Supply Professional December 2019

DECEMBER 2019

ALL IN THE FAMILY Adam Pernasilici and the allure of transportation Guarding against procurement fraud

Supplier relationship management Evolving payments Facility retrofitting Canadian Truck King Challenge

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VOL.61 No.6 DECEMBER 2019

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SUPPLYPRO.CA COVERING CANADA’S SUPPLY CHAIN

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COVER: TREVOR BOOTH PHOTOGRAPHY

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FEATURES 8 STRIVING FOR EXCELLENCE Disruption in the vendor management office.

10 A FAMILY AFFAIR Adam Pernasilici on the pull of the transportation industry.

22 ALL ABOUT LOGISTICS Highlights from the Canada Logistics Conference 2019.

ALSO INSIDE 24 OUT WITH THE OLD? Energy efficiency through retrofitting.

26 KEEPING IT ABOVE BOARD Tips for fighting procurement fraud.

28 EVOLVING PAYMENTS A new study looks at alternative payment solutions.

4 UP FRONT 5 BUSINESS FRONT 6 FINANCE CORNER 29 IN THE FIELD 30 THE LAW

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Fleet Managment

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UP FRONT

THE RACE TO ZERO A recent UN report offers what the media love to call a “bleak picture” of the earth’s climate crisis. Entitled “The UN Environment Program (UNEP) 2019 Emissions Gap”, the report says that the commitments of countries to limit the crisis are nowhere close to sufficient to stave off looming record high global temperatures.

Delaying further action will make limiting those temperatures impossible, the report concludes. As it stands, current actions won’t keep those temperatures within the 1.5 to 2 degrees Celsius range deemed “safe” enough to avert devastation.

What’s more, in the face of years of global attention to the situation, 2018 saw record-high greenhouse gas emissions. If drastic measures aren’t taken, temperatures are expected to rise 3.2 degrees Celsius by 2100. To return to a 1.5-degree increase, countries must commit to a five-times reduction in GHG emissions compared to what the 2015 Paris climate accord outlined, the UN report says.

Bleak stuff indeed. But supply chain and procurement can play a major part in curbing emissions. A 2017 report from Clean Energy Canada, entitled “The Power of Procurement: How governments can drive clean growth, cut carbon and create jobs”, highlights public procurement’s influence in the matter. For instance, government purchasers can use push policies to steer procurement organizations towards cleantech.

This would add up to a meaningful amount. Procurement accounts for close to 33 per cent of federal government expenditures - just over 13 per cent of the country’s GDP. Of course, the supply chains and business activities of private organizations play a vital role as well. Many companies have already set impressive goals towards lowering emissions.

Amazon, which until recently had resisted calls for environmental transparency, is a high-profile example. The shipping giant recently announced plans to track its carbon footprint and release a carbon report.

The company has also announced Shipment Zero, its plan to have 50 per cent of all deliveries reach net zero carbon emissions by 2030. As another example, Burberry has set reduction targets for its extended supply chain to 30 per cent by 2030. It’s the first such target for the luxury retailer.

Nestle is another one. In September, the company announced intentions to achieve zero net GHG by 2050. Nestle is working to launch more environmentally friendly products, pushing for 100 per cent renewable electricity and partnering with farmers to restore land.

These are major companies with major resources. But measuring and reducing emissions will be easier for companies of all sizes as they gain experience and calls to reduce output grow stronger.

And while some of these targets are years or decades away, there are immediate benefits to cutting emissions. Along with reputation protecting benefits, greener policies help to build an organization’s culture through the shared pursuit of a worthwhile cause. Those benefits alone can make the fight for a sustainable planet worthwhile.

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 SALES REPRESENTATIVE FARIA AHMED 416-441-2085 ext 106, faria@supplypro.ca EDITORIAL ADVISORY BOARD LORI BENSON Procurement Compliance, L&D, Engagement and Knowledge Lead | Business Enablement, Ernst & Young LLP THOMAS HUDEL Manager, Purchasing and AP, Esri Canada Ltd. WAEL SAFWAT Procurement Director, Black & McDonald SHERRY MARSHALL Senior Manager, Meetings, Travel & Card Service, PwC Management Services KIRUBA SANKAR Director, Corporate Social Responsibility—RBC Global Procurement JEFF RUSSELL Purchasing Manager, ABS Machining 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.

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BUSINESS FRONT—BY MICHAEL HLINKA

UNIVERSAL BASIC INCOME A NEW WAY TO MEASURE ECONOMIC WELL BEING If you’ve been following the US political scene, you may have heard of Andrew Yang. He hopes to be the Democratic nominee for president, which means that if he were successful, he’d be going head-to-head against Donald Trump next November. What has distinguished Yang’s campaign is his call for universal basic income or what he calls the freedom dividend. Every American 18 or older would receive a monthly check in the amount of $1,000, no questions asked, which amounts to $12,000 per year. A couple would receive a combined $24,000, which is enough to live on in most part of the US and very close to the poverty line which for a family of four currently stands at $25,750.

It’s an interesting idea from a deep thinker (the fact that he thinks deeply about issues almost guarantees that he won’t be elected). From listening to Yang, part of the motivation for the plan comes from his understanding that the ways that we measure economic well-being don’t capture anything particularly meaningful.

We tend to look at gross domestic product (GDP) or more precisely GDP per capita. That means the more we consume, the better off we are. And perhaps once upon a time, when we were a manufacturingbased economy, this could have had some significance. But not so much anymore.

MEASURING PRODUCTIVITY I teach at a school for a living. I am a full-time tenured professor at George Brown College and teaching is a service. My contribution to GDP is measured 100 per cent by how much I’m paid. This means that if I receive a two per cent pay increase, then I’ve become two per cent more productive. This is, of course,

silly on the face of it. A more sophisticated and realistic measure of my productivity would be to chart the number of classroom hours, adjusted for the number of students in the room. In other words, if I taught for 12 hours and had, on average, 40 students one year, and then 10 hours of teaching and 50 students the next year, we could meaningfully say that I was approximately four per cent more productive (500/480). But that ignores the quality of my output which means it’s not particularly helpful either.

Back to Andrew Yang and his argument about economic wellbeing and the curious connection between his world view and Donald Trump’s. I believe that when Donald Trump said: “Make America Great Again” it meant one thing to his ideological foes and another to his supporters.

His enemies saw him hearkening to a return to the 1950s, where women and visible minorities were discriminated against and this was actually codified into the law. His supporters looked back nostalgically to a time when a middle-class man and one income could support a wife and household full of children. And those days are definitely gone.

But this still begs the question: how can we more perfectly quantify economic well-being? It seems to me that the best measure would be to calculate how much it costs for an individual or family to provide for basic necessities: food, clothing and shelter. Then we would figure out the median individual or family income and see what percent of that income has to be allocated to those basic needs.

necessities that would be excluded.

I would not include the cost of vehicles, even though owning a car is required for many North American families. I would not include the cost of mobile devices like smartphones, even though many would argue that it’s virtually impossible now to live without one. Except what we’ve seen over the years, is that the cost of products like these has increased at a rate much lower than inflation on the basic necessities I’ve cited previously, in particular food and shelter. Clothing prices have been coming down in real terms because of globalization.

That would be one measure.

The other metric I think we should look at is the number of hours spent working and commuting relative to the number of hours in the week. Right now, we calculate average work week, but we don’t consider the time it takes to get to work. And this can be significant in a place like Toronto, where many folks are spending at least a couple of hours a day getting back and forth to their place of employment.

I think that Yang would agree that these measures are better than GDP per capita. It doesn’t fully address what he’s concerned about. When he talks about universal basic income, it’s more than just about the money.

It’s about the freedom that this money would provide, and the safety net that would be provided to all Americans. And if we could actually quantify things like that, it would surely be a better way to understand economic well being than GDP per capita. SP

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

“ From listening to (Andrew) Yang, part of the motivation for the plan comes from his understanding that the ways that we measure economic well-being don’t capture anything particularly meaningful.”

PRACTICAL NECESSITIES There would be lots of things that could be understood as practical SUPPLYPRO.CA 5

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FINANCE CORNER—BY VINCENT AMANYI

SEARCH FOR SYNERGY THE KEY TO UNLOCKING PROCUREMENT’S FINANCIAL POTENTIAL The procurement department is by no means a limited operation.

Rather, it’s an enterprise enabler that’s fast becoming a revenue generator. Yet there’s often disparity among business units as to who internal clients are. To deal with this, best-in-class practice demands forming a working capital steering committee with one point of contact between procurement and finance/AP to enable target value within an organization.

The big picture concept is to enable excellent working cash flow. This can help to unlock a key driver of organizational health and operating efficiencies while eliminating or minimizing risk to the supply base or damage to relationships with vendors and suppliers.Adopting payment terms could be an effective strategic approach to unlocking the capabilities of diverse supply base.

The synergy between procurement and other business units plays a vital role in enabling efficiency.

The traditional role of procurement in firms retools the unconventional channel of managing operational support because some business requirements come in different forms, making it difficult to create value applying the same strategy across the board. An example could be regular testing of the market to understand the nature of changes, which could help purchasing develop a strategy of enacting an extended contract with suppliers or vendors as a result of executed contracts to stabilize the supplier base. Mature procurement organizations are in the race to develop a structured sourcing methodology to create value across the enterprise. The involves eliminating contact between 6 DECEMBER 2019

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business units and vendors, thereby leveraging multiple services or product supplies across business units. Sourcing strategy is a viable method of driving agile procurement systems through feedback engagement and knowledge sharing with vendors or suppliers to increase performance. Consolidating purchasing of different products or supplies could enact some form of discount pricing as cost avoidance.

The combination of cost-saving through pricing negotiation with vendors/suppliers and cost avoidance through testing the market could enable procurement operations as a revenue generator.

