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The path to sustainable supply chains
Plus: The ROI of supply chain education Are couriers slowing down? Preparing for a warehouse inspection Conveyors showcase A load consolidation success story
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Taking Stock
The Slow Supply Chain movement W
ith the economy showing more signs of recovery every day, it’s an apt time to reflect on the downturn’s effects. I submit that the most enduring legacy of the Great Recession will be slower supply chains. Driven by economic necessity, in the past few years a growing number of companies have opted for deferred shipment options. At our recent sustainability roundtable (see page 12), John Scheel of Grand & Toy explained the savings his company has extracted by moving away from next-day deliveries. Freight bills are down and the extra time has created all sorts of efficient processes in the DC. And that’s without factoring in the positive environmental effects of reducing the number of trucks on the road (something Unilever Canada has done too, as the story on page 17 relays). “Time is the friend of sustainability,” Scheel reasoned.
And the carriers—in most modes, anyhow—appear to be on board, since operating at slower speeds saves them money too. Ocean shipping companies have reportedly started travelling at speeds as slow as 14 knots (down from full speeds of up to 25 knots) to reduce fuel consumption. Truck and rail carriers have cottoned on to a similar concept. And as Gary Breininger’s story on page 18 demonstrates, even courier companies that have built their reputations on speed are now placing less emphasis on express service. Why do I think this movement will last? Economics, pure and simple. While it takes work to build more time into supply chains without compromising deadlines, the effort is rewarded with very real cost savings. While there will always be some shippers whose primary concern is speed, I suspect there are many others that have had a taste of lower rates and don’t want to go back. A better carbon footprint is icing on the cake. The Slow movement has taken root in cultural consciousness. Scores of people adhere to Slow Food, Slow Shopping and Slow Travel philosophies. Perhaps it’s time to add the Slow Supply Chain movement to the list.
April/May 2010 | Volume 55 | Number 3
Features
Contents
12 Green leaders A group of industry experts shares effective ways to create more sustainable supply chains. 17 Payload payoff An update on how a multi-year three-way load-building partnership between Unilever Canada Inc, Schenker of Canada Limited and Nulogy is driving savings. 18 Is express shipping dead? How couriers are evolving to meet shippers’ demands in the post-recession world. 22 A smart step Is continuing education worth the investment? We explain how to measure the returns.
Columns 27 Materials Handling How to prepare for a warehouse inspection. 28 Legal Link What to do when a 4PL deal turns bad. 30 Firefighter When a shipping project goes awry, it helps to roll up the sleeves.
Departments 3 5 6 8 11
Taking Stock Supply Chain Scan Benchmarks Movers + Shakers Done Deals
24 Conveyors move along Modern technology meets classic design in this showcase of new equipment. MM&D | April/May 2010
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Border rules 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
Experts give advice on how to comply with new advance data regs, page 10
Supply Chain Scan
Inside | TIA report, page 6
Gold medal for logistics
ART DIRECTOR: Stewart Thomas (416) 764-1547 stewart.thomas@industry.rogers.com
VANOC pro shares tales from the Games
PRODUCTION MANAGER: Kristen Hrdlicka (416) 764-1692 kristen.hrdlicka@rci.rogers.com
By Deborah Aarts
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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. 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 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 acknowledge the financial support of the Government of Canada through the Canada Periodical Fund (CPF) for our publishing activities. Our environmental policy is available at www.rogerspublishing.ca/environment
Photo: © VANOC/COVAN
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ver wonder how much logistics work goes into running a major global event? Ken Nord knows. At the Ontario Hospital Association’s recent Clinical Services Supply Chain conference in Toronto, Ontario, Nord—who served as manager of Customs brokerage and freight forwarding for the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Games (VANOC)—shared the scope of his department’s work at the Games. The VANOC logistics team was made up of 62 full-time staff and 572 temporary workers, divided into three areas of responsibility: material planning, logistical operations and venue logistics. They were supported by five partner organizations: Canada Border Services Agency, Air Canada (the official airline), CP (the official railfreight services provider), Purolator Courier Ltd (the official courier services supplier) and the Pacific Group of Companies (the designated Customs broker and freight forwarder). The scope of the work is impressive. The logistics team and its partners had to co-ordinate the flow of goods to and from more than 80 sites— including nine competition venues, six non-competition venues and more than 50 support venues—all on extremely rigid deadlines. The hub of activity was a 520,000sqf distribution centre in Delta, British Columbia. VANOC and its partners used most of that space—400,000sqf— to house approximately 4,700 Games-related SKUs. The remaining 120,000sqf were subleased to offset costs. From December 7, 2009 to April 5, 2010 the facility operated two shifts, seven days a week. continued on page 6
Make www.mmdonline.com part of your workday Here’s a sample of recent daily headlines from our website: • Airfreight vs the volcano • CTA cracks down on cargo crime • Toyota’s materials handling arm restructures • CSCSC accredits six more educational programs • Saskatchewan shortlines get funding • Trade surplus widens further • New container service at Halifax • Tighter marine pollution rules on deck 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 | April/May 2010
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Supply Chain Scan continued from page 5
Whenever possible, VANOC accumulated inventory ahead of time to guard against the possibility of missed deadlines. “In many ways, it was the opposite of just-intime,” Nord said. When it came to moving the inventory out, CP handled the load-in and load-out of the Olympic villages and venues; Purolator managed all intervenue transfers; and VANOC itself handled deliveries between the Vancouver and Whistler villages. Since security was paramount, every delivery had to adhere to a master schedule. Every driver had to be accredited, and all vehicles had to have an access and parking permit. All delivery vehicles had to be pre-screened and sealed before departing an origin facility and then re-screened before entering a Games venue. Was such a cautious approach worth it? Nord says it was. Everything—from security fencing to athletes’ equipment to the podium used in the men’s hockey medal ceremony—arrived where it needed to be on time, for all the world to see.
Optimism reigns at TIA conference By Walter Weart
I
n April, 575 members of the Transportation Intermediaries Association (TIA) from the US and Canada met in Tucson, Arizona for the TIA’s 32nd Annual Convention and Trade Show. And despite the uncertainties in the economy, the outlook was optimistic. “The TIA 3PL Market Report indicates that, throughout 2009, member load count increased,” said Robert Voltmann, TIA’s president and CEO. “ This shows the strength of the 3PL sector.” Sessions ranged from emergency disaster preparedness to safety to the future of the 3PL industry. Keynote speaker Harry Beckwith presented insights into why customers choose 3PLs (and what factors make them stay). Most of the major North American railroads, including CN, made presentations, and their message was consistent: they are seeking closer working relationships with 3PLs, particularly through their intermodal offerings. A highlight was the awarding of the Avalon Risk Management scholarships, which were created to promote education and industry involvement. The five recipients were all first-time TIA conference attendees; among them was Montreal, Quebec-based Marcia Robitaille of Traffic Tech, Inc. The TIA will hold its 33rd annual convention and trade show in Orlando, Florida next April. Walter Weart is communications manager for the TIA.
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Supply Chain Scan
Movers + Shakers Canadian Pacific Railway Limited has appointed Edmond Harris to executive vice-president and chief operating officer. A 30-year veteran of the North American railway industry, Harris was CN’s executive vice-president, operations until 2007. Since then, he has provided consulting services for Class 1 and regional railroads.
Tom Pauls
Tom Pauls, CITT, has joined Stoakley-Dudley Consultants Ltd as a recruitment consultant, supply chain and logistics. Pauls is on the board of directors of SCL Canada and the executive of CITT’s Toronto Area Council.
Cargojet Income Fund has named Jamie Porteous a trustee of the fund, replacing Dan Mills, who retired in March. A founder of the Mississauga, Ontario-based cargo airline, Porteous has been executive vice-president of sales and service since its inception. Lufthansa Systems AG has appointed Stefan Hansen as CEO and chairman of the executive board for a period of three years. Hansen succeeds Wolfgang Gohde.
