Supply Professional April 2019

APRIL 2019

INNOVATION MADE EASY

tealbook founder Stephany Lapierre streamlines your supplier search Supply chain skills for the future

Trade compliance Canadian auto shows Social procurement E-commerce

PM 43096012

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Only

10%

of RFPs are awarded to the lowest priced vendor

35%

of vendor submissions are received in the ďŹ nal hour before the deadline

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VOL.61 No.2 APRIL 2019 SUPPLYPRO.CA COVERING CANADA’S SUPPLY CHAIN

@SupplyProMag facebook.com/supplyprofessional linkedin.com/company/supplyprofessional

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COVER: JOHN PACKMAN PHOTOGRAPHY

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FEATURES 8 SUPPLY CHAIN SKILLS Need upgraded skills? These organizations can help.

11 THE CASE FOR DDMRP Taking the nervousness out of your planning system.

13 SOCIAL PROCUREMENT A holistic approach to buying.

14 STEPHANY LAPIERRE Entrepreneurship and procurement lessons with tealbook’s founder.

ALSO INSIDE

18 TRADE COMPLIANCE Stay on the right side of the rules.

5 BUSINESS FRONT

20 LEGALITIES AND SMART TECH Tips for managing digital risk.

22 KNOW THY CUSTOMER The value of client feedback.

4 UP FRONT

6 FINANCE CORNER 45 IN THE FIELD 46 THE LAW

42 THE GAMECHANGER Blockchain and supply chain transformation.

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Fleet Managment

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UP FRONT

LEADERSHIP’S FUTURE Where our future leaders come from is changing as business changes.

The fluid nature of business allows for more movement from one field to another. This is often an advantage, as it allows for the breaking down of silos within an organization, letting different areas of the business benefit from each other’s knowledge and experience.

I recently attended the ProcureCon Canada 2019 conference in Toronto. The event boasted a great line up of speakers and relevant, engaging topics. The event always does a good job of covering many of the leading-edge topics in procurement and supply chain.

One of those speakers, Jamie Crump, president of the Richwell Group, told the audience an anecdote about working with a new chief procurement officer. Interestingly, Crump told the audience, the CPO lacked hands-on procurement experience.

At first, Crump was apprehensive. What could this new CPO know about running a procurement department? But as she got to know this new leader, she realized it was a good fit. Crump knew procurement, and would focus on that. The CPO would concentrate on other priorities like raising the department’s profile within the organization.

What struck me was how much more porous job descriptions have become. This is evident in supply chain as the field takes on a more strategic, less tactically focused position.

Hard skills are still important. But they’re easier—well, let’s say more straightforward—to teach and to learn. It’s a different game to teach soft skills: curiosity, emotional intelligence and so on are the attributes that allow people from outside supply chain to take up leadership roles within it.

But the ability to transfer skills, soft or otherwise, is also what’s allowing supply chain leaders to grow beyond the profession. It’s allowing them to take up leadership positions in other areas—including right at the top.

A fortune.com article from last December argues that many future CEOs will come from the ranks of chief supply chain officers. Driven by the “Amazon effect,” speed to market will increasingly become important to organizations looking to ensure they don’t lose out to faster, more nimble competitors.

As this effect tightens its hold on business, the article argues, organizations will increasingly turn to best-in-class supply chain professionals for the skills needed to give customers the experience they’ve come to expect.

We’ve already seen this among a few of the largest and most successful companies on the planet. Apple’s CEO, Tim Cook—recruited by Steve Jobs in 1998—is often credited with fixing its supply chain. GM’s CEO, Mary T. Barra, served as the company’s VP, global product development, purchasing & supply chain, before taking the top job.

Supply chain’s evolution has meant that those from the outside can use their experience to enrich the field, while supply chain professionals can export their skills and expertise to other areas—including the CEO’s office.

Not every supply chain professional will rise to CEO. But every supply chain professional can use their skills and leadership qualities to support their organization’s strategic vision.

PUBLISHER/ADVERTISING SALES DOROTHY JAKOVINA 416-441-2085 ext 111, dorothy@supplypro.ca EDITOR MICHAEL POWER 416-441-2085 ext 110, michael@supplypro.ca DESIGN Art Direction BARB BURROWS Design Consultation BLVD AGENCY CUSTOMER SERVICE/PRODUCTION LAURA MOFFATT 416-441-2085, ext 104, lmoffatt@iqbusinessmedia.com 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, Corporate Social Responsibility—RBC Global Procurement JEFF RUSSELL Director, Procurement— Carbon, Samuel, Son & Co. iQ BUSINESS MEDIA INC. Vice President STEVE WILSON 416-441-2085 x105 swilson@iqbusinessmedia.com President ALEX PAPANOU

PUBLICATION MAIL AGREEMENT NO. 43096012 ISSN 1497-1569 (print); 1929-6479 (digital) CIRCULATION Mail: 302-101 Duncan Mill Road, Toronto, Ontario M3B 1Z3 SUBSCRIPTION RATES Published six times per year Canada: 1 Year $ 99.95 CDN Outside Canada: 1 Year $ 172.95 USD Opinions expressed in this magazine are not necessarily those of the editor or the publisher. No liability is assumed for errors or omissions. All advertising is subject to the publisher’s approval. Such approval does not imply any endorsement of the products or services advertised.

Publisher reserves the right to refuse advertising that does not meet the standards of the publication.

No part of the editorial content of this publication may be reprinted without the publisher’s written permission. © 2018 iQ Business Media Inc. All rights reserved. Printed in Canada.

MICHAEL POWER, Editor 4 APRIL 2019

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BUSINESS FRONT—BY MICHAEL HLINKA

FUNDING RETIREMENT DOING SO IS A RECENT, AND NICE, PROBLEM TO HAVE I listen to many different podcasts and heard something several days ago that has been bouncing around in my mind. It was the observation that the idea of “retirement” is something that was unheard of even a short time ago. If we went back even 150 years (a nanosecond when it comes to the totality of human history), no one thought about retiring. You worked until you died, with the understanding that as you got older, both the amount and nature of the work that you did would change.

However, as Canadian society got wealthier and fewer and fewer of us lived on farms, there was a broadly accepted consensus that there would be a time when each citizen would no longer be required to work, in large part because many of us would not be able to work.

Beginning in the 20th Century, there was a massive shift of people from rural into urban centres and a significant minority of us worked in factories. Much of the labour required a great deal of strength and it was not reasonable to expect that individuals in their 70s and 80s would be able to perform that type of work.

THE HISTORY OF RETIREMENT The first social program to address this evolving reality was the Old Age Security Act of 1951. The qualifying age was 70. But what was so interesting was that life expectancy at that time was 67!

Think about it for a moment: old age security was understood as a benefit that many if not most Canadians would never receive.

And it was always understood that old age security would not be enough for people to live on.

Rather, OAS would be a supplement to personal savings which should have always formed the bulk of retirement savings.

The next major social program was the Canada Pension Plan, introduced in 1965. Its target benefit was to provide 25 per cent of a worker’s lifetime wages, up to a stated ceiling. The current maximum benefit for someone who retires at the age of 65 is approximately $1,150 per month which translates to $13,800 annually. And that pretty much hits the current 25 per cent threshold, given that the average full-time Canadian wage is around $55,000.

With CPP, there is also the opportunity to defer the benefit and receive a higher payout, allowing some folks to work past “normal” retirement age.

ANCHORING AND ADJUSTMENT There is a concept in behavioural finance known as “anchoring and adjustment”. What it refers to is the tendency for people to come up with an original estimate of (for example) the value of a stock and then as new information emerges, fail to incorporate that new data adequately. In other words, right now I think a stock should be $20 per share. Some really, really bad news comes out about it. In the absence of my original estimate, I would consider fair value to be $10. But I anchor my original estimate to the $20, and now I consider fair value to be $15.

It seems to me that we have “anchored” our estimate of retirement age based on outdated data.

When 65 was established, medical science was far less advanced than it is now. There are a variety of medical procedures that exist today that weren’t around 50 years ago that have effectively added years to people’s lives. Then there’s the nature of work itself: If you’re doing heavy manufacturing work then you’re simply not physically able to continue working compared

to doing more cerebral office or service work. Bottom line: right now, 65 years old doesn’t make the sense it once did.

OK, then. How can we reconfigure Canada’s retirement system to make more sense and reflect the reality and needs of the Canadian marketplace? Let’s start with old age security. It should be phased out in the following way. For those who are currently receiving OAS, the dollar benefit should be frozen.

This means that in real terms, the benefit would go down over time.

There should be a sliding scale so those who are, for example, currently 64 years old or younger will receive a percentage of the current benefit (e.g. 64 years old, 95 per cent of current benefit, 63 years old, 90 per cent, et cetera) with the understanding that if you are 45 years old or younger, you wouldn’t see any benefit. At the same time, there should be the ability to make higher CPP payments such that up to 50 per cent of your wage could be enjoyed in retirement.

Essentially, CPP, which is based on the value you created over your lifetime, would be the cornerstone of each individual’s retirement.

Because there is no question that funding retirement is a problem, but as problems go, it’s a pretty good one to have! SP

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

“ How can we reconfigure Canada’s retirement system to make more sense and reflect the reality and needs of the Canadian marketplace?”

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FINANCE CORNER—BY PATTI LOWES

THE FULL VIEW PROCUREMENT FROM THE CFO PERSPECTIVE Chief financial officers look at procurement from 360-degrees and every possible angle. For them, the process includes everything from mitigating the risk to their organization involved in ordering products or services, receiving goods at the back door, to the supply chain and to financial cash flows. Supply chains are so important, from pricing to ensuring financially solid vendors.

Procurement practices are vitally important to the overall health of an organization. But if not properly controlled, the process can lead to huge profit losses and even bankruptcy.

Let me share a story of a good friend who lost sight of these important strategies. I met with Jeff, who worked in the HVAC business, several years ago. He had a thriving business that had been growing at double digits annually for quite a number of years. Some years the growth was 50 per cent.

This was the point where he really started to destroy the benefits of this growth. More and more focus was put on growth.

At first this worked really well and profits increased at a great rate.

The company started taking on more and more contracts, without following proper controls to manage procurement.

FOCUSED ON GROWTH Management was so focused on growth, quoting, selling and completing projects that there was little time for anything else. They were constantly putting out fires.

It was difficult to hire competent employees so quickly. Discount pricing was not optimized. Getting two quotes on large items was a thing of the past. Ensuring financially strong subcontractors was not adequately investigated.

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heads were directing bills to be paid on the fly, since they urgently needed products and services.

Supplier terms were not negotiated up front. Neither was best discount on product prices. There was no consideration for cash flows. Some large purchase orders were not put in the system until the day it was to be paid.

Finance couldn’t manage the cash flows because there was no disciple in following the rules. One day there was lots of cash in the bank and the next there was a huge deficiency. Things were working great when the cash was flowing in—there was no urgency to control operations since profit was up.

Things looked great. Finance kept complaining, however it fell on the owner’s deaf ears as the company was making lots of money. Or so they thought.

This kept happening and all went well, so long as the customer was paying on time. Then one day, Jeff told me, the customer simply stopped paying. In no time at all they were out of terms of the agreement with the bank. The bank was about to call their loan. They were just barely meeting their payroll.

Suppliers’ payments were being stretched to the maximum and beyond. The customer kept promising to pay. Meanwhile, the banks were knocking on their door.

And moreover, their major subcontractor went bankrupt. This led to incomplete work and poor workmanship, which then needed to be retrofitted and completed.

Management quickly needed to find another subcontractor to complete the work, for a reasonable price.

This was not an easy task, since they didn’t follow procurement practices in getting a second quote on the original estimate. Now they had to get quotes on completing the balance of the work. Nobody wanted to quote this, since there

were so many unknowns, so the only option was to hire a subcontractor on time and material. This was a huge cost increase.

GET MULTIPLE QUOTES The lesson to be learned is always have second or third quotes on large work. Always take the time and do credit checks on large and important vendors and properly access their viability. Always have a backup plan.

The company put too much focus on growth and not enough on keeping their eyes on the ball with respect to their procurement practices and, of course, their cash flows. The company started stretching its accounts payable terms to meet payroll. It urgently needed cash to inject into the business in order to survive. Otherwise, the inevitable outcome would be bankruptcy.

The company had lots of explaining to do with the bank.

The bank’s credit department was called in to review the viability of the company. Everyone was stressed out; suppliers were calling, employees where let go.

Fortunately, the customer finally paid. But this was a huge wake up call for the company. The organization’s management pulled back the reins and started enforcing procurement practices and cash management on a weekly basis.

Without cash, you can have a very profitable company. But you can also go bankrupt.

The lesson to be learned is this: if an organization does not put focus on strongly controlled procurement practices, even a thriving business can go into bankruptcy, practically overnight. SP

Patti Lowes (pattilowes@ gmail.com), CPA, CMA, is a chief financial officer with 20 years’ experience in mid-sized Canadian companies.

“ Take the time and do credit checks on large and important vendors and properly assess their viability.”

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BY SUPPLY PROFESSIONAL STAFF

BACK TO SCHOOL EDUCATION ADAPTS TO A CHANGING SUPPLY CHAIN WORLD Supply chain, like many professional fields, is in the midst of enormous change. The existing workforce is aging while Millennial-generation employees are on the rise. As well, there’s an increasing use of cutting-edge technologies like the Internet of Things (IoT) and artificial intelligence, robotics and 3D printing. Global supply chain challenges are also raising the field’s profile within organizations—all of this means professionals in the field must reassess their skills to remain relevant and continue to drive value for their organizations. But which skills should be developed?

How should supply chain professionals prepare for these changes? And what educational opportunities exist to help those professionals on their way?

For these and other questions, Supply Professional magazine has you covered. We’ve compiled information about designations and educational courses from several organizations, including universities and professional associations.

Take a look below and see which ones may be right for you.

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ATHABASCA UNIVERSITY

Looking to take your supply chain management career to the next level?

The Faculty of Business at Athabasca University (AU) has a number of open, flexible options for those looking to advance their supply chain management (SCM) career path.

“We’re more than a leader in online education, we invented it,” says dean Deborah Hurst. “By working with key partners, like the Supply Chain Management Association (SCMA), we’re able to offer courses that give our learners immediate workplace applicability—taking theory and putting it to practice on realworld problems. We provide the applicable tools to empower our learners to reach their educational and career goals.”

Combining management leadership skills with supply chain management knowledge, AU’s online format provides

working professionals flexibility without sacrificing academic rigour or peer-to-peer interaction.

Those just starting out in their supply chain management careers can enhance their strategic supply sustainability and operational effectiveness with AU’s Online Supply Chain Management Certificate of Completion. These courses explore all aspects of SCM strategy in your organization, from supply chain mapping to issues related to developing green supply chains in eight courses.

Students can use these courses to complete a Post-Baccalaureate Diploma in Leadership and Management or put them towards AU’s Online Master of Business Administration (MBA) for Supply Chain Management program, should you meet the entrance requirements.

For the more experienced SCM professional, AU’s Online MBA for SCM is that next step.

Depending on your undergraduate studies, whether or not you’ve achieved your Supply Chain Management Professional (SCMP) designation—and if you’ve previously studied with AU—you may qualify for either the standard entry route or the accelerated entry route into the program.

Supply chain management professionals can take courses from wherever they live while working.

Offering the world’s first online MBA program 25 years ago, AU has met students wherever they’re at in their lives. No matter where you’re at in your journey, AU has options to help you achieve your educational goals on the pathway of your choosing. www.business.athabascau.ca/

CIFFA

In a competitive marketplace, setting yourself apart from the crowd is a key to success.

