PurchasingB2B August 2014 by Annex Business Media

Canadaâ&#x20AC;&#x2122;s magazine for procurement and supply chain management professionals

AUGUST 2014

feeling the energy Highlights from SCMA National Conference Edmonton

Also inside: Purchase-to-pay automation GBTA Energy, Resources & Marine Symposium Total cost of ownership PM 40069240 $18.00

SUPPLY CHAIN FINANCE

Canada’s magazine for procurement and supply chain management professionals

features 80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9

www.PurchasingB2B.ca

Publisher

Dorothy Jakovina 416-510-6899, djakovina@bizinfogroup.ca Addressing issues affecting Canada’s public procurement professionals EDITOR

Michael Power 416-442-5600 ext 3259, mpower@bizinfogroup.ca Fleet Management/CAR Editor

Emily Atkins 416-510-5130, eatkins@bizinfogroup.ca Art Director

Sandy MacIsaac 416-442-5600 ext 3242, smacisaac@bizinfogroup.ca

Contents Vol. 56, No. 5 • AUGUST 2014

10 Feeling the energy

p.14

Edmonton hosts annual SCMA conference.

13 end-to-end efficiency The advantages of P2P systems.

14 financing the chain Recent trends in supply chain finance

28 e nergy logistics Moving people and goods in the oilsands.

30 s taffing the oilsands Filling the energy sector’s employment needs.

p.28

Production Manager

Kim Collins 416-510-6779, kcollins@bizinfogroup.ca 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 56 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

also inside

departments 4 Online News 5 Business Front 6 Ask The Expert

7 Procurement Profile

34 The Law

Collaboration Is King

Editorial

nyone involved in procurement and supply chain management these days has seen a shift whereby collaboration and cross-functional knowledge and flexibility is increasingly important. It’s a trend I’ve witnessed at industry conferences, for example, where speakers have mentioned the importance of such knowledge. The recent ISM2014 Conference in Las Vegas featured an education session called Boardroom Financials. The speakers stressed the importance of learning the language of finance as a way to directly communicate procurement’s value to the CFO and the C-suite. If the finance department runs the risk of underestimating the value of cost avoidance, procurement must show that value using language finance understands. Procurement and finance share certain characteristics. Finance tends to be strategic in its thinking, just as procurement does. If your procurement organization has recently been aligned under finance, it pays to get to know and love the department. Yet another relationship exists between travel and procurement, which is why we publish our sister magazine, Travel Management Canada. Travel falls within the portfolio of many procurement practitioners, so understanding the needs of the traveller, the risks business travel can pose and how to mitigate them, is important. The language of the travel manager is another dialect procurement must strive for fluency in. For procurement, collaboration and cross-functional savvy is more important than ever. General business skills—gained through an MBA or time in other departments—would also serve well. You never know where those skills might lead: Apple Inc’s current leader, Tim Cook, spent time as the company’s chief procurement officer. AUGUST 2014 | 3

What’s new on

.ca Events

Features www.PurchasingB2B.ca/features

Should Canadian companies deal in Chinese currency? Travel Procurement Symposium September 18-19, Niagara Falls, ON Whether you’re a procurement practitioner new to the travel portfolio or a seasoned veteran looking to enhance an established program, please join us for the 2014 Travel Procurement Symposium!

http://www.travelprocurementsymposium.com/ CAMSC Business Achievement Awards

E-invoicing Advantage A report on e-invoicing’s growing significance and how it can help companies achieve financial visibility, control and reduce costs.

September 24, Toronto, ON This event recognizes the leaders of supplier diversity and celebrates the achievements of innovative minority and Aboriginal suppliers.

www.PurchasingB2B.ca/topic/events/ SCMAO 2014 Annual Conference

Fleet Management 2015 Sneak Preivew Check out our sneak peek at what’s coming up for the 2015 model year. Fleet-friendly cars, trucks and SUVs that will be making the selector list next year.

October 24-25, Mississauga, ON. This event includes two days of education, networking and up-todate information on industry trends and best practices.

www.PurchasingB2B.ca/topic/events/

www.PurchasingB2B.ca/category/3-fleet/

Social Media Stay up-to-date, connect with peers and join the conversation by connecting with PurchasingB2B!

Enhanced Features www.PurchasingB2B.ca/features SCMA National Conference Take a look at our website to read more from this year’s SCMA Conference in Edmonton. (page 10)

Photo Contest!

Do you fancy yourself a shutterbug? We’re looking for your Canadian landscape photo submissions for our October 2014 issue. Send your high-resolution images to Sandy MacIsaac at smacisaac@bizinfogroup.ca.

Connect with editor Michael Power and stay up-to-date with what we post online.

Submissions Canada’s magazine for procurement and supply chain management professionals

2013

OCTOBER 2013

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Business Front

Merit Is Not A Four-Letter Word by Michael Hlinka

f you had to name two of the most successful up-start companies of the past 20 years, I wouldn’t be surprised if Google and Facebook would top the list. Google transformed the way we find information on the internet, Facebook the way that people interact. And the investing community has spoken: At the time of writing, Facebook has a market capitalization of $173 billion and Google comes in at $389 billion. Yet according to one of the stupidest pieces of drivel I’ve come across in a very long time, “a lack of diversity could have a direct impact on their bottom line.” The writer is Jessica Guynn Elizabeth Weise and her piece appeared in USA Today. What is the problem with those companies—and what exactly is meant by a “lack of diversity”? As it turns out, their workforces are too male, too white and too Asian. Under-represented groups include women, blacks and Hispanics. To that list (this is hers after all) let me add a few: there are almost no Inuit in Silicon Valley. Trying to find an Amish programmer would be like finding a needle in a haystack. How many Nepalese Sherpa are there writing code? Weise provides some statistics that “prove” her case. Nationally, blacks make up 14 percent of the U.S workforce and Hispanics 12 percent. At Google, three percent of the staff are Hispanic and two percent black. At Yahoo and Facebook, four percent are Hispanic and two percent black. Ergo, discrimination exists, right? She suggests that it may be “unconscious”—that is, you tend to hire people in your network whom you know. And this is unquestionably true. Right now, in my small company (I’m an educational provider for the financial services sector) I have five contract employees. There is Jason, a white male Canadian. There is Anna, a female Chinese-born (now a Canadian citizen). There is Asad, a male Pakistani-born (permanent resident.) There is Kirushnalini, a female Canadian-born, parents of Sri Lankan heritage. There is Aeran, a female Korean-born of Chinese heritage, studying in Canada on a student visa. By my count, there are two men, three women, and four of the five are “visible” minorities. However, in Weise’s bizarre world-view, the fact that two are Asian may reduce the diversification benefits, but at least they are female. I suppose that this might mean I’m some sort of model employer! But not for the simplistic reasons that are implied by doing a head count based on sex and national origin. I consider myself a model employer, because like the major companies in Silicon Valley, I focus on merit, first and foremost. All of the people I’ve hired were students of mine before they started working for me. They had demonstrated their work ethic in advance of drawing a pay cheque. All of the people I’ve hired indicated a passion for the field in their academic pursuits. All of the people I’ve hired are people whom I consider of superior moral fibre. Something that seriously impacts hiring for specialized work, whether it’s the computer industry or my line of business, is the self-selection process: who comes to the employer with the required skills? Let’s talk about Google and Facebook. Overwhelmingly, they need computer scientists and programmers. What dePurchasingB2B.ca

grees are black Americans graduating with? According to numbers I saw from 2010, blacks gravitated towards the following disciplines (and I use the term loosely): school student counseling, human services and community organization and counseling psychology. In my day, we had a term for courses like these ones: bird courses. Tweet-tweet—you’ve got a degree. But why would companies like Google and Facebook have any need for you?

“I consider myself a model employer, because like the major companies in Silicon Valley I focus on merit, first and foremost.” My suspicion is that the “shortage” of blacks and Hispanics in Silicon Valley is much more a function of the supply side of the equation, than the demand side of the equation. But advancing a thesis like that isn’t likely to sell many newspapers, and that’s the business that journalists like Weise and USA Today are in. Rational and sober analysis is useful precisely to the extent that it might increase circulation. Otherwise, to Hades with it! Weise’s “theory” is that Google and Facebook will be held back in the future because of their lack of diversity. The logical corollary, of course, is that they should already have been held back in the first place if their selection process was anything but talentbased. That’s the simple and commonsense truth. It’s about merit and nothing else. In that respect, perhaps Google and Facebook don’t have “diverse” workforces because these two organizations are only concerned about excellence, which is merit-driven. On the other hand, it seems to me—a casual reader of USA Today—that this is a newspaper that is far more interested in “diversity” than even competence. B2B Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network. AUGUST 2014 | 5

Ask The Expert

Game plan

What’s the difference between procurement and strategic sourcing? By Linda Craig

6 | AUGUST 2014

hen companies discuss the acquisition of goods and services, sourcing and procurement are two terms that are often used interchangeably. While they’re related, they are in fact two different concepts. Procurement is more transactional—think purchase order, fulfillment and payment. It essentially involves steps that are carried out with the focus on one item at a time. Other than knowledge of, perhaps, the last price paid or how many units were purchased previously, there is a limited historical view. While much effort is made to streamline the processes involved and identify any possible efficiencies, procurement still falls squarely beneath the operations umbrella. If you were to think of procurement using football terms, the activities can be likened to the set plays that are carried out during the course of a game. Sourcing, on the other hand, is more strategic. Again, compared with football, you can think of it as the overall game plan. There’s a lot of behind-the-scenes work that has to be done, both on and off the field, to ensure that all the necessary components are in place (people, training, equipment and so on) so those set plays can first be created and then run successfully. Considering that, for the most part, a company’s purchasing activities account for the largest capital expenditure, devising a strategy to achieve the ultimate return on investment makes sense. This is where strategic sourcing comes in. It involves a more holistic viewpoint where other considerations besides just price point come into play. It requires the consideration of many factors that, when combined, can provide sustained cost savings, stability and optimization of how goods and services are obtained. Its evolution is fluid and constantly improving. Sourcing strategies don’t develop in isolation but rather are the result of collaboration and coordination between various areas within a business such as sales, marketing, operations and technology, finance and HR. The discussions revolve around an awareness of and alignment to corporate objectives.

