Ctl jun 13lr

SUPPLY CHAIN Exploring the complexity of wind turbine transport

JUNE 2013

TRUCKING Can LNG deliver the savings needed to justify the costs?

Published Since 1898

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N E E GR T S A F O TO R ING THEI Y F I S N E T IN ET NES ARE JUST AS THEY FR TIONS I L G N I P A SHIP PACITIEST OF NEW REGUL A C N E E C GR HE IMPA ABOUT T

SUPPLY CHAIN CANADA Our comprehensive report from the 2013 conference

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SPECIAL INSIDE: Our comprehensive report from the Supply Chain Canada conference pg. 14

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Features

VOLUME 116

ISSUE NO. 5

17…RISK RELIEF

JUNE 2013

COVER

Tips on effectively managing risk when shipping critical items to project sites.

18…COOKING WITH GAS

Liquefied natural gas is currently enjoying its turn in the spotlight. But can it deliver the savings necessary to keep transportation costs in check?

22…DELIVERING THE WIND

Wind turbine transport is a complex supply chain operation. We followed a group of wind turbine units – or WTGs – on their intricate journey by sea, rail and road.

Departments 4....... VIEW WITH LOU Why joining the SmartWay fuel saving program is worth your time.

6....... IN THE NEWS Port of Montreal now accessible to all post-Panamax ships; Transport ministers approve Funding Declaration at International Transport Forum; Werner CEO predicts rates, costs will both go up this year; and more.

26. .... DASHBOARD TransCore’s Canadian Freight Index dips in April; cross-border truckload freight costs drive increase; domestic business drives railway freight increase as US freight drops; and more.

28. .... INSIDE THE NUMBERS A snapshot of energy use and greenhouse gas emissions by industry and mode.

30. .... BIGGER PICTURE Ten things your company can do to save money on freight.

TOO GREEN

?

TOO FAST

Shipping lines are intensifying their green capacities just as they fret about the impact of new regulations. Have they gone too green too fast? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Our Annual Shipper’s Choice Awards Survey rating the performance of carriers in all modes is now completed.

Your response has made it a success.

Look for the results in our September issue. www.ctl.ca

ct&l june 2013

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­

the view with Lou Volume 116 Issue No. 5 June 2013 EDITORIAL DIRECTOR

Lou Smyrlis (416) 510-6881 Lou@TransportationMedia.ca

Smart shippers are SmartWay shippers

MANAGING EDITOR

Joining this fuel saving program is definitely worth your time

D

iesel price volatility makes fuel surcharges a critical element of every transportation budget. Although the average fuel surcharge assessed by Canadian motor carriers may be in the low 20% of the base rate so far this year, it was double that within recent memory and wreaking havoc on transportation budgets.

With that in mind, can there be any better strategy than for shippers to work closely with their motor carriers towards improving fuel efficiency? That’s exactly the opportunity presented by the arrival of SmartWay into Canada for carriers progressive enough to grasp it and shippers smart enough to encourage them doing so.

Originally launched by the US Environmental Protection Agency in 2004, SmartWay is Lou Smyrlis, now administered in Canada MCILT

by Natural Resources Canada.

It works by linking shippers with an interest in greening their supply chains with SmartWay-recognized fuelefficient carriers. The program offers a wealth of information, resources and services designed to help you save fuel – and it doesn’t care if you’re doing it for the environment or because you want to ensure your profits aren’t literally going up the smokestack. In fact, sustainability projects work best when they combine environmental stewardship with good business sense.

I’m taking part in a national information tour launched this spring by Natural Resources Canada and the Supply Chain and Logistics Association of Canada. The tour has touched down in Vancouver, Toronto, Montreal, Winnipeg, Cornwall and Calgary.

Aside from providing a great deal of information about what it takes to be part of SmartWay, it also let shippers and carriers hear first-hand from a panel of stakeholders who are already part of program.

Consider what carriers involved in SmartWay south of the border have achieved since 2004: • Reduced fuel consumption by 55 million barrels of oil; • Saved $6.5 billion in fuel costs; and • Reduced emissions by 23.6 MMT CO2, 478,000 tonnes NOx, and 22,000 tonnes particulate matter.

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ct&l june 2013

Adam Ledlow (416) 510-6890 Adam@TransportationMedia.ca

There are more than 3,000 shippers, logistics companies and freight carriers currently in SmartWay, including nearly 300 Canadian companies. There are large purchasers of transportation services for whom being part of SmartWay is becoming key to getting their freight, and that trend will grow. Consider what David Patterson, director of transportation management at Ryder, and one of the participants on my stakeholder panel, had to say. Ryder, one of the continent’s largest purchasers of transportation services, has been part of SmartWay since 2004 and promoted the program to its clients. It manages transportation on behalf of blue chip clients such as Northrop Grumman, Dr. Pepper Snapple Group, Bacardi, Xerox, Philips North America, Delphi, Stonyfield, Lexmark, and Imperial Tobacco.

Ryder managed 1.6 billion miles in 2011, the most recent full year of data. The 499 SmartWay carriers doing business with Ryder averaged 2,867,773 annual miles with the 3PL. The non-SmartWay carriers averaged less than 123,000 annual miles. In fact, a staggering 91% of all freight miles managed by Ryder are now contracted with SmartWay carriers.

As mentioned, getting the attention of the increasing number of shippers looking to green their supply chains is not the only reason to be part of SmartWay. Tammy White, business development executive at XTL, was also part of my panel at the Toronto session and what she shared about XTL’s savings was impressive. Prior to 2011, XTL’s reefers were on manual start/stop and basically ran constantly. Last year, the company invested in Intelliset technology, which provides programmable start/stop on each unit at various temperature intervals. By doing so, it reduced 150 hours of use per unit per year and cut its energy costs 36% per unit per year. In another fuel-saving initiative, it reduced its acceptable idling time for its tractors to five minutes.

With the cost of idling a tractor calculated at $4.50/gallon, the potential savings in fuel could amount to $50,000 per year if drivers are properly educated and the program is properly controlled. And those are just two of several fuel saving projects at XTL. For my money, smart shippers and carriers CT&L are SmartWay shippers and carriers.

For more information go to: www.SmartWay.nrcan.gc.ca.

www.ctl.ca

FEATURES EDITOR

Julia Kuzeljevich (416) 510-6880 Julia@TransportationMedia.ca PUBLISHER

Nick Krukowski (416) 510-5108 nick@ctl.ca ACCOUNT MANAGER

Joelle Glasroth (416) 510-5104 joelle@ctl.ca ART DIRECTOR

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Carroll McCormick, Leo Ryan, James Menzies, John G. Smith, Ian Putzger, Ken Mark MARKET PRODUCTION MANAGER

Gary White (416) 510-6760 gwhite@bizinfogroup.ca

VIDEO PRODUCTION MANAGER

Brad Ling

RESEARCH MANAGER

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CIRCULATION MANAGER

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VICE-PRESIDENT PUBLISHING

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Bruce Creighton HEAD OFFICE: ­ 80 Valleybrook Drive, Toronto, ON M3B 2S9 ­ ­ CANADIAN TRANSPORTATION & LOGISTICS 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 ­ BIG Magazines LP, a division of Glacier ­ BIG Holdings Company Ltd. ­ SUBSCRIPTIONS: Contact us at: mmarasigan@bizinfogroup.ca­ Tel: 416 442 5600 ext. 3548. Fax: 416 510 6875. ­ Website: ctl.ca (click on sub­scription button) SUBSCRIPTION RATES: Canada: $64.95 + applicable taxes, per year; $105.95 + applicable taxes, for two years. U.S.A.: US$105.95 per year. All other foreign: US$105.95 per year.

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in thenews

The Port of Montreal is now accessible to all post-Panamax vessels.

Montreal now accessible to 6,000-TEU container ships

By Leo Ryan

In a development that strongly positions the Port of Montreal for future challenges and growth, it was announced mid-May that the strategic Canadian gateway to the industrial heartland of North America will henceforth be accessible to all postPanamax vessels, including 6,000-TEU container ships. Up until this announcement, container ships of no more than 4,200 TEUs capacity could berth at the inland St. Lawrence River port with a maximum allowable draft of 11.3 metres.

The Montreal Port Authority (MPA) said that the important initiative comes on the heels of a decision by the Canadian Coast Guard (CCG) authorizing the passage of vessels up to 44 metres wide in the Quebec-Montreal section of the St. Lawrence navigation channel. The previous permitted width was 32.1 metres without restrictions.

The CCG made the provisions following the results of a study commissioned by the MPA and conducted jointly with Transport Canada, the CCG, the Laurentian Pilotage Authority and the Corporation of Central St. Lawrence Pilots.

In an interview, Anne Legars, vice-president of the Shipping Federation of Canada, said: “This is very positive for all users and stakeholders of the Port of Montreal.

For a number of years, we have been working on this project with port officials, carriers, pilotage organizations and Transport Canada to measure all risks, and we have come to the end of a process of reflection and analysis. It certainly 6

ct&l june 2013

opens up opportunity and flexibility.”

Designs of larger ships in recent years, Legars pointed out, have focused on wider beams to boost cargo capacity while not increasing draft levels.

In the case of post-Panamax ships trading with Montreal, except in very rare locations on the St. Lawrence River channel, downbound and outbound post-Panamax vessels will potentially be able to cross each other simultaneously, indicated port spokesman Yves Gilson. Otherwise, a downbound ship has priority.

Sylvie Vachon, MPA president and CEO, declared: “This initiative will allow the Port of Montreal to strengthen its position as North America’s leading port for container traffic with Europe, and it will reinforce Montreal’s strategic position as a logistics and transportation hub of choice for all types of cargo.”

“Shipping lines, no matter what type of cargo they carry, will be able to substantially increase capacity on their service to Montreal, which will inevitably lead to benefits for the port’s broad customer base,” she added.

The Port of Montreal handled 1.3 million TEUs in 2012. Thanks to excellent intermodal collections, about 40% of the box throughput is generated by shippers in the US Midwest.