DISCIPLINED PROCESS A finance department’s ability to maintain a disciplined process in executing accurate cost management creates an efficient platform for an organization. This can translate into good predictive business operations. The standard payment terms of Net30 could help to unlock procurement cost savings, especially when dealing with a vendor or supplier with a tight cash flow. Suggesting variable payment terms will create value on two fronts, like Net15 -three percent of the total sum will translate into savings of three percent of the total sum if properly implented. For vendors or suppliers with a large cash flow, firms can propose Net45-90, giving the procurement operations deep pockets, especially if they have a good credit account with that vendor.

Procurement activities can establish a good interface to review multiple price lists from different suppliers to validate

best pricing, stock level and to capture lead times. A procurement operations review can check if there is an existing agreement to EOQ/volume pricing. The framework of economic order of quantity is based on the premise that more quantity translates to a price reduction. The execution of this process usually occurs in the procure-to-pay strategy.

RISING COMPLEXITY Front-end planning is needed to create synergy with the deliverables to achieve value for an organization. Due to the rising complexities of business operations, the current trend is to outsource procurement and focus on their core competency.

Procurement must be harmonized to enable value. That integration can create an agile collaborative platform that translates into financial value. Technology is the driver of information integration among stakeholders. This creates value, and firms are implementing enterprise resource planning tools so business units can enable procurement authorization requests in real-time by factoring all requirement aggregate.

Effective deployment of procurement operations can be a revenue generator if all the business operations and requirements are tied to a strategic goal when implementing a system.

The chief financial officer and other management team members must champion such a program in order to drive cost savings so that the procurement framework can help to deliver financial value. SP

Vincent Amanyi is commercial director at VGA Energy.

“ The ability of a firm’s finance department to maintain a disciplined process in executing accurate cost management creates an efficient platform for the organization.”

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BY SANJA CANCAR-TODOROVIC

A quick Google search offers a definition of a vendor management office (VMO) as a department within the organization responsible for supervising vendors during the lifecycle of the contract, and ensuring that they are compliant with their contractual obligations.

While this definition might have been accurate 15 or 20 years ago, I’ll argue that the VMO concept is ripe for disruption and transformation into the Vendor Management Centre of Excellence (VM CoE).

In an article published in Supply Professional last February, I wrote about the fourth industrial revolution (4IR), and the importance of having corporate culture powered by innovation and diversity of thought. Both are required to ride this wave successfully. We are at a tipping point—the gig economy is bringing new perspectives and technology, and while much of the 4IR is driven by the transformative power of technology, the people component of business will never go away. Understanding 8 DECEMBER 2019

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FIXING THE BASICS, ELEVATING THE SCOPE As a first step, I would encourage taking stock of current VMO practices to understand the state, gaps and a vision of what “good” looks like. With this knowledge, you can establish the VM CoE as a core competency with a consistent set of capabilities, tools, interaction models and enterprise framework/ methodology that ensure the organization is maximizing value and mitigating risk across the supplier lifecycle.

Create a comprehensive view of the key enterprise supplier/ vendor partner relationships across the organization to understand the state and begin assessing, evolving and standardizing vendor partner management practices inclusive of performance management, strategic roadmaps, risk management as well as relationship management.

Ensure that you have a pool of high performing talent focused on:

As a first step, take stock of current VMO practices to understand the state, gaps and a vision of what “good” looks like.

Relationship management and oversight • VM CoE needs to be a trusted partner and advisor to the organization. Building and maintaining executive-level relationships with internal partners and vendor partners can build that brand.

• Manage and administer vendor contracts in accordance with internal policies that meet internal legal, control, audit, compliance, risk and privacy mandates and security requirements.

• Strengthen the oversight of vendor partner performance, ensuring adherence to all contracted service levels, while evaluating the merits of contracts regularly.

• Develop, maintain and evolve vendor partner scorecards and dashboards. Having the penalties and awards attached to the scorecard ensures everyone has skin in the game. Money speaks volumes, and financial incentives are a sure way to ensure that everyone is highly motivated to perform during the lifecycle of the contract. As such, the VMO CoE needs to be an active participant in contract renewal negotiations and negotiations of vendor scorecards.

• Act as the ultimate escalation point for internal business partners in resolving vendor partner issues and lead the implementation of solutions.

• VMO CoE should, in partnership with procurement, lead the annual vendor planning sessions to identify and plan contract renewals and market strategies factoring in growth, market trends and vendor partner performance.

Financial management • Ownership of the vendor invoice/billing ensures procedures are followed and cost expectations are monitored to identify and resolve discrepancies.

• Involvement in internal financial planning, including budget forecast, ensuring a proactive view of changes to the contract or vendor partner performance.

Change management and leadership • Fostering a culture of innovation and continuous improvement is important. The VM CoE has

Business performance management • The VM CoE owns the vendor scorecards; including measuring, monitoring, managing and

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

a responsibility to empower vendors and the internal teams to identify opportunities for change; support the implementation of best practices and implement changes required to standardize processes and achieve consistency and efficiencies.

©123RF.COM/VECTORPECTOR

STRIVING FOR EXCELLENCE IS THE VENDOR MANAGEMENT OFFICE RIPE FOR DISRUPTION?

the landscape in front of us, it’s obvious the traditional VMO concept is no longer relevant, and its evolution into the VM CoE is not just a recommendation, but a necessity to address business delivery, reliability, quality, customer experience and the bottom line.

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reporting on delivery performance and quality against SLAs, MSAs, KPIs and evolving business needs.

• Collaborate with vendor partners to align on opportunities for quality and efficiency improvements and action plan to address gaps; implement solutions and manage costs.

©123RF.COM/VECTORPECTOR

Risk management • Be accountable for supplier risk and performance management by monitoring and ensuring vendor partner compliance to contractual and regulatory requirements.

• Maintain knowledge of business risks to identify controls that reduce residual risk levels and ensure action plans to address them.

• Have a “paper trail” (digital trail is preferred), and ensure there’s a robust documentation, tracking, monitoring and reporting system to capture trends, risks and exposures related to the services provided (including due diligence, customer impacts, and so on).

Leadership and talent development • Your team is your biggest strength. Technological advancements will never replace meaningful human interactions within business relationships.

Foster the growth of a highperformance culture within your team so that they can pass the same on to the vendor partners.

• Supplier engagement is vital, so building a relationship where vendor partners are informed, excited, engaged and committed to delivering the best talent is key.

CULTURE OF INNOVATION We must remove the stigma around procurement and vendor management as a department

Establishing a supplier diversity program not only strengthens brand, business and community recognition but also drives innovation and provides further opportunities to identify competitive suppliers where sales and new innovations go to die. A great way to do this, while driving the bottom line, is to establish a reciprocity program to identify revenue opportunities across business lines with existing and potential vendor partners.

• For existing vendor partners, ensure transparency in communications and strategize across the supplier lifecycle on new opportunities. Vendor partners can also be customers which can positively change the dynamic of your relationships, moving those relationships from one of vendor management to partnership management.

• For prospective vendors, develop an expectation that your organization is to be considered for the needs within the vendors’ organization that you can deliver.

Make introductions between your sales teams and the prospective vendors. Build relationships and engagement across your organization and vendors!

Foster a culture of innovation, not just within your VM CoE team, but with your vendor partners as well. Trust that your vendor partners are subject matter experts—if you empower them

to try new things they’ll often produce solutions to problems you didn’t even know you had.

Create a platform for vendor ideation; this can be part of your monthly business reviews, where vendors can share or try new ideas without fear of failure or the need to ask for permission. Your participation, feedback and support is required for this to work.

Celebrate small wins and even failures that resulted in valuable lessons. Encourage innovative thinking and an agile approach to implementation - fail small, fail fast, learn from it, improve and then try again. Embrace managed risk when innovating. Total risk avoidance is no longer a viable option for you.

Most important, recognize your most innovative vendor partners. Establish a vendor-partner innovation awards program to recognize top vendor partners whose innovative ideas have had a positive impact. Have a dedicated team managing this program’s framework, categories, evaluation criteria and so on. A program like this will create a culture of innovation and engagement through recognition, but it will also serve as an incentive for other vendors to start sharing their own ideas!

strengthens brand, business and community recognition but also drives innovation and provides further opportunities to identify competitive suppliers.

Although supplier diversity may be “the right thing to do”, there is something to be said for having a diverse and inclusive environment that facilitates a broader exchange of perspectives and better reflects the true makeup of our society and customer base.

But complacency is a trap.

We don’t have the luxury of time, money or resources to continue getting the same thing we were getting over a decade ago. What we knew back then is no longer relevant.

The traditional concept of VM is ripe for disruption, and organizations interested in letting go of the old ideas, habits, values, beliefs and ways of doing business, are the only ones who will come up on top.

The above points are a good start to successful relationship management. But they are not the only ones and they are not static.

Be open to evolve, not just from VM to the VM CoE, but even past that. Change is the only constant in life, and those willing to embrace change will prosper. SP

DIVERSITY OF THOUGHT Diversity of thought propels new ideas, innovation and business forward. More often, organizations recognize the value of supplier diversity. Doing business with companies that share the same values and building a portfolio of diverse suppliers lets organizations create healthier communities and differentiate themselves with consumers.

Establishing a supplier diversity program not only SUPPLYPRO.CA 9

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BY MICHAEL POWER

ADAM PERNASILICI ON THE MAGNETIC PULL OF THE TRANSPORTATION BUSINESS Quite possibly, the transportation business has worked its way into Adam Pernasilici’s DNA. Or at least, he wonders whether his attraction to the industry is “somewhat genetic.” The business has been a family affair for the last three generations — Pernasilici’s grandfather was a truckdriver in Italy before immigrating to Canada. His father, Angelo Pernasilici, who is founder and CEO of Windsor-based Laser Transport, worked as a terminal manager at a dock operation before starting the business. As a child, the senior Pernasilici would hang around in front of a local grocery store, offering to help people transport their groceries home in a wagon for tips. The younger Pernasilici also caught the bug and has worked his way up to vice-president of the family business.

