Canadian Shipper January + February 2019

JANUARY 2019

PUBLISHED SINCE 1898 | WRITTEN FOR BUYERS OF TRANSPORTATION SERVICES

LEADERSHIP ROUNDTABLE HR in the supply chain

INLAND PORTS Easing congestion in B.C.

GROWING GREEN

AGREEMENT 40063170

MASTERING THE MECHANICS OF THE CANNABIS SUPPLY CHAIN

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GOING PLACES Ours is a business of relationships, where trust is paramount. At Air Canada Cargo, we draw on an 80-year legacy while setting a course for tomorrow. We are 1500 employees worldwide, proudly working together to surpass expectations and quickly move goods to hundreds of cities around the globe.

As one of the fastest growing air cargo companies in the world, we’re going places, and we hope you’ll come with us.

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CONTENTS

JANUARY 2019

DEPARTMENTS

10

5 | Editor’s Foreword Pipe dreams

COVER STORY

6 | In the news CITT Award of Excellence winner; Hong Kong Maritime Week; IATA cargo media day; The rising threat of cargo theft in Canada

GOING TO POT

33 | Inside the Numbers Power play

Mastering the mechanics of the cannabis supply chain

35 | Coaching Corner The glass cliff

38 | The Bigger Picture The sulphur wars

@istock

20 With the market for legal cannabis set to hit $6.5 billion by 2020, producers, retailers and their logistics suppliers are racing to catch up.

FEATURES INLAND PORTS | 14 Ashcroft Terminal looks to extend its international reach

LEADERSHIP ROUNDTABLE Our expert panel discusses human resources trends in the supply chain

TRANSPORTATION INFRASTRUCTURE | 17

28

The puck drops on the Gordie Howe International Bridge

RAIL | 24 Short line proving its value to local supply chain

COLD CHAIN LOGISTICS

| 28

Collaboration grows alongside perishables traffic © iStock

www.canadianshipper.com January 2019 3

Jacek Misiak Truck Driver 8 years, VersaCold

VersaCold is a food-first company. With over 70 years of supply chain experience, we’re a diverse team dedicated to ensuring the safety, quality and freshness of the food families eat—every step of the chain.

versacold.com

EDITOR'S FOREWORD John Tenpenny January 2019 Volume 122 Issue No. 1

EDITOR John Tenpenny (416) 510-6880 john@newcom.ca EDITORIAL DIRECTOR John G. Smith (416) 614-5812 johng@newcom.ca MANAGING DIRECTOR, TRUCKING AND SUPPLY CHAIN GROUP Lou Smyrlis lou@newcom.ca ART DIRECTOR Anita Balgobin CONTRIBUTORS Carolina M. Billings, Carolyn Gruske, Ken Mark, Carroll McCormick, Ryan McLeod, Ian Putzger, Laurie Turnbull PRODUCTION MANAGER Kimberly Collins (416) 510-6779 kim@newcom.ca DIRECTOR, BUSINESS DEVELOPMENT Delon Rashid (416) 459-0063 delon@newcom.ca REGIONAL ACCOUNT MANAGER Anthony Buttino (514) 292-2297 anthonyb@newcom.ca CIRCULATION MANAGER Mary Garufi (416) 614-5831 mary@newcom.ca PRESIDENT Joe Glionna CHAIRMAN & FOUNDER Jim Glionna

5353 Dundas Street West, Suite 400, Toronto, ON M9B 6H9 Canadian Shipper is written for Canadian transportation and logistics professionals who manage product flow from manufacturer to point-of-sale. Editorial is focused on reporting, analysis and interpretation of Canadian logistics trends and issues. It is published by NEWCOM MEDIA INC.

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Pipe dreams

A

lberta and the Federal government are at loggerheads about what to do about the lack of capacity to ship crude oil out of the province, which is costing the Canadian economy as much as $80 million a day.

Alberta Premier Rachel Notley’s plan is buy more rail cars to help ship additional oil, as well as force a production cut from the biggest oil producers starting in January. One plan floated was a proposed joint purchase of two unit trains, estimated at $350 million.

“Alberta will buy the rail cars ourselves to move this oil,” she was quoted as saying.

For shippers, while the prospect of more rail cars on the lines may seem like an invitation for delays, it’s a short-term fix that is needed to keep the oil flowing and prevent Alberta’s, as well as the nation’s economy from stalling.

Prime Minister Justin Trudeau’s government has been cool to Notley’s proposal, in part because it would take at least a year to get the new trains in place. Federal Finance Minister Bill Morneau said the government is focused on long-term, cost-efficient ways to get crude to market, i.e. pipelines.

But the only current proposal to increase pipeline capacity to the coasts is the Trans Mountain pipeline expansion, which is in limbo following a court ruling overturning its federal approval. Ottawa is trying to get that project back on track with more consultations, but if that does happen, it will be several years before oil actually starts moving, something everyone, including shippers, can’t afford to wait on.

Exacerbating the problem is Canada’s almost total reliance on the U.S. as an export market. Almost every drop of oil that is not refined and used in Canada is exported to the United States. Without more pipelines to the coasts where oil tankers could theoretically then ship oil overseas, Canada’s oil producers are at the mercy of the U.S. While the Feds have thrown some money at the problem in the form of $1.6 billion in aid to the province’s energy industry, that too is a short-term solution that does nothing to address the problem. The package is based, in some ways, on those offered to softwood, steel and aluminum producers after the U.S. dealt them direct blows with new import tariffs.

With no new additional pipeline capacity coming on line in the foreseeable future, the Federal government needs to chip in and help the province with the short-term solution that makes the most sense and has the best chance of success—new trains.

If Trudeau and Morneau want to avoid getting oil on their faces, they need to step up and pay up so one of Canada’s most important resources can once again flow freely. CS

POSTMASTER: Please forward forms 29B and 67B to: 5353 Dundas Street West, Suite 400, Toronto, ON M9B 6H9 Second Class Mail Registration Number 0721.

PUBLICATIONS MAIL AGREEMENT 40063170

© iStock

John Tenpenny, Editor john@newcom.ca

www.canadianshipper.com January 2019 5

IN THE NEWS

Logistics lifer CITT Award of Excellence recipient Beverly Jones is proudest of others’ accomplishments

By John Tenpenny

According to Beverly Jones, it didn’t take long before she was hooked. Her obsession of choice? Logistics education of course.

Since beginning the process to obtain her CCLP designation from CITT as a 22-year-old industry novice, Jones hasn’t stopped learning and doing all she can to ensure others in the industry she loves embrace continuing education.

“I wanted credentials to gain credibility. Coming into a male-dominated industry, I thought ‘who is going to listen to a 22-year-old woman? It’s been critical in my career; to know I hold the designation is so positive and it keeps me on top of the pile.”

At the recently held CITT conference in Vancouver, Jones was awarded the association’s prestigious annual CITT Award of Excellence for 2018. The award is given to a CITT-Certified Logistics Professional designation holder who has demonstrated career-long excellence and leadership in supply chain logistics, as well as notable involvement in CITT. “I’m incredibly honoured to be recognized with this award,” said Jones in accepting the award. “CITT is an organization that is very close to my heart, and when I think of the remarkable professionals who’ve previously received this award, I’m humbled.”

Currently a manager at FedEx Trade Networks, Jones says she enjoyed the program, and was invited to facilitate CITT courses at Sheridan College in Oakville, Ont., which she has been doing for over 20 years. “It helps me give back to the industry, to stay involved and connect with other professionals in the sector, and keeps me current. My biggest professional accomplishments are always when I see my team succeed, so seeing people come through the program and grow is so rewarding, and keeps me engaged.”

6 January 2019 www.canadianshipper.com

Beverly Jones, CCLP, was awarded the CITT Award of Excellence for 2018 at the association’s annual conference in Vancouver.

Along her journey, Jones says she’s always received support for her industry educational efforts, particularly at her current employer. “I can’t say enough about the past five years at FedEx. They have supported me and allowed me to do this.”

Having been involved with CITT for so many years, Jones has seen the course evolve from being held in a classroom to being offered online.

“It’s important that CITT be flexible and cater to this new learning environment because it’s imperative that we continue to educate and provide the

fundamentals to those coming up behind us so we can keep our industry strong,” says Jones Evaluating students has also changed, she says, pointing out that 20 years ago report writing was the format for assessment, while business case studies are currently being used. Looking ahead, she believes online presentations will be the next logical step.

“It speaks to the Millennials wanting to put together Powerpoint presentations and discuss them, to be more dynamic and visually engaging. We’re not there yet, but we need to be.”

When it comes to technology, Jones admits that while it’s not feasible for the facilitators to stay of ahead of the curve, it is important that trends such as blockchain are acknowledged.

“Does CITT need to teach a course in blockchain? No. What we need to be able to do is support it so that our candidates have a fundamental understanding of where the technology is going and how it is going to evolve and change our industry.”

It’s those kinds of challenges that Jones has encountered as a CITT facilitator that have kept her engaged and she remains passionate about her role in moving the logistics profession forward.

“Just because we have our CCLP, we don’t walk away from it. Our passion needs to be ‘I want to continue to understand what’s going on in this industry.’ And companies need to embrace that as well and engage and encourage their employees to stay current.”

Asked her advice for young people in the business, she said: “Don’t limit yourself. Join a company where you can experience multiple facets of the business. And get courses behind you to get credibility and insight into the industry.

You won’t enjoy the work until you understand the fundamentals—and enjoying the work makes you that much better at it” CS Photo: Suzanne Rushton Photography

IN THE NEWS

Boosting Asian connectivity Asian Logistics and Maritime Conference highlights Hong Kong’s place as a key logistics hub

By John Tenpenny

Hong Kong Port is currently the fifth busiest container port in the world, handling 21 million TEUs in 2017.

