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Teamwork and technology rev up Deeley Harley-Davidson’s DC
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Taking Stock
Peer-to-peer problem-solving T
his issue marks the second appearance of MM&D’s newest column, Firefighter. On page 30, you’ll find a report from Jeff Kay, warehouse and distribution manager for Wallace & Carey. Kay explains how a chain of small equipment failures sparked a crisis in his frozen warehouse. The story starts out as the stuff of nightmares but ends, remarkably, with minimal damage. It’s a potent example of the power of training, preparedness, resourcefulness and quick decisionmaking. Which is why we’ve introduced Firefighter as a regular feature. It’s there so you can draw from one another’s experiences so that when the unexpected happens, you’ll be prepared to handle it. Firefighter is just one tool you can use to boost your problem-solving prowess. In-person networking is great for generating ideas, too. One of the best venues for this is SCL Canada’s annual
conference, which takes place on May 4 and 5 in Toronto. We have two passes (worth $1,295 each) to give away. There are two ways you can win one. 1. Read the Firefighter column in this issue (or the excellent contribution by Silvia Castellarin and Ana Gallo in the January/February issue). Drop me a line sharing why you think the approach used was effective, what you might have done differently or how you have fixed a similar situation and we’ll put your name into a draw for one of the passes. 2. Share your own Firefighter story. In a few sentences, tell me what you’ve done to fi x an unexpected problem in your supply chain, be it with a carrier, in your warehouse, with a supplier, at the border or elsewhere. We’ll give a conference pass to the best submission—and we’ll consider expanding the most interesting entries into future Firefighter columns. The deadline for both contests is Friday, April 5; we’ll contact the winners the following week. Peer-to-peer advice is cost-effective, credible and proven, but it only works with your participation. Why not join the conversation?
March 2010 | Volume 55 | Number 2
Contents Features
Columns
12 Born to be wired Deeley Harley-Davidson Canada’s DC was growing too crowded and disorganized to handle its booming business. Today, thanks to technology and teamwork, it’s tuned for high performance.
26 Learning Curve Want safe carriers? Do your due diligence. 29 Legal Link How good is your forwarder? 30 Firefighter It’s getting hot in here.
25 NA 2010 preview A sneak peek at some of the hottest technologies that will be on show in Cleveland in April.
TM
MM&D | March 2010
19 Livestock traceability Inside Manitoba’s new system of tracking livestock from farm to fork. 23 Who’s responsible? Everyone has a role to play in creating safe global food supply chains. 24 News from the food chain CFIA targets high-risk foods; new products to optimize temperature-controlled logistics.
Departments 3 5 7 8 8 10
Taking Stock Supply Chain Scan Movers + Shakers Global Focus Benchmarks Done Deals
3
Solutions That Make The Supply Chain Work® Connect with the leading material handling and logistics suppliers for manufacturing and distribution at the year’s biggest event. One Show, Four Days and Thousands of Solutions NA 2010 will showcase over 400 solution-packed exhibits and 60 educational sessions that will help you: ■ Streamline your manufacturing, distribution and supply chain operations ■ Increase productivity ■ Reduce costs Don’t miss NA 2010. Access free on-line registration, detailed exhibitor information, educational session details, Show news and your personalized My NAShow Agenda Planner and Solution Matchmaker on-line at NAShow.com.
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Hello, robots! www.mmdonline.com Publisher/Editor-in-Chief: Emily Atkins (416) 764-1537 emily.atkins@rci.rogers.com EDITOR: Deborah Aarts (416) 764-1538 deborah.aarts@rci.rogers.com MANAGING EDITOR: Deanna Rosolen (416) 764-1533 deanna.rosolen@rci.rogers.com ART DIRECTOR: Stewart Thomas (416) 764-1547 stewart.thomas@industry.rogers.com PRODUCTION MANAGER: Kristen Hrdlicka (416) 764-1692 kristen.hrdlicka@rci.rogers.com SALES MANAGER: Dorothy Jakovina (416) 764-1550 dorothy.jakovina@rci.rogers.com SENIOR ACCOUNT MANAGER: Catherine Martineau (647) 988-5559 catherine.martineau@rci.rogers.com CIRCULATION MANAGER: Celia Ramnarine (416) 932-5071 rogers@cstonecanada.com EXECUTIVE PUBLISHER: Tim Dimopoulos EDITORIAL ADVISORY BOARD: Shakeel Bharmal, Jack Bradley, Tracy Clayson, Douglas Harrison, Belinda Junkin, Aaron Lalvani, Ruth Snowden, Amanda Tolhurst and David Wood.
ProMat 2011 to collocate with international automation show, page 10
Supply Chain Scan
Inside | Box rates rise, page 8
Waste not, want not Packaging and network design are best bets for savings, expert says By Deborah Aarts
I
t’s no secret that supply chain managers are under big pressure to cut costs. According to Jack Ampuja, re-evaluating two key areas—network design and packaging—can yield the most impressive results. Ampuja is president of Supply Chain Optimizers and executive director of the Centre for Supply Chain Excellence at Niagara University. He spoke at a recent Retail Trade Advantage breakfast series event co-hosted by MM&D and Lalvani Logistics in Burlington, Ontario.
Rogers Publishing Limited President and Chief Executive Officer Brian Segal Senior Vice-President, Business & Professional Publishing John Milne Senior Vice-President Michael J. Fox Vice-Presidents Immee Chee Wah, Patrick Renard Rogers Media Inc. President and Chief Executive Officer Anthony P. Viner Publications Mail Agreement #40070230, Registration #10824, ISSN: 0025-5343. Return undeliverable items to: MM&D, Circulation Dept. 8th Floor, 1 Mount Pleasant Ave., Toronto, Ontario M4Y 2Y5. Materials Management & Distribution, established in 1956, is published 8 times a year by Rogers Media Inc. Rogers Publishing Ltd., One Mount Pleasant Road, Toronto, ON, M4Y 2Y5. Montreal Office: 1200 avenue McGill College, Bureau 800, Montreal, QC, H3B 4G7 Subscription Price: Canada $62.00 per year, Outside Canada $120.00 US per year. MM&D is published 10 times per year except for occasional combined, expanded or premium issues, which count as two subscription issues. Subscriber Services To subscribe, renew your subscription, change your contact information or address, please visit us at www.rogersb2bmedia. com/mmd Mail Preferences: Occasionally we make our subscriber list available to reputable companies whose products or services may be of interest to you. If you do not want your name to be made available please contact us at rogers@cstonecanada.com or update your profile at www.rogersb2bmedia.com/mmd MM&D receives unsolicited features and materials (including letters to the editor) from time to time. MM&D, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. MM&D accepts no responsibility or liability for claims made for any product or service reported or advertised in this issue. MM&D is indexed in the Canadian Business Index by Micromedia Ltd., Toronto, and is available on-line in the Canadian Business & Current Affairs Database. MM&D acknowledges the financial support of the Government of Canada through the Publications Assistance Program toward our mailing costs. Our environmental policy is available at www.rogerspublishing.ca/environment
Network design A company’s supply chain network is, by Ampuja’s definition, “the whole system linking where the product is made all the way to where it’s going.” In recent years, the network design paradigm has changed. “Unfortunately, most of the logistics networks set up across North America are predicated on low-cost energy,” he said. For years, companies worked to consolidate their warehouse facilities into a few major hubs, having determined that the costs of operating multiple facilities outweighed those associated with long-distance travel. Now, with fuel prices at a high plateau, many have changed their thinking. One is Home Depot, which once prided itself on its light warehouse use and heavy reliance on direct-to-store deliveries. One company executive once boasted about having the largest less-than-truckload bill anywhere. When fuel prices climbed, however, the company realized its approach was no longer brag-worthy. In fact, it was a problem. “So they are now opening up a whole bunch of distribution centres,” explained Ampuja. continued on page 6
Make www.mmdonline.com part of your workday Here’s a sample of recent daily headlines from our website: • What the 2010 federal budget means for shippers • Airports to work with feds on CATSA review • Walmart ratchets up green mandate • Motor carrier rates stabilizing • All vessels on Seaway inspected in 2009 • CN to invest $100 million in new logistics park • Canada logs first annual trade deficit since 1975 • GS1 and VICS introduce Empty Miles to Canada We’d like www.mmdonline.com to be your first stop for Canadian supply chain news. Please write to Deborah Aarts at deborah.aarts@mmd.rogers.com with your feedback.