Ministers approve Funding Declaration at International Transport Forum

By Julia Kuzeljevich

Ministers from the 54 member countries of the International Transport Forum are calling for more investment in strategic transport infrastructure and services. They have officially approved and released the joint Declaration From Ministers on Funding Transport.

“Funding transport is a major challenge for transport policy today. The demand for mobility through high-quality transport networks and services is growing fast. Transport infrastructure is much

more than asphalt, concrete or steel; it is the backbone of national economies, providing connections for people and goods, access to jobs and services, and enabling trade and economic growth,” stated Ministers in the Declaration.

“There is a clear willingness to make transport funding a growth strategy, and a willingness politically to address the dilemma, possibly by including the need to introduce some unpopular measures,” said Jose Viegas, Secretary General of the International Transport Forum, speaking at a press conference where the Funding Transport document was officially released.

“We also know that there will not be a single magic bullet solution. Governments realize they have to put their relationship with the private sector on more stable footing without shifting the risk entirely to the other side. Mutual trust must become part of the permanent transport lexicon,” said Viegas.

He noted that the style of the ITF is not to approve uniform models of public consultations, but for Ministers to share what they have learned and take it home with them.

German Transport Minister Peter Ramsauer noted that worldwide, only very few countries could say they had the problem of “an overfunding of transport infrastructure.”

“In Germany, the infrastructure is considered very good in the international context. Yet we have infrastructure that is underfunded. Since the Berlin Wall fell (in 1989), we have been busy with rebuilding the east (former East Germany) and there has been some neglect of the infrastructure in West Germany. Now we are trying to make a shift from east to west in regard to road, rail and waterways.

Our problem is the budget – it’s a continuous struggle,” said Ramsauer, adding the country has a current infrastructure budget of just over 10 billion Euros, but needs 14 billion.

“We think the best thing to do in Germany would be to introduce more tolls.

A user charge is now already in place for trucks weighing over 12 tonnes,” he said.

Germany faces general elections in September, and Ramsauer said that regardless of who is in power, “We have to www.ctl.ca

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in thenews find structural solutions for funding transport.”

Highlights of the Declaration include the statement that “a reliable, intermodally integrated transport system is essential to economic prosperity and equitable access to goods and services; that the system needs to be financially sustainable, safe and secure and meet high standards of environmental protection.”

The Declaration recognized that sufficient infrastructure investment and maintenance is required to ensure a robust, high quality, sustainable transport system and acknowledged that sustainable, inclusive growth “requires productive investment and innovative funding solutions, not least to limit transport costs for industry and trade; that investments in transport – including for renewal and maintenance – that both improve productivity in the long run and stimulate construction activity and employment in the short term.”

“A long-term perspective on funding transport is needed to ensure that investment is aligned with strategic objectives and with asset lifecycles to preserve the integrity of existing networks; and that careful planning and timely implementation are critical for efficient delivery of transport investments, particularly infrastructure,” said the Declaration.

Ministers further emphasised the need to align funding for

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transport infrastructure and services with transport’s fundamental role in the economy and society, considering fiscal constraints, which requires stable funding arrangements that facilitate implementation of long-term policies promoting sustainable transport, anchoring funding in the benefits derived from transport, establishing consistency between funding practices and strategic directions for change in the sector, and adopting decision processes that ensure funds are deployed to their most efficient use.

Truckload rates will go up this year, but so will costs: Werner CEO

Increasing demand and tightening capacity will combine to increase truckload rates by 1.5-2% this year, Derek Leathers, president and CEO of Werner Enterprises predicted when speaking at the recent ALK Transportation Technology Summit.

He said demand has been increasing slowly but steadily, with a sharp uptick soon expected due to the colder than usual Spring conditions.

At the same time, truck capacity is shrinking as fleets struggle to reinvest in new equipment. The average age of fleet trucks sits at 6.6 years, he said. Overall US capacity is down 9.6% since

www.ctl.ca

2008 and 17.6% from its high in 2006. Leathers pointed out impending changes to US Hours-of-Service rules, scheduled to take effect July 1, will further reduce capacity, essentially removing the equivalent of 75,000 trucks from the road.

Modest rate increases, Leathers said, will be offset by increasing costs, including fuel, wages, equipment and compliance. The key to improving profitability will be improving efficiencies and maximizing the benefits of technology, he told the Summit.

“The world we live in today is much more designed around how do we move less freight and how do we do it more efficiently?”

Leathers said. He advised carriers to maximize opportunities to convert truck shipments to rail, specifically using double-stacked container on flat car (COFC). “Our job as logistics providers is to look every single day for increased opportunities to save our customers money,” he added. “If we don’t, someone else will.”

Celadon acquires Hyndman Transport

Celadon Trucking Services has announced the acquisition of Hyndman Transport, adding 175 tractors and $48 million in annual revenue to its Canadian division.

Hyndman, based in Wroxeter, Ont., offers domestic and cross-border trucking services. Terms of the deal were not disclosed, however CT&L reported last year that Celadon was looking to grow its Canadian fleet through acquisitions.

“Hyndman has been a well-respected Canadian truckload carrier that has provided a high level of dry van freight services for its customers since 1937,” said Paul Will, president and CEO of Celadon Trucking. “We believe this acquisition offers solid potential to expand our domestic Canada footprint and advance our overall growth plans by delivering growth in our dry van, cross-border transportation service offering.”

The company said Mike Campbell and Jeff Sippel, Hyndman’s president and CFO, respectively, will remain on to manage the business.

“We’re excited to work with Mike Campbell and Jeff Sippel, who will continue to help manage and service existing Hyndman business,” Will said. “We look forward to continuing to provide the quality service that the Hyndman core account base has come to expect. Based on previous acquisitions, we believe we can actually enhance that service through upgraded equipment, advanced technology, additional assets available for dispatch, and an industry leading safety record.”

Railway Sector, local governments unveil railway proximity guidelines

The Railway Association of Canada (RAC) and the Federation of Canadian Municipalities (FCM) have unveiled brand new land use guidelines and a Web site intended to promote best practices and awareness about the issues associated with developments near railway operations.

The document, “Guidelines for New Development in Proximity to Railway Operations,” was launched as part of the FCM Annual Conference and builds on guidelines first launched in 2004.

Using input from various stakeholders, the updated guidewww.ctl.ca

lines address issues concerning noise, vibration and safety, and focus on the increasing challenges associated with new residential development.

Demand for new forms of infill developments across Canadian cities is growing, including on sites in proximity to railway corridors. As older 20th century commercial and industrial properties are increasingly being converted to residential uses, proximity issues are top of mind.

The new report outlines common issues that can arise when communities and railways are in close proximity. It also indicates mitigation guidelines and implementation mechanisms for new developments.

“The railway industry aims to be a good neighbour and, as residential development continues to grow around rail operations, it is essential that municipalities across the country are aware of best practices pertaining to the intersection of property development and rail operations,” said Sean Finn, FCM-RAC Proximity co-chair and executive vice-president of corporate services and chief legal officer at CN. Another key component to the revamped initiative is an updated Proximity Issues Web site with increased functionality.

Included are updated issues lists and definitions and a complete reference section.

Canada, US announce ‘first-ever’ binational border infrastructure investment plan

Canada and the US announced today they will partner on a joint Canada- US Border Infrastructure Investment Plan (BIIP).

Denis Lebel, Minister of Transport, Infrastructure and Communities, and Vic Toews, Minister of Public Safety, along with Ray LaHood, Secretary of the US Department of Transportation, and Janet Napolitano, Secretary of the US Department of Homeland Security, released the “first-ever” joint BIIP and said the plan fulfills a commitment made under the 2011 Canada-US Beyond the Border Action Plan.

Canada and the US enjoy the world’s largest trading partnership, with two-way merchandise trade totalling $570 billion in 2012. The BIIP is an interagency and binational planning mechanism developed to establish a mutual understanding of recent, ongoing and potential border infrastructure investments.

It outlines the approach that Canada and the US will take to coordinate plans for physical infrastructure upgrades at small and remote ports of entry. The initiative will be updated and disseminated annually.

“Modern border crossings are essential to the efficient flow of trade and travellers, which is why the Border Infrastructure Investment Plan and the collaborative relationship with our American neighbours are so important,” said Minister Lebel.

“Our government is investing in border crossings, ports and gateways to reduce wait times, increase trade and create jobs.”

The BIIP’s release follows recent announcements by the Government of Canada of significant investments at four initial priority land ports of entry identified by Canada in the Action Plan: Lacolle, Que.; Lansdowne, Ont. (Thousand Islands Bridge); CT&L Emerson, Man.; and North Portal, Sask. ct&l june 2013

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cover story

TOO GREEN TOO FAST?

By Leo Ryan

10

T

he Green Wave that has characterized fleet expansion in the global marine industry in recent years is gathering force. But at the same time, efforts at rule-making have intensified at international, national and regional levels amidst undiminished environmental activism. This has become very preoccupying for shipowners who have largely embraced new technology that significantly reduces fuel consumption and enhances environmental sustainability. There are fears that proposals

ct&l june 2013

to make eco-friendly shipping still greener will further strain the fragile bottom lines of many marine carriers.

At a conference in Europe earlier this year, a Greek bulk shipping magnate, John Platsidakis, summed up the frustration of his peers by firing off this distress flare: “We carry 90% of world trade and we emit only 2.7% of the CO2, but still we are treated as if we are acting with indifference to the environment.�

Part of the problem appears to be that it has been harder www.ctl.ca

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cover story

Shipping lines are intensifying their

green capacities

just as they fret about the impact of new regulations

for this big, fragmented industry to present a united lobbying front.

Canadian firms in the forefront of sustainability

Within such a challenging context, nevertheless, Canadian shipping firms have steamed ahead with an unprecedented fleet renewal, with a strong green focus, since Ottawa eliminated a longstanding controversial 25% duty on foreign-built vessels in October 2010. Capital expenditures so far well exceed $1 billion.

Fednav of Montreal, the largest ocean-going user of the St. Lawrence Seaway, has reduced by 45% since 1990 the amount of emissions generated by carrying one tonne of cargo for one nautical mile. This has stemmed from substantial investments in new ships with cleaner engines and numerous new design features.