The Asia-Pacific region is growing rapidly despite uncertainty related to the trade conflict between Mainland China and the United States. Hong Kong continues to be a key trading and logistics hub linking the mainland, Association of Southeast Asian Nations (ASEAN) members and global markets through its excellent regional and global sea and air links. The eighth Asian Logistics and Maritime Conference (ALMC), organized by the Hong Kong Trade Development Council (HKTDC) and Hong Kong Special Administrative Region Government, held in November, and attended by Canadian Shipper, brought together logistics industry players from across the region and the world.

The discussion in the opening plenary session under the theme “Boosting Asian Connectivity for a New Regional Economic Order,” focused on changes in transportation trends and logistics technology, challenges in highway and rail infrastructure, and opportunities for Hong Kong to maintain and enhance its role as a regional transportation and logistics hub.

“Asia is a strong, resilient trading bloc in a globalized world, and connectivity is the key to global growth,” said Karen Photo: Hong Kong Trade Development Council

Reddington, president of the Asia-Pacific Division of FedEx Express. She suggested three ways to build on this connectivity.

One is to keep trade as open as possible.

Confident countries lower their trade barriers and do more business as a result, with economies and companies prospering, she said. “Asia is embracing free trade because it is confident.”

The second way to build connectivity is to provide businesses with the right digital expertise to grow their footprint, and with environmental knowledge and awareness to improve efficiency, while enhancing the environmental sustainability and safety of cities.

The third critical factor in building connectivity is to develop infrastructure to accelerate and support growth.

This requires policy makers to have long-term foresight, since infrastructure must be five to 10 years ahead of growth, she explained.

At the Q&A session, speakers were asked to address Hong Kong’s future role as a logistics hub is. Zhong Cheng, deputy general manager of China Railway Container Transport Corp.

(CRCT), pointed out that Hong Kong is Asia’s maritime and logistics centre, particularly for re-export. Reddington

added that Hong Kong was FedEx’s headquarters for Asia Pacific for good reason. “It is already the world’s largest air cargo hub, but it is not resting on its laurels, building a third runway.”

Hong Kong also has a good regulatory system, she said.

Canadian content was provided during a cold supply chain logistics session that provided insight into the process that allows consumers in Japan to enjoy fresh pork from Eastern Canada.

Headquartered St-Hyacinthe, Que., Olymel is the country’s largest exporter of pork products, with most of its product destined for Asia. The company’s main export market for chilled pork is Japan—a six to seven-day journey across Canada to Vancouver followed by a two-week containership voyage across the Pacific. Air freight is not an option due both to the volume shipped and the cost, said Alexandre Tarini, vice president of logistics for Olymel.

The pork is shipped by rail across Canada in 53-foot containers. Timing is of great importance to ensure the product arrives in good condition and has adequate shelf life for customers in Japan.

“We make sure we send the cargo at the proper time to meet the proper ship, every day of shelf life is very important, if we miss that sailing add an additional seven days of transport,” said Keith Reardon, senior vice-president, consumer product supply chain growth, for CN Rail.

Ensuring that the pork arrives in Vancouver in good condition is a challenge not just because of the distances involved but also the Canada’s weather that can vary from 35 degrees Celsius in summer to minus 35 degrees Celsius in winter. Tarini explained that they have telematic monitoring of the containers for temperature and airflow, and if necessary, they can stop a container intransit if necessary. “We have selected vendors who are able to repair these units at specific strategic locations on our network,” explained Reardon.

According to Tarini, over time, issues with containers have reduced from six per cent to less than one per cent. “The risk of getting a bad product to the customer is almost absent. What we’ve done with companies like CN is reliability of service,” he said. CS www.canadianshipper.com January 2019 7

IN THE NEWS

The cargo facility of the future Growth and technology front and centre at annual IATA cargo media day event

By John Tenpenny

IATA director general and CEO, Alexandre de Juniac addresses the media at the organization’s annual cargo media day in Geneva, Switzlerland.

Demand growth is expected to slow in 2019 due to a weaker world trade environment, which has been impacted by increasing protectionism, with tonnage predicted to nearly four per cent, according to the International Air Transport Association (IATA).

The prediction was made at the association’s annual cargo media day, held at its headquarters in Geneva, Switzerland, and attended by Canadian Shipper.

IATA is predicting that, following an increase of 4.1 per cent in 2018, growth will slow to 3.7 per cent to 65.9 million tonnes, the slowest pace since 2016.

Cargo yields are expected to grow two per cent, well below the “exceptional” 10 per cent growth in 2018.

IATA says this continues to recent strengthening of the cargo business since cost increases are lower.

Overall cargo revenues are expected to reach $116.1 billion in 2019, up from $109.8 billion in 2018.

IATA director general and CEO, Alexandre de Juniac says: “We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer. So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year. But there are 8 January 2019 www.canadianshipper.com

downside risks as the economic and political environments remain volatile.”

The association forecasts that global airline net profits will be $35.5 billion in 2019, up from $32.3 billion in 2018, making 2019 the tenth year of profit and fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital.

During a presentation, IATA’s chief economist Brian Pearce, pointed out that air cargo has outperformed the sluggish world economy and grown more over the last five years than other modes of transportation.

He also citing the phenomenal growth in e-commerce for helping to keep air cargo’s share of shipping higher.

Digital technologies have revolutionized the retail industry, IATA’s head of e-commerce and cargo operations, Brendan Sullivan told the assembled media members.

Global e-commerce is growing at 20 per cent on average per year, he said.

“With the emergence of many new players and consumers, including developing countries, there’s still a lot of room for growth. Of all retail sales globally, 11.4 per cent (one in 10) are happening online.

He also said that today, online shoppers want speed, predictability of deliv-

ery times and visibility. This requires tracking and monitoring in real time, smart data sharing, speedy customs procedures and efficient and seamless return of products, something the air cargo industry is well positioned to do.

By improving e-commerce services and making them globally available, developing countries can grow their economies, reducing poverty and inequality, said Sullivan. “The air cargo industry is transforming to capitalize on e-commerce by building global standards, creating partnerships and fostering innovation.”

He pointed out that IATA, including Cargo iQ, works hand-in hand with the air cargo industry in embracing new initiatives and technologies that enable speed, visibility, and predictability such as Interactive Cargo to track, monitor and interact with each shipment, ONE Record to replace all existing paper and electronic documents through a virtual shipment record, Fast Cargo to speed up on-the-ground processes and Cargo Facility of the Future to embrace innovative technologies and processes.

Sullivan also discussed IATA’s Smart Facility solution which is still in the pilot phase as a way to reduce the estimated $160 million the industry spend on cargo handling facility audits.

Currently, the industry spends thousands of man-hours on redundant facility handling audits as each carrier is performing them individually to ensure operating standards are matching agreed service levels. That puts a burden on carriers and facility operators alike, said Sullivan.

He adds that the Smart Facility Operational Capacity (SFOC) audit has the potential to reduce this burden significantly by establishing an industrywide, mutually recognized audit and accreditation scheme that creates trust in the operational capacities of cargo facilities and will allow carriers to reduce their audits to individual unique selling points (USP) instead of validating the entire handling process from A to Z. “If Smart Facility could reduce the total industry audit burden by 20 per cent, this would result in US$51 million in industry savings for one audit cycle alone,” said Sullivan. CS Photo: IATA

IN THE NEWS

White paper examines what’s fueling cargo theft in Canada As long as cargo continues to move along the highways, pass between trailers, and hang out in truck yards, there will be cargo theft. Just how big is the cargo theft problem today? While experts are hesitant to hang a price tag on it, most agree that cargo losses total in the billions each year. And despite more consistent reporting and closer monitoring, the problem isn’t going away— in some ways, it’s growing.

Northbridge Insurance released a special report titled Canadian Cargo Theft Trends: What’s new, what’s now, and what’s on the horizon, describing how advancing technology and new highvalue targets are putting carriers at risk from coast to coast.

Since the voluntary system for reporting cargo theft was launched collaboratively by the Insurance Bureau of Canada and the Canadian Trucking Alliance, an increase in reporting has provided an opportunity to take a closer look at how cargo theft is affecting Canadians and how carriers can mitigate this growing risk.

“These losses are having a direct impact on carriers’ bottom lines, and bring a huge reputational risk,” stated Garry Robertson, who leads the Claims Special Investigations Unit at Northbridge. “For consumers, stolen products are often hiding in plain sight. The saying, ‘it fell off the back of a truck,’ may once have referred to a great deal, but it’s important to start asking where goods are coming from. Eventually, costs will increase,” he added.

Using data from local law enforcement reports, the Insurance Bureau of Canada, and other cargo authorities, the report offers a review of the current trends and changing risks surrounding cargo theft.

Key findings:

• Mixed-load cargo, such as grocery and household items, topped the list of most commonly stolen products in 2018.

British Columbia Alberta Saskatchewan Ontario Quebec

1% 10% 1% 10% 78%

While data indicates that most reported theft occurs in Ontario, more consistent reporting has been coming out of the west in recent months. There, lumber loads and heavy equipment have been going missing more often, and now Alberta is catching up to Quebec in terms of reported theft.

• Meat products are becoming a primary target for theft and have attracted well-funded criminal networks: Northbridge Insurance claims data from 2018 shows that one stolen load was valued at $200,000, which would require a coordinated effort and investment in specialized equipment to prevent spoilage.

• Cargo itself isn’t the only target: thieves are becoming increasingly more interested in the trailer as well, which is virtually impossible to recover once dismantled.

• While Northbridge data shows that most reported theft occurs in Ontario, more consistent reporting from western Canada is indicating an increase in missing lumber loads and heavy equipment.

• Technology is spurring growth in the industry, but also producing new methods for criminals. In many cases, thieves are breaching online broker sites to select high-value deliveries and collect them ahead of schedule by assuming a false identity. CS www.canadianshipper.com January 2019 9

THIRD PARTY LOGISTICS

Assembling and executing a supply chain for cannabis has its challenges for all those involved

BY CAROLYN GRUSKE

D

ave DiPersio has had an opportunity few business leaders ever get: he has been involved in the creation of an entirely new supply chain and logistics operation for a brand new industry.

When asked if it was a challenge he ever expected to face, his answer is quite clear.