At the same time, the company itself has grown. Laser Transport started as a one-truck, two-employee operation in May 1985. Angelo drove the truck himself while his wife, Suzanne, helped with the backend work.

“I always knew that I wanted to be involved in the family business,” says Pernasilici, now 35. “I was never pressured, but there was something magnetic about it. I was always intrigued. I have always loved how dynamic our industry is. At any given time, there are so many moving parts that need to be aligned in order for us to be successful.”

Pernasilici grew up in Windsor where he played competitive sports. He left his hometown to attend school and was drafted by the Seattle Mariners baseball team as a high school player.

Ultimately, he decided to focus on his education, but still played intercollegiate baseball at the NCAA division one level. He attended Coastal Carolina University and Marist College in South Carolina and New York, studying finance before returning to Windsor and the family business.

“I was probably a pretty good player locally and an OK player at the college level, but I don’t think the prospects of ever turning professional were a significant reality for me,” he says. “It was a great dream and I chased it hard and I really, really enjoyed playing. It’s something that I wouldn’t trade. But ultimately, I think I made the best decision. I got a great education out of it and made some life-long friends. I always kind of knew that I was going to come home and do this.”

Pernasilici, CCLP, CITP, has now been involved in the family business for just under 20 years. At the beginning he would help around the terminal and his first few days involved cleaning up skids in the yard along with grounds maintenance. From there, he moved into the company’s service department and eventually into operations. He held several roles in that department, including intermodal,

MAKING THE LEAP It was during a turbulent period that Pernasilici made the jump from operations to a role in executive administration within the company.

In 2012, his father was in the process of not only buying out his business partner but also battling kidney failure at the same time. Luckily, despite the bumpy period, the outcome was positive. The takeover was successful, the senior Pernasilici received a kidney transplant from his wife, Suzanne, and their son became VP of operations.

Angelo had the transplant on July 4, 2012 and since then Laser Transport has adorned all their trailers with the “beadonor.ca” logo to raise awareness of the benefits of organ donation.

These days, the company runs lean at about 100 employees, and the junior Pernasilici has oversight of several areas, among them P&L, safety, recruiting, hiring and compliance. His former, more hands-on role he now refers to as ‘the weeds.’

“Moving out of the weeds for me was pretty challenging,” he says. “I loved operations, I loved sales, I liked being in the thick of

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TREVOR BOOTH PHOTOGRAPHY

A FAMILY AFFAIR

dry van and eventually into flatbed operations.

While agreeing that his son was never pushed to join the family business, his father Angelo notes that Adam took an early interest in the field. “I have to believe that osmosis played a role in the initial draw,” says Angelo.

“From an early age, Adam showed interest and took on all of the opportunities and challenges that were thrown his way.”

Overall, pride and a desire to move the business and industry forward are what motivates his son, Angelo says. A team player, Adam is passionate about improving the experience of drivers and their quality of life, his father notes. He is also resilient and works to tackle challenges head on. “On many occasions, I have seen him come out on the positive end of a difficult task due to his persistence,” he says. “When many people would have lost motivation, he continues to gather steam.”

TREVOR BOOTH PHOTOGRAPHY

We’ve worked very hard and are very proud of the strategy that we’ve put in place to create long term, meaningful employment in an industry with turnover ratios that typically exceed 80 per cent. things. The transition to strategy and strategic management is something I didn’t have much experience in.”

Pernasilici praises the team he works with, noting that many of the employees have stuck with the company over the past 20 years. The average tenure at Laser Transport is just under nine years, a statistic that includes drivers and owner-operators.

“We’ve worked very hard and are very proud of the strategy that we’ve put in place to create long-term, meaningful employment in an industry with turnover ratios that typically exceed 80 per cent,” Pernasilici says.

A typical day for Pernasilici starts with a walk around the company to chat briefly with employees from each division. Conversations highlight what’s happening, what’s running smoothly, and what challenges employees have encountered. The company’s philosophy, Pernasilici says, has always been to hire skilled people for operational roles rather than clerical positions. The goal is to minimize menial tasks like data entry so employees can focus on areas where their skills are most useful.

While Pernasilici doesn’t have a fixed schedule, he is able to maintain his passion for the industry and looks forward to each day.

Getting tidbits of information about potential new clients from the operations group as well as sitting down with his father to debrief are the two highlights of each day.

“He’s a wealth of knowledge,” he says about his dad. “The fact that I can walk across the office and sit down and discuss new business and have the opportunity to hear about how that may have come up in the past, what went right, what went wrong, that’s invaluable to me.”

His son has a deep appreciation for family life, Angelo says, and that focus has transferred to his role at Laser Transport. When Adam took over recruiting and hiring, he insisted on meeting each driver and simplifying the hiring decision with two questions: does the applicant show the professionalism needed to maintain the company’s image? And, is this someone that my SUPPLYPRO.CA 11

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family would enjoy associating with?

“Adam’s strategy, along with our platform, has helped create industry leading levels of retention and safety performance,” the senior Pernasilici says.

After his children are in bed, the younger Pernasilici spends most evenings in front of the computer reading about the industry. Keeping up to date with what’s going on provides a base from which to form decisions, he says. He also writes the occasional article for industry publications.

Pernasilici, who completed his CITTCertified Logistics Professional (CCLP) designation from CITT in 2017, notes that the reason he undertook the designation was that he realized the overwhelming competitive forces in the industry, compelling him to arm himself with as much knowledge and skill as possible. Trucking, specifically, has low barriers to entry and he could see competition popping up everywhere, especially in Windsor. The city is an ideal location for trucking and logistics, especially given its proximity to the US. “I asked myself, ‘what can these companies not do? What are they not able to do?’ For a lot of them, they’re struggling with startup issues, they’re struggling with retention.

They’re struggling with driver turnover,” he says. “I thought, ‘I need to start expanding my knowledge base. We need to start widening the service gap. We have to propel ourselves so much further above our competition that it’s not a difficult decision of who to go with.’”

Pernasilici describes himself as a challenge seeker, a characteristic that comes in handy in an industry like transportation. But he’s also clearly proud of the culture that Laser Transport has built over the years. “Drivers are at the centre of everything we do,” he says. “We’ve created a model that allows them to be home more. We have industry-leading levels of safety and retention. We’re accommodating, (we support) things that allow them to get to their kids’ little league games, recitals and graduations. Being a part of that is part of what gets me up in the morning.”

MENTORSHIP AWARD By far the proudest moment of his career came in October when CITT recognized him as a Mentor of the Year at the organization’s annual conference in Niagara Falls, Ontario, Pernasilici says. The award goes to a CCLP designation holder who shows “dedication to nurturing the professional growth and career development of a mentee and junior colleagues.” Jane Ayn Lyndon, CCLP, sales manager at Mactrans Logistics, was also recognized with the award.

Our industry is extremely challenging, it’s fast paced, it’s fast changing. You have to be ready for the quick changes that come about and be able to mitigate and accommodate and get back on track.

“I’ve always felt that I’d been afforded monumental opportunity in my life from many mentors,” Pernasilici says. “This award was recognition that I’ve taken my experience and used it for the advancement of our industry, and I’m very proud of that.”

An area in which Pernasilici acts as a mentor is in his role as an instructor at Windsor’s St. Clair College, where he’s taught since May. Last semester he taught transportation and trade while this semester he’s teaching leadership for global managers, a new course. The position came about after CITT asked him last spring to participate in a roundtable for moren than 100 people at the University of Windsor. The discussion focused on the future of supply chain, trends in the industry and essential skills for those looking to enter the field. The event went “incredibly well,” Pernasilici says, with students surrounding him after the discussion, peppering him with questions: ‘What can I do in supply chain? How do I break in? How do I know if I am on the right path?’

“For lack of a better term, that was really cool. I really, really enjoyed it,” he says. “The event got some press and I ended up getting an offer to teach transportation and trade at the local college.”

Teaching has completely altered the trajectory of his career, Pernasilici says. He focuses a significant amount of time on students’ futures and how they can break into the supply chain job market. They alone are in charge of their professional development, he tells them, and it’s an area they must focus on. “If it’s not a formalized education then you need to expand your knowledge base,” he says. “I encourage them to read something every day.”

While Pernasilici hasn’t yet mapped out his next professional step, his goal is to keep moving forward. His family’s lineage in the industry is a high bar to live up to, he says. But he’s committed to the challenge, noting that he wants his children to see the effort he’s putting in, just as he saw his parents’ effort and they saw the struggles that their parents endured.

Now is also an interesting time to be based in Windsor, Pernasilici notes. The Gordie Howe International Bridge connecting Windsor and Detroit, for example, will be a major catalyst for the region. The Windsor-Essex Development Commission, the Institute for Border Logistics and Security, the Windsor Transportation Club, the Port Authority of Windsor and others are working to develop talent, attract business, create mobility and infrastructure and are advocating for industry. “It’s a very, very exciting time to be in Windsor and I’d like to leave my stamp on that,” Pernasilici says. “The CITT award got some great visibility and I think that with great visibility comes some great responsibility. I’ve begun using my social media platforms to advocate for positive advancement in our industry. That’s also something that I’d like to move forward with.”

Along with his dedication to supply chain, Pernasilici finds time for cooking, golf and spending time outdoors. He’s very family focused and says he has “two incredible parents and a fantastic sister,” as well as an “incredibly supportive wife,” Laura. His son, Luca, is twoand-a-half and his daughter Lyla just turned five.