MM&D | March 2010
5
Supply Chain Scan
“Shipping air helps no one.” continued from page 5
Good modelling software can show companies their options for reconfiguring supply chain networks, whether they are looking for the lowestcost, best-service or most environmentally friendly option—or a hybrid of the three.
There’s no magic formula to network design; millions of factors can contribute to determining the optimal number of facilities in the optimal locations. This is why Ampuja recommends using modelling software. “You can’t do this manually. You’ll get an okay answer, but you won’t get the Packaging optimal answer. If you do a computer analysis, you’ll get a more precise Ampuja says packaging is another area ripe with answer. There’s a lot of money on the table, and there’s a tonne of complexity, cost-saving potential. Many departments within so you really need a tool to do the work with.” a company have a stake in how goods are packaged, but there is seldom anyone measuring problems caused by poor packaging. Items are often shipped in boxes far larger than what is needed; Ampuja reported that the average box shipped by companies is only 65 percent full. As carriers move to dimensional weight-based freight pricing structures, it’s sent the cost of shipments skyrocketing. “We’ve seen companies in Canada and the US see their small-package freight bills climb in double-digits in the past few years.” Smarter packaging is Ampuja’s remedy to this problem. This is relatively easy for companies to achieve for outbound shipments. It’s tougher with inbound chains, because it means negotiating with suppliers, but it can be done. Ampuja walked the audience through a high-profile example. In 2006, Walmart committed to reduce its packaging by five percent. That small change is expected to net savings of US$10 billion—US$3.5 billion by Walmart, US$6.5 billion by its suppliers. Ampuja cited another company whose adoption of more efficient packaging reduced its costs associated with carton material by 22.4 percent, filler by 60.3 percent, packing labour by 12.5 percent and freight by 19.8 percent. Overall, better packaging reduced its delivery costs by 23.2 percent. “Shipping air and excessive filler helps no one,” Ampuja said. “There’s no value to it. It’s bad for the business, and bad for the environment.” He concluded his presentation by advising practitioners to keep a broad view when planning a network or packaging optimization initiative. “We have to look at the whole supply chain as a single entity; that’s where the opportunity is. Cut into pieces you don’t get the right answers.”
6
MM&D | March 2010
Supply Chain Scan Movers + Shakers The Meyers Group of Companies— which includes Meyers Transport, Mortrans and Mosaic Logistics— has a new management team. Jacquie Meyers is Jacquie Meyers and Natalie Meyers the new president. An eight-year industry veteran who recently earned the CITT designation, she will focus on the company’s growth, sustainability and logistics in her new role. Natalie Meyers is now chairperson of the company, with responsibility for safety, operations, administration and finance. She has worked for Meyers since 1995. The two women represent the fourth generation of the Meyers family to manage the company. They take the reins from Evan Meyers (Jacquie’s father) and Larry Meyers (Natalie’s father). Provincial Trailer Rentals has named Mark Diamantopoulos to the position of vice-president of sales development. His role will be to develop solutions that integrate the full scope of the company’s services with select accounts across Canada.
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Transport Canada has reappointed Douglas Smith as chair of the Great Lakes Pilotage Authority for a term of three years. The authority’s mission is to establish, operate, maintain and administer an efficient pilotage service for commercial vessels within the Great Lakes region. Schneider National Inc has named Derrel Chappell director of wholesale business development for its intermodal division. Chappell brings more than 40 years of rail industry experience to his new role.
LANDOLL CORPORATION
American Airlines Cargo Division has appointed John Tiliacos to the position of vice-president of cargo operations. Tiliacos replaces Mark Najarian who has been named the airline’s managing director of JFK International Airport in New York.
MM&D | March 2010
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Supply Chain Scan Global Focus What a difference RFID makes Mumbai, India-based stainless-steel products manufacturer Viraj Products Ltd exports to more than 80 countries from multiple facilities. Until recently, the company tagged its bundles of profiles—some of which weighed up to half a tonne—with hand-written codes before storing them in random stacks in its warehouses. Finding the right bundles for each shipment was an inefficient and wasteful challenge. The company recently implemented an RFID solution from Vicinity RFID Solutions with UPM Raflatac ShortDipole UHF tags and Psion Teklogix UHF handheld readers. In the first six months, it gained precise real-time location data for all steel profile bundles. It also gained the ability to perform fast and accurate retrieval, among other benefits. Panalpina expands in Russia Panalpina has chosen a strategic site to open its new office: Murmansk, Russia, a city close to the borders of Norway and Finland. Murmansk is home to the world’s largest natural gas field, with reserves estimated at 3.8 trillion cubic metres of natural gas and more than 37 million tons of gas condensate. From the new office, Panalpina will concentrate on providing forwarding and logistics services to seismic companies, drilling contractors, supply and support vessel operators, oilfield supply and service companies, engineering firms and offshore construction companies.
WTSA carriers raise rates
Container shipping lines in the Westbound Transpacific Stabilization Agreement (WTSA) are raising the general rates for ocean cargo moving from the US to Asia. Starting April 1, the carriers involved in the WTSA—APL Ltd, COSCO Container Lines Ltd, Evergreen Line, Hapag Lloyd AG, Hanjin Shipping Co Ltd, Hyundai Merchant Marine Co Ltd, Kawasaki Kisen Kaisha Ltd (K Line), Nippon Yusen Kaisha (NYK Line), Orient Overseas Container Line Inc and Yangming Marine Transport Corp—will increase dry cargo rates by US$300 per 40-foot equivalent unit (FEU) and US$240 per 20-foot equivalent unit (TEU). For US west coast routes, refrigerated cargo rates will increase by the same amount. The rates for all other cargo— including inland intermodal and all-water shipments from the US east and Gulf coasts—will increase by US$500 per FEU and US$400 per TEU. “Despite modest improvements in cargo demand and rates in recent months, all carriers continue to lose money in both directions between the US and Asia,” explained WTSA executive administrator Brian Conrad. “This has put sustained pressure on the westbound backhaul segment of the market to make its full contribution to roundtrip costs, particularly given cargo imbalance, equipment repositioning and other constraints unique to the trade.”
8
Teamsters target FedEx
The Teamsters Union has filed an application for certification with the Canada Industrial Relations Board to represent around 45 FedEx administrative workers based in Mississauga, Ontario. The company’s Canadian employees have never before joined the Teamsters. According to the Teamsters, several reasons are behind the workers’ interest in unionizing, with the main contributor being a $16,000 annual wage disparity with similar workers at rival express delivery company Purolator. What does FedEx think of the development? In a statement to MM&D, the company said nothing has changed for the time being. “This application does not mean that the union represents any FedEx Ground employee or has majority support at this time. The company will request a hearing to challenge this application, which resulted from a card-signing organizing effort. Until this challenge is resolved, FedEx Ground is under no obligation to bargain with the Teamsters.”
