SEPTEMBER/OCTOBER 2017
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CYBERSECURITY Industry wake-up call
TRADE CETA takes off
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CONTENTS
SEPTEMBER/OCTOBER 2017
DEPARTMENTS
12
5 | Editor’s Foreword NAFTA posturing 6 | In the News Hapag-Lloyd anniversary; Digitization of the shipping industry; Canada to pilot new air cargo program 51 | Retrospective TMS' future is now 52 | Inside the Numbers Ramping up for renewal
53 | Coaching Corner Toxic workplaces
54 | The Bigger Picture Renegotiating NAFTA
COVER STORY
20
Window and door manufacturer succeeds with dedicated, on-site transportation solution.
Regional Focus Canadian-EU trade agreement takes flight
St. Thomas, Ont.’s North Star Windows & Doors, with the help Ryder, lowered transportation costs while improving service and creating opportunities for growth.
FEATURES
36
EAST COAST GATEWAYS | 26 Atlantic ports look to the future for growth
CYBERSECURITY | 32 Cyberattack a wake-up call for shipping industry
AUTOMOTIVE SUPPLY CHAIN | 36 Carriers and suppliers carry on in the shadow of NAFTA
TECHNOLOGY | 43 Transportation Management Systems www.canadianshipper.com September/October 2017 3
John Tenpenny
FOLLOW THE NORTH STAR
EDITOR'S FOREWORD John Tenpenny September/October 2017 Volume 120 Issue No. 5
EDITOR John Tenpenny (416) 510-6880 john@newcom.ca RESEARCH DIRECTOR Lou Smyrlis lou@newcom.ca ART DIRECTOR Ellie Robinson ellie@newcom.ca CONTRIBUTORS Carolina M. Billings, Ken Mark, Carroll McCormick, Tom Peters, Leo Ryan, Laurie Turnbull PRODUCTION MANAGER Kimberly Collins (416) 510-6779 kim@newcom.ca VIDEO PRODUCTION MANAGER Brad Ling CIRCULATION MANAGER Mary Garufi (416) 614-5831 mary@newcom.ca PUBLISHER Nick Krukowski (416) 510-5108 nick@newcom.ca PRESIDENT Joe Glionna CHAIRMAN & FOUNDER Jim Glionna VICE-PRESIDENT, OPERATIONS Melissa Summerfield
HEAD OFFICE: 80 Valleybrook Drive, Toronto, ON M3B 2S9 Canadian Shipper is written for Canadian transportation and logistics professionals who manage product flow from manufacturer to point-of-sale. Editorial is focused on reporting, analysis and interpretation of Canadian logistics trends and issues. It is published by NEWCOM BUSINESS MEDIA INC.
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Will they stay or will they go?
W
ill he or won’t he? When it comes to the ongoing negotiations of the North American Free Trade Agreement (NAFTA) the elephant in the room is whether U.S. President Donald Trump will make good on his threats to pull his country out of the deal. Whether you believe Trump is serious or is just blowing hot air as a negotiation tactic, the facts are weakening the ground he’s trying to hold. Since coming into effect in 1994, NAFTA has created the world’s largest free trade area of 450 million people. It’s an economic powerhouse estimated at $22.6 trillion, as measured by gross domestic product. That’s because it links the economies of the United States ($18.6 trillion), Canada ($1.7 trillion), and Mexico ($2.3 trillion). That trade area is greater than the economic output of the 28 countries in the entire European Union. More than 15 per cent of all U.S. goods and services sold in the world are bought by Canadians. Canada is the largest export market for two-thirds of U.S. states and is, by far, the country’s biggest customer, buying more American goods and services than China, Britain and Japan combined. When it comes to jobs, the target of most of Trump’s barbs concerning NAFTA, nearly 3 million (2.8) American jobs are supported by sales of goods and services to Canada (1.6) and Mexico (1.2) And it’s not just Canadians who see the benefits of NAFTA remaining in place. Even a fellow Republican dismissed as absurd the notion that the U.S. might impose trade barriers. “We’re each other’s strongest trading partner, we’re each other’s closest ally, literally and figuratively,” Kentucky Governor Matt Bevin told the Canadian Press ahead of a July meeting of U.S. state governors attended by Prime Minister Justin Trudeau. “The idea that it won’t come out in good measure for both parties is preposterous. I mean, the idea that it won’t be continuing a strong relationship is something, I think, people shouldn’t even waste time thinking about.” Even the idea that Trump can unilaterally pull the United States out of NAFTA is debatable. Robert Holleyman, a former high-ranking trade official in the Obama administration, argues Trump could use his executive authority to pull the United States out of NAFTA, but he would then need Congress to pass a law reversing a number of policies that the deal brought in. This means that, if Trump withdrew from NAFTA, some provisions of the deal— the binational panels that resolve trade disputes, for instance—would disappear immediately for the United States, while other things, such as preferential tariff treatment for Canadian and Mexican goods, would remain in place until Congress could get legislation through to repeal them. Either way, it is likely that an attempt to pull out would lead to a legal battle, with either members of Congress or industry taking the President to court to argue his authority to scrap the deal on his own. CS
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John Tenpenny, Editor john@newcom.ca www.canadianshipper.com September/October 2017 5
IN THE NEWS
Hapag-Lloyd steams ahead in Canada on 125th anniversary
By Leo Ryan
Hapag-Lloyd accounts today for one-fifth of all containerized cargo handled in the ports of Vancouver, Montreal, and Halifax.