Professional designations offer excellent opportunities to improve your skills and advance your career. Designations like the CIFFA Professional Freight Forwarder (PFF) can elevate the logistics professional and the industry to an increased standard.

“CIFFA’s PFF designation signifies a high degree of knowledge, experience and level of excellence that individuals provide to the freight forwarding SUPPLY PROFESSIONAL

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industry” says Bruce Rodgers, CIFFA’s executive director. “We have seen a significant increase of interest in our program since we revised the criteria and enhanced the educational requirements back in 2017. Employers see the immediate benefits of having highly skilled, principled and competent professionals on staff, trained in all aspects of global supply chain.” Current PFF’s contribute to the industry by sitting on working groups and committees, representing freight forwarders at events and trade shows and contributing to the overall promotion of the global freight logistics sector. They make a point of continuing to learn throughout their careers and are required to maintain personal and professional development through conferences, workshops and training.

PFF’s are granted access to CIFFA communications, including the daily eBulletin. They enjoy free membership if employed by a CIFFA member and receive member pricing on CIFFA education and events.

They’re also listed in the CIFFA print and online directory that recognizes them as “individual members.”

An employer or client can feel confident that a PFF has been properly vetted. CIFFA has an application requirement where they must be nominated by a current or previous employer, provide multiple industry references and proof of Canadian residence. Each application is approved by the CIFFA board of directors. www.ciffa.com

CANADIAN INSTITUTE OF TRAFFIC AND TRANSPORTATION The CCLP designation (formerly known as CITT) is granted by CITT—a non-profit organization created by industry in 1958. The CCLP designation is ideal for anyone who buys, sells or manages

the flow of goods or products or is impacted by supply chain logistics.

To earn the CCLP designation, candidates must complete a program of study involving CITT’s specialized logistics courses and business management courses for which exemptions are available.

Alternatively, one can take the challenge on-ramp, consisting of an exam and a structured interview.

Regardless of whether a candidate takes the program of study or the challenge on-ramp, they must have three years of relevant industry experience and commit to a professional code of ethics. To develop and continuously improve the curriculum, CITT has worked directly with industry to create a national standard for measuring and marking competency in supply chain logistics. The competencies certified by CCLP are: • Integrated logistics • Operations management • Distribution • Transportation • Customs and compliance • Risk management • Relationship management • Leadership CCLP holders are connected to the network of thousands of fellow CCLPs and CITT students representing carriers, 3PL/4PLs, warehousing, ancillary service providers and shippers across commercial sectors. These professionals gather at learning and networking events throughout Canada, through CITT’s six local area chapters. CCLP designation holders and CITT students also get free access to CITT’s acclaimed webinar series (regularly $900 per year), an exclusive job board, and

preferred pricing for CITT’s annual Canada Logistics Conference and other professional development opportunities.

“You can’t get any better than the CCLP designation for selfdriven learning, notes Perry Lo, CCLP, CA, managing director, Canaan Transport, Ontario. “It was so relevant in what I do day-today that I’m still applying some concepts from the courses 10 years later. And I’ve gained a huge network of contacts to help me and my business. www.citt.ca/cclp

GLOBAL BUSINESS TRAVEL ASSOCIATION

The Global Business Travel Association’s (GBTA) Global Travel Professional (GTP) certification is designed to raise industry standards, enhance work performance and recognize those with core competencies essential to the business travel management discipline. Benefits of the certification program include professional growth and development, a demonstrated commitment to leadership and knowledge of the industry along with recognition and career advancement.

GTP certification benefits the business travel industry overall by curating a body of knowledge for business travel professionals.

It also helps to measure and maintain industry knowledge while granting recognition to industry professionals who pass the exam.

It also elevates the status and credibility of professionals in the business travel industry.

The GTP Approved Provider Program allows organizations that offer business travel-

related educational sessions the opportunity to award recertification credits to GTP certification holders.

The program works to enhance the professional development of GTP credential holders by offering learning experiences related to business travel management.

There are two steps in the Approved Provider Program: 1. Qualify as an approved provider; and 2. Submit content for review.

There are several benefits to the program. For example, GTPapproved providers: • Can publicize their organization as a GTP approved provider; • Receive an approved provider seal for use in marketing and onsite materials as well as on attendee certificates of completion; • Are listed as a GTP approved provider on the GTP certification page; and • Can link to the GTP section of the GBTA website. www.gbta.org/professionaldevelopment/global-travelprofessional-certification-gtp

SUPPLY CHAIN MANAGEMENT ASSOCIATION

Celebrating its 100th anniversary in 2019, The Supply Chain Management Association (SCMA), along with its network of provincial and territorial institutes, is Canada’s leading association for supply chain professionals, whose vision is to ensure that Canadian supply chain professionals and organizations are recognized for leading innovation, global competitiveness and driving economic growth.

The SCMA confers the Supply Chain Management Professional (SCMP) designation, Canada’s SUPPLYPRO.CA 9

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most sought after professional designation for those entering the profession and advancing as leaders in end-to-end supply chain, along with additional foundational, specialized and ongoing learning and training. To achieve the SCMP designation candidates must complete course requirements through the SCMA’s SCMP Program or through advanced standing of prior learning or work experience, attend the SCMP In-Residence Week (IRW), and pass the SCMP National Exam.

The SCMP designation signals to your employer your commitment to continual excellence, ethics and professionalism, and distinguishes you in your field.

The SCMP Program curriculum spans end-to-end supply chain and will provide applied learning to impact your performance at work immediately.

It includes eight courses, covering such topics as logistics and

transportation, operations and process management, global sourcing and overall supply chain management and six workshops, focused on general business skills development. The newly transformed IRW is the capstone learning and networking event for those seeking the SCMP designation. SCMP candidates stretch their thinking around futureoriented topics such as data and analytics, demand planning, vested outsourcing, sustainability, strategic planning, leadership and the digital supply chain. It features renowned faculty from across North America, provides a National Exam prep session and keynote speeches from supply chain executives. This intensive three-and-a-half days sets the SCMP designation apart from all other supply chain designations, and participants often comment on how it has changed their supply chain careers.

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designations is the SCMP National Exam, which, unlike others, is a case-based final examination requiring candidates to demonstrate the ability to apply their knowledge to a simulated supply chain challenge. Given the prominent and respected position that the SCMP designation has within the supply chain community in Canada, a number of postsecondary institutions in Canada and internationally, along with other designation-granting associations, have signed advanced standing agreements with SCMA enabling their graduates more efficient pathways to earn the SCMP. The SCMP designation is now seen as an important asset in the growth of a supply chain career in Canada. For those seeking more foundational learning prior to seeking the SCMP designation, the SCMA offers the Supply Management Training (SMT) program that consists of courses and seminars designed for practitioners looking to gain knowledge at a foundational level with practical learning. Graduates of the SMT program may continue later with advanced standing into the SCMP pathway. A commitment to ongoing career learning is an important aspect of holding the SCMP designation and the SCMA provides high-quality individual and corporate-level professional development seminars, webinars, and local events across the country so that designation holders can be at the forefront of trends and innovations throughout their careers. www.scma.com

SCHULICH SCHOOL OF BUSINESS The new Master of Supply Chain Management (MSCM) program from the Schulich School of Business at York University is designed to prepare students for leadership roles in building,

managing and changing supply chains. The 39‐credit, full-time or part-time program will develop the analytical and managerial skills needed to find creative supply chain solutions to business opportunities and challenges in private, nonprofit and governmental sectors.

The program adds value to supply chain professionals who hold undergraduate degrees in areas such as engineering, economics, healthcare, science, social science and business.

The MSCM allows for part‐ time enrolment for those already working in the field. Full‐time students can finish the program in one year, while part‐time students can do so in as little as two years.

Certain qualified candidates may be eligible for advanced standing.

The MSCM curriculum combines foundational business knowledge with specific, functional courses and their practical application. The program is experiential and culminates in a collaborative supply chain consulting project in which groups explore opportunities for business development and problem-solving for a local client organization.

As space is limited, meeting the general admission requirements for the MSCM does not guarantee admission. A holistic approach is taken during the application review process and all components are considered during the application review process. Applicants require an undergraduate degree with a minimum of a B+ average in the last two full years (or equivalent) of academic work. Applicants with a three-year degree must also have one year of full-time, post-graduate work experience.

Applicants must complete an online application which involves completing essays (two written, one timed written and two video), submit a resume, two references and unofficial copies of transcripts from all post-secondary institutions they’ve attended. www.schulich.yorku.ca. SP

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BY ROBERTA MCPHAIL

THE LESS NERVOUS MRP THE EVOLUTION OF PLANNING SYSTEMS IN THE NEW NORMAL OF SUPPLY CHAINS Supply chain professionals now have myriad tools at their disposal to plan and manage inventories and manufacturing. These tools include ERP, MRP, Lean, demand forecasting and 6 Sigma. So how have these tools kept up with today’s complex and volatile business conditions? Let’s explore this in more detail.

MRP AND THE LAND OF FORECASTS We’ll first review the industry standard model from APICS\ ASCM based on MRP. Demand is created through a forecast that’s passed through a master schedule, into an MRP calculator and, from there, planned work orders (WO) or purchase orders (PO) are firmed up. Safety stock is applied to protect against variation. A sales and operations planning process may exist at a family level to provide a longer planning horizon.

Such a process also provides an operations plan output to give some stability to the manufacturing operations. This is sometimes referred to as a “push system.”

MRP has also had the added issue of nervousness, with a dependent demand item connected via a bill of material. A symptom of this nervousness is the proliferation of Excel spreadsheets as the primary planning mechanism. Planners need to keep an Excel copy to snapshot and plan independently from MRP. Or, companies have defaulted to a simpler planning reorder point method or min-max method.

The end result of this tends to be a mismatch of inventory to demand and supply—we call this the bimodal effect, meaning there is too much or too little. The ERP/MRP software industry has embraced these methods and it’s now the default standard for most planning systems.

LEAN AND PULL AND THE JAPANESE INVASION The Toyota Production System (TPS) or Lean in North America was very much based on a demand-pull system. Using kanbans or supermarkets with synchronized flow, Lean attempts through-waste reduction by improving the flow of a system.

Lean’s focus on waste and onepiece flow is designed to have products available only as needed.

Pull makes total sense, however the Lean world has not played well with the MRP world and vice versa. How do we use our ERP tools with this? Kanbans are perhaps too simple for most manufactures and certainly too simple to use in complex, mixedmode manufacturing.

THEORY OF CONSTRAINTS AND THE GOAL Certainly, The Goal, by Eliyahu M. Goldratt, has been recognized as one of the bestselling management books of all time. The book discusses how to create throughput while recognizing constraints in a business. Cost accounting is considered an evil in decision making and the first drum buffer rope scheduling systems—a planning and

Roberta McPhail is the owner of McPhail Enterprises.

DDMRP is the global standard for demand driven planning, scheduling and execution of the entire supply network— from end users and distribution centres to manufacturing and multi-tiered suppliers. scheduling solution derived from the theory of constraints—evolved from this. It uses an excellent approach to business as a system.

It’s well-established in the consulting community but has never been fully embraced by industry. Again, this method optimizes flow and throughput.

DEMAND MANAGEMENT – FORECASTING – IMPOSSIBLE DREAM In the recent history of planning systems this topic has gained a major focus. In summary, the concept is that if we can fix the forecast we fix the problem. The basics of stabilizing demand are valid. Most larger companies focus software and processes to this issue. Big data, Industry 4.0 and artificial intelligence (AI) have started to blend into these processes to fix the demand issue.

To what effect have we fixed the inventory issue?

INTRODUCING DEMAND DRIVEN MATERIALS REQUIREMENT PLANNING (DDMRP) Developed by the Demand Driven Institute, DDMRP is the global standard for demand driven planning, scheduling and execution of the entire supply network—from end users and distribution centres to manufacturing and multi-tiered suppliers. DDMRP is a multiechelon material and inventory planning and execution system that enables a company to become demand driven, dynamically sizing and adapting supply networks and production systems through sensing changes in demand patterns and the responsiveness of supply.

DDMRP and its Demand Driven Operating Model provide the methodology to decouple the entire supply network at strategic inventory locations, creating independence between supply and demand.

Through structured mathematical design, decoupled strategic inventory buffers can absorb demand volatilities and supply disruption, fully dampening the Bullwhip Effect and restricting its transfer through the supply network. Demand signals between consuming and producing nodes of the supply network are then stabilized with inventory availability being significantly improved. Even if a supplier is late or there is a demand spike, the mathematical design of the buffer will enable these inherent variations to be absorbed.

Forecasts are still used to size and adjust buffer sizes, but they’re not used for supply order generation.

As an introduction to the process, below is the DDMRP fivestep implementation approach.

Step 1: Strategic Decoupling: In this stage, we answer the question of where to place our buffer inventory. We use a series of logic factors such as customer tolerance time and where is the major variability. Ultimately, we build a conceptual model of where to place buffer stock.

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Step 2: Buffer Profiles: Using data parameters such as lead time and average daily usage we construct a red, yellow and green buffer profile. Each of the colour zones has a different purpose. Green represents order quantity and frequency of ordering; yellow is the coverage over the lead time.

Red represents safety coverage related to lead time and demand/ supply variability.

Step 3: Unlike most planning systems with static inventory levels, buffers adjust to demand over history. This is a critical and differing element to most MRP systems.

Step 4: Planning signals use a simplified net flow calculation of on-hand+on-order – qualified demand. If this net flow signal is in the yellow zone or lower, then we replenish up to the top of green.

Step 5: Manufacturing and PO priorities are now set by the planning and on-hand penetration into each part’s respective colour zone. The higher the penetrations, the higher the priority of the WO or PO.

Position

2

1 Strategic Decoupling

Pull

Protect

Buffer Profiles and levels

Many companies globally have now embraced this new methodology. Well-known names such as British Telecom, Shell Lubricates, Michelin and Louis Vuitton have started their demand-driven journeys. In Canada, we have STEMCELL Technologies and Ballard Power Systems. Many others have started along a similar path. Typical results are, in at least 20 per cent, inventory reductions with 95 per cent service level attainment.

The good news is that software is now available to support the DDMRP process. This software

COMPLIMENTARY WEBINAR

Evaluating Best Value In Healthcare Procurement: Stories From The Field

3 Dynamic Adjustments

4

5

Demand Driven Planning

is certified by the Demand Driven Institute and many ERP now have native or seamless bolt-ons. SAP, Dynamics, Syspro—to name but a few—provide DDMRP modules. Consulting firms are also available to help. Many companies start their own pilots via taking a two-day demand driven planner class. Software and demand driven affiliates lists can be found on the demand driven site: www.demanddriveninstitute. com. Text books, case study videos and hundreds of training events are now available globally through the

Visible and Collaborative Execution

demand driven site.

Now is an exciting time for supply chain professionals. I encourage those at all management levels to check out this very valuable new methodology. For more info on DDMRP in Canada please feel free to contact me (robertamcph@gmail.com). SP This article is based on an education session originally presented at the 2019 Cargo Logistics Canada Conference in Vancouver, BC in February. To learn more about Cargo Logistics Canada 2020, visit www.cargologisticscanada.com.

WIth rising costs and an aging population, procurement teams areunder pressure to find the balance between best outcomes for patients and clinicians, and best value for taxpayer dollars.

Many procurement teams are meeting this challenge through increasingly dynamic and innovative RFx strategies that focus on achieving a specific outcome, rather than meeting a predefined list of specs.