Pernasilici’s advice for supply chain professionals is similar to the guidance that he gives his students: everyone is in complete control of their professional development. It’s easy to get bogged down by the grind of a job or position, he says, but it’s still possible to take charge of one’s education regardless of employment situation.

“Being well-rounded and well-read allows you to contribute when the opportunity arises,” he says. “I think that’s very important. I encourage everyone to seek out knowledge, gain credibility, step out of your comfort zone once in a while and don’t ever close yourself off to opportunity. Our industry is extremely challenging, it’s fast paced, it’s fast changing.

You have to be ready for the quick changes that come about and be able to mitigate and accommodate and get back on track.” SP

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Fleet Management

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2019 Truck King Challenge And the winner is ...

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Road Test A look at the 2020 Ram ProMaster.

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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Driver safety Minimizing the risks to fleet drivers.

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

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

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Fleet Management

By Howard J Elmer

The Results Are In! The 2020 Canadian Truck King Challenge This year, the Canadian Truck King Challenge focused on testing the mid-size truck segment. As to the why? Well, we look at what’s happening in the truck world and test what Canadian truck buyers are most interested in as each model year rolls out. And, right now, the mid-size segment is exploding.

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Early this year we sent invitations to every manufacturer asking them to provide us with the relevant trucks; including the off-road versions, a market that we knew would be of interest to Canadian buyers. So, whether it’s the FX4, the TRD Pro, Rubicon, PRO-4X or ZR2 Bison, mid-size owns the off-road market.

The builders all know that we’ve been pitting new pickups head to head for 14 years now, and some of them responded enthusiastically to this year’s mid-size challenge. However, some turned down our invitation. Each had their reasons. What were they? Doesn’t matter really— their absence speaks for them.

Included here are the builders who did decide

it was important to compete and what they brought to the challenge.

The challenge is all about real-world testing.

In other words, we use these trucks the way you, the consumer, would. As we do each year, we enlisted the aid of five experienced judges to drive the trucks back-to-back on our test loop.

This year, with the mid-size truck capacities in mind we drove the Head River loop empty and then we did it all over again with 500lbs of payload in the beds. Finally, each truck towed a flatbed trailer loaded with 2,000lbs of concrete, giving each trailer a gross weight of 4,000lbs.

This ritual of back-to-back driving over the same 20-km test loop is what makes the Truck King Challenge unique. This routine gives each judge a chance to “feel” the differences in each truck as they drive over the same course, again and again. Over two very long days we manage to collectively drive more than 2,000km around this course.

There is always an off-road element to the challenge. But this year, because of the unique off-road trucks we had a chance to test, we spent significantly more time in the snow, mud and water.

Speaking of snow, we were dumped on with the largest single-day snowfall (for November 11) in 70 years, at least that’s what Environment Canada said. As I’ve said before it’s the Truck King Curse—we always get rained on during testing, but snow was unique. Though, it did make for some great off-roading video. That FM/SP SUPPLY PROFESSIONAL

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footage will be coming to our YouTube channel soon.

Also, of interest to consumers each year is our fuel study. Supported by Natural Resources Canada, we use electronic data collectors to measure fuel consumption during all aspects of our testing. What we offer is unique. Sure, we’ll tell you how the trucks performed while running empty—but we also do that analysis while the trucks are loaded with payload and while towing. Watch for the release of the 2020 Canadian Truck King Ch allenge Fuel Study in the coming weeks.

A word about our scoring. The final numbers are averaged from among all the scores submitted by the five judges. They are then converted to a percentage so we can offer a final score out of a possible 100.

Thanks to all who cared enough about their customers to participate. We are grateful for your support in our quest to bring meaningful real-world test results to Canadian truck buyers.

1. Chevrolet Colorado ZR2 Bison

Winner! 78.5 72.5 71.3 70.4 70.0

2. Jeep Gladiator Rubicon 3. Toyota Tacoma TRD Pro 4. Jeep Gladiator Overland 5. Toyota Tacoma TRD Sport

Toyota, with the oldest continuously built mid-size, the Tacoma, gave us two trucks. One for the street, the other off-road capable.

We always get rained on during testing, but snow was unique.

2020 Toyota Tacoma TRD Sport Exterior colour: Voodoo Blue Interior colour: Leather, black/grey Engine: Direct injection 3.5L DOHC V6 w/VVT-i Mechanical Features: Part-time selectable 4WD w/two-speed electronically controlled transfer case, automatic limited-slip differential, locking rear differential Transmission: six-speed manual Suspension: Rear leaf spring suspension, sport tuned bilstein shock absorbers Brakes: Front ventilated disc brakes, rear drum brakes Wheels: 17-inch alloy wheels Tires: P265/65R17 Total MSRP : $46,696.40 FLEET MANAGEMENT SUPPLYPRO.CA 15

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S:17"

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FCA’s Jeep brand gave us two versions of its all-new Gladiator pickup truck. Applying the same trim levels available on the Jeep Wrangler SUV—the new pickups were equipped as an Overland edition and the most aggressive off-roader—the Rubicon.

2020 Toyota Tacoma TRD Pro Exterior colour: Army Green Interior colour: TRD Pro Leather, black Engine: Direct injection 3.5L DOHC V6 w/VVT-I Mechanical Features: Locking rear differential, Part-time selectable 4WD w/two-speed electronically controlled transfer case, automatic limited-slip differential (Auto LSD), crawl control + multi-terrain select Transmission: Six-speed automatic Suspension: Fox shock absorbers Brakes: Front ventilated disc brakes, rear drum Wheels: 16-inch alloy wheels Tires: 265/70R16 Total MSRP: $58,096.40 General Motors sent us one truck, their newest and most capable midsize off-roader, the Chevrolet Colorado ZR2 Bison.

2020 Jeep Gladiator Overland Exterior colour: Billet Silver Metallic Interior colour: Black Engine: 3.6L Pentastar VVT V6 w/stop-start Mechanical Features: Heavy–duty engine cooling; fuel tank skid plate transfer case skid plate 2.72:1 Command–Trac part–time 4x4 system; Torx tool kit; 3.73 rear axle ratios–speed control; transmission skid plate; tip start, Trac–Lok anti–spin differential rear axle Transmission: Eight-speed automatic transmission Suspension: Five-link coil suspension design, Dana M210 front axle Dana M220 rear axle Brakes: Four-wheel ABS discs Wheels: 17-inch aluminum Tires: 33-inch off-road tires Total MSRP: $63,265.00 * (includes optional cost of; leather package; trailer tow package, cold weather group; LED lighting group; Uconnect 4C NAV & sound package; Safety Tec Group; Trail rail cargo system; Tonneau cover)

2020 Chevrolet Colorado ZR2 Bison Exterior colour: Satin Steel Metallic Interior colour:Jet Black Engine: 3.6L V6, DOHC WT Mechanical Features: Full-locking front & rear differentials, 4WD w/Electric two-speeed transfer case with shield Transmission: eight-speed automatic Suspension: Multimatic DSSV dampers, 50MM suspension lift Brakes: Four-wheel antilock disc brakes Wheels: 17-inch AEV aluminum wheels Tires: 31-inch Goodyear Wrangler Duratrac off-road tires Total MSRP: $60,295.00 18 DECEMBER 2019

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Exterior colour: Firecracker Red Interior colour:Black/Dark Saddle Engine: 3.6L Pentastar VVT V6 w/stop-start Mechanical Features: 4:1 Rock–Trac heavy–duty part–time 4x4 system 4.10 rear axle ratio; fuel tank skid plate transfer case skid plate heavy gauge rock protection sill rails Torx tool kit Power tailgate lock heavy–duty engine cooling; class IV hitch receiver; trailer hitch zoom; 240–amp alternator Transmission: Eight-speed automatic Suspension: Front FOX performance shocks; rear FOX performance shocks; Tru–Lok front and rear axles Dana 44 M210 wide front axle; Dana 44 M220 wide rear axle; electronic sway–bar disconnect system Brakes: Four-wheel ABS discs Wheels: 17-inch aluminum Total MSRP: $68,050.00* (includes optional cost of, leather package; trailer tow package; cold weather group, LED lighting group, Uconnect 4C NAV & sound package; Safety Tec Group; trail rail cargo system; Tonneau cover; Black Jeep Freedom Top)

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PHOTO: FIAT CHRYSLER AUTOMOBILES

2020 Jeep Gladiator Rubicon

Fleet Management

By Lesley Wimbush

Apart from the crowd

PHOTO: FIAT CHRYSLER AUTOMOBILES

The 2020 Ram ProMaster Cargo Van The last decade has been one of refinement for cargo vans. Where customers once had little choice but truck frames fitted with cube shells, there’s now an array of specialized vehicles to fit virtually every need.

We can thank the Europeans—such vans have been familiar there for decades and the Fiat-Chrysler merger helped bring this platform here. Thus, the Ram ProMaster was born and Canadians have bought 20,000 of them since 2013.

There’s plenty of competition, but as the only front-wheel-drive vehicle in the Class 2 commercial van segment, the ProMaster offers distinct advantages that set it apart.

A front-wheel-drive powertrain is lighter and less complex, and centres all components in the cab. Since there’s no need for a driveshaft and rear differential, it frees space for a low load-floor

and step-in height. Front-wheeldrive is inherently more stable in ice and snow. And, while most of its competitors are of a truck-like body-on-frame construction, the ProMaster is built on a lighter unibody platform, enhancing its comfort and handling.

There haven’t been many changes to the ProMaster. Last year it and its smaller sibling, the ProMaster City, got frontend redesigns that more closely resemble the big-rig fascias of the Ram pickup. Aside from an updated grille, the full-size ProMaster added optional black steel wheels, and revised bumpers.

Motion-sensing LED interior lights were added to the options roster, as well as steel-grated rear windows for regular models, and polycarbonate side windows can be had on high-roof variants.

