Supply Professional April 2022

APRIL 2022

HISTORY OF SUCCESS

John Kreller on education, history and supply chain Micro-fulfillment

The rise of digitization

Ukraine and the supply chain Analytics & reporting Cost control

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VOL.64 No.2 APRIL 2022 SUPPLYPRO.CA COVERING CANADA’S SUPPLY CHAIN

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COVER: MIKE FORD PHOTOGRAPHY

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FEATURES 7 SUPPLY CHAIN DIGITIZATION Accelerated efforts to adopt technology.

10 HISTORY OF SUCCESS Supply chain insights with John Kreller.

13 A NEW WORLD Strategic sourcing versus strategic procurement.

14 QUICK AND MINI The rise of micro-fulfillment.

ALSO INSIDE 16 A CLEAR VIEW Procurement analytics power people, the planet and business.

4 UP FRONT

18 NEW OPERATING MODEL Assessing procurement’s total value of ownership.

6 IN THE FIELD

5 BUSINESS FRONT

30 THE LAW

20 GEOPOLITICS OF SUPPLY CHAINS Ukraine crisis highlights importance of understanding the global stage.

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UP FRONT

TIME FOR CHANGE One positive development, if I can put it that way, to arise from the COVID-19 pandemic and the invasion of Ukraine is the spotlight these events have shone on supply chains. Many who likely didn’t have a clear idea of what a supply chain was a few years ago are now much more familiar with the field and what it involves.

As well, lockdowns brought supply chains, quite literally, to people’s doorstep. Many who otherwise would have bought goods in bricks-andmortar stores began shopping online. This boosted e-commerce like nothing had before.

This sort of disruption has become a permanent fixture in business.

In our story about the Ukraine conflict on page 20, Joy Nott of KPMG Canada stresses that organizations must abandon their ‘wait-and-see’ attitudes towards their supply chains. Accept that disruption is the new normal and plan accordingly, she counsels.

Considering this, now is the perfect time to adapt supply chains to continuing unpredictability. What has become clear is that supply chain education can evolve to suit this new world.

Here are a few ways in which we can develop that education to prepare us better for what lies ahead.

With Industry 4.0 underway, the digitization of supply chain functions will only increase. As discussed in our article on digitization on page 7, according to The Hackett Group, enterprise digital transformation jumped to the number-one spot among priorities in 2021 for responding supply chain executives. Over half (53 per cent) of those responding to the The Hackett Group’s survey reported having a major digital transformation initiative on the enterprise agenda. At the same time, 65 per cent of these companies have accelerated their digital programs since 2020, when the pandemic began.

Supply professionals who haven’t already will need to familiarize themselves with artificial intelligence (AI), machine learning (ML) and other digital tools. Supply professionals must learn the data skills needed to use these technologies going forward.

Another lesson from the Ukraine conflict and its effects on supply chains is the need for professionals in the field to gain a broad understanding of the world and its geopolitics. Tim Moore, president at Tim Moore Associates — Canada’s Supply Chain Recruiters, makes this point, again on page 20. Research skills will become increasingly important. Some organizations may look for candidates with higher education, such as a master’s degree or PhD., in political science, international relations, or other related fields.

Another pursuit must be to continue promoting supply chain careers to students. Those attending high school, university and college must be told that supply chain offers great career options for those with digital skills and broad knowledge of the world. Long gone are the days of simply filling out POs and pressuring vendors for the lowest price.

The business world will emerge from the pandemic. We’ll grapple with conflict in Ukraine and continue an uncertain, yet always-interesting, path.

Amid disruption, that much is certain. Now is an ideal time to rethink supply chain skills and education.

EDITOR MICHAEL POWER 416-441-2085 x7 michael@supplypro.ca PUBLISHER ALEX PAPANOU 416-441-2085 x1 alex@supplypro.ca DESIGN Art Direction ROY GAIOT Design Consultation BLVD AGENCY CUSTOMER SERVICE/PRODUCTION LAURA MOFFATT 416-441-2085 x2 lmoffatt@iqbusinessmedia.com ASSOCIATE PUBLISHER FARIA AHMED 416-919-8338 faria@supplypro.ca EDITORIAL ADVISORY BOARD LORI BENSON Procurement Compliance, L&D, Engagement and Knowledge Lead | Business Enablement, Ernst & Young LLP THOMAS HUDEL Manager, Purchasing and AP, Esri Canada Ltd. WAEL SAFWAT Procurement Director, Black & McDonald SHERRY MARSHALL Senior Manager, Meetings, Travel & Card Service, PwC Management Services KIRUBA SANKAR Director, Program Support, Purchasing and Materials Management— City of Toronto JEFF RUSSELL Corporate Purchasing Manager & Inventory Manager, Miller Waste Systems Inc. iQ BUSINESS MEDIA INC. Vice President STEVE WILSON 416-441-2085 x3 swilson@iqbusinessmedia.com President ALEX PAPANOU

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BUSINESS FRONT—BY MICHAEL HLINKA

FACING REALITY NORTH AMERICA SHOULD DEAL WITH THE WORLD ON OUR OWN TERMS The COVID-19 pandemic should have been a wake-up call for North America. Through no fault of our own, we were impacted by a pathogen that originated in China. We’re still not sure whether it came from a wet market, or if something manmade escaped from a lab. On one hand, how COVID-19 started matters profoundly. But on the other hand, it doesn’t. Because we are so reliant on a global supply chain where China is the central player, we can’t afford to pursue the truth too aggressively. We, and here I refer to Canada and the US, had already effectively surrendered our sovereignty.

This should have been a wakeup call. Once the crisis part of COVID-19 had passed (which was at least a good year ago), we should have taken stock of where we were.

We should have taken a step back and differentiated between the essential and the superfluous.

What do I mean by that? When push comes to shove, what matters most are secure borders and self-sufficiency in the essentials of life, which means food, energy and technologies that would include pharmaceuticals and computer chips. But the Ukraine crisis exposes how non-existent our thinking has been on the most important issues.

Canada is uniquely blessed.

We share a border with the world’s foremost economic and military superpower. We are protected from hostile powers on both the east and west by two huge oceans. We are blessed by abundant natural resources, in particular oil and natural gas.

Canada’s enlightened and self-interested immigration policies

mean that we cull the best and brightest from around the world.

This is good for our economy and good for our social fabric as we integrate grateful, hard-working people from the four corners of the earth. We have been so blessed that we have allowed ourselves to become both naïve and soft.

Let’s return to the UkraineRussia conflict. There are two possible explanations for the invasion. The first is that Russia was threatened by Ukraine’s desire to join the NATO alliance and acted pre-emptively to prevent it. The other is that Vladimir Putin has grandiose dreams of empire building, trying to resurrect the borders of what was once known as the Soviet Union. My guess is that soon after this column is published, there will be a negotiated settlement where some Ukrainian territory is ceded to Russia, and Ukraine will remain somewhat autonomous. There’s a good reason why this will be the case.

NORTH AMERICAN TERMS Germany, Western Europe’s leader, made itself reliant on Russian energy. This was short-sighted and foolish and it’s Angela Merkel’s true legacy. It’s yet another lesson for North America. We can insulate ourselves from the rest of the world. It is much more the case that the other continents need North America more than we need them, and we can and should engage on terms that are acceptable to us.

It should start with Canada and the US withdrawing from NATO and other international bodies like the United Nations. Then we can negotiate our own unique trade and military treaties with individual

countries. Our economic policy would be captured pithily with “North American Self-Sufficiency.”

There should be free trade between the US and Canada.

Then there should be a common trade policy with the rest of the world, something that economists refer to as a customs union. North America would jointly announce tariffs that would start at moderate levels and gradually, over time, would increase until we let the invisible hand of the market transform our economies and we would produce all the essential goods and services we need.

There should have been an important economic lesson that we learned from COVID-19 and the shutdown of the North American economy. So much of what many of us do is completely superfluous.

I think of the salons that dot Yonge Street in Toronto, where mostly women are getting their nails done. If that service stopped, would we really be worse off?

I consider my own full-time vocation (post-secondary teacher) and think about all the confused young people who are wasting their time with degrees and designations that will burden them with both debt and bitterness at the end of their academic journeys.

Let’s start acting like mature, responsible adults. It starts with a precise definition of our vital interests. I have already made my view clear: at its core, it is economic independence. Military security is guaranteed by the US and otherwise we should avoid the “foreign entanglements” that America’s first president, George Washington, warned about over 220 years ago. We should condemn

Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.

“We have been so blessed that we have allowed ourselves to become both naïve and soft.”

any offensive military incursions as immoral. We should extend humanitarian aid and accept carefully vetted refugees to join in the Canadian experience. But we should simultaneously understand that the world is a dangerous place and our national interest, properly understood, should be put first. SP SUPPLYPRO.CA 5

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IN THE FIELD—BY EUGENE FERNANDEZ

THINKING OUT OF THE BOX UNCONVENTIONAL APPROACHES HELP REALIZE SAVINGS My “thinking out of the box” started at age 10 when I watched planes fly above my home bordering a desert in India. I wondered if I would ever get out of the box and fly in a plane. Little did I realize, I would eventually fly weekly as a supply chain and procurement consultant across the US and Canada.

My first job was in management services, and I was thinking out of the box. The first day, I looked at the annual report. I realized the excise duty tax, then 300 per cent, formed the largest spend. Perhaps no one had questioned it for 25 years. In India, the 20-page excise duty act was intended to be a manufacturing tax, but was charged on selling price, which is double the manufacturing cost.

I approached the legal department, and a case was filed and won, after five years, at Supreme Court. This produced substantial savings for the company.

So, this gave me my first principle look at the top spend. It also allowed me to think outside the box, even if the goal looks impossible, like changing interest and brokerage fees at banks. Credit card spend was originally not an addressable spend until Citibank questioned it, saving $1 billion.

Others then followed.

Another example was at a $2-billion procurement transformation. I asked the customs duty rate, and everyone told me that in the US, in the oil industry, there was none. I applied my next out-of-thebox principle: don’t just believe what anyone tells you, even a C-level executive. Verify it.

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When looking again at global AP spend, I found no duty was paid in the US. However, treasury transfers were over $300 million for duty payments in other countries on US-made products. Discovering this saved tens of millions in quick-hit savings by duty reduction on CKD (“completely knock down parts,” split into two parts to reassemble locally). This reduced the duty rate.