“Never. Absolutely not. I’m actually an accountant by trade, so this role is actually a departure from finance in general. To go into a brand new industry, was pretty exciting.”

DiPersio’s role is senior vice-president and chief services officer for the Nova Scotia Liquor Corporation (NSLC). As such, it was up to him to oversee the development and the roll-out of the province’s plans to manage and sell recreational marijuana products.

As most Canadians are aware, in June 2018, the federal government passed Bill C-45, the Cannabis Act, which was designed to legalize and regulate the sale 10 January 2019 www.canadianshipper.com

and use of marijuana in Canada. The Act came into full effect on October 17, which was the first day that Canadians could legally purchase the product through licensed retailers.

According to a report by CIBC World Markets, “by 2020, the legal market for adult-use cannabis will approach $6.5 billion in retail sales. For context, this is greater than the amount of spirits sold in this country, and approaches wine in scale.”

The comparisons to the liquor industry are useful for perspective; however, marijuana is a very different product.

Like a number of its provincial counterparts, Nova Scotia decided it wanted to be the sole wholesale distributor and retailer of adult-use cannabis, and while the province already had a similar system in place to manage liquor sales, getting its marijuana sales network (and the supporting systems) in place wasn’t as easy as simply adding SKUs of bud to the existing

alcohol inventory purchases. At each step of the process, the NSLC had to start from scratch: Who were the suppliers? What products did they have? How would it ship the products to its stores and directly to customers? How would it track inventory and meet its reporting duties to the various branches of the federal government? The list of questions was practically endless, and to make matters even more complicated, changing expectations of what exactly the federal legislation legalizing the use of recreational cannabis would contain and when it would be implemented caused considerable uncertainty for all involved in the newly emerging industry.

“I’d say the most satisfying thing was building something from nothing and building it all so quickly,” says DiPersio.

In the end, NSLC decided to operate 12 stores—11 constructed as a “shop in shop” model and built inside existing liquor Photo: iStock

THIRD PARTY LOGISTICS

stores—and one stand-alone location.

It also decided to sell cannabis products online. Additionally, NSLC had to decide on its logistics partners.

DiPersio said Canada Post was the obvious choice to deliver online sales to customers as it has ability to reach every person in the province. The postal service makes daily pickups at the distribution centre (DC) and delivers the orders to most customers the next business day.

GardaWorld, which NSLC was already using to handle its cash management services, was selected to transport the inventory from the warehouse to the stores via armoured car.

The Metro Green Logistics division of Metro Supply Chain Group of Companies was picked to operate the fulfillment centre, a 20,000 square-foot warehouse located somewhere in the province (“We don’t disclose the physical address because that’s one of our security features,” said DiPersio.)

“All of our inbound product is FOB [Freight on Board] to our fulfillment centre, so it’s the producers’ responsibility to get the product to us. And then Metro is managing everything that happens within the actual distribution centre. So they do all of the receiving and the put away,” explained DiPersio.

According to DiPersio, store shipments are typically packed in totes, unlike alcohol which gets moved on pallets.

Store receiving also differs from the alcohol side of the business, with locked cages being added to the cannabis stores’ receiving areas—a security measure not taken with the alcohol inventory.

Security measures

Security and theft prevention is definitely one of the chief concerns when it comes to selling, handling and transporting cannabis. Jeff Meyers, COO of Vancouver-based Spire Secure Logistics, which is a security consultancy for governments and businesses, including those in the cannabis sector, said just because a product is legal or legalized, it doesn’t mean it’s exempt from criminal interest.

For example, he pointed out there is still black market tobacco available, and organized crime still benefits from those sales.

Photo: Nova Scotia Liquor Corporation

The Clyde Street location in Halifax is one of 12 cannabis outlets operated by the Nova Scotia Liquor Corporation and its only stand-alone location.

Thomas Gerstenecker, CEO and founder of 3|Sixty Secure Corp., a cannabis-specific secure transport and security services company based in Almonte, Ont., said that because a shipment of cannabis product can be worth more than 10 times the same volume shipment of alcohol, for example, it garners the attention of thieves.

To prevent truck hijackings, Gerstenecker said 3|Sixty puts a number of preventative measures in place including videoing all product so there is evidence if tampering occurs. Careful and deliberate route planning is undertaken, but if a truck does go off route, the vehicles are geo-fenced, which means an alert goes off at the operations centre, notifying the company of a route departure.

Hijackers gaining access to information about shipments is a serious risk, according to Andy Richards, CEO of Spire, and it’s one of the reasons the company advises all of its clients to perform deep and thorough background checks on all of their employees. He said that these checks must go beyond simply looking to see if a person has a criminal record. Instead, they have to ferret out relationships between the employee and people involved in gangs or other criminal organizations.

Of course, security measures aren’t

the only things to worry about when considering cannabis logistics. Government regulations must also be considered as well as business best practices.

Kevin Ward, business development manager at Atlas Growers Ltd., an Edmonton-based company specializing in medical cannabis, said getting logistics companies to understand the needs of the cannabis industry has been challenging.

Because they are required by law to report any potential product loss to the Federal Ministry of Health and the RCMP within 24 hours, companies like Atlas ask third-party logistics providers for their standard operating procedures in the event something happens during transport, such as trucks breaking down. Shockingly, according to Ward, some of the shipping companies have been reluctant to provide this kind of information because they either haven’t received these kinds of requests or they deem the information proprietary and confidential.

Not only must cannabis companies be aware of where their products are during shipment, they must ensure that those products remain within Canada’s borders at all times. Bojan Krasic, the chief financial officer for Oakville, Ont.based beleave kannabis corp., which is involved in both the adult-use and medicinal (or “wellness”) marijuana mar-

www.canadianshipper.com January 2019 11

THIRD PARTY LOGISTICS

kets, said this requirement limited the number of potential logistics providers.

“We couldn’t use someone like UPS or FedEx because at times those companies will pick up a shipment and take it to a hub somewhere like Dallas, where they’ll aggregate a bunch of packages and they’ll try to ship it back to Canada,” he said. “We couldn’t break any international laws because even though it’s never leaving their facility, it’s practically trafficking cannabis.”

When it comes to shipping, marijuana is a pretty forgiving product.

Most licensed producers in Canada started out by purchasing seeds (as opposed to plants or cuttings) According to Atlas Growers’ vice-president of cultivation, Jim Hole, seeds of all types are pretty resilient. He said as long as the Rule of 100 is followed, seeds should remain viable.

As long as the temperature (measured in Fahrenheit) and the humidity add up to a

“We couldn’t use someone like FedEx or UPS because at times those companies will pick up a shipment and take it to a hub somewhere like Dallas, where they’ll aggregate a bunch of packages and they’ll try to ship it back to Canada.”

– Bojan Krasic, CFO, beleave kannabis corp.

number totalling less than 100, everything should be fine. “If you go above 100, the seed deteriorates very quickly, so you want to keep it cooler and drier, so it can last for a very long period of time. There should be no quality issues if the seed was vacuum-packed for shipping,” he said.

Atlas Growers’ CEO Sheldon Croome added that since seeds are relatively inexpensive, it makes them easy to ship.

“Transportation-wise, there’s not much risk in sending seeds. They’re just shipped in a box, probably by Canada Post. Seeds aren’t extraordinarily high

in value. Something like a pallet of a cannabis derivative, like cannabis pills, that can have a far higher value, and shipments over $100,000 are picked up via armoured vehicle.”

Insurance concerns

Like other industries, the cannabis industry has the option of taking out insurance for a whole host of situations, including cargo loss and theft, but according to Toronto-based Sean P. Bell, vice-president of Canadian Insurance Brokers, there are very few man-

Follow us on 12 January 2019 www.canadianshipper.com

THIRD PARTY LOGISTICS

dated protections.

“They need a cannabis bond, just like the liquor company producing liquor would have a liquor bond,” he said.

“There are obviously multiple options to place the bond, but there isn’t much of a mandatory insurance requirement. It is mostly a public relations thing. Producers are crazy not to insure as robustly as possible because with one bad day, their brand is gone.”

Even with insurance in place, it still makes sense to take preventative measures to ensure cannabis cargo is safe during the shipping process. At Atlas Growers, Ward said that means physical security measures were created to protect the facility, including the shipping area.

“The facility is fully secured with 360 degrees of perimeter security and lighting. We have a perimeter fence which is eight feet topped with barbed wire and and an electronic gate, all fully moni-

tored. We actually have it monitored in such a way that even if you were to clip a chain link trying to break in, we would we know.” Before a driver can even back their truck up to the one shipping dock doors, their identity is confirmed and reconfirmed, explains Ward.

As for how the industry and especially its logistics networks will develop and evolve, that’s still very much up in the air. It will take time to measure how much demand there truly is for the products. It will also take suppliers time to ramp up their production schedules and to fulfill their initial promises to retailers. For example, DiPersio said NSLC originally expected to carry about 350 SKUs, but opened with between 100 to 150, as products were in short supply.

DiPersio also speculates it will take some time for suppliers and retailers to learn how to work together to meet each other’s schedules, since a number

of the producers who are now selling recreational products originally started as medical marijuana producers and only set themselves up to serve a directto-consumer delivery model.

“From our perspective, the producers still have a lot of development to do going by when people are showing up versus their scheduled appointment and how much product is showing up versus how much we requested.

“I’m sure they’ll move quickly and I’m sure there will be lot of improvement in the inbound supply chain over the coming months.” CS Carolyn Gruske, a former Editor of MM&D, is an award-winning journalist with expertise reporting about supply chain and logistics, automotive and transportation, information technology and legal matters.

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www.canadianshipper.com January 2019 13

INLAND PORTS

Perfect Match Fueled by a new partnership, Ashcroft Terminal is looking to extend its international reach

BY JOHN TENPENNY

W

hile a marriage of convenience may not be the best way to build a healthy longterm relationship between two people, when it comes to business partnerships, both sides getting something they want out a of a deal is essential On the heels of a planned $28.2 million expansion, Ashcroft Terminal announced that PSA International, one of the world’s biggest container port operators, acquired a majority interest (60 per cent) in B.C’s largest inland cargo terminal.

