Canada’s magazine for procurement and supply chain management professionals
APRIL 2014
SAFE SUPPLY CHAINS Mitigating the Risks of Global Sourcing
Also inside: Public Procurement Scrutiny SaaS Negotiation Tips ProcureCon Canada Highlights PM 40069240 $18.00
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Canada’s magazine for procurement and supply chain management professionals
features 80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9
www.PurchasingB2B.ca
Panelists weigh in on how to deal with global sourcing risks.
Dorothy Jakovina 416-510-6899, djakovina@bizinfogroup.ca Addressing issues affecting Canada’s public procurement professionals Michael Power 416-442-5600 ext 3259, mpower@bizinfogroup.ca
28 S AAS NEGOTIATIONS What to consider during cloud computing, subscription-based software negotiations.
FLEET MANAGEMENT/CAR EDITOR
Emily Atkins 416-510-5130, eatkins@bizinfogroup.ca ART DIRECTOR
Highlights from the inaugural ProcureCon conference in Toronto.
PRODUCTION MANAGER
CIRCULATION MANAGER
Barbara Adelt 416-442-5600 x 3546, badelt@bizinfogroup.ca BIG MAGAZINES LP
EXECUTIVE PUBLISHER: Tim Dimopoulos VICE-PRESIDENT OF CANADIAN PUBLISHING: Alex Papanou PRESIDENT OF BUSINESS INFORMATION GROUP: Bruce Creighton For over 55 years, PurchasingB2B has been a trusted source of information for Canadian purchasing/supply chain management professionals in the private and public sectors. Special features and supplements include Fleet Management, Canadian Automotive Review (CAR), PurchasingB2G, and Travel Management Canada. PurchasingB2B is published eight times a year, except for occasional combined, expanded or premium issues which count as two subscription issues, by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd. © Contents of this publication are protected and may not be reproduced, in whole or in part, without the written consent of the publisher or editor. NOTICE: PurchasingB2B accepts no responsibility or liability for claims made for any product or service reported or advertised in this issue. PurchasingB2B receives unsolicited materials including letters to the editor, press releases, promotional items and images from time to time. PurchasingB2B, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. SUBSCRIPTION SERVICES: To subscribe, renew your subscription, or to change your address or information, contact us at 416-442-5600 or 1-866-543-7888, ext 3258, apotal@bizinfogroup.ca, or visit us at www. PurchasingB2B.ca. Subscription price per year: $99.95 CDN; Outside Canada per year: $172.95 US; Single issue Canada: $18 CDN. Annual Supply Chain Survey issue, Canada: $45; Outside Canada: $70 US. Taxes extra. From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374, Fax: 416-442-2200 E-Mail: jhunter@bizinfogroup.ca Mail to: Privacy Officer, 80 Valleybrook Drive, Toronto, ON M3B 2S9 Printed in Canada. ISSN: 1497-1569 (print); 1929-6479 (digital) Publications Mail Agreement No. 40069240 We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage
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31 PROCURECON CANADA 2014
Sandy MacIsaac 416-442-5600 ext 3242, smacisaac@bizinfogroup.ca Kim Collins 416-510-6779, kcollins@bizinfogroup.ca
Vol. 56, No. 2 APRIL 2014
9 RISKY BUSINESS
PUBLISHER
EDITOR
Contents
p.9
also inside
departments 4 Buylines
32 Le professionnel
5 Procurement Profile
33 The Professional
6 Business Front
34 The Law
8 Ask The Expert
13 17
Procurement’s Journey
Editorial
I
was lucky enough in March to not only attend but also chair one of the three days of ProcureCon Canada 2014. The conference, the inaugural ProcureCon event in Canada, addressed several topics, ranging from spend analysis to sustainability to e-Procurement. As part of my chairing duties I also addressed attendees and spoke about issues and trends within procurement, as I see them. During my talk I said that I’ve admired the strides the field has taken in a short time. Although some organizations once viewed procurement as a backroom function, that’s hardly the case now. Leaders in the field now boast influence at the highest levels, and have helped shape the profession into a driving force within their organizations. I also noted how procurement has shifted towards the strategic, rather than remaining solely tactical. This has meant a higher profile and increased visibility, leading to collaboration with other groups, whether it’s HR, travel, marketing or finance. To meet this demand, procurement has worked to learn the language and culture of these groups. Procurement practitioners now need new skills and knowledge. If procurement wants to convince decision makers of its strategic nature, it must show return on investment. To do so, it must hunt for and develop talent in a wide range of skills outside of the procurement silo. That means getting accustomed to providing input and contributions across an enterprise—an opportunity as well as a challenge. Listening to other conference speakers, I noticed how often the concept arose of procurement as a journey. The destination, the speakers seemed to agree, was less important than the steps along the road. Hopefully, through attending conferences and with the information within our pages, we help you along that journey. APRIL 2014 | 3
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Buylines
KPMG: corporate responsibility reporting lacking in supply chain
C
orporate responsibility (CR) reporting has evolved into a mainstream business practice over the past 20 years, and is now undertaken by over three quarters (83 percent) of the top 100 companies in Canada—up from 79 percent in 2011—according to the 8th KPMG Survey of Corporate Social Responsibility Reporting. The survey analyzes global trends across 41 countries with a focus on the quality of CR reporting by the world’s top 250 companies. Implications for Canadian organizations include the need for focus in supply chain reporting. Many companies don’t fully report on the impact of their supply chains, the report says. Industry sectors with significant supply chain risks, including chemicals, utilities and oil & gas, tend to have the lowest levels of reporting. The survey also touches on financial risks. Despite acknowledging risks to their businesses from environmental and social factors, most large companies don’t report the potential financial impacts. The 2013 survey shows that CR reporting is a standard business practice globally as well as here in Canada—with 71 percent of companies worldwide publishing a report, compared with 64 percent in 2011 and 12 percent in 1993.
Canadian manufacturers poised for revival By The Canadian Press
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CIBC World Markets says Canada’s battered manufacturing sector may be poised for a revival following a decade of contraction. A report co-authored by CIBC economists Benjamin Tal and Nick Exarhos says currency and market conditions are improving for Canadian manufacturers. They say firms that have survived through the lean times of recent years are in position to take advantages of new opportunities, especially the weaker dollar. The loonie has been trading below parity with the U.S. dollar since February 2013 and is currently worth about 90 cents US. According to the CIBC reports, companies that make wood products, primary metals and machinery have some of the best prospects.
RBC: purchasing managers index shows uptick in March By The Canadian Press
T
he RBC Canadian Manufacturing Purchasing Managers Index registered 53.3 in March, the 12th consecutive month the index has indicated expansion. The monthly report highlighted a solid improvement in business conditions last month, especially with exports, but producers also experienced higher costs due to a weaker Canadian dollar. “Manufacturers reported a welcome recovery in new order volumes, helped by stronger export demand, and this in turn supported job creation during March,” said Cheryl Paradowski, president and CEO of the Supply Chain Management Association. “Input prices meanwhile continue to rise sharply in the wake of the weakening exchange rate.” The RBC monthly PMI report said the new export orders in March increased at the second-fastest pace since October but input costs rose at the steepest pace since May 2011. The report also noted that manufacturers’ production was held back last month by supply disruptions that led to longer delivery times for raw materials. The reading is up from 52.9 in February—a six-month low— and the highest since December. A reading above 50.0 indicates an expansion in the Canadian manufacturing sector while readings below that level indicate the sector is declining.
Contract awarded for McMaster Children’s Health Centre project
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CL Partnerships has signed a fixed price contract to design, build and finance the new McMaster Children’s Health Centre. The contract’s value is $70.5 million and covers the design and construction of the facility, as well as project financing. Construction will start this spring, with completion expected by fall 2015. The new children’s centre will be fully accessible and include an outdoor wheeling track, therapeutic playground and physiotherapy space. The site will bring together a number of programs that are currently located at Hamilton Health Sciences’ Chedoke site. The centre will accommodate the delivery of patient- and family-focused service and individualized programming and will accommodate 70,000 visits annually. The project falls under Infrastructure Ontario’s alternative financing and procurement model, which transfers the risks associated with designing, constructing, and financing the facility to the private sector. PurchasingB2B.ca
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Passion For Procurement
Procurement Profile
Daniele Gorla, director of strategic sourcing, Canadian Pacific
How did you get into the procurement field? One of my first jobs in university involved procurement. I helped quoting materials, in preparation for bid proposals, at my father’s engineering firm. After graduating with a business degree and a major in marketing and communications, I worked in marketing and continued for many years, even after my MBA. It wasn’t until I joined Canadian Pacific, almost 15 years ago, that I pursued an opportunity in strategic sourcing. My intent was to broaden my knowledge of the business, but before long, sourcing and procurement became a passion. Describe a typical workday. I lead all sourcing, procurement, contract and supplier performance management activities for a wide variety of portfolios at Canadian Pacific, including corporate services, office services, corporate travel and MRO (maintenance repair & operations). I could be working with finance seeking new payable solutions, negotiating our benefits or pension plans with HR, or mechanical and engineering groups implementing a vendor managed inventory process. I work with risk management in developing new policies and with legal services in creating new contract templates. My internal customers include almost every department in the organization.
What do you like most about your job? I love the wide variety of industries and the diverse nature of the projects I am involved with. There is a sense of achievement working on a deal that is quantifiable, has KPIs and an impact on the company’s bottom line. Even more fulfilling, to me, is the opportunity to manage the ambiguity of sourcing and procuring services, when risk mitigation is often a major driver and process improvement is the underlying value. What event/highlight of your career stands out the most? The risk I took that most affected my career was moving to Canada. Leaving a job and a life to learn English was just the beginning, and what started with an opportunity after my MBA paved the path to a fantastic journey; taking me from Sao Paulo, to Halifax and then Calgary.
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What are your future educational/ professional plans? I try to stay involved with planning committees for industry related events and, at times, with teaching, which is a great learning exercise. Anyone’s career development should be grounded in building connections and exercising leadership. The way you lead and inspire people is the secret to building high performance teams and driving results. My next goal is to contribute what I have learned in the private sector and give it back to the community; I believe joining a not-for-profit board will accomplish that objective. Tell us something about yourself outside of the procurement field. I am still trying to adapt my work-life balance with golf. I have been playing (if I can truly say that I play the game) for a few years, and I am far from having a handicap (or sharing one). There is something about the game that slows my fast-paced mind and brings me back to the reality of imperfection. I will keep trying and, if nothing else, enjoy the sun and the friendships while playing. Again, it’s all about relationships, whether at work or the golf course!