Benchmarks Atlantic Packaging Products Ltd has been approved for Forest Stewardship Council (FSC) certification for its five corrugated box plants in Ontario. Atlantic has 16 manufacturing facilities and warehouses in Canada. It claims to save more than 13 million trees annually. UPS Canada is celebrating its 35th anniversary. When the company decided to expand beyond the US, Canada was the first country it turned to. From its start in 1975—with a single taxi picking up its first shipment—UPS Canada has grown to 11,000 employees and 54 package operations facilities across the country. Lowe’s has presented TST Overland Express with its Platinum Service Award for top-level delivery service for Canadian shipments in 2009. TST has been a Lowe’s core carrier since the retailer expanded into Canada in 2007. It handles both domestic and cross-border shipments.
MM&D | March 2010
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Supply Chain Scan
ProMat, meet robots
>
The Material Handling Industry of America (MHIA) will have some company for its biennial ProMat show next year. ProMat 2011 will collocate with the Automation Technologies Council’s International Robots, Vision and Motion Control Show. The events will take place from March 21-24, 2011 at McCormick Place in Chicago, Illinois. John Nofsinger, MHIA’s CEO, said the decision to host the two events in the same place at the same time came about for several reasons. “Collocating the two events will allow manufacturing, distribution and supply chain professionals unparalleled education and networking opportunities as well as exposure to the largest equipment and technology display of any show of its kind in North America,” he said. “In today’s world of needing to be nimble and innovative, the collocation is a home run for participants and attendees of both events.” In other MHIA news, NA 2010, the North American Material Handling and Logistics Show, takes place in Cleveland, Ohio from April 26-29. See page 25 for a preview. MM&D
Oakville, Ontariobased McKesson Logistics Solutions has changed its name to Accuristix. The change reflects the acquisition of 100 percent of the company by Associated Logistics Solutions in October 2009. The company anticipates no staffing, leadership or structural changes.
Done Deals William L Rutherford Limited of Mississauga, Ontario has acquired Montgomery International Inc, a Customs broker and freight forwarder based in Philadelphia, Pennsylvania. William L Rutherford has expanded Montgomery’s operations by opening a new regional office in Buffalo, New York.
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A fund affiliated with private equity firm New Mountain Capital LLC has acquired Milwaukee, Wisconsinbased RedPrairie Holding Inc, a provider of supply chain software. In other RedPrairie news, Mississauga, Ontario-based third-party logistics provider Sherway Group has selected its Warehouse Management and Workforce Management solutions to direct operations over the 3PL’s one million-plus square feet of warehouse space. Tecsys Inc’s Visual Logistics software is now available for use with mobile handheld computers from Mississauga, Ontario-based Psion Teklogix Inc. The software gives the handhelds the ability to deliver visual instructions to users. Contrans Group Inc of Woodstock, Ontario has acquired Truboy Freight International Inc, an Ontario flatbed transportation business. Contrans will blend Truboy into its Laidlaw Carriers Flatbed LP division. Michigan-based Syncreon, a provider of integrated logistics services and customized supply chain solutions, has acquired NAL Worldwide Holdings Inc. NAL is an Illinois-based third-party logistics and supply chain services company.
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Lufthansa Cargo and Austrian Airlines have agreed to carry one another’s cargo through air hubs in Frankfurt, Munich and Vienna. In Austria, the two companies will integrate their freight handling and distribution activities. In all other countries, freight activities will be amalgamated under Lufthansa Cargo.
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The Konstant速 Group of Companies
Born to be
wired
Teamwork and technology rev up Deeley Harley-Davidson’s DC
Photography by Roger Yip
What does it take to exceed the expectations of a demanding retail network? For this motorcycle parts and merchandise distributor, it’s taken sound strategy, good tools and a shift to a more collaborative operating structure. Deborah Aarts explains.
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Left to right: Deeley Harley-Davidson Canada’s Christine Davey, Stacey Arthur and Jeff Draves
H
arley-Davidson® aficionados are fiercely loyal, but in exchange for that loyalty they maintain high expectations of the brand. They want their motorcycles in tip-top shape at all times. They want the latest gear as soon as it’s available. To satiate their needs, Canadian HarleyDavidson enthusiasts rely on a network of 77 authorized retail stores across the country. And those retailers in turn rely on Deeley HarleyDavidson Canada, the exclusive Canadian distributor for all things Harley-Davidson and Buell™, to keep them stocked with the latest gear. The company manages the distribution of Genuine Motor Parts and Accessories and Motorclothes® apparel out of a 40,000sqf distribution centre in Concord, Ontario. (Motorcycles move through a separate supply chain, also managed by Deeley.) Supplied by the Milwaukee, Wisconsin US headquarters of Harley-Davidson, it houses everything from motor oil to tires to leather jackets. “If you can put it on a motorcycle or its rider, we’ve got it,” explains Stacey Arthur, Deeley’s information technology director. Some of the SKUs are always in stock; many others are seasonal items, released in batches several times a year. At any given time, the DC must have enough on hand to manage retailers’ standard stock orders, plus regular requests for rush deliveries and seasonal items. Deeley has always been able to ship out enough to keep stores stocked—it just hasn’t always done it very efficiently. A visit to the facility a few years ago would reveal a building full of skids crowding the floor and inventory cramming the shelves. That’s not the case today, thanks to a decision to rethink the way it managed its distribution processes. Get your motor runnin’… “It all started with the realization that we were running out of room,” Arthur says. “We knew we’d either have to move or change our processes.” Since the DC is situated close to major highways and the homes of most of Deeley’s employees, the company was not keen on the idea of moving. That left one MM&D | March 2010
All outbound orders are packed and shipped through a single portal for delivery to retail stores.
option: improving the inner workings of the operation. Product simply had to move through the DC more quickly and efficiently. “The idea was to maximize the building,” she adds. Recognizing the need for change is one thing; designing that change is quite another. Early on, the company determined an outside perspective would be beneficial. It enlisted the help of Markham, Ontario-based consultancy Supply Chain Alliance Partners (SCAP). For those involved in the day-to-day management of the DC, it was initially tough to hear the impressions and advice of an external party. But once the ideas were on the table, Deeley associates dropped their defences and started working collaboratively with SCAP. Together, the team came up with a new strategy of managing the DC’s activity. At its core was an order segregation methodology designed to manage each type of shipment—stock, rush and seasonal—differently. “That really was the key. Once we had the orders broken out so we had some visibility...it really started to click,” reflects Arthur. SCAP worked with Deeley until the project picked up steam and a cross-functional team— comprised of managers from the distribution, purchasing, IT and sales teams—was in place to handle it. This was a big change for the company; traditionally, most DC decisions were made by DC staff alone. But collaborative representation helped guarantee that the effects of changes on different areas would be well understood. MM&D | March 2010
Together, the team came up with a plan for the DC designed to benefit everyone in the business. That was three years ago; since then, the company has implemented several phases of change. First gear First on the agenda was dealing with orders for seasonal items. During peak periods (like the start of the riding season, when, according to Jeff Draves, senior manager, product services, “everyone wants everything”) the company is slammed with orders of both stock and seasonal items. In the past, filling this need created major bottlenecks in the DC. At times, the backlog of skids from the factory climbed to 200. This created chaos as associates struggled to put product away and pick enough to meet demand. “We wouldn’t really know what was in each box until we’d opened it,” recalls Arthur. “We’d realize we didn’t really need what was in the box right away, but since we’d opened it, we’d have to keep going through the process of putting it all away.” The solution was to start cross-docking seasonal items. Deeley adopted a new approach to ordering seasonal items from the US. It started ordering such products separately and requested that each order come with a unique purchase order. This makes a shipment of seasonal items immediately identifiable to receivers, who can then direct it to the cross-dock area. Racks line the receiving area, and each of Deeley’s retailers is assigned a slot. When a load of seasonal merchandise enters the facility, operators unpack it and dispense the contents into the appropriate retailer’s slot. Seasonal orders were the logical first choice for the company to crossdock because of the strict deadlines they must meet. These items are released on set dates, and retailers don’t like to receive them even one day late. Today, a seasonal item is in the DC for a very short period of time—often only a few days, and never more than two weeks. For the staff, the increased speed of such shipments carries ancillary benefits as well, Draves says. “Our performance is measured on fi ll rates and inventory turns, so we have a vested interest in the velocity at which product moves through the DC.”