Kleo Landucci, formerly Ashcroft’s managing director and now the chief commercial officer, overseeing sales and marketing, told Canadian Shipper that as a family-owned entrepreneurial group, they had been aware for several years that for the company to achieve its growth potential and vision “we needed a globally focused partner.” PSA, she said, “has the expertise to understand how to develop international ports at a whole new level, so we are 14 January 2019 www.canadianshipper.com

pretty excited about that.

“With 74 million TEU in 40 ports, PSA will give us the global reach,” she added. PSA has operations in 16 countries in Asia, Europe, and the Americas, but none in Western Canada.

By comparison, Dubai-based DP World, which operates Vancouver’s Centerm and Prince Rupert’s Fairview container terminals, operates 78 marine and inland terminals and handled 70 million TEUs in 2017.

At the same time that the Landucci family were evaluating their options, PSA was embarking on a transformational journey of its own, according to Kelvin Tan, Ashcroft’s newly appointed CEO, who will be taking over from Kleo’s father Robert, the company’s driving force since founding Ashcroft Terminal in 2001, who will now serve on the board of directors.

“As a port and terminal operator, we started to think about how we could improve our service to customers and as a result we started to understand that in order to do that we had to

get into the logistical space of the supply chain,” said Tan. The opportunity to partner with the Landucci’s was the first deal in North America that made sense for PSA, said Tan, adding that the company has evolved since he joined in 2001, from a Singapore-centric operation to one that now has a large strategic global presence.

“If you look at the model of Ashcroft, it makes sense,” he said. “A single facility where you have both mainlines [CN and CP] crossing, literally right next to each other.”

The Ashcroft acquisition is PSA’s first foray into Canada, Tan Chong Meng, the company’s group CEO, stated when the deal was announced in July. “[It] offers us an entry point into the hinterland supply chain for the North American market, as well as an opportunity to increase our capabilities in intermodal and inland container depot operations.”

He added that the terminal’s strategic location allows PSA to establish a Photo: Ashcroft Terminal

INLAND PORTS

common user ICD and provide greater options to cargo owners and consignees. “We will partner with shipping lines, rail operators and trucking companies to implement a more robust, efficient and cost-effective supply chain solution to serve the needs of major exporters in Western Canada.”

For his part, Ashcroft’s founder feels the future of the inland port is in good hands. “PSA’s expertise as a world-leading port operator, coupled with Ashcroft Terminal’s current service to Canadian producers, established relationships with key stakeholders and Ashcroft Terminal’s in-depth knowledge and experience in rail operations will put the terminal in good stead for future growth,” said Robert Landucci.

Location, location, location

Located 340 kilometres east of Vancouver, in the Thompson Okanagan region, the 320-acre Ashcroft Terminal is the only inland port in Canada that has both Canadian Pacific Railway and Ca-

nadian National Railway mainlines running through it.

As an inland terminal, it can help alleviate congestion around Metro Vancouver by handling import and export rail cargo offloaded from or destined for container ships docking at the Port of Vancouver. Transportation congestion in the lower mainland continues to be a major issue for cargo and commuter movement, so much so that the Canada Transportation Act review report identified it as one of the main obstacles to economic growth over the next 20 years.

Ashcroft currently services all sectors of the natural resource industries, which include agriculture, mining, forestry and oil and gas; by providing transloading, fleet management, railcar storage and logistics solutions.

For Landucci, PSA’s investment in Ashcroft underscored the upside the multi-national company sees in inland port terminals, especially in Canada, which has lagged behind other regions in their development.

“The key is to do whatever you can do inland for efficiency and cost effectiveness to make your marine ports more efficient,” she said. “So you can really do the more inefficient work inland and increase throughput on your marine terminals—make your marine ports as efficient as possible on the more constrained footprint that they have. And that’s really what the job of an inland port is as part of the supply chain ecosystem, and PSA, with its investment is really validating the importance of that.”

Added Landucci: “We happen to have a very strategic location, and we are looking forward to maximizing our capacity with our new partners … Having a global impact is what we’re after.”

Key in helping Ashcroft reach its potential as an inland port for Vancouver is the slew of expansion projects announced last spring totalling $28.2 million—$9.2 million of which is coming from federal funding under Canada’s National Trade Corridors Fund—which www.canadianshipper.com January 2019 15

INLAND PORTS

Thompson River, and then Canadian National came along a few years later, and built their line on the north side, but before reaching the town ran into difficult terrain just south of where Ashcroft Terminal sits and was forced to build a bridge, leaving both railways on the same side.

When Vancouver businessman Robert Landucci, who had started his own lumber company, arrived on the scene he couldn’t believe his good luck of finding a piece of property with both railway mainlines within it boundaries.

That good fortune continues. With the backing of its partner, PSA, Ashcroft Terminal will focus on building the services that support its primary business streams of transloading, bulk storage and containers, while working with its customers, locally, nationally and internationally, says Landucci “The key for us is having the dual access at such a strategic location in the gateway to smooth out fluidity and create that capacity and release valve outside for the lower mainland.” CS

Ashcroft Terminal chief commercial officer Kleo Landucci (left) and CEO Kelvin Tan, are leading the charge in the wake of PSA International acquiring a majority interest in B.C.’s largest inland cargo terminal.

will add a new rail link to the CN mainline, additional rail track of existing infrastructure, an internal road system and a multi-commodity storage facility.

The projects are scheduled for completion in the summer of 2021.

“This is a huge deal for us,” said Landucci. “It will allow us to build in track and connect directly to the CN mainline where we will have direct access with a lead line and ancillary transloading, marshalling and storage tracks.

“It is significant for us, so much so that the day of the announcement we had customers—potential and existing—calling us to find out when they could send us rail cars.”

Landucci explained that the expansion will double Ashcroft’s track infrastructure. “As far as our geographic footprint, it will only take us to being twenty per cent built out. We have a lot more we can do, which is very exciting.”

For the relaunched container program, Landucci said commodities will arrive at Ashcroft via bulk rail or truck.

16 January 2019 www.canadianshipper.com

The products will be transloaded into marine containers for the journey to the Port of Vancouver, giving Ashcroft more control over supply chain costs, according to Landucci.

Initially, the resources to be transloaded are expected to be sourced in Canada, although the CN and the CP networks extend to Chicago and locations to the east and south either directly or through interlining with eastern railroads. Either way, according to Landucci, Ashcroft will provide greater export opportunities for Vancouver and two-way hauls for the railroads. Vancouver in 2017 ranked 47th among global ports with 3.25 million TEU, an increase of 11 per cent over 2016, and by mid-year 2018 had seen an increase of five per cent to record 1.64 million TEUs. Ashcroft’s built-in advantage goes back to its days as a transportation centre of goods and people travelling north in search of gold during the late 19th century. First Canadian Pacific built on what it felt was the easier side of the

SIZE

MATTERS Terminal size comparison Ashcroft Terminal (Ashcroft, BC)

320 acres

Deltaport (Delta)

210

Fraser Surrey Docks (Surrey)

154

Ridley Terminal (Prince Rupert)

135

Westshore Terminals (Delta)

133

Vanterm (Vancouver)

76

Neptune Terminals (Vancouver)

71

Fairview (Prince Rupert)

59

CN Intermodal (Prince George

33

Photo: Ryan McLeod

INFRASTRUCTURE

The new bridge crossing the Canadian-U.S. border from Windsor to Detroit is slated to begin operations in 2025 and is named in honour of “Mr. Hockey” Gordie Howe.

GAME ON The new Gordie Howe International Bridge will increase cross-border traffic flow while making truck crossings faster and smoother

BY KEN MARK

O

n October 5, officials dropped the puck on the Gordie Howe International Bridge construction project linking the border cities of Windsor and Detroit. Barring overtime, it will be completed in 2024 with the formal opening slated for 2025.

At the recent Canadian Council for Public Private Partnerships (P3) annual conference in Toronto, Bryce Phillips, CEO of the Windsor-Detroit Bridge Authority (WDBA) outlined the contract totalling $5.7 billion, of which $3.8 billion covers construction costs. The rest pays for operations and maintenance expenses. To make it all happen, Canada agreed to pay the entire tab on its own.

The project was officially launched in September 2002, when then Prime Photo: Windsor-Detroit Bridge Authority

Minister Jean Chrétien and then Ontario Premier Ernie Eves jointly announced a $300 million commitment to build the structure. If indeed the project opens on schedule in 2025, its gestation period will be slightly shorter than Howe’s quarter-century (1946-71) career with the Detroit Red Wings.

The bridge’s birth pains started with the challenges related to getting elected officials in two levels of government (state and provincial) in both Canada and the U.S. to agree on how to share costs, satisfy voters, meet safety and environmental standards and negotiate and sign relevant business contracts and international treaties. Such encounters involved scores of lawyers, engineers, consultants, politicians, diplo-

mats and concerned citizens.

During these discussions, Canada kept its stick on the ice. Among other things, the Province of Ontario invested $1.4 billion in building the 11-kilometre long, six lane-wide Herb Gray Parkway to link the proposed bridge to Highway 401. It opened in 2015.

Not so with the red-white-and-blue team. Despite the signing of a permit by U.S. President Barack Obama in 2013 and a special “interim local agreement” from then Michigan governor Rick Snyder to clear constitutional hurdles to deal with Canada, there was a constant stream of U.S. opposition. Much of it came from Manuel “Matty” Maroun, owner of the competing, four-lane Ambassador Bridge, which opened in 1929 www.canadianshipper.com January 2019 17

INFRASTRUCTURE

The port-of-entry (POE) compound for the Canadian Border Services Agency will occupy 53 hectares of land.

as well as various, Detroit-area municipal and state politicians. In all, Maroun filed 25 court challenges, none of which were accepted, to stop the proposed bridge project.