What advice would you give to those new to the field or planning to enter it soon? Take risks. Be in charge of your career and invest in yourself. Opportunities will come but it’s up to you to identify them. If you believe a qualification will better prepare you for supply chain challenges, put in the effort. Career development is about building confidence, developing leadership style and being passionate. B2B
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Business Front
An Inconvenient Winter by Michael Hlinka
I
’m writing this column at the end of the coldest winter I can remember. This resonates with me in a particular way. About seven years ago, in the wake of the release of the movie, An Inconvenient Truth, I was asked to be part of a panel discussion about the issue of global warming. Let me be very specific about the context: the theory espoused by former US vicepresident Al Gore was that CO2 emissions, generated from fossil fuels, were responsible for a warming trend in global temperatures. The end result—according to Gore—was a kind of Apocalypse where we would see anything and everything from typhoons to hurricanes to famine to widespread flooding as the ice caps melted. It was the scientific version of the brimstone and fire preacher’s version of hell. This was what I had been called upon to discuss. There were several members on the panel and I was the only one who expressed skepticism. I am not a scientist. I can pretend to understand how CO2 uniquely captures heat from the sun’s rays, while it doesn’t simultaneously deflect those rays in the first place. Like I said, I’m not a scientist. But I did attend high school and I vividly recall Etobicoke Collegiate’s most respected physics teacher who argued (in the mid 1970s) that CO2 emissions were inevitably leading to a new Ice Age! At the time, I bought the story lock, stock and barrel. With age comes both wisdom and skepticism. There’s a good reason why as a Canadian I’m particularly interested in theories concerning global warming. Compared to the other developed countries of the world, none other relies quite as much on the production of oil and gasoline products as we do. The Alberta oil sands are a resource that provides benefits for all citizens. Both Ontario and Quebec are have-not provinces and we don’t complain when the equalization payments flow our way. Yet at the same time, there are calls from many Central Canadians, particularly from members of the chattering classes, that the oil sands are almost uniquely bad and that production should at least be curtailed if not ended entirely.
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Let me return to that panel discussion, held in the summer of 2006. There was a scientist—a PhD—who guaranteed that if CO2 emissions continued at current rates, that summers in Toronto would be unbearably hot within five years (that would mean 2011), causing widespread fatalities from heat stroke, and that we would never see snow again in this city. As I write this, the date is March 23. The temperature is -8 Celsius and I see snowbanks everywhere and all I can think is: where’s global warming when we want it? We’ve already seen implications of the global warming scare in this province. Perfectly functional coal-fired plants were shuttered early, which has at times required Ontarians to buy electricity off the North American grid. Currently, over two-thirds of the electricity generated in the US is from fossil fuels, with the majority being coal (so much for saving the planet). Because while many of us pay lip service to reducing CO2 emissions, when push comes to shove, there is a broad consensus that sacrifice is fine—as long as it’s not being asked of me! However, there is a prudent approach that Canada could take to the issue of CO2 emissions. It makes sense to be cautious. If the Al Gore camp is indeed correct, then the consequences would be calamitous. Here’s how we might proceed… just in case. First, continue extracting petroleum products from the oil sands. Yet at the same time, Canada could—and I would argue should—become a leader in energy efficiency. Who can argue with that as a principle? And the surest mechanism to accomplish that is tax policy to get us into smaller cars, to get us to insulate our homes, to get us to walk and bike as a means of getting to where we need to be. Presently, taxes on gasoline average about 40 cents per litre across Canada. We use about 40 billion litres of gas every year, which means that about $16 billion in government revenue is raised by gasoline taxes. What if we started raising taxes, annually, by about 20 cents per litre? Then used that extra revenue to reduce income taxes, which are now the biggest source of revenue for the government? This would encourage people to legally avoid taxes by consuming less fossil fuel. Because taxes would be lower on income, it would encourage more people to work longer and harder because taxes discourage wealth-generating activities. Environmentalists would be mollified; hard-core capitalists would celebrate the increased efficiencies in the system and these benefits would be permanent—whether or not Canadian winters remained cold, or became as balmy as those of Florida. B2B
Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network. PurchasingB2B.ca
14-04-07 10:52 AM
Head Professional Development Directory
Have You Signed Up? The Purchasing Management Association of Canada byline (PMAC) and the Supply Chain & Logistics Association Canada (SCL) joined forces to create the robust, highly focused Supply Chain Management Association (SCMA). The Ontario Institute of PMAC is now known as Supply Chain Management Association Ontario (SCMAO).
WE’VE JOINED FORCES
Become part of a network of over 3,000 members in Ontario and 7,000 across Canada. Imagine how this professional network can help you reach your career goals! Whether you are working in the industry or considering a career in supply chain management, with SCMAO membership the sky’s the limit! To apply for membership visit www.scmao.ca
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Ask The Expert
Know Your Duties The impact of customs on procurement by Jeff Russell
A
cross industries, today’s procurement professionals face similar challenges with rising energy, labour and raw material costs, flattening sales, loss of operating dollars and operating margins. Senior management now demands not only reductions in procurement costs—such as purchase price—but also a reduction in the total cost of ownership. There are several tools available to do so. One is to source globally. The world is getting smaller and purchasing products from China, Vietnam, Thailand, Indonesia, Central Europe and others is much easier. Through buying products at lower costs than domestic sources, procurement now provides opportunities to regain profit. But be aware of duties, product classification (HS Code), trade actions, SIMAs (Special Import Measures Act) and other factors associated with the country you’re sourcing from, the products purchased and the company or manufacturer you’re working with. Information on applicable tariff treatment, product classification, duties, trade actions, SIMAs, what countries or companies to avoid is not readily available to procurement. If a company uses a brokerage firm, the rater is likely unfamiliar with the product and there’s the possibility of a wrong classification or duty rate.
“Through buying products at lower costs than domestic sources, procurement now provides opportunities to regain profit.”
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There are two critical concepts necessary to properly source globally: the Harmonized Code (HS Code), and the List of Countries and their applicable Tariff Treatment. You can’t import without understanding the relationship between the two concepts and how they affect total cost of ownership. Procurement professionals
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must understand the relationship between how customs rates a product and the impact of that to the bottom line. The Harmonized Code System (HS) is the standardized coding of names and numbers for international trade. Nearly 200 countries representing 98 percent of world trade use the code. It covers some 5,000 commodity groups, each identified by the six digit code (with another four digits applied by each country and unique to that country) arranged in a legal and logical structure for a universal economic code for goods. The information is assembled from the commercial declarations of imports and exports, and is used to determine duty rates, negotiate trade agreements, maintain trade statistics and identify goods and shipments. Canada’s Border Service Agency (CBSA) and customs brokers use our HS Code to classify imported products. Canada’s HS Code is broken down into 99 different chapters sorted by commodity, a high level—general description, and basic product description. For example, let’s consider a chain and parts of a chain made of iron or steel (skid chain). This item belongs in Chapter 73: Articles of Iron and Steel. The HS code is 7315.20.000. To determine which duty is applicable to this product, the first to look at is the MFN tariff (most favored nation tariff) at 6 percent of export cost. If there is missing paperwork declaring the country of origin or if the commercial invoice doesn’t accurately describe that country, a brokerage firm or an organization’s customs department uses the MFN Tariff. If you use the second tool, the list of countries and their tariff treatment, you might be able to get a GPT (general preferential tariff) treatment instead of the MFN. Switching from a MFN to a GPT treatment saves three percent of the export cost at time of import. So if your total import/invoice cost was $100,000, three percent impacts your bottom line. But if you bought the skid chain from a country that’s listed LDCT (least developed country tariff) or other (a Free Trade Agreement between Canada and that country), that product is duty free. For companies with procurement practitioners involved in customs and product valuations when assessing a product’s total cost of ownership (like this skid chain) they’ve just sourced their product from a country that Canada has a free trade agreement with and their applicable duty is zero. Consider those companies that rely on a customs department or a brokerage firm to determine their product classification/valuation—they’re more likely paying a six-percent premium for their product, and are unable to compete against the company paying no duty. Which procurement professional do you want to be: the one engaged with customs, tariff treatments and identifying countries to properly source from; or one with no firsthand knowledge of such information? B2B Jeff Russell, SCMP, CSMP, MCIPS—CIPS, is director of procurement for Crane Supply.
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Head Thought Leadership
Risky Business Mitigating the risks within the global supply chain
T
by Michael Power
hese days, supply chains are faster and longer, and companies have become accustomed to sourcing abroad for a competitive
advantage. Many are familiar with sourcing in China, while Asian countries like Vietnam, India, Bangladesh and Thailand have grown as sourcing destinations. Latin America and Mexico are also rising in popularity.
But global sourcing involves risks as well as rewards. Natural disasters, factory fires and other events have highlighted risks to an
organization’s reputation, efficiency and bottom line.
To explore these risks and how to mitigate them, PurchasingB2B held a panel discussion at the Cargo Logistics Canada Conference
in Vancouver, January 29-30. The discussion touched on trends in global sourcing, steps to minimize the hazards and tools and resources available to deal with them.
On the panel were: Bruce Winder, presi-
dent of Bruce Edward Winder Consulting
Limited; Warren Sarafinchan, vice-president of supply chain/information services
at SunRype Products; and Joshua Kroeker, assistant vice-president, business development—global trade and receivable finance at HSBC.
China and Asia The panel looked at China, along with the risks and rewards of sourcing from that
country. While the country remains a “powerhouse” in terms of where many
consumer products are made, whether it’s
a suitable destination depends on the commodity being sourced, said Winder.
But organizations can definitely save
money by looking to China for goods or services.
“You really have to know what you’re
doing, though,” he said. “You have to un-
derstand the total cost of ownership—and there are a lot of inherent risks.”