New for 2020 is a factory installed trailer hitch with a max tow rating of 6,800lbs and the 136-inch wheelbase (which slots in between the 118-inch and extended 159-inch models) can now be had in 2500 standard roof and 3500 standard and high roof configurations. While the EcoDiesel was previously available as an option, there’s now a single powertrain for all ProMasters, the 3.6L Pentastar V6, with 280hp at 6,400rpm, and 260lbs-ft of torque at 4,400rpm. It’s mated to a six-speed automatic transmission.

The ProMaster’s form follows its function, from the slab sides that make it easy to affix a magnetic business sign, to the 260-degree opening rear doors, and rugged black plastic on the vulnerable front fascia—easier and more economical to repair than metal.

The low floor makes it a lot easier to load cargo—up to a maximum of 4,680lbs. The Ram ProMaster’s cargo area is designed to be “upfitter friendly” with available partitions, storage cabinetry, and up to 17 tie-downs.

The interior is equally utilitarian, with wide seats upholstered in heavy cloth, several cupholders and storage space overhead.

The ProMaster’s dash is steeply sloped, rendering it useless for cellphones or clipboards.

Standard on all models is backup camera, six airbags, keyless entry, air, UConnect with five-inch infotainment screen, Bluetooth, steering wheel audio controls and a USB port. Available options include navigation, rear parking sensors and park assist, alloy wheels, and Fleet Telematics.

Notable are the optional sliding doors, which makes it the only one in the segment with side loading.

The ProMaster is relatively easy to drive, with a tight turning circle. There are a lot of blind spots, particularly on those with partitioned cabins and no rear windows. The van would benefit from active safety features like blind spot monitoring, rear cross traffic alert and emergency braking assist. Forward visibility is good, thanks to its short nose and huge windscreen. The lack of a tilt steering wheel is an omission. But despite a few flaws, there’s a lot to like about the ProMaster. FM/SP FLEET MANAGEMENT SUPPLYPRO.CA 19

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Fleet Management

By Stephanie Wallcraft

Minimizing on-the-road risks to drivers Driver safety is a concept that doesn’t take long to become complex once its many facets come into focus. Experts consider the following aspects to be among the most pertinent ways that driver safety applies to fleet management. While no fleet safety plan is foolproof, incorporating these points into yours can make a difference.

Treat distracted driving as a serious concern. Bruce Brunsch, a retired police officer and collision reconstructionist, says that distracted driving is the single largest factor in modern-day incidents on the road.“Eighty percent of collisions are caused by driver inattention,” Brunsch says. “It’s all about drivers not being checked in while they’re driving.”

Distracted driving is often characterized as mobile phone use, but it can also extend to other tasks such as eating while behind the wheel or even adjusting an on-board radio or infotainment system. Adding zero tolerance for distracted driving to a fleet’s safety policy is well worth considering, though some fleet operators may choose to take this a step further and actively monitor driver behaviour.

“Without knowing what happened, it’s sometimes difficult to be able to change that behaviour or coach the rest of your drivers,” says Sherry Calkins, vice-president of strategic partnerships for fleet telematics provider Geotab. “We 20 DECEMBER 2019

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have an add-in tool called accident reconstruction (that shows) exactly what happened, second by second, for 100 seconds leading up to a crash. It gives us a lot of context behind what happened and allows that safety manager or supervisor to understand. They obviously didn’t have their brakes on at the time, therefore they weren’t paying attention. (Driver-facing) cameras, too, are a big help.”

Manage driver fatigue. A lack of rest and sleep can put drivers into similar rates of impairment as alcohol and drugs, says Mike Harnett, president of consulting firm Solaris Fatigue Management.

“Impairedness is directly tied to how long we are awake,” Harnett says. “After 17 hours of wakefulness, an individual is the equivalent of .05 percent BAC (blood alcohol content). At 21 hours, they are at .08, and at 24 hours, .10.

“If a driver is behind the wheel, either of their truck or their personal vehicle driving home, they

are at significant risk.”

Fleet drivers may also be losing sleep due to sleep apnea— undiagnosed at rates as high as one in every three professional drivers, Harnett says - which is exacerbated by shift work and sedentary lifestyles.

Get some shuteye

Harnett says that employees are responsible for getting enough sleep and managing any medical disorders they may have, but employers have an obligation to provide education and mitigate fatigue risk associated with nighttime and shift work.

Nighttime driving has a 30-percent increase in risk compared to daytime driving, and 12-hour shifts have a 27 percent increase for something to go wrong compared to eight-hour shifts, Harnett says.

“We’re not saying that you can’t drive at night or have extended hour schedules,” Harnett says.

“But recognize where the risks are

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The fleet safety plan

and then put strategies in that will help mitigate the risk. Many of our schedules have built-in incentives to work long hours or several shifts before taking time off. Employees need to understand the impact of their decisions on health, safety and performance.”

Monitor for and correct other unsafe behaviours in real time.

More traditional safety risks such as speeding, hard braking and not wearing a seatbelt are ongoing risk factors for which fleet managers should diligently monitor.

“We want to be able to point out when they’re not driving according to policy standards,” Calkins says. “If the driver doesn’t have their seatbelt on, I would want the (telematics) device to be able to alert that driver. The device continues to beep until that driver changes that action.

“Although they know they’re doing something wrong, they don’t know exactly what that buzzer is trying to tell them at that moment.

We have a solution called GoTalk that is text-to-speech … when a driver doesn’t have the seatbelt buckled, you could have that device actually get spoken words to that driver telling them, please buckle your seatbelt. The same type of rule can be applied for speeding and harsh braking.”

Reward positive habits.

Monitoring behaviours reveals repeat offenders, but it also highlights drivers who follow the rules and take responsibility for their own safety. Rewarding these drivers and making an example of them can encourage better behaviour from others.

“Sometimes (fleet managers) use the gamification approach to try to get drivers to stay in that high score green zone,” Calkins says.

“Sometimes there are monetary awards to having a good score.

Putting the power in the driver’s hands, whether through a mobile app or a report they get by email … (drivers) trying to be that number one, always trying to be in the green, I think is important.” FM/SP FM/SP SUPPLY PROFESSIONAL

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

SUBARU

BEST RESALE VALUE OF ALL MAINSTREAM BRANDS

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5 years in a row

2020 ASCENT

2020 LEGACY

2020 CROSSTREK

2020 OUTBACK

©123RF.COM/ ANDREA DE MARTIN

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

2020 IMPREZA

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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. 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. 2. 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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BY MICHAEL POWER

ALL ABOUT LOGISTICS

CANADA LOGISTICS CONFERENCE 2019 HIGHLIGHTS Focusing on areas like technology, robotic fulfillment and material handling, cannabis logistics, trade policy and even emotional intelligence in logistics, the Canada Logistics Conference offered guidance for almost every facet of supply chain. Shippers, carriers, 3PLs and ancillary services providers gathered in Niagara Falls in October to network, learn and enjoy the view of the falls during the event, hosted by CITT. Technology’s impact on supply chains and transportation was highlighted in the opening panel discussion, Emerging Technology’s Influence on Transportation Buying Trends: The Digital Effect on the Consumer Market, moderated by Scott Shannon, VP—North American surface transportation, at C.H. Robinson.

“As industry experts, we understand that the value creation of supply chain is significantly impacted by technology,” Shannon told the audience. “This would be true from a shipper perspective, a carrier perspective as well as other providers like 3PLs. But it doesn’t end there, technology is significantly impacting industry verticals. The one we hear the most about is retail and e-commerce. That’s having a significant impact on order cycle times as well 22 DECEMBER 2019

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as the position of inventory.”

Panelist Dave Brajkovich, chief technology officer, Polaris Transportation Group, outlined steps the company has taken to adopt technology. One venture was creating a company, NorthStar Digital Solutions, within Polaris to digitize its platforms. The new company’s first step involved integration, including placing most of its services and hardware outside its perimeter. “Maintenance is a lot lower, performance is a lot higher, costs have decreased and we’re starting to see a better way of integrating with our partners and our clients,” Brajkovich said.

Connectivity and support have improved to make it easier for partners and clients to connect with the company. Clients can now give information to a “bot” and the data enters the system to provide the client with answers.

Fellow panelist Andrew Midwinter, director, logistics at floor and wall covering distributor Gesco, also said his company has invested in technology. Gesco has, for instance, implemented a warehouse management system, an inventory and forecasting replenishment system, a data analytics platform as well as other applications, Midwinter said. “Without data and without the ability to analyse your volumes and

your costs, you’re relying on numbers on a rate sheet to determine your success,” he said.

For his part, Shannon noted there’s a “great hunger for more technology solutions,” with shippers pressured to improve end-user experience while also creating efficiencies.

According to the company’s research, most supply chain decision makers believe technology can help to enable that process, he noted. But technology should be created by and for supply chain experts, and many carriers note that industry experts play a major role.

Fellow panelist Steve Raetz, director, research and market intelligence, C.H. Robinson, broadened the scope of data sources to include transactions associated with transportation, purchase orders, as well as social media, weather, traffic and so on. All these influence the fluidity of today’s supply chains, he said. The company has a visibility platform that not only aggregates data but sweeps social media for information on road closures, storms and other factors that could impact the movement of goods. Data science and predictive analytics could then help to determine the probability of disruption.

“This is the future,” he said. “How do you do more with less? How do you minimize disruption? How do you bring inventory levels down? How do you speed up the flow of goods?

How do you create transparency into all your disciplines in the supply chain? We’re on the verge of some of the most exciting things that this industry has only ever dreamt about.”

In an interview after the session, Shannon noted the limitless opportunities that artificial intelligence offers within the supply chain. For example, the company worked with AnheuserBusch on what are called “beer bots”, Shannon said. D.H. Robinson uses AI to provide up-tothe-second rating to Anheuser-Busch, which then puts that into their internal rate matrixes and tenders it to D.H. Robinson. That means D.H. Robinson can rate and accept tender for thousands of loads each second.