The third principle is to assume people give suggestions based on their own limited, and perhaps not updated, knowledge. While consulting at a large retail organization I suggested a WMS solution along with a best-of-breed advanced supply chain retail solution. This raised the objection that their legacy system was the best. They even had 150 staff maintaining it.

Cued in to such statements, I proposed two software solutions which, when implemented, generated $1 billion dollars in savings.

KEEP LEARNING To enable effective out-of-the-box thinking you must continuously add to your knowledge. Books can be out of date. Read current innovation articles and get alerts. Read magazines in waiting rooms. For example, reading about nano technology and other solutions helped me 20 years ago to think outside of the box about placing a nano robot in or on ship containers.

That has become today’s reality.

A recent out-of-the-box thought I’ve had is to contribute to an AI/ML solution for CEOs of SMEs. The solution would allow

them to talk to their computer each morning, asking five things they need to do that day. The computer provides suggestions, for example about offering a 3.5per cent discount to client A to close a sale (let’s say, using Salesforce Einstein AI); replace machine B to save $1 million in product quality costs and increase in production (by using linear programming optimization/decision trees, MRP, and so on); audit vendor C invoices to save over $1 million (using AI/ML analysis of invoices and fraud detection); increase price of product D by 8.3 per cent (using linear programming/price elasticity of demand); and increase media advertising 23 per cent (as it generates more customers per dollar as shown by AI due to recent customer social attitude changes).

Out-of-the-box thinking will always keep you well-liked by the CEO. For example, for replacing 200 vendors with only two that have a higher gross margin, all procurement staff is replaced by vendor’s staff for free, eliminating one per cent of revenue obsolescence write off, or saving all warehousing and shipping labour costs.

In another global organization, out-of-the-box thinking involved using, in three to four months, a courier IT parcel tracking system in manufacturing steps, logistics and online customer delivery, thus avoiding a $1-billion planned IT investment over two years.

Another of my pet out-of-thebox ideas is an AI/ML solution that matches candidates searching for

Eugene Fernandez, B. Eng., CSCMP, CPSM, P. LOG, PMP, is principal consultant at Eugene Fernandez & Associates Ltd.

“Assume people give suggestions based on their own limited, and perhaps not updated, knowledge.”

jobs to local positions, without those candidates needing to apply.

The software makes these matches based on the job description, manager, company culture and other criteria, then proposes one person for the job. One day, if you’re looking for employment, that person could be you. SP SUPPLY PROFESSIONAL

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BY MICHAEL POWER

GOING DIGITAL GLOBAL EVENTS HAVE ACCELERATED SUPPLY CHAIN DIGITIZATION EFFORTS Some aspects of supply chain management stay constant. Disruption, uncertainty and the need for agility all remain among the top priorities of those in the field. The COVID-19 pandemic and, more recently, war in Ukraine, are examples of how events beyond our control affect those supply chains. What has evolved is the ability to deal with these challenges. Technology and digitization playing a key role in that evolution.

Supply chain leaders realize this.

In the most recent Key Issues Study from The Hackett Group, enterprise digital transformation jumped to the top priority for 2021 among supply chain executives who responded to the study. Over half (53 per cent) of respondents reported having a major digital transformation initiative on the enterprise

agenda. As well, 65 per cent of these companies have accelerated their digital programs since the pandemic began in 2020.

“You look at these issues over time, there have always been disruptions – there has definitely been more, but there have always been disruptions,” says Richard Lebovitz, CEO of LeanDNA. That said, the need for digitization wasn’t as strong previously. “People were very happy working in the war room with spreadsheets.”

The remote working that sprang from the pandemic has shifted organizations to operating much more online, Lebovitz says. While many organizations initially resisted digitization, many have been forced to adapt. The pandemic has influenced this shift towards the digital. So too has growing product customization and configuration, he says. For example, two decades ago, an aircraft mainly had to be safe, efficient and good quality.

Now, onboard electronics, seat configuration and other factors also play a role in design.

“The other trend is just the globalization of supply chain, where you went from a factory making everything from beginning to end, to where now there’s a lot of tiers and global suppliers all over the world,” Lebovitz notes.

Both the fourth industrial revolution, or Industry 4.0, and the pandemic have catapulted business further into digitization, says Maria Greaves-Cacevski, senior category sourcing lead at Chemtrade Logistics. Organizations are looking to reduce complexity while optimizing everyday tasks through technology. IT projects that were previously viewed as an expense are now seen as essential.

Complexity arises from trying to break down silos within an organization so that processes run seamlessly from start to finish, she says. Understanding the chal-

lenges that team members and stakeholders face helps to avoid putting undue pressure on them and minimizes the creation of new, smaller problems. Digitization can also help to optimize other areas like supplier risk analysis, Greaves-Cacevski says.

“We’re able to put information in real time and disseminate it to our key stakeholders so that they can make the best decisions on where to source or where there is alternative sourcing,” she says.

Several areas of technology investment have accelerated in the past two years, due to the pandemic and, more recently, the crisis

in Ukraine, says Josh Nelson, associate principle at The Hackett Group. Those events created a combination of demand shocks and supply disruptions – airport closures, manufacturing facilities and transportation systems shutting down while consumers bought more household supplies.

“What companies were looking for at that point was, ‘how do I do business processes quicker? How do I become more agile?’ That’s where a lot of the digital investment came in,” Nelson says. “If you have the right tools to do the planning and for visibility, you can really turn plans around much quicker.”

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Changing supply chains mean companies need better visibility to make data-driven decisions, says Michael van Keulen, chief procurement officer at Coupa Software.

And while those supply chains have had a long-standing need for digitization, that need has only accelerated in the past few years due to supply chain disruptions.

“It’s just magnified the importance of digitization, and companies that didn’t have a good strategy around digitization found themselves in trouble because they just didn’t have the right visibility nor the ability to very quickly pivot between speed over quality, over continuity, over lead time,” van Keulen says.

While cost historically has been a major factor for supply chains, business continuity has gained in importance, he notes. Having a 8 APRIL 2022

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digital twin of your supply chain provides an easy way to run ‘whatif’ scenarios, allowing organizations to pivot quickly between suppliers while grasping potential downstream ramifications.

DATA IS KEY A first step towards digitization is getting connected with accurate data, says Lebovitz of LeanDNA. The best software is useless if the data it uses is bad. Yet, ensuring good data isn’t a one-time event.

Data quality must be an ongoing part of a digital transformation.

The next step involves working to ensure visibility and identifying priorities. That process requires analytics, while priorities must then be clear across each element of the supply chain. The next step in digitizing is ensuring proper workflow.

That can help shine a light on a

problem’s cause while providing a framework to collaborate on solutions. The next stages involve adding a layer for the dashboard and the executive management and control towers, followed by automating the process through robotics process automation (RPA).

“If you don’t do all these other steps and you try to go direct to automation using AI, you could have a lot of issues because people don’t really believe it and they don’t trust it,” Lebovitz says. “It’s important for building trust in the information, trust in the prioritized action, that it’s the right thing to do. If you do that well, you can get to full automation.”

Planning is essential to digitization, says Greaves-Cacevski.

Although the data behind technology is black and white, the process involves people. Remaining flexible

is important, she says. Consulting stakeholders, analyzing industry metrics and trends, learning from past successes and failures all count when mapping out how to implement a strategy.

“Everything is a journey right now, and with journeys there are ups and downs,” she says. “Being able to react and to change as you need to; adaptability is critical in implementing any kind of software system.”

The Hackett Group’s Nelson agrees on the importance of assessing the state of supply chain processes when beginning a digitization process. The technology, how the organization is performing, and so on can all be assessed. Look at the organization’s performance compared to peer companies, whether the cycle time is longer, and how the service level compares.

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opportunities lie. Poorly performing processes can be illuminated, making it more likely that a given technology will improve them.

“It becomes less of, ‘just digitizing for the sake of digitizing,’” Nelson says. “You’re actually trying to solve a problem and improve business performance.”

SOMETHING FOR ALL Digitization doesn’t just help the procurement department, says van Keulen. While procurement benefits through, for example, better spend compliance, visibility and structure, digitization offers something for every cross-functional department in a company. Finance gains through improved governance, enhanced controls and accuracy in financial reporting. For the IT department, a cloud-based environment needs fewer resources to maintain their infrastructure. The business benefits through reduced administrative burden and a more

“We’re able to put information in real time and disseminate it to our key stakeholders so that they can make the best decisions on where to source.” seamless experience between managing their budget versus forecasting and actuals. It’s about extracting more value from business spending, which helps to accelerate achieving strategic objectives, he says.

“The key to success for digital transformation is, don’t do change to the people, do it with them,” van Keulen says. “Demonstrate there’s

something in it for every single person in the company. This is not an administrative procurement tool, for finance or IT. It’s also not just for legal or the business. It’s for all of us together.”

A clear business case helps to get stakeholder buy in for digitization, says The Hackett Group’s Nelson. That involves more than just savings – doing things quicker, increasing working capital and providing better service are additional selling points.

“If you can really start focusing on the opportunities and have an embedded business case, that goes a long way,” he says.

It’s important not to blindside end users when introducing digital tools, cautions Greaves-Cacevski.

While it’s not ultimately their decision, the success of digitization depends on their buy in. As for the C-suite, gain their approval by presenting the case using a familiar term: return on investment.

“There will be intangible benefits that we may not be able to quantify,” she says. “But bring it back to the values and the deliverables of your respective organization. Show them how the software is going to meet and overachieve those deliverables.”

Finally, it’s important to keep change management in mind, Greaves-Cacevski adds, as there’s often apprehension around new technology. People worry that technology will change their jobs, and there can be concern about what changes may look like. While these shifts come with a learning curve, emphasize the value they will bring, she advises.

“Digitization is critical, and with the pandemic, we’ve gone into reactive mode,” GreavesCacevski says. “A lot of people aren’t comfortable using technology. We have to look at the softer side of change and how quickly it’s happening.” SP

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A HISTORY OF SUCCESS

JOHN KRELLER SHARES HIS LOVE OF HISTORY ALONG WITH SUPPLY CHAIN INSIGHTS While John Kreller has a keen interest in European military history, his first forays into the supply chain profession were less than strategic.