The new bridge which will be built east of the existing structure will be more convenient and less congested than the current one, which requires trucks to pass through city-centre streets in both Detroit and Windsor. As well, modern customs and immigration plazas will feature the latest digital security and inspection technology to speed up truck flow by eliminating the need for drivers to stop at booths to present personal identification, licenses and other documentation to officials.

The modern, wider lanes of the new bridge and the latest technology will increase traffic flow while making truck crossings faster, smoother and safer.

Steve Ondejko, president of Tecumseh Ont.-based Onfreight Logistics is already a huge fan. “With the Ambassador Bridge, you always had to watch out for car traffic and drive carefully to avoid the constant repairs. And if there was ever a serious problem, trucks would be backed up for miles. With the new bridge, we do not expect to see policemen directing traffic,” he says.

Despite Canada’s willingness to pay 18 January 2019 www.canadianshipper.com

for the total cost of the bridge construction, U.S. opposition to the project remained until we also agreed to pay for the entire cost of building the customs and immigration plaza and for the road link connecting the new facilities to the existing I-75 state highway as well. The port-of-entry (POE) compound for the Canadian Border Services Agency (CBSA) will occupy 53 hectares of land. On the American side, it will be 68 hectares.

But Ondejko does not believe that building the link to I-75 link will happen quickly. “The proposed route runs through several existing suburbs which will require U.S. officials to buy land and receive all the necessary approvals,” he notes.

Ironically, Maroun will face similar challenges after recently receiving permission to build a new bridge of his own. To satisfy numerous city and state zoning, environmental and other regulations, he will have to clean out the houses and other buildings on his own properties.

P3 savings

The Gordie Howe bridge is the latest example of the public private partnership (P3) approach for funding the construction, operations, as well as the

maintenance and repair of major infrastructure projects. P3 projects are commonly used for hospitals, schools, courthouses and other public facilities.

Current P3-funded transportation projects in Canada include the Confederation Bridge linking Prince Edward Island and New Brunswick, Ontario’s Highway 407, the City of Ottawa’s transit system expansion, Toronto’s EglintonLRT line and Montreal’s new Champlain Bridge. These projects all generate income through tolls or fares.

According to Bill Anderson, director of the University of Windsor’s Cross-Border Institute, choosing the public-private partnership construction, finance and management model can often stretch out a project’s delivery time. “Negotiations often take longer because such projects are more expensive and complicated since they involve more partners as well as different levels of government than conventional contracts.”

Ultimately, the government and the private-sector consortium building and operating the new crossing hope to collect enough toll revenue over the life of the contract to recoup the project’s cost and yield a profit. The contract permits the private-sector partner to operate the bridge and collect tolls for 30 years, Photo: Windsor-Detroit Bridge Authority

INFRASTRUCTURE

after which the two sides may decide to renew the contract. The government remains the owner unless it decides to sell as Ontario did with Highway 407.

In simple terms, the P3 option enables governments to leverage the private sector’s expertise, efficiencies and innovation by taking an all-inclusive Design-Build-Finance-Operate-Maintain (DBFOM) approach.

Governments also transfer much of the risk from possible cost overruns and delays to its private-sector partner while maintaining ownership of the facility. An independent monitor ensures that the contract is fair, open and transparent.

The WDBA’s recent Value for Money Report, concluded the P3 financing approach saved an estimated $562 million compared with using traditional publicsector procurement practices.

And yet, P3 arrangements are not fool-proof. In a just-released report, the Ontario Auditor General, Bonnie Lysyk concluded that a series of changes to Metrolinx’s light-rail projects in the Toronto and Greater Hamilton Area increased costs by $436 million. She concluded that municipal and provincial governments caused the loss by requiring major changes related to the Eglinton Crosstown and now-cancelled Scarborough LRT, after contract terms had been approved.

Getting back to the cross-border bridge, choosing a suitable name was no “empty netter.” Accordding to David Bradley, a Burlington-based consultant and former CEO of the Canadian Trucking Alliance and president of the Ontario Trucking Association, he suggested naming the bridge after the long-time star with Detroit Red Wings in 2010, because “he was a gentleman off the ice and my Dad’s favourite hockey player.

“At the time, politicians on both sides of the border were suggesting names such as the Friendship Bridge and the Detroit River International Crossing which people would shorten to DRIC. Support from Prime Minister Stephen Harper who is a keen hockey fan helped out a lot as well.”

Gordie Howe is not the only North American sports star to have a major

infrastructure project named after him. The city of Boston honoured Red Sox slugger Ted Williams by placing his name on the highway tunnel under its harbour. Howe and Williams also have something else in common— they both wore number nine on their jerseys. CS

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.

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www.canadianshipper.com January 2019 19

LEADERSHIP ROUNDTABLE

THE PANEL

(clockwise from top left)

Ross Reimer, President, Reimer Associates Pina Melchionna, President & CEO, CITT Doug Harrison, former President & CEO, VersaCold Logistics Services Paul Kurrat, Director of Operations, Global Warehousing & Distribution Pat Campbell, Vice-president, Strategic Initiatives, SCMA

B

eing able to attract and keep staff—whether truck drivers, DC workers or increasingly, the skilled IT and analytics experts to manage back end data operations—has become a competitive advantage. No matter which part of the supply chain you’re operating in, the last five years have been challenging, with the rise of e-commerce and shifting worker demographics.

To get some answers Canadian Shipper and Inside Logistics magazines put together a panel of experts to share their insights, tips and strategies to help transportation and logistics companies better manage the human resources challenges.

This is Part One of a two-part series, which will conclude in the March 2019 issue of Canadian Shipper.

What are some of the great HR challenges facing the industry as we begin a new year?

COMPETITIVE ENVIRONMENT Those companies that thrive will be the ones who can best address the HR challenges facing the transportation and logistics industry 20 January 2019 www.canadianshipper.com

Doug Harrison: Finding the right talent that fits your company culture is critical to a company’s success. There is certainly, in the western world, a global shortage of talent and capable talent, and I think that we’ll see that will constrain the economy and growth inside organizations. We’ll have to really think of innovative ways of using technologies or automation, and how do we find those employees as the [population] ages, and we’re looking for people to backfill those critical roles.

Paul Kurrat: Our greatest challenge is quite simple: recruitment and then retention. As soon as we do find someone, keeping them has become a different type of challenge than what we’re used to in years past.

LEADERSHIP ROUNDTABLE

“As soon as we do find someone, keeping them has become a different type of challenge than what we’re used to in years past.” — Paul Kurrat

Pat Campbell: From our members, we hear that their biggest challenge is finding the duality of skills that they require. They can find someone who has got some management skills, but then they’re missing some of the technology skills that we see becoming more and more relevant in today’s work environments.

Pina Melchionna: The shortage for talent is the biggest challenge. Whether it’s because of the demographic shift we’re seeing and people are aging out, or whether it’s because of the technological disruption, and skills are not keeping pace.

Ross Reimer: No question what we see from our vantage point, as a recruiter, is a shortage of top talent. I think the supply chain world has to go outside of supply chain. I think we have to be very aggressive on marketing our industry outside of the current borders we work within, and most of the folks I work with are resistant to that for obvious reasons. It takes time to train, it takes more of a start-up, ramp up time, but ultimately we’ve got to bring more people to this huge industry, but we need more top talent.

How have the challenges facing the industry changed over the past five years?

Paul Kurrat: Personally, I think the push over the past 20 years for post secondary education has given us now a workforce that doesn’t want entry-level, or expects more than entry-level.

Additionally, 40- to 60-hour work weeks, we’re finding for sure are out for many potential employees.

Pina Melchionna: From a learning and educational perspective, one of the things that I’ve definitely seen is the explosion of supply chain type courses and training that are now available from universities and colleges. I think supply chain used to be an industry that people sort of stumbled on by accident, and now there is targeted recruitment. So, as a learning organization ourselves, our challenge is to make sure we’re working with those colleges and at universities, and making sure that the graduates are coming out to the industry have the appropriate combination of both theoretical as well as practical skills that the industry requires.

Pat Campbell: As we have more and more academic institutions picking up

supply-chain management programs, I’m not sure that they can keep pace with evolving digital technologies It has to be a partnership between educational institutions and employers, so that there’s more opportunities to engage students, perhaps, earlier in internships, or work placements, so that they get the balance of skills, and get introduced to new technology.

Ross Reimer: I think e-commerce is having a massive impact on the driver shortage, not just tractor-trailer, but right down to the final mile in a small car or van, and there’s tremendous pressure to find enough drivers, to compensate them appropriately, and delivering whatever it is that someone orders individually to every single home puts a lot of traffic on the road.

It’s going to have to be addressed, obviously with compensation, because there’s just a huge driver shortage.

Doug Harrison: We think about how unemployment is relatively low, but the reality is there’s a big group of unemployment that isn’t measured, and it’s people who are trapped. They don’t have the skills for today’s economy, and so there’s a big portion of people out there www.canadianshipper.com January 2019 21

LEADERSHIP ROUNDTABLE

“We have to be very aggressive on marketing our industry outside of the current borders we work within, and most of the folks I work with are resistant to that.” — Ross Reimer

that really are looking for a role, but can’t find a role because of the requirement in the role has changed. I think what we’re seeing is, that we’re looking for a different type of employee today.

This new world is going to force us to think about the employment market differently, and we have be able to look at transferable skills, and then look at how we as employers or through educational bodies, teach the technical skills that are required. What’s exciting is that a lot of post-secondary education organizations are stepping up to provide more education in supply chain.

In terms of things such as talent development, recruiting and compensation, what are some solutions the industry can use to combat the labour shortage?

Pina Melchionna: From an employer perspective, an interesting difference is maybe develop for fit rather than hire for a specific skill set that you’re looking for. Hire a person with the right attitude, the right cultural fit for an organi22 January 2019 www.canadianshipper.com

zation, and then reach out to organizations that can train the skill set that they need. I think that would help expand the talent pool.

[CITT] just completed a three-year project with industry in which we discussed what the competencies are for the talent of the future. We’re working with employers to make sure that we are training according to those competencies, rather than just theoretical.