Data analysis—past, current and projected—is a key component of strategic sourcing. It’s not enough to base decisions on what the point of purchase cost is, but rather the total cost. For example, perhaps it makes more sense to buy in greater volume, which in turn can lead to better transportation optimization. Drilling down further, how will more inventory affect warehousing costs? By looking at pricing trends companies may decide to change when they do their buying to increase their purchasing power. To further optimize the process, it may make sense to develop partnerships with other companies. Vendor selection and management is also an integral part of sourcing. Again, it’s not just about the lowest price point but which vendor provides the greatest overall value and consistent performance. Clearly, much can be gained from having a sourcing strategy. It not only provides a positive trickledown effect for the company but the potential for customers to benefit as well. For example, cost containment alone allows companies to keep product prices from rising, which is good for consumers, which may lead to increased demand and additional revenue. While larger companies are more likely to have adopted strategic sourcing practices, there’s no reason why smaller companies should think that the size of their operation limits what they can do. Step beyond procurement and consider a sourcing strategy. You don’t need to make a huge change—even small, incremental changes over time can provide value. Start by broadening the focus beyond individual transactions and start seeing the forest for the trees. An easy place to start might be by examining vendor agreements. Based on day-to-day, week-to-week transactions that take place, there’s already a lot of vendor interaction. Why not take the opportunity to leverage the relationship to the next level and maximize the potential? Procurement Professional Tip: Go beyond the point of purchase cost and think about them in terms of end-to-ends. From identification of the need through to receipt, are there any additional, associated costs that haven’t been considered? Management Insight: Even if your company has a strategic sourcing strategy, when was the last time it was actively re-visited and re-evaluated? While the plan you have in place may be working well, don’t become too complacent. As economic, political and environmental forces tend to change, continue to evaluate and measure your sourcing strategy to ensure you’re not missing improvements that could be made. Take some time to look at the way your company approaches strategic sourcing and make it a goal to achieve the best value game plan. B2B Linda Craig CSCMP, CCLP, CHRP, MBA, is the managing partner of RSVP (Retention Strategy Value Partners), a strategic supply change innovation organization. Reach her at Linda@retention.ca.

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Procurement Profile

People, Learning And Strategy Kathy Simon, director, indirect procurement, Indigo Books & Music Inc.

How did you get into the procurement/ supply chain field? I was a customer service representative at a manufacturing firm and when the buyer/planner left, the general manager asked me to take over. I fell in love with the field and six months later enrolled for my SCMP. I ventured into finance but realized indirect procurement and strategic sourcing is my element. Having finance experience helped, and I’ve been fortunate to work in industries like manufacturing, distribution, transportation, banking and retail. I touched various areas of supply chain/procurement such as buying, inventory management, logistics, strategic sourcing and vendor management. I settled in strategic sourcing/indirect procurement. What does a typical workday look like? I’m responsible for Indigo’s indirect spend, including implementing a procurement policy, spend review, identifying savings opportunities, vendor-base rationalization and execution of procurement initiatives through RFxs. My immediate focus is to standardize our procurement processes and templates, develop Indigo’s procurement strategy, establish business relationships with internal stakeholders and vendors and to demonstrate indirect procurement’s value and contribution. I’m in meetings most days regarding procurement projects with business units or initial discussions about what procurement could do for them. I also do research and analysis and build our strategy. What do you like most about your job? People, learning and strategy. I look after a wide variety of portfolios and categories so connecting with people is rewarding. Helping people achieve departmental objectives helps to keep me going. I love participating in procurement initiatives for goods or services that I know little about, which requires learning and

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bringing myself close to the knowledge level my business unit has. Procurement can’t be merely a transactional group executing purchase orders. We must ensure that procurement helps to formulate corporate strategy and to provide input for budget preparations.

What career highlight stands out most? When I got my CSCMP designation—it took a lot of effort to get through the courses, participate in a week-long in-residence program and write the two-day final exam—while working full-time. I’m especially proud since English isn’t my first language (Hungarian is my native language and I studied Russian and French). What are your future plans? Continue my career growth and return to teaching, which I used to do at a community college. Take on speaking arrangements at conferences so that I can fuel the passion of fellow procurement professionals. I’m also considering an MBA.

What advice would you give to those considering a career in procurement? Demand is high and there is a shortage of well-skilled people. Those new can be intimidated by negotiations or contract drafting. You can learn, grow and improve, but if you don’t ask questions you won’t get far. Nail that down and everything comes more naturally. B2B

7 | MAY 2014

AUGUST 2014 | 7

Head Professional Development Directory

byline

TO ADVANCE YOUR CAREER, LEARN FROM INDUSTRY EXPERTS. OUR PROGRAMS As the leading association in Canada for supply chain management professionals, SCMAO offers professional development and education connected to industry. • Taught by supply chain practitioners Our instructors translate real-world experience into meaningful classroom discussion that you can apply at work. • Supply Chain A-Z Whether you’re new to supply chain or managing at the highest levels, SCMAO offers programming to meet your needs. • On-Going Support As a full-service association, SCMAO offers networking opportunities and career building events allowing for maximum career growth.

Certified Supply Chain Management Professional (CSCMP) Internationally-recognized, the CSCMP designation is the highest level of professional education in supply chain management in Canada. Diploma in Procurement and Supply Chain Management Developed for skilled supply chain professionals at the intermediate level. Supply Management Training A foundational education in tactical and operational knowledge. Professional Development Seminars Keeping you informed of emerging trends and supply chain practices. Corporate On-Site Training Customized and cost-effective training delivered conveniently in your own facility.

ALIGN YOURSELF WITH SUCCESS  LEARN WITH SCMAO For more information on our programs please contact the SCMAO office at education@scmao.ca or Christopher Lau at 416-977-7566 (ext 2145). 8 | AUGUST 2014

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Professional Development Directory Advertorial

What has the biggest impact on the profitability of your supply chain? You do On top of negotiating Total Landed Cost, many purchasing pros are now managing the flow of goods or materials, and are sometimes even responsible for ensuring uninterrupted supply chain operations. That’s a lot of responsibility. And it can have a big effect on your bottom line. After all, studies prove that uninterrupted supply chains are more closely linked to corporate financial performance than any other operational factor.1 What’s more, a recent study from MIT found that supply chain performance is more sensitive to mature skill-set and expertise of logistics-related supply chain professionals than any other operational factor – including commodity and fuel costs.2 So there’s a lot of opportunity for profitability. But chances are if you’re taking on more responsibility for your supply chain, you’re doing so without the benefit of specialized, logistics-specific professional education. That might be intimidating. But CITT can help you. You can complement your purchasing knowledge with CITT’s expert-level, 5-course suite of specialized logistics courses.

The CCLP® (CITT-Certified Logistics Professional) online course of study will equip you with a depth of understanding that is more complete and comprehensive than any other logistics designation program offered in Canada. Take our 5-course suite of specialized logistics courses and you’ll have the best technical foundation for profitably managing stable, reliable supply chain and logistics operations. Then you’ll be eligible to complete your professional certification from CITT and carry industry’s most widely-held and relevant designation in logistics: CCLP. No other professional credential says “Logistics Expert” as decisively as CCLP Because supply chain logistics has become such a specialized and sophisticated field, cross-functional certification is becoming increasingly more common among highly committed pros. And most certified procurement professionals qualify for advanced standing towards the CCLP designation. Visit www.citt.ca/logisticsprofitability for more information. Or contact us at info@citt.ca or 416-363-5696.

Add “Logistics Expert” to your professional credentials. And more profitability to your supply chain logistics. CITT’s fall semester starts September 2nd. Register now at www.citt.ca to guarantee your spot. ® CCLP is a registered trademark of CITT 1 Henricks, K, Richard Ivey School of Business, University of Western Ontario, Singhal VR, DuPress College of Management, Georgia Institute of Technology. Supply Chain Disruptions and Shareholder Value, 2005. 2 Simchi-Levi, D, Kyratzoglou IM, Vassiliadis CG, Supply Chain and Risk Management: Making the Right Decisions to Strengthen Operations Performance, Study by MIT Forum for Supply Chain Innovation and PwC, 2013.

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AUGUST 2014 | 9

SCMA National Conference

Feeling The Energy In Edmonton Bagpipes, jugglers, networking events and education sessions were among the highlights from the 2014 SCMA National Conference by Michael Power

elegates felt the energy at the 2014 SCMA National Conference, with delegates heading to Edmonton this year for the annual event. The conference began June 11 with a visit to Fort Edmonton Park for the kick-off celebration. Midway games, jugglers, stilt-walkers and a Ferris wheel greeted delegates before a steak and rib dinner at Blatchford Field Air Hangar. The next day, Mike Whelan, SCMA national board chair, welcomed delegates and referenced the theme of energy. “We meet today with our SCM colleagues from across Canada to harness the power of the collective knowledge that drives today’s most prosperous companies,” he said. Ferio Pugliese, president of WestJet Encore, acted as keynote speaker. Pugliese noted the tough environment that airlines operated in. In the past decade, airlines have rung up a cumulative net loss of $50 billion, he acknowledged, and 97 percent of all airlines will fail within their first three years. Canada alone has seen 78 airlines come and go in the past few decades. “It’s a tough business,” he said.