And when it comes to complex, clinically sensitive projects, ERPsand basic bidding tools lack the flexibility and functionality to support the process.

In this webinar, hear from procurement leaders on how they leverage purpose-built sourcing software to manage the RFP evaluation process for best value decisions.

Through real-life examples, we’ll investigate how healthcare procurement teams can: • Balance price and nonprice criteria in their evaluation; • Manage a more efficient evaluation process; and • Ensure patient outcomes are front and centre in their RFP decisions.

Date: WEDNESDAY, MAY 22 Time: 11:00AM EST Register: https://bit.ly/2OvkC1X

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BY KRISTI FAIRHOLM MADER

SOCIAL PROCUREMENT ADDING VALUE TO COMMUNITY WELL-BEING Social procurement is getting a great deal of buzz within both public and private sector organizations these days, and for good reason. For instance, federal, provincial and local governments are all looking at ways in which they can achieve additional value. As well, businesses are incorporating social impact and outcomes into their core business practices while social enterprises are looking at social and economic returns. At the same time, communities are faced with complex challenges that require many different responses—social procurement is one solution.

But just what is social procurement? Every purchase produces an economic, environmental and social impact.

Those impacts can be intentional or not, says David LePage of Buy Social Canada. According to LePage, “social procurement is about capturing those impacts and seeking to make intentional, positive contributions to both the local economy and the overall vibrancy of the community.”

Social procurement involves leveraging a social value from existing procurement practices.

Social procurement adds a

social value consideration to an organization’s evaluation of price, quality and environment of the goods and services that it purchases. The concept and practice of social procurement can be broken down into two different methodologies or ways of implementation: one is the social purchasing of goods and services (e.g., from social enterprise suppliers) and the other is the inclusion of community benefit agreements (CBAs) in infrastructure development.

For example, public purchasers must often procure catering services. Social procurement opens up catering opportunities to social enterprises that may provide employment opportunities to people facing employment barriers. Similar pricing, similar quality, local employment and social impact translates to greater community value. The Government of Canada is piloting this approach.

As Larry Berglund of Presentations Plus, a CCSPI training partner says, social procurement is the transition from making good deals, to making deals that do good. Procurement, which is a transactional tool of the demand side, redefines the value proposition to go beyond the lowest cost and be based on values of a larger stakeholder base.

Another example of this can be found in the Village of Cumberland, BC. In 2016, the Village Council adopted a social procurement policy. When

Businesses are incorporating social impact and outcomes into their core business practices while social enterprises are looking at social and economic returns.

evaluating bids for a contract, staff and elected officials consider the usual criteria of quality, price and environmental issues, but now add a fourth component: social.

Bidders must meet certain social values determined by the village council. The village includes a living wage evaluation, along with apprenticeship opportunities, for residents who are at-risk youth, aboriginal people, women, newcomers to Canada or retiring veterans and people transitioning into new careers.

When a local company called J.R. Edgett was hired to build a new bike lane for mountain bikers to travel safely from the Cumberland Recreation Institute parking lot down to the main entrance into the mountain bike trails, the company also contributed to the building of trails in the Cumberland Community Forest.

Council and staff initially worried fewer vendors would bid after the social procurement policy was adopted. This worry turned out to be needless—the village’s last tender for its new water supply UV treatment plant attracted eight bidders.

Yes, there are challenges that come along with social procurement. However, there are not as many as you might assume. Under trade agreements, competition is required. Social procurement does not remove that competition, but the practice does ask for and evaluate the potential social benefits and impacts of procurement practices. There are also opportunities within trade agreements to provide direct award to social enterprises; this is an opportunity to direct spending to enterprises with community value and impact baked into their offering. The New West Partnership Trade Agreement (NWPTA) and the Canadian Free Trade Agreement (CFTA) also provide exemptions for social enterprises.

Buy Social Canada is a certification approach that works to advance and build social procurement by bringing together socially driven purchasers and social enterprises together, building

Kristi Fairholm Mader is project manager of CCSPI.

business relationships that generate social benefits to communities across the country. Purchasers can find certified social enterprises through their social enterprise directory on their website.

Social procurement is quickly becoming a best practice among many public sector organizations. The municipalities of Vancouver and Calgary, along with Manitoba Housing, are all examples of governments actively using social procurement criteria and frameworks in their procurement practices. The Coastal Communities Social Procurement Initiative (CCSPI) is a two-year initiative to support the implementation of social procurement across Vancouver Island, the Sunshine Coast and coastal communities on the West Coast. Communities large and small are making the shift.

CCSPI provides education, training, resources and consultation to local government and First Nation purchasers on the West Coast. The initiative supports social enterprise and local goods and services suppliers and construction firms to prepare and respond to social procurement opportunities.

That opportunity is significant.

On Vancouver Island alone, local governments and institutional buyers spend $1.5 billion each year. When matched to social and community benefits, that’s a lot of additional value for communities, taxpayers and governments. SP To learn more about social procurement, visit www.cspi.ca or contact the author, Kristi Fairholm Mader, at kfmader@scalecollaborative.ca SUPPLYPRO.CA 13

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THE PROBLEM SOLVER

TEALBOOK’S STEPHANY LAPIERRE ON INNOVATION AND TECHNOLOGY’S ROLE IN SUPPLY CHAIN AND PROCUREMENT

supplier side, helping to scale the company she worked for before taking a sales position in Toronto for a Montreal-based pharmaceutical company. She then switched to a data company for a short time before moving to Boston.

Her experiences to that point led her to start a strategic sourcing and procurement business in that city 13 years ago. Her goal was to help commercial teams find more of the kind of innovation that she herself had sought. The company grew quickly, expanding its expertise into helping those procurement teams become more efficient.

“I was very fortunate to work with very large companies, and then my business transitioned to start working with fast growing companies that got funded and were ramping up really, really quickly,” she says. “So they were looking to build the procurement function—or even begin education on why they should build a procurement function—and then we would build a procurement function for them.”

While working in Boston several years ago, Quebec native Stephany Lapierre came to a realization of sorts about innovation. It was in that city that Lapierre started the first of the two companies she would eventually head. She was working directly with commercial teams, mostly in the pharmaceutical space, and she noticed that her field was highly competitive. Lapierre was constantly on the lookout for innovation, which, perhaps ironically, she found was in short supply. She spent a good deal of time meeting with suppliers over coffee, looking for tidbits of innovation that she hoped to glean from her conversations with them. Sadly, about 99 per cent of the time, she notes, those efforts were a bit of a waste. “When it came down to finding innovation, or finding things that were interesting, if I really put my mind to it, it was really hard,” she recalls. “I wanted to know someone who would know who to contract, and when to contact them, and I didn’t have procurement support in my company.”

THE NEED FOR SPEED When a company is in a period of “hypergrowth,” savings often takes a backseat to speed, agility, scalability and frictionless processes, Lapierre says. Ramping up those attributes first often helps an organization reach their goals faster. Lapierre and her team found that they excelled at helping companies do just that.

With larger companies, the change management process is often heavier. Smaller companies offer a clean slate, she says.

“We could actually build the function in a way that was enabling for the leadership teams to have visibility and also the business to move faster and to be more competitive,” she notes.

Lapierre’s company was adept at finding innovation and developing tools to improve RFPs, create better processes and more seamless workflows where legacy systems were still in place. But the more tools introduced to solve one problem, the more islands of supplier data were created across multiple systems—and often duplication within the same systems.

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As she relates the story of her search for innovation, Lapierre sits in a boardroom at one of Toronto’s main innovation hubs, the MaRS Discovery District. The not-for-profit organization has the goal of commercializing publicly funded medical research and other technologies, as well as supporting a number of the country’s technology start-ups. The tech hub is also about a 30-minute walk from the offices of the second company that Lapierre started, tealbook. The company works to connect buyers and suppliers faster, better and in a more trustworthy way, using the kind of innovation that Lapierre searched for in Boston.

Originally from Drummondville, QC, about halfway between Montreal and Quebec City, Lapierre left the province at 18 to teach skiing in Whistler, BC. She then attended the University of Guelph in Ontario, in large part to learn English, where she completed a bachelor of commerce in marketing management.

After graduating, Lapierre worked on the

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IMAGE: JOHN PACKMAN PHOTOGRAPHY

BY MICHAEL POWER

IMAGE: JOHN PACKMAN PHOTOGRAPHY

The more that we unify, the more understanding of the relationship, the goods and services, the patterns, the similarities between their customers or their suppliers or to each other, the actual network becomes much more intelligent and much more trusted.

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This could impair the leadership team’s ability to make informed, strategic decisions due to a lack of access to good data. Employees ended up searching out information through Google, calling friends or other less-efficient means. This introduced new suppliers, often unnecessarily. This all burdens the legal and finance departments while creating a lot of data duplication, she says.

At first, and although she saw these inefficiencies clearly, Lapierre fought the urge to take on fixing the situation. By this time, she was busy as a mother of three daughters and running a successful consulting business.

But after eight years of watching the same inefficiencies repeated, seeing supply chain and procurement starved for change and innovation, she decided to start tealbook four years ago, the company of which she’s currently the CEO. The company offers a cloud-based solution, called Enrich, that uses machine learning to unify data across companies from around the world into one profile per company. Currently,

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tealbook provides a database of 1.2 million suppliers globally, with the goal of building that to 100 million companies. But Lapierre stresses that, it’s not just the number of companies, but also the depth of information that tealbook’s solution is able to present. “The more that we unify, the more understanding of the relationship, the goods and services, the patterns, the similarities between their customers or their suppliers or to each other, the actual network becomes much more intelligent and much more trusted,” she says.

PEST CONTROL IN PORTUGAL The company has built a workflow that delivers the information in what Lapierre calls “a beautiful, easy-to-use interface that’s as easy to use as LinkedIn.” That gives an organization’s leadership team visibility and a unified, horizontal view of suppliers. That information can get quite granular—for example, if a company is looking for, say, pest control in Portugal, suppliers are organized by spend, region, certification and so on. The information appears on users’ smartphones via an app.

Another solution tealbook offers, called Explore, allows clients to click “find similar companies” to view other recommended suppliers sorted by relevance, geography, diversity or whatever classification is needed.

A company can then build a list of incumbents, prioritize their mandate or goals and add more competitive suppliers that are innovative, or diverse, or fit whatever requirements that company is looking for.

“It doesn’t replace a complex RFP but it pushes it as far as an RFP,” Lapierre says. “And the intent there is, I want to build a list, I want to put my requirements, I want to invite my team to collaborate, to add to the list, remove from the list, build the requirements together. The purpose is to invite suppliers to respond. It’s very similar to an RFI, RFQ, RFX, but it’s more agile and it’s quite flexible.”

Or, for example, if a client wants to communicate a change of policy with a specific group of suppliers, they can easily find the suppliers they want to communicate that change to, set out what they want to communicate and send out the information to those suppliers.

A third offering from tealbook, called Impact, helps organizations access supplier diversity data. Users can generate diversity spend reporting to set baselines or meet and set new corporate goals. Organizations can view existing small and diverse suppliers, along with their certifications and expiry dates.

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The decisions that you’re making today will impact the future talent that you’re going to bring into your organization.

accolades. In its relatively short life, tealbook has won the Gartner 2018 Cool Vendor in Strategic Sourcing Applications. It was also selected by the Canadian Innovation Exchange as a member of the 2017 CIX Top 20. For her part, Lapierre is also one of the Supply Chain Management Association’s 100 Influential Women in Supply Chain for 2019.

But such success doesn’t come without challenges. Entrepreneurs must be “super passionate” about what they’re doing, Lapierre says. As well, raising capital can be tough. For some time, many people didn’t understand what the company was trying to do. People would ask questions like, ‘who maintains the data?’ The answer, Lapierre says, is ‘no one.’

“Nobody sits at Google and maintains Google,” she says. “It’s the same principle. The more data we get in, the more we’re able to actually build trends and similarities and then give it back to you in a way that’s relevant.”

Lapierre has also discovered that having the right people in place at a company is crucial.

And she has been fortunate, she says, to find such people. She found her chief technology officer, for example, just over two years ago.

He worked at Google previously and before that built social media platforms in Silicon Valley.

He also spent years working at companies like Ariba and IBM. “He had all the components of my vision,” she says.

But like many in supply chain and procurement, Lapierre didn’t start her career with sights set on the field. Her focus was always set first on solving the business problem of helping identify suppliers more effectively.

And just as you can’t build a company without investing in talent, an organization’s supply chain and suppliers are a critical component of success, she says. How you treat them, where you find them, what type of burden you put on them—all of these factors are important. “All these things can be resolved by technology,

by transparency, by speed, by efficiencies, by being more thoughtful and by having more confidence in the information,” she says.

THE ROAD AHEAD The world of business, and therefore supply chain, is changing. However, Lapierre says, many companies (especially in Canada) are still far behind and often lack the support from the executive teams to make changes. At the same time, some companies are doing exciting, innovative things. How can supply chain leaders attract the new talent they need to push forward with change?

“The decisions that you’re making today will impact the future talent that you’re going to bring into your organization,” Lapierre says.

“To be a driver of change, to be enabling a digital transformation and giving teams the freedom to make some changes and really embrace it, will make a significant difference.”

For those newer to the field and perhaps looking for a job, Lapierre advises to pay attention to the executive team’s commitment to and investment in building up the supply chain function. It also helps to find out what a company’s technology roadmap consists of.

“Ask those really important questions. What does the future look like? What’s the vision for procurement or supply chain? It’s a basic question, but it’s such an important one when you’re deciding where you’re going to end up working and the environment that you’re going to get yourself into.”

A willingness to adapt is also important.

Those who work in highly tactical positions, or who are guarded about their knowledge, will struggle to survive in supply chain and procurement’s new environment, Lapierre says.

But those looking to be part of the new order must look for ways to collaborate, be more efficient, streamline workflow and find ways to eliminate those more tactical tasks that take away from higher, more strategic priorities.

“If you have that mindset you’ll be fine,” she says. “I think procurement teams, or even supply chain, are not going to have more headcount. They’re going to look to streamline through technology. If you embrace that, if you’re someone who can either drive it or help drive it throughout the organization, I think you’re going to win a lot of points with your innovation team, your transformation team, your technology team, and open yourself up to so many more exciting opportunities.” SP

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2019 ANNUAL SURVEY OF THE CANADIAN SUPPLY CHAIN PROFESSIONAL Supply Professional magazine and the Supply Chain Management Association of Canada (SCMA), invite you to have your say in Canada’s most meaningful supply chain survey.

Your valuable insights are important and will help shape the results of this survey so you can: n Compare your current salary against your peers, and see how education, gender and other factors impact salaries. n Learn about the trends, challenges and other opportunities that are affecting Canada’s supply chain community.

Survey is in the field from June 4 to June 30 Starting June 4th, you can access the survey on www.SupplyPro.ca and www.SCMA.com As a bonus, you’ll be entered into a draw for one of ten $50 Tim Horton’s Gift Cards!

Thank you for your participation!

Look for the survey results feature article in the October 2019 issue of Supply Professional, and posted on www.SupplyPro.ca and www.SCMA.com November 1st.

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TRADE COMPLIANCE

PROTECTING SUPPLY CHAINS FROM THE RISKS OF GLOBAL TRADE As supply chains grow more global and complex, the risks to organizations that use those supply chains has increased. And while the recent proliferation of trade deals in which Canada is involved is designed to make the process of global trade and sourcing easier, supply chain professionals must ensure they are as up-to-date as possible on the rules, regulations and risks involved in global trade.

Among these challenges is trade and customs compliance. But what does trade compliance involve, what are the risks and how can supply chain professionals mitigate them?