In this period of major anniversaries (Canada 150 and Montreal 375), one can justifiably include mention of HapagLloyd AG, the German carrier that has emerged as arguably the leading global container shipper to Canadian ports after entering this regional trade in modest fashion 125 years ago. It was in 1892 that the small freighter Cremon set sail from Europe to Canada for the first time under the Hapag flag, arriving at the Port of Montreal in March of that year. The Cremon, with a length of 90 metres and capacity of just over 2,100 gross registered tons, would be dwarfed today by behemoths more than three football fields long like Hapag-Lloyd’s Antwerpen Express which moored in Vancouver in May. The largest container vessel to call at a Canadian port so far is 366 metres long and offers a capacity of 13,200 TEUs (20-ft equivalent units). During an exclusive interview with Canadian Shipper at the headquarters of the Canadian division in Montreal, Wolfgang Schoch, managing director of
Hapag-Lloyd (Canada) Inc., indicated that “Hapag-Lloyd accounts today for one-fifth of all containerized cargo handled in the ports of Vancouver, Montreal, and Halifax. We are the biggest container customer of Vancouver and Halifax and second biggest in Montreal. “We feel extremely tied to Canada for economic and historical reasons,” he said. The Hamburg-based shipping line offers some 14 liner services to Canada— six in Vancouver, three in Montreal and five in Halifax. They connect Canadian exporters and importers with Northern Europe, the Mediterranean region, Asia and Oceania as well as with Africa via transshipment in Tangier, Morocco. On the radar screen is the fast-growing Port of Prince Rupert in northern British Columbia, which boasts the fastest transit times to Southeast Asia from North America’s West Coast and is considerably expanding its container facilities. “This could be an attractive option in the future,” said Schoch. Through railway connections, notably
6 September/October 2017 www.canadianshipper.com
by CN and CP to Canadian ports, HapagLloyd has been able to efficiently link important markets in the United States like Chicago and Detroit to its international liner network. A CSX Transportation connection via Valleyfield, Que. added this past spring opens up access to Philadelphia and shipping services via the Panama Canal to Oceania. In reviewing the significant developments that helped turn Hapag-Lloyd into the fifth largest container shipping company in the world, Schoch pointed at the acquisition of CP Ships in 2005. “CP Ships was a stepping stone for us to become a market leader in Canada.” Then followed the merger in 2014 with Chilean shipping line CSAV. And just this past May came the merger with the United Arab Shipping Co. (UASC). The combined fleets encompass 230 vessels with a capacity of approximately 1.6 million TEUs and average ship age of 7.2 years. “We see no need for further investments in new vessels in the next three to five years,” Schoch said.
IN THE NEWS
Montreal a strategic hub in North America Meanwhile, Schoch stresses that HapagLloyd uses Montreal as its main hub not only for the Canadian market but also as a gateway of choice for the U.S. market. “Nearly 50 per cent of our export cargo via Montreal comes from the United States,” he said, pointing to such shippers as Ford, GM, and John Deere. He added that one third of the import cargo carried by Hapag-Lloyd via Montreal has a final destination within the United States. Schoch, in fact, describes Montreal “as our most important strategic hub in North America where our container throughput nearly matches what we do in Los Angeles/Long Beach combined.” He regards Montreal as a “very fluid port, with low dwell times at terminals, and excellent intermodal connections.” He cautions however, that the day may come soon when Hapag-Lloyd container vessels carrying more than 4,400 TEUs will need to call Montreal to remain on a cost- competitive footing. “With the implementation of CETA (the Canada-EU Comprehensive Economic and Trade Agreement), we anticipate further growth in maritime trade between Eastern Canada and Europe, with potential deployment of 6,500-TEU ships to Montreal.” The implication, he says, is further dredging and deepening beyond the current maximum draft of 13 metres, particularly in the channels on the St. Lawrence River between Trois-Rivières
“We feel extremely tied to Canada for economic and historical reasons” Wolfgang Schoch, managing director of Hapag-Lloyd (Canada) Inc.
and Montreal. “One centimeter of extra draft translates into 200 more containers on board.” Improving world shipping trends For his part, Nils Haupt, senior director of corporate communications at HapagLloyd, commented on three current trends in the world shipping arena by observing, first of all, that there are signs of improvement in ocean freight rates for an industry that has been limping through high debts and losses for nine years. “It’s not a strong recovery (in profits), but it is reassuring that for more than 40 years, there has been an average annual growth rate of three to five per cent in demand for global container transportation.” Secondly, a persistent serious problem remains shipping capacity widely outstripping demand. But last year witnessed a record scrapping of older or smaller
container vessels to the tune of 700,000 TEUs. At the same time, orders for new box ships have virtually dried up in the last six months. Thirdly, under a wave of consolidation, nine of the top 20 container carriers from three years ago have disappeared. “We have been an active player in the consolidation process, having merged with three different companies in 12 years, and we plan to continue as a driver of consolidation,” Haupt said. CS Leo Ryan is a veteran journalist who has reported on key transportation and trade developments in Canada for more than two decades. A former Montreal bureau chief for The Journal of Commerce, he specializes in port and shipping issues and was awarded the Medal of Merit in 1992 by the then Canadian Port and Harbour Association.