“Not only would it have taken countless people, the performance of that would not have been as good because they weren’t reacting to information that was absolutely up-to-thesecond fresh,” Shannon said.

EMOTIONAL INTELLIGENCE In another session, supply chain recruiter Tatiana Lazareva, principal at Unicorn Experts, discussed the importance of emotional intelligence (EI) in logistics. Logistics is an emotionally challenging area of supply chain, she said, with most points of failure occurring in logistics functions. As well, logistics professionals often work under intense pressure, she noted. Lazareva’s discussion highlighted five components of emotional intelligence: SUPPLY PROFESSIONAL

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self-awareness, self-regulation, social skills, empathy and motivation.

Self-awareness is useful when resolving conflict, Lazareva told the audience. But many people go on autopilot when dealing with others and use behavioural patterns that their brains formed when younger but that they tend to use for the rest of their lives. People employ these patterns without realizing that they’re ineffective or damaging. “That’s why we have so many toxic people around us,” she said.

The birthplace of emotional intelligence, Lazarova said, is self-awareness. “You have to take responsibility for all the actions that you make,” she said.

Lazarova also highlighted empathy, noting that “kind is the new strong.” Social skills, another aspect of emotional intelligence, helps people to build networks. And while selfawareness may be the core area of emotional intelligence, beliefs and values are also important. Decide what you refuse to tolerate and what behaviours you’d welcome from others, she advised.

Lazarova also shared tools to enhance self-awareness, noting that when she started developing her own emotional intelligence she wanted to learn why it’s easier to get angry rather than stay calm. The reason, she learned, is that people try to make whoever they’re talking to think the way they do about a topic. To improve her self-regulation Lazarova took notes and detached herself from situations. Checking notes later helped her track her progress in interactions.

She also offered tips to improve motivation, including starting the day with affirmations, facing fears, setting small and measurable goals and celebrating results.

Empathy is essential, she said, encouraging the audience to acknowledge new employees who may struggle at their roles in the workplace.

Finding exceptional talent has always been a challenge for any organization or company. But somehow our industry seems a bit more challenged.

Supply chain recruiter Tatiana Lazareva, principal at Unicorn Experts, discussed the importance of emotional intelligence (EI) in logistics.

Regarding social skills, she recommended being present when networking, making sales calls and other work-related social interactions.

Be in the conversation and ask questions, she recommended.

WAR FOR TALENT Why is there a war for talent and why have a talent strategy? Pamela Ruebusch, founder and CEO of TSI Group, discussed these and other employment questions during an education session entitled Strategies for Addressing the Talent Gap. “Finding exceptional talent has always been a challenge for any organization or company,” she told the audience. “But somehow our industry seems a bit more challenged.”

The logistics industry is losing workers and they’re not being replaced fast enough, Ruebusch said. Baby Boomers are retiring and the industry has an image issue—many potential employees don’t realize the challenging and rewarding nature of a career in the logistics and transportation fields, she said.

Ruebusch discussed some of the skills that supply chain professionals need now and in the future. These skills extend beyond technical know-how, although people are more often expected to have some knowledge of big data, blockchain and other cutting-edge technologies.

Analytical thinking, critical thinking and project management skills remain important, while financial knowledge is also key.

“You want to ensure that you attract people with these skills,” Ruebusch said. “That will depend on how well you deploy your talent strategy.”

To tap into up-and-coming talent, Ruebusch recommended partnering with post-secondary schools that offer internships. As well, capitalize on international students, as many have double degrees or industry background and can potentially bring a lot of knowledge to an organization.

Ruebusch also recommended involving employees as company ambassadors. “Educate your employees about your company’s mission, vision and empower them to be great brand ambassadors for your company,” she said.

Overall, the Canada Logistics Conference 2019 gave an insightful look at a wide range of supply chain and logistics topics. The quest for talent, the rise of new technology and the need for those working in the field to continue to learn and grow emerged as pivotal themes at the event. SP Scott Shannon of C.H. Robinson (left) moderated a panel on transportation buying trends that included (at table from left) Dave Brajkovich of Polaris Transportation Group; Andrew Midwinter of Gesco; and Steve Raetz, also from C.H. Robinson.

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BY TOM SZAKY

Tom Szaky is the founder and CEO of TerraCycle.

SUSTAINABLE RETROFITTING

FORWARD-THINKING RETROFITTING MUST INCLUDE CIRCULAR RESOURCE MANAGEMENT Buildings and facilities are examples of where humans are more resource intensive in groups than individually. The more people you have in any given area, the more material and energy consumed. When it comes to person-made structures and other area properties, these impacts are compounded and become more complex.

Structural development notwithstanding (think cement, steel, water, copper, PVC plastics and sheetrock fitting the utilities, let alone extraction and materials sourcing, including raw land), day-to-day operation and maintenance take time, energy and resources.

From electrical and climate control, to plumbing and safety, upward improvement and updating of these systems are a huge part of building sustainability in both the “green” sense and as a matter of continued operation.

The expression “Keep the lights on” is only a start to describe the processes ensuring efficient function and value for stakeholders.

Depending on when they were built, out of what, and constraints of technology and environmental conditions, many buildings and facilities may benefit from retrofitting, meaning additions 24 DECEMBER 2019

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of technology, components or accessories to utilities that did not have them previously.

There are several reasons to retrofit having to do with current and projected needs. For example, many North American apartment buildings pre-date the 1960s, built to keep warm in winter and mitigate heating costs; today, these buildings must adjust for a warming world.

Retrofitting can increase energy efficiency, optimize current systems and reduce risks over time. In earthquake and flood prone areas, history and data create the case for strengthening existing infrastructures. Replacing old glass windows with thermoplastic sheets prevents temperature loss and swapping out fluorescents for LEDs can lower lighting costs. Because of these benefits, the concept of “green buildings” is on the rise for many facilities. Sustainability is a value-add from a marketing perspective, while also accruing costsavings and functionality innovation.

THE COST OF GREENING Yet the industry is at a crossroads. Many building management professionals are finding the incremental costs of upgrades and building

certification to be prohibitive and prefer to invest in dressing up the exterior. However, research from Deloitte shows the cost of greening a building is insignificant compared to the cost of mending a building exterior, and that these upfront costs tend to be offset by lower long-term lifecycle costs, raising the building market value over time.

The book, Sustainable Retrofitting of Commercial Buildings: Cool Climates, also expounds on the concept of retrofitting offering opportunities to not only improve water footprint, reduce energy consumption and optimize building performance, but to create a more inviting and marketable product through certification and other benchmarks. For example, the additional capital cost for providing the requirements of BREEAM or Leadership in Energy and Environmental Design (LEED) can be offset as the marketability of the finished building will be greater than previously and possibly a greater rental value.

Repair and reuse are better than throwing away and going all-new, which is why retrofitting is an essential way to keep structures useful by creating value without starting over entirely.

The hierarchy of waste puts reduction and reuse at the top before recycling, with disposal down at the bottom. In that spirit, it’s important that proper measures for reuse and recycling are employed to maintain the benefits and offset the resource intensive nature of buildings and facilities. Any “out with the old, in with the new” initiatives to retrofit must plan for circular materials recovery and processes that divert this material from going to waste.

It’s a common belief that certain items are beyond recycling due to their material makeup, that certain materials have no way to be recycled and integrated into new production.

We know this is not true. In a report by Giroux Environmental Consulting for the Canadian Council of Ministers of Environment, it’s outlined that for construction, renovation and demolition (CRD) waste, including concrete, asphalt shingles, carpets, gypsum and roofing SUPPLY PROFESSIONAL

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materials, recycling technologies do exist.

But copper pipes, light bulbs and ballasts, sheetrock, old carpeting, electrical wiring and concrete, just to name a few items facilities managers might swap out as part of a retrofit fall outside the scope of recyclability in the current waste management infrastructure. Why? The global market for standard recyclables like glass, paper, aluminum and some plastics is weakened as it is, let alone these “difficult-torecycle” materials that require separating and special collection and transportation models.

Discards generated by properties (or most human activities) aren’t accepted for recycling through conventional public programs.

Most build-up materials, packaging and shipping items, industrial plastic and items from the front and back of houses cannot be processed municipally. Combine the complex nature of these items with the volume of it in the buildings and facilities industries and what you get are metrics that do nothing for your sustainability report, as this waste is tracked for landfill and incineration.

CRD waste is largely managed through voluntary producer responsibility initiatives (versus extended producer responsibility mandates, as these materials are mixed) by

suppliers, vendors and producers committing to providing solutions. One of the most important things you can do to retrofit sustainably is choose companies that are doing this.

THE SEARCH FOR SOLUTIONS There are solutions for old utilities being replaced through retrofit for almost every aspect of the real estate sector that can be tailored to fit and scaled up to suit business needs at low risk.

At TerraCycle, we have embraced this approach with the Zero Waste Box system, which includes solutions for facilities.

Property managers and employees can select the size, type and volume of boxes, fill with the appropriate streams and ship the box back to TerraCycle using the prepaid, pre-affixed shipping label once full. This system can be applied to large-scale outputs with a range of pallet configurations for items like air filters, disposable garments and gloves, safety equipment and protective gear and shipping materials.

My company has a unique perspective on retrofitting because not only are we all about finding circular solutions for building and facilities waste, we have employed many of these to our headquarters. The building was originally a warehouse and today we house

150 people. More people mean more material consumed, so it’s important that we adapted our space to accommodate and balance this.