Between new trade deals, no trade deals, political interference in global trade and so on, sourcing professionals face no shortage of uncertainty, says Garland Chow, associate professor emeritus, operations and logistics division and past director, bureau of intelligent transportation systems and freight security at UBC Sauder School of Business. In fact, surveys of procurement and sourcing senior management routinely place risk management at the top of the list of concerns.

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environments, with different factors that could possibly change,” he says. “When you source domestically, that’s one of the reasons why you do that. You generally have more information, you have generally more reliable information and if there’s a trade war it affects you less although it can affect you if your domestic supplier depends on a foreign supplier.”

COMPLIANCE DEFINED Customs compliance is the process of scrutinizing the standards, documentation, taxes and the duties that a customs authority or regulatory body needs to ensure all obligations and requirements are met to prevent an organization from facing fines and penalties, says Cora Di Pietro, vice-president and general manager, global trade consulting at Livingston International. Customs compliance also allows businesses to take advantage of monetary recovery and cost savings through customs initiatives, including duty drawback and free trade agreements.

Trade agreements are instrumental in facilitating open trade, but they also increase the requirements for import documentation and regulatory oversight, Di Pietro notes.

Those trade agreements also heighten the

requirements for import documentation and regulatory oversight. For example, the new rules for automobiles and auto parts in the not-yet-ratified United States-Canada-Mexico Agreement (USMCA) place a wide range of requirements on businesses that import these products to prove that they are eligible for duty deferral under the new trade deal, she says.

Her compliance team at Livingston has been combing through the document’s 4,000 pages to extract the minute details and the changes in compliance requirements between it and NAFTA. “Businesses need to keep abreast of any and all changes in a free trade agreement to ensure they are mitigating any potential risk and liability, but also to ensure they are taking full advantage of existing and new agreements,” she says.

This increased complexity also means more potential for the risk of costly errors. One of the most common missteps regarding trade compliance involves the misclassification of imports. Each import must be classified using a specific code, Di Pietro notes. Goods that are not properly classified can mean incorrect duty applied to that product—either too much or not enough. If it’s not enough, the company may face retroactive payments or significant penalties. For high-volume shippers, these retroactive payments and fines could mean millions of dollars.

“Classification is the foundation of trade compliance and incorrect classification of a product used in the qualification of a good for any free trade agreement may also cause that product to not qualify for that particular free trade agreement,” she says.

Often, misclassification can be avoided by ensuring all pertinent information is provided in order to classify the product correctly—including the form, fit and function of the product, Di Pietro says.

Communicating this information to those responsible for the product’s classification is important, as is providing specification sheets, SUPPLY PROFESSIONAL

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ILLUSTRATION: ANGELICA YIACOUPIS

BY MICHAEL POWER

ILLUSTRATION: ANGELICA YIACOUPIS

diagrams, comprehensive descriptions and other documents. High-volume shipments with multiple products can mean hundreds of classification codes, she says. “If such shipments occur frequently, it could become difficult to manage the associated data and things begin to fall through the cracks.”

Di Pietro recommends developing an overall trade compliance strategy, and she and her team spends much of their time doing so on behalf of clients, many of which are looking to enter new markets. Often, these markets have their own unique regulatory regimes, trade agreements and customs processes.

When developing a strategy, ensure to evaluate sourcing and selling markets to understand the requirements for each market and determine how to optimize time in

Classification is the foundation of trade compliance and incorrect classification of a product used in the qualification of a good for any free trade agreement may also cause that product to not qualify for that particular free trade agreement.

transit and duty outlay while minimizing risk exposure, Di Pietro says. How onerous are the regulatory requirements? What is the administrative burden? Are there tariff barriers and, if so, is there another market that has a free trade agreement to help contain costs and allow a business to compete in that market? What are the risks of being in a certain market – from transport delays and inadequate infrastructure to customs clearance times? Are there alternative

sourcing markets in the same region to serve as supplements in the event the terms of trade change in the primary market? These and other factors must be considered and evaluated to achieve optimization, Di Pietro says.

For more information, check out the websites of customs agencies like the Canada Border Services Agency or U.S. Customs & Border Protection, Di Pietro recommends, along with industry associations including Export Development Canada.

Canadian companies looking to source from foreign suppliers must ensure those suppliers are compliant with export regulations to begin with, says procurement professional Jeff Russell. For example, exporters in China must obtain an export compliance licence.

Without one, Canadian companies could end up violating Chinese law.

“You’ve got that type of compliance that you have to be aware of,” Russell says. “Do they have the necessary requirements to ship the material out of their own country? If they don’t, you could be doing something wrong right off the bat.”

RULES OF ORIGIN Another potential pitfall lies in recent changes to rules of origin. For example, goods manufactured in Canada that happen to include Chinese raw materials may be classified by the US government as originating in China.

This could be the case even if the products are shipped to the US for distribution, Russell adds. A Canadian company caught in this situation may find itself paying duty on those goods if they go to the US. “It’s making it more complex,” he says. “Now, you have to trace your supply chain components further down the line to see where they’re coming from.

Procurement professionals are going to have to start understanding their traceability on these things down the road.”

To mitigate such risks, supply chain professionals must understand as fully as possible everything about the products they are importing to avoid paying unexpected duties, Russell advises. Engage with the process as much as possible.

“Otherwise the purchasing decisions that you’re making could be having a negative impact on your organization as you move forward,” he notes. “Procurement people need to get fully engaged in understanding the product—how it’s made, how it’s manufactured, it’s uses, it’s end use so that you can be more involved in the overall business.”

Supply chain professionals can’t stop supply chains from becoming more complex. But they can arm themselves with knowledge of processes such as trade compliance to ensure that they’re as protected as possible from the risks that come with that added complexity. SP SUPPLYPRO.CA 19

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BY RICHARD CORLEY

Richard Corley is a Toronto-based technology lawyer.

His colleagues Seth Klerer and Sarah Stothart co-wrote the following article with him.

MANAGING DIGITAL RISK

A LEGAL LOOK AT SMART TECHNOLOGIES IN THE SUPPLY CHAIN As procurement organizations move up the digitalization value chain and acquire and implement increasingly complex and integrated systems, it is critical that the risks associated with these technologies be identified and managed. End-to-end risk management from technology specification, selection, implementation and integration, through ongoing operations and governance must be achieved through technology acquisition and managed services contracts. Automated contracting systems, such as AI-powered robotic purchasers and blockchain-based smart contracts, also need to be structured and contracted to ensure that liability for failures and errors is addressed.

CHALLENGES Smart technologies encompass the spectrum of digital tools used in procurement and supply chain management, including big data analytics, artificial intelligence (AI), robotics and blockchain. Most procurement organizations are moving up the digitalization value chain, from digitalizing data to the use of ERP systems to automate workflow, to robotic processing, to the application of big data analytics and the use of machine learning and AI systems. Blockchain is also increasingly used to improve traceability 20 APRIL 2019

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and transparency along supply chains.

The 2018 Deloitte Global Chief Procurement Officer (CPO) survey (2018 Deloitte Survey) found that managing risk continues to be one of the top three priorities for procurement departments (along with cost reduction and new products), but that many companies struggle to effectively implement advanced digital technologies. Problems with data, namely lack of integration and poor quality data were identified by more than 45 per cent of procurement leaders as barriers to the effective application of digital procurement technologies, and only three per cent of procurement leaders believe staff possess all the skills to maximize digital technology use.

Blockchain is currently deployed or scaling in only two per cent of firms, but is being piloted or considered by another 23 per cent.

Firms looking to implement digital procurement technologies are looking to outside providers of managed services, often in the cloud, to provide the technologies and skills required to implement and support them, but remain focused on risk management. Lack of familiarity with the technologies and the management of the risks may prevent companies from realizing the benefits available through procurement digitalization, but these knowledge gaps may be

addressed through external technical and legal advisors with expertise.

MANAGING RISKS Implementating and operating digital procurement technologies involves a variety of inter-related legal, economic and operational risks, all of which must be addressed through the technology procurement process and documented in the resulting technology contracts.

Legal risks and contractual provisions include those dealing with: • compliance with applicable laws; • protection of confidential information and personal information; • cybersecurity breaches; • payment of taxes; • compliance with reporting obligations; • insurance coverage • representations, warranties and covenants; and • indemnities and limitations of liability.

Economic risks and corresponding contractual provisions include those dealing with: • the pricing and management of changes; • price performance and other adjustments to prices over the term; • price benchmarking; • financial and performance audits; • impacts from changes in currencies; and • gain sharing.

Operational risks and corresponding contractual provisions include those dealing with: • the integration of the new technology and data with other technologies and platforms in use by the organization; • performance management (including service levels, reporting, fee reductions and incentives); • allocation of roles and responsibilities; • continuing access to key service provider personnel; • continuing access to key facilities and assets; • ownership and licensing of data and intellectual property; • availability of verified disaster recovery and business continuity plans; SUPPLY PROFESSIONAL

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• governance commitments; and • transition assistance.

In addition to the usual technology risks, the use of blockchain and AI procurement agents (AI agents, where the AI system is empowered to make procurement decisions and to place orders relatively autonomously) raises additional legal concerns surrounding the enforceability of the contracts, and the resolution and rectification of errors.

Blockchain technologies (typically employing a private or “permissioned” blockchain architecture, rather than the “public” blockchain models employed by Bitcoin and other cryptocurrencies) may be used to form smart contracts and to track goods and payment obligations throughout the supply chain. Blockchain, which relies upon the creation of an immutable, distributed digital ledger to document such transactions, is curretly being used to track several products, ranging from diamonds (by De Beers) to fresh produce (by Walmart, Unilever, Nestle, and others). Blockchains can also create smart contracts, which include conditions of payment, to automate purchase transactions (e.g., once the product is confirmed to have been delivered, payment is automatically advanced).

AI agents may use machine learning and big data analytics to determine when and how

much of each product to order, and to then to automatically place the corresponding orders.

While Canadian e-commerce laws, such as the Ontario Electronic Commerce Act, 2000, provide for the use of AI agents (“electronic agents” are defined in the Act as “a computer program or any other electronic means used to initiate an act or to respond to electronic documents or acts, in whole or in part, without review by an individual at the time of the response or act”) to form valid contracts, mistakes underlying the contract may, in some cases, be asserted to invalidate the contract.

Where an AI agent or a smart contract is being provided and managed by a service provider for the procuring organization, the underlying technology contract should consider the different types of risks arising from the use of such technology (including programming errors and errors in the data), include provisions to mitigate such risks, and then allocate the liabilities appropriately.

In order to assist our clients to effectively and efficiently procure complex technology systems and managed services relationships, we use an agile procurement methodology which is comprised of three principal stages: 1. Fact finding and due diligence: During which the procuring entity performs a market scan and uses Requests for Information, Requests

for Qualifications, Requests for Expressions of Interests, and meetings with prospective service providers to clearly understand the technology products and services available in the market.

2. RFP development and clarification: During which the Request for Proposals (RFP) is developed, issued, questions received from prospective proponents and clarifications issued in response.

3. Assessment of proposals, negotiations and contract: During which the procuring entity receives and assesses the proposals, concludes expedited negotiations with the leading proponents and then enters into a contract for the best solution.

We have used this agile procurement approach to good effect with both public sector and private sector organizations, in some cases with formal “fairness” oversight.

As procurement departments pursue the increased efficacy, efficiency and value offered by the digitalization of their supply chain, proper risk management is a critical consideration.

This article has highlighted some of the legal, economic and operational risks that need to be managed, and described an agile procurement methodology that may be used to facilitate the acquisition of complex technologies and service offerings. SP

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BY DAVID MUNCASTER

VOICE OF THE CUSTOMER CAPTURING FEEDBACK IS KEY TO SUPPLY CHAIN SUCCESS IN THE DIGITAL AGE With the ability to make instant and customizable buying decisions combined with the option to purchase from any supplier worldwide, skill in understanding what customers want and how your supply chain can provide it becomes paramount. That’s where the customer survey comes in. A customer survey is not just about getting feedback—a good organization will have methods to dissect that information. Such a survey can be used to forecast trends, understand buying habits and be responsive in the supply chain. Connect this with the reach (and impact, both positive and negative) of social media and supply chain professionals must include the survey as a factor in understanding how to thrive in the new digital landscape.

Every organization needs a way to capture the customer’s voice.

But that doesn’t end with a fancy survey. First, start with understanding the customer’s initial expectations for a product or service. This could be as simple as the market 22 APRIL 2019

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an organization is in, the industry it serves or the common service it provides. Secondly, look at that expectation and close the gap with the actual product or service. Are you confident that you can meet those expectations? Finally, the real challenge arises when the customer gets the product or service. They then make another assessment and determine whether their perception of what you provided matches with their expectations. Ultimately, identifying and working to answer these three gaps is fundamental to understanding, and satisfying, your customer.

MINING FOR GOLD “Perception” is a key word to take note of. That’s where a good survey analysis will help you understand the true voice of a customer. Finding the specifics in a survey can be difficult, as you’re only hearing from a portion of your total customer base. The percent that say they’re satisfied only tells you so much.

Not all customers provide comments and the ones that do could provide incomplete ones. Customer survey comments can be like a gold mine, but like any prospector, it takes time to get through all the dirt to the real nuggets. For example, how do you deal with comments from customers such as “Your delivery is terrible!” or “I don’t like your product”? These are not very helpful. Your survey systems need to be able to investigate and glean info from those comments and may require direct discussions with

The digital age has changed the way we get and receive customer feedback, and this feedback is having profound effects on entire organizations.

those customers to truly understand why “your delivery is terrible!”

When dealing with your customer survey and the comments, there is a tool in quality management circles called the Kano Model. This model says there are three distinct characteristics that customers view your product or service with: basic characteristics, performance characteristics and delighter characteristics. Basic characteristics are what allow you to get in the market. It’s what your customers expect from anyone providing your service or product.

Performance characteristics are the ones that allow you to remain competitive—they are the attributes you do better or worse than your competitor. Finally, delighters are those attributes which put us ahead of our competitors, the things customers don’t expect but realize are new or different that others don’t possess.

The challenge you have is that, over time, delighters will become performance characteristics, which will become basic characteristics.

Apply this to supply chain activity; in the past, delivery of a product within three-to-five days would seem normal and acceptable. It became a basic characteristic that wouldn’t provide a competitive advantage. Then the ability to be faster or slower in that window became a performance characteristic. If you could do it in three days consistently while your competitor could do it in five days, customers would be happier and purchase from you more often. Then a progressive supply chain professional came up with the idea of next-day delivery at no additional charge based on order size. This was a delighter to customers. That supplier became a supplier of choice, was able to charge more for the service and it set them apart in the industry ... at first.

But as more companies adopt the delighter (say, providing next-day delivery), that attribute becomes normal and expected. People start saying, “I expect next day delivery now.” If you can’t provide that on a consistent basis, then your performance scores will drop.

David Muncaster is manager, continuous improvement and CSAT, Staples Advantage Canada.

Finally, since so many competitors end up adopting it as customers expect that attribute, it becomes a basic characteristic. Customers expect everyone to have it and may not even consider a company that can’t provide it. We see that with next day delivery—more and more customers are having to find ways to fulfill this need.

Really analyzing customer feedback allows an organization to understand what those basic attributes are in order to continue to do them well, how you are doing on the performance activities compared to your competitors and uncover those potential delighters that could make you an industry leader.