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Photo: Leo Ryan
www.canadianshipper.com September/October 2017 7
IN THE NEWS
continued from p.7
Shipping industry at the tipping point of digitization Report says ocean supply chain needs better data sharing and collaboration A new report indicates the maritime industry and broader ocean supply chain are suffering from major and costly inefficiencies due to ineffective data sharing and poor cross-industry collaboration. The study, entitled Competitive Gain in the Ocean Supply Chain: Innovation That’s Driving Maritime Operational Transformation, is based on a global survey of more than 200 executives and professionals from terminal operators, carriers, logistics providers, vessel owners, port authorities, shippers, consignees and other members of the global ocean supply chain. The study indicates that importers, exporters, container carriers, terminal operators, vessel owners and other stakeholders suffer from poor visibility and predictability around shipments and are
losing money due to a lack of partner synchronization and insufficient data insight. However, there is recognition, particularly among industry leaders interviewed, that digitization and mindset shifts are afoot, and will be a boon to all players in the industry. “Everyone benefits from collaboration and data sharing,” said Andreas Mrozek, Global Head Marine & Terminal Operations for the Hamburg Sud Group. “It starts with the customers and moves to the carriers, then the terminal operators, vendors, freight systems, truck companies, and keeps going down the line. Closer collaboration is a compelling value proposition for each supply chain partner.” Ninety per cent of survey participants said real-time data access and informa-
tion sharing was important to increasing the efficiency and performance of the shipping industry. Some 82 per cent said the industry needs to improve supply chain visibility. The push for improvements will likely come from a combination of forces, according to industry executives. Shippers will push for better operational visibility; alliances will demand better ways for their carrier members to share information to improve efficiencies and customer service; and terminals and port authorities under pressure to increase utilization and optimize existing infrastructures. On average, surveyed executives estimated that each of a wide range of ocean supply chain processes could be improved by as much as 66 per cent and no
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IN THE NEWS
less than 55 per cent if the industry updated its IT systems and improved its ability to share data within the supply chain. “Our study underscores the critical need for the shipping industry to improve collaboration and visibility through the adoption of new technology-driven models and processes,” said Dave Murray, head of thought leadership for the BPI Network, which released the report in coordination with Navis and XVELA. “Perhaps partly because the industry has been preoccupied and constrained by its economic challenges—but also because many of its members are just plain resistant to change—the industry has been far too slow to enter the digital age.” According to respondents, the areas most in need of improvement are: 1) carrier to terminal coordination, 2) supply chain visibility and information sharing, 3) terminal operations, 4) cargo flow visibility and predictability, and 5) coordina-
tion across carrier alliances. “The findings of the study are consistent with what we are hearing in the field from some of the biggest carriers and terminals in the world—namely that coordination, collaboration, and visibility across the supply chain need to improve through a common cloud platform and network,” commented Guy Rey-Herme, XVELA CEO and President. “This is vital for all involved to remain competitive and eliminate inefficiencies that are hobbling the industry’s growth opportunities.” The report indicates that industry resistance to change, coupled with the industry’s aging and inflexible IT systems, are key impediments to improving visibil-
ity and collaboration. Some 54 per cent of respondents said the industry being “slow to change” was one the biggest roadblocks to improving collaboration, while 49 per cent cited the cost and complexity of legacy systems. At the same time, many in the industry believe that change is coming. Some 46 per cent of respondents said their companies were either investing significantly in new technologies or significantly increasing those investments. “We are seeing accelerating technology innovation and upgrades as terminals and carriers alike embrace the age of digitization,” said Benoit de la Tour, President of Navis and Head of the Software Business at Kalmar. “And we are seeing strong uptake this year, along with a more positive outlook in third-party research and media reports from some of the leading companies in the container shipping line industry.” CS continued
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IN THE NEWS
continued from p.9
Canada pilots new IATA-FIATA air cargo program Program has been modernized with input from airline and forwarding communities
To meet the evolving needs of the air cargo industry and better reflect the change in relationships and the transformed role of the freight forwarder, IATA and FIATA joined forces to review, refine, and re-en-
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IN THE NEWS
gineer the current Cargo Agency Program to develop a new and modernized program: the IATA-FIATA Air Cargo Program (IFACP). This program, which began its global rollout with the Canadian pilot in August, replaces the current IATA Cargo Agency Program. The existing program, which was established in the 1960s, needed modernization as over the years, the role of the forwarder has evolved from the original concept of acting solely as a sales agent for the airlines, to the current business relationship whereby the forwarder routinely contracts directly with the airline as a customer on a principal-to-principal basis. The IFACP provides a framework of industry standards that are relevant, in line with best practices and safety regulations and fit for purpose. Standards to
“Canada is uniquely situated to pilot this new global initiative. There is an excellent working relationship between the forwarder community and the airlines serving Canada.” Gary Vince, president , CIFFA
cover the endorsement of freight forwarders will be administered as a joint program on behalf of and to the benefit of the participants. “Canada is uniquely situated to pilot this new global initiative,” said Gary
Vince, CIFFA president. “There is an excellent working relationship between the forwarder community and the airlines serving Canada.” Bill Gottlieb, former president of both CIFFA and FIATA, has worked for several years on the IFACP design and development. Gottlieb, who is currently chair of CIFFA’s National Airfreight Committee, said Canada was chosen early on as the global pilot. “The joint airline/forwarder working group identified Canada as the natural choice for the IFACP pilot country. Canada has a relatively small number of IATA cargo agents, yet spread over a large territory, that will be transitioning to the new program, so we are able to manage the communication and react to any unforeseen issues while we migrate the forwarding community within the timelines.” CS
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TRANSPORT CASE STUDY
FOLLOW THE NORTH STAR With the help of Ryder, North Star Windows & Doors lowered costs while improving service, creating new opportunities for growth in North America
F
rom its headquarters in St. Thomas, Ont., near London, North Star Windows & Doors manufactures and sells energyefficient vinyl windows, patio doors and entry doors. Since 1985, North Star products have been enhancing homes, new and old. These windows and doors are literally show-stoppers. In 2017, Home to Win, the popular HGTV Canada series, offered viewers a chance to compete for a gorgeous waterfront home featuring North Star Windows & Doors. In the company’s winning story, improved transportation plays a starring role.