Like many who choose it for their career, Kreller notes that he mostly fell into the field, almost as if by accident.

“After high school I did a trip through Europe,” says the Kitchener-Waterloo, Ontario native. Kreller is now warehouse manager at Eaton, an intelligent power management company. “You kind of plan your future while you’re doing that. There were many things I was considering. Supply chain was not on the list at that moment in time. But again, as I said, like a lot of people I kind of fell into my career.”

When he returned to Canada from Europe, Kreller began working on a production line at MTD Products, a designer and manufacturer of outdoor power equipment such as lawnmowers and snow blowers. When he realized that he wanted his career to take a different path, he enrolled at Wilfred Laurier University in Waterloo, Ontario as a mature student. While studying there, he earned a diploma in Business Administration and Small Business Management.

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GETTING STARTED After that, when Kreller was about 22, he jumped into a job loading trucks at Al’s Cartage in Kitchener. That position, he now says, is where he began his warehousing and supply chain career.

Kreller worked at Al’s Cartage for about a year, gaining experience before taking a warehouse job at Kaufman Footwear. His duties at that company included loading bins, picking orders, clean up as well as general labour tasks. He eventually moved into a shipper position.

It was also around this time that Kreller got married and bought a house. After 10 years working at Kaufman Footwear, he made a switch to a position at Spaenaur in Kitchener, a manufacturer of fasteners and related products. Kreller found working with such hardware fascinating and enjoyed the courses the company offered that went into detail regarding the various components in the company’s warehouses.

“I ended up running their secondary overflow warehouse which supplied the main building, which was located out in Breslau, Ontario,”

he says. “We did a lot of the receiving there, and putaway. I went through the “train the trainer” program for reach trucks and forklifts and basically became responsible for teaching staff how to drive the equipment safely. I was there for probably a year. I had just received a promotion to their order desk when I got the opportunity to move over to Research in Motion.”

At the Waterloo, Ontario software company, Kreller began working as a shipper. He learned a lot about import, export and customs, as well as Blackberry’s products. He worked there for three-and-a-half years, enjoying the time as an employee of the company. But the organization was moving to a 24/7 shift rotation pattern, he says. The new schedule would mean difficult shifts, and Kreller couldn’t imagine going to work at, say, 7pm on a Saturday evening. Such schedules would cut too deeply into time with his family. As a result, in 2003, Kreller decided to leave Research In Motion.

“A lot of good people came out of there,” he says of the company and its staff. “It was an excellent training ground for people in supply chain as well as other departments, so there is that facet of it.”

Kreller’s next position was in a supervisory role at Kaperal Corp. in Waterloo. The organization was another high-tech company that built communications housings. He worked there for about six-and-a-half years, eventually becoming warehouse and logistics manager. In the end, the company’s Germany-based parent organization decided to move manufacturing to China. That decision meant closing its Canadian operation.

Once that happened, Kreller worked for about six months at a medical equipment company called Excel-Tech. While he credits the organization for having the most diversified product he has ever shipped in his career, he eventually left for a job closer to home.

That move led to a position at Rimowa North America, a manufacturer of luxury luggage, suitcases and bags. He spent seven years as a logistics and shipping manager at the Cambridge-based company.

Eventually, Kreller landed his current position as warehouse supervisor at Eaton Corporation. He has 21 employees he supervises in 12,000 square feet of warehouse spread across the company’s manufacturing facility.

“What’s interesting about Eaton is that they have what they call the “Eaton University, and it has all kinds of different courses that that they want you to take as part of their onboarding process, which I find very interesting,” Kreller note. “It’s a company that’s very interested in, and is a leader in, inclusion and diversity.”

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MIKE FORD PHOTOGRAPHY

BY MICHAEL POWER

MIKE FORD PHOTOGRAPHY

DAY IN THE LIFE Now, Kreller’s day-to-day routine is varied.

His work day starts at 6am, when he meets with his team members. The group lays out what the day is going to look like – a process Kreller says he bases on safety and quality, as well as delivery and cost targets. All that varies throughout the week depending on what’s happening.

“We look at some of our metrics like inbound and outbound traffic, our putaway rate and things like that,” he says. “Right now, the supply chain is in a lot of pain because of slowdowns elsewhere, the economy and the world.”

Other morning tasks Kreller handles include doing daily payroll, along with going through emails to see what items cropped up during the night shift.

“Things like that, morning priorities for production,” Kreller says. “I’ll do a walkaround on the floor, make sure everybody is set for the day, that trucks are properly engaged at the docks and all the safety equipment is in place, making sure everyone has their PPE, including masks. Those type of things.”

Kreller also participates in a series of meetings with various stakeholders, called tier meetings, that occur throughout the morning. Those meetings end around 9:15am. Much of the tasks after that focus on maintaining the flow of the day. Trucks must be loaded with parts, offloaded and received, as well as put into their proper locations. That happens twice a day, in the morning and again in the afternoon.

“That’s the day-to-day,” Kreller says.

“In between, there are other meetings. There’s training. There are emails to deal with. It’s a very good crew. They’re all very helpful and responsive in helping out a new guy learn his position.”

Along with his degree from Wilfred Laurier University, Kreller has taken various courses at Conestoga College. He recently completed an online analytics course through Laurentian University. He has also continued his education through reading and has enjoyed the work of leadership author John Maxwell, as well as other books on the topic of leadership.

Kreller notes that he’s faced both challenges and opportunities as his career has progressed.

For example, while working at Rimowa North America, US Customs asked to review the company’s product to ensure that it complied with NAFTA regulations. Perhaps, Kreller specu-

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“Continue your education.

Learn as much as you can about what’s going on in various industries, because it can all be applied to other fields.”

lates, they found it difficult to believe that the company was actually manufacturing luxury luggage in Cambridge, Ontario.

US customs officials remained onsite in the company’s boardroom for several days, perusing product samples and touring production facilities. The officials finally accepted that the items were all made in Canada and the cost of whatever was imported didn’t outweigh what was produced domestically. “We were able to resolve the issue with US customs and continue on our way,” Kreller says. “Also at Rimowa, I did a duty drawback with the CBSA and brought back over a million dollars of import duties into the company coffers. I was pretty proud of that achievement.”

One change within the warehouse introduced while Kreller was at Rimowa involved introducing a kit picking process. When he first started at the company, production staff would go through the warehouse picking their own parts. There was little inventory control, so parts could get mixed up. The kit picking process provided visibility into inventories out to a week or two, depending on how far in advance picking took place. Inventory shortfalls were easy to spot in advance.

That way, Kreller says, production supervisors no longer had to ask purchasing staff where their parts were. The warehouse unit could easily report on the shortages, which could then be ordered more quickly.

“It was a constantly evolving process,” Kreller says. “When I started at Rimowa, I was the third person on the team. And subsequently that team grew to 47 staff members with three supervisors and two shifts. It was quite the growth over the seven years that I was there.”

When the pandemic began, Kreller’s company at the time began noticing issues with customers in Quebec closing their doors, while other areas began responding in various ways as well. Kreller’s company was considered an essential service and continued operating while others closed their doors and shut down their operations.

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Suppliers stuck with Kreller’s company once they learned it had been deemed essential, he says. And while supply chain issues continued from China, there wasn’t much that could be done about that. The situation was challenging both professionally and personally, he notes.

INTERESTS ABROAD Kreller has long been interested in spending time working overseas, he says. Such an opportunity may end up presenting itself at his current company, which is a worldwide corporation.

“One thing I’ll say about my career is, I’ve never been afraid of those challenges of change,” he says. “But ideally, I’d like to get to a nice country in Europe where I can do some exploring on the weekends and satisfy my interest in history.”

Kreller is an avid reader, with most of his time spent reading military history. Ancient Greece and Rome, early North American and Medieval European history count among his specific interests. Studying history – looking at mistakes made in the past – can help to inform the decisions that we make in the present day, Kreller notes.

“Just about anything, really,” he says of his interest in the subject. “It really fascinates me.

I think there is a lot to be learned from history.

I’m constantly reading, whether it’s about leadership or history. Sometimes, they’re one and the same, so this allows me to continue my education.”

Kreller also has an interest in gardening and the outdoors. Throughout the pandemic, he built extra vegetable gardens on his property.

It has been small actions like these that acted as stress relievers during an uncertain and trying period, he notes. Growing vegetables, as well as keeping a bee garden – designed with nectar and pollen producing plants – relieve some of that stress while also contributing to the wellness of the environment.

“I also sit on the board of directors of the Kitchener Rangers Hockey Club, that’s another

interest,” he says of his role with the major junior hockey team.

For those who are either new to the supply chain field or looking to advance a career that’s already underway, Kreller stresses the importance of finding a mentor. Such a coach can work with a supply professional to illustrate to them what the challenges are in the field, as well as providing the opportunity to work through some of the issues they face, Kreller says.

At this point in his career, Kreller finds himself in the position of wanting to offer such guidance to others in the field.

“I’m really looking to develop future leaders,” he says. “I’ve moved around a lot, and I think in most places I’ve left a company in very good shape. Succession planning is a big piece of that, so I’m always looking for the next leader to come up behind so that I can potentially move up or move on myself.”

Whenever possible, it’s important for supply professionals to seek out such arrangements, where they are able to learn from one of their peers, he notes.

“All boats rise, hopefully, working together as a team,” he says. “Continue your education.

Learn as much as you can about what’s going on in various industries, because it can all be applied to other fields. Information is not so focused that you can’t learn from seeing other entities and what they do to improve themselves.” SP

SUPPLY PROFESSIONAL

2022-04-11 1:30 PM

BY JON HANSEN

Besides wondering how many of us consider strategic sourcing and strategic procurement two sides of the same coin, I can’t help but think the issue is the narrow definitions versus the differentiation. According to one P2P service provider, strategic procurement, also known as strategic sourcing, refers to “the long-range plan to ensure a timely supply of goods and services that are critical to an organization’s ability to meet its core objectives.”

A NEW WORLD STRATEGIC SOURCING VERSUS STRATEGIC PROCUREMENT Google “what is strategic procurement?” and see what comes up.

Even with the improvement in Google’s algorithms, the competing results may make you scratch your head. It seems that there’s little, if any, difference between the term “strategic procurement” and “strategic sourcing” as both come up using the above search term.