10 | AUGUST 2014

Avoiding service contract disasters To eliminate risk completely, no one would be able to get out of bed, said Maureen Sullivan, president of NECI National Education Consulting Inc, during her day-long preconference seminar. The session, How to Avoid Service Contract Disasters, touched topics like vendor intelligence and market research available to procurement practitioners. For example, a request for expressions of interest (REOI) lets the industry know what’s coming, Sullivan told the conference room. The REOI advertises a project and attract vendors while gathering intelligence and discovering who’s out there. Meanwhile, a request for information is more specific and looks for ballpark pricing, among other areas. “Market sounding” is a request for information that looks at what deal structure is appropriate. From there, procurement practitioners can formulate a draft RFP and then the final RFP. Procurement doesn’t necessarily go through

all stages, Sullivan said. And while a competition is primarily pricebased, Sullivan noted, the RFP process involves areas other than price. If you run a competitive process, Contract A principles apply unless you’re very express about it not applying, Sullivan said. Contract A involves that the organization inviting proposals is making a legal offer to the world at large, thereby accepting Contract A. Contract B is the actual contract that is eventually signed to perform the work or provide the goods or service. Contract A is implied unless stated otherwise. While organizations can negotiate within Contract A, they must be express about it. The bottom line, Sullivan said, is fairness and transparency make business sense: treating vendors fairly leads an organization to get better value and attracts the best options. Sullivan also touched on the twin concepts of copyright and confidentiality. Copyright, she said, covers tangibles like books and is covered under federal laws. Confidentiality involves intangibles and is protected through common law. Copyright belongs to a product’s creator whether it’s a blueprint, report, map or software, she said. Unless negotiated, you don’t have the right to make copies of that product. It pays to think about copyright and mention it during negotiations. Confidentiality involves information like trade secrets and common law requires that information not be known publicly, of value and kept confidential by the owner. Once identified as a trade secret, anyone who receives the info is obliged to keep it confidential. World-class procurement During his session entitled World-Class Procurement: Evolving Value Proposition, Performance and Capabilities, Kurt Albertson

of The Hackett Group presented results from the organization’s key issues study on how procurement’s evolving value is changing. Procurement must focus on revenue growth, said Albertson, to avoid net margins deterioration. Many companies are looking to emerging markets for growth, but those markets haven’t returned to their pre-recession growth rates and are seeing increased risk while growth has decreased. “There’s a gap, at least from our perspective,” Albertson told the audience. Companies must focus on innovation, he said. But while there’s a push for innovation among clients, what that actually means remains an issue. How do CPOs define it? Albertson cited Frederic Khalil; CPO at Guardian Life Insurance, saying innovation involved thought leadership and finding ways to approach services differently. Ramsay Chu, CPO at Rio Tinto, said innovation involved displacing traditional, less-efficient processes with new and creative solutions. Albertson noted that procurement is running lean with diminishing opportunities to further reduce costs. The Hackett Group polled organizations on they’re focus going forward. The most shocking result of that poll, Albertson said, was that cost reduction had fallen to fourth place among priorities. While important, cost control is crowded out by factors like expanding purchasing’s influence—ranked number one—and innovation, at number two. Other priorities included value contribution visibility, supplier relations management programs and processes and measuring procurement performance and value. Sustainable supply chains Monica Ospina, director of O trade, spoke on building sustainable supply chains as drivers for development and mitigating risk. Regardless of the industry, its size or its place in the supply chain, all players must apply a great amount of trust when doing business among themselves, she said. And while some might see this as the value of trade, others might see it as the biggest risk. Malfunctions in suppliers-buyer interactions can negatively impact the entire chain, Ospina said. If consumers lose trust, the chain can collapse. There are examples in which cases of child labor, lack of workplace health and safety standards or environmental disasters, create negative reactions in consumers and investors resulting in actions against brands and supply chain. Risk and corporate responsibility are important, she said, Feeling the love during Ferio Pugliese’s keynote address

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Dr. Kimberley Amirault-Ryan

with industries and consumers aware of their responsibility in turning raw material into finished products and consumption into garbage. Consumers and companies are proactive now in protecting the environment and respecting human and labour rights, resulting in what Ospina called sustainable supply chains. Procurement is key in making this happen, she said. Buyers are strategic players and as strategists ensure inventories to keep production, forecast market trends and mitigate risks. There’s a trend towards scorecards to evaluate suppliers and contractors, Ospina said. By doing so, procurement looks to comply with industry rules and regulations, independent monitoring and evaluation of suppliers and contractors, supplier engagement, capacity building and traceability audits, among others. Companies evaluate suppliers because their sales and market access depends on reputation and their brand’s value is linked to the respect consumers have for the company, she noted. Best practices aren’t so much a matter of good corporate citizenry as marketplace survival. Building sustainable supply chains will be part of day-to-day business practices going forward. The conference offered learning opportunities and networking, all while taking in Edmonton’s sights and historic locations. Delegates could embrace the energy not only of Western Canada but of the supply chain management profession. The 2015 National Conference, Sailing to New Horizons, is in Halifax, June 10 to 12, 2015. B2B For an enhanced version of this story with additional coverage, visit us online at http://www.purchasingb2b.ca/features/

SCMA board chairman Mike Whelan

AUGUST 2014 | 11

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PurchaseTo-Pay

The P2P Advantage Purchase-to-pay systems can help organizations integrate procurement with finance and AP for a smoother process. By Michael Power

nyone tuned into business trends has seen a rise in automated functions for processes that were once manual. This is as true for procurement as any other business function. Through purchase-to-pay systems, for example, technology lets procurement and supply chain join with areas like finance or accounts payable. Often shortened to P2P, purchaseto-pay includes requesting, purchasing, receiving, paying for and accounting for goods. And the use of such systems is growing. A new study by research firm Ardent Partners shows that 29 percent of companies internationally are using e-invoicing, with adoption expected to increase. According to the survey, the benefits gained from such tools is driving this growth. But talking about P2P solutions resembles discussing “transportation”, says John Lark, senior director, solutions marketing, Ariba. It can mean bicycles, tennis shoes, skateboards, airplanes or something else. “People get wrapped up in thinking it’s onesize-fits-all,” he says. “But the guidance I give companies with $10 million in revenue with localized suppliers and business is different from a $10 billion multinational with suppliers all over the world and 20 different back-end ERP systems.”

Strike a balance

Important to P2P is the ability to understand business needs, where inefficiencies lie and how to optimize them, Lark says. P2P systems require a balance of simplified processes that are easy to use but complex enough to do the job, he says. Companies overthink their purchase process, which means difficulty deciding what to automate, he notes. He advises looking at business as three processes: ordering from a pre-configured catalogue; collaborative ordering that requires managing several aspects (travel and expense or temp labour, among others); and automated processes such as manufacturing that already have large investments. Lark recommends comparing those three processes against the steps in the P2P process to identify pain points and areas of influence. This is tailored to each company and differs depending on what level of implementation the organization has already achieved. “People will often think, ‘I need to get a better ordering interface, without thinking about the fact that that ordering interface has peripheral touches across the whole system,’” he says. While the essence of P2P systems is integrating procurement with accounts payable, companies sometimes implement only certain pieces such as the front-end procurement or the payment process, says Munish Dakar, associate director, strategic procurement at Bell. Dakar recommends companies strive for a more holistic, end-to-end system. “All the information is housed in a single system—you don’t have to go from one system to the other if you need to run a report or something like that,” he says.

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The automation and standardization P2P systems offer can boost efficiency, Dakar says, especially in large organizations where business units often have different ways of issuing purchase orders and doing other processes. A P2P system can also help standardize the requisition process, he notes. Previously, people placed orders then, upon payment, checked if a budget existed for that order. Difficulties arise in tracking spend in large organizations with many employees placing orders. P2P systems can check at the beginning if there’s a budget, Dakar notes. Systems can create spend thresholds that allow purchases over certain amounts to require approval, as well as offer visibility into the overall spend on different categories, he says. But along with the advantages, challenges arise in the integration of P2P systems, Dakar notes. For example, some organizations have an existing ERP system that they want to keep, which can lead to duplication. Lately, however, Dakar has seen companies going towards less integration and customization. “I think there’s a tendency these days to have as little integration as possible and save on the implementation time as well as the expense,” he says. Getting users up-to-speed may mean training employees at different levels of usage, Dakar says. One level includes “administrators” or “super-users,” meaning employees who manage the system and need more knowledge of how it works. Dakar notes that basically, P2P systems are similar to any online shopping. But a few key differences can crop up, such as the need to know which cost centre to use when making purchases, he says. “So there are a few nuances, but the end-user training isn’t very difficult and it’s quite intuitive because the system is very user-friendly.” Difficulties arise through the sheer number of employees requiring training, he says. Strategies include training key people who then train colleagues. Online and webinar training also helps organizations deal with a high volume of people. B2B

AUGUST 2014 | 13

Supply Chain Finance

Trends To Finance The Chain Along with supporting sustainability and CSR goals, supply chain finance helps companies grow business and hold onto cash longer By Michael Power

onger international supply chains, the recent economic downturn and other factors have helped focus companies on creating value through supply chain management practices. This growing interest has given rise to the use of tools, including supply chain finance, in order to realize business benefits from their procurement and supply chain management activities. A narrow definition of supply chain finance involves companies looking at their procurement processes—where they buy goods and services and from whom—along with devising ways in which to finance those suppliers while improving their negotiating position or document flows as an indirect consequence, says Ben Arber, head of global trade and receivables finance with HSBC Bank Canada. For example, he says, a company may purchase a large amount of raw materials from countries such as China, Bangladesh or Viet-