We do windows A few years ago, with business opportunities expanding, North Star arrived at a corporate crossroads: It could sink money into its aging fleet, or grow the core business. “We had not replaced trucks or trailers for many years,” says Pat Rooke, North Star Vice President. “But, rather than updating the fleet, we wanted to invest money back into equipment to facilitate growth in the organization.” Deciding to go with the dedicated transportation Solution was step one. Step two? North Star wanted a partner who understood its
12 September/October 2017 www.canadianshipper.com
unique challenges. “Delivery of our windows and doors is very different than the delivery of goods for other industries,” says Dan Burzese, Materials Manager for North Star. “Drivers and helpers unload at both warehouse locations as well as job sites. These are very diverse delivery conditions. Safety is an issue too; the drivers have to know how to handle the large units.” Partnering with North Star was about the alignment of corporate values around customer service and image, says Mark Edds, Managing Director, SCS Ryder Canada. Photos: John Tenpenny
TRANSPORT CASE STUDY
From its St. Thomas, Ont. manufacturing facility North Star Windows & Doors, with the help of Ryder's dedicated transportation solution and on-site presence, delivers its product across North America.
“North Star Windows was looking for a partner that could handle the growth expectations they had in their business as well as a company that could support ‘white glove’ last mile delivery.” The single largest challenge, according to Edds, was dealing with a work force at North Star that was very tenured and with wages and benefits that were not in alignment with the market. “We worked closely with them on a strategy of moving the workforce over to Ryder to ensure their customers felt no impact from this need to outsource. “They needed to get out of trucking
Caption
continued www.canadianshipper.com September/October 2017 13
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TRANSPORT CASE STUDY
continued from page 13
and concentrate on building the quality products that they do well and Ryder was the solution to make that happen.” Given years of work with the windows and doors industry, Ryder was able to provide the expertise needed, along with drivers who specialize in drop van deliveries. Ryder also enables North Star to efficiently handle seasonal fluctuations in demand, with a pool of experienced drivers ready to step up as needed.
To invest in its core business and grow, North Star Windows & Doors had to find a better way to deal with an aging fleet, transportation costs, complex deliveries and seasonal labour fluctuations. Ryder responded, with a dedicated transportation solution and on-site presence.
“We also wanted to improve the customer’s experience with North Star,” says Bryan Smith, North Star’s Controller. “Delivery is an extension of our service. Ryder may be handling transportation, but it is still North Star delivery in the minds of our customer.” Ryder takes a project management approach says Edds, where subject matter experts in safety, human resources, IT, engineering, equipment sourcing, sales and operations are engaged. Once a start date is agreed upon, weekly meetings are held to review the project plan and call out all completed tasks and any task that is becoming a potential barrier to success. “The subject matter experts are asked to lead their area of expertise and report to the executive team made up of leadership from both Ryder and the client,” says Edds. “We’ve had a very successful launch history when the proper resources and time is given to a startup. North Star launched during one of their busiest times and it was a success because both organizations needed it to be and both provided the start-up team with the resources and time to execute without any issues.” continued
The outsourcing difference Since partnering with Ryder, North Star has achieved:
Core business growth • Not having to invest in a new fleet allowed operations to expand without a shipping cost increase or interruption • North Star is expanding business and product lines within Canada, and into the U.S.
Improved routing, in all seasons • Routes consolidated during times of low demand • Fuel cost savings realized through consolidation • Trailers, trucks and drivers available as needed during peak periods
Improved customer experience • 99%+ on-time delivery • Better handling of fragile shipments for reduction in damages • Proactive communication before delivery, and follow-up afterwards www.canadianshipper.com September/October 2017 15
TRANSPORT CASE STUDY
continued from page 15
With Ryder's help, North Star Windows & Doors has reached 99 per cent on-time delivery for the approximately 250,000 units it manufactures each year.
On time and on-site With Ryder on the job, Smith says ontime delivery is above 99 per cent. Ryder is also delivering another key advantage: peace of mind. A Ryder representative works on-site at North Star every day, simplifying communications and success. “Advanced communications with our customers lets them know of delays due to weather, road conditions or issues with other customers on the routes, and that is critical to North Star’s success,” Burzese says. “We also follow up with customers after the delivery to let them know that North Star and Ryder are jointly looking at ways to improve our delivery and customer service.” Having Ryder on site enhances collab-
oration on customer expectations for delivery and load sizes and organization, says Smith. “With improved communications between Ryder and North Star, we can respond quickly to delivery changes and issues that arise on delivery day. From the customer’s perspective, it’s a seamless integration; they feel like they are speaking with a North Star employee.” According to Edds, the reason behind the impressive results are twofold. “[Ryder] was able to handle the growth North Star achieved in a manner they would not have been able to if they were still using a private fleet model. We were able to flex up, provide more equipment and drivers than they had been able to prior to our taking over the business.