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Second gear After it started cross-docking seasonal orders, Deeley started the second phase of its improvement plan: getting retailers to place orders in batches. “Originally, retailers put in orders every day, and we shipped them every day,” Arthur says. “Because of the way many operated, we’d end up with a huge peak on Mondays and Tuesdays, and then virtually nothing on Thursdays and Fridays. When you overlap that with the huge seasonal peaks we had from May to September, it could be a bit of a nightmare.” Deeley started assigning retailers regular deadlines to place orders: weekly throughout most of the year, twice-weekly during the busy summer season. If the deadlines are met, the stores are guaranteed delivery by a set day. This change has removed much of the variability in the DC. “We’ve balanced a lot of the volume so that it takes away a lot of the peaks and valleys,” says Arthur. “Retailers have started taking advantage of the stocking day, so our rush orders have cut in half.” The enthusiasm among retailers toward the change has been strong. In fact, many have taken the opportunity to become more strategic in managing their stock, reports Draves. “There are a lot of retailers who will now take the time to build an order and do proper inventory management.” A key driver of the successful transition to batch ordering was collaborative inventory management (CIM) software. Deeley’s CIM program—which ties into its warehouse management system (WMS)—is not new, but it was an effective tool in helping the retailers adjust to the change. Smarter use of CIM has also helped Deeley improve its sourcing. It started using the technology to collaborate much more actively with Harley-Davidson US. The manufacturer now gives Deeley more notice about product obsolescence and substitutions, which allows the distributor to make sure everything in stock will be sellable. “We’ve reduced our obsolete inventory by about a million dollars since we’ve started,” Draves says. “It’s of almost no consequence to us now.” Third gear Today, with its cross-docking and order-batching initiatives well-established, the DC is running much more smoothly. Every day, orders are seeded according to type and issued for picking at assigned times over three shifts. Stocking orders are mainly picked on the midnight shift. The pool of rush orders—which has greatly diminished—is typically picked in late morning, giving the company plenty of room to meet its next-day delivery promise. For larger stock items, the picking is done with a forklift carrying cages, each of which carries a retail store-specific bins. Veteran staff members can pick for as many as six retailers at once. Every pick is validated with an RF gun, which transmits the information back into the WMS. The DC is also outfitted with a horizontal carousel for small, fast-moving items. The carousel runs on a legacy software system tied in to the WMS. Once the operator chooses an order to pick, the carousels spin to pull the appropriate items to the pick face, with a pick-to-light system indicating the appropriate quantities. A hydraulic platform moves up or down so that the operator can pick items comfortably.
14
Once the orders are picked, they move to the shipping area to be prepared for delivery. To avoid damage, items are packaged with like items. “We almost over-pack,” acknowledges Arthur. “But if it’s riding season and a customer needs a part and it arrives damaged, it’s not worth it.” Once packed, the orders move into the outbound shipping area. In the past year, it is here that the biggest transformation has taken place. Before, staff working in the shipping area had to log on to each carrier’s proprietary electronic system in order to prepare orders to leave the building. Carriers were generally selected using a mix of precedence (the carrier that’s been used on a route in the past) and convenience (the carrier that the worker happens to have used that afternoon). There was little attention paid to finding the best cost or to factoring in how things like size and destination can affect it. Recognizing the opportunity for improvements, the company implemented shipping software from Scancode Systems Inc, which was purchased shortly thereafter by Descartes Systems Group. The program is linked to Deeley’s in-line cubing unit. Once a package’s barcode is scanned, its weight and dimensions are recorded and the information—as well as data on destination and
Associates pick orders using wire-guided trucks in the narrow aisles.
MM&D | March 2010
urgency—is processed and run through a database of rates to determine the best shipping option. Once a carrier is selected, the software generates a shipping label. “It factors in all those components to make a logical decision on the best carrier to meet the service requirement,” explains Bill Curry of Descartes. “With two scans, it’s probably replaced 20 steps.” The new program gives other departments in the company—including customer service—a real-time window into how orders are being shipped. It also helps staff drill down into data on a particular SKU or customer. It’s still relatively early, but so far the system has been a major driver of efficiency, Arthur reports. “We were able to redeploy one associate to other work, because we only have one shipping station now. Everything moves through one portal instead of several. “It’s given us some pretty good data on what we’re actually shipping that we weren’t capturing—things like the cube and weight. We were relying on our partners to tell us what we were shipping. Now we know.” Shifting into reverse Returns are a big part of Deeley’s business. Each retailer is given an allowance for how much they can return, based on quarterly purchases. For many reasons—usually a desire to liquidate—some take full advantage. In the past, the stores would submit returns information using an array of media, including spreadsheets and fax. Deeley would often find itself in the dark about what was coming back until the item re-entered the DC. And since the process tended to be managed on an ad-hoc basis, it created a good deal of disorganization. Today, retailers submit their lists of returned items as an inbound shipment document via the web. This has created a second receiving stream at the DC. “The intention is that the product is returned to us to resell,” explains Draves. “We can now see what’s coming back…and we can consider our purchasing decisions against that.” Perhaps the biggest beneficiaries of this change are the stores. The new returns system lessens the time and bureaucracy involved in sending back stock. “It used to take three months from the time the retailers submitted their claims until we actually paid them. We’ve reduced that down to a month, at the most, which creates huge savings for them,” Arthur says. “We don’t want them spending their time on administrative tasks. We want to make their backroom easy.” The open road ahead It’s been three years since Deeley started its DC overhaul, and the company’s improvement efforts are far from over. Currently, it is working to change the way it slots its SKUs to improve order-picking. “We’re re-profi ling,” explains Christine Davey, senior manager, DC operations. “Right now, the slotting is random. We see a bit of a lag in the putaway process, so we’re changing that to increase productivity…We’re going to have high-velocity zones within each aisle.” Items will be grouped by size and type, with fast movers placed at easy-to-access locations. More cross-docking is on the docket, too. Deeley plans to use the approach for rush orders in the near future. It also intends to increase the amount of full pallets of consumables—like motor oil, batteries or air fi lters—it sends
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to its retail stores. That said, it is unlikely that this will become a major part of the DC’s business; most of the retailers simply don’t need orders that large. “Retailers do have limited storage space, so we have to keep that in mind,” Arthur explains. These changes will continue to make the DC more efficient and better equipped to handle increased volumes. But there are limits to what the facility is capable of. Deeley’s business continues to grow, and there will come a time— possibly in the not-too-distant future—when expansion will be the only option. “Eventually, we are going to run out of space here, so we’ve looked at adding another DC in Calgary as a next step. We’ve determined the cost of shipping to the west outweighs the cost of running a DC there,” Arthur says. She estimates Deeley will likely make the move within the next five years.