The digital age has changed the way we get and receive customer feedback, and this feedback is having profound effects on entire organizations. In the past, poor performance by a supply chain might have led to word of mouth impacting the bottom line of a local branch. But now, with social media, thousands, if not tens of thousands of potential customers worldwide can have a damaging effect on businesses. It’s imperative we use the voice of the customer to stay ahead in this new landscape. SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

Fleet Management 26

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Canadian Auto Show Roundup Electric cars in the Great White North.

The whole package Test driving the 2019 Kia Forte Sedan.

Connected future Connected, autonomous vehicles are closer than you may think.

Know thy technician Smoothing out the upfitting process.

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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Supply Professional_April2019_apr15.indd 23

Remarketing What to do with old cars in your fleet.

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2019-04-16 11:14 AM

Fleet Management

NAFA’s I&E named top trade show

Hyundai Canada launches NEXO

Trade Show News Network has named NAFA’s Institute and Expo (I&E) to its list of the Top US Trade Shows for the fourth year in a row.

The ranking is based on net square footage of trade shows in the US. I&E ranked 206 of all US events, coming in at just under 62,000sqft. No other fleet industry show made the list.

Hosted annually by the NAFA Fleet Management Association, I&E offers fleet and mobility professionals networking with industry peers from around the world, education and training sessions along with the latest products and technology at the largest expo in the fleet industry.

I&E brings over 2,000 fleet professionals together, including over 1,100 fleet managers. The trade show floor encompasses more than 200,000 gross sq. ft. and hosts more than 260 exhibiting companies.

Hyundai Auto Canada Corp. has launched NEXO, Canada’s only fuel cell-powered SUV and the first vehicle of its kind to be made easily accessible to consumers. By collaborating with Modo, the first Vancouver-based carsharing cooperative of its kind, the NEXO will bring fuel cell technology to a much wider audience, Hyundai said.

NEXO is powered by hydrogen, a fully sustainable energy source, which allows the vehicle to emit clean water vapour and purify the air as it is driven. This technology also provides the vehicle with superior range conservation in cold climates compared to other battery electric powertrains. A five-minute refill carries the vehicle for up to 570km.

Modo will make two NEXO vehicles available for consumer use in the coming weeks through its carsharing services. This collaboration will provide Vancouver residents with access to fuel cell vehicles, Hyundai said. The company will also be the first to make fuel cell vehicles available for retail sale through select local dealerships.

With the launch of NEXO, Hyundai will offer a second-generation fuel cell vehicle, the first being the Tucson Fuel Cell which launched in 2015.

While hydrogen fueling infrastructure is still in the early stages of development, Vancouver is home to one of Canada’s only public refueling stations located in the city’s Marpole neighborhood.

Canada invests in the country’s largest public electric vehicle network in Quebec The federal government has announced a $5-million investment to build 100 electric vehicle (EV) fast chargers across Quebec. Built

by Hydro-Québec with funding through Natural Resources Canada’s Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative (EVAFIDI), the chargers will be part of Hydro-Québec’s Electric Circuit, the largest public charging network for electric vehicles in Canada.

The government said it is spending over $182 million across the country on a charging network for electric vehicles through the initiative. The money will also help to pay for natural gas stations along key freight corridors and stations for hydrogen fuel cell electric vehicles in metropolitan centres.

This investment also includes support for the demonstration of nextgeneration charging technologies, as well as the development of binational (Canada and the US) codes and standards for low-carbon vehicles and infrastructure.

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Volvo using in-car intervention against intoxication, distraction Volvo Cars plans to address driver intoxication and distraction by installing in-car cameras and other sensors to monitor the driver. The technology will allow the car to intervene if a clearly intoxicated or distracted driver does not respond to warning signals and is risking an accident, the company said.

That intervention could involve limiting the car’s speed, alerting the Volvo on Call assistance service and, as a final action, slowing down and parking the car.

Examples of such behaviour include a complete lack of steering input for extended periods of time, drivers who are detected to have their eyes closed or are off the road for extended periods of time, as well as extreme

weaving across lanes or excessively slow reaction times.

A driver monitoring system is an important element of allowing the car to make decisions in order to help avoid accidents, Volvo said.

Introduction of the cameras on all Volvo models will start on the next generation of Volvo’s scalable SPA2 vehicle platform in the early 2020s.

Details on the number of cameras and their positioning in the interior will be announced later.

The company is limiting the top speed on all its cars to 180km/h from model year 2021. Volvo Cars has revealed the Care Key, allowing Volvo drivers to impose limits on the car’s top speed on all cars from model year 2021, before lending their car to others.

Mazda Canada names David Klan president and CEO Mazda Canada Inc. has appointed David Klan as president and chief executive officer of MCI. Klan will succeed Masaharu “Massey” Kondo, who has been promoted to general manager, global sales and marketing division at Mazda Motor Corporation in Japan.

Klan assumes responsibility for Mazda’s business operations in Canada, and will report to Masahiro Moro, Mazda Motor Corporation senior managing executive officer with oversight of operations in North America; chairman and CEO, Mazda North American Operations.

A 27-year veteran of Mazda, Klan has held numerous executive positions globally since he started in 1992, including director of marketing for Mazda Canada; general manager of global brand marketing at Mazda Motor Corporation in Japan; and director of marketing and regional general manager at Mazda North American Operations.

Since 2009, Klan has led the company’s national sales, marketing and regional operations as senior director.

He holds an MBA from York University’s Schulich School of Business and a bachelor’s of business administration in business management from Stetson University.

Hyundai’s Nexo is powered by hydrogen, a sustainable energy source, that allows the vehicle to emit clean water vapour as it is driven.

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2019-04-15 10:44 AM

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Fleet Management

By Lesley Wimbush

1.

The future of electrification Canada’s International Auto Shows shine high-voltage spotlight on mobility From Montreal, to Toronto, to Vancouver, Canada’s International Auto Shows have enjoyed record-breaking attendance this year, a testament to the public’s enduring passion for the automobile. And like the cars themselves, auto shows have had to adapt to remain relevant in the face of rapidly evolving technology and consumer expectations. Today’s vehicles are a lot more than simple transportation—they’ve become highly sophisticated mobility solutions offering a dazzling array of new connectivity, safety and autonomy features.

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Under the spotlight this year were such notable technologies as Subaru’s DriverFocus, which uses facial recognition software to monitor the driver’s fatigue; a new road-scanning feature from Mercedes that detects imperfections ahead and automatically adjusts the suspension to adapt; towing and trailering apps that use cameras and automated driving systems to help facilitate hookup, monitoring and trailer backup; “virtual cockpits” or highly customizable and dynamic digital gauges replacing traditional analog; smartphone apps that can

remotely monitor, start, warm up, and even summon the car; and more sophisticated levels of automated driving that help keep the vehicle between the lines if the driver becomes distracted.

A panoply of new and future electrification, the auto show is still the best place to introduce alternative energies to the Canadian public.

No longer a novelty, or nichevehicle for virtue-signalling ecowarriors, the electric vehicle takes centre stage with a growing number of manufacturers entering the ring.

With longer driving ranges, shorter

1. Hyundai unveiled their stunning Le Fils Rouge concept at the Montreal show last January.

charging times and loaded with new technology features, EVs have become a truly viable alternative to traditionally powered vehicles.

Most brands feature one, if not an entire lineup, of hybrids, but pure electric cars are beginning their move into the mainstream.

While Toyota hasn’t any fully electric cars in its lineup yet, the Prius is the world’s best-selling, and probably best-known, hybrid.

For 2019 Toyota introduces the Prius AWD-e, which in addition to its hybrid powertrain up front, now features a rear-mounted electric motor to drive the rear wheels. The e-AWD system reacts only when needed—the Prius remains otherwise a front-driven car to save fuel.

Ford’s new EV lineup

Ford’s recent announcement that it was cancelling all of its passenger cars but for the iconic Mustang was shocking, but not surprising given FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

2. Le Fils Rouge features cuttingedge technology including a panoramic floating display in front of the driver and a futuristic cockpit.

3. Mitsubishi’s Outlander PHEV is Canada’s most popular plug-in, with the company refocusing to concentrate on electrification and crossovers.

4. Nissan’s Leaf Plus features a larger battery pack that increases its range up to 363km.

2.

3. that it’s concentrating on the more lucrative pickup and crossover segment. But what is surprising is their intention of introducing 40 electrified vehicles (16 of them pure EVs) to the market by 2022. For now, you can still buy the Fusion Hybrid and Energi hybrid, but the Focus all-electric has been cancelled for 2019.

From teetering on the brink, Mitsubishi’s come full-circle since joining the Renault-Nissan alliance. The Outlander PHEV is Canada’s most popular plug-in and the company is refocusing to concentrate on electrification and crossovers. Making its Canadian debut at the Montreal show, the futuristic e-Evolution concept uses a trio of electric motors (one up front, two behind) to power the allwheel drive system, and it boasts a sophisticated level of artificial intelligence technology onboard.

Honda boasts a trio of gaso-

4. line-electric hybrids in the Accord Hybrid, Clarity plug-in, and the Insight, powered by a four-cylinder engine combined with two electric motors. An all-electric Clarity is available in other markets, and Honda recently announced that their retro Urban EV concept is slated for 2019 production, but neither is as yet confirmed for Canada.

General Motor’s all-electric Bolt is the first affordable EV to offer 383km of pure electric range. While the hybrid Volt will not return in 2019, GM plans to concentrate its resources on future battery-electric crossovers, SUVs, minivans and even pickup trucks.

Luxury brand Cadillac will be the face of GM’s push to become an industry leader in electric vehicles.

Cutting edge technology

Hyundai’s electrified stable includes the Ioniq hybrid, plug-in, and all-electric, the Sonata Hybrid

and the new all-electric compact crossover Kona with over 400km of range. Making its Canadian debut, Hyundai unveiled their stunning Le Fils Rouge concept in Montreal. A showcase of cutting-edge technology, including a panoramic floating display in front of the driver and futuristic cockpit, the EV concept is an indicator of future Hyundai design to come.

While Mazda has thus far avoided the EV segment, concentrating its efforts on high efficiency traditional engines, the Japanese company will launch its first battery electric vehicle in 2019. Most likely a small crossover, the EV will be followed by a range-extended version using a rotary engine.

Making its first Canadian appearance at the Montreal Auto Show, Nissan’s Leaf Plus features a larger battery pack that increases its range up to 363km—versus the 243km of the regular Leaf. Nissan

also unveiled another version of their best-selling EV at the Toronto show. The Leaf Nismo RC is a 322hp, AWD electric race car that will be one of the official pace cars for the Nissan Micra Cup, a Canadian race series now in its fifth year.

There were over 40 production and concept electric and plug-in hybrid vehicles on display at the Toronto Auto Show alone, and each auto show made a fleet of EVs available for public test drives.

Plug-in electric and hybrid cars have risen to nearly 46,000 units in Canada and 2018 sales were more than the previous three years combined. Government rebates play a huge role in influencing those sales.

With Ontario cancelling a program that refunded up to $14,000 per vehicle, it remains to be seen whether leaps forward in quality, variety and range are enough to maintain that momentum. FM/SP FLEET MANAGEMENT SUPPLYPRO.CA 27

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Fleet Management

By Barrie Kirk

Cars 2.0

Automated vehicles and the impact on mobility Welcome to the era of connected and automated vehicles (CAVs)— it has started.

The deployment will happen incrementally from now to the 2030s and beyond. We are now at a point in time that is very similar to 1908 when the first Model T Fords rolled off the production line. We know how much the arrival of cars changed individual lives, our society, businesses and the world in the 20th Century, generally for the better but not exclusively. Cars 2.0 will have an impact in the remainder of the 21st century that is every bit as broad and deep as in the years and decades following 1908.

This article will describe the current status and expected deployment of automated vehicles, the big picture socio-economic impact and the more specific impacts on businesses.

Status and deployment

The first generation of CAVs is in use today. These are use cases— often called “low hanging fruit”— such as low-speed, fully-automated shuttles that are in regular daily use in various countries, along with heavy equipment applications such as heavy haulers in the mining industry.

In the early 2020s, we will see the deployment of driverless taxis, which will likely be the first fully automated passenger cars that we will see on our city streets. There is a general recognition within the auto sector that driverless taxis will become common through the 2020s and that this will lead to a trend 28 APRIL 2019

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Barrie Kirk, P.Eng. is executive director of CAVCOE.

in which people buy rides rather than buy cars. Ford, GM and other OEMs understand that in the 2020s, they will build and sell significantly fewer cars than they have in the past. The same OEMs understand that the market for Mobility-asa-Service (MaaS) is significantly larger than the market for building and selling cars. Uber, Lyft and others are actively developing their plans to provide robo-taxi services; the OEM are also active in this space. These early driverless taxis will be geographically-constrained to areas that have been mapped with great precision. This generally means that they will operate in downtown areas.

The next generation of CAVs, defined as able to go anywhere, at any time, in almost any weather, will not appear until the 2030s.

Socio-economic Impact

The greatest single benefit of CAVs will be their safety and the expected reduction in traffic collisions and deaths. A joint CAVCOE-Conference Board of

In the early 2020s, we will see the deployment of driverless taxis, which will likely be the first fully automated passenger cars that we will see on our city streets.

Canada report forecast that when CAVs are fully deployed, traffic collisions and deaths will be 20 per cent of what they are now.

Unfortunately, CAVs are overhyped. We read about “crashproof cars” and a future utopia of zero collisions and deaths. This is a wonderful objective but a total fantasy, as all hardware and software fail occasionally. We should expect that CAVs will be much safer than human-driven vehicles, but never completely crash free.

There is also an impact on healthcare. It is well-known that for young adults, 18-30, traffic collisions are a leading cause of death. It is less well-known that young adults in the same age range, who were healthy but die suddenly, are an important source of organ and tissue donations. It follows that the arrival of CAVs will benefit younger people but will lead to problems for older people who need an organ transplant.

Finally, CAVs and driverless taxis will lead to improved mobility for seniors and the handicapped. This will allow them to stay at home longer and have a better quality of life.

Impact on Businesses and Jobs

A study by KPMG, the large consulting company, resulted in a global “AV Readiness Index”. This shows that out of 25 countries, Canada is number 12 in its readiness for the CAV era.

This is disappointing. A country like Canada, with its wealth and resources, should be more prepared for the disruptive changes that the CAV era will bring. There are some initiatives to prepare Canada but, compared to other countries, there is not enough, and they are too slow.

For businesses, there will be winners and losers.

The winners include the technology sector, and this is one area in which Canada is doing very well. There are strong CAV and electric vehicle ecosystems in Ottawa, Kitchener-Waterloo, Toronto, Montréal and other parts of Canada. There are also strong artificial intelligence (AI) clusters in Edmonton, Montréal and Toronto. These companies and universities are well supported by government.

The biggest winner of all will be companies in the data business.

A well-known saying is “data is the new oil”. The various sensors on CAVs will be able to gather huge volumes of data in real time.

Through communication networks, especially 5G (the new mobile phone standard), this data can be FM/SP SUPPLY PROFESSIONAL

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2019-04-15 10:44 AM

harvested and monetized. Opinions vary, but the value of this data can be 3-10 times the value of the vehicle. One of the reasons that this data is valuable is that it will be an input to online advertising.

The more that the advertising companies know about each individual, the greater the ability to micro-target advertising, and this generates substantial value.

The greatest single negative impact of CAVs will be the impact on jobs. In the CAV era, there will be fewer jobs for people who drive taxis, buses, trucks, et cetera as we move towards MaaS. Fewer cars will be manufactured which will impact the auto sector; this is a trend that has already started.