For example, one result defines strategic procurement as incorporating: “actions aimed at reducing the supplier base, negotiations, communication and maintaining long-term relationships with suppliers (Ryals and Rogers, 2006; Swinder and Seshadri, 2001).” Note the date of the earlier reference – 2001. Another result, this time for strategic sourcing, says “A procurement process that continuously improves and re-evaluates the purchasing activities of a business in order to reduce costs.” Is the word ‘reduce’ or ‘reduction’ overemphasized?

A MORE COMPLEX EVOLUTION? What do I mean by “narrow definitions?” Here is a quck history lesson. Strategic sourcing arose in the late 80s or early 90s. Its adoption was first confined to large companies to “quantify and increase vendor return on investment (ROI).”

Looking at the origins of strategic sourcing and the introduction of strategic procurement in 2001, you can see why the view of the two disciplines is interchangeable. It appears that rather than being different, one marginally evolved from the other.

Swinder and Seshadri provide an example of this narrow evolutionary path in saying that the “cooperative negotiation with a small base of suppliers” reveals the “impressive ability of the purchasing function to enhance shareholder value.” It sounds close to the ROI reference to strategic sourcing, the only difference being that said ROI is “extended” to include shareholders.

Based on this, inserting the word “procurement” after strategic is a misnomer, as procurement’s evolution over the past few decades is far more complex and demanding.

The Deloitte Global 2021 Chief Procurement Officer Survey reports that “With changing business dynamics and increasing layers of complexity, expectations of the CPO role have increased.” The changing business dynamics and “increasing layers of complexity” mean that procurement “isn’t just about cost savings and operational efficiency anymore.”

“Procurement’s role has been elevated to a whole new level of acknowledged importance.”

When CPOs talk about dynamics and complexity, they say that there is “so much more to procurement today.” The “more” includes “innovation, digital transformation, introducing new products and services,” and “other factors such as climate change, geopolitical stability, increasing societal expectations, and world health.” Put another way, the word “strategic” with procurement takes on a whole new meaning.

As is becoming more apparent, procurement’s role has been elevated to a new level of importance since the pandemic began. Terms such as “supply chain disruption” and “rising costs” are now a normal part of our vernacular. The world now realizes what we in the industry have long known: no single part of our lives is untouched by global supply chains and, therefore, procurement. This public awakening has thrust what we do into a spotlight, making our quest for getting a seat at the table moot. The real question we must ask is if we are ready to be truly strategic?

Last year, I spoke with AT Kearney partner and futurist Dr. Elouise Epstein. During that discussion, she noted there are challenges with outdated curricula.

Many educational programs must reboot to reflect the new demands of a high-profile profession.

While it’s not the only reason, Dr. Epstein’s point is well taken.

Lagging education and, more specifically, curricula that no longer meet the demands of a complex world are noteworthy – which is reflected in the numbers.

As far back as 2016 and every year since, most CPOs believe their

teams “do not have the necessary skills to deliver their procurement strategy.” What is equally concerning is the growing talent gap in procurement. In her recent article, chief procurement and supply chain officer at Tesca Group, Nadia Stoykov, referred to the fact that between 2018 and 2028, “there will be 2.4 million unfilled (procurement) positions with a potential economic impact of $2.5 trillion.”

This means that organizations will have an added challenge in becoming strategic beyond updating their current team’s skillsets. I am talking about both attracting and retaining new talent. Stoykov refers to this when she talks about reports that “the average ‘new hire’ only lasts 18 months before moving on to another company.” This is more troubling given that it applies to frontline staff and goes up to more senior management positions.

In a world that is becoming increasingly volatile, uncertain, complex and ambiguous (VUCA), strong leadership and team stability are even more necessary – especially regarding new digital possibilities.

A WHOLE, NEW MEANING A 2021 McKinsey article about inflation and volatility calls on our profession to step-up and take the lead responding to the “urgent challenges in the current market, as well as any future uncertainty.”

From cross-functional collaboration to establishing a “nerve centre” that “brings together a team of specialists from supply chain, planning, finance, operations, and engineering,” strategic procurement has taken on a whole new meaning.

In response to this new world, there is the belief that procurement can deliver significant value to enterprises. Of course, there is a caveat here: organizations can only realize this value when they are “armed with the right capabilities for pursuing sophisticated approaches.” Now that is what I call being strategic. SP SUPPLYPRO.CA 13

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2022-04-11 1:30 PM

BY NOELLE STAPINSKY

THE LAST MILE RACE

MICRO-FULFILLMENT HAS BECOME THE NEW FOCUS FOR RETAILERS Retailers knew they would have to embrace e-commerce eventually. But when the world stopped amid the COVID-19 pandemic that confined consumers to their homes, online shopping not only accelerated, it shifted consumer behaviour significantly. Despite the risks in supply chains, customers wanted goods delivered fast and for a reasonable price. While larger retailers could pivot quicker than others, most have shifted to using existing locations as micro-fulfillment centres (MFCs) to meet demand and decrease last-mile delivery costs.

According to Jon Rosemberg, founder and CEO of Strongpoint Group Inc., the concept of MFCs was traditionally called ‘ship from store,’ a strategy that allowed retailers to get products to customers faster by shipping from a store in a closer geographical area.

“It was more of a convenience play,” he says.

“One of the things that the pandemic did – which was going to happen anyway – was it accelerated the behavioural change in consumers. If we wanted to buy something, we had to buy it online, as there was no other choice or alternative. This was especially hard for older generations. The pandemic forced everyone to get outside of their comfort zone and it really disrupted the traditional magnetism toward brick-and-mortar retail. We were already seeing a shift from brick and mortar to online and that was continuing to move, so 14 APRIL 2022

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retailers knew that at some point they were going to have to leverage their retail footprint in a way that made financial sense.”

The case for brick-and-mortar will remain for those selling expensive products, like Apple, or retailers with tremendous traffic like Loblaws and Walmart, where consumers can purchase items that aren’t typically bought online. “There is also the financial advantage of buying in-store, and there’s even a quality advantage when it comes to things like perishables,” says Rosemberg. “But if you’re a retail store, one of the key metrics that you look at is productivity per square foot, or profitability and revenue per square foot. If your store is limited to servicing the customers that walk in, your revenue per square foot is limited to that.”

Pandemic restrictions are easing, but online shopping will continue growing and changing the way retailers accommodate customers. “Prices, consumer choice, delivery, availability, location and convenience have become the new drivers of shopping behaviour,” says Shash Anand, vice-president of product strategy at SOTI, a business mobility solutions provider. “Retailers are now required to offer speed and flexibility, putting them at risk of losing customers if both shopping and delivery experiences aren’t seamless.”

Retailers must remember that the era of mindless “add to cart” is over, Anand says. Shoppers are more mindful of the shopping journey – from

clicking to shipping. “Consumers now care about how the supply chain operates in the background due to its impact on the rising prices of their favourite products and overall satisfaction. They want to know if trucks are on the road, if there are stocked shelves in stores, and the exact wait times for orders and package deliveries to their doorsteps. Consumer expectations have not only changed, but if their preferred retailer is unable to provide any of those critical elements in their shopping experience, they will look for other retailers who can.”

SOTI’s latest retail report: From Clicks to Ships: Navigating the Global Supply Chain Crisis 2022, revealed that 56 per cent of Canadian consumers are less likely to order an item that requires shipping from overseas than they were a year ago. And 33 per cent of Canadian consumers said that if delivery or pick-up takes longer than two days, they will look elsewhere.

MORE MONEY, HAPPY CUSTOMERS Micro-fulfillment solutions can help companies improve the customer experience with faster delivery times and save money by carving out space in existing stores, rather than creating new warehousings. There are a few versions of how companies are implementing micro-fulfillment.

“Some are picking singles manually in their warehouses, in stores or applying a hybrid setup SUPPLY PROFESSIONAL

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where they allocate space in the back of the store for dedicated order assembly,” says Gary Newbury, founder of Retailer Inc. and a consultant specializing in rapid performance improvement across retail supply chains and the last mile. “Some are using automation within their main warehouses and some are doing micro-fulfillment, distinct from their warehouse network from centres local to, or some distance from, their target market, which is what Sobeys is doing with Voila. It’s able to transport orders to customers in a reasonable time to meet an agreed delivery window.”

Newbury says that Target does about 90 per cent of their picking in store – something they’ve done well. “But one thing that I’ve been saying for years is to stop in-store picking and find a different route because you have pickers getting to the product before the actual customer arrives to shop. But when you look at the store-based approach, if you’re only selling a product infrequently, why commit warehouse or inventory space to that product when it could be on the shelves for customers. If you put your fast-moving products through the automated picking lines and leave slow movers on shelves, you need to keep good stock control on those when you make them available online.”

The other major challenge with micro-fulfillment centres is managing inventory allocation.

“If you have micro-fulfillment centres and 400 stores across the country, you need to figure out where you’re going to place your inventory. And that’s not an easy question to answer,” says Rosemberg. “Artificial intelligence (AI) and machine learning are helpful in understanding

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“One of the things that the pandemic did – which was going to happen anyway – was it accelerated the behavioural change in consumers.” what the customer trend is going to be, but it’s both an art and a science.”

Newbury agrees, “In-store traffic is easier to predict week to week, but e-commerce on the other hand is very hard to predict with any confidence what that might look like next week or next month. We want to get an e-commerce volume to support whatever structure we’re doing on the ground in terms of fulfillment, and then design our promotions, online assortment and speed accordingly to compete and drive that volume.”

This is where automation, AI and mobile solutions come in. “Retailers need to find a way to accelerate innovation and implement technology to communicate with consumers and partners, while also taking into consideration the fact that we’re still very much in a state of flux, which places a premium on the need for flexibility and scalability,” says Anand. “By investing in mobile technology, brands and retailers can not only diagnose problems quickly and adapt to the evolving retail ecosystem, but ensure they remain on top of customer needs, support employees in the field and remain profitable.”

Anand suggests that retailers consider integrating handheld and wearable barcode scan-

ners, printers, radio frequency identification devices (RFID) and GPS-enabled tablets with data collecting apps to stay connected with employees and logistics partners to relay information quickly to customers. “If the retailer has invested in the right technology, their customers standing in front of an empty shelf, for example, can scan a QR code and get information on when that item might be replenished and can be offered options to pre-pay. They can also receive a notification when their item is ready for pick up, arrange a delivery or be directed to the nearest retail location which has the item in stock.”