In seeking more ways to save fuel and reduce emissions, Fednav is now testing new software developed by the Maritime Innovation centre established by the Institut Maritime du Quebec. It helps ship captains take advantage of the pull of the tides within the St. Lawrence River to cut fuel use.

Fednav has invested more than $500 million for 21 new vessels – nine allocated for Great Lakes/Seaway service – as part of a major renewal program. Seven have already been put into service. The six Lakers recently ordered from Japan’s Oshima Shipyard, to be delivered in 2015 and 2016, will use 20% less fuel and generate 20% less nitrogen oxide emissions than the first generation Oshima ships bought a decade ago.

In an interview, Rod Jones, president of the CSL Group, stressed that “CSL is striving to become a world leader in environmentally-responsible shipping.”

Celebrating the 100th anniversary of its creation (June 17, 1913), CSL Group is the world’s leading operator of self-unloader vessels in the deep-sea and inland trades. It delivers more than 70 million tonnes of bulk cargo for its customers in the construction, steel, energy and agro-food sectors. Subsidiary offices abroad are located in Boston, Sydney (Australia), Singapore, Norway and the United Kingdom. The original enterprise, Canada Steamship Lines, specializes in the domestic Great Lakes/St. Lawrence waterway trades.

In a widely-held view among shipping executives, Louis Martel, president of Canada Steamship Lines, asserts: www.ctl.ca

“You can’t separate commercial success from environmental sustainability anymore. Customers expect it as a condition of doing business with you. Also, environmental excellence is important for existing employees and stateof-the art ships are a great marketing tool to attract technologically-aware new blood into the company.

“The very existence of the Trillium Class ships reflects our confidence in the future of the Canadian shipping industry and the St. Lawrence Seaway.”

A naval architect who rose to the top of the ladder of Canada Steamship Lines in April You can’t 2012, Martel quarterbacked the renewal of an separate aging fleet through the building of Trillium Class vessels at a Chinese shipyard. commercial The first of six vessels specifically designed success from for the inland trades, the Baie St. Paul, opened environmental the 2013 season on the St. Lawrence Seaway in late March at the St. Lambert lock near sustainability Montreal. This passage “ushered in a new era anymore. in domestic shipping,” enthused Terence Customers Bowles, president of the St. Lawrence Seaway Management Corporation. expect it as a In addition to a more efficient hull struccondition of ture, propeller design and anti-fouling paint, and Tier II main engines, the Trillium Class doing business uses variable-frequency drives so fewer generwith you. ators need to be on line to start machinery – – Louis Martel, president of thereby shaving fuel consumption.

Canada Steamship Lines Commenting on other technical achievements of the new generation of self-unloaders, Martel pointed, among other things, to an unloading system regulated by computer to function very quickly or slowly, depending on the nature of the operation.

“This is eco-unloading without even seeing the cargo that is completely covered. We come alongside a dock, place the boom into a covered hopper and the cargo flows inside with a conveyor.”

In transshipping from a Laker to an ocean vessel, CSL has developed a sophisticated technology, says Martel.

“You have a telescopic boom that you can extend or retract to trim the cargo more evenly inside the hold of the ocean-going ship.”

Algoma Central Corporation of St. Catharines, Ont., has invested some $400 million for eight new ships,

“

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ct&l june 2013

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cover story including six Equinox Class bulk carriers, also presently under construction in China. A special feature will be the Wartsila freshwater gas scrubbers that will remove 97% of sulphur dioxide emissions.

With a hull optimized for hydrodynamic efficiency and cargo capacity, the Equinox vessels will be powered by smaller, twostroke engines that will consume 45% less fuel per cargo tonne than the older four-stroke engines. They will, in effect, require less horsepower to achieve higher speeds than previous designs.

Two gearless bulk carriers and four self-unloading vessels are

designed for the Great Lakes trades. The first Equinox Class ship is slated to arrive in Canada this summer.

In Quebec City, the Groupe Desgagnés has invested more than $300 million in six new ships for its international, domestic and Arctic operations. Among other green features, all Desgagnés ships generate a fraction of former garbage volume thanks to an onboard recycling program introduced two years ago.

In truth, Canadian companies rank in the vanguard of international green shipping.

Maersk surpasses its green targets

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Deluge of regulations dismay marine industry

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ct&l june 2013

Looking at the global players, Maersk Line, the world’s largest container operator, has an impressive record on green performance.

The Danish shipping giant recently announced that it reached in 2012 – eight years ahead of schedule – its 2020 target of cutting CO2 emissions by 25% from its benchmark 2007 levels.

“It is confirmation that we are on the right track,” said Morton Engelstoft, chief operating officer. “And to keep that momentum, we’re raising the target to a 40% reduction by 2020.”

Maersk attributed its superior performance to a combination of operational efficiency, network and voyage optimization, slow steaming and technical innovation.

“We will hit the 40% target with more of the same,” according to Engelstoft.

“Other important factors,” he went on, “will be the continued cooperation with our vessel-leasing partners to retrofit their ships, and the arrival this year and next of the Triple-E vessels, which will be he largest and most energy-efficient ships on the water.”

(The Triple E ships due to come on stream will have capacities of 18,000 twenty-foot equivalent units.)

By cutting Maersk’s own carbon footprint, Engelstoft affirms that it is also lowering the CO2 emissions of its customers – “thereby helping them meet their own CO2 targets.”

But while the world shipping industry in general supports international efforts to combat pollution, there is increasing concern over complying with a deluge of new regulations that go too far in terms of financial cost and technological capability.

Under rules set by the International Maritime Organization (a UN agency), vessels operating within 200 miles of North America or Europe, for instance, will be required by 2015 to use fuel that contains 35 times less sulphur content than fuel burned at present. The sulphur content for the Emissions Control Areas (ECA) is to drop from 3.5% to 0.1%. Clean distillate www.ctl.ca

fuels currently cost about 50% more than bunker fuel – and the differential could be higher by 2015.

The IMO is also moving ahead with steps to clean up ships’ ballast water. New rules could come into effect later this year if enough national governments ratify a convention.

But scrubbing technology conceived as the best solution remains at a preliminary phase.

Moreover, installing cleansing units to scrub emissions dumped back into the ocean comes at formidable cost. On the basis of each unit costing up to $1.7 million and installed on some 60,000 ships on the world ocean fleet, shipping companies could be hammered with an estimated bill of $50 billion.

Whereas measures to reduce CO2 emissions at least reward shipping firms through lower fuel bills, there will be no such return on new ballast water equipment.

Attending a Connecticut Maritime Association event this past March, Masamichi Morooka, chairman of the International Chamber of Shipping, emphasized that stringent measures to reduce shipping’s impact on the environment need also to be economically sustainable. Striking such a balance was vital at a time that “shipping finance has virtually dried up.”

Morooka went so far as to advance a potential cost to the shipping industry of “hundreds of billions of dollars” for overall immediate investments in exhaust gas cleaning systems, technologies to reduce CO2 emissions, as well as the use of distillate fuels and the installation of ballast water treatment systems.

Closer to home, one should recall that since 2006, a severe vessel inspection system at the entrance of the St. Lawrence Seaway at Montreal has resulted in not a single incidence of a foreign aquatic invasive species entering the Great Lakes. But the Canadian Shipowners Association (CSA) warned in April that ballast water rules planned by the US Environmental Protection Agency threaten the commercial viability of Canada’s Great Lakes fleet.

The EPA Clean Water Act General Permit for incidental discharges will impact directly on the 2014 Seaway navigation season next March. Any vessel built after December will, in effect, be required to be equipped with a ballast water treatment system.

As observed by CSA president Robert Lewis-Manning, “a technology that will work in the fresh and cold waters of the Great Lakes and St. Lawrence Seaway does not exist.”

Whenever the technology is developed, such a system will cost up to an estimated $5 million per unit – much more than any potential saltwater equivalents and adding another financial burden to Canadian Great

Lakes carriers. Worse, there is a discriminatory nature to the EPA approach: US shipping fleets on the Great Lakes are exempted from the new provisions.

CT&L For more than two decades, veteran journalist Leo Ryan has reported on key transportation and trade developments in Canada. A former Montreal bureau chief for The Journal of Commerce, he specializes in port and shipping issues and was awarded the Medal of Merit in 1992 by the Canadian Port and Harbour Association.

ct&l june 2013

13

Supply Chain Canada: report

‘Market evolving dramatically’ for transportation providers: Day & Ross COO

By Julia Kuzeljevich

T

he ‘old rules’ are going by the wayside as transportation providers look to more global markets, Day & Ross Transportation Group COO Doug Harrison told the Global Supply Chains track at this year’s Supply Chain Canada conference.

“Our view is that the Canadian market has been slower to change than the global The Canadian market, and our customers are demanding far more services, more information, more market has been capabilities, than the market is able to proslower to change vide today,” Harrison told the strongly attended 46th annual conference held in than the global Mississauga, Ont. market, and our Day & Ross has spent a lot of time lookcustomers are ing at hardcore data and facts – within its network it buys $120 million in transportademanding far more tion and logistics services as well as being a services, more transportation provider. With annual reveinformation, more nues of $800 million, the company now has four distinct divisions: general freight, Supcapabilities, than the ply Chain Solutions (4PL), dedicated logismarket is able to tics (3PL), and the Sameday division of retail fulfillment, home delivery, healthcare, provide today. expedited and under 500 lbs specialists.

– Doug Harrison, “We see the market evolving dramatiCOO, Day & Ross cally. The 3PL market in North America has Transportation Group seen lower growth than traditionally – 18% a year over the last two years versus 25% in previous years. But this is still tremendous growth. The focus is on outsourcing. We see far more of this going forward as a response to what is

“

”

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ct&l june 2013

going on in industry in general as companies get back to core competencies,” said Harrison.

In terms of trends, Harrison said exits and bankruptcies are now declining, but there are more global competitors as supply chains become more global. Successful companies are taking one of two approaches: specialized or focused service offerings, and bundled solutions.

“Customers are saying ‘bring more capability to the market,’” he said.