Because most CAVs will be electric, gas stations will gradually disappear. Because electric vehicles have far fewer moving parts and will be more reliable, they will need less servicing than current vehicles.

If we assume that computer drivers will be safer and more law-abiding, we will need fewer traffic police.

And the list goes on.

Another example is the auto insurance sector which will be negatively impacted. During the transition period, when the driving task is shared by humans and computers, there is the well-known question when a collision occurs— who is responsible?

As driverless taxis become more common, the insurance industry will be hit in three ways. First, if CAVs are—as expected—much safer than human drivers, the number of collisions, deaths and injuries will decrease.

This will reduce the payouts and therefore reduce the premiums and revenue. Second, driverless taxis will be fleet owned and operated, and this means that there will be fewer personal cars on the road and therefore fewer consumer insurance policies. Third, some car manufacturers have already announced that they intend to offer lifetime liability coverage for CAVs that is bundled in with the cost of the vehicle. Given that when a fully automated car has a collision, the software will be blamed in many cases. This trend is making a virtue out of a necessity.

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OEMs understand that the market for Mobility-asa-Service (MaaS) is significantly larger than the market for building and selling cars.

These factors combined mean that the insurance market will contract over the 2020s and 2030s.

Those companies that can adapt will succeed and those that cannot will go out of business. One person who shares this perspective is Warren Buffet who owns Geico.

Buffet has said publicly that CAVs will be great for society but bad for the insurance industry.

There are many other new AV-related businesses in development and being piloted.

These include automated ground delivery robots, drone delivery systems and small electricpowered automated aircraft for short and medium distance applications.

Impact on Fleets

There will be multiple impacts on fleet owners and operators. For companies that are in the business of long-distance trucking, there is the well-known problem of the shortage of drivers. Younger people do not want the kind of lifestyle that involves spending one-to-two weeks driving around North America, away from home and family. Also, the older drivers are starting to retire.

For these companies, automated long-distance trucks will solve a problem and provide a real benefit.

As an interim step, I envisage long-haul trucks driven out of a city by humans, stopped on a site adjacent to a highway, and put into auto pilot mode to drive themselves to the destination city. When they arrive, they park in a similar site adjacent to the highway and humans drive the trucks to their destinations in the city.

In the longer-term, fullyautomated trucks will go from one location in the city to its final destination in another city.

For fleets used for local deliveries, work is progressing on a combination of technologies to deliver parcels to businesses and homes. One of these approaches is the development of robots to deliver parcels. While these devices are useful, their range is limited. Therefore, the concept is to pair them with automated vans that drive the robots to a neighbourhood, and the robots then take the parcels.

UPS has announced a demonstration project using one of its delivery vans coupled with a drone. Again, the van would drive to a neighbourhood, but this time, the roof slides open and the drone lifts off and delivers a parcel. Even if the van moves to another street, the drone can track the van and return to the mothership.

We do not normally think of robots as autonomous vehicles, but there is a lot of progress in the capability of humanoid robots.

These robots are designed to look a bit like a human (think Data from Star Trek) and can do work such as installing drywall. There is even a YouTube video showing one of these robots doing a backflip.

These robots can also be used for local delivery of parcels. The Globe and Mail has published a letter from me proposing that Canada Post explore the use of android robots for delivering mail to homes. The benefit is to go back to mail delivery to all homes while eliminate the use of community mailboxes, all without the expense of a large labour force.

Utility companies make extensive use of vehicle fleets.

In many cases, one or more humans are required to do something at the destination. There is a good argument for the use of autonomous utility vehicles even when there are humans on board.

These arguments include improved safety and the ability for the workers to catch up on paperwork and emails while in transit. It has already been established that computers will be gentler drivers than humans, and this results in less wear and tear on the engines and brakes, resulting in longer intervals between maintenance, and longer life for the tires.

The Dutch are testing an automated garbage collection truck. In this concept, the human continues to empty the garbage cans into the truck, but the truck automatically drives down the road following the human.

An important element of fleet operations is servicing and maintenance. At the moment, maintenance technicians need to be skilled in maintaining gasoline and diesel engines and hydraulic systems. In the future, technicians will be required to maintain these legacy systems, and also maintain the vehicles of the future with large batteries, electric drive trains and a very large amount of complex software. The challenge for colleges is to start training today the technicians that we will need for the vehicles of the 2020s and beyond.

Conclusions

It is clear that CAVs will lead to huge, disruptive changes to our personal lives, businesses and society. A key benefit is that computers will be much safer drivers than humans.

There will be substantial changes to both the private and public sectors. It is important that organizations start now to evaluate how they can address the opportunities and challenges ahead and get ahead of the curve.

The deployment of CVs has already started—on a very gradual basis. The number of CAVs in use and their capability will increase through the 2020s and into the 2030s. By 2030, our lives, businesses and the world will be very different. FM/SP FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

YOUR FLEET IS AN INVESTMENT. AND IT’S TIME IT PAID OFF. If you view fleet primarily as a cost, that misses the big picture.

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Supply Professional_April2019.indd 31

2019-04-15 10:44 AM

Fleet Management

By Michael Power

Vehicle remarketing

NAFA Ontario event speakers give insights into the automotive salvage industry The entire automobile salvage industry has grown recently—so much so that of the 13 million units that leave the carpark every year, four million of those units go to the salvage auctions. That was a summary of the industry from Blaire Earle of Impact Auto, during a presentation at the Canadian International Automotive Show (CIAS) in Toronto on February 22.

The talk was part of NAFA Ontario’s first-annual CIAS breakfast. Earle, along with Peter Snoyer of ADESA, presented on emerging trends in vehicle remarketing to roughly 60 industry attendees.

Among other topics, Earle touched on factors driving the salvage business, including what’s behind the number of total lost vehicles. For example, the number of kilometres driven in North America has increased along with the average age of vehicles on the road. As technology in those vehicles gets more sophisticated, the capacity to do repairs once a car is in a collision decreases, Earle noted, which has to do with both the skilled labour required and the technology itself.

A significant trend among vehicles going to auction is that the ACVs (actual cash values) of vehicles in the auction lanes have 32 APRIL 2019

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increased. As well, the demand for SUVs and light trucks has gone up, not only in North America but among international buyers.

“That’s why the returns and the value of those vehicles that we see, and what buyers are willing to pay, have jumped up especially over the past three-and-a-half years,” he said.

While the average age in years in the auction lanes has increased, the age of vehicles on the road has also gone up due to those vehicles being better built, Earle noted.

That has led to higher quality, nicer vehicles in the auction lanes.

Those higher end vehicles—as well as parts if the vehicles are in accidents—are in demand from international buyers because they’re often not available in those countries.

Traditionally, imported Japanese cars have been in demand among many overseas buyers, Earle said. Recently, demand for small- to medium-size SUVs has risen. “You’re not seeing a bunch of diesel pickup trucks that are damaged being shipped through the international market,” he said.

Another contributing factor to the increase in total lost vehicles is driver behaviour, Earle noted.

Distracted driving and smartphone use behind the wheel have

Eventually, more and more will be online and less and less will be going to auction— that’s what’s coming down the pipe

increased, leading to more vehicles in the auction lanes that were in collisions, because the driver was too distracted to hit the brake. Also, the use of cannabis among drivers before they get into a car is now almost as high as smartphone use, Earle said, according to studies done in Colorado where cannabis is also legal.

“We expect to see another climb in claims,” he said. “And, at the same time, drinking and driving rates in Canada are increasing.

I found that one quite surprising.”

The development and expansion of electric cars has led to business growth, Earle told the audience.

The numbers surrounding electric cars can be controversial, with anywhere between .25 and a half percentage of adoption of EVs in North America. That said, electrification is definitely coming to the industry with the only question being when it takes place. A number of factors affect the value of aftermarket batteries, Earle noted, again pointing to technology that’s going into new batteries.

“Right now, used batteries are in demand because they’re used in storage solutions around the world and they’re used for everything from the running of a household in Africa to small machinery in a company there,” he said.

FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

Blair Earle of Impact Auto (top) and Peter Snoyer of ADESA (bottom) shared insights into the automotive salvage industry during NAFA Ontario’s CIAS breakfast in February.

Competitive bidding

The auction industry has changed considerably in the last 20 years with more channels now open, noted Peter Snoyer of ADESA, a fellow speaker at the event. Why would you choose a physical auction? Perhaps the biggest benefit is the competitive bidding process and the transparency that goes along with it, Snoyer said. This helps organizations realize the maximum resale value for their vehicles.

A major trend of the past 10 to 15 years in auctions is their simulcast capability. That has become perhaps one of the biggest impacts on how vehicles are sold today, he noted. “There are the physical people that are at the auction and then there are the people that are online,” Snoyer said. “They go through and they’re watching the auction and they’re able to bid online.”

That has led to an average of about 45 per cent of the vehicles bought at auction today purchased by someone online. Of the 55 per cent of vehicles that are bought by in-lane buyers, 80 per cent of those cars have an online bidder as a back bidder.

“When you factor all that in, the online is impacting close to 80 per cent of everyone’s business,” he said. “It’s at the point now where if our system goes down, the sales stop. They wait until it goes back up, because it greatly impacts the resale of vehicles when you lose that kind of buying audience. It’s kind of the best of the physical world and the online world meeting together. It used to be that dealers would have to fly in and buy in Vancouver and then go to Calgary or come from Montreal and buy in Toronto. That’s really been a game changer in the industry.”

While the internet makes the business process easier and faster, it also means more people involved in the process, Snoyer said. The company employs 700 people to manage its upstream programs, among those 400 are IT specialists.

With that kind of employee base, the focus is exclusively on the customers’ upstream programs.

The infrastructure is built for online

selling, which is being done by the manufacturers’ mandate, he noted.

“Eventually, more and more will be online and less and less will be going to auction—that’s what’s coming down the pipe,” Snoyer said.

Among the most recent changes in the vehicle auction space is the development of virtual lanes, which began in the US a little over a year ago and started in Canada last January, Snoyer added. With a virtual lane, auctioned cars don’t cross the block. Virtual lanes began as a safety measure, he noted, with several deaths taking place at auctions, especially in the US. Auction companies began looking for ways to make the environment safer, as well as wanting to define the legal responsibilities if something happens in the auction lane.

Virtual lanes involve one or two dedicated lanes in which the vehicles are washed, cleaned and staged as they normally would be at an auction, Snoyer said—except that the vehicles don’t go through the lane. Virtual lanes take place on regular consignment auction day.

For example, 10 lanes will have vehicles driving through, a dedicated lane or two will be virtual lanes. The set up and structure is different. There’s carpet, there are tables and chairs and the crowd is there, but there are vehicles that don’t cross the block, Snoyer said.

“Everyone is very used to and efficient at purchasing online,” he noted. “Going out and looking at the vehicles, walking a lot, is becoming less and less of a trend.”

Some buyers will always prefer a physical auction where they can “kick the tires” before they buy, Snoyer says. Overall, however, buyers appreciate the added efficiency of virtual lanes.

Like many areas of the automotive field, the remarketing industry is changing and developing due to factors like advances in technology. As the two speakers at NAFA Ontario’s event made clear, fleet professionals will benefit from staying abreast of these developments going forward. FM/SP

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2019-04-15 10:44 AM

Fleet Management

By Kara Kuryllowicz

Automotive Cybersecurity

Cyber-protection for commercial fleets is critical Cybersecurity is a hot topic and it’s been a priority for the automotive industry since 2015, when Charlie Miller and Chris Valasek hacked a 2014 Jeep Cherokee, taking control of the vehicle’s braking, steering and acceleration. Fiat Chrysler recalled 1.4 million Jeep Cherokees to patch the vulnerability.

While that hack put the focus on the vehicles, a recent Frost & Sullivan release on automotive cybersecurity as a strategic priority notes that some of the most pressing threats include attacks on preor retro-fitted telematics systems. In fact, hackers’ ability to control and manipulate such systems’ data can have a significant, adverse effect on productivity and profitability.

Past hacks demonstrate that a robust cybersecurity solution with multi-layer protection for commercial fleets is critical, because telematics have been used to stop large commercial fleets. Not that long ago, a large US transportation company’s fleet management and logistics software was locked down, halting operations. Every piece of data needed to run the business was only available digitally. No one had access to orders, truck and driver schedules, optimal routing and related information until the attacker was paid off.

“Most feel it’s cheaper and faster to pay the ransomware, which may be hundreds of thousands of dollars, so that you can get back to business,” says Daniel 34 APRIL 2019

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Thunberg, global head of connected transport, with Netherlandsbased Irdeto. “However, this could just result in additional attacks as the hackers know this business is willing to pay. Deterring and preventing such attacks is the most effective strategy of all.”

Experienced security teams work to identify the information and systems that are most crucial to a business, then allocate security principles and strategies. What value does the data have to the fleet in question and is it worth anything to anyone else? As the transportation company above discovered, specific data, like order, driver and truck scheduling, enabled its operations, protecting that data was important. Meanwhile, while relevant, fuel consumption and maintenance schedules data didn’t affect real-time deliveries.

“Consider the commercial consequences when a security incident occurs, such as lost revenue and the impact on customer satisfaction and public trust,” says Thunberg.

“Look beyond that to the effect of a leak that makes employees’ home addresses or health information public and the resulting impact on reputation as well as the likelihood of a hefty fine or penalty.”

Security experts must stay ahead of attackers. As Thunberg says, security is never static and updates are a necessity not an option.

“Make it such a headache to hack your system that the hackers

move onto to an easier target,” says Thunberg. “Invest in what’s necessary to protect your systems and spend just a bit more than what’s enough in the right areas—it’s a fine and challenging balance but cost-effective and results-focused.”

Hacking a single telematics system residing across a company and all its vehicles offers a better ROI than fleet vehicles, which need to be individually hacked. Not only are they sourced from multiple OEMs, the model years and trim

Most feel it’s cheaper and faster to pay the ransomware, which may be hundreds of thousands of dollars, so that you can get back to business.

levels vary and most likely, each system will be different. The hack that gives the attacker access to a 2017 entry-level Camry won’t work on the 2016 or the 2015.

“It’s attacker bang-for-the-buck!

If you hack an application, you’ve hacked one application, but if you hack an operating system, you own all the applications,” says Mark Kuhr, CTO and co-founder of Synack, which relies on hackers to identify vulnerabilities and improve their resistance to attack.

Irdeto’s Secure Environment detects tampering and anomalies in vehicle software to protect against and respond to cyberattacks.

“Cybersecurity is a pure cost of doing business—it’s a preventive measure, and as insurance, it’s a cost, typically five to 10 per cent of a fleet’s total operating cost,” says Thunberg.

Irdeto’s Keystone solution allows fleet and vehicle owners to create and control policies around multi-user vehicle access, settings and usage and managers can create, transfer and revoke digital keys. Through the Keystone app, they determine when, where and how drivers can use vehicles and customize vehicle settings for each user. It can help prove driver access and use to insurers. The app is functional whether there’s phone coverage or internet access and managers can change the profiles.

While vehicle manufacturers and telematics providers and users invest in solutions to protect fleet telematics and vehicle data, Ryan D’Souza, regional director, Prairies, Jim Pattison Lease notes fleet operators and drivers play a role. Because thieves have used remote amplifiers to augment the signal from a keyless entry device to unlock and even start vehicles, JP Lease recommends remote covers with signal block technology.

D’Souza also suggests vehicles’ keyless fobs be stored as far from parked vehicles as possible.

When decommissioning vehicles for resale, all aftermarket, peripheral devices, such as telematics, navigational devices, garage remotes and cameras must be unpaired, removed and the data and history deleted. FM/SP FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

2

NO MATTER HOW YOU SEE IT, THE NUMBERS ARE ALWAYS RIGHT.