14 | AUGUST 2014

nam and pay those overseas suppliers after 60 days. While that company may be able to borrow working capital at an interest rate of two percent, the overseas suppliers may have to borrow at six or seven percent. The company would then ask a bank to pay those suppliers on the first day of every invoice rather than waiting until day 60 to receive payment. Therefore, suppliers not only get much earlier payment but also a much lower cost of working capital. Arber has seen a rising interest in supply chain finance over the past 15 years, before which practically no one in North America was engaging in the practice. The reasons for this, he notes, include the fact that supply chain finance offers genuine and specific ways to help a business to grow. At one time, a main reason that drove companies to engage in this practice was the realization that those suppliers had a cash flow crunch or other financial issue that, in turn, affected their own businesses, Arber notes. “Now, that element remains but it’s a lot more of providing finance to those Asian suppliers in order to help their negotiating position,” he says. “For example, providing finance by pushing terms out to 90 days because that provides you finance with the supplier—it’s actually like a cheaper price of goods.” There are several other factors driving organizations to engage in supply chain finance, Arber notes. For example, it allows a CFO to show financial benefit to the company through the procurement and supply chain function. As well, technology allows CFOs to compare factors such as inventory levels to their peers. If they’re worse off than those peers, they might then realize they should be pushing terms out or being more aggressive in the procurement discussions that they’re having with suppliers. A third theme that emerges is the complexity of supply chains—it’s often not a question of buying something, bringing it back to a manufacturing hub and selling it to someone else. “You’ll often have two, three, four or five counterparties in the supply chain before you actually take possession of the finished goods or raw materials,” he says. Supply chain finance trends Although the situation is changing, supply chain finance remains a relatively new practice in Canada overall as compared to the US, says Jason Palmer, director, Canada trade head with Citi. An emerging trend in this area is that certain sectors—especially mining and oil & gas—that haven’t historically been interested are beginning to get involved in supply chain finance initiatives, says Palmer. The shift is taking place, he notes, because these industries are looking to free up more working capital, which is one of the benefits that supply chain finance offers. Until recently, mining has been under pressure with lower product demand and rising production costs. Companies in this sector are looking for ways to squeeze out cash flows internally—something supply chain finance does well. Canada’s energy sector hasn’t been under this sort of intense

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cost pressure, Palmer says. But the industry is capital intensive, which forces companies to focus on working capital as a means to reduce borrowing needs, diversify funding and support their complex supply chains. One way to improve working capital is to look for ways to hold onto cash longer or pay suppliers later. This can be done with extension programs, pushing payments out to 120 days rather than 60 while allowing suppliers to get paid earlier than they could before, Palmer says. “Typically, the drive to improve working capital comes first and the recognition that supply chain finance can really play a role is what follows,” he notes. An additional benefit of supply chain finance is that it can aid an organization’s sustainability and corporate social responsibility efforts, he notes. For example, in certain regions the mining industry represents that area’s economic cornerstone and supply chain finance can help to provide indirect financial support to companies in that region by offering a “carrot with no stick” to vendors in the region in which they operate. The process supports businesses by allowing them to be paid early. By way of example, Palmer cites a municipal-led program in the UK put in place last year that provides early payments to companies in an attempt to spur economic growth and activity. Another trend Palmer notes is the way in which companies are now launching supply chain finance programs is moving closer to the RFP model used in the cash management world. “We’re seeing companies get a lot more organized around the way in which they approach banks for supply chain finance services, which speaks to companies getting more educated on the topic,” he says. In addition to the usual supply chain finance practices there are several other techniques that involve both the supply chain and banks, and that are used to deal with suppliers. Palmer provided a description of several of them: Factoring: This involves a company selling its accounts receivables to a bank. Supply chain finance represents factoring because when a supplier gets paid early, the company is, in fact, selling its receivables—essentially a factoring transaction. Historically, factoring offers less-than-ideal conditions because a company often doesn’t get 100 cents on the dollar in the transaction. But while supply chain finance is basically factoring, the terms are better and there’s better value to the supplier. The supplier usually initiates factoring while supply chain finance comes from the buyer. Accounts receivable insurance: This involves an organization approaching an insurance company or export credit agency to provide insurance on their accounts receivable. If the company is unable to pay, the insurance company will pay the supplier. This differs from supply chain finance in that there’s no advance payment; rather, it amounts to payment default insurance. Bank payment obligation: A combination of a letter of credit and open account payment method. A BPO, which is used for international trade transactions, tries to do away with some of the paper, since a letter of credit is very paper-intensive. The BPO is sponsored by the International Chamber of Commerce and has a number of rules similar to those involved in a letter of credit. As well, moving to a BPO means suppliers can get paid only slightly faster than if a letter of credit is used. The process is new and not widely used, with banks still devising strategies surrounding it.

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For Steve Pedersen, VP North American Corporate Card Products of BMO Financial Group, supply chain management involves an end-to-end view of the supply chain and how to best optimize its processes. The “financing” element focuses on the payment side of the process, especially as it relates to capital management. Traditionally, receivables and payables departments have been separate groups within a company, he says. But more often, these groups are linked because of the rising importance of working capital management. Understanding cash flows in a holistic sense to finance a company’s needs may mean a fluid approach to dealing with payables. For example, an organization can pay very quickly to take advantage of rebates at certain times of the year, but then slow down payments due to working capital needs at other times of the year, he says. “How you look at that will be predicated on your working capital needs and costs,” Pedersen notes. “So I look at supply chain financing as everything around how to finance your procurement processes. But more importantly, how does that interaction work with the broader treasury needs of the company—it’s not just optimizing suppliers, it’s suppliers in conjunction with working capital.” But supply chain finance doesn’t come free of challenges and areas that procurement professionals should ensure they’re aware of. The practice is very specific to buyers who have a strong relationship with their suppliers and trust them to deliver, says Arber of HSBC Bank Canada. A supply chain finance program will have recourse back to the buyer, so if a large buyer uses their credit rating in order to finance a supplier, and the supplier doesn’t deliver, that buyer must pay the bank. “So it’s really only applicable to those long-term relationships that the buyer has,” he notes. Risk solutions exist to achieve similar aims with newer suppliers, along with insurance solutions that see importers protect themselves against areas like political risks or environmental hazards such as floods in emerging markets. “But in general supply chain finance from an importer’s perspective is really specific to those strategic supplier relationships,” Arber says. Supply chain finance can offer organizations benefits such as the ability to hold onto cash longer or meet sustainability and CSR goals. As the practice becomes more ingrained in Canada, more organizations may begin to see these benefits. B2B

AUGUST 2014 | 15

TAKE THE PATH OF MOST RESISTANCE. 2014 RVR ALL-WHEEL CONTROL (AWC) WITH DRIVE MODE SELECTOR 10 YEAR / 160,000 KM POWERTRAIN LIMITED WARRANTY** 2.0L DOHC MIVEC 4 CYLINDER ENGINE (148 HP, TORQUE 145 LB-FT)

Available on RVR SE 4WD and GT models§

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GET A LOT FOR A LITTLE!

§ AWC standard on RVR SE AWC, Limited Edition and GT/Lancer SE AWC and GT. S-AWC standard on Outlander GT. ‡ Whichever comes first. Regular maintenance not included. New vehicle limited warranty covers most vehicle parts (excluding batteries, with entertainment systems and other items excluded under the warranty’s terms and conditions) under normal use and maintenance. ** Whichever comes first. Regular maintenance not included. See dealer or mitsubishi-motors.ca for warranty terms, restrictions and details. Not all customers will qualify.

FOR FURTHER INFORMATION PLEASE VISIT MITSUBISHIFLEET.CA AND/OR CONTACT DAVID MURPHY AT DMURPHY@MMCAN.CA OR 905-214-9048.

Winner of the 2013 ecoEnergy Award for “The Most Fuel-Efficient Subcompact Car”

In this edition 20 road test

AUGUST 2014

Choosing a tiny hatchback

22 Work truck

Putting a Sprinter through its paces

24 canada’s flexy winner

How Calgary won for its safety program

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.

Seeing is believing

Google Glass – driver aid, or dangerous distraction? By Lesley Wimbush “This Internet thing? It’s here to stay.” Wearing the new Google Glass and a “smart watch” on his wrist, Angelo DiCicco looks more like an emissary from the future than general manager of Toronto’s Young Drivers of Canada. “However—it’s not our job to police it, but how to adapt and be ready for it.” According to Young Drivers, driver distraction accounts for 20 to 30 percent of all collisions. Annually, there are 2,406 traffic-related deaths, 172,883 related injuries, and 30 percent of all workplace fatalities—with a cost to Canada of $62.7 billion annually when you factor in emergency response, hospitalization, insurance and lost revenue due to impeded traffic f low. Collisions involving cell phones account for approximately 28 percent, and you’re 23 times more likely to crash if texting while driving. Human beings have been driving for the last hundred years. But physically, our vision and multi-tasking abilities haven’t evolved beyond what we needed to see a few hundred feet ahead, while travelling on foot at no more than running speed. Piloting a vehicle safety requires concentration and skill—throw the burgeoning level of technology and connectivity into the mix, and the potential for disaster is enormous. PurchasingB2B.ca

Unfortunately, traffic laws governing distraction lag far behind technology. Despite all the overwhelming evidence of the dangers of cell phone use, many provinces have only had legislation in place for a few short years, and the fines are ludicrously small. Recently, we spent the day with Young Drivers of Canada, in Toronto, for a hands-on demonstration of some of the latest technology, and to discuss how it affects driver distraction.