16 September/October 2017 www.canadianshipper.com
“We were also able to bring stability to their program. Our on-site team works closely with theirs and operate as one. We are making decisions that are in harmony for both companies not just moving freight. All of these actions have saved North Star money and allowed them to concentrate on their core competence, which is building a superior product for the building industry.” “When we started working with Ryder, we had definite expectations,” Rooke says. “Delivery on time, every time. Lower logistics costs. No capital expenditure. The ability to fluctuate labour with the seasonality of our business improved customer satisfaction. “Ryder has delivered.” CS Photo: John Tenpenny
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REGIONAL FOCUS
BY KEN MARK
FLYING
CANADA SERVING AS A TRANSSHIPMENT AMERICA IS JUST ONE POTENTIAL BENEFIT
20 September/October 2017 www.canadianshipper.com
©honglouwawa/iStock
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HIGH
T POINT BETWEEN N THE EU AND NORTH NACTED CETA TREATY OF THE NEWLY ENACTED
A
fter eight years of often tense negotiations, the 1600-page CETA (Comprehensive Economic and Trade Agreement) treaty between Canada and the 28-member European Union officially came into force on September 21. The lingering tag of “provisional implementation” simply indicates that all the market provisions for reducing and eliminating close to 96 per cent of all product tariffs become effective on that date. The outcome of continuing talks on other outstanding investment and service sector issues and their resolutions will have no impact at all on the trade in goods or customs and duties terms that both sides have ratified. For most Canadian Shipper readers, it
will be “steady as she goes,” says Anders Fisker, president of Mississauga-based FCL Fisker Customs & Logistics. “I cannot foresee any major changes in the transportation and logistics processes and procedures for Canadian exporters resulting from CETA. “However, on the customs side, exporters now become responsible for supplying the Rules of Origin (RoO) data to ensure that Canadian products qualify for CETA duty reductions.” Fisker’s daughter Christina, the firm’s Director of Customs and Compliance adds, “Although this is a new requirement, Canadian government officials have streamlined the process. Exporters can now add this information with just another line on basic commercial invoices rather than obtaining a separate declaration from a third party to confirm the Canadian content level of the exported product to ensure that it qualifies
for the reduced or eliminated tariffs. “Since EU customs officials in member countries may later perform audits to confirm the validity of the Canadian content claim, exporters must ensure they have the proper documentation to support their claims.” While customs issues have dominated most of the headlines so far, Christian Sivière, a trade expert with Montrealbased Solimpex, thinks exporters and importers should closely examine the numerous potential CETA-related business opportunities and challenges. “CETA is not just about saving money from eliminating or reducing tariffs. Companies should also re-examine their overall business strategy of dealing with their overseas customers and suppliers,” he says. “Since the EU is closer to major markets in Central Canada than Asia, EUsourced products can now move more quickly and with greater agility. As a result, Canadian exporters and importers continued
www.canadianshipper.com www.canadianshipper.com September/October September/October 2017 2017 21
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may want to expand their marketing and sourcing efforts over there.” According to Bob Sacco, GTA Trade and Customs Practice Leader at KPMG LLP, CETA may also shake up Canada’s domestic markets. “Some companies may need to reconsider their marketing and pricing models, especially if their competitors can now import and sell EU products at lower prices thanks to reduced duties and paperwork.” To take full advantage of CETA’s benefits, executives must do their homework says John Boscariol, a Toronto-based partner, at McCarthy Tétrault LLP. “The Canadian business community has not done much planning to deal with CETA’s coming into force. The first question they need to ask is, How does CETA affect our products and do they qualify for preferential entry? Except for products in various sensitive areas, all duties have been removed.” Similarly, in the other direction, CETA opens up the Canadian market to European goods, the same way NAFTA did for U.S. and Mexican products. Under CETA, EU bidders will be able to pursue Canadian government procurement deals. That includes for the first time, sub-national markets such as provincial and municipal buyers, which Boscariol estimates is worth $125 billion annually versus $25 billion at the federal level. At the top of the list is public transit equipment, hardware and systems, not to mention infrastructure projects. Boscariol adds that the new CETA rules state governments can no longer discriminate against foreign product and service suppliers. Before, public-sector contract terms often excluded foreign suppliers outright or imposed tough compliance rules. The expanded pool of eligible suppliers will enable government buyers to increase their choices while saving time and reducing costs through more efficient and competitive procedures. But to take full advantage of CETA, buyers, sellers and government regulators need to become familiar with the new rules of the game.