PRIORITIZING ESG Micro-fulfillment and shipping direct to home is a density game, and a strategy for reducing costs on last-mile delivery efficiently and sustainably. It also reduces GHG emissions.

“Whether you’re talking about greenhouse gases, carbon footprint or even the social justice movement, all of these things have been in the background for years, but they’ve bubbled up throughout the pandemic,” says Rosemberg.

“For any company that wants to survive and thrive in the future, they must prioritize environmental, social, and governance (ESG).”

There is no silver bullet, but retailers must create an on-demand customer experience online and in store. It’s costly, but if done properly and product is allocated well, retailers can provide the desired experience while saving money. SP

2022-04-11 1:30 PM

BY HUGO FUENTES DIAZ

A CLEAR VIEW HOW PEOPLE, THE PLANET AND BUSINESSES WIN WITH PROCUREMENT ANALYTICS The procurement analytics market is projected to reach $8 billion by 2026 (Marketandmarkets, 2022).

Why is it growing so rapidly?

Amidst the global pandemic, companies are turning to supply chain analytics to increase their end-to-end supply chain visibility to make more informed decisions that increase their bottom line, mitigate operational risks and diversify their supplier base. Analytics is the process of collecting, modeling and analyzing data, along with being able to turn it into actionable insights.

Over time, the role of the procurement professional has evolved, transitioning from a transactional buying role into a strategic decision maker. The objective for any procurement professional today should be to procure materials or products that prioritize the most convenient combination of quality, cost, timing and environmental impact.

As such, suppliers and vendors should be assessed on all four aspects. For example, procuring a product from China will have different repercussions from a cost, time, quality and environmental-impact 16 APRIL 2022

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perspective than it would from a product arriving from Europe. Analytics help procurement professionals make the best decision when balancing all four critical aspects.

In addition, our global trading environment today is characterized by higher complexity, amidst changing regulations, new supplier options, rising pressures for full transparency coming from consumers and company shareholders and so on. The modern procurement professional is now confronted with a reality that demands deeper and faster understanding of what is going on within the supply chain.

This new reality challenges the conventional toolbox used to monitor our supply chains. Methods such as Excel spreadsheets are no longer sufficient to deal with the level of effectiveness and timeliness that’s required. While spreadsheets can house data, they do not have the ability to create an accurate, clear and insightful view of the procurement process performance in a timely manner.

It’s becoming increasingly important for companies to establish a centralized data hub or con-

trol tower that provides visibility and guides decisions across the organization. Analytics can act as a central hub with concrete and measurable elements that help drive future decisions.

ANALYTICS STREAMLINES REPORTING Spend analytics allows procurement professionals to understand, in detail, how they are spending and investing money from the organization in the most effective way possible. Sourcing risk analytics allows users to evaluate their suppliers and create a diversification strategy that is connected to risk. If too many materials are being sourced from one supplier and there is a disruption in their supply chain, analytics can help you determine the best alternative strategy. In addition, supplier performance is measured through analytics tools, allowing organizations to access real time information surrounding reliability. This allows companies to make imperative decisions around continued work or proactive conversations with their suppliers.

WHICH KPIS ARE IMPORTANT? The metrics to be measured will always depend on the company’s goals and strategic priorities. Typically, however, there are six KPIs that procurement professionals should prioritize. First, reviewing the total cost of ownership (TCO) to ensure alignment with your company’s financial strategy. Second is supplier in-full on-time (SIFOT) for supply planning and supplier relationship management.

Third is supply variability and lead time adherence. Fourth is inventory turnover for packaging and raw materials, as individuals need analytics to tell a story around asset management and the level of inventory carried. Fifth is inventory write offs that are driven by the expiration of materials. Lastly is plastic emissions, because as a procurement professional, you have direct access to decision making that affects plastic waste and equivalent carbon emissions.

KEY IMPLEMENTATION CHALLENGES Having a solid data foundation is the most prominent challenge.

This can be overcome by developing a supply chain data management strategy upon which companies can build a solid analytics infrastructure. This is critical for starting the analytics journey and gradually increasing the value added to the organization.

Data integration is a common challenge we are seeing amongst businesses. Supply chain data is typically being stored in different systems, making manual reporting extremely inefficient. Often, companies make use of data generated from internal and external sources.

Leveraging external data from suppliers and internal data from transactional activities can contribute to increased end-to-end visibility.

Although your organization might have an ERP system in place, there is relevant data that exists in other systems of record that could enrich the procurement analysis, but it is not easy to access, validate and SUPPLY PROFESSIONAL

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integrate. Having an automated process that allows you to view all relevant data in one area, is imperative to a company’s success.

Real-time visibility is becoming one of the top priorities for many companies this year because of how quickly disruptions can occur.

The pandemic has proven how important real-time visibility is for the flexibility of modern supply chains. Manual reporting methods that only allow for information to be viewed monthly are no longer sufficient. Cadence and velocity of data updates are important and best overcome with SaaS models.

BENEFITS OF ANALYTICS Using the right analytics at the right time can be a huge enabler for companies to save cost, reduce operating risks and increase environmental accountability. While many procurement teams still focus on tracking purchase price variance (PPV) metrics, we recommend that companies adopt the total cost of ownership (TOC) approach.

The reason for this is that it depicts a more accurate and comprehensive view of the holistic cost of procuring materials, providing better insights and visibility into your spend. As a result, procurement teams can effectively find

opportunities to save on cost without negatively impacting transportation costs and working capital on inventories.

Analytics can also positively affect your business agility through supply lead-time reduction, increased customer response times by reducing lead-time variability and lastly, carbon footprint impacts by reducing the amount of plastic waste that needs to be managed through the supply process. Reducing carbon emissions and plastic waste is not only a benefit to the planet, but also to your company. SP

Hugo Fuentes Diaz is the CEO of a leading supply chain analytics platform, The Owl Solutions.

“The role of the procurement professional has evolved, transitioning from a transactional buying role into a strategic decision maker.”

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2022-04-11 1:30 PM

BY SANJA CANCAR-TODOROVIC

A NEW OPERATING MODEL

Sanja Cancar-Todorovic is director – strategic relationships, global real estate asset management, at Manulife.

ASSESSING THE TOTAL VALUE OF OWNERSHIP Over the last decade, and particularly since the COVID-19 pandemic began, the procurement and supply chain function has evolved from enablement roles to a strategic partner function across most organizations.

The traditional measure of success for procurement and supply chain was always tied to value for money – cost savings, cost avoidance, and labour arbitrage in the BPO/ITO space. That outdated concept has now been replaced by value of ownership, recognizing that the bitter taste of poor quality lasts a lot longer than the sweetness you get from a cheap price.

This new operating model has put significant pressure on the procurement and supply chain function to transform itself in a short time, without impacting business operations in the process. The most successful transformations achieved the desired outcomes by focusing on strategic partnership management, as opposed to a traditional vendor management approach, basing their supplier evaluation criteria on the following areas.

THIRD-PARTY RISK MANAGEMENT The digital transformation that most organizations have undergone since early 2020 was primarily driven not by the CIO, but COVID-19. The pandemic has accelerated the fourth industrial revolution that most organizations were tiptoeing around, before the pandemic pushed them into it.

But with massive changes, we are also exposed to massive risks that, if not mitigated, could have catastrophic consequences. Vendor concentration, fourth-party risk management, information security, business continuity, vendor reputational risk and vendor financial health were check-the-box topics before COVID-19. They are now part of the elevated third-party risk management process that starts at the vendor evaluation and onboarding stage. It is managed through structured, well-defined vendor governance process and continuous risk monitoring.

Balancing vendor concentration with vendor consolidation is tricky as it is not the same for every industry, or even every organization within the same industry. The approach must be guided by the organization’s risk appetite. While it is not favourable to have one vendor perform all or most critical functions for the organization, the benefits of economies of scale are achieved by doing just that. Thus, it is crucial that organizations have a well-defined and communicated risk appetite that will drive scoring of this criterium.

Fourth-party risk management has gained a lot of traction. This implies that, in addition to continuous monitoring of the third-party risk, organizations should also monitor their vendors’ vendors. This requirement alone has put pressure on procurement and vendor management functions, resulting in bigger teams with enterprise

risk management skills in addition to sourcing and vendor management skills. Nevertheless, understanding fourth-party risk is an important criterium in the vendor evaluation process.

With the unprecedented reliance on IT vendors, information and cyber security are at the top of the threat scale. Fortunately, there are many InfoSec tools available that can continually monitor data breaches. The best defense remains comprehensive vendor due diligence, including reviews of the independent InfoSec Audits and vendor SOC reports, by the organization’s IT SMEs. Even if the due diligence process checks out, organizations need to have a well-established exit strategy in case of unforeseen circumstances.

Similarly, to the InfoSec and Cyber Security, business continuity moved from the check-thebox exercise to an integral part of the vendor evaluation process. Engaging vendors with an established business continuity plan that is regularly tested and updated is a winning strategy.

That’s especially true if the vendor is critical to the organization.

Reputational risk is the hardest one to manage. It is the risk of public impressions, whether true or not, regarding the vendor’s business practices, actions or inactions, that will adversely affect vendor’s earnings, economic value, capital or ability to maintain business relationships.

Depending on the type of public impression,

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organizations might need a plan to disassociate themselves from the impacted vendor. Hence the importance of an exit strategy.

Lastly, vendor financial health is another data point used in the vendor evaluation process to determine vendor’s financial stability. Gathering and monitoring financial information and assessing the financial stability of potential suppliers can reduce financial risk and increase business confidence. Identifying high-risk suppliers drives better fact–based decisions, including where to source from, whether the supplier base needs to be diversified or if the relationships need to be terminated.

An organization’s risk appetite plays a big role in this criterium, as publicly traded versus privately owned companies will have different views on sharing such information. This knowledge should impact decisions and help to mitigate risk and add value to the organization.

RELIABILITY Vendor reliability should be viewed from two angles: will contracting this vendor mitigate any business disruption risks, and does the vendor have an efficient operating model with the reputation of being a good strategic partner that meets service level agreements? The answers

“Procurement and supply chain professionals must deliver value across several areas, as opposed to delivering only the lowest cost.” will only be gotten by doing independent vendor reference checks, connecting to their current customers and/or relying on the professional sourcing network experiences.