Even driving on a closed course proved difficult using Google Glass.

AUGUST 2014 | 17

News continued from pg 23

“Intense focusing on a task can make you blind to your surroundings.”

Lesley Wimbush tries out Google Glass for the first time behind the wheel.

Accompanied by an instructor, we drove a public road course with some pre-determined incidents thrown at us along the way. Most of us spotted the cyclist who pulled up beside us in the turning lane, but a few were late in seeing a man chasing a ball into the street, and stopped just short of hitting him. And these exercises took place without any additional connectivity distractions. Next, we watched a video and were asked to count the number of passes completed by two teams tossing a volleyball around. While some of us successfully came up with the right numbers—nobody in the group spotted the costumed dancing bear in the background of the video. This is known as the “Invisible Gorillia” effect say Charles Shrybman, Young Drivers’ senior regional trainer. “Intense focusing on a task can make you blind to your surroundings,” he said. Engrossed in a cell phone conversation, we become “cognitively disengaged” and we don’t immediately recognize looming disaster. It’s not just the time lost looking at the phone—it actually takes time for the brain to switch over and process completely different tasks. “We see 50 percent less when distracted.” While studies show experienced drivers tend to slow down while using their phones, new drivers actually speed up. “Roadways have become much more complex for new drivers without cognitive development who make decisions based on emotions rather than experience,” said Shrybman. For the next exercise, I’m wearing a $1,500 prototype pair of Google Glass and, granted, while there are some adjustments to be made to the user-interface, it’s extremely difficult to navigate the closed course behind 18 | FLEET MANAGEMENT | AUGUST 2014

the wheel with them on. In theory, it sounds simple; the execution was a bigger challenge. In the back seat, Wayne Giang, a University of Toronto PhD student studying human attention as it applies to vehicle control, attempts to send me both text and visual messages with various degrees of success. The picture fades in and out, the glasses switch on and off at will, but even so, it’s easy to see that once the bugs have been worked out, Google Glass will inevitably be adopted by mainstream users. But with the glasses periodically chiming in my ear to alert me of incoming messages, the “smart watch” on my wrist buzzing in tandem, and Wayne’s disembodied head winking in and out of the tiny screen at the corner of my eye—I’m relieved that the “intersection” I’m trying to navigate is closed to other traffic. While it’s easy to see the benefits of safety systems such as back-up cameras, lane departure warnings and stability control, relying entirely on technology leads to complacency behind the wheel. The abundance of in-car connectivity shows that public is demanding it despite evidence of its dangers. What makes governing new technology so difficult is that for every negative, there’s a positive counterpoint that can be made. Giang, our PhD demonstrator, points out that that the Google Glass can alert wearers to traffic conditions ahead. And in the case of newer drivers, those who haven’t yet developed the ref lex responses of experienced drivers—the technology can follow the alerts with prompts. For example, in the case of a blocked lane, merging vehicle or collision ahead the driver may be prompted to move left or right, slow down, or exit. DiCiccio estimates there are currently about 10 pairs of Google Glass in Ontario, with that number likely to increase to 5,000 to 10,000 by the end of the year. Monitoring their use will be extremely difficult, particularly since they’ll soon be available with custom frames by such makers as Oakley and fashion designer Dianne Von Furstenberg that will make them harder to spot. “We need to peer into the future, the intersection of technology and driving, while it’s still malleable,” he said. He suggests we gain a better understanding of our needs and how they integrate with those of others–and even more importantly–maintain our driving skills. “Working towards a co-operative driving culture is a start.” B2B PurchasingB2B.ca

It’s the one to buy, no matter which award you look at.

The all all-new new 2014 Jeep pC Cherokee herokee For 2014, Jeep Cherokee has proven itself a winner, twice over. It just captured the AJAC Award for Canadian Utility Vehicle of the Year, beating out competition priced thousands more. And it’s already AJAC Best SUV (under $35,000). It offers incredible fuel efficiency as good as 6.4 L/100 km highway,+ an industry-first nine-speed automatic transmission,** and over 70 standard and available safety and security features. Now with two titles under its belt, you have twice the reason to put Jeep Cherokee in your fleet this year.

Canadian Utility Vehicle of the Year

Best New SUV (under $35,000)

fleetchrysler.ca

1 800 463-3600

+As good as 6.4 L/100 km (44 MPG) highway and 9.6 L/100 km (29 MPG) city. Based on 2014 EnerGuide highway fuel consumption ratings. Government of Canada test methods used. Your actual fuel consumption will vary based on powertrain, driving habits and other factors. Ask your retailer for EnerGuide information. **Based on 2013 Jeep Brand’s “Mid-size SUV” sub-segmentation including: Ford Escape, Honda CR-V, Hyundai Santa Fe Sport (5 pass), Subaru Forester, Toyota RAV4, Chevrolet Equinox, GMC Terrain, Hyundai Tucson, Toyota Venza and Kia Sorento.

Did you ever have to make up your mind? Fiesta and Micra donâ&#x20AC;&#x2122;t make it easy By Emily Atkins

Both cars offer a peppy ride, and if manhandled up to the redline they scoot smartly off the line.

he market for five door compact hatches is full of choices. Almost every manufacturer has one of these pocket-sized wagons on offer, so the product better be goodâ&#x20AC;&#x201D;and reasonably priced. Spoiled for choice, we decided to compare newly re-released Nissan Micra to the recently updated Ford Fiesta. Both are comfortable hatchbacks, quite capable of handling four good-sized adults or two plus lots of cargo. In spite of their diminutive proportions, they both manage to offer large door openings all the way round, making for easy entry and exit for people and smooth loading of the hatch. On the interior, the Ford wins out, with more comfortable and supportive seats, and a better-looking cabin and instrument cluster. The Fiesta also has flip-down rear headrests that afford the driver a better view out the back when there are no passengers back there. But the Micra came out on top with its intuitive smartphone connectivity and standard backup camera and AC. Fit and finish on both vehicles is extremely good, with solidly closing doors, minimal gaps and decent protection from road noise. The Micra starts at $9,998. The one we tested was a 2015 manual-transmission SR model, with a 109HP, 4-cylinder 1.6L motor, retailing for $15,748. It comes standard with backup camera, AC and Bluetooth connectivity. 20 | FLEET MANAGEMENT | AUGUST 2014

The Fiesta base model starts at $11,269. The SE hatch starts at $14,866 and the model we drove ran to $19,095 with keyless entry pad ($125), comfort package including heated seats, heated power mirrors with blind spot insert and automatic temperature control ($500) and the SE manual EcoBoost package ($1,295). The latter item swaps the standard 1.6-L V4 motor for the 3-cylinder 1.0-L ecoboost turbo powerplant, and gives you 123 horsepower and 125 lb.-ft. of torque, along with regenerative braking. The differences between these cars lie mainly in their handling and performance. The Fiesta delivers a quicker and more sporty ride, although at highway speeds it feels light, as though it could use a little downforce. By contrast, the Micra gets to speed a bit more slowly, but feels comfortably planted at the velocities needed to keep up with Highway 401 traffic through the GTA. Neither is a torque powerhouse, and both require late shifts and liberal throttle application to achieve a peppy ride, not likely what the typical driver will do. Driven moderately both return excellent fuel economy and would be great candidates for city fleet applications where small, easy-parking hatchbacks are needed. These two cars are very much peers, differentiated largely by the turbo 3-cylinder motor available in the Ford. B2B PurchasingB2B.ca

It… is about action not reaction. ARI is known and trusted by fleet decision-makers throughout Canada to minimize risk control costs. It is about keeping drivers safe. About data. Presenting it through alerts, trends and safety profiles. The result is a world with fewer violations, accidents, costly repairs, downtime—and less exposure. It is about fleet management success. Moving the needle, and the bottom line. Learn more about ARI’s professional fleet management services: 1-800-361-5882 www.arifleet.ca

Diesel Workhorse

2014 Mercedes-Benz Sprinter brings it all home

By Peter Bleakney

t’s fair to say Mercedes-Benz had it pretty good with the Sprinter commercial van here in North America. Until just recently, this diesel-powered Euro workhorse was alone in its niche, a spot it occupied in both price and quality above the usual van suspects—offerings from Ford, Chevy and GMC. The second-generation Sprinter first appeared here in 2008 under the Dodge banner, and it currently snags about ten percent of the market. Sixty percent of Sprinters sold go to the construction segment (carpenters, plumbers, HVAC, etc), and while this Euro-sophisticate costs about ten grand more than it domestic competitors, it has been named Vincentric’s Lowest Total Cost of Ownership in Class for four years running, Best Fleet Value in Canada for 2012 and 2013, and it just scored the 2014 Canadian Black Book’s Best Retained Value Award. The Sprinter’s fuel economy, long service intervals and high residual value play in its favour. But Easy Street for the Merc is offering upkl a few speed bumps. The Nissan NV2000 entered the market recently, and now the Sprinter must contend with the transplanted diesel Fiat Ducato van (Dodge ProMaster) and all-new 2015 Ford Transit that is available with both diesel and EcoBoost power. Like the Mercedes, the Nissan is body-on-frame and rear wheel drive, but it only has gasoline power. The Dodge/Fiat is front drive with unibody construction and has available diesel power. The Ford Transit features unibody construction with rear-wheel-drive. To counter this fresh competition, Mercedes-Benz is offering less. That would be less displacement and less fuel 22 | FLEET MANAGEMENT | AUGUST 2014