Canadian Sailing
Fred Florence is now chief operating officer at Mississauga, Ontario-based hydrogen generation systems manufacturer Hy-Drive Technologies Ltd. He joined HyDrive as vice-president and chief financial officer in 2008.
The Canadian Trucking Alliance (CTA) has announced its new executive committee. Paul Easson, president of Eassons Transport in Berwick, Nova Scotia, is chairman. He succeeds Bruno Muller of Alberta-based Caron Transport. Other officers include Mark Seymour of Kriska Transportation (first vice-chairman), Don Streuber of Bison Transport Inc (second vice-chairman), Scott Smith of JD Smith and Sons Limited (secretary), Gene Orlick of Orlicks Transport Inc (treasurer) and CTA president and CEO David Bradley.
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WHAT ARE SOME OF THE KEY BENEFITS? People are constantly gaining new knowledge, skills, attitudes and values; continuing education benefits not only individuals and communities but also the country’s economy. In our knowledgebased industry where change is a constant, people who embrace lifelong learning and who continuously learn new skills can better cope with the demands of evolution in the workplace.
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Supply Chain Scan
How to manage new border rules Experts offer advice for the advance data age By Deborah Aarts
I
n January, US Customs and Border Protection began enforcing its Importer Security Filing (ISF) rules, commonly known as 10+2 (after the data elements that must be submitted ahead of time for marine shipments). Canada Border Services Agency (CBSA) is working to implement similar requirements for importers with its Advance Trade Data (ATD) initiative and eManifest program—and those rules will eventually affect all modes. At IE Canada’s recent Emerging Issues in Customs and Trade Compliance conference in Toronto, Ontario, a panel of experts weighed in on what those in the Canadian trade community can glean from US experiences. Carol Buckton, senior director of trade logistics at Siemens Canada, said the array of programs on both sides of the border “really equal the same thing: mandatory advance data.” Even though the eManifest start date for importers is not until 2012, shippers should conduct extra due diligence when dealing with partners in the supply chain today, she suggested. They should ask about carriers’ abilities to comply with ATD and review how the CBSA’s proposed cut-off times for data transmission—24 hours for marine, four hours for air, two hours for rail and one hour for trucks—will fit into their supply chains. “Start mapping out your supply chains,” she said. “Don’t wait until the deadline comes to start transmitting this information.” Ruth Snowden, executive director of the Canadian International Freight Forwarders Association (CIFFA), said a big challenge of ATD will be managing all the data across multiple parties without adding redundant processes. “How do we create the links to ensure that we are able enter data once, accurately, so we can use it again and again?” The advantage Canadians have is timing, she pointed out. Because Canada is a few years behind the US, practitioners here can learn from issues that have emerged south of the border.
Mike Laden, principal of Trade Innovations, Inc, said technology will be crucial to complying in an efficient way. “Automate or perish,” he said. “We’re in an automated environment now.” He added that the new technology needed to meet advance data requirements can carry side benefits, like better speed and visibility. “I won’t stand before you and tell you this will save you money, but you should look for the silver lining. Look for opportunities,” he said. He also advocated adopting a healthy amount of patience. “This is a massive change and it’s going to take time to get it right.” As vice-president of transportation at US retailer Kohl’s Department Stores, Dan Mueller has gone through the 10+2 compliance process. “Don’t panic. That’s key,” he advised. “As you go through the process, if you slow down a bit you’ll find it’s not as bad as people say it is.” Once the 10+2 rules were announced, his team got all the facts and listed the potential challenges. Ultimately, they came up with a list of practical tactics. A big one was developing strategic, longterm relationships with service providers instead of rate-hopping; this creates consistency in the supply chain. “If you have communication, transparency and partners you can trust…and you test everything as soon as you can, this isn’t really that big a deal,” said Mueller. MM&D
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Supply Chain Scan
Done Deals Vancouver, British Columbia-based Lions Gate Trailers and Mississauga, Ontario-based Provincial Trailer Rentals have finalized the purchase of certain assets of the Canadian branches of GE Canada Vehicle & Equipment Services. Lions Gate now operates the former GE Trailer Fleet Services facilities in Winnipeg under the Lions Gate brand and has started integrating the six other GE facilities into its existing network. Waterloo, Ontario-based Descartes Systems Group Inc has acquired Belgium-based Porthus. Porthus provides global trade management solutions. Aurora, Ontario-based Magna Seating, an operating group of Magna International, and Hollingsworth Logistics have formed a joint venture to supply Volkswagen Group of America with complete seat systems for a mid-size sedan to be built in Tennessee. Canadian Pacific Railway Limited (CP) has reached a one-year agreement with Teck Coal Ltd. CP will transport metallurgical coal from Teck’s mines in southeast British Columbia to Kamloops and Vancouver-area ports for export. Aircraft Spruce & Specialty Co has installed and activated 230-watt CS6P modules from Ontario-based Canadian Solar Inc at distribution warehouses in California and Georgia. The two solar electric systems can harvest approximately 332,264 kilowatt-hours per year at peak capacity.
Air Canada and Korea’s Asiana Airlines have signed a memorandum of understanding to create a strategic partnership. This follows an Open Skies agreement signed by Canada and Korea in 2009. Greene, New York-based Raymond Corporation has been named an independent distributor for the sale, rental and lease of Plug Power Inc’s GenDrive fuel cell units in North America. Raymond will also provide warranty and maintenance service on GenDrive products and serve as an authorized distributor of parts. Spacesaver Corp has acquired Compact Storage Systems (CSS). Both companies are based in Wisconsin. CSS manufactures heavy-duty carriage systems used to turn compact racking into high-density storage. The Children’s Place, a children’s clothing retailer, has named Damco its Customs broker for Canada and the US. Damco already manages the retailer’s purchase orders from global origins to its four distribution centres in Canada and the US. Atlanta, Georgia-based supply chain software solutions provider Logility Inc has acquired certain assets of privately held supply chain optimization systems supplier Optiant Inc of Boston, Massachusetts for US$3.3 million. TNT and Con-way Freight are launching a new joint US-to-Europe accelerated export service. It will provide day-definite, road/air/road service for heavier shipments.
Green
leaders The path to sustainable supply chains
In a struggling economy, making supply chains more environmentally sound isn’t as easy—or as clear a priority—as it once was. Deborah Aarts sits down with with six experts to find proven, cost-effective ways to go green.
Photography by Roger Yip
E
arlier this spring, with the recession still close in the rearview mirror, MM&D hosted a roundtable discussion to assess the state of sustainability initiatives in Canadian supply chains. At the table were six industry experts: Jack Ampuja, president of Supply Chain Optimizers; Bob Dineen, president and general manager of Dominion Warehousing & Distribution Services Ltd; Bob Edwards, vice-president and general Back row: Bob Dineen, John Scheel, Bob Edwards and Jack Ampuja. Front row: Barry Murphy and manager of Green Age Design; Barry Murphy, Donna O’Reilly. national sales manager at Wheels Group; Donna O’Reilly, vice-president of commercial financial services at RBC Royal Bank That’s why it’s important, when evaluating (which sponsored the event); and John Scheel, vice-president, supply chain suppliers or service providers, not to take at Grand & Toy. sustainability claims at face value. A recurring theme in the discussion was the importance of creating green “A mission statement is only a meaningless line solutions that are really effective—from both an environmental and cost on a piece of paper if it’s not part of company perspective—in today’s economic climate. As the panellists shared culture,” Dineen said. experiences and ideas, the following five best practices emerged. “Do companies actually live up to the mission that everyone externally—as well as internally—is 1. Learn to identify greenwashing looking at? Are they really doing the things they The roundtable agreed on one fact: it’s easy to talk the green talk. These say they are?” Ampuja asked. days, nearly every company has the word “sustainability” featured “The worst thing is for a company to say ‘we’re prominently in its corporate literature. With organizations of all shapes going to do something’ and then make zero and sizes broadcasting the same message, it’s tough to separate the legitimate progress. At that point, they’ve lost credibility leaders from the greenwashers that deliver no real improvements. entirely.”