While China will remain a viable sourc-
ing option, other Asian countries such as Vietnam and Cambodia will become more
popular. “You’re already seeing that for Panel participants (from left): Michael Power, editor, PurchasingB2B (moderator); Joshua Kroeker, assistant vice-president, business development—global trade and receivable finance at HSBC; Warren Sarafinchan, vice-president of supply chain/information services at SunRype Products; and Bruce Winder, president of Bruce Edward Winder Consulting Limited. PurchasingB2B.ca
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certain commodities where it makes
sense,” Winder said. “If Vietnam has a number of natural resources in wood, you’ll see a lot of wood products coming out of Vietnam.”
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Thought Head Leadership
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Winder stressed labour as a reason for the narrowing gap between China and other Asian sourcing destinations. As the country’s middle class grows, China’s wages are increasing. Oil costs have also risen, which affects everything from raw materials to transporting products to North America. “Then, you also have to look at the changing foreign exchange rates, as well,” he said. “If the RMB strengthens and the Canadian dollar strengthens, and the US dollar, those are all in play. We went from having sort of an on par Canadian dollar to the US dollar to having to add another 10 percent on when you land products now. That’s not just China, but those are just some of the things you look at when you look at your total line of cost.” China remains an emerging market, which means the country is still learning and developing its banking system, rule of law, transparency and intellectual property, Winder noted. Quality management also remained a concern. “Part of it is because it’s so far away,” he said. “By the time you have a problem and it ends up in North America you may have already paid the supplier.” Kroeker agreed that China is changing rapidly from producing low value-add goods to higher value-add products, often with a higher technology component. Chinese manufacturers had done well in building relationships around the world to ensure they can deliver a higher quality product. As well, currency issues factored strongly. He routinely asked customers whether Chinese suppliers still want to be paid in US currency, since that’s expected to shift dramatically in the next five years. In the future, he said, those suppliers will want to be paid in RMB instead. “How can that (shift) benefit you and how can that benefit your supplier?” he said. “I think that’s going to be a trend over the next few years.” Relationships are also important with Chinese suppliers, he added. Those sourcing from China can run into trouble if they look to Chinese suppliers for occasional or one-off orders. “You need to make sure that your suppliers and your entire supply chain realizes that they can make more money by giving you the right products at the right time with the right quality, on an ongoing basis,” he said. While several other Asian sourcing options exist, where you look depends on what you’d like to source, Kroeker said. Bangladesh, for instance, is a “textiles powerhouse,” that makes lots of fabrics, T-shirts and related products. But the market is very different from China, as are the risks, he noted. For example, it takes much longer for documents to get through Bangladesh’s system than through China’s, and the list of banks that Canadian organizations can deal with is limited. One potential risk, Kroeker said, involves sourcing professionals getting a tour of one factory, when in reality the goods are made in another facility. This has been a problem in Bangladesh, he noted, and to avoid the situation banks are asking more questions of their clients to understand their supply chains. “It’s not just a CFO and CEO meeting anymore, we want to talk to the purchaser—the supply chain people—to make sure we understand that the supply chain risks are being managed before we get involved in any sort of financing,” he said.
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“If you build a win-win relationship, usually the supplier will help you out if something goes wrong. Agreements are good just to clarify it.” —Bruce Winder Up-and-coming locations like Bangladesh, Vietnam and Cambodia can have underdeveloped infrastructures compared to China, said Winder. That can increase lead times for goods, he noted. There can also be risks associated with rule of law and intellectual property management. “In some cases, folks actually have to import raw materials from China or other countries into these secondary countries, and that takes time and adds costs,” he added. “It’s not just labour that’s a risk; it’s also how you manage inputs into production, rule of law, infrastructure and other issues.” A rigorous methodology for factory and product assessments can help mitigate some of those risks, he said. Never buy without visiting the factory and asking questions. Find out how much production is outsourced and visit local raw material makers, he advised. For example, when sourcing bikes, he used to visit the factory that made the handlebars, chain and wheels to understand better how the finished product came together. Supplier relations are key, added Kroeker, who agreed that asking suppliers questions cut risk and helped minimize miscommunication. Documentation can also help ensure safe supply chains. “Using letters of credit, using inspection certificates, all of those traditional ways of managing risk are going to be very important,” he said. “But nothing will take the place of a good relationship.”
Closer to home
While Asia remains a popular sourcing destination, other
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abroad, added Kroeker. Organizations sometimes do the prototyping and customs processes locally, then offshore for large-scale manufacturing work. “As long as your product doesn’t have a lot of IT that you’re concerned about, it’s a very, very good way of doing it in terms of giving good customer service, but also being able to get the sort of largescale manufacturing overseas that just isn’t available here all the time because we don’t have the skilled people to do a lot of the high-tech manufacturing,” he said.
Best practices
places have also resurfaced. That’s given rise to practices like near shoring, which Sarafinchan said applied to bringing some of that sourcing volume back to North American locations. When challenges arise—especially when with large products or volume—responding can be slow or expensive. Establishing proper relationships with international partners can result in a well-functioning global supply chain, he said. “Where it doesn’t, I’ve seen products come back onshore,” Sarafinchan said. “There are advantages to both strategies; in some cases sourcing domestically makes better sense for an organization. And in some cases it really depends on your company.” Whether an organization chooses to source locally, across North America or globally, it pays to understand the total cost of ownership involved, he said. The costs of duty rates, for example, can take supply management practitioners by surprise. “Those dollars start to add up,” he said. “And once you establish that supply chain it can be really expensive to push the undo button. Making sure you do the due diligence up front is key.” Nearing shoring is especially effective for products where lead times are king, Winder noted. Tapping a Mexican supplier rather than sourcing the product from Asia can see the time drop substantially. “If something goes wrong it’s a lot easier to take a five-hour flight down to Mexico and check it out—or Alabama and check it out—than to go to China,” he said. It’s possible to successfully source both at home and
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Regardless of destination, organizations can use best practices to mitigate risk. Factors to consider when sourcing nearby can be transferred to international sourcing, Sarafinchan noted. He also recommended investigating an organization’s statements to understand its financial situation. It pays to meet with not only sales staff but also with the organization’s senior team and R&D department, he said. Asking for KPIs and to tour their facility can help determine whether a supplier is a good fit. “Spending as much time as you can spend with a prospective vendor—wherever they’re based— is key,” he said. “In some cases you’re entering into long-term relationships and you want to make sure those relationships will be ones that are good for both parties.” Winder advocated taking it slowly at the start of a relationship with a new vendor. From the beginning of the process to receiving the first shipment usually takes from a year to a year-and-a-half. “If you’re doing it quicker than that you’re probably missing a few steps,” he said. Winder also recommended starting by building a global sourcing strategy that looks at where the organization plans to buy, from which suppliers and so on. From there, do supplier assessments and narrow down the list of potential vendors. Think about the sourced product and its specifications before putting out an RFI or RFQ, Winder recommended. This process builds towards a sourcing trip where an organization can visit key manufacturers, build relationships, look at sub-contractors and so on. Organizations can then build a sourcing plan, which is contingent on numerous factors. “There are a lot of things you do and a lot of best practices; it’s a long process and very detailed,” Winder said. “You can save a ton of money and make material gains for your company, but you have to do it right—and you need help to do it.” Kroeker noted that some Canadian companies develop an ownership stake in an overseas manufacturing facility. Doing so aligns supplier and buyer interests, he said. But he cautioned that even companies that own an overseas manufacturing facility outright must check that operations are running properly. “You still need to have certain things in place to make sure that everyone is doing what they’re supposed to,” he said. Sarafinchan stressed the importance of building the right team to assess a new supplier—procurement alone wasn’t enough. Operations, finance and quality departments should be involved in looking at whether to bring a new vendor on board. “Don’t underestimate the complexity
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Thought Leadership
of setting up a new supply chain,” he said. “Ensure you’re getting the right supports. There are lots of global logistics companies out there that can help you.” As well, don’t lose site of global sourcing’s positive outcomes, like growth, Sarafinchan added. Communicate to suppliers that an initial order could lead to more future business, he said. “If you can let them know that that’s your plan, that’s going to go a long way in building that relationship.” Establishing a vendor agreement that is balanced and treats vendors fairly is useful, Sarafinchan said. When doing business in new regions, get appropriate legal advice, since the rule of law is different depending on which country you’re sourcing from. While such agreements were critical, Winder warned, in some countries those agreements weren’t especially enforceable. That’s why relationship building remains important. “If you build a win-win relationship, usually the supplier will help you out if something goes wrong,” he said. “Agreements are good just to clarify it.” As well, it’s important to understand the cul-
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ture of the sourcing location, Winder added. In some countries, for example, it’s rude to say no. A supplier who nods his or her head through an entire meeting might not actually be agreeing to everything being said. That’s why it pays to get agreements in writing, he noted. The panel also discussed component traceability and the global supply chain. With events like deadly garment factory fires in Bangladesh recently, companies have more public pressure than ever to ensure their supply chains are ethical and socially responsible, said Winder. That includes not just operations at overseas factories, but the raw material inputs into that facility. That’s why auditing factories is so important to ensure an ethical supply chain. “You need to do your homework and buy from folks who buy into that—and you have to police them,” Winder said. Such due diligence has moved from a “nice-to-have” feature to a mandatory one—even with banks—noted Kroeker. For example, to open a bank account, organizations are run through several searches to ensure there are no hits related to child labour or other negative characteristics. “This is kind of the new normal in terms of the way the world is going, and I think it’s a good thing,” Kroeker noted. Ultimately, it’s neither possible nor desirable to eliminate global sourcing risk completely, the panel agreed. But it’s important to understand what the risks are in order to manage them. As the panel discussion highlighted, mitigating risks can lead to rewards within any sourcing strategy. B2B
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Addressing issues affecting Canada’s public procurement professionals
Under The Microscope Rather than a liability, scrutiny of public procurement can be seen as an advantage by François Emond
D