You will see far more RFIs qualifying to RFPs, Harrison added. “We’re seeing far more complexity and more dramatic shifts in the supply chain, so what can we do even in a transactional sense, to add more value to the partnership? As our customers come out with RFIs, they are coming forward with softer requirements around HR practices, what do your financials look like, what are you doing around technology development, and asking us to prove it. We’re seeing more customers wanting to know what our green policies and our safety practices are,” said Harrison.

Fewer and fewer carriers today are investing in assets.

They have become more focused on the market and its capacity and when they will invest in equipment, he said.

“The other big issue we’re building towards is the whole capability viewpoint of human capital in the industry,” said Harrison. Two years ago, Day & Ross began a strategic process built around “visioning” and “living in the future” while executing today. Teams were taught to execute within “work streams,” with evolution focused on execution and results, culture and strategy.

“It’s a several-year process. True change takes time. In a positive sense, people outside the industry are coaching www.ctl.ca

Supply Chain Canada: report

us, so we’re thinking outside the industry. I’d say our coaches have been challenging us and we’ve spent time teaching our coaches to really ramp up. A year-and-a-half in, we’re starting to see some of the results we’ve been looking for around metrics and turnover,” said Harrison.

He is predicting a “dramatic consolidation in the market” over the next few years.

“The only thing that is holding back consolidation today is buyer and seller aligning over what the price is,” he said.

Asked to point to some reasons around this consolidation, Harrison said: “We’re seeing new entrants into the Canadian market and into the North American market who may take a strategy of making more acquisitions. The other thing is a lot of Canadian service providers have been bought by private equity firms and there is a window within which there has to be a sale.

I think this will drive a round of consolidation. Finally, it’s been a tough several years in the industry, and if you have an aging fleet, with aging technology, the right thing to do may be to sell,” he said.

Advanced providers will become more focused on their service offerings, whether multi- or single-line.

“I think as we go forward, the issue of finding great talent comes down to having a culture that makes great talent find you, to building succession plans, to providing rewards that may not be monetary. I think we have to be prepared for a workforce that’s going to be even more mobile. We better have a lot of technology built in to get people up to speed quickly and get their optimal performance.”

Harrison sits on the Board of the Mohawk Community College and said the talent out there is great, but that it’s a demanding group.

“They will change us, we won’t change them.”

Transparency, compliance to drive reliability in future global supply chains

By Julia Kuzeljevich

R

eliability, and the factors that drive it, will be essential for global supply chains of the future, according to a panel session on global supply chains at the 46th annual Supply Chain Canada conference.

It will take a strong focus on compliance and transparency to drive reliability. But there remains a lot of complexity in global intermodal supply chains, occurring most often in the links between the modes, noted panel moderator Ruth Snowden, executive director of the Canadian International Freight Forwarders Association.

How can carriers approach the issue of reliability?

David Cardin, president of Maersk Canada, told attendees of the conference – held in Mississauga mid-May – that reliability “can only exist when there is the basic infrastructure to make it happen.”

“It starts with a schedule – it really is about compliance to your plan. When things don’t work, you have to talk about www.ctl.ca

recovering. This is where the value of the transport chain shows its mettle,” added Jean-Jacques Ruest, executive vice-president and chief marketing officer at CN Railway.

Schedule deviations are realities, and Cardin noted that carriers themselves will adjust their schedules to allow for cargo to connect where it makes sense. (As a positive example of operating decisions, it is expected that shipping lines will deviate from their routes to save someone on the high seas.)

Yet customers of steamship lines sometimes experience a significant impact when things go wrong. Goetz Alebrand, vicepresident of seafreight logistics at Kuehne + Nagel, listed two major impacts: loss of revenue and increased costs.

“There are costs related to not complying with schedules, and more costs when a little factory in an emerging nation has to deal with an order change over short period of time,” he said.

On the intermodal side of the business, reality shows that dwell times are not decreasing – at least not all of the time.

“First and foremost you have to understand what customers you are talking about to really understand what the implications are.

You have to understand what the customers’ business is,” he said.

Governments and the issue of customs compliance are the main influential factors seen over the last few years, noted Alebrand.

“You try to establish a lot more transparency along the route.

Over the next 10 years, we will have to have smart technologies to make use of the increased information we have gathered over the last 10 years,” he said.

In terms of driving more fluidity, Ruest said there is a need for pragmatism. “What would help us is to have more access to more EDI information, and to quality and precision of information,” he pointed out. “It becomes an extra layer of focus when we know what’s in the box. Usually, we know by exception.”

Freight forwarders, noted Alebrand, are still the “architects” of transport and understanding customers’ end-to-end challenges is very important.

“I think there will be a lot more data integration along the chain. Complexity and information flow are keywords we would like to see in the future. There are a lot of opportunities in the international supply chain,” he said.

“The good news is there are a lot of strong partners out in the market, and lots of know-how available.”

The scale of the vessels coming into the market is also creating a lot of excitement, according to Cardin. But what has to happen in the transpacific trade, to accommodate the larger sized vessels, is consolidation and withdrawal of services.

“The challenge will be, do we have the equipment (cranes) to handle the larger vessels. Is the terminal footprint large enough to handle these, for example, if dwell times on the ground increase?”

There will also be implications on the labour force as operations requirements increase.

Over the next decade, said Ruest, railroads will be spending more on intermodal, and making more investment in IT and KPIs as well as in terminals, both in building new ones and expanding old ones. And technology will have to be compatible with mobile platforms. ct&l june 2013

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Supply Chain Canada: report

“Sites will have to become more and more multifunctional and multi-service to minimize the time you have to handle the product. If you can run longer trains this will mean lower costs,” said Ruest, who noted that CN is building track at the Port of Prince Rupert this year.

“There are lots of discussions among carriers about what can be served directly what can be served by transshipments,” said Cardin. “I think you will find more customers looking to find out what can you get out of it,” he said.

Going global? You need to meet these challenges: SCL keynote

By Julia Kuzeljevich

B

ecoming a global enterprise involves meeting a series of challenges, says Aaron Hutcherson, vice-president of global supply chain with McCain Foods, and they’re moving faster and becoming more complex by the day.

Hutcherson was a keynote speaker at the 46th annual Supply Chain Canada conference, held at the Mississauga Convention Centre in mid-May. There are a number of approaches to learn from the manufacturer’s perspective, Hutcherson advised the large crowd of supply chain professionals in attendance. McCain’s makes and markets frozen products, such as breakfast foods, potato products and cakes, and has experienced a lot of growth and acquisition over the years, expanding from the Canadian market into markets worldwide.

“Integrating the cultures and systems has been important to us.

We have developed a manufacturing footprint globally,” he said.

The challenge for any manufacturer who wants to innovate?

It’s about supplying the right product, at the right quality, at the right place and right time.

From a global enterprise perspective, there are five specific challenges you need to meet on the path to integration, noted Hutcherson.

The first is the consumer challenge.

“The heart of our business is potatoes. We make an astounding array of products out of this product, and each product is derived from what would be a tasty offering to the consumer in a particular country. This requires deep understanding, observing, and listening to consumers about their likes and preferences globally,” he said.

Testing products and innovation globally is another challenge.

So is data integration. Hutcherson said McCain’s is looking to achieve integration via ERP to gain instant access to information systems globally, linking what are essentially 10 separate databases from several different offices.

He said it’s about “looking forward out of the front window” in terms of being able to see daily sales rates, inventory levels, in real-time rather than figures from last month.

There are tremendous sales opportunities in emerging markets, and recognizing true trend changes as quickly as possible is key, he said.

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Meanwhile, sales forecasting is “the heart’ of all data for business operations.

“It’s important to have people with excellent practitioner skills and good information sources. Even with all of that in place, everyone faces the challenge of what do you want to do when you want to introduce a new product. How much should we make ahead? How much is the supply chain? How quickly can we ramp up in case the sales take off?” said Hutcherson. “It’s a difficult task, but it’s the lifeblood of successful growth.”

When it comes to contingency plans, Hutcherson cited some of the tenets of Murphy’s Law: if anything can go wrong, it will.

“In addition to this law, I like Murphy’s Corollaries, such as ‘Left to themselves, things tend to go from bad to worse,’ and the Constant of Murphy, ‘Matter will be damaged in direct proportion to its value,’” he said.

Interestingly enough, the more thorough the contingency plan, the less likely it is that you’ll need it, said Hutcherson.

The fifth challenge, the logistics challenge, involves getting the product to the consumer at the right time, damage-free all the while keeping customer updated as to the progress.

McCain’s has had its successes and its issues in meeting these challenges, said Hutcherson. He talked about McCain’s launch of frozen sweet potato fries in the Australian market. The fries were so successful and sales skyrocketed after McCain’s decided to launch an advertising campaign along with releasing the product.

The issue? Because of a lack of forecasting, there was just not enough product to keep up with demand, no large enough domestic source of raw materials to meet the demand, and a long supply chain, so McCain’s had to put stores on allocation while it tried to fill a months-long backlog.

“Could we have had a better story with better forecasting?

In the U.K., we launched frozen jackets (baked potatoes that could be cooked in a microwave in less than five minutes). In this example, we put in place locally-grown potatoes, phased the launch, and launched in a mini-region first,” said Hutcherson.

In terms of present and future challenges, food tracing is certainly high on the agenda.

“It’s something that we do every day, maintaining our traceability on everything that we produce. Yet every manufacturer had a tremendous scare over the radiation event in Japan (in 2011 after the tsunami and earthquake). We were amazed by the number of companies in that region of Japan that we bought material from and we had to track down and trace all of it.

It was a wake up call for understanding the breadth of our supply chain, and it’s made us much more sensitive to that,” said Hutcherson.

CT&L Features editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards. www.ctl.ca

marine transportation

you’ll

sleep better this way

Risk management tactics when shipping critical items to project sites.

By Kevan Gielty, CEO of Coast Underwriters, a division of RSA Canada

L

et’s say you’re building a wind farm in southwestern Ontario, and have critical pieces of equipment and parts being shipped from various corners of the world. The project is on a tight timeline and lost parts or time would mean reputational damage and significant financial losses. It’s critical that the equipment and parts get to the site intact and on time.