Shipping industry says Brexit talks must move faster to prevent disaster
B
ritain’s economy faces a “disaster,” unless Prime Minister Theresa May’s administration picks up the pace of Brexit negotiations, says Britain’s largest transport trade association, the Freight Transport Association (FTA). “The clock is ticking and we urgently need agreement on the first phase of negotiations so we can move on to crucial issues such as trade, transport and the establishment of a transition period to allow businesses and authorities alike to adapt,” said the organization’s head of European Policy, Pauline Bastidon. As the second round of Brexit talks got underway recently, the stakes are high, and the British pound has weakened as global markets question the UK’s political will to go through with the European Union divorce. Working groups on citizens’ rights, financial settlement, and “other separation issues”, such as the jurisdiction of the EU’s top court, have been convened. Not on the agenda yet, to the consternation of traders, are discussions of trade, transport, customs and transitional arrangements. The FTA warned that, without clarification a settlement, the industry faces a “cliff edge.” “If time runs out and this is not discussed, there will be dramatic and potentially disastrous consequences,” explained Bastidon. “Without resolution of these issues, we could face restrictions to international freight transport, delays at the borders and disruptions to supply chains. We must urgently start discussing concrete solutions to ensure that trade movements are not impeded.” Customs catastrophe The possible introduction of physical customs checks following Brexit would be another problem for British ports and shipping and would likely reduce the volume of trade, according to the head of the sector’s UK industry body. Prime Minister Theresa May has said
she wants a customs arrangement with the European Union which allows trade to be “as frictionless as possible”, but few expect goods will be able to continue to move as seamlessly as they do within the bloc. “The nightmare scenario is actually having physical customs borders ... it would be absolutely a catastrophe for the ports and for our sector,” Guy Platten, Chief Executive of the UK Chamber of Shipping, told Reuters. “You’ve suddenly got lorries stacked up, you’ve got sailings canceled ... the whole supply chain is completely affected.” The chamber says 95 per cent of Britain’s international trade is moved via ship, and the industry supports 250,000 jobs. Dover on the southeast coast of England, Europe’s busiest ferry port, currently handles around 500 non-EU trucks a day and around 8,000 from the EU, he said. If the EU trucks faced the same customs checks as the non-EU trucks the whole process will be slowed, particularly impacting goods such as fresh food, he added. “The sailings will still take place, but maybe they won’t be able to fit in as many sailings as they could do before ... so that will affect the business of those ferry companies and potentially the viability of routes.” The chamber, which represents 170 firms including European companies such as Sweden’s Stena Line, Denmark’s DFDS and France’s Brittany Ferries, says the volume of lorries passing through Dover increased 150 percent between 1992 and 2015. Customs controls within the EU were scrapped from 1993. Platten said the government needs to reach an early agreement on customs, or ensure a transition period, as checks will require new infrastructure that will take time to put in place and which British ports will struggle to physically accommodate.
continued ©Andrew Linscott/iStock
www.canadianshipper.com September/October 2017 23
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continued from page 23
Top: Since the EU is closer to major markets in Central Canada than Asia, EU-sourced products can now move more quickly and with greater agility. Bottom: Agriculture, aerospace and automotive vehicles and parts are just some of the industries that hold potential under CETA, according to Maersk Line Canada President Jack Mahoney.
As well, Canada can leverage its membership in both NAFTA and CETA to serve as a potential trading hub or transshipment point between the two trading blocs. To do so, Canadian firms must meet the relevant rules of origin or Canadian content levels for products moving through our supply chain pipeline to U.S. or EU customers. CETA’s reduced tariffs on automobiles and auto parts and RoO levels are one of the key wins for that sector. Canadian-made goods shipped to the EU containing inputs from other nations will be permitted entry as long as exporters declar that the contents were “under their control.” However, CETA regulations place such foreign content data under the accumulation rule under which the Canadian exporter must state that level to meet the new RoO standards. According to Sacco, even if some of the products contain subassemblies from Mexico, a NAFTA member that has also signed a free trade agreement with the EU, Canadian exporters must still declare the level of Mexican content to EU trade authorities. But 24 September/October 2017 www.canadianshipper.com
after exporters become familiar with the new rules, keeping EU officials happy will become simpler. Says Jack Mahoney President of Mississauga-based Maersk Line Canada, “Some of the verticals where we see the most potential in Canada are agriculture, aircraft and parts, beverages, chemicals, electronics, food, machinery and equipment, motor vehicles and parts, plastics, and rubber. “An independent Conference Board of Canada study estimates that by 2020 CETA will increase our country’s EU merchandise exports by about C$1.4 billion.” And yet, international trade rules often go well beyond adjusting tariff levels. Various product groups such as food, pharmaceuticals, military weapons and equipment each have their own standards and regulations. For example, EU concerns over how Canada would implement its new rules regarding cheese imports held up CETA implementation here even after it had received royal assent. Boscariol strongly suggests that Canadian firms look very carefully into how CETA will affect their products moving into and out of the EU. CETA will also help boost transportation and logistics, efficiency and productivity at Canada’s Atlantic Ocean-facing ports and harbours—St John’s, Saint John, Halifax and Montreal. That’s because the new agreement will permit freighters from EUflagged carriers to move empty containers between Canadian ports using their own ships and crews. The new rules only apply to EU-registered vessels, not those flying flags of convenience such as Liberia and Panama. Under current regulations foreign carriers must use Canadian ships and crews for such repositioning. Says Tony Boemi vicepresident, Growth and Development at the Port of Montreal, “The new rule enables eligible carriers to save time, money and effort to use their own ships and resources. “For example, products such as fresh EU seafood and other
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seasonal goods can be delivered directly to the Port of Montreal for Canadian consumers. However, Atlantic Canada is the main source of our seafood exports to Europe. Thanks to CETA, eligible EU carriers will be able to move their empty containers more conveniently and at lower cost using their own resources to Atlantic Canada ports to be loaded with Canadian seafood products for EU consumers.” Initially, logistics and transportation executives or customs brokers may need further assistance to get a firmer grasp of CETA’s complexities. Their first stop should be professionals at various trade-related provincial and federal departments and agencies. These include Export Development Canada (edc.trade/ ceta-opportunities-challenges) and Global Affairs Canada, especially its Trade Commissioners Service (tradecommissioner.gc. ca). The latter has offices in almost all 28 EU member countries and often several in the larger, more active markets. Once executives become comfortable with CETA’s positive challenges, they will have to deal with future uncertainties related to discussions concerning the United Kingdom’s exit from the EU. British Prime Minister Theresa May has already invoked Article 50 which set the clock ticking for her country to leave the European Union by March 2019. But few observers believe that anything so drastic will unfold quickly. And yet, says Boscariol, “If the UK leaves, despite Canada’s long historical, political and economic ties, our two countries will have
to negotiate a new trade agreement since the UK will no longer be part of the European Union. “If it indeed leaves the EU, CETA terms will no longer govern trade between Canada and the United Kingdom. Trade relations will revert to the earlier, less liberal most-favoured nation system of the World Trade Organization.” Closer to home, talks aimed at updating NAFTA have already started. Since it was ratified in 1994, NAFTA has greatly expanded trade involving Canada, the U.S. and Mexico. For example, over that period, trade between Canada and U.S. has more than tripled. The two countries’ logistics and transportation systems, practices and networks are now tightly linked. However, since the toughtalking Trump administration has focused its attention on protectionism to boost employment in the U.S. manufacturing sector, future discussions could become testy. The lessons that Canada’s transportation, logistics and customs practitioners and executives learn from adapting to CETA will come in very handy for dealing with future challenges. CS Ken Mark is a veteran technology expert, who has covered supply chain management since it was called distribution and has documented its legitimization as a critical business function. He holds an MBA from York University.