o you feel that public procurement professionals are constantly under the microscope, with scrutiny coming from the public, politicians, senior management or even from our suppliers? If you feel that’s your day-to-day reality there are two ways that you can deal with it. As the expression goes, you can view the glass as half empty or half full. That analogy applies to the perception of public procurement as well. Procurement processes are often questioned and most of the time those questions relate to perceptions. Was the procurement process done properly and strategically? If the answer to these questions is not a convincing “yes”, the next step is to discover whether procurement professionals were involved in the process. If they were, were they involved soon enough to be able to ensure that strategic issues were addressed? Unfortunately, most of the time the answer is no. However, this observation becomes a great opportunity for us to take our profession to another level by raising the awareness of the value we can bring to the process. We can support our internal customers in defining their needs so that their goals are met. We can help ensure that the process is as transparent as possible and stands the best chance of working in an open market, therefore optimizing competition and keeping costs down. We can do this all in compliance with the various regulations specific to our organizations. More than ever, Quebec has seen its public procurement practices placed under scrutiny. The provincial government has created the Commission d’enquête sur l’octroi et la gestion des contrats publics dans l’industrie de la construction, often referred to as the Charbonneau Commission. Testimony from the stakeholders who’ve spoken to the commission demonstrates various aspects related both to the tendering process and contract management. Collusion
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among bidders has been mentioned several times during testimony and has been of major interest to the Quebec public but also to the Canadian public procurement community who is watching closely the commission’s evolution. Is it possible to completely eliminate the risk of collusion in public procurement? Probably not. But are there ways to minimise that risk? Definitely yes—procurement professionals can help to achieve that goal by defining a strategy that will minimize the risks of collusion. Contract duration, ensuring open market conditions, bonding requirements, awarding method and so on are all elements that help define a proper procurement strategy that may lead to minimizing the risk of collusion. Others within an organization might not necessarily see these factors as critical as we do. That’s why we can bring added value to the process. Some may see the results and recommendations of bodies like the Charbonneau Commission as a threat to our profession, fearing that increased regulation may reduce the scope of the value we can bring in a process that will be more complicated. What’s most likely to occur is that politicians and senior management from public agencies will want to see a line drawn between the users of goods and services and the suppliers who provide them. This is where the threat becomes an opportunity for public procurement professionals to step up and demonstrate the value we bring and the importance of our profession. B2B
François Emond is the executive director of the Canadian Public Procurement Council and can be reached at femond@cppc-ccmp.ca. The organization is the leading voice for professionals involved in public procurement in Canada. Members of the CPPC are public agencies coming from all government levels. You can visit the CPPC website at www.cppc.ccmp.ca. APRIL 2014 | 13
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Join us at the 2014 SCMA National Conference Canada’s largest conference for professionals in supply chain management
June 11-13, 2014 | Edmonton, Alberta
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Interesting Times Recent trends and challenges in public procurement by Rusty Joerin
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rocurement professionals are living in interesting times. There are significant challenges associated with current trends in public procurement. Ignoring the trends and challenges is not an option for those wishing to stay employed in supply management. This article is empirical and based on my observations working in public procurement. The processes involving major procurements are increasing in complexity. This is due in part to federal and inter-provincial trade agreements and in part to Supreme Court of Canada (SCC) decisions. The implementation of the Canada-European Trade Agreement (CETA) will add to major procurement complexity as CETA will apply to all levels of government procurements. Canadian cities and towns need to prepare now for CETA’s implementation. The recent SCC decision concerning Tercon Contractors v. British Columbia (MOT) has resulted in a trend to avoid creation of “Contract A” in tendering documents. The challenge to the public buyer is how to do this properly, still be seen to treat respondents equally and know under what circumstances it is best utilized. There is the real possibility that the most qualified companies will decline to respond to requests that avoid contract A. Decisions about what procurement strategies to employ are now more complex. Subjective criteria such as sustainability and social responsibility are more heavily weighted during evaluations and are differentiating factors in selection of suppliers. The challenge for procurement professionals is to design an evaluation process that is acceptable to all parties by removing the taint of hidden bias whether real or perceived. Subjective criteria will need explanation in the supply request and the information required in responses should be clearly and completely articulated. Government procurement is trending to greater standardization of process and products purchased. For example, the Province of British Columbia is introducing what is termed a twopage short form RFP (SFRFP) in an effort to increase supplier accessibility to government procurement. The SFRFP is intended for low risk procurements valued under $250,000. Boilerplate terms and contract forms will be standardized and incorporated by reference to the province’s web pages. Respondents, once familiar with the referenced terms, should be able to
PurchasingB2B.ca
focus on the procurement without wading through pages of legalese. Similarly, governments are realizing the benefits of standardization of products purchased. For example, they need to know that the valve (or any similar infrastructure component) installed 15 years ago can be easily replaced or refurbished by one manufactured last month. As a result, commodity contract terms are getting longer. This trend presents a risk of reduction of the supplier base and hence reduced competition for government supply in some markets. Procurement professionals will need to hone their negotiation skills and marketplace knowledge to ensure that their organizations obtain fair value for commodity goods purchased. Senior governments are pushing for centre-led procurements on behalf of agencies funded by those senior governments. While many of these agencies are already participating in co-operative and/or consortia purchasing arrangements, the principle of one contract for all is predicted to reduce duplication of procurement effort and achieve economies of scale. There are, however issues yet to be addressed in the trend to centralized contracting. For example, would a consolidated procurement lessen future competition, creating an oligarchy of large suppliers in that particular market? What are the social and economic costs to a community losing a viable business because we decided to contract centrally? With less competition, would our economy lose the incentive to innovate? How can we create an acceptable balance between agency priorities and group priorities in a centre- or consortia-led procurement. As we’ve seen, the procurement process is evolving. What we do in our work will continue to be tested and challenged, if not in a court of law, then by our clients, peers and suppliers. Understanding and preparing for the potential outcomes of procurement trends is the key to success while working during interesting times. Knowledge acquisition in negotiation, request drafting, interpersonal skills and contract management is helpful. Even more important is the knowledge gained from experience and the sharing of that experience with your peers. B2B Rusty J. Joerin, SCMP, is a consultant specializing in public sector procurements. He authors a free monthly newsletter titled Better Value Procurements sent to selected organizations. To subscribe e-mail rusty@woodsgift.com.
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IN THIS EDITION 20 S AFE STOPPING
APRIL 2014
20
Tire technology advances in the wet
22 A BUMPER CROP
22
2014 SUVs for every requirement
26 ROADWORK
Testing with intent
Fleet Management is a special section of PurchasingB2B magazine, running in the January-February, March-April, May, July-August, October and November-December issues. It is an important resource for Canadian procurement professionals who recommend, select and manage fleet vendors and service providers. Editorial inquiries: Emily Atkins, 416.510.5130, eatkins@bizinfogroup.ca. Advertising inquiries: Dorothy Jakovina, 416.510.6899, djakovina@bizinfgroup.ca.
NRCan recognizes best fuel sippers
Subaru’s Crosstrek XV Hybrid made the NRCan list
Natural Resources Canada recognizes the most fuelefficient new light-duty vehicles in their class sold in Canada each model year. The 2014 models have been announced, with Toyota/Scion taking six of the 21 spots this year. The full list can be seen on the NRCan website at http://tinyurl.com/oqoucuq. Winners include: Toyota Prius, Prius c, and Prius v, Honda Accord Hybrid, Ford C-Max Hybrid, BMW 328d xDrive Touring, Toyota Tacoma, Ram 1500 Diesel, Subaru Crosstrek XV Hybrid AWD, Toyota Highlander Hybrid AWD LE and the Mazda5. Best-in-class vehicles have the lowest estimated annual fuel use, based on 20,000km driven with a mix of 55 percent city and 45 percent highway. For each class, the most fuel-efficient conventional vehicle and the most efficient advanced technology vehicle (where applicable) are recognized.
April 8th to 11th Fleet Management’s staff will be joining thousands of fleet managers in Minneapolis for the NAFA 2014 Institute and Expo. The four-day event is packed with learning opportunities, networking, driving opportunities, and even some fun. Opening night will be the Flexy Awards, followed by live entertainment, rounding out a full day of education sessions. On Wednesday and Thursday there’s more education, plus the trade show floor is open in the afternoons. From the keynote speakers to the Canadian chapter events, Fleet Management will be there to bring you the highlights online and in our next edition. PurchasingB2B.ca
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Correction
In our previous issue we confused two new Audi models. Below is the Audi Q3, as shown at the Detroit Auto show. We apologize for the error.
Credit: Lesley Wimbush
NAFA Preview
APRIL 2014 | 17
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www.PurchasingB2B.ca
Visit our newly redesigned website for the latest news!
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News continued from pg 17
Honours and accolades By Fleet Management Staff
Toyota tops in Canadians’ eyes Toyota came out on top for the sixth year in a row in the Reader’s Digest survey of the most trust Canadian car brands. Toyota was also crowned the most trusted hybrid carmaker for the fourth year running. “Satisfying the needs and wants of our customers and being rewarded with their trust and loyalty makes us very proud,” said Seiji Ichii, president and CEO Toyota Canada. “We thank our customers for their support and honouring Toyota Canada with six consecutive year wins of these two awards.” For the survey, Reader’s Digest commissioned Ipsos Reid to study who Canadians view as Canada’s most trusted brands in 37 product categories. Approximately 2,500 surveys were completed, providing a representative sample of the Canadian population.
ARI makes top 10 in tech providers list ARI ranked seventh on this year’s InformationWeek Elite 100, a list of the top business technology innovators. “It is an honour to be recognized for the third time by InformationWeek as a top business technology innovator and to be named among the top ten of this year’s Elite 100,” said ARI executive vice-president and CIO Steve Haindl. “This year we share this recognition with members of our vendor relations and fleet management services teams, who worked with us to develop an original business model for our industry that provides growth opportunities for our business partners while extending greater cost savings to our customers.” The undertaking ARI completed in 2013 correlates data from various business systems relative to existing vendors, customer vehicles and financial transactions. The solution allows ARI to visibly analyze a market—down to the operating vehicles, maintenance spend and proximate vendors. Correlating this information with geospatial dashboards allows the company to better communicate with its vendors about the opportunities in their immediate market and to negotiate stronger discounts on behalf of its clients. Previously named the InformationWeek 500 awards, tek 500 awards, the more selective Elite 100 Awards marks the 26th year InformationWeek has identified and honored the most innovative users of business technology. ARI was ranked on the InformationWeek 500 in 2012 and 2013.
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SUBMI-892
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1
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X-ModeTM System 4 Enhanced control of the road with the push of a button
Choose PZEV technology, the affordable eco-friendly alternative without the compromise.
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To consult our Fleet ordering guide or for more information please visit www.fleet.subaru.ca or call 1 877 293-7272 for the National Fleet Sales department.