But to get there, these huge pieces of cargo need to be transported from the manufacturer to port, then loaded on a ship, transported across the ocean, unloaded, and transported to the end destination. There are a number of links in the chain where things can go wrong. That’s where an expert risk manager can mean the difference between the items arriving on time and unscathed or not.

Project Cargo insurance is a highly specialized form of marine cargo insurance designed to provide protection for goods and materials being delivered to large-scale operations. This insurance covers the entire shipping process from the time the projectcritical goods or materials leave the manufacturer to arrival at the project site. These kinds of risks are generally associated with the construction of engineering projects, including power generation plants; wind farms; gas and oil refineries; water treatment; railways; extraction of minerals, metal and ores; petrochemical plants; and civil and commercial properties; and a powerful tool in keeping construction, operations and maintenance moving forward on various large-scale operations.

In our experience, up to 70% of project cargo losses may be preventable. That’s where a strong risk management plan comes into play. The risk management plan is vital in ensuring you are able to deliver ongoing and sustainable revenue.

Most claims are due to human error – dropping items, not properly accounting for size during transport, and various other preventable issues. Here’s how you need to look at managing supply chain risks: It is prudent to engage the insurer’s risk manager before the shipment takes place so that they can review the logistical plan in the event they may have recommendations.

• Leaving the manufacturer: As soon as the project-critical item is delivered from the supplier, a risk manager should survey the condition of the item and check the quality and sustainability of the packaging – these items are unlikely to be standard box cargo size and will need to be packaged, moved and stored appropriately. The risk manager will make sure that the item is lifted onto the ship, secured and covered properly. It’s imperative that these items are secured properly as they are often transported on the ship’s deck.

• Cargo at port: The port’s infrastructure and lifting gears will be checked to ensure they meet all requirements and that the proposed loading and discharge points are appropriate.

• Shipping: A risk manager will review the suitability of the ship, pre-load surveys and supervise the handling, loading, stowage and www.ctl.ca

lashing on board the ship. The impact of waves, rolling, pitching, and swaying needs to be taken into account in ensuring that the items are properly secured.

• Offloading: At the port of discharge, a risk manager should inspect the port infrastructure and all lifting gears. The unloading is generally supervised to ensure that the proper degree of care is taken and vital details, like the item’s centre of gravity, are taken into account.

• Transportation to the final destination: (These issues can also come into play as items leave the manufacturer). This piece can be quite complex. A risk manager will survey the inland route, with an eye on the shape of the roads, the suitability of the trucks being used, the height of bridges and overpasses, any low-hanging power lines, and the possibility of theft or hijacking. Any problems should be flagged in advance and alternate routes suggested. The risk manager will consider the impact of lateral movement, vibration and road surfaces on the items, as well as route plans, weight limitations, the quality of trucks and any possible delays.

• Unloading at the final destination: Your cargo has made it to the final destination, but a risk manager’s job isn’t done yet. You’ll want to ensure that lifting gears and storage facilities are checked, and that unloading surveys are carried out. The risk manager should also supervise the unloading.

Shipping project cargo from Germany to Canada is somewhat predictable in that the infrastructure is understood. But, many Canadian companies are building mines in Latin America and the African continent which introduces many other issues, some of which are not clear. In these cases, it is imperative to consult with an expert risk manager who has knowledge of the specific country and can advise not only on the logistical aspects, but also the political issues. Project Cargo insurance is split between Cargo insurance (covering marine perils involving loss or damage to materials, plant and machinery while in transit from manufacturer to project site) and cover for Delay in Start-Up (DSU) or Advance Loss of Profits (ALOP). The ALOP/DSU coverage protects against financial loss, which can result from business interruption caused by physical loss or damage to project-critical or key items while in transit to the project site. Damage to project-critical items can have a serious effect on the completion and operational start up of a project. Some policies cover the increased costs of working and continued payment of fixed costs and debt servicing as a result of the delay.

While effective risk management will help mitigate many risks, things can happen that you simply can’t plan for. You’ll want to speak to a broker specializing in marine cargo insurance, and choose an insurer with significant expertise, global capabilities and a solid reputation.

For more information, visit www.coastunderwriters.ca or www.rsagroup.com.

CT&L ct&l june 2013

17

alternative fuel

to everything there is a season N

To borrow from the popular ’60s song,

atural gas continto move now. “One of the natural gas is enjoying its ues to wriggle its biggest things that relates in the spotlight. way into the to fuel is supply and intransportation industry’s frastructure and so forth,” Can it deliver the savings necessary heart as a fuel of choice, he noted. “We had a willto keep transportation costs in check? the latest examples of ing partner in Shell that which include Bison was heavily investing in Two industry pioneers share Transport, which has ennatural gas, so the supply is their experiences. tered into a five-year agreehere and we have applicament with Shell Canada to tions with a regional density in

By Jim Bray and Lou Smyrlis run 15 liquefied natural gas Alberta that lend themselves to (LNG) tractors in Alberta, and this.”

Robert Transport’s more than threeBison is initially targeting its LCV year-long investment in an LNG-powered application, pulling twin 53-ft. trailers at a fleet serving one of Canada’s busiest truck corridors. full 140,000-lb GVW, consuming “a fair amount of Bison’s move is the more recent and also served as the fuel,” Fridfinnson said, but which “from an overall perfirst step in launching Shell’s LNG refuelling infrastruc- spective are very fuel-efficient because we’re moving two ture in Wild Rose Country (the grand opening was held trailers with a similar amount of fuel. And that’s how you May 28). Bison is using Shell’s Flying J outlets in Calgary, can drive the economics of it: if you can burn enough of Edmonton and Red Deer to refuel its LNG fleet once all the fuel, you can overcome the capital costs involved, is up and running. which are significant, in this case.”

Trevor Fridfinnson, Bison’s vice-president of western Initial routes are principally Calgary to Edmonton and operations, says “a convergence of factors have made it back, which can be accomplished on a single tank of fuel. potentially economically viable,” noting that the compa- And even though only a few trucks are involved in this ny thinks the move could be the right thing for the indus- conversion compared with the vast number that Bison try as a whole from a sustainability aspect. “You put those actually operates, it shouldn’t really be looked upon as factors together and it lined up, as now is a time when merely a pilot project. we’re willing to go down that path.”

“At 15 trucks, it’s really more than that,” Fridfinnson A few operations have made similar commitments in said. “We’re trying to demonstrate that we’re motivated other parts of Canada, but Bison claims this is the first to make this work and to demonstrate it on a reasonable time a company operating in Alberta has done a conver- scale.” sion on this scale. And, as Fridfinnson said, it made sense Bison is also planning for a time when LNG is more 18

ct&l june 2013

‘turn, turn, turn’

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alternative fuel

widely available. “We’re taking a look at LNG in other jurisdic- are operating nuances of natural gas that are really going to make tions,” Fridfinnson said, “most notably in British Columbia infrastructure the critical piece. If you cannot have ready access because they’ve got an aggressive program through their natural to it like you do with diesel, then you run the risk of having gas utility that is trying to convince transportation companies to operating challenges – for instance, if you don’t keep the fuel take the plunge by covering off a certain amount of the incre- cool and do all the rest of it, then it loses its effectiveness.” mental cost associated.”

Fridfinnson thinks estimates that 40% of commercial vehicles Fridfinnson said the company will probably make that deci- could be using natural gas in 10 years are premature, though he sion later this year. does anticipate a trend. “It’s not going to be an “If we can get between Calgary and Vaninsignificant number,” he said. “There’s defiWe’re trying to couver, then that’s viable, but how do you nitely room for some significant uptake.” make sure that you have a mid-point fuelling There is also uncertainty about the longdemonstrate that option that’s going to work for that?” term road tax implications for natural gas.

Runs strictly through the Lower Mainland “We believe Ottawa and the provinces will we’re motivated to aren’t really in the cards, because “the big tax natural gas similar to how diesel is taxed. make this work and thing for us is that the way you recoup the We are infrastructure-challenged in North costs of the heavy-duty engine conversion is America and as users of the highways, it is to demonstrate it that you do it in an application that burns necessary for fleets to help fund highway on a reasonable enough fuel to generate enough volume of improvements through fuel tax programs, but savings,” Fridfinnson said. “That becomes the any new costs in the system affect payback,” scale. hitch point.”

Penner said. “Our business can’t afford to Trevor Fridfinnson, That government support that was availinvest in this technology as an environmental Bison’s vice-president able in B.C. wasn’t available in Alberta, where initiative. It has to have its business case.” of western operations the deal is between private sector operations Robert Transport, meanwhile, has been a only – a fact Fridfinnson finds unfortunate. pioneer in making the business case for adopt“With all new technologies, you ing liquefied natural gas, which it sometimes need those incentives to regards as the fuel of the future. For get over the hump,” he said, “and I more than a year now, its trucks haulthink that’s probably why we haven’t ing freight from Montreal to Toronto heard about a number of other fleets have been topping up their cryogenic following suit. And given the amount tanks at an LNG fuelling station at the of natural gas in this province and the carrier’s Mississauga terminal and importance of natural gas to this heading back to home base to fuel up, province, it’s a bit surprising.” hook up and head out again. It is the In the meantime, as Bison’s COO culmination of a company decision and executive vice-president Rob made back in 2010. Company owner Penner points out, there is much to Claude Robert estimates that savings learn. With the LNG trucks going Bison will be running 15 liquefied natural gas tractors in over diesel will be at least 20-30% and into service Jan. 1, Bison is just now Alberta as part of a new deal with Shell. that the LNG engines will emit 20% getting the utilization of those trucks fewer greenhouse gases. into a range where it feels confident about being able to gather “We have millions invested. The reason we believe in this is reliable data. because tomorrow the industry will be using alternative fuels.