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EAST COAST GATEWAYS
THE RISE OF THE ULTRA-CLASS While expansion is on the table at the Port of Halifax, more recent changes are helping ensure cargo flows more smoothly than ever BY CARROLL MCCORMICK
Halifax Port Authority
H
istory was made as the largest container ship ever to steam into the Port of Halifax bellied up to the Halterm International Container Terminal on June 29. At 349 metres long and 10,062 TEU capacity, the Zim Antwerp, owned by ZIM Integrated Shipping Ltd., marked the beginning of a new era of ultra-class shipping through Halifax. This ultra-class ship, whose port of call previous to Halifax was New York, is also symbolic of the changes that the Halifax Port Authority (HPA) is exploring to ensure the Port evolves with the changing times. “The current infrastructure at Halterm is enough to berth and service one ultra-class. The goal is to be able to berth and service two at once,” explained Lane Farguson, Communications Advisor with the HPA.
The Port has plenty of capacity—more than double the approximately 500,000 TEUs a year it sees now—but with the improvements to the Panama and Suez canals, and projects at other ports, the HPA is studying what it must do to service this emerging class of giant container ships. “A few things have happened in the past couple of years that are increasing the size of container ships [and their frequency on the East Coast],” says Farguson. One such event was the renovation of the Bayonne Bridge in New York, which raised its height by 64 feet to 215 feet, to allow ships up to 18,000 TEU to pass under it. “Shipping along the East Coast is evolving,” says Farguson. The desire to be able to berth two ultra-class container ships simultaneously is part of an infrastructure exercise that even includes the possibility of moving a
26 September/October 2017 www.canadianshipper.com
terminal to the Dartmouth side of Halifax Harbour. “We have narrowed down the options to one particular site but we can’t say anything more about that right now. It is an option HPA studied—exploring possibilities that serve the economy of the local region, now and well into the future. If you don’t fully explore the options available, you don’t know what is possible. Make sure everything is fully understood,” Farguson says. Intriguing as a long-term infrastructure project such as that may be—one that could even be teamed with an inland terminal yard—the more medium-term concern is handling as many ultra-class container ships as the world is prepared to send to Halifax. “The most critical ability for us is the berthing for two ultras at the same time. We need to look at additional berthing
EAST COAST GATEWAYS
A new Halifax Port Authority website will include a truck tracking capability with the posting of gate times and truck turn times at the Ceres and Halterm terminals.
Halifax Port Authority
(Opposite page) The 349-metre, 10,062 TEU Zim Antwerp became the largest container ship to call on the Port of Halifax when it docked at the Halterm Terminal on June 29. (Right) The Halifax Port Authority recently consolidated its existing web properties with increased focus on cargo to help ships such as the ACL Atlantic Sea, seen docking at the Ceres Terminal last November.
Steve Farmer
length somewhere. Once that is in place, the necessary topside equipment will have to be brought in as well. We want to have it done sooner than later, but we are realistic about the fact that it takes time to make the decisions and set this up properly,” Farguson emphasizes. Meanwhile, as planners ponder bigpicture items such as these, others at HPA created, and this June launched, a new website for shippers, called the Port Operations Center. It consolidates and cleans up functionalities previously delivered by www.HalifaxGetsItThere.com, which itself was enhanced last year and will be phased out later this year. This will serve as a single gathering place for current operational information for local and global members of the port community, including shipping tools, operations information, container tracking, spe-
cial alerts, and key performance indicators (KPIs). “The refresh will improve the user experience and consolidate our existing web properties with increased focus on cargo,” explains Farguson. “It will also include a new operations centre which will include new KPIs allowing cargo owners more ability to track their cargo, as well as a new special alerts section for road closures, construction, weather alerts, that sort of thing.” Farguson adds that users can sign up for automated alerts that they receive via email or SMS. Farguson says improvements have made the new site a lot easier to understand. “Some of the alerts were available following the enhanced tracking in 2016, but we have brought in improved functionalities under one roof. The new site has a cleaner interface with the route maps.