Inside Deeley Harley-Davidson Canada’s DC
Location: Concord, Ontario Size: 40,000sqf DC employees: 27 (more in peak season) Shifts: Three shifts, 24 hours a day, five days a week Dock doors: Two Racking: Concept Storage AS/RS carousel: Remstar Barcode readers and printers: Intermec Forklifts: Raymond and Toyota WMS: JD Edwards (now Oracle) Cubing unit: Global Sensor Systems Shipping software: Descartes Systems Group CIM software: Manugistics (now JDA)
MM&D | March 2010
the past three years. We’ve reduced inventory, we’ve increased turns, we’ve reduced SKU count on the shelf, all of it,” says Draves. Moreover, the retailers are happy, which is quite possibly the most important area in which Deeley must succeed. Every year, the company sends a survey to its retailers, asking them to evaluate all aspects of its business. Since implementing the changes, the score for the DC has increased 22 percent to 83 percent. When asked what has been key to the success of the transformation, Arthur, Draves and Davey are unanimous. In the past three years, Deeley has evolved from a company made up of departmental silos to a cohesive team capable of implementing mutually beneficial changes to the company’s supply chain. “It was a cross-functional team that did this,” Arthur says. “In the An associate on a work platform beginning, it was difficult for everyone to step away from their own interests, picks items from the horizontal but I think that increase in the [retailer satisfaction] score for the DC belongs carousel, which contains small and to everyone, not just the DC staff. It touched everybody.” fast-moving SKUs. Draves corroborates her statement. In his view, the company’s success at the DC has hinged on the successful pairing of the right technology and real teamwork. Overdrive “Everyone’s vested interest is in improvement and in working towards By nearly every measurement, the company’s solutions that work for everyone,” Draves says. “We all got together and three-year improvement drive is paying off. modified and rewrote processes and trained with our departments at the Productivity is up and costs are down. same time. That’s our greatest accomplishment. Continual change is easy, “All of the metrics have gone in our favour in because we’re all going through it together.” MM&D
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the retail trade Advantage 2010 Breakfast Series
Join us for education and networking in each exciting event
Brought to you By
Next up: Don romano, president of Mazda Canada tells the story of “Zoom-Zoom”. May 20th, 7:30am to 10:00am at Spencer’s on the Waterfront, 1340 Lakeshore road, Burlington, ontario
thANkS to our SpoNSorS:
CoMiNg SooN: JuLy 15: Scott Johnston,
vice-president and COO of Siemens Transportation SepteMBer 22: Stephen Hummel, Laurier University presents a Lean workshop NoVeMBer 18: TBD
What you missed at the last event: On February 18, Jack Ampuja, president of Supply Chain Optimizers, shared winning strategies for eliminating waste from supply chains. With smarter network design and more efficient packaging processes, companies can reap double-digit savings in their operations. All it takes is ongoing analysis, the right technology and an end-to-end understanding of the supply chain. For more details see news article on page five of this issue.
thANkS to our VALueD pArtNer:
About the series: The Retail Trade Advantage is a forum developed to showcase innovative supply chain strategies in retail-related industries and to foster exclusive trade relationships to help you grow your business. RTA fosters learning and executive networking through a speaker series and unique pairing exercises designed to help you meet new business partners. These breakfast events are beneficial for anybody who wants more than just a bland business presentation. They are interactive, engaging and thoughtprovoking networking opportunities.
to book a ticket call 905 878 3191 or email info@retailtradeadvantage.com For sponsorship information please call emily Atkins, MM&D’s publisher at 416 764 1537
To learn more about these face to face marketing opportunities, please call Emily Atkins at 416 764 1537.
Tracking livestock
Manitoba launches a new food traceability system By Deanna Rosolen
L
ivestock and poultry traceability is not new to Canadian agriculture. Industry and government have used tags, tattoos, brands and paper-based logbooks for years. These traceability systems have traditionally been developed on a sector-by-sector basis, but are based on similar criteria.
Government involvement The federal government has outlined three pillars to efficient and effective food traceability: identify the animals or products, follow their movement and identify their departure and destination premises. Animal identification programs do currently exist. The Canadian Cattle Identification Program, for example, launched in 2001. It covers beef cattle, dairy cattle and bison. And the Canadian Sheep Identification Program launched in 2004. Both of these programs—which are mandatory in all provinces —dictate that these animals must be wearing a registered ID tag before they leave their farm of origin. Information on all these animals is stored in a central database and is maintained by the Canadian Cattle Identification Agency (CCIA). Federal, provincial and territorial agriculture ministers are working together to support the development of the National Agriculture and Food Traceability System (NAFTS), a program focusing on all livestock and poultry. But in order for traceability to be more geographically appropriate, the federal government recently asked that provinces step to the plate. Manitoba’s food chain In the case of Manitoba, the provincial government worked with IBM Canada to develop its own system. Winnipeg-based John Graham, services executive for food traceability at IBM, explains that the company began working with the Manitoba government in 2006 to tag cattle and pork with RFID chips. IBM then helped to map a value chain for both cattle and pork for the province. For cattle, for example, that chain follows a calf from the farm or ranch on which it’s born to the
farm where it’s put out to pasture and then to the farm where it’s fed grain or corn and fattened up (which is often in the US). The next step is the slaughterhouse and then finally the grocery store where consumers can buy the product. “That’s the production in a nutshell,” explains Graham. “It’s a little bit more complicated than that. There are a few more loops, but essentially that is the high-level value chain.” Once the map was put together, IBM gave the province a software demonstration showing how to take things further. The demonstration showed the province how the records contained in information systems on the farm, at the slaughterhouse or within a logistics firm could be linked together. It also shows, says Graham, that “traceability could be done from a grocery store all the way back to not only the farm but also to the feed and the location of the feed that had been used on the farm on that particular animal—be it a cow or a pig.”