consumption in the form of a first-in-class four-cylinder turbo diesel engine—now the base engine in the 2014 Sprinter. It’s a 2.1L turbo making 161HP and 265 lb-ft of torque, mated to a seven-speed 7G-Tronic Plus transmission. Mercedes certainly knows its way around diesel power, and this engine punches well above its weight. For most applications, I can’t see anyone needing more than the diesel four cylinder. Nonetheless, the 188HP, 325 lb-ft 3.0L turbo diesel V6 with five-speed auto will suit for heavier hauling duties and those weighty conversions like RVs, ambulances, etc. The 2014 Sprinter starts at $39,900 and is available from the factory in two wheelbases (144-inch and 170-inch), three body lengths, two chassis ratings (2500 and 3500), three GVWR’s, two engines, three roof heights (standard, high and super high) and it can be ordered as a passenger van, cargo van, crew van, minibus or just the cab on chassis. I snagged a 2500 144 Cargo Van with high roof (starting $42,400) to move my son and all his stuff into a new apartment. This is an impressive drivetrain. The under-square engine (longer stroke than bore) in conjunction with the two-stage turbo equates to prodigious torque right off idle. Acceleration is effortless, even when loaded to the gills with furniture. The seven speed auto features reduced slip in the lock-up clutch, which, according to Mercedes, gives more direct acceleration. Playing into the fuel economy equation is a “smart” alternator that gives priority to charging under braking and coasting, and the electric fuel pump delivers on demand. Additionally, the A/C compressor has a freewheel function so it’s only working when needed. So how does it all come together? If your work requirePurchasingB2B.ca

ments include highway driving, the 2014 Sprinter delivers on its promise of reduced consumption. I saw a bona-fide 8L/100km on an admittedly light-loaded and light-footed highway stretch. Around town the mileage jumped to around 13L/100 km. This Sprinter is a pretty easy rig to drive. The hydraulic steering has better feel than many cars I’ve driven lately, and its tight turning circle adds to in-town maneuverability. It feels quite “Euro” on the road—as planted and buttoned down as one could hope from such an upright vehicle. For 2014, the Sprinter’s interior gets a refresh, showing better ergonomics and materials along with a number of available driver assist systems. The snout got reworked too. The grill is taller, the hood is raised and the headlights (optional bi-xenon) are more sharply contoured. The high seats, low cowl and huge windshield make for a panoramic forward view. The lower sections of the rearview mirrors are convex to cover the blind spots. Helping in this regard was the camera and radar-based Driving Assistance Package ($1,950) that adds blind spot warning, lane departure warning and collision warning with brake assist. All very nice, but what I could have really used was a backup camera. Doesn’t seem to be on the menu. The optional $400 Comfort Seats are pretty comfortable. Strangely, Comfort Seats don’t include heat. That’s another $400. If you want your front seats suspended, add $820.

As with Porsches and pickups, the Sprinter’s list of options and packages is as lengthy as the day is long. This tester had the $350 full partition with window that separates you from the cargo. It certainly gave me peace of mind when the box was full of furniture. The $650 Convenience Package adds a multifunction steering wheel, trip computer, 12V power in the driver’s seat base, lockable glove box, hinged lid for central storage container, cruise control and pixel-matrix display in the instrument cluster. There’s a token cup holder recessed into the dash top that is typically German: a small and shallow afterthought. My travel mug wouldn’t fit. The door pocket worked fine. The front auxiliary heater ($750) did a good job of quickly warming up the cabin, and had I spilled a tray of Tim Hortons, the $480 interior washable trim would have made it a non-event. The $600 Cargo Access Package is a necessity—ceiling lamps, illuminated exits, two-stage opening for sliding door, rear step and assist handles at the rear doors. With all its permutations, the 2014 Mercedes-Benz Sprinter is an infinitely useful commercial contraption, made even more so by this new four-cylinder diesel that will, in actual fact, return near economy-car fuel economy under the right conditions, that is, light-footed motorway driving. And while pricing might still not be in Mercedes’ favour (the Ford Transit and Dodge ProMaster start about $7,000 less), neither of those base models has diesel power. B2B

Specs at a glance: 2014 Mercedes-Benz Sprinter 2500 Cargo Van Base price: $39,900 Optional equipment: Comfort Seat Package $400; Driving Assistance Package $1,950; Convenience Package $650; Cargo Access Package; vibration damper $160; high roof $2,500; full partition with window $350; navigation $650; auxiliary front heater $750; washable interior trim $480 Price as tested: $50,950

Having the divider between the cargo and passenger compartments offered peace of mind when driving. Inset: A washable interior is optional. PurchasingB2B.ca

AUGUST 2014 | 23

Safety city

How Calgary won a NAFA Fleet Excellence Award

By Kara Kuryllowicz

n 18 months the City of Calgary has reduced its preventable collisions by 22.5 percent. That’s just one of the reasons the city’s fleet director won a NAFA Flexy award earlier this year. Four years ago, the City of Calgary’s fleet services committed to a drastic cultural and attitudinal shift by moving to a proactive, collaborative and recognition-based approach that helped decrease the preventable collisions and at the same time reduced the number of employee appeals of collision preventability determinations by 90 percent. “Because our safety culture had always been strong, a shift to new and innovative ways of enhancing safety was simply the right thing to do,” says Jacquie Deitch, director of fleet services for the City of Calgary, and the winner of NAFA’s 2014 Excellence in Public Fleet Safety Award. “The success of our new approach and programs can be seen in these numbers.” Fleet services’s 8,200 drivers and 3,000 vehicles across 30 departments—ev-

erything but fire, police and transit—typically travel 23 to 25 million kilometres annually. Averaging 1,100 to 1,200 collisions per year, fleet services’ senior management, in partnership with the city law department, decided to reassess the collision investigation process as well as training, education and recognition programs. Until September 2010, randomly selected individuals in the 30 departments conducted internal, peer-to-peer collision investigations. Their notes and photos were shared with the fleet safety & training, collisions & compliance department which then had to determine the cause of the collision, attribute fault and if necessary, assign remedial training, demerit points, and disciplinary action, which could include the loss of driving privileges. During this process, the evidence presented for review was often weak and the statements provided didn’t point to a root cause. This made it difficult for the evaluator who hadn’t been at the incident/collision to accurately classify it as “preventable” or “non-preventable”. As a result, numerous drivers appealed their “preventable” classification and subsequent demerit points.

JP Boyes (left) and training officer and collision investigator John Dilisio show off the uniforms and investigation vehicle.

The fleet safety team. 24 | FLEET MANAGEMENT | AUGUST 2014

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MEET THE TEAM BEHIND YOUR TEAM. Behind every Ford vehicle are experienced men and women who understand the challenges of managing a fleet. Whether itâ&#x20AC;&#x2122;s having the right vehicle for the job, helping keep fuel and maintenance costs low, or helping ensure your employees are safe and productive, Ford Fleet is the team behind your team. Contact us at focfhq@ford.com or 1.800.668.5515

The city law department reassigned all collision investigations to fleet safety & training rather than the 30 departments, which allowed the former investigators to focus exclusively on the actual tasks in their job descriptions such as road maintenance and repair. Although the bulk of the collisions and near-misses were minor, there were still associated costs to be managed and reduced. “To collaborate with our drivers and provide a value-added service, we committed to an ‘investigate and educate’ rather than a disciplinary approach to find the root cause of the collision or incident, then give them the tools they needed to prevent a recurrence,” says JP Boyes, the team coordinator of fleet safety and training, collisions and compliance in the fleet services department. While the investigative and compliance approach is now more formal it’s also more collaborative. Boyes’s 10 certified collision investigators, who arrive at the scene in Calgary police-force inspired uniforms and vehicles, regularly interact with representatives from each of the affected unions which Boyes invited to sit on the collision and compliance committees. “We’re in this together as partners who want to protect our drivers and equipment to ensure they return home safely after every single shift,” says Boyes. As well, since 2012, the core driver training program has changed to include in-vehicle training/testing for new employees and specialized training on equipment as well as technical and soft skill training courses, for example, defensive driving, transportation of dangerous goods, airbrakes, cargo securement, traffic construction set-up and more. Some of the in-vehicle training now takes place in two vehicle simulators that travel to various fleet locations in a trailer that is essentially a high-tech, mobile classroom. The made-in-Montreal simulator boasts a library of over 92 different scenarios that can emulate virtually any vehicle, from a one-ton to a semi or sanding dump truck with road and weather conditions that range from snow-covered and black-ice to heavy fog, rain or snow, and time of day, from dawn to dusk and the dead of night. As importantly, each simulator can accommodate three drivers and an instructor, which gives drivers further learning opportunities as they

Jacquie Deitch shows off the simulator.