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1. Only on Limited models. 2. Fuel consumption figure rating posted by Natural Resources Canada of 6.3L/100 km (highway) for a 2014 2.5i Forester equipped with continuously variable automatic transmission and a 60L fuel tank capacity. Fuel consumption figure should only be used for vehicle comparison purposes. Actual fuel consumption will vary based on driving conditions, driver habits and vehicle load. 3. Available on the 2.0XT model. 4. Automatic transmission only. 5. Not available on the 2.5i (EJ1-X0) model. 6. Available on the 2.0XT model. 7. To qualify for « 2014 TOP SAFETY PICK+ » a vehicle must earn «good» ratings in the moderate overlap front, side, roof strength and head restraint tests; a «good» or «acceptable» rating in the small overlap front test; and a «basic», «advanced» or «superior» rating for front crash prevention. Technical specifications are subject to change without any prior notice. Vehicles shown for illustration purposes only.
THE ANSWER TO ALL YOUR QUESTIONS
2014-02-11 11:00 AM 14-04-07 3:03 PM
Article and main image by Emily Atkins
Safe Stopping
Tire technology advances in the wet
C
Tire photos courtesy Michelin
ar control in wet conditions is fundamental to safety, and yet when tires wear they tend to lose traction as the grooves get shallower and the tread gets thinner. Michelin is seeking to remedy this problem with a new tire design that maintains its traction qualities as it wears. And in a graphic demonstration, they showed that, indeed, their half-worn tire can have better stopping power and better wet traction than their competitors’ tires. To demonstrate the qualities of their new Premier All Season tire, the manufacturer let a group of auto journalists loose on their Laurens Proving Ground test track facility just outside of Greenville, South Carolina. Two sets of exercises were set up to show the tire’s capabilities: wet braking and wet handling. In the wet handling exercise, test drivers took four cars out, each shod with a different set of tires—new Premier A/S, half worn Premier A/S and two different brand-new competitor tires. The cars were all Cadillac CTSs, a model appropriate for the tire, Michelin said. The handling track is a purpose-built wet skid pad zone at the Proving Ground, equipped with enough sprinkler nozzles to simulate monsoon conditions. The course was
Premier A/S New Tread Close Up 20 | FLEET MANAGEMENT | APRIL 2014
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designed with a slalom section for quick directional changes, a couple slower corners, and a straightaway to test hydroplaning and hard braking. It was a challenging drive and provided plenty of opportunity for subjective comparisons of the tires. The difference between the Michelins and the competitors was evident, especially in the amount of hydroplaning and cornering grip they afforded. The Caddys all had their traction control turned off, but stability control on, and with the Michelins the stability systems activated far less often when the car was pushed. But as much as the subjective testing on the skid pad showed a difference among the tires tested, it was in the objective test—wet braking—that the Premier A/S really proved itself. The half-worn Michelins went up against brand new Bridgestone and Goodyear tires in an electronically measured stop from highway speed on a uniformly wet track. The Premier A/S consistently stopped a car length shorter than the other two tires. These results were consistent across the pool of drivers performing the tests. So, how did Michelin design a tire that has so much more grip when it’s half used up? The secret is in the compound and the moulding technology. Michelin calls it Evergrip, emphasizing that the tire “evolves” rather than just “wearing”. The grooves in the rubber that evacuate water from the contact patch are inverted V-shapes, so they get wider as the tire wears down. As well, hidden grooves appear only as the tire erodes. The tires are compounded with high levels of silica, which gives extra grip, and sunflower oil, for improved cold weather flexibility. The new tires are available now through regular distribution channels. Michelin says pricing is slightly above the Tier 1 average. B2B PurchasingB2B.ca
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RE-DESIGNED, RE-ENGINEERED, AND RE-MARKABLY RIGHT FOR YOUR FLEET.
Completely re-designed for 2015, the all-new Chrysler 200 offers a perfect marriage of performance, efficiency, and state-of-the-art technology. It boasts an amazing 19% improvement in fuel economy.** It also gives you Best-in-Class* available horsepower (295 hp), segment-first* 9-speed automatic transmission, and 60 available safety and security features – offering the most advanced safety features in its segment. More than ever, the all-new Chrysler 200 is the affordable and stylish mid-size sedan that brings a big advantage to your fleet.
THE ALL-NEW 2015
CHRYSLER 200
fleetchrysler.ca
1 800 463-3600
**19% highway fuel economy improvement based on internal 2-cycle testing versus 2014 Chrysler 200. *Based on 2014 Ward’s Upper Middle sedan segmentatÚn.
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A bumper crop 2014 SUVs for every requirement
Dodge Journey
Ford Edge
By Tony Whitney The Dodge Journey midsize crossover has been a very successful vehicle for Chrysler Group, winning awards and shouldering aside a wide range of competitors to become the best-selling product in its class in Canada. Part of this success is due to the fact it’s recently been advertised at under $20,000, but the Journey has plenty of other benefits going for it, including available three-row seating and more roominess than most class rivals. It’s actually longer than either a Toyota Highlander or a Honda Pilot, both of which are perceived by many to be in a larger size class. It’s an attractively styled vehicle, and since its 2009 introduction, seems to have steadily improved as far as build quality and cabin comfort goes. Unusual in a vehicle at this price point, the interior boasts plenty of soft-touch mouldings and a better ambiance than many more expensive competitors. Although the third-row seating won’t likely appeal to business users, the bigger-than-usual rear cargo area with the seat folded certainly will. With the second row seats folded too, load space is very impressive. There are no less than seven trim levels from very basic to near-luxurious. Journey buyers have a choice of two engines—a 2.4-L fourcylinder (173-hp) and a 3.6-litre V-6 (283-hp). The Journey is sold in European markets as a Fiat and there’s a diesel option, but there’s no talk of Canada getting the oil-burner. The V-6 should appeal to users with towing in mind or regular trips with a full load of passengers, but for most applications, the fourcylinder is perfectly satisfactory and offers excellent fuel economy and DODGE JOURNEY decent refinement. Consider this to be a midsize product at a compact price. 11.2-litres/100 km city;
By Tony Whitney The Edge is Ford’s midsize crossover and it’s one of the products that has helped rejuvenate the blue oval in recent years. It made its debut as a 2007 model and proved immediately popular—not least for the fact that there are three engine choices, rare in this class. The current Edge is a face-lifted version of the first generation vehicle. It’s a good-looking crossover, given the limitations stylists have in this class, and competes in a well-populated segment. There’s been no attempt to squeeze three rows of seats into the Edge, and as a result the space available for five occupants is better than average. The trio of engine options includes a 2.0-litre, 240-hp, turbocharged EcoBoost 4-cylinder and two V6 units, one of 3.5-litres displacement with 285-hp and the other of 3.7-litres developing 305-hp. Business users may find that the 4-cylinder turbo meets their needs very well, given that there’s always a fuel consumption penalty with V6 power. The 4-cylinder seems a lot less powerful on paper, but on the road, it has great response and cruises happily at freeway speeds. It’s also surprisingly refined. All engines use a 6-speed automatic transmission and all models are available with all-wheel drive. The spacious cabin is quite lavishly trimmed, and with the rear seats folded, cargo space is excellent. Throughout the vehicle, fit and finish is well up with best-in-class standards. The Edge is quite costly compared to some of its rivals, starting at around $31,000, but a well-optioned example is knocking at the door of the midsize luxury class. An all-new Edge, designed for FORD EDGE global markets, is on the way, probably for 2015. 9.9-litres/100 km city;
7.7-litres/100 km hwy. (2.4-litre 2WD)
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6.6-litres/100 km hwy. (2.0-litre 2WD)
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Mitsubishi Outlander
MITSUBISHI OUTLANDER 9.0-litres/100 km city; 7.0-litres/100 km hwy. (2.4-litre 2WD)
By Tony Whitney Mitsubishi is not among the major players in the Canadian auto market, but it produces increasingly attractive products. The company’s Outlander battles in the midsize crossover segment and the current (third-generation) model was launched for the 2014 model year. The new Outlander is more refined and sophisticated than earlier models, the design team having decided to take a more conservative approach. The result is a trim, reasonably spacious crossover that
promises to have wider appeal than earlier variants. As with so many rivals, buyers can choose four or six-cylinder powerplants—a 2.4-L 166-hp inline 4-cylinder and a 3.0-litre 227-hp V6. The four-cylinder is commendably quiet and refined for its displacement, but for business users who plan to tow anything or carry substantial amounts of cargo, the V-6 is probably a better choice. The 4-cylinder uses a continuously variable transmission (CVT) and the V6 comes with a 6-speed automatic. The entry-level vehicle starts at around $26,000. The cabin is much improved over earlier Outlanders. A third row seat is available, which is more likely to attract family users than fleet operators. The Outlander is fun to drive and reasonably quiet on the freeway, especially the V-6 version. The top variant boasts such cutting edge safety aids as adaptive cruise control and lane departure warning technology, neither of which are easy to find on competing products. There are three basic trim levels, but the options list is extensive. The Outlander deserves to be on the list of any fleet studying the midsize crossover segment, not least for its 10-year 160,000-km powertrain warranty and 5-year 100,000-km bumper-to-bumper new vehicle warranty.