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MM&D | March 2010
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Through the project, Graham says it became apparent that there was an issue regarding meat safety and the US closed the for Manitoba, one of its more pressing issues right now is its border, it would be an economic and environmental disaster. pork industry. Manitoba is the largest pig-producing and “The producers would not want to waste any more money pig-exporting province in Canada, accounting for about 30 feeding the animals so there would be mass slaughters because percent of national pig production and 60 percent of national they wouldn’t be able to export them. And there would be far pig exports. Almost all of the province’s pig exports go to the more production than the Canadian market could absorb.” midwestern US. This makes an open border and free trade It fell to IBM to come up with a solution that would help with the US vital to Manitoba’s farmers. mitigate the risk by demonstrating how to isolate a problem The province and the pork industry told Graham that if to a particular region. Since hogs from Manitoba could be
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anywhere in North America within 72 hours, quick determination of the root of any problem is crucial. No one wants to repeat what happened in 2003, when a case of bovine spongiform encephalopathy (BSE) found in a cow killed in Alberta shut down the entire western Canada’s beef industry. With the right traceability system, only a percentage of the industry would shut down and the rest could keep producing. “If we could put in a traceability system that could isolate the problem and prove to veterinarians and officials in the US that we had the problem under control in Canada, we could keep the rest of the industry working,” explains Graham. With these goals in mind, IBM began working to create a system capable of telling users exactly where livestock has been exported to and allowing all parties to zero in on areas to quarantine. This project became known as the Manitoba Premises ID Database, or PID. IBM began working with the province on this last March, and it’s set to go live this
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MM&D | March 2010
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year. The project is built around IBM’s enterprise asset management software. Expanding NAFTS This initiative ties in well with the goals of NAFTS. The aim of NAFTS is to create a secure, sustainable and value-driven system that will provide timely and relevant
traceability information. This data is hoped to enhance emergency response and market competitiveness in a way that best serves industries and governments. There are many benefits of implementing such a comprehensive traceability system. For government and health officials, it means gaining the ability to act quickly in a crisis situation and know where animals or products are in the supply chain. For livestock producers and grocers, the system offers a way to differentiate products because they can verify that those animals came from safe properties. It also allows producers to verify the ages of animals. This is an important factor. Take the example of BSE—in order to protect themselves from potential exposure, most countries won’t accept animals older than 30 months of age. For the logistics service providers handling food products— including carriers and warehouse firms—proper traceability can greatly simplify the otherwise complex process of isolating food identified in a recall. It can also ensure these companies have the best information possible to provide proper storage and transportation conditions. Finally, the system can also be used to reassure consumers of food safety and provenance. Recent high-profile recalls and border closures to certain products have made consumers more concerned about the food supply chain. They no longer just want to know their food’s nutritional characteristics; they also want to know its country of origin, how and who handled it and how industry can back that up. For this, the system also offers process verification. Graham explains that producers whose animals are free of hormones and antibiotics will be able to prove it through the system. “Producers can verify that [a] particular packaged product that a consumer bought in a grocery store came from [a] particular farm.” Once the NAFTS vision is fulfilled regarding livestock and poultry, there are other categories to be mapped, including produce, grains, pulses, spices and beverages, and then more complex products like vegetable beef barley soup. “It’s an important [issue],” says Graham. “We’re an exporting country and we export a fair number of agricultural products. I think it’s important to maintain our position globally that we be able to create programs such as these.” MM&D
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MM&D | March 2010
Who’s responsible? Everyone must pitch in for a safer global food supply chain By Mark FeDuke
W
ith a near-constant barrage of food recalls on domestic and imported foods, officials in Canada and the US are working to tighten food safety regulations. As a father and as someone who eats, I really don’t have an issue with the idea that folks ought to be held accountable for the products they introduce into the food supply. Our company isn’t a billion-dollar food processor with thousands of vendors, gives us a near-constant presence from pre-planting to but that doesn’t mean we can’t do our part to help raise the harvesting, processing, packing and shipping. bar on food safety. Regardless of where a company sits in the We also arrange independent lab analysis and advice on trade chain, everyone has responsibilities beyond their field management practices. We may source from two or three immediate one-up, one-down links. We are all accountable to processors to meet the volume needs of a specific foodservice the final consumer. program, so having boots on the ground A meat processor can swab every is a benefit for product consistency. nook and cranny and implement the People ask how our vendors take to very best of critical controls, but if being placed under such scrutiny. They folks downstream fail to maintain safe benefit from accessing our customer food handling practices or if final network, but they also get to rely on us consumers fail to understand and/or as a resource helping them to maintain follow proper cooking instructions, first-rate food safety systems. If some of the work done upstream can be what we’re doing leaks out of our network compromised. and helps our competitors, well, so be it. As a supplier to international food We all benefit from the bar being raised. processing and food distribution Let me put it to you another way: networks, our company is keenly aware supply chain management literature is of the supply chain security and food full of advice on how to achieve lean safety realities of a post-9/11 trading supply chains, agile supply chains and environment. Offshore sourcing may their chimera-like offspring, “le-agile” offer interesting opportunities, but supply chains. In all this talk of efficiency how do you account for safety controls for food products is it possible folks might lose sight of responsibility? If coming from overseas? Do you leave it up to procurement staff companies in a trade chain perform an overlapping function to evaluate quality control reports from foreign vendors? —say, pursuing best practices in food safety—do we consider There’s a great deal of talk about global standards but there this as adding cost and waste to a lean chain or do we consider really isn’t a fully agreed-upon, all-encompassing set of food it as adding value? processing safety regulations. Guiding principles, yes. Best I see it as responsible stakeholders collaborating to mitigate practices, certainly. But regulations, no. As an importer, how risks for the benefit of the chain as a whole and, more do I keep on top of differing standards and food systems? importantly, to the folks who we all ultimately report to: the At our company, our quality control and quality assurance end consumers. MM&D teams undergo continuous training. We also provide ongoing training and shared learning opportunities for our foreign Mark FeDuke is director of trade compliance at VLM Foods vendors. Our Chinese quality control inspectors travel 25 days Inc, a Montreal-based import/export food trading company. a month visiting with our dozen or so Chinese vendors. This Email him at mark@vlmtrading.com.
Offshore sourcing may offer interesting opportunities, but how do you account for safety controls for food products coming from overseas?
MM&D | March 2010
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News from the food chain
There are about 1,500 commodities affected by the initiative; these are foods regulated under the Food and Drugs Act and Regulations. These will be subject to increased scrutiny at the border; the CFIA will identify and add commodities to the Canada Border Services Agency’s filter list in phases over the next two to three years. he Canadian Food Inspection Agency (CFIA) had launched Through the initiative the CFIA aims to improve the a broad initiative to improve food safety by targeting availability of information on problem commodities. For high-risk commodities and importers. instance, the melamine scandal in China wasn’t just about That was one of the key messages delivered by Michel infant formula; potentially tainted dairy ingredients were also LaBrosse, director of the CFIA’s import control division, at IE in imported candies and cookies, but the CFIA didn’t have the Canada’s Fifth Annual Food Forum held in Mississauga, data to know what percentage of dairy ingredients were found Ontario in February. As LaBrosse explained, more than 65 in these other products. percent of all food in Canada is imported or contains imported Other objectives include tracking imported food to identify ingredients. While the majority of importers are “good the origin and destination—and to be able to do this quickly corporate citizens,” the one to two percent that are not represent so as not to impede the trade of safe food. 98 percent of the food safety risk in Canada. The role of the importer in all this, said LaBrosse, is to It’s these companies that led the CFIA to launch the Food ensure the food they import is safe. “Importers need to have and Consumer Safety Action Plan last year. The aim is to a quality management system in place and they need to update its regulatory processes to address the new realities and recognize that this is their responsibility.” risks of the global economy. There are three areas of focus: In September 2009, importers and brokers received six preventing problems, targeting the products that present the months of notice about implementation of stricter rules on highest risk and providing rapid response to problems. the first 14 commodities. A notice will be sent again this spring for phase two. The CFIA expects that future phases will be implemented on a quarterly basis. MM&D
CFIA effort targets high-risk food commodities
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MM&D | March 2010
Distribution Centre Technologies Showcase
NA 2010 preview
A sneak peek at new and innovative technologies The 2010 North American Material Handling and Logistics Show (NA 2010)— which is sponsored by the Material Handling Industry of America (MHIA)—takes place from April 26-29 in Cleveland, Ohio. The theme this year is Solutions that Make the Supply Chain Work. With more than 500 exhibitors, there will be plenty of equipment, technology and services on hand that were designed to do exactly that. Intelligrated’s soon-to-be-relaunched Real Time
truck on display. The 4450—which can handle loads of up to 4,000lb—has a short head length, which reduces its turn radius and makes it ideal for tight spaces. The truck also allows operators to select different travel speeds so they can adjust the truck to the environment they’re in—a boon for productivity and control.