26 | FLEET MANAGEMENT | AUGUST 2014

watch their peers in realtime and in the playback. “Our employees were starved for a new way to get the practical, in-vehicle experience without the accompanying on-the-road stressors associated with holding up traffic, incurring real damage to either the vehicle or what was around them, and needlessly burning fuel,” says Boyes. The simulators feel 90 to 95 percent real as drivers experience the effects of acceleration, braking and cornering on the various road surfaces and even the handling differences between a tandem sanding truck running with a 20 percent load on bare roads or carrying a full 26,000 kg load in slippery, whiteout conditions. “The comfort and confidence levels increase when employees can become familiar with in-cab technologies such as computer controls for sanding and plowing , along with airbrakes in a completely safe, controlled environment,” says Boyes, who also notes the simulators are so effective the use of actual training vehicles is often reduced. “It’s too soon to say whether there will be cost savings or returns beyond the reduced fuel consumption,” says Boyes. When teaching students the ECO module, the simulator determines the driver’s initial fuel consumption when they drive as they normally do, then re-evaluates them again on the simulator after watching a 15-minute presentation on green driving behaviours. “We invariably see reduced fuel consumption because they’re braking, turning, accelerating and moving out of intersections differently,” says Boyes. “When we give our drivers the appropriate, relevant information and the tools, they get even better.” Fleet Services has partnered with the Calgary police truck unit and the Canada Safety Council to encourage drivers to take responsibility for their own safety and the safety of those around them. The Canada Safety Council’s Standard Collision Prevention Formula—Recognize the hazard, Understand your defence and Act in time—is encouraged and embedded through consistent communication. Since 2011, fleet services has conducted 12, one-day compliance spot checks that pulled over and checked out 50 to 60 drivers and their vehicles each time. If they’re doing “great work” they get an immediate thank-you from the police and fleet investigator as well as a mug emblazoned with the Canada Safety Council’s three-point safety message, and a Tim Horton’s gift card. “The spot checks aren’t new and we still support and enforce our safety policies, but we’re finally recognizing the drivers for everything they’re doing right,” says Boyes. They’re also told their “great work” will be shared with their supervisors and their names entered in an annual draw for a monetary reward to take place during National Safe Driving Week in December. “As a result of these changes, we’ve received positive feedback from all stakeholders and overall the corporation is in a better place to protect our assets and educate and enhance the safety of our drivers and the citizens of Calgary,” says Deitch. B2B PurchasingB2B.ca

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GBTA Energy Symposium

Energy Logistics GBTA Canada symposium highlights air and ground logistics in oil and gas industry By Jessica Patterson

etting people to the right spot, on time, is critical in the oil and gas industry, a crowd of travel managers, buyers and service suppliers heard at the Global Business Travel Association (GBTA)’s Energy, Resources & Marine Symposium 2014 | Calgary, held June 25. Canadian Natural Resources Limited president Steve W. Laut said employment in Canada—as a result of oilsands investments—will grow to 905,000 jobs by 2035, generating billions of dollars in economic benefits. With that growth comes opportunities. A panel entitled ‘Plane’ Truth: An Introduction to Air Logistics, focused on how aviation companies can work with the oil and gas sector. Kelly Ewasiuk, director, transportation and field services, Cenovus Energy Inc., moderated the panel that included Chris Avery, VP, network planning, alliances & corporate development at WestJet Airlines; Ian Darnley, director of business development at Sunwest Aviation Ltd.; and Paul Spring, president and operations manager for Phoenix Heli-Flight. “It’s a giant jigsaw puzzle, to put together the schedule,” said Avery. “Directionally, it’s a challenge. Usually, a lot of people want to go up to Fort McMurray first thing in the morning, but no one wants to leave first thing in the morning, so we’re full going up and empty going back.” If a commercial airline can’t meet timelines, charter airlines fly in and out of the oilsands areas. Such airlines operate according to an organization’s needs and are popular with oilsands companies, said Ian Darnley. “We do about 150 flights a week, and 80 percent of those flights are in support of the energy and resource sector,” he said. “It can be very challenging, because typically the industry wants to go to the same place at the same time.” But sometimes, there isn’t an airstrip and companies need to get people to remote ar-

28 | AUGUST 2014

eas. “We’re the guys who come in when there are no other logistical options for wheeled or float aircraft,” said Paul Spring. “It brings on a whole new set of challenges.” The logistical challenges for helicopter companies are that they never know where they’re going to land, Spring said. “We take out crews to survey areas, we do seismic activity which means slinging dynamite, portable drills, moving crews, supporting slashers and taking guys out to cut line all day,” he said. “We’re dropping off people at 10pm at night to set up nets to catch bats. We pick them up at 4am. We have the bat girls and the lizard guys, and the ones who listen to songbirds.” Business has grown in all sectors of aviation, said the panelists. “Getting people to the right spot, according to the right schedule, is critically important,” said Darnley. One Sunwest customer started in 2007 with one flight, and now has 50 flights a week with a range of aircraft across the country. It’s typical of producers in the industry, Darnley said. The symposium featured a panel called Grounding to a Halt, focusing on ground logistics. John Vawter, VP of CWT Energy, Resources & Marine, moderated the panel which included Steve Bacovsky, president of National Motor Coach Systems Ltd.; Judy McBride, owner of TransProtection Security Services Ltd.; Aaron Nickel, sales manager, project truck division, Canada, Avis Budget Group Inc.; and Linda Lee, travel manager, TransCanada PipeLines. “Where you need cars and transportation in Canada isn’t necessarily where everything is,” said Vawter. “How do you deal with supply and demand?” Supply and demand is different for the motor coach industry, Bacovsky said. “As far as remote areas, we’re in transportation and most of the equipment is on wheels so we can move it there, but there will be a cost involved.” Travellers spend a lot of time going from place to place, said Linda Lee. When companies are looking for a ground transportation vendor, they’re looking for consistent, reliable service. “Safety, ease of booking, current records and efficiency are essential,” she said. “Make it as quick as you can to allow a traveller to get from point A to point B, because that will ensure repeat business.” She said companies must react quickly to customer needs, to be flexible and maintain their insurance, safety policies and maintenance programs. “Some of our customers come in, do an audit and site inspection with no warning,” said Bacovsky. “We’re not scared to open the doors to these people, because we’re hauling their employees and they’re very important people to us.” B2B Jessica Patterson is a freelance writer based in Calgary.

PurchasingB2B.ca

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GBTA Energy Symposium

Accomodating The Oilsands Housing workers for Western Canada’s oil and gas industry offers challenges By Jessica Patterson

ne of the single-greatest challenges faced by the oil and gas industry is filling employment needs for projects located in remote areas, a sold-out crowd heard at the Global Business Travel Association (GBTA)’s Energy, Resources & Marine Symposium 2014, held June 25, in Calgary, Alberta. Oil and gas companies have unique needs when it comes to accommodations, ranging from hotels, to camps and modular housing. A range of service providers has stepped up to fill that need—but as the industry grows, so will that need. A panel, called Accommodating the Oil, Gas and Energy Industry, discussed how to meet that industry’s challenges. Ian Race, VP sales and account management, Vision Travel Solutions, moderated the panel while panelists included Tiziana Fathers, global sales team lead, Canada, IHG Americas Sales; Meagan Martin, property management manager for Civeo; Terry Wallis, lead, travel and meetings, Encana; and Gord McIvor, management consultant with Trican Well Service Ltd.

“Into the future, companies are looking to innovation to serve the oil and gas industry.”

30 | AUGUST 2014

Over the next decade, feedback from the Petroleum Labour Market Information Study forecasts investment levels in Canada’s oil and gas industry are projected to sustain an annual average of approximately 900,000 to one million direct, indirect and induced jobs across Canada, Race told the crowd. “That is significant,” Race said. “While 80 percent of these jobs will be based in Western Canada, 65 percent will be based in Alberta. A large portion of these jobs will be supported by labour coming from across the country.”

And all of these workers will need somewhere to live. Typical housing arrangements often include hotels. Oil and gas companies like Encana scope available hotels and lodging in remote locations—working with hotel reps—before engaging on a project. If the location is remote enough, they build their own camps, Wallis said. Other companies rely on camps to house their workers if the location is remote, said McIvor. “We have a large contingent of employees, and we have people that are moving around from man camps to mobile facilities,” he said. “I move, on average, 1,000 to 1,500 people on a monthly basis.” To respond to the opportunity in the growing energy and oil & gas fields, accommodation service providers have stepped up and offer a broad range of services to the industry. “We staff 20,000 beds annually, we serve more than nine million meals a year, make over three million beds, and wash over seven million pounds of laundry,” Martin said. Employees at energy and resource management companies tend to keep different schedules when compared to the traditional business traveller, Martin said. “The famous seven on, seven off schedule is no longer the norm, you’re looking at 14 and seven, 21 days and seven, and even five weeks on and two weeks off.” Workers are even doing six weeks in, one day off, for three months in a row, she said. “Our challenge is how do we provide essential services they need, to be able to have quality of life in the lodging industry?” Hoteliers also service the oil and gas industry, and hotels are increasing distribution in Western Canada because the oil and gas industry is growing, said Tiziana Fathers. “Guests differ from traditional business travellers,” Fathers said. “It can be really complex, and we’ve noticed multiple players and stakeholders who are not as established. This industry is ever-changing, dynamic and we need to approach it in that way.” Remote locations offer some big challenges. “One of the biggest challenges we have is attrition. The younger generations want high-speed Internet, good food and we try as much as possible to give them comfortable accommodations. That attrition, we see clearly in Texas.” Into the future, companies are looking to innovation to serve the oil and gas industry. “We know that by mid-next year we’ll have 2,000 passengers a week into one of our new camps,” Wallis said. “We’ll be working with the carriers, with the properties, so we can feed and house those workers in one transaction instead of hundreds. Innovation and progress with our partners is our approach for what is coming.” B2B Jessica Patterson is a freelance writer based in Calgary.