Toyota Highlander By Emily Atkins For 2014 Toyota made a few changes to the Highlander SUV, not the least of which is a sophisticated new look. This big beast is very sleek now, with a new nose and grille and clean lines in the interior. Additionally, all Highlanders now hit the road with a 3.5-L, 6-cylinder motor and automatic transmission. There’s also more cargo capacity, a standard back-up camera connected to the in-dash display, and the latest in audio and navi systems. All Highlanders also have third-row seating. The XLE V6 AWD model we tested sells for $39,900, and came with 19-inch wheels, leather seating surfaces, flip-up rear hatch glass, and a plethora of other nice-to-have amenities. The base model LE, at $31,680, is no slouch, however, and would make a great choice for a fleet vehicle. The Highlander handles like a much more petite vehicle, and offers a smooth engine feel—there’s no grind and whine that seems common in SUVs with smaller motors. Fuel economy is reasonable in normal driving mode, but in Sport mode this SUV gulps the gas. Toyota claims fuel economy of 11.5L/100km highway and 8.2 city (10 combined). Our test of just over 300km netted 13.6L/100, in both city and highway, much of that in Sport mode. PurchasingB2B.ca
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From a driver convenience and comfort perspective the Highlander delivers in every way. It’s superbly comfortable, and offers intuitive controls for both navi and audio. The cockpit is thoughtfully laid out, with intelligent details like a proper place for your smartphone, complete with a divider to hold it secure, and a gigantic bin between the front seats for purses and other bulky stuff that usually ends up under the passenger’s feet. The cupholders, as well, are cunningly designed to adapt to almost any vessel. Toyota put a lot of brainpower into making the driver of this vehicle feel at home. For $40 grand this Highlander is not the cheapest, but it offers luxury and driving experience well beyond that price point. APRIL 2014 | 23
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Mazda CX-5 By Emily Atkins The CX-5 is a good product for Mazda, with 13 consecutive months of increased sales reported this February, and a 33 percent bump in sales from 2013 to this year. The CX-5 is a small five-seater SUV that offers car-like handling, great cargo capacity and great trim at affordable prices. The all-wheel drive model tested at $33,250, came with a 6-speed automatic, paired with a 2.5-L, 4-cylinder motor that turns out a respectable 184HP. Standard equipment on this GT AWD model included intelligent key system w/push button start, Bluetooth, power moonroof, blind spot monitoring, fog lights, rain-sensing wipers, 19” alloy wheels, a nine-speaker
BOSE audio system, leather upholstery, and dual-zone automatic climate control. Optional extras in the GT Tech package were brake support, Bi-Xenon headlights, adaptive front lighting, headlamp leveling, nav and satellite radio. An entry-level GX model with a manual transmission, 2-L engine and front-wheel drive starts at $22,995, and even this trim level has push-button start, auto-off headlights, a full suite of safety features, and the same 1,835-L cargo capacity (seats down) as the more expensive version. During its test drive the CX-5 performed well in terms of comfort and convenience, and especially handling. It demonstrated a few shortcomings, however. The brakes felt anemic, the engine whines when cold and is slow to warm up, and the electronic interface was odd and occasionally annoying. Perhaps the computer didn’t like my BlackBerry, but it would insist on downloading the phone book each and every startup, a process which took minutes and delayed the phone connection every time. Each time a new email was received the display told me so, demanding a touch input to return the screen to any other mode. Quite perversely, the ability to adjust the automatic wiper settings, which is crucial to safe driving, is locked out while the car is moving. Seems strange to have a car demand action for each and every email, but not allow me to change safety settings. Over an 880-km test run, in both highway and city driving, and without a load, the CX-5 averaged 10.3 L/100km, a far cry from the 8.5 city and 6.6 highway that it’s rated for.
Hyundai Santa Fe By Emily Atkins The 2014 Santa Fe Sport 2.0T Limited AWD is a powerhouse in the crossover utility segment. Updated for this model year with new sheet metal, the third-generation Santa Fe is a good-looking vehicle. And it’s got more than just good looks. During a week-long test drive the Santa Fe performed extremely well, showing that the 2014 model is living up to the 2013’s designation as AJAC’s best SUV. It handles beautifully, especially in ice and snow, offers a comfortable, stable ride, has plenty of power and a responsive automatic transmission. The interior is well appointed, offering lots of cargo space, and well-designed cabin storage options. The sliding rear seats make for an especially comfortable ride for passengers in the second row. Connectivity is intuitive and the big screen is easy to see and use. The top-of-the-line model tested had heated seats and steering wheel, which worked well and were a treat in this cold winter. One quibble is the blind spot warning system, which although it works well, is not very visible when the sun is behind the vehicle. The orange indicators fade out in that lighting condition, especially if the mirrors are a little dirty. 24 | FLEET MANAGEMENT | APRIL 2014
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And the Santa Fe does have a large blindspot, making the warning system a welcome addition. Standard equipment includes heated front seats, power windows, driver’s seat power lumbar support, a six-speaker audio system, Bluetooth, a tilt and telescoping steering wheel with audio controls, and cruise control. The turbocharged 2.0-litre tested develops 264hp and 269 lb-ft of torque on regular fuel. Equipped with standard all-wheel drive, fuel consumption for the Santa Fe Sport 2.0T is rated at 11.4 L/100 km in the city and 8.2 L/100 km on the highway. Over the week, our tester reported 10L/100km doing both city and highway. The model tested starts at $38,899. The base model Santa Fe starts at $26,599. B2B PurchasingB2B.ca
14-04-07 3:06 PMFleet Digest 04-14.
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By Alan Sidorov
Testing with intent A
Roadwork
few years ago, I was working at Laguna Seca racetrack with a couple of very experienced engineers. While taking a break we watched how different drivers went about the business of testing. One engineer commented that beyond an absolute novice, if he saw somebody just flogging around the racetrack doing endless laps with no purpose, he would never consider working with that driver. After a while, you learn that if you want to be a good test driver, it is essential to have a clear goal of what you are trying to learn, on every part of the racetrack, every corner, every braking zone. It really is that specific. I obviously still use that approach on the track, but also apply the principles to how I do road tests, whether for a magazine article or a potential purchase. When I first pick up a vehicle, I am obsessive about going around and measuring everything, trying the different seats, mirrors, control layout, clarity of instrumentation. Looking carefully, you can usually tell whether the engineers were meticulous or not. There are some standard checks, for example the ergonomics, visibility in all directions, smoothness of the gearbox, engine and so on. Now for the drive. In addition to normal chuffing around, do some harder braking, including a proper emergency stop. Sounds obvious, but make sure there is nobody behind you, not even a nun on a moped, who could be hidden in a blind spot. Remember, your highest brake pressure should be early in the braking zone, when kinetic energy is highest. On dry pavement, it takes a serious push to activate the anti-lock brakes. Don’t worry, you won’t hurt anything. Our advanced driving school fleet does thousands of ABS stops in a season without failure. That one stop during your test drive will give you some indication of the vehicle’s active safety. When it comes to acceleration, don’t be fooled by a non-linear throttle, which subjectively makes an automobile feel peppier under light acceleration. You need to figure out how it will do, for example, in over-
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taking, such as getting from 80 to 100kmh going uphill or carrying a load. The more linear the throttle, the more forgiving the vehicle will be in slippery conditions. Whether it is a van, truck or car, everything has its strengths and weaknesses. Try to drive it in the kind of situation in which it will be used the most. Take a very careful look at the option list. I recently tested a 2014 Subaru Forester. I really liked the design, especially in terms of outward visibility, solid structure, and good dirt road capability. The manufacturers usually give us vehicles equipped with all the bells and whistles, which really does not suit the way I live. I prefer a good cloth seat to leather, and simply do not want an automatic, no matter how good it is. I drive on snowy roads in the mountains quite often, and do not want a transmission that does a single upshift or downshift on its own. Turns out Subaru still offers a sixspeed manual gearbox and cloth seats in a decently equipped Forester. It’s less expensive too. Be very careful of outdated information. A friend may have had the same basic model a few years ago, and loved or hated it. But things change quickly in the automotive world these days. A great example would be another recent test vehicle, a Dodge Grand Caravan. A few years ago, I took a Grand Caravan on a tour of Nova Scotia. The Stow and Go seats, which folded flat into the floor and made the thing an instant camper, were the best part of that minivan. The money saved on hotels went towards some fine seafood dinners. Other than that, quality control, handling, etc were all on the feeble end of the scale. The current version was much better in every respect—seats, driving position, ergonomics, and build quality. It even handled the curves on the Sea to Sky Highway with a degree of competence. Not up to the standards of the better European vans, but you can’t buy those in this country anyhow. And, it still had the Stow and Go seats. It pays to do your own research and plan a proper road test. B2B
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14-01-14 9:27 AM 14-04-07 11:04 AM
Technology
Cloud Buying
What to consider during cloud computing, subscription-based software negotiations by Phil Downe
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uring the past year I’ve come across a few deals where the client was given an incentive and, following a little negotiation, moved their in-house, licensed software application to a SaaS (Software as a Service) model. In one case, the client was given no alternative. The software vendor had changed their delivery model and forced the client to migrate over to their SaaS alternative. SaaS should be distinguished from PaaS (Platform as a Service) and IaaS (Infrastructure as a Service), which are somewhat different models with unique issues. Cloud-based solutions are an increasingly popular alternative in how one might deliver business value to the organization. Vendors have re-packaged old clichés like economies of scale, virtualization of environments, automatic upgrades and scalability into new cloud marketing programs.
Sales reps have also re-tooled their pitches to extol the virtues of subscriptions (subs) over what they now claim are costly, cumbersome in-house solutions. The one thing that hasn’t changed is the vendor’s revenue recognition focus and that remains their most compelling quarterly objective. Maximize the revenue and get it in as early as possible but in any event, before the end of the quarter. I’ve always said that vendor reps can’t see beyond the end of the quarter and the same holds true today no matter what model they’re selling. But more on that later. As a buyer, what are some of the factors to consider when buying subscription-based software? The first thing I do is look far down the road and ask myself what alternatives I’ll have once I’ve swallowed the subscription pill. The fewer options you have the more red flags you should see. At a minimum, the tougher it is to switch vendors the more time you should spend nailing down your renewal options. When evaluating your initial alternatives, spreadsheet all the costs of a traditional in-house solution running on a server with a full-paid, non-exclusive, perpetual application license. These should include the annual support charges, expected growth and any professional services fees. Then compare those longterm costs to the sub costs and implementation of the cloud solution based on the same number of users, future growth and annual sub price increases (if any exist). There will likely be
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professional services fees, as well. There’s almost always configuration and customization work in large-scale solutions. Run an analysis for the entire potential lifecycle of the solution. Five years is the traditional analysis period for most business transactions and SaaS providers have considered this when they created their pricing models. If you do a longer-term analysis with charts for both solutions I’ll guarantee you the total cost of ownership (TCO) line will cross at just after five years. At that point the SaaS line will continue to rise each and every year above the in-house TCO line. Subscription pricing Get future price protection, expressed as a percentage of list price, built into the deal and insist on full disclosure of list prices. Many vendors don’t publish them, but with no real “stake in the ground” the door is wide open to re-buy price increases and higher sub pricing for additional users. The vendor will say that value gets added to the software through periodic upgrades but you can counter with economies of scale. As more subs are sold the vendor’s margins go up at the same time as their average support effort comes down, especially once you are a mature user. In addition, can anyone dispute the fact that technology costs tend to go down over time? Why would a client agree to pay a higher price for the same subs that you have re-bought every year for the last five years?