Doug Harrison: You know, I think as people think about their careers, the employer has an obligation, and the employee has an obligation to their development. As we start to see shorter and shorter tenures of an employee in a company, the reality is a lot of that investment in learning continuous improvement and development really has to be undertaken by the employee.

You’ve got to commit to your career.

You’ve got to spend time. You’ve got to continue to learn, continue to grow, continue to evolve, and the company’s role, as a new generation of workforce evolves is: How do I give you basic

training to allow you to be successful in the role, in the time period that I have with you?

Paul Kurrat: We as employers have to change our mindset of looking for somebody five days a week, from eight to four.

There’s a whole group of people out there that have different needs and desires of what they want to get out of a job in terms of time. I think when you do that, you open yourself up to a whole different group of potential employees.

With the industry’s workforce ageing, is there a role to be played by older workers mentoring their younger colleagues?

Pina Melchionna: Prior to joining the supply chain industry, I was in the banking and finance sector, where they had the same problem: How do you retain, in some fashion, those retiring employees to make sure that the information is kept internally? One of the things they tried was a reverse mentorship, where the retiring employees are paired with a new millennial employee.

LEADERSHIP ROUNDTABLE

Interestingly, both learned skills from each other. In terms of mentorship, the millennials learned things like conflict resolution, one of those transferable business skills that you learn on the job and not necessarily from training. It seemed to be working with some success.

Ross Reimer: When I was on the board of governors of a college, what we heard from employers was, “You’re teaching technical skills, but you are not teaching management leadership communication skills.” It was a very consistent message. So, I think mentorship programs are phenomenal, and I think there’s a great opportunity for all generations to learn from each other.

Paul Kurrat: At Global, we’ve had to change our mentorship program. We do many more checks on how it’s going, and have begun to formalize how we measure development. Just because somebody has worked somewhere for 20 years doesn’t mean he’s going to A,

share, or B, know to say what you need him to say. We’ve always assumed that the person you place in the mentor role with has the skills, the ability and the desire to mentor.

Ross Reimer: The transfer of knowledge is really important, too for an employee’s career development path. The more you can take an employee and move them between roles, the more knowledgeable they become and the more you can give them a really great career of continuous learning and being challenged.

Doug Harrison: It takes a lot of work to get people to come to work for you.

Retaining employees becomes incredibly important, but as the saying goes, “You don’t quit your company, you quit your boss.” What we see as recruiters or people who come to us looking for new opportunity, is invariably they’ve worked for someone that has been so uninspiring, or even worse, difficult to work for, and the bosses aren’t getting

any training. There’s very little leadership training of value, unless they’re investing in it on their own, and I think companies have to look at that and say, “If we really want to retain, our leadership team has to have the know-how to lead, so we don’t lose this new talent that we’ve spent so much money to attract.” I see it after the catastrophe, and if I look back up the chain it’s like, “Wow, if you just sort of treated that person decently or listened to them, they’d still be there.”

Pat Campbell: I have to give a plug to organizations like CITT and SCMA. As employers are looking to develop from within, don’t forget about your associations. Because we can definitely partner with you to supply some of those technical skills that perhaps an employee might be missing, to be able to move into a different area within the company. So, we’re definitely here to help support employers as they’re developing talent from within. CS

Let Our Process Work For You We stay close to the pulse of the industry Our research is fresh and relevant We fill positions in record time

Our database of qualified candidates is unmatched and growing We concentrate exclusively on recruitment within supply chain

Experience | Connections | Opportunities 905.844.6424 | www.reimer.ca www.canadianshipper.com January 2019 23

The Huron Central Railway runs right through EACOM’s sawmill property in Nairn Centre, 50 kilometers west of Sudbury.

RAIL

TROUBLE ON THE LINE The value of short line railways is being put to the test in Northern Ontario

BY CARROLL MCCORMICK

T

he battle raged in 2018 to persuade politicians to support a request by Genesee & Wyoming Canada Inc. for C$46 million to improve its Huron Central Railway (HCRY) operation between Sudbury and Sault Ste. Marie. Without it, Genesee & Wyoming said it would close the line by year’s end.

Finally, in November the Ontario government announced that the Northern Ontario Heritage Fund Corporation would give HCRY $980,000 in short-term aid. (In April, 2018 the National Trade Corridors Fund rejected its application for $46.2 million.)

“This financial aid will allow HCRY to maintain jobs and to continue to serve its customers beyond the end of the year, although the full rehabilitation of the railway will take a greater investment.

Importantly, this funding allows time for GWCI and both levels of government to pursue longer term financing solutions for the railway,” a Genesee & Wyoming 24 January 2019 www.canadianshipper.com

spokesperson told Canadian Shipper.

Is HCRY critical enough to the supply chains of its customers to warrant taxpayer support? No, according to Clifford Spratt, a councillor in Blind River, one of the towns HCRY passes through. This past summer, Spratt told SooToday.com, “When you’re in business, you’re there to make money. If you’re not… then you move on.”

This argument, despite its thin elegance, misses a few points.

The evidence is compelling that HCRY is a critical and irreplaceable component of its customers’ supply chains. The alternative—trucking— sounds impracticable at best. And the math suggests that the net damage HCRY’s closure would cause while waiting for another short line company to one day materialize, or never, outweighs the cost of publicly supporting the upkeep of a transportation corridor no less important than Canada’s publicly funded highways.

Canada’s attitude toward short lines sits in stark contrast to that of the United States, where various programs and tax incentives exist to help them. In Canada, while funding materializes periodically, provided the affected parties scream long and loud enough, governments have been deaf to the many requests, from short lines on up to the Railway Association of Canada, and even the 2015 Canada Transportation Act Review, for systematic support.

HCRY operates on 283 kilometres of track, owned, incidentally, but not maintained, by CP. In 2017, HCRY moved 12,900 carloads of freight and will move about the same in 2018. Algoma Steel, Domtar and EACOM Timber represent over 75 per cent of HCRY traffic.

“One carload can replace up to 3.2 trucks on the road,” says Claudine Bois, Genesee & Wyoming’s communication advisor. “Without HCRY, we could see an increase of up to 40,000 trucks annually on the regional highway.”

Photo: EACOM

One fully loaded lumber rail car would fill over three tractor trailers.

Road to nowhere

Winter is an important time of year for Huron Central customers, when waterways are closed.

Photos: EACOM (top): HCRY

To those who see no problem with 40,000 trucks swarming in to fill the void, should HCRY close, Genesee & Wyoming offered the following minilesson in a July 2018 presentation to stakeholders: In 2010, HCRY, facing unaffordable infrastructure work, received $33 million in federal and provincial funding, and added $11 million of its own, to fund its operations from 2011 to 2015. A third-party study Genesee & Wyoming commissioned calculated that by not having that cargo hit the highway, taxpayers accumulated a net savings of $15.8 million: $35.3 million in road maintenance, $11.5 million in accident costs, and $2 million in environmental costs ($48.8 million).

The road in question is Highway 17, which parallels the HCRY line from Sudbury to Sault Ste Marie. Described by some as “about the worst” road in the country, it is regarded as a poor place for more heavy traffic.

“Besides the HCRY, the only other ground-based transportation along that route is Highway 17, a two-lane highway that is not well suited for major freight transport,” says Michael Macnamara, chair of the Greater Sudbury Chamber of Commerce. “It experiences frequent closures, especially during the winter months. Highway 17 is four lanes leaving Sudbury but quickly goes down to two lanes until you approach Sault Ste. Marie. The mix of traffic, especially in bad weather can be a little harrowing.”

How do customers rate HCRY’s value to their supply chains? www.canadianshipper.com January 2019 25

RAIL

Algoma Steel shipped just over 2.3 million tons of finished goods between April 2017 and March 2018, via rail, road and waterway. “By rail we ship via CN and CP ... between 14,000 and 15,000 rail cars per year ... on average it takes about two and a half trucks to replace one rail car,” says Brenda Stenta, manager, corporate communications with Algoma Steel.

“HCRY is our connecting line with CP. Generally, we prefer to receive raw materials by vessel, however we do receive scrap steel and a portion of our iron ore by rail, primarily during the winter months when the shipping season is closed.”

When choosing between rail and truck, rail is the preferred method of transport for the commodities that Algoma ships, says Stenta. “Our geographic location and the winter closure of the shipping channel are two key factors that will inevitably drive increased truck traffic in the absence of rail.

26 January 2019 www.canadianshipper.com

HCRY gives us rail optionality, which improves our reliability and ship-ontime performance, and aids in maintaining a competitive cost structure.”

Wood is good

HCRY runs right through EACOM’s Nairn Centre sawmill, near Sudbury, one of the company’s five in Northern Ontario. The sawmill supports 190 direct sawmill jobs and more than 200 indirect jobs in forestry and transportation. “Our woodlands operations employ more than 50 small businesses in the region for the construction and maintenance of access roads, tree planting and harvesting, as well as transportation of products to and from the sawmill,” says Christine Leduc, EACOM’s director, public affairs.

EACOM fills about 1,100 outbound rail cars a year, with weights approaching 200,000 pounds per car. Sixty per cent of its product goes to the U.S. and is moved by rail, while trucks deliver

the other 40 per cent to its Canadian markets. “We need a more competitive freight transportation system,” says Leduc, pointing out moving freight by truck to Florida, for example, would be too costly. “So we are reliant on rail.”

EACOM uses HCRY, and beyond that, other rail lines, to move some 41 per cent of its lumber outbound, and 16 per cent of its logs inbound. Of the costs and challenges of switching to truck transport, Leduc says, “The impact of the closure of HCRY would mean moving all of our product by truck to Sudbury. The impact would be millions in added transportation costs.”

There would also be an impact on Domtar, she says. EACOM sells wood chips to Domtar’s Espanola mill and “For Ontario’s solid wood industry to be competitive, we need markets for our chips. We would therefore also be concerned about the competitiveness impact of a rail closure.”