Productivity The Ultipack automated void containment Solutions in action. system from Sealed Air Corporation will be on Conservation show for people looking to increase packaging Many companies will be highlighting solutions that efficiency. Fed by data from a WMS or ERP system, an automated dispenser offer energy-saving features. Such tools are being fills packed boxes with appropriately sized wedges of corrugated cardboard touted as cost-effective, environmentally friendly to protect items in transit. The solution is designed to help companies lessen and efficient. the overall number of people packing boxes in the DC. As an environmental Intelligrated, for example, will highlight its family bonus, the cardboard is easily recyclable. of Crisplant tilt-tray and cross-belt sorters. These Presto Lifts Inc will be showing its new P4 hydraulic load leveler for use in sorters feature linear synchronous motors, which the manual loading and unloading of pallets. Its platform lowers to floor reduce energy consumption by up to 75 percent. height so pallets can be placed and removed using a hand pallet truck. The company says they’re suitable for high-speed When unloading, the platform starts at its lowest height and is applications with a wide variety of product sizes progressively raised so that each succeeding tier of goods can and shapes. be removed at the same ergonomically correct height. This Intelligrated will also be relaunching is meant to limit worker fatigue. the Real Time Solutions order fulfillment Also on the pallet front, the PalletPal Inverter system, which it acquired with its 2009 from Southworth Products Corp will be on display, purchase of FKI Logistex. The system showing an alternative option for rotating fully includes pick-to-light, pick-to-voice, pickloaded pallets. It is used when companies need to replace to-cart, RF picking and order fulfillment broken pallets, switch loads to or from in-house pallets, software. Southworth Products’ Palletpal Inverter. transfer loads to slip sheets and/or replace damaged goods The Raymond Corporation will highlight at the bottom of a load without manual restacking. its 9000 Series Swing-Reach lift trucks, which now offer energy-saving features like AC technology Safety for longer battery run times, regenerative lower- Loading docks are one of the most dangerous areas in a warehouse. In fact, ing that automatically recharges the battery and in the US, approximately 260 lift truck accidents occur each day. Terrebonne, LED compartment lights. The trucks contain Quebec-based GMR Safety Inc will be showing off its recently launched Power Raymond’s ACR System, which allows trucks Chock, which restrains vehicles arriving at the dock door. The device is a to perform at heightened large steel chock set on a wheeled base, which is rolled and placed in front of levels throughout a shift. a vehicle’s rear wheel. The chock locks into place and prevents trailer creep Raymond will also have its and early departure. new Model 4450 three-wheel The company will also show its Clear To Go dock door protection and access sit-down counterbalanced control system, a high-visibility barrier designed to sustain impact at the dock door. When hit, an alarm sounds to alert employees of a possible risk. This is Raymond’s Model 4450 meant to reduce accidents at the dock door. counterbalanced lift truck. To review the agenda of the NA 2010 educational conference or to browse what other exhibitors will have on display, please visit the show’s website at www.nashow.com. MM&D MM&D | March 2010
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Learning Curve | Tracy Clayson
Safety first
Do your homework if you want a compliant carrier
W
hen a shipper chooses to outsource the transportation component of In many provinces, shippers and brokers can its business, it assumes the responsibility of ensuring the chosen access data on a carrier’s safety by submitting a carrier is a safe and compliant operator. CVOR number to the transportation ministry’s It’s usually not a top priority. Shippers often choose carriers based on website. In the US, shippers and brokers can access size, experience, support structure or industry knowledge. The ultimate a program called SafeStat, which gives a chart and goal is to find an effective, economical and reliable transportation solution statistics based on a collective assessment of audits, that provides customers with a positive delivery experience. violations, inspections and collisions. Generally the shipper expects the carrier to handle goods with care, Note: the CVOR may not be registered to the ensure on-time delivery and offer clear billing. Expectations may also cover trading name of the carrier, so it might be communications, as holding carriers to a regular reporting schedule necessary to ask the carrier for the right details. keeps the transportation process moving steadily and creates stronger A good carrier will happily comply, as it will expect relationships. Shippers also expect to get value for their money, which they you to undergo due diligence about safety when can ensure through a number of means, including comparing costs, deciding whether to use its services. auditing freight bills and analyzing surcharges. Also, shippers should verify that there are no But beyond the obvious details about price and carrier ability, the clauses or exemptions in the carrier’s insurance shipper should also expect to see evidence that demonstrates the carrier’s policies that might nullify insurance coverage. status on safety. Carriers are quick to make strong statements about their safety records in their sales pitches. Broker responsibility Such claims are worth investigating further. Often, shippers place the onus on their brokers to make sure a carrier is Site visits are an effective way to gauge a safe. Brokers are required to conduct stringent screening to avoid carrier’s culture of safety. These reveal intangible unnecessary collisions, freight damage or other safety-related problems. elements of the business, such as how staff comes The broker has a vested interest in choosing safe partners. If a carrier is across in face-to-face communication and how involved in a collision and its insurance doesn’t cover the cost of the claim, the company goes about making decisions. the broker may be required to reimburse the shipper for freight damages. It’s also smart to do some digging and make Of course, in this circumstance the broker would probably seek damages reference calls to existing clients—and not just from the carrier. The broker may even have terms in its contract to the ones the carrier tells you to contact. indemnify itself and the shipper from damages or losses related to handling Finally, if you still think low-cost is best, keep the shipper’s freight. this in mind: if the cheap carrier you choose has Even with such legal safeguards in place, it is better to have no accidents a limited number of units or drivers, overloads at all. This is why brokers should conduct an exhaustive review of any trucks, keeps haphazard equipment maintenance carrier’s qualifications and history during the screening or selection stage. schedules and puts drivers on the road without It’s a process shippers should take an active role in. In the rush to get the the allowable on-duty hours, it could cost you best price and the most time-efficient solutions—or under the belief that more than any savings you might have realized. the broker bears full responsibility for due diligence—shippers often fail Of course, accidents do happen, and when to properly scrutinize a carrier’s safety record. But the law isn’t always clear there is an event involving damage, there will be on who’s liable for freight damages, so it’s worth it for cargo owners to take investigations and reparations. However, if you’ve the extra steps. chosen a carrier willing to share information, answer questions and demonstrate good risk Before awarding a contract management techniques, you can greatly reduce At the basic level, shippers need to know their carriers have a valid the chances your company will get embroiled in commercial vehicle operator registration (CVOR), a certificate of insurance a safety-related issue. MM&D and workers’ compensation coverage. This documentation is important, but it tells the shipper little about a Tracy Clayson (tracy@in-transit.com) is managing carrier’s actual safety rating. This could be the critical divide between risk partner, business development, of Mississauga, management and a real threat. Ontario-based In Transit Personnel.
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MM&D | March 2010
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Legal Link | Marvin Huberman
How good is your forwarder?