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MM&D | April/May 2010
What is the best way to make sure your partners are living up to their promises? According to Ampuja, it’s all about the data. “Don’t just give me verbiage. Give me numbers,” he said. “I want to see actual reports and details on what you’re doing to prove that you’re green so that we can all line up together.” He acknowledged that relatively few companies currently have the capabilities to do this, adding that it will be easier to do as companies become more sophisticated in measuring the environmental footprints of their supply chains. “A lot of this type of measurement is immature at this point. We really don’t have good standards or good systems of doing it. But as the pressure builds and more people get on the bandwagon, we’re going to see those details flesh out and become much more real.” Edwards identified external validation as a good tool to distinguish credibly sustainable companies, pointing out that the option is gaining in popularity. “A good way to fight claims of greenwashing is to have some kind of third-party certification ready,” he said. Moreover, he added that all companies might soon be aiming towards a similar set of guidelines. “I believe there will be an international standard. Kyoto will drive it. It’s not too far down the road.” “It’ll be like the ISO registrations we were seeing 10 or 15 years ago,” added O’Reilly. There’s nothing wrong with holding partners to set environmental standards, but Scheel warned that taking a strict approach may mean sacrificing relationships with good business partners. “The problem with [environmental mandates] is that they really shrink the pool of people you can deal with,” he said. “If you look at it from a vendor compliance point of view, initially, large companies are going to be much faster to be able to jump on board. A lot of smaller vendors don’t have the capital and resources to play. So consequentially it’s almost anti-small business; by mandating [rigid sustainability targets], you might be squashing opportunity.” MM&D | April/May 2010
2. Lead—don’t follow—governments Many in the supply chain industry have delayed going green until the federal government implements a comprehensive set of regulations. Such rules—whether related to carbon caps, clean engines, waste production or any other environmental metric—would “definitely be drivers of change,” Murphy said. While this prospect makes some uneasy, Ampuja said there is plenty of opportunity for shippers to take an active role in shaping policy. “Governments don’t lead the public. They respond to the public,” he said. “So the onus is on business. If the public gets the feeling that business isn’t doing enough on green and sustainability, there will be a clamour, and the government will step in to help. If the public gets the impression that business is really out front doing things, there won’t be that kind of clamouring. So as businesspeople you’ve not only got to be doing something, you also must be broadcasting that information.” Edwards chimed in to point out that the government can be an ally in building sustainable supply chains. “Yes, government is regulatory, but it is also very supportive towards research and development,” he said. “Whatever efficiency you’re going for, you can go to them under the various programs that are out there and find dollars to put toward your test or your model.” 3. Get your service providers on board The group went on to discuss whether shippers or service providers should bear responsibility for bringing sustainability initiatives to the table. Some in the group said that carriers and 3PLs tend to be reactive, arguing that most would not be moving towards sustainability if shippers weren’t pressuring them. For these companies, going green is more a market-driven competitive differentiator than it is an act of altruism. “If I don’t lead the customer to the solution and someone else does, I’ve lost that customer forever,” said Dineen. “If I lead him to the solutions, even if I have to take a short-term hit on it, it’s ultimately the right thing to do and the customer will stand by me.” Ampuja pointed out that shippers interested in end-to-end sustainability have an obligation to ensure their partners are on the same page. “What everyone is starting to realize now is how interconnected the supply chain is,” he said. “If I’m going to be green, I have to know my supplier is green. If my supplier is doing things that hurt my green efforts, then I’m in a vulnerable position.” That may work well conceptually. But when it comes to implementation, Scheel backed a different approach. At Grand & Toy, he has often turned to 3PLs to take the lead in implementing green measures. Larger service providers have the wherewithal to invest in sustainability-related research and development, he said; they are the ones who know how to do things like maintain hybrid trucks or incorporate energy-efficient distribution centre technology. “They can come up with something a lot better than what I’d ever be able to drum up,” he said. In fact, sustainability has become a cornerstone of the company’s service provider evaluation process. “We have a corporate sustainability report prepared for us, and every carrier or vendor we buy from has to meet that measured standard…It’s a matter of us asking ‘how clearly can you tell us what you’re doing for us?’”
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As a service provider, Murphy has noted many customers taking a similar tack. “We’re finding more and more people interested in what we can do in terms of optimization of their networks and their supply chains,” he said. “At the same time, we’re also looking to talk to them more about converting their truckload business to intermodal rail or boxcar.” This approach is win-win, he said, as it forces everyone to up the ante. Thanks in large part to such back-and-forth consultation with customers, Wheels Group was able to move 192,000 tonnes of freight by rail in the US last year. In doing so, it generated 19,483 tonnes of carbon—a 58 percent reduction from the 46,133 tonnes that would have been generated by truck.
what used to take 16. That saves money for the operation and conserves a tremendous amount of energy. It’s just one example of a bottom-linemotivated project that is also helping the environment. And it wouldn’t have been possible 4. Change the status quo without challenging the status quo. Scheel brought up an example of one operational change that has proven very successful in reducing Grand & Toy’s carbon footprint. The company 5. Evaluate yourself had long offered customers next-day delivery as its standard service option. Scheel’s example fits with another best practice A relic of the days when sustainability was a fringe concern—if it was on to emerge from the roundtable. Ultimately, the the corporate radar at all—rush delivery was considered a cornerstone of group found that the best way to facilitate the business. meaningful environmental improvements is not When the company started to brainstorm ways to cut costs while implementing state-of-the-art technology or improving its environmental performance, someone tabled the idea of giving adopting rigid corporate mandates, helpful customers the option to defer delivery. Even though the next-day guarantee though they may be. Rather, it is the decidedly was core to the business, the team figured it couldn’t hurt to ask. budget-friendly practice of taking a critical eye “We actually went out to the marketplace and asked our customer base to what’s already taking place. ‘does next-day delivery really matter?’ Almost immediately, 75 percent of “My experience is that without any capital our customers said ‘it doesn’t matter to us. We’re more than willing to take expenditure you can affect an energy budget by delivery in 48 or 78 hours,’” Scheel explained. “After all, it’s office products… at least 25 percent by putting more effort into the We’re not delivering vital organs. existing infrastructure,” said Edwards. “You just “I think there is value in getting the whole industry to change the [next-day have to work harder. You have to measure it and delivery] paradigm. I think we’re working on something that was cool in the monitor it and know what you’re actually doing 1970s or 1980s. The world has changed.” in your systems. With such overwhelming support, Grand & Toy has started extending its “If you put all the pieces together, plus delivery windows, and the benefits have been huge. Over-the-road trips are conservation, plus managing your systems the fewer and far more efficiently loaded, which has played a major role in way they’re supposed to be managed, you can get reducing emissions. The change is also paying off operationally. those overall rates of return for the project.” “From a supply chain perspective, you can imagine what the ability to “I think a lot of good has come out of the lag your product by an extra 24 hours means. It gives you the opportunity recession, because it’s forced a lot of businesses to do things like consolidate loads and pick in batches. There’s a whole to evaluate everything,” O’Reilly added. “Two bunch of things that or three years ago they wouldn’t necessarily make it a lot more have been looking at where they could improve Want more? dynamic,” Scheel said. operational efficiencies to become more More in-depth coverage of our The change played environmentally sustainable.” sustainability roundtable can be a role in reducing the Ampuja elaborated on her point. found in a special feature section on number of Grand & “The supply chain is a big creator of carbon. So our website. There, you’ll find four Toy warehouses from how do you reduce it? You try to manage the companion reports: seven to three. And supply chain better,” he said. “There is a whole • Is sustainability still top-of-mind? those facilities are far bunch of things that almost any company can do • “Selling” supply chain sustainability more efficient; thanks that are common sense. Take a closer look at load • The SME factor to the company’s utilization or the number of miles that are run • Get greening! decision to consolidate that you don’t need. You don’t need a lot of fancy Visit: http://tinyurl.com/yye3y47 volumes, workers can software or outside help to get started. You just now pick in eight hours need common sense.” MM&D