SUSTAINABILITY Is value achieved with this vendor engagement sustainable in the long run? Did the vendor underprice themselves so they will have no choice but to reduce their overhead to compensate for the difference, resulting in a decrease in quality and customer support? Or is the vendor’s operating model built to withstand time and market turbulence? Does the vendor have an

appetite for innovation, and are they open to new products, services or ways of doing business in line with your organization’s innovation roadmap?

COMPLIANCE For this criterion, the organization must rely on the internal compliance and privacy SMEs to answer the following: will this vendor align to internal policies and governance processes? Are they aligned to the organization’s values and are they in compliance with applicable laws? It’s recommended to include the organization’s standard terms and conditions as part of the competitive sourcing process, asking vendors to sign-off on them or provide their red-line, as part of the evolution process.

QUALITY To score on this criterion, organizations will either evaluate the vendor product samples (if engaging the vendor for product sourcing) or must rely on the independent reference checks (if engaging the vendor for service or solutions sourcing).

RECIPROCITY This criterion is probably one of the most delicate ones, as it touches on both the sourcing and the sales targets of the organization: does the vendor have any current or future spend with the organization? Is this vendor replacing another that has the spend with the organization? If so, what is the potential financial impact of the vendor transition? Adding the potential impacts of reciprocity numbers will paint a different picture with a holistic view of the total value of ownership.

COST Finally, there’s the cost. Arguably, this is last only because it becomes irrelevant if the criteria above have not been satisfied. But if everything else checks out, the pricing negotiations become important as the only tool ensuring cost control.

However, this negotiation must result in a winwin outcome, otherwise one party (usually the vendor) will walk away feeling cheated. That will reflect in their deteriorating performance, producing a further domino effect on the organization and its customers.

Today, procurement and supply chain professionals must deliver value across several areas, as opposed to delivering only the lowest cost. This new operating model has transformed the procurement/supply chain function. It calls for an enhanced skills set, tools and resources for vendor and category management/sourcing professionals. That skills set must drive the procurement, supply chain and vendor management strategies and initiatives to create value across the organization, while influencing buying behaviours and processes consistent with policies, strategies and best practices. Gone are the days when “procurement professional” and “buyer” were interchangeable terms. SP

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2022-04-11 1:30 PM

BY MICHAEL POWER

RESPONDING TO CRISIS SUPPLY CHAINS MUST BRACE AGAINST SHOCKS FROM THE UKRAINE CONFLICT The world’s supply chains were already strained from the COVID19 pandemic when Russia invaded Ukraine on February 24. The conflict is now the latest event to snarl global logistics, destabilize prices and raise the possibility of shortages of goods and commodities.

How can supply professionals mitigate the conflict’s effects? How can they prepare for the next shock?

“It’s a continuation of the exacerbation that started before COVID-19 that made COVID-19 worse,” says Johnny Rungtusanatham, Canada research chair in supply chain management and professor of operations management and information systems at the Schulich school of business, York University. “Now we’ve got this additional human-made event 20 APRIL 2022

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that’s creating more stress points in the global supply chain.”

The conflict brings fresh challenges. Cargo must be diverted from areas where goods aren’t being flown, increasing costs. Buyers must find alternative sources.

All this means supply chain stress, Rungtusanatham says.

While the invasion is a unique event, it’s one in a list impacting supply chains.

“What we need to learn from all these past (events) is to come up with time-tested capabilities and mitigation plans that we should be thinking about at an individual level, company level and country level,” Rungtusanatham says.

ANOTHER LAYER The Ukraine conflict is simply the latest layer of challenge and complexity for supply chains, says Joy Nott, partner, trade and customs practice at KPMG Canada.

Yet many organizations remain in a “wait-and-see” mode.

But there will be no return to “normal” for supply chains, she says. A new version of normal has emerged to grapple with as we move forward.

Many of the big-picture decisions surrounding today’s supply chains were made in the mid-to-late 90s and early 2000s, she says. Companies decided then, for example, to make parts or products in Asia, then ship them to North America, Europe and so on. In 2022, the world is a different place, she notes.

Now is the time for many organizations to look at how those supply chains might be altered to ensure flexibility going forward.

“What that new normal is going to look like in its final, end state is to be determined,” Nott says. “But we’re definitely in a state of flux for the foreseeable future and that holding off on making major supply chain decisions is holding off on future success.”

Major global events like the Ukraine conflict highlight why supply professionals must stay

“Holding off on making major supply chain decisions is holding off on future success.”

abreast of global events, develop countermeasures to soften their impact and protect supply chains, says Tim Moore, president of Tim Moore Associates – CANADA’s Supply Chain Recruiters. He agrees that supply professionals can no longer take a wait-and-see approach to dealing with global events, noting that “proactive trumps reactive.”

“Whether or not you’re impacted by the war in Ukraine, a knowledge of geography can be of primary importance,” he says. “What physical constraints might there be in dealing with a region, because of their natural resources? How easy is it to gain access to the outside world by using existing transportation systems? Is the country or region essentially landlocked?”

Do the risks of the Ukraine conflict and other crises spell the end of just-in-time (JIT) inventory management and reshoring of manufacturing? The last 20 years have seen supply professionals chasing short-term profits with cutting inventory as the easiest way to do that, says Rungtusanatham.

This led to the faulty implementation of JIT, in which many organizations worked to cut as much inventory as possible. The least powerful player ended up keeping the most inventory.

“Nobody ever said that just-intime means everybody cuts inventory or removes flexibility,” he says. “Just-in-time simply said, figure out where in your supply

chain is it most efficient and most flexible to keep inventory so you can react fast when there are changes in demand or changes in the supply condition.”

And while reshoring certain goods, especially essential ones like medical supplies, makes sense theoretically, it wouldn’t work for all products, Rungtusanantham says. Canada isn’t competent at making all products domestically and the practice would lead to higher prices than consumers would be unwilling to pay.

To deal with global risks, Moore advocates hiring staff with specialized knowledge of geopolitical issues and regions. Such staff can research and understand cultures, geography, industry, transportation routes, governments and economics, he says.

“A bachelor’s degree in international affairs, political science and perhaps even a master’s degree or a PhD. may be required for more extensive research and analysis on assets, trade agreements or high monetary or capital equipment investments,” he says.

And while the Ukraine conflict and other geopolitical events create instability, they also offer supply professionals opportunities to make positive changes, says Nott. Now could be the time to address sustainability, weed out modern slavery or shore up governance.

“There are opportunities now to work these things into the supply chain,” she says. “If you’re going to go to that proverbial whiteboard, there are opportunities to layer these positive things into the supply chain at this point.” SP

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Fleet Management

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Building fleet culture Tips for meeting fleet challenges in 2022.

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Small but mighty Compact vehicles to fit all fleets.

Fleet Management is a special section of Supply Professional magazine. It is an important resource for Canadian supply professionals who recommend, select and manage fleet vendors and service providers.

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The TCO of fleets Have fleets become too costly to operate?

EDITORIAL INQUIRIES: Michael Power, 416-441-2085 x110, michael@supplypro.ca

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Road test Test driving the Subaru Forester Wilderness.

ADVERTISING INQUIRIES: Alex Papanou, 416-441-2085 x101, apapanou@iqbusinessmedia.com

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Fleet Management

By Kate Vigneau

A fresh look at TCO

Kate Vigneau, CAFM, is director of fleet, MCG Consulting Solutions.

1.

Have fleets become too costly to operate?

TCO has traditionally stood for

total cost of ownership. This has been a methodology of accounting for fleet costs over the lifetime of the assets. The TCO equation adds lifetime depreciation and operating costs to acquisition costs and subtracts the residual value of the asset.

Every part of the equation has increased over the past two years, making fleet assets almost “too costly to operate.”

What’s a fleet manager to do?

Prioritize the capture of cost data and invest time in analysis that will lead to cost reductions.

Since the world shut down due to the COVID-19 pandemic in March 2020, fleet costs have been on the rise. The factors leading to price hikes include global uncertainty, supply chain interruptions and, most recently, the war in Ukraine. Inflated prices are being felt in almost all aspects of fleet.

Most important are the following:

to limiting the import of Russian fuel. taff. Drivers and technicians S are two categories of workers that are hard to come by. Scarcity drives up salaries and organizations have to pay more for skilled labour.

In response, the unfortunate choice of many organizations is to delay needed replacement, thinking they will save money. Delaying replacement, however, leads to higher maintenance costs. In fact, maintenance costs are often far more than the capital costs avoided by not replacing vehicles when due. Only advanced data analysis will help organizations understand the cost trade-offs and make the right decisions.

2.

Data and automation

ehicle purchases. Even though V individuals and many fleets have been driving less, the demand for new and used vehicles has gone up. With stocks low due to supply chain issues, prices are forced upward.

If you do not have a fleet information management system, telematics and automated fuel pumps; it is past time to get them. Fleet is a data-intense field and cost data is essential in guiding acquisition decisions.

Automation is the mainstream for fleets and the utility of the tools available is steadily increasing. The top capabilities or information that you can use in controlling costs are:

uel. The US is facing unprecF edented fuel price hikes due

tilization. Information on U when and how assets are used

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can ensure the fleet is the right size, right type and is using the right fuel to operate efficiently.

Eliminating, rotating or pooling lightly used assets can bring about significant savings. Shifting a fleet of SUVs to small sedans can save thousands of dollars per asset. Converting to an alternative fuel, such as electricity, will result in savings to operating costs. A utilization review is often the quickest route to cost reduction. ifecycle costs. The optimum L replacement point for every asset can be calculated where all capital and operating costs are known. When you remarket an asset at that point, you have ensured that the total costs associated with having owned that asset are minimized.

Detailed costs data is key in determining when this optimum point is for each vehicle classification in your fleet. aintenance productivity.

M Mechanic shortages and supply chain disruptions mean that both labour and replacement parts are more expensive. They also mean that repairs can be delayed, and the costs and operational degradation associated with downtime (idle crews) will

be expensive for the organization. At the same time, many organizations are delaying replacement to ‘save’ money.

That means the demand for maintenance increases even more. Having cost information can help drive staffing and outsourcing decisions and ensure needed maintenance activities take place to minimize costly downtime.