We have greywater capture bins to water our flowers and gardens from rain runoff, solar panels on the roof for net zero electricity use and converted all our buildings and outside parking lot lights to LED bulbs, significantly cutting our electric bill. All construction waste is recycled and disposed of in a safe and green way from either our Zero Waste system bins or by working with our local recycler, Soltara. With concrete, we’ve used recycled glass beer and wine bottles as our retaining walls to make our gardens’ beds in the courtyard, where recycled flip flops are repurposed as soft, colorful gravel. To create room dividers and walls, some areas have plastic bottles hung from the ceiling, which repurposes material and makes for a striking visual.

Retrofitting can solve problems with existing facilities, expand your offerings or make them better. Designing for a changing world is about creativity and holistic, big picture thinking with an eye for details. Making sure to discard and properly manage any “waste” produced as a result is key to working in the circular economy, as is looking for other places to save resources along the way. SP

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BY JEFF RUSSELL

Jeff Russell is purchasing manager at ABS Machining

PROTECTING YOUR ORGANIZATION FROM UNETHICAL PROCUREMENT PRACTICES Corruption creates an unlevel playing field.

In business, corruption adds costly barriers to buying products and services, can increase delays in getting products or services to market and can damage a company’s reputation and image. It can destroy a person’s reputation. One of our primary goals in purchasing is to reduce costs and corruption will counter potential savings. This can lead to severe financial losses.

As our ability to buy products and services globally increases, so too does our ability to encounter corruption. What is considered normal business practice in some countries may be illegal in Canada or the US. As procurement professionals, we should be concerned about corruption and how to identify corruption.

The US has been fighting corruption since 1977, when it enacted the Foreign Corrupt Practices Act (FCPA). In 1998, the FCPA was amended to apply to all foreign companies and their employees. Also in 1998, the battle to end corruption took on global prominence as the Organization for Economic Cooperation and Development (OECD) adopted the Convention on Combating Bribery of Foreign Public 26 DECEMBER 2019

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Officials in International Business Transactions.

Today, 43 countries have adopted the convention, incorporating the policies into domestic anti-corruption laws. The goal is a level playing field for everyone doing international business.

Under the FCPA, two recent examples of companies charged, and their penalties, include: In June 2019, Walmart Inc., a US-based multinational retailer and its wholly owned Brazilian subsidiary, WMT Brasilia S.a.r.l.

(WMT Brasilia), agreed to pay a combined penalty of $137 million for violations to the Foreign Corrupt Practices Act (FCPA).

In July 2018, Credit Suisse’s Investment Bank in Hong Kong, a Swiss-based issuer of publicly traded securities in the US, agreed to pay a $47 million penalty for its role to win banking business by awarding employment to friends and family of Chinese officials.

Canada enacted the Foreign Corruption of a Public Official Act (FCPOA) in 1999. Recently, the Canadian Government made amendments to the FCPOA by bringing it in line with the US FCPA, making facilitation payments illegal and increasing the maximum penalties. Violations

DEFINITION OF CORRUPTION One of the biggest challenges in defining corruption is that there’s no singular definition, as it varies in different countries. The simple legal definition of corruption is a form of dishonesty or criminal activity undertaken by a person or organization entrusted with a position of authority, often for illicit benefit. For businesses, there are seven types of corruption to consider: 1. Conflict of Interest: • an employee has an economic or personal gain from a transaction • a buyer issuing a purchase order to a family member or friend without notifying senior management 2. Bribery: • offering, giving, receiving anything of value to influence the outcome of a business transaction • receiving a gift from a supplier while soliciting proposals from the same 3. Embezzlement: • the fraudulent appropriation of money or property for personal gain by someone entrusted to safeguard assets in another’s interests 4. Illegal Gratuities: • like a bribe, only something of value is given after the transaction is completed • receiving a gift from a supplier after you’ve awarded business 5. Kick Back: • a form of negotiated bribery in which a SUPPLY PROFESSIONAL

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©123RF.COM/ MACROVECTOR

COMBATTING CORRUPTION

can now mean a maximum prison term of 14 years and millions of dollars in fines.

Currently there are 27 ongoing investigations, three cases where charges have been laid but not concluded and only four convictions. Some recent examples of organizations charged under the CFPOA and their penalties are: In June 2013, Griffiths Energy International Inc., a privately held oil and gas company, pleaded guilty to one count of bribery under the CFPOA and a total financial penalty of $10,350,000.

In June 2011, Niko Resources Ltd., a publicly traded company based in Calgary, Alberta entered a guilty plea for one count of bribery and received a financial penalty totaling $9,499,000.

We must develop stringent purchasing guidelines or policies to reduce the risk of violations of anti-corruption laws or the company’s own standards.

©123RF.COM/ MACROVECTOR

commission is paid in exchange for services rendered • a supplier gives part of an over billing to the person who helped facilitate or allow the transaction 6. Extortion: • demanding a sum of money (or goods) with a threat of harm if demands are not met • an employee tells a supplier that the organization would not do business with them anymore unless the supplier paid the employee a processing fee 7. Facilitation payments: • a payment to a public or government official that acts as an incentive to complete some action or process expeditiously, to the benefit of the party making the payment • payment to a government official to expedite the papers needed to release customs clearance on products being exported from a country As there is no single definition of corruption, what’s considered normal business operations

in some countries may be illegal in Canada.

As procurement professionals responsible for thousands to millions of dollars in transactions, securing the best possible deal for our organization, we must be aware of and ensure compliance to Canada’s CFPOA and to the US FCPA. FIGHTING CORRUPTION Companies need to enact policies and procedures and then train employees. Many corporations have policies about receiving gifts from suppliers, usually stating gifts are not to exceed a certain (minimal) monetary value or not at all.

We must develop stringent purchasing guidelines or policies to reduce the risk of violations of anti-corruption laws or the company’s standards. Purchasing guidelines should be clear, concise and detail the do’s and don’ts of purchasing within the organization and dealing with suppliers. One tool is establishing a purchasing code of conduct with an annual review and sign off. This ensures buyers are

aware of penalties for non-compliance while conducting business on the organization’s behalf.

Another method is to ensure procurement processes are open and transparent, that all suppliers are treated equally and fairly. One of the biggest mistakes made in a bidding process is to conduct the process in secret with little oversight. Transparent processes build trust and integrity, stronger supplier relationships and foster open communications. These are cornerstones to combating corruption.

A third way to combat corruption is to review your company’s monthly spend data and receipts for errors or anomalies. With established commodity and sourcing strategies in place, monthly spend dollars and receiving data should be known or forecasted to a plan. Any high dollar irregularities should be investigated to learn why there is an error.

A final way to combat corruption is to ensure all buyers are properly trained on anti-corruption policies and abreast of existing laws. Buyers may not understand current laws or whether certain behaviors are illegal. Remember, what may be normal in one country may now be illegal. Only recently did Canada make facilitation payments illegal, while the US did so in 1977. Some countries still allow them. Only by training buyers can we ensure they don’t fall victim to unethical behavior.

Transparency International created the Corruption Perception Index which ranks 180 countries. In 2018 more than two thirds of the countries scored below 50 with an average score of just 43. Corruption is a global problem and Canadian buyers who do business internationally should understand how it creates an unfair advantage by increasing costs. The penalties for non-compliance to the CFPOA are too great. SP Research for this article includes information from: • Organization for Economic Cooperation and Development • Department of Justice United States • Department of Justice Canada • Transparency International SUPPLYPRO.CA 27

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BY PAUL BARKER

now on offer can be daunting,” Bochicchio says.

EVOLVING PAYMENTS STUDY EXPLORES WHAT’S IN THE WALLET OF CORPORATE TRAVELLERS A new study has found that while corporate cards are the most used method of payment for business travel, many companies do not realize that alternative payment solutions exist that might better suit their needs.

Entitled “Evolving Payments In Corporate Travel”, the joint study, which was released in October, was conducted by the Association of Corporate Travel Executives (ACTE) and Mastercard, with contribution from the NAPCP, a membership-based professional association for the commercial card and payment industry.

Leigh Bochicchio, executive director of ACTE, says that digitalization is driving significant change across all business functions within organizations globally. And nowhere, she adds, is this more apparent than in the world of corporate travel management.

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FOUR PAYMENT TYPES The study’s findings are based on responses from 290 corporate travel managers and executives in Asia-Pacific, North America, Latin America and Europe who were asked what business travel payment type they preferred of the four currently in use: • corporate or commercial card; • lodge/central travel card (an account used by a travel agent to book travel for centralized management of travel expenses); • virtual card (a single-use or multi-use account number used for a limited scope of travel spend or purchases); and • a personal credit card.

While corporate cards are the most commonly used (67 per cent) and the most preferred, Jennifer Merli, vice-president of global product management at Mastercard, notes in the report that “only 54 per cent of those surveyed are satisfied or very satisfied with their current modes of payment, meaning there is room for improvement.”

She goes on to write, “is this general dissatisfaction translating into the use and adoption of new payment types, such as the virtual card? For example: those with an appreciable percentage of

It’s important to remember that an organization’s payments solution is only as effective as those using it. Employee education is crucial to the success of any travel payments program

travelling employees may consider adopting virtual cards to apply more control than a typical central travel account offers. This approach can be complemented by corporate cards for more transient spending needs like restaurants, ground transportation and other on-the-go items.”

STAYING CURRENT In an interview with Supply Professional, Merli says Mastercard partnered with ACTE on the study in order to make sure that the company remained current with customers’ wants and needs, and how and why those customers use Mastercard products.

“It was a quantitative study, but with tons of good qualitative information that helps explain the numbers,” Merli says. “We started at a baseline with an attitudinal and behavioural questionnaire.

We wanted to know how they use payment cards. What kind of payment cards do they use and why? Even at that very basic level, it uncovered some rich behavioral information. Not just ‘I am using a corporate card for hotels and a lodge/central travel card for my employees’ air spend.’ It’s the reason for those choices that we really want to know more about, for when we know what the specific needs are then the tailoring of an actual solution is going to be a better fit.”