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MM&D | April/May 2010
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New electronic trade documents solution helps to cut costs and speed cross-border shipments
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lmost half of Canada’s annual gross domestic product crosses an international border1, which can create major bottlenecks for business in this post-9/11 era of heightened scrutiny. But with the recent launch of a new electronic customs documents system, FedEx is helping Canadian businesses save time and money with their shipments moving around the globe. Using the new FedEx® Electronic Trade Documents (ETD) solution, international shippers can simplify and speed up their customs documents process, buying precious time and reducing the likelihood of delays at the border. The digital system also helps reduce the need for voluminous paper documents, saving money on printer and energy costs as well as trees. Perhaps best of all, FedEx offers it free to its shippers. “A critical part of the FedEx value proposition is focused on making international trade easy and more efficient because it is so essential to Canadian businesses and the Canadian economy,” said Lisa Lisson, vice-president of Marketing and Customer Experience for FedEx Express Canada. “The next step is for Canadian businesses to look to foreign markets beyond the United States, and our ETD system can help companies expedite their shipments to scores of markets around the world.” In a globalized economy, foreign trade is responsible for about 45 per cent of Canada’s GDP, but almost 80 per cent of that trade is with the United States.2 When the U.S. economy slows down, Canadian companies can feel the impact. “Canada’s businesses need to embrace global market diversification,” said Mrs. Lisson. “We need to break out of our comfort zone and look to the international markets where the real growth is or risk being left behind while the rest of the world globalizes. At FedEx, we’re positioned to help. With service to more than 220 countries and territories worldAccording to “Canada GDP Growth Rate” data published by TradingEconomics http://www.tradingeconomics.com According to “Canada Balance of Trade” data published by TradingEconomics http://www.tradingeconomics.com
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wide, we have customs specialists who can help international shippers navigate the requirements of different countries, and now with ETD we have a technology to help speed up and simplify the customs documents process.” ETD is unique in the world of international customs clearance. It gives FedEx customers the ability to upload their own customs documents, including commercial invoices and NAFTA certificates – or use FedExgenerated customs documents – before their shipments are picked-up. The electronic documents replace the multiple paper copies that would otherwise have to be attached to the shipment. They also help avoid potential mistakes from illegible handwriting. The electronic customs documentation is submitted and often cleared well before the shipments actually reach the border. ETD provides the benefits of pre-clearance assistance and proactive problem resolution, reducing the possibility of clearance delays. FedEx brokers contact shippers proactively if additional information is required. If a shipper doesn’t use a FedEx customs broker their documents can still be submitted electronically and
they can still use their own broker. ETD is available to all FedEx international shippers shipping to designated countries. The greater a company’s international shipping volume, the larger the efficiencies that can be realized, enabling Canadian businesses to focus on what drives their business and spend less time on shipping processes. “One of the most important contributions FedEx can make to Canadian companies is to help them participate in the global economy,” said Mrs. Lisson. “With ETD we’re doing that – delivering peace of mind to our customers with shipments almost anywhere in the world. International shipping just got even easier with FedEx.”
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Payload payoff
The benefits of a phased-in shipment consolidation program
When Unilever partnered with Schenker and Nulogy to improve its shipping processes, it knew the savings would not be immediate. Now, with the second phase of the program in full swing, the economic and environmental rewards are rolling in. Deborah Aarts gives an update.
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ometimes it pays to be patient. In November 2007, MM&D profiled phase one of a distribution improvement project being conducted jointly by shipper Unilever Canada Inc, third-party logistics provider Schenker of Canada Limited and software vendor Nulogy. Phase one of the project involved an overhaul of the back-end processes used to plan outbound loads from two distribution centres in the greater Toronto area. By replacing a deluge of phone calls, emails and spreadsheets with new software (Nulogy’s LiveLoader program), the three parties created a new system that better prepared Unilever’s complex shipments within the DC. As helpful as phase one was, it was never expected to generate much of a return. Rather, it was meant to lay the groundwork for a second phase—optimizing the load-building process— that promised to create significant cost savings and environmental benefits. Starting phase two In the past, Unilever shipped outbound deliveries from its DCs in frequent intervals using less-thantruckload (LTL) services. The goal of phase two was to come up with ways to put the same number of shipments into full truckloads. Shortly after phase one wrapped up in early 2008, Nulogy set to work preparing LiveLoader to handle the next step. The team configured the software to give Schenker warehouse staff direction on which loading configurations could fit the most pounds in the fewest trailers. Once a trailer was completely full, the driver could proceed directly to the destination hub city, where pallets could be deconsolidated for local deliveries. No need to cross-dock and consolidate LTL shipments at the carrier’s Toronto depot. Initially, some carriers resisted the idea. But once the Unilever team was able to convey the potential advantages, most got on board. “While Nulogy was looking at the algorithms, we were negotiating with carriers. We were looking to change the way we paid our freight dollars,” recalls Unilever’s manager of transportation MM&D | April/May 2010
services, Ginnie Venslovaitis, who recently left the company. “We told our carriers ‘we’re going to load your trailers to the max. You’re going to get the same shipments, but you’re going to load them differently… It’s going to be on my head to fill the trailer completely, because I don’t want to pay for empty space. And since you’re not going to have to cross-dock it at the front end, you won’t have to touch it twice, so you’re going to have savings.’” Phase two went live in November 2008 with shipments from its Toronto food DC to Vancouver—Unilever’s most expensive lane. Shipments to Calgary followed in January 2009. So how does the new load-building process actually work? Linked to Unilever’s demand information and Schenker’s WMS, the LiveLoader system flags enough pallets to fill a full truckload and factors in weight, cube size, stackability and other factors to map out the best configurations. Since all pallets in a trailer are labelled and destined for the same place, there are few restrictions about which pallets go where. As Kevin Wong, Nulogy’s chief operating officer, explains, LiveLoader creates a plan of what is possible and then hands it off to the loading-dock staff. “We achieve consolidation in the plan, but then we let people use their 10 or 15 years of experience to make it work in the trailer…The LiveLoader says they can do it, so it becomes a challenge to make it fit,” he says. To accommodate the consolidated loads, Unilever’s carriers had to make some equipment modifications. Since many of the company’s pallets are mixed, they can’t always be stacked atop one another, so many of the carriers installed load bars to handle the second layer. This in turn forced Schenker to switch its dock equipment, as the forklifts in use were too tall to use with the load bars. The payoff Despite all the work involved in making it happen, Venslovaitis says all partners—including carriers—have embraced the second phase of the project as a means to boost efficiency. But it is Unilever that is seeing the biggest improvement. In 2009, with just the Vancouver and Calgary lanes on board, Unilever shaved $120,000 off its transportation spend. The figure will be smaller this year; the company sold its laundry division, so overall shipment volumes will be down. Even still, Venslovaitis pegs the savings at between $80,000 and $100,000. Aside from cutting costs, the change is also improving Unilever’s environmental footprint. If the savings weren’t there, Venslovaitis says, it’s unlikely the company would have embraced the consolidated approach. “To be honest, it would have been a struggle if I had to spend $120,000 more to ship 10 fewer trucks,” she says. “But because I’m saving $120,000 while pulling trucks off the road, it’s awesome.” In Wong’s view, much of the success came from taking a phased approach to implementation. “We learned a lot by rolling out phase one, reflecting a bit and then starting with phase two,” he says. “Phase one was a teaser. Now, we’re getting things out of it. The benefits are happening.” MM&D
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Is express shipping dead? In the post-recession world, couriers continue to evolve
When it comes down to cutting transportation costs, many shippers are finding that speed doesn’t matter as much as it once did. Gary Breininger explains how courier companies are adjusting to new expectations.