Leduc also raises the issue of

RAIL

whether the trucking industry would even be capable of picking up the slack.

“We are retiring more drivers faster than we are hiring them. We are already in a situation where it is a challenge for our company and the country [to find enough drivers].”

Asked about the negative feedback when short lines ask for public funding, Leduc believes that if any of EACOM, Domtar or Algoma were to close because of uncompetitive transportation costs, “the impact on the taxpayer would be bigger than the cost of subsidizing the short line.”

Among the towns along the line that have been supporting HCRY’s request for financial assistance is Espanola.

“HCRY provides 43 direct jobs; however, this railway is an integral link for the Espanola and Nairn mills, which provide additional employment for another 700 people,” reads a statement from the Town. “The ability for these mills to receive chemicals by rail and

ship product is vital to their ability to compete in global markets. It is estimated that these mills generate over $600 million in economic activity in our area.”

Moreover, says Bill Foster, Espanola’s deputy mayor, trucking is not even an option for some products. “For Domtar, the chemical unload facilities were designed with rail transport in mind and specifically two chemicals—50 per cent caustic and sodium chlorate— should not be shipped by truck. The plant is not set up to handle the volume of incoming materials by tanker truck.”

There are also implications for future economic development, should governments refuse assistance to HCRY, such as the planned Ring of Fire chromite mining and smelting development. “We understand that the early proposals for developing the Ring of Fire would be to involve transportation by trucks to a processing facility and then by rail from there,” says Macnamara. “The HCRY is an important nod-

al connection to our larger railway system. When we see other projects, such as the Ring of Fire, transferring to rail could be an important piece of moving the product to market.”

Bois argues, “HCRY is essential to some customers offering competitive freight transportation. The railway ensures the viability, sustainability and potential growth of existing industries. For some customers, HCRY is the only direct rail option. The presence of the railway also plays a vital role in the socioeconomic development of the region and can be a factor of influence for the establishment of new industries.” CS

Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade.

He is based in Quebec.

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www.canadianshipper.com January 2019 27

INDUSTRY SPOTLIGHT

CHAIN OF COMMAND With a growth in perishables traffic has come closer collaboration between supply chain partners

BY IAN PUTZGER

C

anada’s leading perishables forwarder is running out of space at Vancouver International Airport.

Warehouse capacity at the airport is strained, both on the forwarding side and at the airline handling level, reports Brendan Harnett, CEO and chairman of Flying Fresh Air Freight.

The rapid rise in e-commerce has stretched capacity at the airport to the maximum. Having no room for expansion, Harnett is bracing himself for an in28 January 2019 www.canadianshipper.com

crease in costs, possibly from raised storage rates, elevated terminal charges or a reduction of free storage time. He is planning to take on new office space and convert the office section of Flying Fresh’s current facility into additional warehousing capacity. Even that may not be enough, though.

“I think we will have to purchase additional warehouse space near the airport and transfer our non-perishable product there,” he says.

VersaCold, the nation’s largest logistics provider in the temperature-controlled arena, is also boosting its footprint. A year ago it opened a new 255,000 square-foot distribution centre in Milton, and the final phase of the project, which will double the current pallet capacity, is due to open this month.

The two companies’ expansion has been propelled by strong growth in perishables traffic, both domestically and internationally. “This year has been great for us,” ©iStock

INDUSTRY SPOTLIGHT

At the premium end of the temperaturesensitive market pharmaceuticals and healthcare traffic has also continued its upward momentum, producing doubledigit increases at some airports. Ageing populations and growing affluence in emerging economies, coupled with changes in lifestyle that have led to a rise in afflictions like diabetes, have been major factors, noted Andrea Gruber, head of special cargo at the International Air Transport Association (IATA).

Supply chains keep adding complexity as both production and consumption continue their global spread. VersaCold remains focused on the domestic market but it is pursuing international growth through its 3PL and 4PL activities.

“We target double-digit growth in all our business units,” says Harrison, adding that he sees good potential in both segments. Free trade agreements with all other G8 nations should lead to more traffic, he notes.

Not for the perishable-of-heart

says Doug Harrison, president and CEO of VersaCold, who announced he was stepping down from his role shortly after speaking with Canadian Shipper. The market for refrigerated and frozen food has grown at an average rate of two to three per cent a year, he notes.

Flying Fresh has enjoyed strong export momentum in the past year. Above all, seafood traffic from the Maritimes has shown solid growth, led by lobster exports to China.

Much of this is a continuation of the growing appetite of Chinese consumers for Canadian seafood, fish and fruit, but 2018 has seen an additional boost from the U.S.-China trade conflict, notes Harnett.

“It had a huge impact on the lobster industry out of Nova Scotia. We were able to sell a much higher volume,” he says.

“With cherries it increased out sales to China. We would have sold to other places, but China was prepared to pay more for Canadian product.”

The increasingly global nature of perishables flows, reinforced by sourcing reactions to harvests impacted by adverse weather conditions, is leading to supply chains that are in constant flux. The Fruit Logistica Trend Report 2018 predicts the emergence of “faster, more flexible distribution networks characterized by greater transparency, more sophisticated forecasting and closer collaboration between supply chain partners.”

The need for greater flexibility is reinforced by the rise of e-commerce. “Ecommerce is still a relatively small percentage but it’s growing at a rapid rate,” observes Harrison, adding that this is characterized by very short shelf life.

Goods have to be kept frozen or refrigerated through the delivery process.

IGD, a UK-based research and training charity, predicts explosive growth in online food and groceries. Its analysts forecast 48 per cent growth in the UK by 2022, with the U.S. market expected to expand 129 per cent, while China should see a 286 per cent increase.

One segment in e-commerce that VersaCold is currently working on is meal kits, which are moved through a multitude of channels. The company has made progress in conversations with final mile delivery providers, Harrison says. www.canadianshipper.com January 2019 29

INDUSTRY SPOTLIGHT

VersaCold’s recently completed warehouse in Milton, Ont. is one of the country’s largest temperaturesensitive distribution centres.

In the international perishables sector ecommerce has established itself in the seafood trade with China, reports Harnett. “It’s already operating under an ecommerce model,” he says.

However, this has not forced any change on processes at Flying Fresh. “I think the bigger impact on logistics and the cold chain is in China,” remarks Harnett.

If e-commerce volumes in the cold chain sector have yet to take off, the industry is already feeling one aspect of the “Amazon effect,” namely the expectation of tighter delivery windows. According to Harrison, this effect and the shortening shelf life of product are driven by the nature of the product itself and the global nature of the supply chain. “Together they have created more rapid supply chains and a need for faster fulfillment,” he says.

Logistics providers are being forced to up their game. This is further driven by a tighter regulatory environment which is showing no signs of letting up. “We will continue to see government agencies focus on food safety and food contamination,” remarks Harrison.

In the pharmaceutical sector the serialization drive aimed at eliminating counterfeit products is nudging the industry towards improved supply chain visibility, notes Gruber.

Compliance considerations aside, ef30 January 2019 www.canadianshipper.com

forts to improve visibility are fuelled by the desire to be able to react faster to temperature excursions and other changes in ambient conditions as well as for planning purposes. Better track and trace information helps customers with their with risk assessment of traffic lanes, Gruber points out.

“More people are monitoring cargo at an almost hourly basis with new temperature recorders,” says Harnett.

Cold hard data

A number of airlines, including Delta and Cathay Pacific, have been trialling Bluetooth technology to track cargo in flight. Traditionally this has been a black hole to avoid interference with aircraft navigation equipment, except for some costly solutions at the high end of the pharma and healthcare sector.

Bluetooth promises an affordable possibility to monitor ambient conditions in the air.

Gruber expects to see more development in this area. For his part, Harnett welcomes this trend but points out that problems with temperature usually do not occur in flight. For the most part they happen on the ground, particularly at interfaces in the cool chain. “We monitor with our own temperature recorders,” he says.

VersaCold has invested heavily in the internet of thigs (IoT) to monitor ambient conditions, both in its warehouses and in trucks and trailers. The technology also comes into play to monitor power units, boilers and door openings. Shipments are monitored through the company’s three linehaul dispatch centres.

“It’s been a great resource. We are able to plan more effectively and we can identify issues before they cause food loss,” says Harrison.

According to Zest Labs, an AgTech company that is promoting IoT, the technology has the potential to enable food wholesalers and retailers to improve their profit margins and reduce food waste by 50 per cent. By one estimate, the food industry loses as much as $15 billion a year because of unsaleable food.

While IoT generates a bonanza of data, the question for users is how to use and manage them. VersaCold has started to use predictive analytics to address both demand and equipment maintenance issues. Harrison says that the company is in the early stages of understanding how to use data, but already it is becoming more scheduled in its warehouse and transportation network. In its warehouses VersaCold has started testing artificial intelligence to put the windfall

INDUSTRY SPOTLIGHT

of data to better use, but it is early days, according to Harrison.

Gruber points out that many question marks are hovering over the use of data, from the question of ownership to confidentiality and controlling access. There is no argument, though, that data has to be shared along the cold chain to maintain its integrity and promote best practices. The Cool Chain Association emphasizes that sharing data is vital for the pharmaceutical sector, and perishables carriers and forwarders have made the same point for their segment.

Operators have pointed out that aligning their efforts would be much easier if there were broadly, if not universally, accepted standards to follow.

At a Cool Chain Association conference last fall the organization’s chairman, Stavros Evangelakis, argued that the air cargo community should develop its own standard without waiting for other groups to take the lead. Some in the industry look to IATA, which has championed the Center of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma), a certification program for pharmaceuticals air cargo logistics that is performed by independent auditors that has found broad backing in the airfreight industry. IATA has been looking at the possibility of developing a similar scheme for perishables, but it remains unclear if this will go ahead.

For its part VersaCold has embraced the British Retail Consortium standard, the first to be benchmarked by the Global Food Safety Initiative.

Harrison calls it the “gold standard” of food safety.