Data capture, she writes in the report, is “more important than ever for expense reconciliation, budget and regulatory compliance reporting, ongoing travel supplier negotiations and duty of care.”

Other findings in the report revealed that: • While corporate cards remain the most widely-used travel payment methods, 48 per cent of respondents confirmed that personal cards are also used by travellers—especially those in organizations with lower travel spend and in North America.

• Corporate card usage rises broadly in line with annual travel

spend. Almost all (97 per cent) organizations with annual spend of over US$100 million use them, while only 50 per cent of companies spending less than US$1 million follow the same path.

• No matter what payment solution is being used—corporate, lodge, virtual or a combination— the onus is on organizations to ensure a clear mandate is in place and that it is being followed correctly.

Mastercard, adds Merli, believes travel data capture is paramount if companies want to: • Understand what employees are spending and where, for expense reconciliation and policy administration; • Provide a duty of care to employees; and • Support ongoing travel supplier negotiations around rebates, rewards and incentives.

“It’s important to remember that an organization’s payments solution is only as effective as those using it,” she says. “Employee education is crucial to the success of any travel payments program.” SP SUPPLY PROFESSIONAL

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IN THE FIELD—BY LARRY BERGLUND

A CONVERGENCE OF VALUES SOCIAL PROCUREMENT AND ECONOMICS Business decisions have been overly influenced for decades by the Invisible Hand theory.

This term was coined by Scottish economist Adam Smith over 200 years ago. The premise was that people will do business in a free market which best decides prices.

An unfettered free market did not want government intervention.

The thinking was, when everyone works for their own self interests we’re collectively better off.

We can see the shortcomings of the Invisible Hand which operated in a time with slave labour, a privileged few controlling commerce, harsh working conditions, child labour practices and an absence of environmental responsibility. Natural resources were seen as infinite but worth fighting over.

Today, in Canada, many of the shortcomings of the Invisible Hand have been eradicated. But not all.

We acknowledge that government intervention is necessary to enforce responsible business practices.

We complement the Invisible Hand with what I refer to as the Indivisible Hand of government.

This guides out of necessity, monitoring the Invisible Hand to ensure social and economic interests are realized sustainably.

Any model that’s primarily profit-based from a supply side needs to be balanced by the demand side. Procurement practices, built on Invisible Hand values, aimed to attain the lowest cost. This theory seemed to make sense until we looked deeper into the supply chain and found that the lowest cost came at the expense of social values and the erosion of long-term economic development.

Until recently, business management training was primarily based on Smith’s theory that if a product was legally sold, the market

would set the price and shouldn’t concern itself with public welfare— that was government’s job. Public sector procurement also followed Smith, where the lowest cost from a tendering process must deliver the best value. Procurement decisions were largely one dimensional— economic interests first.

Quality management started to drive value, which affected costs.

Investing in quality management was primarily meant to ensure economic benefits. Environmental interests followed quality management reluctantly until we could connect environmental benefits with sustaining profits.

Social procurement didn’t hit procurement’s radar until the early 2000s.

Procurement, a transactional, demand-side tool, needed to redefine the value proposition to go beyond the lowest cost and base itself on values of a larger stakeholder base. The lowest cost was not a sustainable model.

The Indivisible Hand, through legislation and by supporting international standards, has transformed how we view value.

We need a three-dimensional model with economic and environmental interests meeting stakeholder expectations.

THE RISE OF VALUE This has led to value-based sourcing, a more comprehensive decision-making approach. Where the objective of competitive bids has traditionally been on lowest cost, the value-based approach is inclusive of other direct and indirect factors influencing value.

If we get the lowest cost from buying imported clothing and uniforms, the budget may see a line savings. What’s unseen may be the exploitation of those making the uniform or the environmental

degradation in the source country.

Value-based sourcing, or social procurement, addresses other factors that require sourcing the uniforms from a supplier audited for compliance with ISO 20400 social procurement standards and/or ISO 14000 environmental standards.

The clothing budget may reflect a higher out-of-pocket cost but the price is value-based. If we shop closer to home, we’ll see similar outcomes. If we source custodial services following the Invisible Hand model, we’ll identify several suppliers offering competitive prices and we can find one with the lowest cost.

If, under the Indivisible Hand, we set higher standards such as fair or living wages of potential custodial suppliers, as buyers, a competitive bid will be awarded but the price will also be valuebased. Stakeholder expectations are still met. The economic multiplier effect redistributes the revenues within the local economy.

Value-based thinking is important for government spending. With billions spent annually, we must ensure common values are reflected in award criteria. The message sent in the tender criteria and weighting is reflected in the competitive responses. Awarding large contracts on a consolidated commitment, where only a handful of large multi-national corporations can supply, negates the opportunity for SMEs and social enterprises to compete. This opportunity is enshrined within the Canadian Competition Act: ensure that SMEs have equitable opportunity.

Arguably, a large, bundled contract may yield the lowest cost, the other dimension of social development offsets the savings in the long term.

Procurement’s engagement

Larry Berglund is principal at Presentations Plus Training & Consulting Inc.

“ Where the objective of competitive bids has traditionally been on lowest cost, the valuebased approach is inclusive of other direct and indirect factors influencing value.”

with social enterprises to create meaningful jobs for people with barriers aids economic and social development. Ensuring that SMEs are economically viable in local communities builds social capital.

Changing the idea from providing public welfare to supporting public well-being, is facilitated through social procurement practices.

The Invisible Hand favoured unfettered market transactions benefitting a small group of stakeholders. This led to the idea that profits should trump principles.

The courts had to intervene to establish laws on conducting business. Business ethics and codes of conduct emerged to signal a change. The Indivisible Hand favours a market transformation reflecting the values of the majority of its stakeholders. The latter theory does not compromise principles or budgets. It does provide a better answer to the question, ‘why did we buy that?’ SP SUPPLYPRO.CA 29

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THE LAW—BY PAUL EMANUELLI

PUBLIC TENDER REBOOT SEVEN DEADLY TEMPLATE DEFECTS Public institutions should tear down their antiquated “Contract A”—based tendering templates and roll out updated bidding documents that are based on the latest case law developments and leading global standards. This discussion covers seven deadly defects common in outdated tendering templates and explains why they should be replaced with updated flexible negotiated RFP formats.

FRANKENSTEIN FORMATS Notwithstanding all the tenderingrelated litigation in recent decades, many organizations continue to improvise with “one-size-fits-all” tendering formats that assemble random, irreconcilable provisions into a single template. These “chop-and-paste” mashups attempt to merge outdated Contract A concepts with more modern and flexible negotiating principles but create runaway formats with legal consequences that are impossible to properly manage, predict or control.

VAGUE PRICE-HOLDING PROVISIONS Contract A is based on the unequivocal irrevocability of a bid for a prescribed time period.

However, many tender calls ask bidders to “hold” their pricing or require that pricing be “valid” for a prescribed time period. These vague pricing provisions put purchasing institutions into a legal grey zone, potentially creating the risks of Contract A lost profit claims even when there was no intention to use that bidding system.

NEGOTIATING OVER IRREVOCABILITY PROVISIONS Contract A replaces negotiation with fixed-bid “one-shot” tenders.

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contract award. These two systems are mutually exclusive, yet many purchasing institutions continue to ask for irrevocable bids while reserving the right to negotiate over those bids even though the courts defined this practice as bidshopping years ago.

CANCELLATION CLAUSES There is no such thing as a risk-free public procurement or the risk-free cancellation of a public tendering process. While tender call terms may contain reserved cancellation rights, bidders in a government procurement process have the right to sue to challenge the fairness of a cancellation decision. The courts serve as the ultimate arbiters of any challenged cancellation decisions, which means that pushing the cancel button may take a purchasing institution on a one-way trip into a legal entanglement over lost profit claims under Contract A formats.

OVERBUDGET BID PROVISIONS Once a Contract A bidding process crystallizes with the submission of compliant bids, there is no safe escape out of an overbudget bid situation, except finding more money. Whether the organization tries to negotiate its way out of the situation or decides to cancel and retender, its next step remains subject to legal challenge and lost profit claims. The failure of the courts to chart a clear course out of overbudget bid situations under Contract A fixed-bid tendering represents one of the most significant defects in the use of Contract A templates.

MANDATORY WAIVERS A non-compliant tender is legally incapable of acceptance. Full stop. Procurement provisions that purport to give a purchasing institution the right to waive bid irregularities are a lawsuit waiting to happen. Rather than becoming the next case study

on the “substantial compliance” test, purchasing organizations would be well served to manage their mandatories and reduce the recurring trip hazards that habitually cause their bidders to become non-compliant in the first place. They would also be wellserved by integrating transparent rectification cure periods into their flexible negotiated RFP formats that allow them to avoid the tender compliance traps inherent in Contract A formats.

LIMITATION OF LIABILITY CLAUSES IN CONTRACT A The only way to effectively limit the Contract A liability of lost profit claims is to avoid creating Contract A. Once Contract A is created, the ultimate effectiveness of liability disclaimers is highly suspect. In fact, these provisions are completely useless in preventing a determined bidder from initiating a lawsuit and potentially dragging a purchasing institution through protracted legal proceedings. As case law has proven, properly drafted negotiated RFPs are a far more effective method of enabling the rapid dismissal of lost profit claims and thereby serving as a deterrent against the initiation of lost profit lawsuits.

As regulatory requirements and case law developments reshape the tendering landscape, organizations are under unprecedented pressure to overhaul their tendering templates. Institutions should critically assess whether their existing templates can adequately withstand the rigours of the modern tendering process since their existing formats could contain deadly defects that call for their immediate replacement with more up-to-date bidding models. SP

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

“ Properly designed negotiated RFPs are based on traditional contract law, with negotiations serving as the embedded operating system for contract award.”

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