Incremental discounts Incremental discounts tied to increased volumes should also be considered. Five hundred subs should carry a higher discount than two hundred and so on. It’s always best to ask for the clip levels and associated discounts right up front. Leave it until later and you’ll find that if you cut back a little the unit pricing is going way up. Yet if you need to buy more you’ll be told you are already at critical mass and no further discounts are available. Support Online help facilities, FAQ databases or an email request template on the vendor’s website might be all you have access to under the normal support plans. If you actually need to speak with someone you might be looking at a significant monthly or annual cost for an upgraded support plan. Service Levels Service levels for latency, availability and problem resolution at a minimum are highly recommended. Remember, a deal without consequences is a deal without direction, so work in some reasonable credits for missed service level agreements, (SLAs). Revenue Recognition While all of the above should be on your high-priority issues list, keep in mind the first issue on your vendors’ list is revenue recognition, (rev. rec.). Following the dot.com collapse in March of 2000 rev. rec. accounting rules were tightened significantly. For our purposes they can be summed up as follows: • Persuasive evidence of an arrangement exists;
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• Delivery has occurred; • T he vendor’s fee is fixed or determinable; and • Collectability is probable. Vendors have more specific rules for recognizing revenue so any time you threaten their commission you can expect a battle for concessions. For example, if an SLA breach calls for a 10-percent credit on the monthly subscription price—and this is possible every month—the vendor may only be able to recognize 90 percent of the total sale. Even if the vendor has a perfect track record on availability, they will resist adding credits to the deal because of rev. rec. Another common occurrence is multiyear price bundling, which always comes late in the game. You thought you’d just subscribe to what you needed and re-buy the subs each year. That instant scalability for growth or downsizing was, after all, an attractive selling point. Then, when you got into the details there was no guaranteed long-term price protection after year one. If you want protection you buy the subs now for future delivery. You also found out the total cost of ownership was more than you budgeted. So you negotiate. You want a better discount so they said, “buy more!” The next thing you know you’re committed for five years and you are now into what’s basically an installment payment plan for 1,000 subscriptions. The vendor gets to book five years of revenue but only if they make one huge final concession, they’ll give you immediate access to all 1,000 subs. But you only need 200 for year one, so why has the vendor just devalued their own product? Have a look back at the second bullet for rev. rec. rules. It’s good for the vendor. They got what they wanted and now—forewarned on some of the underlying issues—you can improve your result as well. These are just a few of the negotiating issues surrounding cloud-based software and services, which can be a minefield for an organization seeking to maximize its investment in IT and optimize value for both internal and external clients. B2B Phil Downe is an IT negotiations contractor and president of Relations Management Group Inc. based in Toronto. He can be reached at 416-920-2228 or Phil.Downe@ITnegotiations.com.
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September 18-19 SAVE THE DATE!
www.TravelProcurementSymposium.com
September 18-19 Fallsview Casino Resort, Niagara Falls, ON
Whether you’re a procurement practitioner new to the travel portfolio or a seasoned veteran looking to enhance an established program, the 2014 Travel Procurement Symposium is designed to help you take your program to The Next Level!
In Partnership with
PurchasingB2B magazine, in partnership with the Global Business Travel Association (GBTA), is pleased to present Travel Procurement Symposium —a high-level event that has been developed specifically to address the needs of Canadian senior procurement and supply chain management professionals with responsibility for their companies’ meetings, events, and business travel spend. This symposium features up-to-date insights, tools and strategies to optimize travel and meetings spend while aligning procurement with overall business performance. The event brings together buyers and suppliers in the procurement and business travel spaces, and offers both groups the opportunity to network with peers and leading industry experts.
Delegate registration opens May 2014 Featuring Keynote Speakers: Hal Johnson & Joanne McLeod
For further information, visit www.TravelProcurementSymposium.com To discuss how you can get involved, please contact Dorothy Jakovina, Publisher djakovina@bizinfogroup.ca 416-510-6899
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ProcureCon Canada 2014
ProcureCon North Procurement practitioners focused on learning from each other at the ProcureCon Canada 2014 conference by Michael Schwartz
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wide breadth of topics and speakers were covered at the ProcureCon Canada conference in Toronto March 17-19. The event focused on procurement practitioners learning from each other, and featured education sessions, panel discussions and interactive roundtables. On the first day, Kathy Simon, director, strategic sourcing and vendor relations at Indigo Books & Music, presented a procurement matrix with five levels—level one was the least strategic, while level five was the most strategic. Sitting at the first or second level isn’t bad, Simon stressed, since procurement can progress. Organizations can also backslide. “It’s important to understand where you currently are and where you’d like to be,” she said. Procurement benefits from a balance of strategic and tactical, Simon noted. It’s important to have a high-level champion backing efforts. She counseled having proper templates to reduce time wasted searching. To conclude, Simon advised building a plan to bridge the gap between where you are and where you wish to be. PurchasingB2B had a strong presence at the conference, with editor Michael Power acting as chairperson for the second day and moderating two panel discussions. One panel looked at procurement tools such as e-Procurement, e-Auction and negotiated RFPs. The second panel looked at optimizing payment strategies for more security, efficiency and spend visibility. Panelists discussed how p-card programs can streamline the procurement process. Also on the second day, Janice Davis, group VP at Shaw Communications, spoke about sustainability’s benefits. She covered misperceptions surrounding sustainability. A sustainable supply chain is not a short-term fix, Davis said. It requires methodology, category work and relationships. Ensuring employees are part of the process makes a good company great, she noted. “Have a plan to achieve your targets,” she said. Bill Michalopulos, general manager of procurement at Canada Post, described procure-to-pay, through which the organization’s work methods, processes and technology had been transformed. Canada Post enjoys continuous improvement, with reduced cost and time for the procurement cycle, consolidated vendor base, enhanced customer satisfaction, increased company profile and integration of accounts payable with procurement, he said. Spend analysis and visibility A panel on spend analysis and visibility featured Eugene Fernandez of Public Mobile and Michael Shelton from Siemens Canada— Energy. Fernandez addressed the verification of total courier (small parcel) spend—often included in the part’s invoice. Implementing the right spend analysis system was crucial but, even then, sometimes part numbers had to be reclassified, he said. Fernandez warned that if a contract value was in the $50 million bracket, approval was lengthy. For companies with global presence, assembling spend data could take four to eight weeks, leading to lack of clarity on categories sourced.
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Daniele Gorla, Canadian Pacific, discussed what procurement needs to achieve simple solutions. Establishing effective contracts avoids high costs, she advised. Long-term contracts, with lawyers advising on liability and indemnification, can help, Gorla noted. Insurance is another vital aspect. Negotiations, make good relationships outstanding. Even the style in which negotiations are phrased boosts strategic relationships. Stéfane Belleau, director of national procurement with Intact Financial Corporation, stressed contract compliance—but also document compliance—for updating documents, being reminded of their expiry and accurate electronic signatures. CPOs need full compliance and automation technology, he noted. Increased spending means contracts centralized within a single tool, and streamlined authorization practices. Jon Heppenstall, formerly of Staples Promotional Products, spoke about supply chain risk, listing manufacturer/supplier bankruptcy; product safety/quality; delays in delivery or non-delivery; and strikes. Contingency plans and proactive measures are essential. HR, language ability, experience with offshore circumstances, an educated workforce and vendor strategies play a part. On the final day, a sustainability panel featured Deloitte Canada’s CPO Geoffrey Parsons, Patrick Etokudo, director of supply chain management at Enbridge and Jeff van Geel, strategic sourcing manager at 3M Canada. His organization strives to get more sustainable materials for packaging and buying local, van Geel noted. In Toronto, said Parsons, Deloitte had consolidated space to a downtown location and brought 3,500 staff into one building. More sustainable procurement in looking at furniture and other fixtures. The conference offered a range of topics, focused sessions that kept the agenda moving. Attendees left with several practical tools in their toolkit. B2B —With files from Michael Power
For more information on ProcureCon Canada, visit www.procurecon.ca. APRIL 2014 | 31
14-04-08 11:31 AM
LE PROFESSIONNEL
Par Cheryl Paradowski
Participez bénévolement à notre nouveau groupe de discussion et aidez-nous à vous aider à tirer le maximum de votre adhésion à l’AGCA
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oujours à l’écoute de nos membres, nous avons entrepris de nombreux projets, petits ou grands, pour nous assurer que les formations et les services offerts répondent à leurs besoins. La transformation du programme d’accréditation fondé sur les principes vers un programme de formation stratégique et le changement de titre qui a suivi (d’approvisionneur professionnel agréé ou a.p.a. à professionnel en gestion de la chaîne d’approvisionnement ou p.g.c.a.) découlait autant des besoins des membres que des exigences du marché. D’une part, nos membres nous demandaient de refléter l’évolution de leur rôle qui englobe tous les domaines de la chaîne d’approvisionnement et non plus seulement les achats, et d’autre part, la fonction de gestion de la chaîne d’approvisionnement devenait un partenaire plus stratégique que tactique au sein des entreprises. Possibilités accrues de formation Pour alléger leur agenda chargé, nos membres nous ont demandé plus de flexibilité à l’égard des formations offertes. Il est donc désormais possible de suivre en ligne des cours du Programme menant au titre de p.g.c.a. et de la Formation en gestion des approvisionnements. De plus, nos membres du secteur public voulaient des cours mieux adaptés à eux, alors nous avons travaillé avec le Secrétariat du Conseil du Trésor du Canada par l’intermédiaire de l’École de la fonction publique du Canada, et avec National Education Consulting Inc. afin de donner plus d’importance au secteur public dans le Programme menant au titre de p.g.c.a. Meilleurs partenariats Afin de renforcer le partenariat au sein de l’AGCA, nous avons créé le Conseil consultatif des corporations qui offre aux partenaires internes de l’AGCA une