“Optimizing the spec’ only comes through running the trucks It’s like learning to skate when you are three years old or learning and figuring out what works and what doesn’t work. There are to skate when you are 30 years old. You can wait till later. We lots of little start-up nuances surrounding spec’, electronics and made the decision to start learning right away and it has been a tuning that need to be worked real experience,” Robert says. through with each tractor to opti- Robert Transport’s Claude Robert estimates that LNG engines He adds that the supply of natural mize it. It’s on us to work through, will emit 20% fewer greenhouse gases compared to diesel. gas for transportation purposes in fine tune and optimize the range on Canada remains limited, while few these vehicles,” Penner said. people understand natural gas and its Despite Bison’s bullishness, Fridimpact on fuel consumption, truck finnson doesn’t see a completely performance, and the maintenance LNG-fuelled fleet anywhere on the and fuel facilities required. Nor is the horizon. “It’s not realistic, probably, price (each truck can cost as much as for any reasonable timeframe,” he $80,000 over the price of a similarly said. “The infrastructure has got to be equipped diesel truck) or reliability of really significantly built out and there the trucks where it should be, he says.

“

”

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ct&l june 2013

www.ctl.ca

alternative fuel

our GHG emissions by 20% and that’s something that needs to be accounted for.

For any shipper who is environmentally conscious about their own supply chain’s carbon footprint, using carriers who run natural gas vehicles is the solution.”

All this talk about moving to natural

Bison officials say the industry will have to improve its LNG infrastructure before companies can move to an all-LNG-powered fleet.

For example, the hoses and fittings are different on natural gas powered engines resulting in trucks having to be taken off the road to fix small things. Robert likens the current situation to the first stage of new generation vehicles. It will probably take another four to five years before the fleet starts to see the real benefits of running with alternative fuels.

“

For any shipper who is environmentally conscious about their own supply chain’s carbon footprint, using carriers who run natural gas vehicles is the solution.

”

Claude Robert, Robert Transport

“Whatever savings we’ve had so far due the lower cost of natural gas has barely covered the costs we’ve had to deal with…Whether you start now or the day after, you will still have to go through the struggle of learning. We are still in a learning curve with a lot more to learn, but there is not a day we are not learning,” Robert says.

But, to place matters in perspective, he adds: “In the long run, we are reducing www.ctl.ca

gas may seem a tad ironic, since the stuff has been around as a fuel for years – as a supposedly dwindling resource. But as the old Byrds song from the ’60s said: “To everything there is a season,” so maybe now it really is natural gas’s “Turn, Turn, Turn” to be in the spotlight.

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ct&l june 2013

21

supply chain

Delivering the

wind

By Ship g

O

n June 9, 2011 the MV BBC Orinoco sidled up to a wharf at the Port of Thunder Bay with 14 wind turbine units (WTGs), including nacelles (the bungalow-sized generator that perches on top of the tower), hubs, spinners, 2.3-megawatt (MW) power units and 42 blades. The ship, operated by Germany-based BBC Chartering, had picked up the load in Aarhus, Denmark for Siemens Wind Power in late May, steamed across the Atlantic, up Highway H2O and across Lake Superior.

Two other ships, the Alaskaborg and the Adriaticborg, operated by Wagenborg Shipping North America, delivered 29 more WTGs to the Port of Thunder Bay that May and June. From there, Anderson Haulage, based in Gormley, Ont., trucked the lion’s share of the components – more than 250 loads – to a 99-MW wind farm in Greenwich, northeast of Thunder Bay for owner Renewable Energy Systems Canada. The wind farm became operational later that year.

Those deliveries contributed to 1,267 MW of new wind energy installed capacity in 2011, bringing Canada’s total installed capacity to 5,403 MW. That’s enough to power 1.2 million homes, according to the Canada Wind Energy Association (CanWEA). Canada’s wind energy industry remains in a huge growth phase. CanWEA reports that by 2015, the country’s total installed capacity will top 15,000 MW. Behind these astounding numbers operates an enormous supply chain effort. A single modern WTG can

22

ct&l june 2013

Wind turbine transport is a complex supply chain operation.We followed a group of wind turbine units – or WTGs – on their intricate journey by sea, rail and road.

By Carroll McCormick

weigh in at 317,515 kilograms (components weigh from 6,800 to 86,200 kg) and stand 122 metres high. The blades can exceed 49 metres in length. WTG components are passed between trains, ships and trucks, each either specially outfitted for the job or purpose-built from scratch.

Voyages such as those BBC Chartering make from Europe to Canada range from 3,500 to 4,400 nautical miles and can take up to 16 days. Cargo securing and lift plans have to be developed and a ship with on-board cranes is dispatched to the port. Loading can take up to four days and involves many specialists, e.g., cargo superintendent, cargo surveyor, lashing crew and port stevedores. The trips have to be timed so ships arrive during the open season of the St. Lawrence Seaway. At the far end of these voyages, the timing of the arrival of expensive cranes and specialists must be carefully scheduled.

BBC Chartering does 15-20 shipments a year in support of the Canadian wind industry. They originate from Northern Europe and the Far East and are shipped to Hamilton and Thunder Bay. BBC Chartering also makes shuttle shipments from Canadian WTG component manufacturers.

After delivery to a port, components are stored in lay down areas until they can be loaded onto trains, trucks or even another ship, as was the case for the Wolf Island, Ont., wind farm. Those WTGS – 86 in all – first travelled in 11 shipments from Esbjerg, Denmark to the port of Ogdensburg, N.Y. From there, Hamilton-based McKeil Marine moved loaded trucks on a roll-on roll-off barge – 87 loads worth – to Wolf Island. www.ctl.ca

By Train g

CP’s entry into the WTG market was in 2005, with an overland trip for 63 railcar loads of blades, hubs, towers and turbines for 12 WTGs. It began at the Port of Houston, with an interchange in St. Paul, Minn. to CP. CP pulled the shipment 4,506 km to the Rushlake Creek Wind Power project near Swift Current, Sask. By May 2012, CP had moved about 4,800 carloads of WTG components.

One of CP’s main clients is Denmark-based Vestas. Its North American operations include manufacturing facilities for blades, nacelles and towers in Colorado. Most Vestas shipments that CP handles are interchanged with BNSF Railway at Sweet Grass, Mont. or St. Paul, Minn. In Canada, Walker notes, “We work collaboratively with CN. In Montreal, we interchange with CN for points east.” Last year, for example, CP handed off WTG components to CN for transport to Amherst, N.S. CP also interchanges WTG components with the Quebec Gatineau Railway. It has a spur running directly to wind tower manufacturer Marmen in Trois-Rivieres, Que. In fact, its largest shipment was a 67-car unit train of tower tops and mid-sections and a 63-car train of bases between Marmen and Randolph, Minn. in 2010.

CP has access to about 400 specialized cars. “Rail cars to load dimensional wind components must be customized. We have a

Tim Heney, CEO of the Thunder Bay Port Authority, discusses the Greenwich shipments: “There are a lot of lay down areas involved. The components came in large quantities. Blades take up the most room and have to be kept in balanced sets of three.

You can get in your own way in a hurry.”

WTGs also leave the Port of Thunder Bay by rail. In 2009, for example, CN moved 102 blades 3,220 kilometres to Dawson Creek, B.C. There, they were offloaded and trucked to the 34-MW Bear Mountain Wind Farm. CP moves wind energy components over 1,930 km to its largest rail transfer facility, located in Wilson, Alta. Otherwise, says CP’s David Walker, director of project cargo, “In [an area where] CP does not have a dedicated rail transfer facility, we identify a temporary rail transfer siding as close to the wind project as possible and dedicate it to that project.”

The Wilson transload facility, owned by Transmark, is about 15 km southeast of Lethbridge and about 200 km east of Calgary.

Transmark has 12,800 m of track space and 20 tracks on an 89-hectare property. Lethbridge-based Gilmar Crane Services keeps a 285-tonne crane crawler on site all the time. During a WTG transfer, more Gilmar cranes, trucks and a couple dozen men bend to the task.

Timing and coordination are mantras in the WTG “Shipping WTG transport business, where trips of thousands of kilometers components by and sourcing of major components from several countries is common. “The timing of arrival of each component is rail requires very critical. Our logistics specialists work intimately incredible focus with the customer and any other third-party providers at and attention the origin and destination locations to coordinate and execute to the optimal plan. Shipping WTG components to detail.” by rail requires incredible focus and attention to detail,” – Dan Bingeman, assistant comments Dan Bingeman, assistant vice-president of vice-president of supply supply chain solutions at CN. chain solutions at CN. With little room to spare on erection sites, compoTower components travelling through Glen Nevis, Ont. Photo credit: CP nents are stored and sorted at ports and transload facilities. “Trains have to arrive in a certain order. A lot of this has to do with how erections are being done,” says Dallas Sherwood, 60-car unit train dedicated to handling sections for 80- and general manager, Transmark.

100-meter towers. Each specialized flatcar has modified saddles CP constantly updates its clients, some of which let CP handle that allows the unit train to carry 20 top, 20 mid and 20 base the next phase: road transport. Other clients handle the last leg sections,” Walker explains. Ninety percent of CP’s infrastructure of the trips themselves. “We give the customer a daily report of has been proven to clear up to 4.6-metre wide tower sections, where the train is so they can schedule the riggers and crane and handle blades up to 49 metres long. operators,” Walker says.

Between 2004 and mid-2012, CN moved more than 3,700 carloads of WTG components. Its biggest shipment was 60 car- By Road g loads of components from New Westminster to Chetwynd, B.C. in 2010. Its longest Canadian trip was a 3,166-km, six-day journey The last leg of every WTG journey is by road. It takes specialized equipment, special permits, special drivers, police escorts and from Thunder Bay to its Dawson Creek transload facility.

CN has transloaded shipments that other rail carriers have extra horsepower to muscle the tremendous loads up to their picked up at US ports, including Beaumont, Texas; Stockton, hilltop homes.

Route surveys determine which roads the loads can take.

Calif.; and Vancouver, Wash. Its Canadian destinations range Height is not the issue; rather, it is length, particularly of those from British Columbia to Nova Scotia.

Winter is no obstacle to rail shipments, but as blade lengths long blades. There is no consistency between provinces or states increase in newer models, so will the challenges to rail transport- on permits, according to Frank Devries, business development, ers. “To date, CN has not been presented with a WTG blade heavy haul and wind energy with Cambridge, Ont.-based Chaldesign our trains are not able to handle. We have heard [about lenger Motor Freight. “They each have their own little twist. plans] to manufacture blades as long as 60 metres. These long Most provinces and states deem [WTG components] super loads, blades will have greater swing outs on track curvatures and usually defined as over 100,000 lbs [454,360 kg] and 120 feet will certainly be more difficult to handle everywhere across our [36.6 m] long. You can’t travel in inclement weather such as in rain or snow.” network,” Bingeman says. www.ctl.ca

ct&l june 2013

23

conr

Trucking WTGs takes specialized equipment, special permits, special drivers, police escorts and extra horsepower to muscle the tremendous loads up to their hilltop homes.