D river behaviour. Bad driving habits are costly to an organization. Speeding increasing fuel use and hard stops and starts can increase maintenance. Tracking this information gives organizations an opportunity to cut costs by training drivers in safe and eco-friendly driving practices.

There is absolutely no replacement for accurate data when it comes to fleet efficiencies. Acquiring the tools to capture this data will involve time and resources but will be well worth the effort invested.

The post-pandemic world

In addition to investing in technology, organizations can also take this time to get creative. With COVID-19 hopefully waning, it is time to return to normal or decide what the post-pandemic normal looks like. Solutions that were FM/SP SUPPLY PROFESSIONAL

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Even though individuals and many fleets have been driving less, the demand for new and used vehicles has gone up.

never contemplated in the past may now be acceptable. Some things to consider: ncourage the use of mobility E options such as ride-shares, rentals, public transportation, biking or walking as alternatives to vehicle ownership. eimburse employees for the R use of personal vehicles on company business.

Consider sales to employees as a remarketing option with little administrative hassle and the best return.

I ncentivize drivers to save fuel.

Train them in eco-driving, set a baseline and share the resultant savings. uy used vehicles to replace B those well past their optimum lifecycles.

A little creativity can result in a lot of savings.

Overall, 2022 promises to be as challenging as the COVID-19 years have been, but with some real opportunities. Technology and creativity are the keys to meeting challenges head-on and achieving efficiencies in an industry where fleets are (almost) too costly to operate. FM/SP FLEET MANAGEMENT SUPPLYPRO.CA 23

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Fleet Management

By Supply Professional

Hyundai Kona

Chevrolet Trailblazer The Trailblazer sits in Chevrolet’s lineup between the smaller Trax, and the larger Equinox and Blazer.

It’s available in front-wheel drive in a single trim level, but most will opt for the all-wheel-drive version, which comes in four trim levels.

The all-wheel Trailblazer uses a turbocharged 1.3L, three-cylinder engine that makes 155hp, more than enough to scoot this little vehicle around. All trim levels include a compact spare tire, 10 airbags, flat-folding front passenger seat, emergency front braking, lane-keep assist and OnStar. Should you want to go a little more upscale, the Buick Encore GX is based on the same platform.

Honda Civic The Civic has been redesigned for 2022 and was named both the Canadian and North American Car of the Year. The Civic sedan is built in Ontario and comes with a 2.0L, fourcylinder engine making 158hp in the three lower trims, or a turbocharged

1.5L that makes 180hp in the Touring and 200hp in the Si. The redesign improves the driving performance, gives it intuitive climate and infotainment controls, and provides more rear-seat legroom. Features include emergency front braking, adaptive cruise control, blind-spot monitoring, heated seats, and smartphone connectivity.

A hatchback Civic is also available.

The Kona is redesigned for 2022 with refreshed styling and upgrades.

The conventional model comes with a 2.0L, four-cylinder making 147hp, or turbocharged 1.6L producing 195hp. It’s also available as an all-electric model with a 64-kWh lithium-ion battery. It’s rated for 415km and can recharge in 9.5 hours on a 240-volt charger, or from 10 to 80 per cent in 47 minutes on a DC fast-charger. The Kona’s features include wireless phone connectivity, adaptive cruise control with stop-and-go function, highway driving assist, emergency front and rear braking, and blind-spot monitoring. The Kona shares its platform with the Kia Seltos, which comes in gasoline only.

Toyota Corolla

Small but mighty Compact vehicles to fit all fleets fleet Not every job requires a full-size vehicle, and staying small, if possible, becomes even more important as fuel prices rise. Small cars and crossovers are easy to manoeuvre in city traffic or park in tight spaces and have folding rear seats that help increase their cargo capacity. Some of these eight choices might fit well into your fleet.

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The Corolla sedan comes with three powertrain choices. The lower trims use a 1.8L four-cylinder making 139hp, while upper-level models have a 2.0L engine that makes 169hp.

There’s also a gas-electric hybrid that’s rated at 4.5L/100km in combined driving. All trims include a safety package of adaptive cruise control, emergency front braking, automatic high-beam headlamps and lane-keeping assist, and all but the base trim have blind-spot monitoring.

A Corolla hatchback model is also available, exclusively powered by the 2.0L four-cylinder.

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Nissan Sentra Nissan’s smallest sedan was redesigned into an all-new model for 2020, and for 2022 gets an available sunroof on its mid-level SV trim, and a “Midnight” black-accent appearance package on the top-grade SR. All three of its trims use a 1.6L four-cylinder engine making 122hp and front-wheel drive. It’s roomy

inside with good rear-seat legroom and features a handsomely styled dash with small-item storage space.

Emergency front and rear braking are standard on all trims, while the SV and SR include blind-spot monitoring, automatic climate control, heated seats and smartphone connectivity.

Mazda3 The Mazda3 comes as a sedan or as a hatchback, called the Mazda3 Sport. Each comes in three trim levels, with the base GX trim carrying a 2.0L four-cylinder making 155hp.

The GS and GT trims use a 2.5L making 186hp, and the GT can further be optioned with a turbocharged 2.5L for 250hp. All trims start with front-wheel drive, but the GS and GT can be optioned to all-wheel drive.

Available features include navigation, driver’s seat memory, wiper de-icer, front and rear emergency braking, 360-degree camera, adaptive cruise control and head-up display.

Ford Escape With the discontinuation of the EcoSport, the Escape is now Ford’s smallest SUV. It offers numerous powertrain choices, starting with a 1.5L, three-cylinder engine with turbocharging (called EcoBoost), making 181hp; or 2.0L EcoBoost four-cylinder in the upper trims, producing 250hp. There’s also a gas-electric hybrid with fuel

consumption rated as low as 5.8L/100km in combined driving, and a plug-in hybrid (PHEV). The plug-in gets up to 60km of all-electric on a charge, and then reverts to hybrid operation when it depletes, increasing fuel economy but not leaving you stranded if you can’t recharge. All models but the PHEV can be optioned to all-wheel drive.

Subaru Crosstrek The Crosstrek is Subaru’s smallest SUV, and as with all of Subaru’s sport-utilities it includes standard all-wheel drive. Engine choices are a 2.0L four-cylinder making 152hp, and in the Outdoor and Limited trims, a 2.5L making 182hp. In some areas offering provincial electricvehicle rebates, the Crosstrek is also available as a plug-in

hybrid (PHEV), rated for 27km on a charge and then reverting to gas-electric hybrid operation when that depletes. All Crosstrek models equipped with an automatic transmission come with EyeSight, a camera-based suite of driver-assist technologies including emergency front braking, adaptive cruise control and lane centring assist.

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2022-04-11 1:30 PM

Fleet Management

By By Al Barner

Building fleet culture 1.

Al Barner, CTP, is senior vice-president, business development at Fleet Advantage (www.FleetAdvantage. com).

Tips for meeting fleet challenges in 2022 Entering 2022, the heavy-duty truck transportation fleet industry continues to deal with a host of challenges carrying over from 2021. These include driver shortages, logistical changes due to a fluctuating pandemic and asset management hurdles that continue to impact organizational bottom lines.

However, leading fleets are realizing that they can recruit and retain more drivers by building a culture that acknowledges safety and driver input while leveraging a more aggressive trade cycle driven by flexibility in operations and finance.

This has been helping companies reduce overall costs while adhering to a long-term strategic asset management plan that helps organizations specify trucks with advanced safety features in mind.

Overcoming driver shortages

Driver shortages are among the most challenging issues for the industry. Transportation fleets will most likely continue to experience a shortage of professional drivers.

The underlying causes of this show no signs of stopping in the coming year. High demand, a lack of new 26 APRIL 2022

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drivers and retiring older drivers continue to play into the issue.

The driver shortage and the retention of drivers were listed as the top two issues faced by transportation firms according to the American Transportation Research Institute’s (ATRI) 2021 report.

Including drivers in the conversation around safety initiatives and acknowledging their input is important for retention strategies.

As more fleets and organizations replace aging trucks with newer, safer equipment on the roads, they will keep drivers and others safer, retain drivers at a higher rate and enjoy substantial savings in reduced accident and litigation costs as well as for maintenance and repair.

Another reason for the driver shortage has been the average age of drivers. This has been climbing for many years now. It is harder to attract younger drivers to the profession, which reinforces the need to build a fleet replenishment plan around shorter trade cycles whereby trucks are increasingly spec’d for newer, advanced safety features that keep drivers safe while returning them home to their families more frequently.

Progressive-minded organizations continuously include their drivers in specification conversations and even poll drivers for input during the process, so they feel like their voice is heard. By creating this type of culture, fleets will be more successful in retaining younger drivers.

A stronger focus on sustainability

In addition to safety features, younger drivers have placed an emphasis on driving trucks that are more sustainable and environmentally conscious. This movement reflects the broader population’s desires to pay closer attention to climate change. It is a leading reason why fleets are now implementing environmental, social and governance (ESG) goals while promoting sustainability through shortening asset lifecycles and optimizing vehicle specification to be more fuel-efficient. These organizations are specifying lighter components that allow for longer maintenance intervals. This reduces environmental hazmat waste disposal. Companies are also supporting their social criteria by

operating the newest and safest trucks which help to further attract and retain a greater pool of diverse drivers and other staff.

Keeping residuals in mind

This new focus on ESG is now a major business strategy. Yet paying close attention to the bottom line is still a significant need for many organizations. This is why they are not only spec’ing for safety but also with residuals in mind. Fleets that operate a lifecycle asset strategy of between three-and-five years to lower their total cost of ownership (TCO) need to spec trucks in a way that allows them to enhance each truck’s residual value.

For example, spec’ing trucks with features that include manual transmissions, 6X2 configurations and a lack of engine brakes will be detrimental to the residual value with a short trade cycle.

Focus on long-term strategy

For other fleets, staying true to their long-term asset management philosophy is important. That’s especially true today when the supply challenges can compromise long-term FM/SP SUPPLY PROFESSIONAL

2022-04-11 1:30 PM

Including drivers in the conversation around safety initiatives and acknowledging their input is important for retention strategies.

decision making. Fleets that have leveraged the power of data analytics for asset management and procurement, along with flexible lease solutions, should continue to maintain this strategy with only minor course corrections as the industry continues to navigate additional procurement challenges. Utilizing finance options such as sale-leaseback and temporary lease extensions can satisfy short-term needs. This can be done without damaging longterm procurement goals due to build slot limitations.