TOP SAFETY PICK+

1

Legacy, Crosstrek, Outback, Impreza: on models with EyeSight® & specific headlights.

Ascent: on models with specific headlights.

2019 ASCENT

2019 LEGACY

2019 CROSSTREK

SUBARU

BEST RESALE VALUE OF ALL MAINSTREAM BRANDS

2

5 years in a row

2019 OUTBACK

98.3% of our vehicles sold in Canada over the last 10 years are still on the road today.

2019 IMPREZA

3

And for the 5th consecutive year, ALG named Subaru as the Top Mainstream Brand for Residual Value.

The numbers speak for themselves. They are proof of Subaru’s reliability.

We know there’s a lot to consider when looking for a fleet vehicle to fit your company’s needs. So add low cost of ownership, responsible engineering, legendary safety and capability features into the equation.

You’ll find out that Subaru is always a great solution.

Visit us at subarufleet.ca 1. Safety ratings are awarded by the Insurance Institute for Highway Safety (IIHS). Please visit www.iihs.org for testing methods. 2. ALG named Subaru the Top Mainstream Brand for Residual Value in the 2019 Canadian Residual Value Awards. ALG is the benchmark for residual value projections in North America, publishing residual values for all vehicles in the United States and Canada. For more information, visit www.alg.com. 3. Based on IHS Markit Vehicles in Operation as of June 30, 2018 for Model Years 2009 to 2018 vs Total New Registrations of those vehicles.

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2019-04-15 10:44 AM

Fleet Management

By David Miller

The whole package The 2019 Kia Forte Sedan Finding a good package at a great price is a goal for many when researching vacations, cable and phone plans, or hosting an event.

The same holds true for new cars, and if one is in the market for a compact sedan, it’s hard to overlook the all-new 2019 Kia Forte sedan.

The powers that be at Kia have put together a package of exterior sharpness, smooth ride, a plethora of technology, all at a mind-blowing starting price of $16,495. A cheap price is nothing new from Kia, but nothing about this new Forte resembles a cheapness in quality, style or ride, and its techheavy capabilities and creature comforts rival other cars hovering around the $30-35K mark.

Now, a starting price is aimed to catch one’s eye and the Forte is set for the manual transmission option 36 APRIL 2019

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only. The automatic version starts at $18,995, and for most of those aforementioned accoutrements, the EX trim level starts at $20,995. My tester, the EX-Limited, the top of six trims, tops out at $28,065 and comes with an eight-inch multimedia interface with navigation, premium Harman Kardon audio system, ventilated front seats and heated rears.

So far, we’ve gone through a lot of price talk for a review, but that goes hand-in-hand with the Kia brand. It may try from a marketing perspective to downplay value for premium touches all for optics and mindset, and that only takes away from its strengths. The 2019 Forte sedan truly has it all (maybe a little less premium than they make it), and the reason it was recently awarded Best Small Car by the Automobile Journalists Association of Canada (AJAC).

Style and substance

Design cues for the Forte derive from the Kia Stinger, its sporty five-door GT fastback sibling and the overall AJAC Canadian Car of the Year winner. It takes on a longer and wider profile through an elongated hood, pushed-back windshield and truncated trunk lid. It doesn’t possess the same curves and slicked-back look of the Stinger but shows well with assistance from a bolder dark grille to steal some attention from a crowded segment of compacts including the Honda Civic, Toyota Corolla, Mazda3, Volkswagen Jetta, Nissan Sentra and its Hyundai Elantra cousin.

If the Forte’s exterior can hold your attention for just that smidge to allow for a peek inside, the interior might close the deal featuring amply space in both rows. The

layout in the EX-Limited cabin is impressive: soft-leather throughout, a large floating infotainment screen and an uncluttered sanctuary. Not to mention all the gadgets from standard heated seats and steering wheel to a wireless charging dock—it’s about everything you need in an easy-to-understand environment filled with buttons, knobs and bolstered seating.

Another impressive characteristic is Kia’s Lane Keeping Assist system (starting at the LX automatic trim) that acts as a semi-autonomous driving aid at highway speeds. A green image of a car in-between dotted lanes pops up on your cluster gauge and will lightly centre the Forte within your driving lane without the use of hands on the steering wheel. I wouldn’t try this for a long period of time, and it will direct you to FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

1. The Forte shows well with assistance from a bolder dark grille to steal some attention from a crowded segment of compacts.

2. The layout in the EX-Limited cabin is impressive: soft-leather throughout, a large floating infotainment screen and an uncluttered sanctuary.

3. The Forte’s gadgets include heated seats and steering wheel to a wireless charging dock—it’s everything you need in an easyto-understand environment filled with buttons, knobs and bolstered seating.”

1.

2. put your hands back on the wheel after about five-to-10 seconds, but if you need to stretch your arms for that second, it’s a nice add-on to have which is unthinkable under $20,000.

Smooth ride

Regardless of the trim, each Forte uses a 2.0-litre, four-cylinder engine rated at 147hp and 132lbs-ft of torque mated to the brand’s first-ever version of an intelligent variable transmission (CVT). The power numbers may seem low, but it gets the job done in both highway and city driving, while the CVT makes sure every kilometre driven is achieved with fuel efficiency at top of mind and without the whining drawl. During my week long test, I managed to achieve an impressive combined 6.5L/100km rating compared to its official

stats at 7.7 in the city and 5.9 on the highway. For those that are adamant against CVTs or still want shifting to be in their hands there’s a six-speed manual transmission in the base trim.

Overall, the ride goes about its business in a smooth and quiet manner. At road speeds, it manages corners with a direct precision; just don’t take it up a notch, as that’s more Stinger territory and the Forte will get squirrelly and lose touch with the gear it should artificially be in. If you drive the Forte for the gas-savings commuter that it is, road noise will be at a minimum and the driver and its occupants can focus on what to spend its disposable income on. The 2019 Kia Forte is all about that great package and when checking priority boxes in its segment, there won’t be many empty spaces. FM/SP

3.

As Tested Price: starts at $16,495; tested at $28,065 Engine: 2.0-litre, four-cylinder Power: 147hp, 132lbs-ft of torque Transmission: intelligent variable transmission (CVT) Rated Fuel Economy (L/100 km): City 7.7/ Hwy 5.9 Observed Combined Fuel Economy (L/100 km): 6.5 FLEET MANAGEMENT SUPPLYPRO.CA 37

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2019-04-15 10:44 AM

Fleet Management

By Mark Boutilier

response vehicles such as ambulances and fire or police vehicles.

Class 2 lighting is often used for an in- or on-road traffic setting that would warn oncoming traffic of potential hazards. This class is approximately twice as bright as a Class 3 option. The Class 3 option is used in a light-duty setting such as warehouses or lumber yard settings and are typically used on a forklift or tractor.

Know thy technician

Understanding what technicians need can make vehicle upfitting smoother When the time comes for fleet managers to turn over vehicles within their fleets, it is also a good opportunity to assess their needs with regards to upfitting requirements. Far too often, fleet managers rely on the information given to them by their end users.

However, many of these items might be wants versus actual needs. Those needs could help their technicians perform better, operate safer, be more efficient and offer savings to the overall cost of ownership. Replacing vehicles starts with deciding whether the vehicles being purchased suit the needs of the required applications.

Choosing the right vehicle involves understanding how the operator functions day to day, the types of service they perform, the terrain they travel through and whether they need to operate inside the vehicle for long durations or if the vehicle operates as a mobile warehouse of sorts.

Assessing needs

Once the decision has been made regarding which vehicles will be required for each technician and application, the next and equally important step is to assess the upfitting needs. The choices are endless and understanding them all can be overwhelming. Safety and practicality are always top of 38 APRIL 2019

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Mark Boutilier is director of business and fleet development at Action Car and Truck Accessories.

There are new products being released every year that increase safety and allow for less stress on the operators.

mind for fleet managers. There are new products being released every year that increase safety and allow for less stress on the operators by preventing bending, squatting, pushing and pulling. Climbing in and out of a vehicle multiple times a day sets up the risk of falls, strains or other injuries.

Investigating options that allow everything within a vehicle to come to the operator such as pull out trays, cargo bed slides, side access doors or parts cases allow for better access, organization and overall allocation of space for required equipment.

When it comes to exterior lighting such as a beacon or strobe lights, there have been very significant improvements in this market over the last few years. These lights are required for various reasons such as warning of specific hazards, transporting oversize loads or providing visual aid to your surroundings in inclement weather. However, the class of light and the number of lights per vehicle depends on the load being carried or the amount of hazard it represents.

Most manufactures have switched to LED bulbs that offer better efficiency and increased illumination. Class 1 lighting is the brightest of the three classes and is typically used on emergency

Knowing in advance

After these major components of an upfit are established, the add-on items come into play. These can include laptop stands, power inverters, cab boxes and so on.

Knowing beforehand the equipment utilized by different divisions of your fleet will indicate the products required to accommodate these needs. Some questions you will need to ask may include, ‘do my operators carry electric equipment that needs to be charged?’ and ‘do my operators receive work orders electronically through a tablet or computer?’

Once you have answered these questions, deciding on the best solution for your needs is very important. For instance, power inverters are great, however, they have their limitations. The total power that an inverter can provide depends on the construction of the inverter itself, along with the manner in which it is used.

Overloading an inverter is very easy to do if you do not pay attention to the specifications of the unit. If your technicians are required to work using a laptop or computer, there are many options when it comes to mounting solutions. They range from No-Drill, Drill Down or Seat-Mate options.

They can also be make- and model-specific, or universal. If your entire employee base uses the same device, a model-specific unit would work. However, multiple devices might require a universal mount system.

In the end, the upfitting process can be a daunting challenge. But remember that knowing the needs of your technicians first will help to ensure that quality, safety and efficiency remain top of mind. FM/SP FM/SP SUPPLY PROFESSIONAL

2019-04-15 10:44 AM

OUTLANDER PHEV

THE PLUG-IN HYBRID ELECTRIC SUV

GOOD FOR YOUR COMPANY, YOUR POCKETBOOK AND YOUR PLANET. Now the vehicles in your fleet can have the efficiency of an electric vehicle with the performance of our proprietary 4WD system, Super All-Wheel Control.

You can go farther with the Outlander PHEV, as it seamlessly transitions between its twin electric motors and its highly efficient gas engine.

Charge anywhere with 4 different charging options.

Ample cargo space and 1,500 lb towing capacity.*

Visit Mitsubishi-motors.ca/fleet to learn more about adding an Outlander PHEV to your fleet. * See Owner’s Manual for proper use when towing. ** Whichever comes first. Regular maintenance not included. See dealer or mitsubishi-motors.ca for warranty terms, restrictions and details. Some conditions apply.

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2019-04-15 10:44 AM

Fleet Management Michael Power ByBy Erik Bousquet

Safety Excellence Empowering your fleet drivers Fleet operators face the task of mitigating risk in a tough economic environment. Recent analysis shows an uptick in traffic crashes.

What’s needed to get control over these escalating costs?

Organizations that employ drivers have a responsibility to ensure their employees are equipped with the skills and knowledge to handling their vehicles, understanding the use and limitations of driver assist systems, safely carrying loads and managing external influences effectively. Equally important is sustaining responsible attitudes and behaviors toward safety.

Most fleet drivers have been driving for many years—representing the preponderance of their driving education. When comparing formal drivers’ education licensing training with post-licensing time on the road, drivers are largely selftaught. What have they learned?

Over time, drivers can develop sub-standard operational patterns and behaviors that put them at risk.

As time goes by without incident, or very minor upsets, drivers can conclude that their actions behind the wheel indicate they’re above average drivers—quite the opposite is probably true. They’ve become unconscious incompetents and continue reinforcing at-risk behavior.

A meaningful model for driving excellence is based on a comprehensive driver safety study performed in Europe by the University of Turku Traffic 40 APRIL 2019

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Erik Bousquet is Behind-the-Wheel Driver Safety Instructor at Driving Dynamics.

Research Department. There are four goals in this model for a driver to demonstrate safety excellence: Competent Vehicle Control: automatic, competent execution of maneuvering tasks; Driving in Traffic Situations: perceive and predict what other road users will do; Journey Choices: proper estimation of travel time, selection of easiest routes and avoidance of demanding traffic situations; and Self-examination: how driving attitudes and behaviour are shaped in order to address factors that put the driver at risk.

Vehicle control is presented as the foundation for attaining driving excellence; however, most drivers have built this foundation with their post-licensing driving experiences, which is failure prone. It is import-

ant for fleet operators to ensure performance levels are derived from proven safety practices. To continue improvements in driver safety performance, employees must provide opportunities to learn, practice and perfect capabilities in: • Situational awareness; • Sound decision making; and • Understanding of at-risk behaviors and attitudes.

Fleet drivers should engage in advanced performance driver safety training and coaching. Factors determining the types of training and coaching include job tenure, geographical conditions, vehicle types, driver risk categorization based on traffic violations, telematics, crashes, etc.

The Network of Employers for Traffic Safety (NETS)1 recommends drivers should cycle through classroom and behind-the-wheel (BTW) courses so that their driving capabilities are brought up to safety performance standards. NETS also recommends drivers receive similar refresher courses every two-tothree years if the BTW course is supplemented in subsequent years by e-learning. Other potential training methods can include: • Online, topic-specific driver safety lessons; • Online micro-lessons (Three to four-minute safety tips); • Safety newsletters; and • On-road coaching.

Tenured drivers’ performance should also be monitored so reme-

dial training or corrective actions can be assigned if there’s a deteriorating trend or jump in risk level.

Sources of risk data can include traffic violations, crash reports, telematics, fleet safety compliance infractions and more. Equally important is the ability to perform driver assessments. Some examples of this are ride-along reviews and online skills, behavioral and psychometric evaluations.

A documented case study2 involving a fleet of 5,000 drivers reflected an employer’s journey as it introduced its first formal fleet safety training policy. The early success, starting with behind-thewheel training for new-hire and high-risk drivers was so significant that the company revised its policy and mandated all employees driving a company vehicle complete a one-day, BTW safety course.

Drivers also received online training to support what was learned.

The company’s crash rate fell by 41 per cent after a three-year cycle.

A continuous training program remains in place.

There are many training protocols and risk assessments which can be implemented to improve drivers’ safety performance and lower a fleet’s crash rate. Fleet operators must determine what fits their culture and budgets, implement a plan that connects risk-level identification with the proper training assignments, communicate the company’s plan and commitment to safety, reinforce this message and adhere to the process outlined in the company’s driver safety plan.

Fleet operators can benefit from implementing resources that automate oversight and compliance with their driver safety plan including a collection of driver risk data available from multiple sources.

In many cases better efficiencies can be found from leveraging the services of safety and risk management providers that specialize in this field. Following such a plan saves lives, keeps families whole, protects an employer’s reputation and can lead to a significant return on the investment. FM/SP 1 NET’s Guide to Driver Safety Training™ 2 Driving Dynamics Client Review

FM/SP SUPPLY PROFESSIONAL

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2019-04-15 10:44 AM

ADOPTING A GAMECHANGER Auditable, encapsulating an unchangeable record of every transaction, movement and status along a product’s journey to satisfy the demands of regulatory compliance.

Real-time, delivering instant tracking capabilities compared to the days required by current systems.

location, time, temperature, oxidation and more.

Since every piece of data on a blockchain is recorded in real time, shippers can deliver instant tracking capabilities compared to the more manual, paper-based processes of the past, in which the need for time-consuming research, emails and faxes between the manufacturer and the vendors after an incident would occur.