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ith annual revenues in excess of $5.8 billion in 2009, there is no question that the courier industry represents an important component of the overall Canadian transportation and logistics industry. Since the sector evolved in the early 1970s, the importance of speed of delivery has been one of its most hotly debated issues. A big part of the reason the courier industry came into existence was the ability of early pioneers like Federal Express and Purolator (here in Canada) to deliver important documents and packages faster and more reliably than postal services. In this sense, the entire industry was founded on the concept of speed; the faster a shipment moved, the better. For proof, simply look at industry growth rates during the 1970s and 1980s, when it was not uncommon to see express service volumes increase at two to three times the rate of non-express—mostly ground—services.
“Despite the economic challenges of the past year, express services continue to be used by sectors that depend on delivery speed as either a requirement of doing business, or a source of competitive advantage,” says Brie Carere, director of marketing and corporate communications at Federal Express Canada (FedEx). “Examples include the pharmaceutical sector where products have a limited shelf life and the fashion industry where trends are always changing and getting goods to market as quickly as possible is key.” Rick Barnes, executive vice-president for Dicom Express, also believes that the need for speed remains. In fact, in 2009 his company introduced a new national overnight service as a direct result of market demand. “With stringent controls on inventory volumes in many industries we still see a need for an overnight air product,” he says.
The need for speed today In the wake of the recession of the past two years, the relevance of express deliveries and other expedited forms of transportation has been called into question. Faced with the harshest economic climate since the 1930s, logistics service buyers everywhere have been forced to ask themselves whether speed of delivery is really that important, and if so, how they can address this need while still effectively managing costs. But express shipping is not disappearing. Even during the darkest days of 2009, there was a What exactly is express service, anyway? substantial market in Canada. Express service within Canada and the US is typically defined as According to our latest estimates, annual express shipments that are delivered on the same day they are picked up, service revenues for Canadian courier companies in or the next day before noon. 2009 were just over $2.8 billion. That equates to 210 In other countries, however, express shipments are classified as million pieces over the course of the year (or 834,300 the fastest available delivery option without using a direct flight, pieces per day). This is a huge number of deliveries. which in most cases means from two to seven days (depending In this sense it is clear logistics buyers still have a on the country of destination). very large need for express courier services.
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MM&D | April/May 2010
Demand dropping The effect on service providers While it may be true that there is a substantial express shipping market in What does this overall decline in the use of express Canada, it is equally true that the use of express services has been declining services mean for the courier companies? in relation to non-express or deferred delivery options. The shift away from express services has As the chart on this page indicates, between 2000 and 2008, the obviously meant less revenue in this specific line percentage of total express shipments declined by three percent—from 25.6 of business. “There has been a lot competitive percent of Canada-origin courier volume to 22.6 percent. In 2009, the pressure for business in recent years as the size of percentage declined at an even more accelerated rate to 21.7 percent. the express shipping pie has become a bit smaller,” According to Rod Hart, senior vice-president of the parcels division at confirms Ben Robinson, director of sales for TNT Canada Post, “there is no question that the economic climate of 2009 caused Express Canada. many companies to trade speed for cost [savings].” He adds that customers still using express are Andrew Williams, vice-president, commercial at DHL Express Canada, doing so much more carefully. “We have also seen shares his perspective to the point. “We view the accelerated decline [in an upward trend in overall [express] shipment 2009] to be largely the result of poor global economic conditions and weights, which is driven by more customers associated trading levels between countries. As such, we expect at least some consolidating their movements.” of the lost business to return once things improve. When viewed on a strategic level, however, the “The other thing to bear in mind when talking about de-speeding is that shift away from express services has had a the trend is most pronounced within North America, where viable ground relatively insignificant effect on courier companies. service options exist,” he adds. He says that for true offshore international This is because most of these companies are now shipments, the options within the courier sector are more limited. offering a broad array of overall supply chain These comments shed light on slackened demand caused by the recession, but they don’t explain why the use of express services Express shipments: Share of total Canada-origin courier volume has been on a declining trend since 2000. 26 One reason might be the cost of oil. Increases in the cost of jet fuel have generated extremely high fuel surcharges in recent 25 25.6% years, putting pressure on logistics buyers to carefully monitor their 24 use of express services. For example, as recently as 2008 23 fuel surcharges on international express shipments were as high as 22 22.6% 28.5 percent. 21.7% Howard Ipp, president of United Messengers, a Toronto, Ontario- 21 based same-day messenger firm, suggests another reason express 20 has been declining. “The trend [of declining express business] really started in the mid- to late-1990s with the growing use of email and 19 2000 2008 2009 electronic documents. Because a great deal—50 to 60 percent or Source: Breininger & Associates Overnight or Later Delivery Market Size more at one time—of courier business traditionally involved the Report, December 2009. delivery of urgent letters and documents, the impact has been substantial.” service offerings; the express option is only one While both of these issues have clearly had an impact on the use of of several shippers can now choose from. express services, there is a deeper root cause that has been evolving for some For many years now courier companies of all time. “For almost a decade now there has been an increasing shift among types and sizes have been expanding their services customers towards the concept of improved total supply chain management, to include a wide range of fully integrated and within this context, there’s a natural evolution towards greater distribution and logistics services that go beyond planning and predictability,” says Cristina Falcone, manager of marketing traditional small package deliveries. Appropriately, communications and public relations at UPS Canada. “This means fewer most investments made by these firms in last-minute shipments, which was often when express services were used.” service offerings and capabilities have been Even though express shipments are Dicom’s core, Barnes says his firm directed toward non-express offerings. For will work with companies opting to design supply chains with extended example, Dicom, FedEx, Purolator and UPS all lead times. “What’s most important is consistency in making sure the now have ground/LTL freight divisions. delivery is made at the time specified, whether it be the next day before Several courier companies today also have noon or in three days.” divisions dedicated specifically to supply chain MM&D | April/May 2010
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management. “Different divisions within a [courier] company are able to The trend towards more collaborative shipper/ work together effectively to bring their customers seamless, easy-to-use courier relationships also holds promise for cost and fully integrated solutions,” comments Canada Post’s Hart. savings. Couriers have also invested in expanding the list of countries served via But in order for these types of arrangements deferred air services. to work, shippers must abandon the common For example, in March FedEx added 13 new countries to its list of economy suspicion that the carrier is always looking to freight service locations available from Canada. TNT has been investing charge the highest rates possible. heavily in road networks throughout the world, particularly in developing “[We work] with customers to find the most countries. efficient way to move their goods, not just to sell The need to offer customers more than just speed was a major driver our most expensive express offerings,” says UPS’s behind DHL Express’s massive service portfolio overhaul in 2008. “We Falcone. recognized that our success going forward would be based on the ability to offer Courier company tariff pricing analysis customers a wide range of time-of-day, and day-of-delivery options,” says DHL’s Express Deferred air Ground Williams, adding that the company now % savings % savings Cost Cost vs express Cost vs express provides customers 11 different levels of core service. Toronto to Vancouver $40.20 $35.70 -11.2% $20.08 -50.1% FedEx’s Carere adds that the onus is Toronto to Houston $91.00 $68.40 -24.8% $21.70 -76.2% now on providing customers with as many choices as possible to find the right Toronto to London (UK) $159.06 $113.90 -28.4% N/A N/A delivery option, “whether the service being used is priority overnight or Above based on an average of DHL, FedEx, Purolator and UPS 2010 prices for a five-pound, single-package shipment. ground.” In short, many courier companies have applied the basic investment concept of diversification, which is clearly No price wars working well in terms of mitigating the risks they would otherwise face as What logisticians shouldn’t count on is to see the market reduces its reliance on express offerings. couriers scrambling for express business by engaging in excessive price wars. There are What it means for shippers substantial fi xed costs associated with operating With so many choices available, the migration away from express-only a reliable express delivery network, regardless of shipping is excellent news for those responsible for purchasing and using volume levels. It’s in everyone’s best interests to courier services—especially if they’re willing to build extra time into their ensure market price levels remain viable. supply chains. Although the market share of express services At the heart of the matter is basic economics. As the chart on this page in the courier sector is declining, there is no illustrates, by using a deferred air service instead of express—and question there is still a need for speed. The key to sacrificing one day in delivery speed—there’s an opportunity to save 11.2 success in the post-recession business landscape percent of the cost of a shipment from Toronto to Vancouver. If that same is knowing when and how to best use the various shipment is sent by ground, the savings increase to 50.1 percent. service options available as part of an overall The savings increase further when shipping to destinations located supply chain strategy for your business. outside of Canada. With the right collaboration and planning, you “There is no question one of the primary benefits to customers doing a can work with couriers to deliver to the right markets better job of managing their use of express services is cost savings,” says at the right time—and at the right price. MM&D Michael Dean Jr, general manager of Geo-Express International. “Our focus on deferred delivery options within the parcels division has Gary Breininger is president of Breininger & proven to be quite successful over the past several years as businesses in Associates Inc, a strategic business advisory and Canada have looked for ways to reduce their shipping costs while still marketing services firm specializing in the maintaining high levels of service reliability,” says Canada Post’s Hart. transportation and logistics sector. Contact him What this trend really demonstrates is the importance of limiting the at gbreininger@breiningerassociates.com or at use of express services to when it’s truly necessary. 416-819-2638.