Ask the right questions to mitigate risk
A
good freight forwarder assumes responsibility for and effectively carries out services and advice in connection with the transportation of cargo from point of origin to point of destination. Traditionally, the forwarder acts as agent for the owner of the goods. It co-ordinates with carriers and makes arrangements for the necessary intermediate steps. The forwarder may also act as a principal contractor, arranging the carriage in its own name and/or consolidating the cargoes of several customers into a single container. Here, the forwarder undertakes responsibility to the shipper as a carrier. Whether the freight forwarder acts as an agent or carrier, it plays an important role in the movement of cargo. If it fails to meet acceptable standards, it can create unnecessary costs, delays, risks and damages to the shipment—all nasty things the cargo owner likes to avoid. By contrast, when the forwarder meets or exceeds the needs of its customer, outstanding results are assured. So what separates the good from the bad? A good freight forwarder will maintain continuous control over the products being moved. It will provide efficient, reliable and integrated end-to-end freight management services. It reduces the risk you face, and as such is worth its weight in gold. Is your freight forwarder up to par? You can find out by evaluating it on the professional, operational and corporate levels.
Professional questions The professional conduct of a freight forwarder should be very important to you as a shipper. Does your forwarder proactively initiate meaningful contact with you? Does it respond to your inquiries? Know and understand your business? Add value to your business by leveraging existing contracts, relationships and networks? Do its industry references check out? Are its representatives of good character, repute and fitness? Does it exhibit practical judgment, integrity and initiative? Is it a member of the Canadian International Freight Forwarders Association (CIFFA) or other professional organizations?
operations in ways consistent with its role described in the contract? Does the forwarder have certification to deal with dangerous shipments? Can it handle highrisk conditions? Can it guarantee cargo security? Does it have the capability to track and trace intransit shipments? Will it arrange for alternative shipment methods when things go wrong? Can it maintain control of the cargo at terminals, such as Vancouver and Montreal, where there is no delivery order mechanism? Can it efficiently handle delays in distribution and/or Customs clearance? Does it engage in preliminary shipment planning and inspections? Crucially, does it ensure that the cargo arrives on time? Corporate questions It is also wise to evaluate the forwarder’s position as a company. Here, you should assess whether it is equipped to address fast-paced changes taking place in the logistics industry. Does it have fair and flexible rates and billing options? Is it equipped with EDI capability? Does the company have experience with your specific cargo? Does it have global capabilities? Finally, does it offer all the services you need?
Evaluating mitigates risk Evaluating your freight forwarder is a timeconsuming but ultimately valuable process. While criteria for evaluation will depend upon specific circumstances and needs, some of the questions Operational questions above may assist in starting the process. You should also ask about the inner workings of your freight forwarder. Although appraisals will not necessarily confer Is it able to manage operational risks effectively? Does it have a successful competitive advantage or guarantee success, it is management team capable of seizing new opportunities? Does it maintain certainly a sign of good management. Because it a solid capital base and robust balance sheet? ensures you are doing your due diligence, it is Does the company control and minimize risk through insurance and also an effective tool for minimizing risk. contractual provisions? Is it protected by freight forwarders legal liability Besides, wouldn’t it be terrific to weigh and and errors and omissions insurance? Will it issue bills of lading describing measure your forwarder and find it is not good, its liability? Furthermore, will it agree that it and its personnel, sub-con- but rather, great? MM&D tractors and agents will comply with global anti-corruption laws (and to periodically certify such compliance in writing)? Marvin Huberman, LLM is a lawyer, mediator Is it willing to enter into contracts subject to trading conditions? Can it and arbitrator based in Toronto. Contact him at properly explain its role in its documentation? Does it undertake its www.marvinhuberman.com. MM&D | March 2010
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Firefighter | Jeff Kay
It’s getting hot in here
What to do when a freezer floods
J
ust before Christmas 2008, the temperature in our freezer warehouse began Adverse weather conditions were responsible to climb. With 105 pick locations and 100 backup pallet positions, there for the equipment failure; there was little we could was potential for huge inventory loss if the issue wasn’t fixed quickly. do about that, as we do live in Canada, eh! But The temperature increase was caused by two factors. The first was a the problem with the sprinkler heads definitely fractured coil that was leaking refrigerant. The second was an accumulation needed resolution. We were using frangible bulb of ice on the rooftop refrigeration unit, which sparked mechanical failure. sprinklers, which have a small bulb made of glass The evaporator units inside the freezer are automatically set to perform that is partially filled with liquid. Heat will cause a defrost cycle to prevent any buildup of condensation and ice on the fans the liquid to expand and the glass to shatter, and coils. When the defrost cycle kicks in, the ambient temperature around opening up the sprinkler for water discharge. The the units rises to over 30 degrees Celsius. The system keeps the units clear unusually high temperature in our freezer at the of ice as long as the freezer’s temperature stays at -18 degrees. But since the time of the crisis was above the maximum the freezer’s temperature had risen above the freezing mark due to the sprinklers we had in place could handle. mechanical failure, when the defrost cycle came on the temperature around Now that we understood the cause we were the units rose to over 40 degrees. able to implement preventative measures to Here’s where things really fell apart. The position of one of the freezer’s minimize the potential for a repeat occurrence. sprinkler heads was directly behind one of the cooling units. All sprinkler heads were inspected to ensure they Under normal circumstances this posed no immediate threat. But the were operating properly. We moved the two heads condensation caused by the thawing temperature caused ice to build up that had exploded to locations further away from inside the sprinkler head. When the cooling unit’s defrost cycle came on, the cooling units and installed bulbs with higher the sprinkler head burst. temperature ratings.
Stepping into action Lessons learned I stood in awe of the cascading waterfall. My immediate reaction was to feel It is always wise to have a preventative maintenance defeated, but I quickly replaced that with action as two inches of water pooled schedule in place to minimize the risk of a major on the floor. Seeing that emergency repairs were necessary, I called our breakdown. Keep a list of all emergency numbers— sprinkler system service provider. A technician arrived on site soon after. including staff—and an adequate supply of Even when the water stopped flowing, we still found ourselves with a relief equipment in an easily accessible place. big problem. With our mechanics department working to restore the broken When negotiating lease agreements for evaporator units, time was of the essence in order to save our inventory and transportation equipment, include a provision clean up before the freezer turned into a skating rink. It became clear we for supply units in the event of an emergency or needed more manpower, so I called in two of our managers for assistance. breakdown. Plan any renovations or retrofits The first order of business was to move the remaining inventory into a carefully and have everything inspected. Assemble few of our multi-temp trailers to maintain its integrity. This process had an emergency response team that will be prepared started as soon as the freezer units failed, long before the sprinkler burst. to deal with any unforeseen circumstances. Not knowing if the problem would be completely rectified by morning, Lastly, when you least expect it, expect it. we decided to set up pick locations in one of the trailers so that the next day’s Emergency preparedness is worth it, even if you orders could be processed from there, if necessary. The remaining backup think you have all the bases covered. MM&D inventory was placed in two other trailers. Having a good lease company behind us to provide extra equipment in a pinch was definitely an asset! Jeff Kay, PLog (kayj@wacl.com) is warehouse With the inventory taken care of, it was time to focus on clean-up. We used and distribution manager at Wallace & Carey in water pumps, hoses, power scrubbers and squeegees to tackle the mess. Oakville, Ontario. We’d nearly finished when it happened again. The ambient temperature was still well above freezing, so as soon as the defrost cycle kicked in, you Firefighter is a forum for practitioners to explain guessed it: another sprinkler head burst. Luckily, the repairman was still how they helped solve an unexpected supply there and was able to turn it off rather quickly. We finished cleaning and, chain crisis. To share a story, contact Deborah with stock safely stored away, worked to get to the root of the problems. Aarts at deborah.aarts@mmd.rogers.com.
30
MM&D | March 2010
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