Bullying an

Multi-axle flatbed carriers move the nacelles, which can top 86,200 kg. Purpose-built tri- and four-axle, double-framed tractors pull the tower sections, which are bookended with twopiece wheeled devices called Schnabels. One piece connects to the front of a section and the other to the rear to build a trailer.

“A Schnabel allows you to carry the component lower to the ground, and carry larger-diameter loads. There is no need for a structure under the load,” Devries explains.

Long before the first loads arrives in Canada, the last few kilometres of roads to the wind farm are upgraded or built from scratch. “On some sites, we will build the roads. We have to have wide corners and the grades can’t be too steep. Typically, we will also make the access big enough for the large cranes,” says Dean Seely, senior construction manager with Calgary, Alta.-based power generator and electricity wholesaler TransAlta.

TransAlta built 21 kilometres of road for its 68-MW wind farm in New Richmond, Que. in 2011, in anticipation of receiving the WTGs the following year. TransAlta typically schedules the cranes, riggers, etc., months ahead of time. “Transport schedule problems depend sometimes on the amount of equipment being transported. If there is enough equipment that we can run unit trains, we get more control,” Seely says.

Trucking the components to the wind farms is becoming big business in Canada. It requires about a dozen trailer loads to move one disassembled WTG: three or four tower sections, a nacelle,

86,000-kg nacelle three blades, a hub/spinner and some misup a hill. cellaneous loads. The road journey to the Dokie Ridge Project, northeast of Prince George, for Plutonic Power, added up to 420 truckloads and roughly 13,154,200 kg of cargo. Challenger Motor Fright did the move, which kept crew and equipment out of Ontario for 80 days.

The home stretch of that marathon delivery was up a sometimes-greasy 4.5-kilometre road that gained 1,067 m of elevation, with an average grade of 18%. Some trucks were both pushed by a flatbed truck loaded with concrete blocks and pulled by a 550-hp articulating tractor.

Devries foresees demand outpacing the supply of specialized carrier equipment. Some easy math suggests that, assuming a generous 2.3MW per WTG to be installed this year, 652 WTGs will be transported. At 12 loads per WTG, that is 7,827 truckloads.

According to Quebec-based Groupe Robert, which entered the WTG transport market in 2009, it has ambitions that speak to even closer partnerships among the transportation modes. It will be interesting to see where this cooperation leads as the multimodal WTG transport industry continues to mature. CT&L

Features editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.

Check it out!

The Annual Survey of the Canadian Supply Chain Professional – Canada’s most comprehensive benchmark study of the supply chain professional ever conducted is now live!

Your participation will ensure an accurate benchmark of salaries in the supply chain sector.

To make your voice count, please visit our homepage at www.PurchasingB2B.ca and follow the link to the survey.

Results of the survey will be featured in the October issues of PurchasingB2B, MM&D, and CT&L, and online.

24

ct&l june 2013

Thank you in advance for your contribution!

www.ctl.ca

On October 16th 2013, please plan on joining Canada’s top Transportation Executives for a day of education & networking.

Introducing the 2013 team of presenters...

We have created an agenda that truly addresses the many challenges facing both Shipper and Carrier executives.

Summit AgendA

Angelo Sarracini

President, Bailey Metal Products Limited

Grace Tomaszun

Manager, N.A. Transportation McCormick & Company

Carlos M. Gomes Senior Economist, Scotiabank

Neil McKenna

V. P. Transportation, Canadian Tire Corporation

FReIGHT BIDS: Is there a better way for carriers and shippers to work together?

CARRIeR PeRFORMANCe MANAGeMeNT: Metrics that deliver results INTeRMODAL TRANSPORTATION: Expanding beyond its niche

Keith Reardon

V. P. Intermodal Services, CN Rail

Mike Owens

Jeff Lindsay

V. P. Physical Logistics, Nestlé Canada Inc.

President and CEO, Canada Cartage

Doug Munro

Oryst Dydynsky

Anna Petrova

Senior Supply Chain Leader, Ferrero

THe vIeW FROM THe TOP: The CEO’s perspective on major transportation trends DeDICATeD TRANSPORTATION: Outsourcing fleet management to a third party CROSS-BORDeR FReIGHT TRANSPORTATION: Best practices TRANSPORTATION SALeS: Can you adapt to the new normal?

Charles W. Clowdis, Jr. Managing Director, North American Markets, IHS Global Insight (USA), Inc.

President and Owner, Maritime-Ontario Freight Lines Limited

Tibor Shanto

Tom Coates

Ron Tepper

Principal, DAP International Trade Consulting

Executive Chairman & CEO, Consolidated Fastfrate

Jeff Pries

Michelle Arseneau

Douglas Nix

Mike McCarron

MeRGeRS & ACQuISITIONS IN TRANSPORTATION: How big are the opportunities?

LOOKING AHeAD: Economic forecasts for 2014 Principal, Renbor Sales Solutions

VP and COO, Lakeside Logistics

Sr. V. P. Sales & Marketing, Bison Transport

Managing Partner, GX organization

Registration: 7:30 am Presentations: 8:20 am sharp MISSISSAuGA CONveNTION CeNTRe 75 Derry Road West, Mississauga, ON 2013 Summit SponSorS

Barry O’Neill

Executive Vice President, Hub Group

Jacquie Meyers

President, Meyers Transportation Services

Wes Armour

President & CEO, Armour Transportation Systems

Vice Chairman, Corporate Finance Associates (CFA) Chairman of CFA’s Transportation and Logistics Industry Practice Group

Consolidation Consultant, Wheels Group

For more information and to register, please visit www.SurfaceTransportationSummit.com

PRODUCED By MOTORTRUCk FLEET EXECUTIVE, CANADIAN TRANSPORTATION & LOGISTICS & DAN GOODWILL & ASSOCIATES

Trans Summit 2013 CTL.indd 1

13-05-31 1:39 PM

dash board

TransCore Canadian Spot Market Freight Index 2008-2013

2008 2009 2010 2011 2012 2013 % %

Change Change

Y-O-Y M-O-M Jan

214 140 171 222 220 228 4% 25%

Feb

217 117 182 248 222 198 -11%

Mar

264 131 249 337 276 245 -11% 24%

-13%

Apr 296 142 261 300 266 229 -14% -7%

TransCore’s Canadian Freight Index dips in April

TransCore Link Logistics reported weaker Canadian Freight Index volumes for the spot market in April. The month-overmonth load volumes had a 7% decrease and the year-overyear volumes fell behind April 2012 levels by 14%.

The equipment postings for April increased by 6% compared to figures from the previous month, and the year-overyear equipment postings saw a significant increase of 11%.

As a result of these index changes, the equipment-to-load ratio declined considerably for April to 2.35 from 2.08 of the previous month.

Overall load volumes for cross-border postings and intraCanada postings averaged at 70% and 25% respectively.

Cross-border loads destined for provinces within Canada were down 21% year-over-year compared to April 2012. In contrast, cross-border year-over year loads from Canada to the US were up substantially by 16%.

Intra-Canada year-over-year load volumes for April were down 2% while equipment increased substantially by 24%.

TransCore’s Loadlink freight matching database constitutes the largest Canadian network of carriers, owner/operators, freight brokers and intermediaries. More than 13 million full loads, LTL shipments and trucks are posted to the Loadlink network annually. As a result of this high volume, TransCore believes the Index is representative of the ups and downs in spot market freight movement.

The first six columns include monthly index values for years 2008 through 2013. The seventh column indicates the percentage change from 2012 to 2013. The last column indicates the percentage change from the previous month to the current month. For the purpose of establishing a baseline for the index, January 2002 (index value of 100) has been used.

Total cost of ground transportation rises 1.2% in March

The total cost of ground transportation for Canadian shippers increased by 1.2% in March when compared with February results, results published by the Canadian General Freight Index (CGFI) indicate.

The Base Rate Index, which excludes the impact of accessorial charges assessed by carriers, increased by 1.0% when compared to February.

Average fuel surcharges assessed by carriers have seen an increase from 21.53% of base rates in February to 22.43% in March.

“All segments showed increases, with cross-border LTL leading the way,” said Doug Payne, president and COO of Nulogx.

“Total costs are now 1.3% higher than a year ago.”

Railway freight shows strong y-o-y gain

Canadian railways carried 28.2 million tonnes of freight in March, a 5.3% gain from the same month in 2012. Rail freight 26

ct&l june 2013

May

316

164

283

307

301

Jun

307

185

294

315

295

Jul

264

156

238

245

233

Aug

219

160

240

270

235

Sep

203

180

234

263

200

Oct

186

168

211

251

215

Nov 143 157 215 252 215 Dec 139 168 225 217 182 TransCore Canadian Spot Market Freight Index 2008-2013

loaded in Canada as well as those received from the US contributed to the increase.

Within Canada, combined loadings of non-intermodal freight (i.e., cargo moved via box cars or loaded in bulk) and intermodal freight (i.e., cargo moved via containers and trailers on flat cars) rose 4.4% to 24.6 million tonnes. The gain occurred solely on the basis of non-intermodal loadings as intermodal loadings fell during the month.

Non-intermodal loadings advanced 5.5% to 22.2 million tonnes in March. The rise was principally tied to four commodity groups – coal, potash, fuel oils and crude petroleum, and iron ores and concentrates. The combined growth in tonnage for these groups alone was higher than the total drop in tonnage from all commodities that fell during the month. In total, 30 commodity groups rose while 34 saw a decline.

Of those commodities that saw a drop in activity, wheat and colza seeds (canola) incurred the largest declines, with their reduced shipments accounting for more than half of the total drop in tonnage.

Intermodal loadings decreased 4.8% to 2.4 million tonnes.