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MM&D | April/May 2010
A smart step
The ROI of supply chain education
Supply chain managers went from sourcing goods from suppliers that weren’t far away to outsourcing them from countries that were. Supply chains became “much more complex processes where you needed to consider freight rates, currency exchanges, integrated containerization,” says Middleton. “All these became elements [to consider] as soon as we stepped outside our immediate environment to source the product and get it to the customer.” Companies like Walmart have had a big influence. The retailer—and other major players like it—has required suppliers to integrate into its sophisticated supply chain system. The result has been that everyone, whether a competitor or not, has looked at their supply chain and reassessed how they manage it. For supply chain professionals the shifts have meant huge changes in how they do their jobs; there’s an increased need to stay current. Kevin Maynard, executive director of the Canadian Supply Chain Sector Council (CSCSC), says in order to keep up with changing supply chains and advances in technology, industry professionals must “constantly be going in and out of the learning system.”
What to take, what to pay To address this demand, associations and educational institutions across Canada offer programs designed to equip veteran and rookie supply chain professionals with the skills and designations they need. t’s long been known that you don’t have to be looking for a new job or in There are options available for employees at line for a promotion to brush up your supply chain skills. Upgrading for different career stages and with unique knowledge any reason has always been a good way to keep you sharp and up-to-date. gaps. Maynard says programs in Canada range Today, however, professional development is more important than ever. from how to operate one specific piece of materials There are several reasons for this. One is that the population hasn’t stopped handling equipment to an MBA or professional aging; as the baby boomer generation retires, a vast pool of intellectual capital designation. and experience is going with them. As a result, there’s been a shortage of qualiThe sheer volume and variety of programs fied supply chain staff, even at the lowest point of the economic downturn. creates many questions for practitioners and their Another reason is that in the last few years, workplaces have been and employers, who are often asked to foot the bill. will continue to be in a state of change—and supply chain has been one of The most common questions surround how much the most affected areas. The pressure on employees to be creative and do the program will cost and what kind of returns things faster and more efficiently has intensified. It’s essential to keep up. the student and employer should expect. It all comes down to the value the skills A changing business training or designation brings to the workplace. Supply chain has changed dramatically in the last two decades. It’s gone Bob Dye, president of the Purchasing Management from a tactical occupation to one that requires strategy, planning and Association of Canada (PMAC), says ongoing managing, according to Alan Middleton. education is a “value proposition”—you can’t put Middleton is the executive director of the Schulich Executive Education a price on it as a percentage of salary. Employers Centre at the Schulich School of Business in Toronto, Ontario. He explains footing the bill need to instead assess the value that the supply chain management field experienced a fundamental shift they will get back from the individual when he when industries realized they could produce goods more cheaply in or she has an “enhanced package of knowledge countries such as India and China. [and] skill sets.” If you’re looking for success in the profession, training is much more critical today than it has been in the past. What types of returns can you expect for your time and money? Deanna Rosolen reports.
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MM&D | April/May 2010
The high-level view More graduate education would elevate the supply chain industry’s profile in Canada, expert says Supply chain education and skills training can have broader benefits than employee satisfaction and corporate profitability. It can help advance the industry in Canada as a whole. Peter Wallis, president and CEO of The Van Horne Institute in Calgary, says that as important as it is to have employees with professional designations and training, it would also be beneficial to encourage more students to research and study the industry at the graduate level. Wallis says this would add more original and innovative Canadian research to the field. And it would also allow students to come through the ranks and teach the skills to a new generation of industry experts. “We need to replenish the ranks of those practitioners in the universities who are retiring,” says Wallis. “And we need to ensure that what I call made-in-Canada supply chain and logistics continues to grow.”
When the student is paying, the appropriate amount to invest “really depends on what [they] expect to get out of their career and how much they’re willing to put in,” says Catherine Viglas, president of the Canadian Institute of Traffic and Transportation (CITT). If you ask Middleton, students should expect to pay “whatever it takes.” In this environment of constant change, the ability to keep pace and stay on top of the most recent developments should be a top investment priority. How employees benefit Individuals looking to enrol in a program may find it tricky to quantify a direct financial return on investment. More often than not, however, freshly trained employees can expect to increase their earning power—especially if the program comes with accreditation. “Over the life of a career an individual with a designation will have earning power in the order of three to four times what an individual who chose not to pursue a professional designation would have,” says Dye. Employees with a new designation and/or up-to-date skills are also better equipped to perform—and excel in—their current jobs. Viglas says those undergoing education should expect to move up the ladder within their organization. If that’s not possible, she says they should look externally to find advanced career opportunities. Of course, a designation or training can really MM&D | April/May 2010
punch up a resume. This helps with job-hunting, but it also affects how seriously employees are taken within their own organizations. With a designation (or other training), Maynard says employees become much more marketable internally. Resilient and dynamic organizations often go through changes internally or merge with other companies. Training helps employees remain of value to their current employer and attractive to a new one. Training programs also allow employees to network. It’s well known that networking is critical for job-hunters. But developing a network of supply chain professionals is also valuable in day-to-day business, says Middleton. Education programs allow you to meet industry leaders, he says, and create opportunities to keep in touch using tools like online alumni groups. If you run into a problem, someone in your new network—a peer you took a course with, for example, or a teacher with experience in the area—might have a solution.
How employers benefit For employers, it’s again difficult to translate the benefits of employee education into concrete figures. But education-friendly companies should expect to see greater contributions to the strategic competitiveness of the organization, says Dye. Employees with a designation or training will “have a greater capability to provide business advice and make a contribution to decision-making. Those who do not acquire enhanced knowledge and skill sets…would be what we describe as individuals who are providers of information, not providers of business advice.” Maynard adds that educated employees will increase productivity. “It’s a very simple correlation.” Because of this, employers should expect to have a better-run supply chain, which translates into larger profits. There’s another reason employers might want to consider supporting an employee’s educational pursuits. If the organization is paying for training or a designation, Middleton says it often proves to be an effective retention device. The employee will feel valued, and the employer will make extra efforts to keep the current and valuable intellectual capital of their staff from going to the competition. Employers are realizing it’s far more costly to replace employees than it is to upgrade and train them, says Maynard. In fact, in the last three months, the CSCSC’s monthly human resource trends analyses have shown a dramatic increase in the desire among employers to invest in the education and training of their people. Training also benefits organizations today because companies no longer see value in relying on a few senior people to control the supply chain strategy. “By having a broader group of better-educated employees, ideas for improvement can come from a much greater number of sources, to the bottom-line benefit of the organization,” says Middleton. The lesson is clear. In the post-recession era, it’s worth challenging locked-down budgets and making a business case for professional development. Doing so can yield significant benefits for both your own career and the profitability of your company. MM&D
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Conveyor Showcase
Conveyors move along
Modern technology meets classic design
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onveyor systems have been around since the 17th century—even longer if you take into account suggestions that the ancient Egyptians used them. The roller conveyor was first patented in 1908, but it wasn’t until the conveyor system was introduced to the automotive industry that it finally hit its stride. Since then, conveyor systems have experienced several tweaks and incarnations—including the addition of belts—and have become widespread in manufacturing and warehouse/distribution applications where quick handling of goods is critical. Today’s offerings have more speed, flexibility, safety features and control then their predecessors. Here’s a rundown of some recent innovations.
