liver more value.

16. 3PLs – We can do it better than you canThe 3PL movement continues to maintain its momentum. The opportunity to utilize a company whose core competence is logis-tics, that has a broad network of carriers and warehouses, and can remove costs from many opera-tions is compelling. It is not un-common for shippers to use sev-eral 3PLs in their operation. Large multi-national companies can employ 40 to 50 3PLs. This was a very positive year for this industry.

17. Some Manufacturing is returning to the United StatesCheaper energy costs (frack-ing) have made manufacturing in the US more competitive by reducing logistics costs. Auto-mation/robotics has led to in-creased productivity and offset the advantage of cheap labour.

18. Near-shoring comes to MexicoThe stars have aligned for Mex-ico. Increasing costs in China, long cycle times, port conges-tion, its proximity to the US and improvements in transportation between Mexico and the Unit-ed States (and Canada) have served to expedite the near-shoring movement in Mexico.

19. E-Commerce spurs new Distribution Channels and New Transportation ServicesOmni-channel distribution (the use of multiple service mecha-nisms such as stores, warehouses, home delivery) has been one of the hottest topics in freight trans-portation in 2014. A by-product of omni-channel distribution has been the emergence of various last mile delivery strategies such as same day delivery (or “same day insanity as described by one industry expert) to meet the changing needs to consumers. Stay tuned for more in 2015.

20. Big Data and Control Towers – Technology comes to TransportationOf course, managing freight transportation requires data, good data and “big data.” It also requires KPIs and the technology to manage the big data. Control towers become one of the tools that some ad-vanced shippers used to over-see their freight operations. This will be another story to watch in the years ahead.

Thank you for following this blog in 2014. To follow me on Twitter, click on @Dan-Goodwill. CS

Dan Goodwill, president of Dan Goodwill and Associates, has more than

20 years of experience in the logistics and transportation industries in both Canada

and the US. Goodwill is currently a consultant to manufacturers and distributors, helping

them improve their transportation processes and save millions of dollars in freight

spend. He has held several executive level positions in the industry.

He can be reached at [email protected].

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No other Canadian carrier has the resources we do on both sides of the border. We enlist the people, technology and processes to speed things up, not slow them down.

We take a proactive approach to enhancing the efficiency of your supply chain on both a day to day basis and when you need action now. Who are you reaching out to? Take another look at Vitran!

TF : 1.800.263.0791 E : [email protected]




Who are you reaching out to?

Coming to your rescue. It’s what we do best.

No other Canadian carrier has the resources we do on both sides of the border. We enlist the people, technology and processes to speed things up, not slow them down.

We take a proactive approach to enhancing the efficiency of your supply chain on both a day to day basis and when you need action now. Who are you reaching out to? Take another look at Vitran!

TF : 1.800.263.0791 E : [email protected]



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