PurchasingB2B.ca

Addressing issues affecting Canada’s public procurement professionals

Total Cost of Ownership Is TCO what public procurement practitioners should be aiming for? By Eddy Jin

ith strained resources in the public sector, there’s an unprecedented focus on the procurement function to maximize value for money. What’s more, funding agencies are expected to demonstrate leadership in steering the spending of those limited funds. At the confluence of those two challenges is the need for institutions to deliver higher levels of service by adopting tools that may not always be measureable in traditional tendering approaches. The diminished fiscal climate has also popularized the view that the best approach to maximizing value for money is focusing on bottom-line pricing. This downward pressure can exacerbate organizations that may require tools that typically are not commoditized. Often, this is the end result of concentrating purchasing decisions on a smaller number of organizations with the corollary that stakeholders are further removed from the process. At the other side of the supply chain, suppliers are often hampered in their ability to demonstrate their true value when the focus is on costs. Innovative technologies are typically developed in the marketplace so the drivers that stimulate their development are not aligned to institutions that don’t measure those costs in their value chain. The antithesis of cost containment is total cost of ownership (TCO); which means all costs associated with acquisition, use and maintenance of a good or service. However determining TCO is challenging. First, understanding something’s true costs means measuring factors in the pre-transactional (market research of a product), transactional (cost of product, setup) and post-transactional (warranty, disposal) phases of acquisition and ownership. Secondly, collecting the data to support these measurements isn’t trivial and often requires cross-functional teams that go beyond the procurement function. Given the complexity in determining real costs and the pressures to deliver value by funding bodies favouring cost containment, is TCO the holy

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grail of procurement? A look at some successful implementations would suggest that TCO is not only a best practice but necessary for innovation.

Efficiency One approach to implementing TCO is to chart the process flow of each cost element in a product’s acquisition and ownership. Often called activity based costing, this methodology helps identify important components specific to an institution’s operations. The end result is that accurate costing components become an integral part of the purchasing matrix rather than a traditional approach where price and “specs” function merely as placeholders and may not reflect actual cost structures.

“Given the complexity in determining real costs and the pressures to deliver value by bodies favouring cost containment, is TCO the Holy Grail of procurement?” The University of Toronto has adopted this methodology and developed it as a framework for its procurement strategy. They identified all steps in the procurement process and mapped out the economic costs of a single purchase. They discovered that it took on average 3.5 hours to purchase everything from a pen to a complete computer desktop refresh. This led to their strategic decision to implement an e-procurement program reducing operational purchasing cost from 3.5 hours down to 20 minutes. The corollary to this TCO result is that it impacts their supplier selection matrix. Building an e-procurement channel with a supplier became a requirement so for the University of Toronto, the decision to buy a pen at $1 or at 90 cents isn’t so simple. They would argue that efficiencies in their operational costs must be taken into account in their evaluation criteria and weightings.

AUGUST 2014 | 31

Innovation Nowhere would TCO be more critical than in the healthcare sector, where innovative medical technologies can improve patient outcomes without driving up costs. The Conference Board of Canada recently put out a report on Innovation Procurement highlighting best practices that recognize TCO as a requisite in decision making both nationally and internationally. A novel approach introduced in the EU is their most economically advantageous tender (MEAT). Consistent with the United Nation’s prescription for best value for money, their primary goal is to use MEAT to facilitate the introduction of new medical devices. This is accomplished by explicitly stating that in addition to price, “cost related factors” (e.g. operating, training), “non-cost related” (performance, supplier competence) and “other factors” (geopolitical issues, patient preferences) are considered. BC’s Health Shared Services (HSSBC) uses a solutions-based or outcome-driven model for their peritoneal dialysis purchases. Their procurement process recognizes the need for the supplier to not only provide the medical device but also to interact with the end client (patient) in delivering the care around the home use of the item. Their TCO model facilitates upgrades of newest technologies, regional flexibility to allow local preferences and management of a seamless experience for patients since multiple suppliers could be involved with a homecare solution. Perhaps the most creative solution towards facilitating the procurement of innovative technologies is Denmark’s model. Their approach to TCO is to utilize both mandatory and voluntary criteria in their procurement matrix. If mandatory requirements are met, suppliers are then required to “voluntarily” differentiate their products or solutions from each other. Diverse committees that typically include end users then assess the voluntary parameters. This allows suppliers to introduce technologies that would otherwise never have exposure in a “price plus specs” type of tendering.

32 | AUGUST 2014

What’s consistent in the approaches taken by the EU, Denmark and HSSBC is the engagement of experts and end users to determine choices. This takes the procurement process a step closer to delivering a more “realistic” model for TCO because clinical expertise and end user experience become part of the procurement matrix.

Challenges While these examples of TCO practices are inspiring and illustrate the enormous value the approach can deliver, there still remains the practical reality of its sustainability. TCO is time consuming and requires resources; both in terms of data collection and analysis. Effective practices also require engaging stakeholders and end users as the final solution needs to address their outcomes. Furthermore, suppliers, both big and small, need a tendering environment that doesn’t favor cost containment and where they can compete fairly to bring to market their innovative solutions. And all of this must be done in a climate of heightened sensitivities to cost containment. The manufacturing sector may provide a sobering perspective on TCO. Typically, price in equipment-based purchases represents only 10 percent of the TCO in manufacturing. A sampling of other costs includes auxiliary equipment costs; inspections; testing; training; facility costs; energy; handling of raw materials; spares and repair parts; production losses and environmental costs. Could a production plant buy purely on price and a specifications match? Total cost of ownership is at the very least a tool to help purchase goods and services where cost containment is still the key driver. Developed as a strategic tool, with a greater inclusion of all stakeholders, end users and even suppliers, total cost of ownership has the potential to drive innovation and operational efficiencies across public sector organizations. B2B Eddy Jin is a procurement consultant who can be reached at eddy@eddyjin.ca.

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The Law

The Power Of Words Arbitration agreements must be carefully drafted By Marvin Huberman

34 | AUGUST 2014

rbitration has theoretical advantages over litigation, including expert decision makers chosen by the parties, decision finality with limited appeal rights, privacy and confidentiality, procedural simplicity and informality as well as lower costs and speedier resolution. These advantages aren’t always realized, particularly when there are deficiencies in the arbitration clause rendering it invalid, not binding or unenforceable. Arbitration can start pursuant to an arbitration clause in a contract or under an ad hoc agreement to arbitrate. Arbitration clauses affect the rights of parties to agreements containing them. The courts strive to enforce arbitration agreements and there’s a strong public policy in favour of this. A recent decision of the Ontario Superior Court of Justice shows the importance of defining the scope of the arbitration, as well as using clear and concise language to describe the dispute. In 2156775 Ontario Inc. v. Just Energy, the court dismissed a motion by the defendant, Just Energy Ontario LP, to stay a civil court action in favour of arbitration, ruling the dispute wasn’t covered by the arbitration clause. The plaintiff, 2156775 Ontario Inc., doing business as D’Angelo Brands, allegedly entered into energy contracts with the defendant, Just Energy, a limited partnership that marketed energy contracts to residential and commercial customers. The defendant, Glen Lancaster, provided marketing services to Just Energy. The 2008 agreement between the plaintiff and the predecessor company to Just Energy didn’t include an arbitration clause, but the 2010 agreement did. That arbitration clause provided, in part: “Dispute Resolution, Binding Arbitration. Customer may contact Just Energy with regard to a concern or dispute under this agreement....Both parties will, in good faith, use commercial reasonable efforts to resolve a dispute. If not resolved within 45 days, such dispute will be referred to and finally resolved by binding arbitration pursuant to Governing Law, before a single arbitrator, without the right of appeal to law

and/or facts, at an arbitration services organization to be chosen exclusively by Just Energy....” [emphasis added]. The Plaintiff began court action in 2013, seeking a declaration that the two contracts were void, and damages for negligent or fraudulent misrepresentation. Just Energy, relying on the arbitration clause in the 2010 contract, asked to stay the civil action in favour of arbitration. The defendant, Lancaster, wasn’t a party to either contract and consented to arbitration. Relying on the Ontario Arbitration Act, 1991, and relevant case authorities, the court enacted a two-step framework for determining whether to proceed with arbitration or go to court. Does the dispute fall within the scope of the arbitration agreement? • If so, should the court exercise its discretion under the Arbitration Act, 1991, to stay proceedings due to the invalidity of the arbitration agreement (among other possible reasons)? • If not, it’s unnecessary to consider the second step. Just Energy’s motion for a stay failed on the first question. The court held that the dispute didn’t fall within the scope of the 2010 arbitration agreement because the arbitration clause applied only to disputes “under” the agreement, whereas the court action challenged the agreement’s existence. The court distinguished arbitration clauses in the case authorities relied upon by Just Energy, which used broad wording like “in connection with” or “arising out of” or “touching or concerning”. The court noted cases in which broadly worded clauses were at issue and which expressly mentioned “validity”. In the Just Energy case, the court found the arbitration clause didn’t mention validity and couldn’t encompass that issue. Since invalidity wasn’t covered, it was unnecessary to continue to the second step to determine if the court should stay the arbitration on the grounds that the agreement is invalid. The court dismissed the motion for a stay and granted the defendants a time extension to deliver statements of defence for court action. Sometimes, it’s only after a dispute arises that the parties realize how important an arbitration clause is. A clause must be tailored to fit the circumstances and meet the parties’ objectives. Most important, it must describe what dispute is captured. Failure to do so can cancel arbitration’s advantages. B2B For an enhanced version of this story with additional comments, visit us online at http://www.purchasingb2b.ca/features/

Marvin J. Huberman, LL.B., LLM, is a Toronto trial and appellate lawyer, mediator and arbitrator. Visit Marvin online at www.marvinhuberman.com. PurchasingB2B.ca

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Style, safety, fuel efficiency, advanced technology and a spacious, comfortable interior. With all of that and more, the new Toyota Corolla is perfect for your business. Combine all of its features with the fact that it has the lowest cost of ownership in its class* and you’ve got a ﬂeet vehicle you and your business can feel good about – today and tomorrow.

ﬂeet.toyota.ca * Based upon 2014 independent 3rd party automotive research company study looking at fuel costs, depreciation costs and maintenance costs for base model Corolla and comparative in market compact segment vehicles over a 10-year period (2004-2013). The study includes competitive models that have been available in Canada for 10 years. Actual cost of ownership may vary.