Integrated control According to manufacturer Dematic Corp, the FlexSort integrated sortation sub-system controls automated package diverting functions as if they belong to a unified machine. FlexSort controls the entire process, including pre-merge, merge, transport conveyor-fed gapping, linear sortation and take-away conveyors. The system offers variable speed control, and will automatically adjust its speed in increments as required. The system doesn’t work with roller conveyors, which Dematic says can compromise package control. Instead, it makes extensive use of belts in monitoring, routing and controlling packages throughout the system. Pop goes the conveyor TKF Inc provides a light-duty pop-up transfer conveyor that can handle loads of up to 250 pounds. The unit uses compact motorized roller-driven strands, eliminating noisy chain drives. The conveyor lifts items vertically above the bed of the feeding conveyor, then conveys them 90 degrees to an adjoining or adjacent conveyor. The company says it’s simple to maintain because there are no vertical guides or cam ramps used in positioning. In addition, it is constructed without slides or bearings. The transfer conveyor is available with urethane V-belt, urethane o-ring or chain strands. The number of strands and stroke height can be customized to suit particular applications. Mobile loader For shippers loading and unloading loose cargo into delivery vehicles there’s the BeltTrack Mobile Loader Conveyor from Caljan Rite-Hite. The powered conveyor is meant for smaller delivery vehicles at grade-level doors, including vans and larger box vehicles.
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The BeltTrack’s operation is designed to be simple. The belt direction can be changed at the push of a button, as can the elevated belt height. The angle of the elevated belt can also be manually adjusted using a hydraulic piston. The BeltTrack is fully mobile and can be easily stored. High capacity, high accuracy The Crisplant loop sorters from Intelligrated are meant for use in applications with high-speed, high-capacity, high-accuracy product flow. The sorters combine high-capacity unit sortation with smooth operation and scalable footprints to work in a wide range of warehouse, parcel, postal, distribution and fulfillment configurations. They are built around energyefficient linear synchronous motors, variable speed drives and smart machine controls. Motor-driven productivity Hytrol Conveyor Co recently launched the E24 Timing Belt Transfer, the latest addition to its family of 24-volt motor-driven roller conveyors. The company says the Timing Belt Transfer stands out because of its E24-powered timing belt strands and pneumatic lift. The neoprene timing belts are coated with urethane to ensure positive grip when transferring product. And the drive sheaves come standard with ABEC-1 bearings, contributing to longer transfer life.
The modular design of the Timing Belt Transfer allows for simple system configurations. It can bolt into three-inch roller centres quickly. According to Hytrol, these factors increase productivity by enhancing throughput; even in demanding applications, the Timing Belt Transfer can sort up to 40 cartons per minute. MM&D MM&D | April/May 2010
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Materials Handling | Dave Luton
Inspection protection
How to prepare for fire, safety and insurance checkups
F
acility inspections are no laughing matter. Just the mention of a visit from the local fire department, the provincial ministry of labour or an insurer is enough to send chills down many warehouse managers’ spines. As is true in most situations, prevention is the best way to avoid trouble. By understanding the rationale behind common inspections and preparing for them, you increase your likelihood of compliance.
Insurance inspections Though it is related to both fire and safety, an insurance inspection has a slightly different focus. These inspections are often announced well in advance. The insurer tends to be more concerned with minimizing its risk of loss than with penalizing non-compliance. In the case of a third-party logistics site with several customers, insurer inspections are frequent because, in addition to the owner’s insurance for the structure, each client is responsible for contents insurance. The landlord’s insurer will be inspecting any possible areas of risk within the facility, including the fire prevention system and the quality of the structure. The inspector will also check if the tenants pose an unusual risk to the building. The tenant’s insurer is worried about the contents of the leased space and risks related to the tenant’s occupancy. The inspector is also worried about risks related to theft and liabilities not covered by the landlord’s insurance. For some things—like fire risk—both landlord and tenant insurers take interest.
Fire inspections A fire department inspection includes three general components: an onsite inspection, a review of record-keeping and a question period. From this process the inspector will create a report noting any issues to be rectified. The list can range from minor violations to major offenses. In extreme cases, the inspection can lead to the shutdown of a facility. Most large distribution centres have a sprinkler system. By law, it must be inspected annually. The sprinkler inspector will make sure the system is functioning according to appropriate fire code standards, conduct tests of alarms and circuits, identify site conditions that might impede the system’s performance and do a visual inspection to find any problems. The inspector then issues a detailed report to the building owner or manager. You should read this report as soon as you receive it and fix any shortcomings as soon as you can. Don’t just file it away and forget about it. You should also send the report to your local fire prevention officer and your insurer’s engineering or loss prevention representative. Keep a copy of this report in an easily accessible place. When a fire department comes for an inspection, it is usually unannounced, and having sprinkler information close at hand will keep you from scrambling. It shows The final word that you are compliant and sets the tone that you take the matter seriously. In all cases—fire, safety and insurance—the most effective way to prepare for an inspection is to Safety inspections simply run a clean, safe facility. Proper design Another common warehouse inspection is a ministry of labour review of and safe operation, including preventive occupational health and safety standards. Officials may choose to inspect maintenance of both facilities and equipment, are a facility for several reasons. the distribution manager’s best defense. The first is a routine inspection to make sure everything is in order. By augmenting this with your own inspections During some of these inspections, officials may opt to look at a specific area you can address many of the potential concerns of the building—machinery guarding, for example—in close detail. that would be found by an outside party. Pretend The second reason is to address a specific incident. If an employee you are an inspector and take a walk through the complains or refuses work due to unsafe working conditions, authorities building from time to time. You might be are likely to come knocking. If there is a critical injury or death on site, you surprised at what you find. can count on at least one inspection. And remember, requirements change over time. A third reason is if your firm is known to have a poor safety record. When your facility does undergo an inspection, Finally, authorities are prone to blitzes, in which they target specific it’s a good idea to have a coffee with the inspector sectors or types of equipment. For example, Ontario authorities recently to ask about changing standards and evolving loss conducted a safety blitz on forklifts. Officials canvassed the province and prevention tools and techniques. MM&D inspected everything from operator knowledge (did the driver know how to read a capacity plate?) to vehicle conditions (are the tires in good shape?) Dave Luton (dluton@cogeco.ca) is a consultant in to workplace hazards and the overall operating environment. the greater Toronto area. MM&D | April/May 2010
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Legal Link | Marvin Huberman
Good deal gone bad
Is it worth suing when a provider breaks a promise?