This is an area where the advance of multinational logistics giants into perishables may have an impact. In recent years the likes of Kuehne + Nagel and Panalpina have acquired a number of forwarders specialising in perishables, while in the pharmaceutical logistics arena UPS bought clinical supply chain specialist Marken in 2016 and last November Kuehne + Nagel acquired Quick International Courier, a specialist in pharma and healthcare and aerospace traffic. Co-

lin Wells, global head, perishables at Panalpina, says that his company is working towards consistent standards that give customers the same experience regardless of location.

With predictions of continuing growth as well as ongoing regulatory pressure, these efforts looks set to continue through 2019 and beyond. CS

Ian Putzger is an award-winning journalist with more than 20 years experience covering transportation and logistics issues. He is a former writer and editor with the Hong Kong-based Asian Sources Media Group, and Airtrade, a British magazine covering the global air cargo industry.

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www.canadianshipper.com January 2019 31

INSIDE THE NUMBERS WITH LOU SMYRLIS, MCILT

POWER PLAY

Canadian shipper views on competitive activity between modes

Canadian shippers resigned to continuing rate increases in 2019 With buoyant freight volumes expected to continue into this year and equipment capacity remaining tight, Canadian shippers are bracing for continued upward pressure on transportation, particularly in truck transportation. Truckload and LTL are expected to hold the greatest pricing power, according to our annual Transportation Buying Trends Survey.

Below normal levels

NA Well below normal levels

9%

17% 3%

Well above normal levels

Above normal levels

21%

8%

of shippers

42% Around normal levels

Modes expected to have greatest pricing power

Shipment level projections for 2019 compared to previous year

Rail

Courier

It will be down more than 20%

0%

It will be down 10-20%

2%

It will be down 5-10%

Intermodal

8%

10%

of shippers

11% Marine

2%

It will stay about the same

35%

It will be up 5-10%

48%

It will be up 10-20%

10%

It will be up more than 20%

2%

8% Air freight

35%

5% 23%

Truckload

LTL

Canadian shipper projections for core transportation pricing in 2019 (excluding fuel surcharge) Flat

Up 2%

Up 2-5%

Up 5%+

Truckload

10%

14%

40%

20%

LTL

14%

19%

38%

19%

Intermodal

17%

13%

28%

16%

Rail

20%

12%

27%

6%

Courier

18%

23%

33%

8%

Air Freight

22%

8%

24%

14%

Marine

23%

11%

25%

11%

Higher rates/surcharges have affected use of transportation modes

Yes

55% of shippers

ŠiStock

45%

No

www.canadianshipper.com January 2019 33

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canadianshipper.com

COACHING CORNER

The glass ceiling vs. the glass cliff

By Carolina Billings, CPCC, CHRL, MA-IS

The glass cliff—discovered by psychology professors Michelle Ryan and Alex Haslam—is the phenomenon of women in leadership roles, such as executives in the corporate world and female political candidates, being likelier than men to achieve those roles during periods of crisis or downturn, when the chance of failure is highest.

Q: Why is it that women are passed over for promotions to top positions until things are so bad, the ship is likely to go under on “her” watch. Our division has been in trouble for a while, more than once I have had to carry the load in between department heads, training them, while I keep suggesting to be considered for the job. This has been going on for a while, and now that it is critical and failure is imminent, they have offered the position to me. I am scared to take it: it feels like a trap.

The glass cliff examines what happens when women (and other minority groups) take on leadership roles. Extending the metaphor of the glass ceiling, research has found that women tend to be appointed to leadership positions under very different circumstances than men.

More specifically, this research suggests that women are more likely to be appointed to leadership positions that are associated with an increased risk of criticism and failure. Women’s leadership positions can thus be seen as more precarious than those of men.

Look at some of the female CEOs today and it’s easy to spot the so-called glass

A:

©iStock

cliff hires. They include Marissa Mayer at Yahoo, Meg Whitman at Hewlett Packard, Mary Barra at General Motors, and Irene Rosenfeld at Mondelez ( formerly Kraft). All these women were appointed to the top job in order to turn their respective companies around.

Some of these women have kept their lucrative jobs but other female CEOs haven’t been so lucky, such as former Yahoo CEO Carol Bartz; former head of Merrill Lynch Smith Barney, and Sallie Krawcheck; former co-president of Morgan.

At the time of her departure in 2011, Avon CEO Andrea Jung was the longest serving female CEO at a major American corporation.

It’s generally harder for women to secure leadership positions, especially in certain industries—logistics being one of them—which is why, when a lucrative opportunity comes knocking, many women throw themselves at it.

Often times they are afraid to ask important questions in fear of either sounding unprepared or having the opportunity taken away.

The latest woman off-the-cliff seems to be GM CEO Mary Barra. The storm started raining down on Barra, the first woman to run a global car company, just two weeks into her tenure. Bad luck to be hit with such a disaster when you’ve only had two weeks as the boss.

But maybe it’s not bad luck. According to a recent slate.com article, maybe Barra’s plight simply follows a script that has played out for many other women. Evidence suggests that women are more likely to get promoted into leadership during particularly dicey

times; then, when fortunes go south, the men who helped them get there scatter and the women are left holding the bag. “When things are going great, it’s usually men who occupy these roles,” says Ryan of the University of Exeter’s School of Psychology.

Are you being set up?

Decoding the following signals in a recruitment conversation may help: • Undue emphasis on diversity and/ or meritocracy, making a big deal of it, positioning it as a differentiator, when it has not been before.

• Downplaying the downside of the job and/or the problems faced by the organization.

• Disproportionately higher (performance-linked) variable component as compared to basic/fixed component, in the compensation package.

• An urgency to close the position, giving you very limited time to consider the offer.

• Negotiated exit clauses.

Carolina M. Billings is Partner & CEO of a business consulting group and has 15+ years of experience in the fields of Business Development & Branding, a Resources and Finance.

She champions leadership initiatives as well as empowering and coaching/mentoring others to lead. For more information please visit www.thewellnessgroup.ca or email Carolina@thewellnessgroup.ca www.canadianshipper.com January 2019 35

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Follow Us On www.canadianshipper.com January 2019 37

THE BIGGER PICTURE

Sulphur showdown Ever since the International Maritime Organization (IMO), the United Nations’ agency responsible for shipping safety and prevention of marine pollution, passed a regulation in 2016 mandating the use of low sulphur fuel in marine shipping, the stage has been set for an international showdown. Industry reports to date on the IMO low-sulphur rule tell a story of contradictory ambitions and competing interests, all being fought on the environmental battlefield. The stakes are high, global welfare affected by climate change on one hand, and profits related to global trade on the other.

The premise seems simple enough on the surface: the heavy fuel oil used by marine ships emits sulphur oxides, a known health hazard. Based on international health studies detailing the effects of sulphur oxides on populations exposed to marine emissions, the IMO calculated significant benefits by reducing the sulphur oxide content in marine fuel. The current regulations limit sulphur oxide content of ships’ fuel oil to 3.5 per cent until the end of 2019.

Effective January 1, 2020 however, the limits for sulphur oxides will be reduced to 0.50 per cent.

The pending date has sent industry stakeholders scrambling in an effort to prepare for the conversion, and by all accounts the transition to low-sulphur fuel

By Laurie Turnbull

may not be smooth. While the IMO is holding steadfast to the January 1, 2020 implementation date, reports vary widely regarding the marine shipping industry’s ability to comply in a substantive fashion. Marine shipping companies will have three options to comply with the new regulations in 2020: use fuel with lowsulphur content of 0.50 per cent; install pollution control technology known as “scrubbers” to reduce the sulphur content in ships’ exhaust emissions equivalent to 0.50 per cent; or burn an alternative fuel such as liquefied natural gas (LNG).

For those who might think these options seem plentiful, they are also somewhat misleading. For example, although oil refineries report they are winding down production of highsulphur fuel in anticipation of the January 1, 2020 implementation date, industry analysts reportedly estimate that new low-sulphur fuel may not be available in sufficient quantities by next year. Even if it is, some shipowners are speculating that the new low-sulphur fuel may cost as much as 50 per cent more, and may not burn efficiently in existing ship engines.

If true, this may leave shipping companies trying to equip vessels with scrub-

38 January 2019 www.canadianshipper.com

bers in a seller’s market, where outfitting a ship can cost as much as $5 million, or more. Regardless of which option shipping companies choose, two outcomes seem certain next year, increased uncertainty and costs, both of which will at the feet of customers. Some of the world’s largest container shipping lines, including Maersk and MSC, have already announced fuel surcharges to recoup anticipated costs while preparing for the IMO rule, leading to criticism from shipper groups who argue the IMO schedule does not provide industry members with enough time to adequately prepare.

A recent development that added even more uncertainty into this volatile mix was a request by the United States to delay implementation of the low-sulphur rule to an unspecified date, in effect a cancellation. In response, the IMO refused, no doubt citing the potential health benefits related to cleaner fuels, setting the stage for an international battle framed by geopolitics.

The U.S. administration reportedly asked the IMO to

cancel implementation of the low-sulphur rule in order to avoid cost increases to American consumers.

That rationale seems juvenile even by U.S. government standards given the tariff increases the U.S. applied to its trading partners in 2018, which will increase prices to American consumers.

Many people are speculating that the real reason behind the U.S. request is to allow American LNG producers time to increase production in order to capitalize on new ship orders for vessels burning alternative fuels. The validity of this claim resonates with those in support of the IMO position, especially in light of a recent report by the International Energy Agency (IEA) that the U.S. may become the world’s second largest exporter of LNG by 2022.

Regardless of the real reason behind U.S. attempts to sink the IMO rule, this situation demonstrates that sustainability policies are subject to the same individual agendas that so often seem, in the short term at least, incompatible with a global view that strives to balance the interrelationship between short-term profitability and long-term environmental strategy. CS

Laurie Turnbull, CCLP, MSc is a Professor, Supply Chain Management-Global, at Conestoga College Institute of Technology and Advanced Learning. He can be contacted at lturnbull@ conestogac.on.ca.

©zygotehasnobrain/iStock

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