As an example, a sale-leaseback

can provide a substantial operating cost reduction. In this situation, the savings can be used for driver bonuses or increased salaries. However, the most important action item is to build an 18-to-36-month roadmap for equipment replacement and proceed with a truck order.

Finding the right strategic partner with common philosophies and access to critical OEM and financial relationships is key in both navigating short-term challenges and in achieving long-term success. Some consultants in the industry today are using fear to pressure fleets to

pivot their asset management strategies, but fleets should stay the course and rely on proven data analytics-driven philosophies for their lifecycle asset management.

Fleets that maintain planning discipline through what has been confirmed by data analytics will continue to lead the industry. That’s especially true given that the laws of science and economics will not be compromised because of current supply chain disruptions. FM/S

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2022-04-11 1:30 PM

Fleet Management

By Stephanie Wallcraft

Off the beaten path

Driving the Subaru Forester Wilderness These days, there are a whole lot of cars on the road that don’t inspire much more than a trip to the grocery store. They’re designed for the practicality of getting from A to B, not for reaching more remote waypoints.

But cars are at their best when they provide freedom, when they meet the needs of day-to-day life while also conjuring dreams of adventure.

Subaru seems to have found a winning formula for this in its new Wilderness line. Launched on the Outback crossover for the 2021 model year, this mid-level grade introduces additional off-road functionality to Subaru’s already capable vehicles. This includes higher ground 28 APRIL 2022

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clearance, improved approach and departure angles, powertrain upgrades and exclusive features.

For 2022, the Forester compact SUV becomes the second Subaru to get the Wilderness treatment.

In addition to Subaru’s standard allwheel drive, a suspension lift gives this Forester a 22.9-millimetre ground clearance, nearly a centimetre more than the rest of the line-up.

Trim-exclusive front and rear bumpers improve the approach and departure angles to 23.5 and 25.4 degrees respectively. Aluminum skid plates protect the engine and rear differential, which has a taller gear.

The Forester Wilderness ships from the factory with 17-inch wheels and winter-rated Yokohama

Geolandar all-terrain tires, including a full-sized spare, which means these tires could be kept on the vehicle year-round even in jurisdictions where winter tires are required. The continuously variable transmission is calibrated to simulate the shorter low gears found in an off-road tuned automatic, which improves control at lower speeds, and the addition of coolant gives the Forester rating a 1,364kg or 3,000lbs towing capacity. For a cost of $40,795 including an $1,800 delivery charge, there’s good value in these upgrades.

But they don’t stop there. There’s also trim-specific badging, a matte black hood decal to eliminate glare, and gold accents – Subaru calls this

colour anodized copper – to highlight the tie-down points on the upgraded roof rack. On the Forester Wilderness, the roof can hold a load of up to 100kgs (220lbs) while the vehicle is in motion or 363kgs (800lbs) while it’s static. The latter is a 45kg (100lb) upgrade over the rest of the Forester line-up and is enough to support a three-person rooftop tent. Family camping trips, anyone?

The gold accents continue into the interior, where they’re joined by standard all-weather floor mats, a cargo tray, and a water-resistant synthetic upholstery that’s easy to wipe clean. This material feels like it wouldn’t breathe well in the summer, though, and the Forester Wilderness is not available with ventiFM/SP SUPPLY PROFESSIONAL

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1. The Outback Wilderness offers Subaru’s updated 11.6-inch portrait-oriented infotainment system, while the Forester Wilderness comes with an 8-inch screen.

2. The 762L cargo space includes grocery bag hooks on the sides and a small hook that flips out from the tailgate.

“Cars are at their best when they meet the needs of day-to-day life while also conjuring dreams of adventure.”

1.

2. lated seats, which is worth bearing in mind. However, the front seats are heated, as is the steering wheel.

Subaru’s dual-function X-Mode feature is included, which has separate settings for snow and dirt or deep snow and mud, plus hill descent control, a roll angle indicator, and a front-facing camera that projects a forward view of what the driver can’t see onto the screen mounted at the top of the dashboard.

The 762L cargo space includes a couple of convenient details such as grocery bag hooks on the sides and a small hook that flips out from the tailgate, allowing a towel or wetsuit to be hung to dry while it’s open.

What the Forester Wilderness doesn’t have is an upgraded engine.

Unlike the higher-powered turbocharged engine that’s offered in the Outback Wilderness, the Forester Wilderness comes with the same 2.5L, naturally aspirated engine with four horizontally opposed cylinders that’s included with the rest of the Forester line-up.

Although the off-road tuned CVT does help this Forester get going from lower speeds, its 182hp and 176lbs-ft of torque leaves some to be desired in higher-demand maneuvers such as highway merging.

The Outback Wilderness also offers Subaru’s more recently updated 11.6-inch portrait-oriented infotainment system, while the Forester Wilderness comes with

an 8-inch screen. Some people may prefer having the Outback system’s more modern look, while others might prefer to have more functions such as heated seats and HVAC controls on hard buttons rather than digital. It’s also worth noting that the Forester still has a built-in CD player, a feature that is likely not long for this world.

For these reasons, the Outback Wilderness is worthy of consideration at an MSRP of $3,000 more than the Forester Wilderness. But where cost sensitivity or overall vehicle size are a deciding factor, the Forester Wilderness supplies comparable capability relative to rivals like the Toyota RAV4 TRD Off-road, Ford Bronco Sport Bad-

lands and Jeep Compass Trailhawk at a lower price.

With its affordability and compact footprint, the 2022 Subaru Forester Wilderness is a great choice for those who want to be ready to pull off the beaten path.. FM/SP

As Tested Price (incl. freight and PDI): Starts at $40,795 Engine: 2.5L four-cylinder Power: 182hp; 176lbs-ft Transmission: CVT Rated Fuel Economy (L/100km): 9.5 city/8.3 hwy/9.0 combined Observed Combined Fuel Economy (L/100km): 11.0 FLEET MANAGEMENT SUPPLYPRO.CA 29

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2022-04-11 1:30 PM

THE LAW—BY PAUL EMANUELLI

ONTARIO’S PROTECTIONIST PANTOMIME “BUY ONTARIO” SCHEME TRIES TO MANAGE FORCES BEYOND PROVINCE’S CONTROL On March 3, 2022, Ontario’s Bill 84, entitled an act to enact two acts and amend various other acts, received royal assent after being rushed through the provincial legislature in just 10 days. Bill 84 creates the new Building Ontario Business Initiative Act, a one-page statute referred to by the government as “BOBI”, which will require Ontario public institutions to apply preferential treatment, as mandated by future provincial cabinet regulations, to Ontario companies in future public sector contract awards.

Based on the government’s announcements, the underlying premise of BOBI is that high wages, and the regulatory burden imposed by provincial regulations, make Ontario businesses uncompetitive when bidding for Ontario public sector contracts against suppliers from other jurisdictions.

According to the government, BOBI would mandate public institutions to pay more for Ontario products and services to subsidize the higher costs associated with, for example, fair wages, environmental disposal fees, and workplace safety standards. These broadly accepted areas of provincial regulation have now been targeted by the provincial government as a problem that needs to be solved. Not by cutting taxes and streamlining regulations to make them less costly and complicated, but by creating more complex regulations that interfere with public sector contract awards.

The Ontario government states that the new scheme “will apply to the province’s overall procure30 APRIL 2022

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ments, which amount to $29 billion in goods and services annually across all public sector organizations.” This means that a massive amount of public sector procurement contracts across Ontario could be exposed to complex protectionist preferences based on future regulations centrally mandated by the provincial cabinet.

BOBI flies in the face of well-established public procurement rules. Non-discrimination, a core global standard in public procurement, was recognized across Canada in the 1990s under the former Agreement on Internal Trade. That treaty was since replaced in 2017 with the Canadian Free Trade Agreement, which further aligns our government procurement rules with international anti-protectionist standards. Treaty enforcement mechanisms include the right of suppliers across Canada, and internationally for larger contracts under similar international treaties, to legally challenge the unlawful imposition of discriminatory barriers against open competition in public sector bidding. This means that contracts should be awarded to the best bid based on the merits of the competition, not based on the location of the bidder. This concept, referred to as “reciprocal non-discrimination”, is so core to the government procurement system that a breach of the principle is tantamount to a declaration of trade war against your trading partners.

While awarding to local suppliers may have appeal on a superficial level, jurisdictions across Can-

ada and globally can and will retaliate by imposing their own protectionist policies against Ontario suppliers. It is unclear whether the Ontario government has done the protectionist math to figure out whether Ontario companies will end up better off or worse once the BOBI scheme instigates retaliatory measures in other jurisdictions that cost Ontario businesses existing customers and clients, as well as new ones, outside of Ontario. If that math was available, we could rationally assess whether triggering a trade war for “Team Ontario” would be worth the trouble for Ontario businesses and taxpayers. Unless the government has a rational business case to support it, BOBI is nothing more than superficial protectionist theatre that appeals to emotion over reason. This is never the basis for sound public policy.

Once Ontario’s misguided local preference train starts rolling, it could derail the entire public procurement system and cause collateral damage across the entire economy. In addition to triggering sanctions against Ontario businesses operating in other jurisdictions, Ontario’s BOBI plan would encourage Ontario municipal politicians, who already face significant populist pressure to favour local suppliers, to follow suit and start applying protectionist measures along municipal lines.

Ontario businesses, especially small- and medium-sized local businesses, could quickly find themselves in the crossfire of local trade wars, encircled by protec-

Paul Emanuelli is the general counsel of The Procurement Office and can be reached at paul.emanuelli@ procurementoffice. com.

“While awarding to local suppliers may have appeal on a superficial level, jurisdictions across Canada and globally can and will retaliate.”

tionist barriers each time they attempt to win work outside their local city limits.

In conclusion, attempting to manage large supply chain forces that are beyond the reach and control of central planners, or politically tinkering with a complex government procurement system, is a bad idea. If the government wants to make Ontario workers and businesses more competitive, employee and business tax cuts and streamlined regulations would be a far more effective and equitable means of doing so when compared to protectionist schemes designed to benefit specially selected suppliers at the expense of everyone else. SP SUPPLY PROFESSIONAL

2022-04-11 1:30 PM

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