T
he following story is based on real events between a real shipper and a real fourth-party logistics provider (4PL). The shipper sought to outsource its logistics activities to a 4PL. The company wanted to share risk, increase flexibility, improve profitability and (most importantly) focus on its core business. So it hired a 4PL to manage all the third-party logistics providers (3PLs), carriers, forwarders, warehouse managers, Customs brokers and other providers in its global supply chain. In its contract, the 4PL promised to manage contracts with multiple service providers, provide distinct services above and beyond those of a 3PL and add value on the technology side. What’s more, it promised to do so in a cost-effective way. The ink was barely dry on the contract before the 4PL started to violate it. It insisted on using its own in-house 3PL services instead of retaining an external service provider better in tune with the shipper’s needs. By pushing business back into its parent company and affiliated corporations, it not only failed to maintain an arm’s-length relationship with providers—it was also falling short of its cost and service promises. The shipper’s costs increased, and many of its shipments were compromised. When the shipper complained, the 4PL was unremorseful and hostile. The 4PL maintained it did nothing wrong and owed the shipper nothing. It was not willing to negotiate, mediate or arbitrate the dispute with the shipper. Once the shock wore off and a sense of betrayal set in, the shipper became angry and decided to wage a legal battle with the 4PL.
the 4PL to pay damages known as equitable compensation. In addition, the judge held the 4PL concurrently liable to the shipper for the tort of negligent misrepresentation and ordered that the shipper be put back in the position occupied before the negligent misstatements of the 4PL. The judge found that the shipper took all reasonable steps to mitigate its losses in the circumstances; the 4PL could not prove otherwise. The court concluded that the shipper suffered direct and consequential economic damages, and that the 4PL was responsible. The 4PL launched an appeal and is currently awaiting a decision. Because of this, the shipper is still waiting to collect on the trial judgment.
Ask before you act It’s a frustrating story, one that most of us can relate to—some more than others. What should you do if a similar situation happens to you? Before you rush to the courthouse (like the aforementioned shipper), you should take stock of—and prioritize—your needs, interests and objectives. Ask yourself about your options and To the courtroom weigh the costs and benefits of each. The shipper hired a lawyer and sued the 4PL. After two years of expensive What are your chances of succeeding at trial and time-consuming litigation, the trial judge ruled that the 4PL violated and of collecting on any judgment awarded against the contract with the shipper, and held the 4PL liable for breach of contract, the opposing side? What would you consider to breach of fiduciary duty, negligence and negligent misrepresentation. be an acceptable outcome? The trial judge concluded that the 4PL failed on two fronts: first, to Would a lawsuit really satisfy or advance your complete the services in a professional and timely manner in accordance cause? Or would it expose you to further risks with the contract, and second, to exercise all reasonable care, skill and and costs—not to mention the emotional and competence in the performance of the agreed-to professional services. psychological stresses of litigation? In the trial judge’s view, the 4PL understood that professionalism and Is it best for you to walk away from the dispute? time were the essence of the contract, and had assured the shipper its services Might you be better off negotiating, mediating or would be completed in a professional and timely manner. Furthermore, the adjudicating a settlement? judge ruled that the 4PL understood the shipper’s objectives and needs, and Once you address these questions, you will be that the shipper trusted it to meet those targets. in a better position to make a wise decision as to The trial judge also found that the 4PL knew its failure to complete what steps you, as a disputant, should take if your services in a professional and expeditious manner would likely cause the 4PL—or any other logistics service provider—fails shipper to suffer damages. The court found that the shipper relied on the to live up to expectations. Such precautions can assurances of the 4PL—without them, it never would have hired the 4PL. better secure a happy ending. MM&D Since the shipper was in a fiduciary relationship with the 4PL and was therefore required by law to avoid conflicts of interest, the court ruled that Marvin J Huberman, LLM, is a lawyer, mediator the 4PL was bound to act exclusively for the benefit of the shipper. The and arbitrator based in Toronto. Contact him at judge found the 4PL breached its fiduciary duty to the shipper, and ordered www.marvinhuberman.com.
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MM&D | April/May 2010
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Firefighter | Shakeel Bharmal
Time to roll up the sleeves
What to do when a shipment project goes awry—twice
I
t’s amazing how beneficial it can be to step in and get your hands dirty. Not too long ago, I was working as the general manager responsible for launching a new 3PL division for a major transportation company. With still-limited staff, we had secured a large pilot project with a company that had won a deal to build customized products for a national retail chain’s flyer-supported campaign. The manufacturer had trusted us with the task of receiving and de-stuffing containers, doing some light assembly work, building and merchandizing retail displays and shipping them in palletized form to the retailer’s DCs in the west and the east. On the morning the first wave of deliveries was to leave for the retailer’s DC in Calgary, I hosted an executive from the manufacturer for a meeting at our Vancouver site. During a tour, we discovered that, due to the structure of the store-ready displays, the corners of the pallet would have to be reinforced to prevent damage that would cause them to be rejected at the retailer DC. The client left for another meeting and my team met to develop a solution. We had 100 pallets to fix, and not much time—the loaded trailers were being picked up the next day for a delivery appointment in Calgary. After 14 years of corporate life, I jumped at the chance to help. I rolled up my sleeves, tucked my tie into my shirt and got to work. When the client executive came back later, he saw me hammering away, looking pretty unprofessional and dirty. He shook my sweaty hand and left without saying another word to catch his flight back to Montreal. Apparently as soon as he left, he called our manager responsible for the account to say how impressed he was with our hands-on approach. It helped guarantee us another, bigger, project. What a rush that was! We got the shipment ready with 20 minutes to spare. As I watched the trucks pull away, I felt an immense feeling of satisfaction—not to mention a new spirit of camaraderie with my operations team. Talk about a great return on investment for a day of hard labour.
its schedule to make the in-store delivery date. Months of work to build goodwill would be lost. Thank goodness for the creative thinking of my team. Their solution was to redirect the trucks back to our Kamloops facility, reconfigure them there and send them back to Calgary. It would be tight, but if everything worked we would just make it for our appointment. My local operations manager felt terrible and wanted to take care of it himself. But we needed him to manage the remaining work in Vancouver. So I volunteered. I learned what had to be done, picked up the correct labels and headed out to Kamloops. While I was on the road, my operations manager made sure there were a few people to help me once I got there. I hadn’t worked in a warehouse for 15 years. Plus, I couldn’t drive a forklift. I got to Kamloops at about 1:00pm, spent about three hours reworking the load with two hardworking young lads and got the shipments out. I headed back to Vancouver with the incorrect labels, which I’d peeled off the pallets so we could use them with the next wave of orders. I made it back to Vancouver at 9:00pm. I was tired, but my mood changed on learning the truck would make the delivery with an hour to spare. Energized, I went into the warehouse looking for more work. The operations manager laughed and pushed me out the door. We made the delivery and the rest of the project went without a hitch. In all my years of building business plans and presenting strategies to my leadership team, I have never felt more connected to my work. MM&D
Not in the clear yet I slept well that night. Good thing, as the next day brought another challenge. I got a call at 6:00am from a colleague saying that we had a problem. In the scramble to load the trucks the night before, two trucks had been filled with pallets labelled with half of one PO number and half of another. Some of the pallets in each truck were not due for delivery for two days, and the Shakeel Bharmal (sb@summitvalue.com) is the trucks were halfway between Vancouver and Calgary. At first, we thought president (Canada) of consulting and training it wasn’t a big deal. Each pallet was identical; only the labels were wrong. firm The Summit Group and an adjunct professor It turns out, it was a big deal. My manager’s past experience with the of supply chain management at the University of retailer indicated that unless the load fully matched the numbers on their British Columbia’s Sauder School of Business. He internal receiving system, the entire load would be rejected. sits on MM&D’s editorial advisory board. We assessed a number of options, including redirecting, relabelling, reloading and reshipping from our Calgary facility. We soon realized this Firefighter is a forum for practitioners to explain wouldn’t work. We would miss delivery by a day, maybe two. Furthermore, our how they helped solve an unexpected supply Calgary facility was full to the rafters. We would incur extra labour costs, our chain problem. To share a story, contact Deborah client would have to pay a penalty and the retailer would have to reconfigure Aarts at deborah.aarts@mmd.rogers.com.
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MM&D | April/May 2010
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