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avenue supplémentaire pour discuter de diverses questions. De plus, au lieu de tenir ses réunions toujours au même endroit, le conseil d’administration se déplace dans les diverses provinces afin de donner aux membres l’occasion de rencontrer leurs représentants nationaux. Nous avons également cherché à renforcer notre leadership au sein de l’industrie en signant des protocoles d’entente avec des organismes qui partagent nos objectifs stratégiques et, plus récemment, en procédant à la fusion historique de l’ACGA et de CAL afin de former la nouvelle AGCA et de devenir ainsi la voix de la chaîne d’approvisionnement au Canada. Ces changements découlent en grande partie des commentaires émis par nos membres dans nos sondages officiels effectués à quelques années d’intervalle selon les ressources disponibles, mais nous reconnaissons que nous avons besoin d’un mécanisme pour prendre le pouls des membres entre ces sondages. Adaptation plus rapide et meilleure réponse aux besoins des membres Pour faire le pont entre deux sondages auprès des membres, l’association aimerait former un groupe représentatif de membres bénévoles qui pourrait agir comme groupe de discussion permanent et réagir rapidement aux idées et aux projets soumis, ou même commenter les activités courantes. Nous sommes donc heureux d’offrir aux membres de l’AGCA une occasion de rehausser leur expérience au sein de l’association tout en contribuant à la satisfaction des membres. Bien que les sondages formels constituent une source précieuse d’information, ils sont coûteux et il faut souvent compter plusieurs mois avant d’obtenir les résultats – le temps de rédiger les questions, d’attendre les
réponses et, enfin, d’analyser et de compiler les résultats. Notre solution réduira le temps de réponse de plusieurs mois à quelques jours et pourra être appliquée à peu de frais. Ce projet ne remplacera pas les sondages formels auprès des membres, mais il s’agit d’un moyen simple de recueillir les commentaires des membres entre deux sondages. Le recrutement commencera bientôt et durera quelques mois, alors surveillez vos courriels. Nous avons aussi confié à Logit Group le mandat de communiquer avec les membres par téléphone afin d’assurer qu’ils ne ratent pas cette occasion. Veuillez prendre quelques minutes pour les écouter afin de découvrir comment vous pouvez contribuer à rehausser les services offerts par votre association. Soyez assurés qu’ils ne vous vendront rien; le but de leur appel sera uniquement de solliciter votre participation bénévole à notre nouveau groupe de discussion. Les personnes qui accepteront de participer à ce groupe devront s’engager à répondre à de courts sondages mensuels (de 5 à 10 minutes) et, occasionnellement, à prendre part à des téléconférences ou à des groupes de discussion. Nous demandons en outre aux intéressés de s’engager pour un mandat de deux ans. Les membres qui participeront au groupe pourront obtenir des points de formation professionnelle continue en vue du maintien du titre de p.g.c.a. et seront admissibles au programme de reconnaissance des bénévoles; leur travail sera publiquement reconnu sur le site Web national de l’AGCA et ils recevront des invitations spéciales à des événements exclusifs de l’AGCA. Pour signifier votre intérêt, veuillez envoyer un courriel (dans lequel vous précisez votre numéro de membre) à l’adresse focusgroup@scmanational.ca. B2B
PurchasingB2B.ca
14-04-07 11:06 AM
THE PROFESSIONAL By Cheryl Paradowski
Volunteer for our new focus group and help us help you get the most out of your SCMA membership
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e have always strived to be responsive to our members’ needs. This was evident in the many initiatives we’ve undertaken, both large and small, to make sure that our association and our educational offerings satisfy the needs of our members. The significant redesign of our designation program from a principlesbased curriculum to a strategic program and its subsequent rebranding from Certified Purchasing Professional (C.P.P.) to Supply Chain Management Professional (SCMP) was as much driven by member needs as it was by market forces. Our members demanded that we reflect the evolving nature of their roles which were moving to encompass all areas of the supply chain and not just procurement, and the shift of the supply chain function from a tactical partner to a strategic partner in an organization. Improved learning opportunities As our lives get busier, members have told us that they want more flexibility in how they receive our educational offerings, so we have launched online study options for our SCMP designation program and our SMT courses. Members in public sector want more offerings specific to them so we have partnered with the Treasury Board Secretariat (TBS), through the Canada School of Public Service (CSPS), and National Education Consulting Inc. (NECI), to offer a broader public sector focus to the SCMP program.
Enhanced partnerships To strengthen the SCMA partnership we created the Institute Advisory Committee to allow for another avenue for concerns to be addressed between internal SCMA partners, and we changed from having fixed-site board meetings to rotating meeting locations across the country to give members a chance to meet their national representatives. We have also sought to strengthen our
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“Recruitment will start soon and continue over the next couple of months, so please watch for invitations to participate in our focus group via email.” leadership position in the industry with formal Memorandum of Understanding agreements with organizations that complement our strategic objectives, and most recently, our historic amalgamation of PMAC and SCL to form the new SCMA firmly establishing ourselves as the voice of supply chain in Canada. These changes were in large part driven by feedback from our members through our formal member surveys that occur every few years, as resources permit, but we recognize that we need a mechanism to take the pulse of our members in between surveys.
Adapting faster to member needs with timely feedback To supplement the time in between our formal member surveys, the association would like a representative group of volunteer members who could serve as a standing focus group and that could respond quickly to ideas or initiatives, or even comment on on-going activities. For this reason we are pleased to announce a new opportunity for SCMA members to enhance the member experience for themselves and benefit all members at the same time. While the formal member surveys give us a wealth of information, they are expensive and results often take many months to return – as much time is spent creating the questions, waiting for responses, and finally analyzing and compiling the results. What we’re suggesting will cut down the response time to days instead of months and will
incur only a minimal cost. This initiative will not replace our formal member surveys; it is intended only as a simple measure to provide us with member feedback in the time between the surveys. Recruitment will start soon and continue over the next couple of months, so please watch for invitations to participate in our focus group via email. We have also contracted the Logit Group to contact members via telephone to ensure members don’t miss out on this opportunity. Please take a few minutes to speak to them to find out how you can help enhance our association. And rest assured that they will not be soliciting you regarding any SCMA products or services; the call will only be for the purposes of recruiting for our new volunteer focus group. Those who agree to participate in our focus group will commit to participating in short monthly surveys (five to 10 minutes in length) and occasionally in conference calls and/or focus groups. We will also be asking those who are interested to commit to a two-year term in this group. Members who participate in the group are also eligible for points towards their CPD requirements and Volunteer Award eligibility, will be publicly recognized on the national website and will receive special invitations to exclusive SCMA events. If you would like to add your name to the list, please send an email (include your member ID) indicating your interest to focusgroup@scmanational.ca. B2B
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The Law Live
Measuring Due Diligence Survey illustrates how public procurement views the state of the sector by Paul Emanuelli
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he Procurement Law Office recently circulated a procurement due diligence survey that helps public institutions assess how they measure up to legal due diligence standards and compare to other organizations. We received feedback from hundreds of respondents across Canada. This column highlights how public institutions assessed their practices in eight target areas, providing a statistical snapshot of the current state of procurement in the Canadian public sector. While 83 percent of organizations responded “Strongly Agree” or “Agree” when asked if they comply with open competition duties, only 67 percent responded the same when measuring compliance with ethical standards during the bidding process. That dropped to 35 percent on whether their accountability controls measure up to due diligence standards, with 65 percent saying “Somewhat Agree”, “Disagree”, “Strongly Disagree” or “Don’t Know” regarding adequacy of their governance measures. A majority reported “Strongly Agree” or “Agree” to creating clear requirements and formats. But they were less confident with project approval and review processes and with the proper definition of project roles and responsibilities. The numbers reflected a need to place greater emphasis on project governance and coordination. Over 70 percent responded “Strongly Agree”, “Agree” or “Somewhat Agree” when asked if they promote awareness of format use, regularly update their templates and use flexible tendering formats. However, a minority (16-29 percent) responded “Somewhat Disagree” or worse when asked the same three questions about their tendering templates, showing that many institutions lag behind when it comes to mitigating tendering risks with overhauled formats. While 89 percent of institutions responded positively when asked if their solicitation documents were easily readable, only 78 percent responded similarly when asked if their institutions clearly define drafting roles and responsibilities. That dropped to 72 percent on whether they properly defined their internal drafting process. These numbers underscored the need for better
coordination across the purchasing process. Over 60 percent said they “Strongly Agree” or “Agree” that they properly scope procurement documents and 75 percent responded the same on the transparency of evaluations. That number dropped to 46 percent when it came to meeting material disclosure duties. Since the failure to properly disclose material performance conditions in solicitations is a major cause of subsequent project delays and cost overruns, this reflected a significant risk factor in the procurement cycle. Contract management contained the weakest confidence levels of any area, with a majority responding “Somewhat Agree” or worse to all questions. Only 48 percent said they “Strongly Agreed” or “Agreed” when asked if they had clear post-award scope management practices. That number dropped to 46 percent for clearly defined contract administration structures and sank to 29 percent for vendor performance tracking. The numbers show a clear need to improve contract management practices to improve transparency and achieve value for money. For training, over 80 percent of procurement operations expressed overall confidence (“Strongly Agree”, “Agree” or “Somewhat Agree”) in their procurement hiring standards and training. That dropped to 73 percent, with 60 percent saying “Somewhat Agree” or worse, when asked whether there was broad awareness and proactive avoidance of procurement-related legal risks. This illustrates the need to implement broader procurement training programs across public institutions. For innovation, 54 percent of organization’s responded very favourably (“Strongly Agree” or “Agree”) when asked if their procurement operations received sufficient attention from senior management. However, that confidence level dropped to 41 percent when it came to technological innovation and sank to 31 percent when it came to tracking market conditions and maintaining commercially reasonable procurement practices. The numbers underscored the need to raise long-term planning issues with senior management and to promote proactive change management strategies. While institutions generally expressed confidence in complying with the “hard” due diligence benchmarks that can be implemented through top-down measures (like open competition policies, standard templates and formal evaluation protocols) they were less confident with some of the “soft” indicators that require a more integrated approach to governance (such as roles and responsibilities, approval and drafting processes and contract administration). To encourage compliance, procurement professionals should adopt a softer touch, promoting proactive awareness and implementing strategies that help integrate procurement standards across their organizations. B2B Paul Emanuelli is the general counsel of the Procurement Law Office and can be reached at paul.emanuelli@procurementoffice.ca.
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