Reduced containerized cargo shipments were the sole factor behind the drop as trailers loaded onto flat cars rose during the month.

Rail freight traffic received from the US rose 12.1% to 3.6 million tonnes – the highest amount of freight shipped from the US for the month of March. The gain was brought on by increases in both non-intermodal and intermodal loadings.

Manufacturing output stagnates, despite marginal rise in new orders in April

The RBC Canadian Manufacturing Purchasing Managers’ Index suggests that the Canadian manufacturing sector stagnated in April but that’s an improvement from the contraction observed in March.

The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – registered 50.1 in April and, posting only slightly www.ctl.ca

RBC Canadian Manufacturing PMI™ Canada’s manufacturing output slightly improves in April 58.0

“While the overall gains made in April were tepid, we expect manufacturing output to pick-up, augmenting export activity and supporting Canada’s growth prospects.”

HIGH: 56.9

57.0 56.0 55.0 54.0

US truck tonnage dips slightly in April, but y-o-y results up 4.3%

53.0 52.0 51.0 50.0 49.0

LOW: 49.3

48.0 Oct

Jan

Apr

Jul

Oct

2011

2010

Jan

Apr

Jul

Oct

2012

Jan

Apr

2013

above the 50.0 no-change mark, signalled broadly no change in overall manufacturing business conditions. However, the PMI nonetheless rose from a survey-low of 49.3 in March, which was consistent with a modest deterioration in operating conditions.

The RBC PMI found that manufacturing output levels in April were largely the same as March, despite the volume of new orders having increased, albeit only marginally. Employment was also little-changed, seeing only a slight rise in staff numbers since March. On the price front, the rates of increase for both input costs and output charges eased, with the rate of input price inflation, in particular, the slowest in nine months.

“Canada’s manufacturing sector kept its head above water in April, registering some improvement over the surprising series low recorded last month,” said Craig Wright, senior vicepresident and chief economist, RBC.

US for-hire truck tonnage fell 0.2% in April, on the heels of a 0.9% gain in March, according to the latest data from the American Trucking Associations.

The seasonally-adjusted index totalled 123.2 in April, compared to 123.5 in March. The highest ever recording was 124.3 in December 2011.

Compared to April 2012, the seasonally-adjusted index was up 4.3%, marking the largest y-o-y gain since January. Year-todate, compared to the same period in 2012, tonnage is up 4%.

“The slight drop in tonnage during April fit with trends from other industries that drive a significant amount of truck freight, such as manufacturing and housing,” ATA chief economist Bob Costello said, noting that in April, compared with the previous month, factory output slipped 0.4% while housing starts plunged 16.5%.

“After rising significantly late last year and in January of this year, truck tonnage has been bouncing around a narrow, but elevated band over the last three months. It is also worth noting that the year-over-year comparisons are much better than expected just a few months ago and I’m hearing good comments about freight so far in May.” CT&L

CIFFA Certificate International Transportation and Trade Take the first step towards CIFFA Certification with the International Transportation and Trade Program.

Designed to provide students with the basic knowledge of international freight forwarding.

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CIFFA Certificate Program International Transportation and Trade  Understanding Freight Forwarding  Transportation Geography  Terms of Trade  Land, Air and Ocean Freight Essentials of Freight Forwarding  International Payments with Letters of Credit  International Payments without Letters of Credit  Export Packaging and Warehousing  Commercial Documentation  Transportation Insurance  Cargo Security and Dangerous Goods  Costing and Quoting  Alternative Methods of Transportation

Visit CIFFA.COM or contact education@ciffa.com www.ctl.ca

ct&l june 2013

27

inside the numbers

GHG EMISSIONS (MT CO2E) BY ECONOMIC SECTOR, 2008 Other Non-Combustion

55Mt

Agriculture

75Mt Oil and Gas

DISTRIBUTION OF FREIGHT TONNEKILOMETRES BY MODE, 2000 AND 2009

158Mt

50

Industry

Transportation

76Mt

34

35 Percent (%)

120Mt

30

28

28

27

25 20 15

Residential

36Mt

38

40

Electricity

Commercial

44

45

171Mt

43Mt

10 5 0

0.3

Road

Marine

Canada’s freight sector has grown considerably over the past two decades. Total freight moved, in tonne-kilometres, increased by 54% from 1990 to 2010. Total freight moved by truck has shown particularly strong growth, increasing by 166% over that period. But there has been a price to pay for that success and that has come through a significant increase in greenhouse gas emissions. GHG emissions from the freight sector have increased 70% between 1990 and 2010. Interestingly, trucking, which is the most often used mode, has actually improved its energy efficiency per tonne-kilometre by 25% over that time period but these efficiency improvements have not been enough to offset the emissions produced from the rapid growth in demand for the movement of goods. The accompanying tables, provided by Transport Canada, show a snapshot of energy use and GHG emissions by industry and mode.

28

ct&l june 2013

0.2

Air

Mode

THE PRICE OF SUCCESS

GREATER GHG EMISSIONS TIED TO MARKET GAINS IN TRANSPORTATION

Rail 2000

2009

TOTAL ENERGY USE IN THE CANADIAN ECONOMY Sector

Petajoules 2010

Mining

Annual growth

743 14.2%

Manufacturing 1,465 2.1% Forestry

32 15.6%

Construction

81 13.5%

Agriculture

246 16.8%

Residential

1,267 (4.5%)

Public Administrations

120

Commercial

989 (1.6%)

(4.4%)

Pipelines

124 (9.4%)

Transportation 2,516 3.1% TOTAL

7,585 2.1%

TOTAL TRANSPORTATION ENERGY BY MODE

Road

Petajoules 2010

Annual growth

2,111 2.8%

Aviation

204 (0.7%)

Marine

118 0.5%

Rail Total

84 29.1% 2,516 3.1%

www.ctl.ca

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the bigger picture

ship smart 10 things your company can do to save money on freight

W

hat can I do to save money on freight? The same question comes up with every shipper I meet. This is a legitimate concern.

Freight rates are on the rise.

The economy is improving slowly and this is pushing up costs. Motor carriers are experiencing cost increase pressures from higher fleet purchase prices, the shortage of qualified drivers, planned changes in Hoursof-Service, the impact of the US CSA program (e.g. culling unsafe drivers) and the more disciplined approach being taken by many carriers to add to their fleets (based on solid customer demand) and to allocate their assets to high-paying, loyal shippers. While this is a daunting list of cost increase pressures, there is much that enterprising shippers can do to mitigate cost increases or even reduce freight costs. Here is my list.

Dan Goodwill, president of Dan Goodwill and Associates has more than 20 years of experience in the logistics and transportation industries in both Canada and the US. He has held executive level positions in the industry, including president of Yellow Transportation’s Canada division, president of Clarke Logistics, general manager of the Railfast division of TNT, and vice-president of sales and marketing at TNT Overland Express.

Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend.

He can be reached at dan@dantranscon.com.

1. Capture and Benchmark your Freight Costs

I encourage shippers to construct a freight activity database. This should include a detailed data template that contains origin/destination/shipper/carrier freight revenue data. In addition, shippers should assemble the current freight budget, actual expenditures and the variances. This will be the starting point for just about any project that you work on. Without quality data, you are not in a position to undertake too many freight projects effectively. You can’t manage what you can’t measure.

2. Conduct a Transportation Audit

Bring in a knowledgeable transportation professional to evaluate every aspect of your freight program, prioritize the cost saving opportunities and then systematically remove inefficiencies and poor practices.

3. Develop Vendor and Customer Collaboration

Initiatives

Speak with your vendors and customers about any processes that cause inefficiencies and seek a better way to do the work. This can include everything from order sizes and pallet configurations to service intervals and consolidation points.

4. Develop a Carrier Collaboration Initiative

Collaborate with your current carrier partners and eliminate any processes that reduce their productivity.

This can include everything from ensuring pick-ups and deliveries can be done on a timely basis, having your paperwork done on time, changing the appointment time to make sure your carriers don’t have to return to pick up leftover freight later in the day, to improving appointment intervals to reduce delays and detention charges.

5. Conduct a high quality Freight RFP once a year

Make sure you open the bid process to new carriers, 30

ct&l june 2013

logistics service providers, new freight brokers and new modes. Supply the carriers with a summary of a year’s worth of shipping data. Share as much information as possible about pallet configurations, loading processes (e.g. live load versus drop trailer), seasonality issues and other aspects of your shipping processes.

6. Create a Core Carrier Program

Leverage your freight volumes in such a way that you gain maximum benefit in your rate negotiations with a limited number of quality core carriers. Form relationships with carriers that have the assets, skills, resources, energy efficiency programs and technology to meet your needs. Utilize smaller carriers and freight brokers to serve niche markets and niche lanes. If beneficial, explore and implement a dedicated transportation program. Treat your carriers with empathy and respect.

Help them be efficient and you will be the big winner.

7. Optimize your Freight Network

Examine the locations of your vendors and customers and evaluate every opportunity to reduce hand-offs, excess inventory and duplicate routings. Look for ways to create round trips, pool points and consolidation/deconsolidation opportunities.

8. Revisit and Test Alternate Modes

Keep an open mind and assess opportunities to switch over the road truckloads to intermodal service, to consolidate LTL shipments into full loads or full loads with stops.

9. Audit your Carrier Freight Invoices

Between 1% and 2% of all carrier invoices are rated incorrectly. There can be errors in the base rate and/ or fuel surcharge and/or accessorial charges. In most states and provinces, you have a specific period of time within which to request an overcharge claim. Monitor the results and go after the offending carriers for those monies owed to your company.

10. Develop a Standard Fuel Surcharge Formula

The surcharge should be in line with your company’s annual freight spend. This can be a discount off the FCA tariff or other similar methodology. Utilize the same fuel surcharge formula across all carriers. This makes it easier to compare the total transportation costs (e.g. line haul plus fuel surcharge).

There is no doubt that there are pressures to increase freight rates in 2013. These are being driven by both economic growth and by forces unique to the trucking industry. Smart shippers can mitigate these cost pressures by adopting a proactive and well-planned strategy to manage their freight program.

CT&L www.ctl.ca