With blockchain, all that is necessary is to look up a serial number and the entire chain of custody and all related product data is instantly available.

Greater visibility afforded by IoT also means misplaced shipments can be more easily located by accessing the last known location in the system. All this enables carriers to provide better, faster service to customers and more cost-effective solutions for supply chains.

It is no secret that blockchain is indeed poised to disrupt the supply chain as we know it. The key to future success for freight forwarders lies in embracing these nextgeneration disruptive technologies like IoT and securing it with blockchain solutions in order to move forward into the digital realm.

KEY CONSIDERATIONS There are two core considerations that are required for blockchain to succeed. First, whereas blockchains in the financial market tend to be public blockchains that anyone can join and access, those in the supply chain should be private and permission-based, where only sanctioned members would have access to the data.

Second, consider that disruptive technologies like IoT can enable warehouse data and shipment information to be accessed on smartphones or tablets in real-time. Real-time updates mean that data is always current, eliminating confusion and redundancies. The blockchain should therefore rely on effective serialization coupled with IoT sensors to track product shipments throughout their journey.

These sensors can record any desired data:

INCORPORATING BLOCKCHAIN With such an array of benefits, it can be tempting to assume that blockchain can and should be used for anything and everything.

Strategizing your use of blockchain, however, is crucial. If you have processes that are performing well for you, there may be no need to replace them with blockchain technology.

Trust what is working.

Some of the areas where blockchain has been demonstrated to deliver value include: Supply chain management, where multiple parties must interact seamlessly with one another, and where failure at one point can impact the product and the bottom line. For instance, the average medicine is transferred between nine or 10 vendors from the time it leaves the manufacturer to when it reaches the pharmacy. Currently, the information on

WHY BLOCKCHAIN IS CRITICAL TO SUPPLY CHAIN To say that business is undergoing significant change in the 21st Century does not do justice to the chaotic upheaval and breakneck speed that freight forwarders must fight to keep abreast of in an already hectic industry.

In many cases, technology is presented as one way to manage the burgeoning demand, embodied in automation, artificial intelligence, machine learning, biometrics, blockchain, and the Internet of Things (IoT). However, at first, these technologies can contribute to the confusion as businesses strive to understand, implement and benefit from them. Perhaps none of these technologies brings as much potential, yet sows as much confusion, as distributed ledger technology, commonly referred to as blockchain.

Few would argue that the use of blockchain presents a unique opportunity to help the cargo industry address their IoT data shortcomings.

Blockchain is quickly becoming a recognized game changer for the supply chain. The attraction is readily apparent. A blockchain, by its very nature, is: Encrypted, providing incredibly high levels of protection against hacking. To date, a blockchain has never been breached.

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ILLUSTRATION BY ANGELICA YIACOUPIS

BY DHEERAJ KOHLI

shipments is scattered between all of these actors, making it very difficult to track the source of an incident that either destroyed the drug’s efficacy or enabled it to be sent to the black market. If all members of the pharmaceutical supply chain are sharing a blockchain, then any deviations can be immediately identified and resolved without endangering the public.

Financial transactions, in which establishing and maintaining trust among companies and consumers is critical. In the developing world, many people do not have access to a bank and therefore have no credit history. This means that, even though they may have the initial money needed to start a business, they cannot

receive a loan because there is no record of their reliability in the financial system. Blockchain can be used to enable people who would otherwise not have access to a bank to open accounts, create a credit history and receive the loans they need. This enables economic growth on a large scale in areas that need it most.

Compliance with national and global regulations, as the combination of immutable records on the blockchain and business logic executed through verifiable smart contracts will ensure that business is being conducted in alignment with legal standards. This ensures that companies will not face fines for violating the law and enables transactions to be conducted more quickly and with greater transparency.

ILLUSTRATION BY ANGELICA YIACOUPIS

Dheeraj Kohli (Dheeraj. kohli@unisys.com) is VP and the global head of travel and transportation for Unisys Corporation.

The blockchain should rely on effective serialization coupled with IoT sensors to track product shipments throughout their journey Not surprisingly, blockchain holds significant promise for IoT, where it can record data from countless devices, sensors and other endpoints. Similarly, Blockchain enables “smart contracts”—self-executing contracts with the terms of the agreement between buyer and seller directly written into lines of code.

In doing so, contract participants can come to a common agreement on what defines a successful transaction and then execute when agreed upon metrics are met.

When looking to begin your blockchain initiative, it is best to start small. Identify a project that will generate a return on investment in the shortest amount of time. An eight-to12-week engagement that proves the ability of blockchain to solve a key tactical or strategic issue is appropriate for a proof of concept (POC).

This allows you to become comfortable and familiar with the technology and delivers a “win” for your business without committing too much in the way of time and resources. A successful POC can be expanded into the pilot phase in which the system is iteratively improved upon to ensure that it continues to deliver value.

Another key consideration when deciding whether or not to implement a blockchain platform is the long-term ramifications that this may have on the relationships that IT must create in order to be successful. As an example, the implementation of smart contracts may require the advice of the legal team to ensure that the technology meets federal and international law. Also, moving from a centralized to a decentralized system will bring with it the need to rewrite governing processes that could impact workflow and supporting infrastructure.

Blockchain is poised to disrupt the global supply chain as we know it. The hurdles can and will be overcome, though it will take the consolidated effort and cooperation of stakeholders across the supply chain—beyond the IT expertise required to address the complex programming involved. SP SUPPLYPRO.CA 43

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Canadian Aboriginal and Minority Supplier Council

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CROSS BORDER

B2B FORUM Windsor

June 4, 2019 Caboto Club 2175 Parent Ave., Windsor, Ontario

Meet with a wide range of suppliers serving the automotive sector in Canada and the USA. Forum Sponsors:

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CELEBRATING THE ACHIEVEMENTS OF OUTSTANDING WOMEN IN CANADIAN SUPPLY CHAIN In celebration of its 100th anniversary and to honour outstanding women in the profession, the Supply Chain Management Association (SCMA) released its first-ever list of 100 Influential Women in Canadian Supply Chain.

This list represents a diverse and powerful group of women. They are achievers in Canada’s supply chain sector, key contributors to the success of their organizations, and role models for others in the profession.

“Individually, each of these women plays a critical role in driving value for their organizations, and, collectively, these 100 leaders are truly driving the Canadian economy,” said Christian Buhagiar, President and CEO, SCMA. Additionally, the Women to Watch in Canadian Supply Chain list recognizes women who have positioned themselves as leaders in the profession and are poised to continue growing their impact.

SCMA.com/IWD2019

Dorothy Jakovina, publisher Supply Professional Magazine, named among the most 100 Influencial Women in Canadian Supply Chain

CONGRATULATES THESE WOMEN FOR THEIR CONTRIBUTIONS TO CANADA’S SUPPLY CHAIN COMMUNITY!

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IN THE FIELD—BY DENIS SANCHEZ

THE CULTURE OF SUCCESS ORGANIZATIONAL CULTURE AND CONTRACTOR PREQUALIFICATION The increasing reliance of firms on their supply chain has contributed to supplier and contractor selection becoming a strategic procurement function.

Contractor prequalification has been recognized as having a direct impact on supply chain integration, operational performance and the contracting firm’s competitive advantage. Contractor prequalification is people driven, whose behaviours and interactions are influenced by organizational culture. This influence extends cross-functionally—within the contracting organization—and externally to the supply chain.

One area of interest regarding organizational culture studies has been its influence on organizational success, effectiveness and performance. Since organizational culture drives employee attitudes and behaviours, it affects the way we interact and which initiatives we support. Culture is a key element in the success or failure of new corporate initiatives and technical innovation. It also impacts how companies configure their processes and procedures. It influences how teams work with each other to support goals and objectives, which values and principles drive business functions and, ultimately, how business is conducted internally and with customers, suppliers and other third parties. The effect of organizational culture is not limited to the firm but also impacts customer and supplier relationships.

Cultural strength drives organizational effectiveness. It fosters internal communication and alignment of corporate goals and objectives, creating a crossfunctional working environment.

Strong company cultures are associated with consistent employee behaviour, which promotes better organizational performance.

This depends on which cultural

traits prevail. A strong company culture with adherence to internal processes and procedures may drive consistency, but it can lead to groupthink and adversity to new ideas. This stifles creativity, innovation and the ability to respond to customer and market changes, it can impede sales and marketing and negatively impact market share in the long run. When it comes to culture, balance is key.

CULTURE AND SUPPLY CHAIN The link between organizational culture and supply chain integration is well documented, however there is limited evidence of cultural studies made on Canadian companies that have implemented contractor prequalification programs. I have seen many companies fail to look at their readiness for it. We studied companies that had designed and implemented these programs in the past 10 years and surveyed stakeholders to understand the cultural traits and profiles of their organizations. The companies studied varied in industry and all had operations across Canada.

The most common organizational culture profile was a company focused on competitive action, where goal and task accomplishment are critical (rational culture) and supported by adherence to policies and procedures (hierarchical culture) and managers’ guidance to help employees have positive performance (team culture).

These are positive attributes when implementing a contractor prequalification program because they help establish the procedural framework, management involvement in guiding compliance and attention to KPIs. The balance achieved by the combination of the three more predominant culture

types is positive to contractor prequalification. Rational cultures encourage people to work together internally and externally with their various partners like contractors.

Team cultures drive the values of teamwork and cooperation, which complement those of rational cultures, internally and across the supply chain. Hierarchical cultures’ focus on control and compliance are positive ingredients to supply chain integration when present in conjunction with other culture types to form the organization’s cultural profile. Through a balance of these cultural traits, the companies sampled were able to leverage their culture to drive success.

Other companies sampled identified risk taking, focus on innovation, and flexible structures, as characteristic of their organization. These are developmental culture traits and critical assets. Much like supply chain integration in general, contractor prequalification requires cooperation and investment from supply chain partners, which is why companies that focus on short-term goals and quick wins have difficulty achieving supply chain integration, whereas those that recognize that the hurdles of an implementation are part of the path to achieving long-term strategic goals are more willing to work together despite any setbacks along the way.

As managers design and implementation a new prequalification program, it is important to examine their organizational culture, how it compares to other companies that have implemented similar programs and how it can be leveraged to support the implementation. The learnings gained from this process generally benefits many other corporate initiatives. SP

Denis Sanchez, MSc, MA is owner and president of Decan Consulting Ltd.

“ Since organizational culture drives employee attitudes and behaviours, it affects the way we interact with each other and which initiatives we support.”

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THE LAW—BY SUSAN LAWSON

GETTING TO HAPPY EASY STEPS TO CONTRACT NEGOTIATION SUCCESS When it comes to contract negotiations there is good news: the process can likely be done in just a few steps. But there is bad news too: the negotiation is not likely to be easy. During the process, if the bigger party is going to force the smaller one to accept the contract, it’s easy for the bigger party, and the contract is done in a single step, which amounts to “take it or leave it.” After all, the only thing that matters is that a contract is in place, right?

Well, let’s analyze that. In this scenario, we can presume that the bigger party is happy because they have a contract that contains all the terms their lawyers say they need. The smaller party is happy because the contract is in place so, presumably, they have some work.

Everyone is happy without the need for negotiations.

But what does a good contract look like? Shouldn’t the contract reflect the nature of the business relationship and what one party can realistically expect of the other party if something goes wrong?

We can put it this way, if the momand-pop shop that supplies all your widgets at rock bottom rates will indemnify you, their big customer, for whatever happens you should be happy, shouldn’t you? If something does go wrong, that big customer could shut them down in one fell swoop—contract success. And, on the flip side, the huge supplier that supplies the hard-to-find widgets and won’t agree to anything other than taking a defective widget back (as long as the customer pays for delivery), that big supplier will get off scot-free no matter what damage they cause.

But that is just how it is. The lawyers for the big companies won’t agree to anything else and small companies don’t want to push back and lose the work with the big customer.

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SIMPLE STEPS Let’s go back to those easy steps (just four of them) and see if that gets us to a different place.

Step One: Figure out what business are you doing together. Why does that matter, you ask? Isn’t a contract just a contract? Let’s look at our mom-and-pop widget supplier.

In this scenario they make a widget we use in our everyday work. It is essential, and if we don’t have it our work stops. If something goes wrong the mom-and-pop shop needs to be responsible. But that small guy can’t take on the financial responsibility for all your losses. So, you can get your indemnity, but it would likely be worthless, they wouldn’t have the money to pay big customer losses.

So how else could we approach this contract? Maybe we should look at why we are dealing with them. The mom-and-pop shop manufacture the widget at rock-bottom prices and take all the manufacturing risk (building, equipment, staff and so on). If something goes wrong what can the big customer realistically expect from the momand-pop shop?

Now we are cooking. If those widgets don’t show up on time and it is the mom-and-pop shop’s fault (and not a worldwide shortage of widget materials or because the customer changed the design at the last minute) they are going to pay.

For what? For all the costs the customer will incur as a result of the delay—having another shift on or a late shift on to accept the late delivery and so on. That is going to hurt. And why is it fair? Because it was the widget maker’s fault, and if they aren’t held responsible, we might have a sloppy widget maker on our hands. Better yet, if they know specifically what they are responsible for maybe it won’t happen.

Step Two: This step involves “the

talk.” The widget maker and the customer need to be able to talk about the tangible implications of the contract. Maybe before the contract is signed, if the customer lets them, the mom-and-pop shop will tell them that to keep their costs low (which the customer really likes) they rely on one widget material supplier and two people in the shop who make those widgets night and day, and that is the only way they make a profit.

Step Three: Analyze the risk. The customer wants to keep their costs low and likes the quality of the widgets the mom-and-pop shop produces. From the talk, they see the risks and have agreed to a communication plan and the customer is going to stockpile some widgets to manage the risk. And you could carry on—maybe you are going to agree on what will realistically happen if you receive defective widgets and so on.

Step Four: Sign that contract with some mutual understanding of the deal you have entered into.

In our example above, the parties are dealing with narrow margins for error and can decide how to manage that, or not.

So there, four steps and you are on your way. Negotiations may not be easy, but they should be the foundational stone of any longer-term contractual relationship. SP

Susan Lawson is a lawyer and owner of the law firm Supply Contracts Simplified.

“ Negotiations may not be easy, but they should be the foundational stone of any longer-term contractual relationship.”

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2019 SCMA

NATIONAL CONFERENCE AND AWARDS GALA

MAY 29-31, 2019

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JOIN HUNDREDS OF LEADERS IN MONTREAL AT CANADA’S MOST IMPORTANT SUPPLY CHAIN EVENT OF THE YEAR. Develop your network with supply chain professionals and organizations already registered for the conference such as: Bayer, BHP Billiton Canada, Challenger, High Liner Foods, Home Hardware, Irving Oil, KPMG, Michelin, OPTEL Group, Rio Tinto, SAQ, Scotiabank, and VersaCold Logistics Services.

HEAR FROM SUPPLY CHAIN VISIONARIES

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NEW THIS YEAR! All non-member registrations for the conference also include a one-year SCMA membership.

Ramesh Chikkala CELEBRATE THE ACHIEVEMENTS OF SCMA’S 2019 FELLOWS: Madeleine Paquin, President & CEO, LOGISTEC Corporation Robert Wiebe, Chief Administrative Officer, Loblaw Companies Limited

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Fellow Awards Gala Dinner, May 30

PLUS Join us as we honour SCMA’s first-ever 100 Influential Women in Canadian Supply Chain and Women to Watch in Canadian Supply Chain !

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