Schedules at a Glance are clearer. The information you are looking for appears with less clutter on the new site.” A container tracking functionality allows shippers and carriers to enter container numbers and note the waypoints the containers have passed as they move from ship to rail, or rail to ship. As well, there is increased accountability and transparency for carriers too, with more KPI data available on the new site, according to Farguson. “You can see container dwell times, and container metrics. It is more about transparency. Everyone keeping an eye on the dwell time and making sure it is within acceptable standards.” Alerts that users can see on the website or subscribe to also include changes to MARSEC (MARitime SECurity), a United States Coast Guard Security System, continued
www.canadianshipper.com September/October 2017 27
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continued from page 27
and road, tug and pilot delays. For example, Farguson says, “We had a construction project along Marginal Road on HPA property last year. When we knew there would be an overnight closure this would have given us the ability to set an alert. Now that it’s in place, it is one more tool available to them.” Also planned for the new website this year is a truck tracking capability: the posting of gate times and truck turn times at the Ceres and Halterm terminals. As for what carriers might do with this information at the Port of Halifax, Farguson comments, “Truckers may figure out ways to use the gate times that HPA hadn’t anticipated.” A hint of how it may help can be gleaned from a traffic app called PORTal that the Port of Montreal launched last year. It allows drivers and dispatchers see wait times on Port property in real time. With such information, carriers make
strategic decisions about which terminal to visit first, dispatchers can allocate more trucks if wait times are high, and, in the bigger picture, PORTal will help reduce greenhouse gas emissions. Some of these new Port Operations Centre tools will likely help carriers when, later this year, the City of Halifax begins a three-year project to demolish and rebuild the Cogswell Interchange. While the dust hasn’t yet settled on whether container truck traffic will continue to be routed through the construction site or through other city streets (a possibility that has raised eyebrows and may raise the roof with affected Halifax residents) HPA’s new traffic alerts may come in handy. The whole business of truck traffic through downtown Halifax as it winds its way to and from Halterm is an issue that is under study. The Municipality of Halifax hired Phillip Davies, a Vancouver-
based transportation consultant, to look at how to reduce truck congestion (and the disproportionate percentage of collisions along the Port truck routes compared to the Halifax Regional Municipality as a whole). Options that Davies floated included a rail shuttle for moving containers between the Halterm and Ceres terminals, either alone, or complete with the truck. Last December, however, a news report noted that any solution would have to wait for the Halifax Port Authority to finish its Master Plan, and the possibility that a terminal might be relocated to Dartmouth. Stay tuned. CS Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade. He is based in Quebec.
The facts and numbers speak for themselves. See how a small change can make a big impact on your bottom line. PortofHalifax.ca
www.canadianshipper.com September/October 2017 29
EAST COAST GATEWAYS
CHANGING THEIR TUNE WHILE THERE IS GREAT ANTICIPATION ABOUT A POSSIBLE CONTAINER TERMINAL IN THE PORT OF SYDNEY, THE PROJECT IS STILL WAITING FOR ITS SHIP TO COME IN—LITERALLY BY TOM PETERS
F
inding a major container line with ultra-large container vessels and a firm, long-term commitment to call the Cape Breton port on a regular rotation, is the remaining piece of the equation needed to start construction of a mega container terminal, to be called Novaporte and an adjacent logistics park, called Novazone. Over 800 hectares have been set aside for the two projects. Novaporte and Novazone have been proposed by Sydney Harbour Investment Partners (SHIP), co-founded by Albert Barbusci of Montreal, and Barry Sheehy of Savannah, Georgia, originally from Montreal and with ties to Gabarus, NS. It was estimated in a study by InterVistas of Vancouver, the full build out of the terminal would cost $970 million and full development of the logistics park, which has a development commitment from the Canderel Group of Montreal, would be $2.1 billion. SHIP, formerly Harbour Port Development Partners, has been touting the project for the past three years or so, working with local government, investors, private engineering and consulting firms and it has brought the project to the point where Barbusci says getting a global carrier to commit is the next vital step. But getting project proponents to nail down a possible time line for the start of construction has been difficult and Barbusci has deflected questions about the status of the project to Mar-
lene Usher, CEO, Port of Sydney Development Corporation. Her most recent comments on the progress of the project have been quite generic. “As far as the activity of the proponents of Novaporte and Novazone, I cannot comment except to say that we are extremely optimistic and pleased with the progress that has occurred,” she said in an email. “SHIP has been relentless in their efforts to bring this project to reality. We expect project commencement in months,” she said, adding she couldn’t comment on “commitments and ongoing negotiations as they are commercially sensitive.” Barbusci and Sheehy want Novaporte to be a transportation hub. They want to attract vessels with 13,000 TEU (20-foot equivalent units) capacities and greater, transload containers onto smaller ships to move that cargo to ports that cannot handle the larger vessels. Barbusci says the terminal would have to handle a minimum 350,000 TEUs annually to be sustainable. Ports America, the largest independent terminal operator on the U.S. East Coast, has signed on to manage and operate the terminal if it becomes a reality. There are reports that a Turkish company, Yildirim Holding AS, is interesting in buying Ports America. If that were to happen it could raise questions about continued interest in the Sydney project. Marine experts have said ports in Nova Scotia, such as Halifax which can now handle the mega vessels, Sydney and another
30 September/October 2017 www.canadianshipper.com
proposed terminal at Melford on the mainland side of the Strait of Canso, have only a small window of opportunity to attract the large ships. The reasons given were that U.S. East Coast ports were spending millions of dollars on dredging projects and infrastructure to handle the big ships and the raising of the Bayonne Bridge in the Port of New York/New Jersey would open up inner harbour terminals to the 18,000 TEU ships. Many of the infrastructure projects are now complete and a portion of the Bayonne Bridge has been raised to 215 feet so those larger ships can now pass under the span and deliver cargo to a huge, more accessible market. However, Usher said recently she doesn’t see the Bayonne issue as a problem and is banking on port congestion in the U.S. to work in Sydney’s favour. “Obviously we are well aware of all of the ports on the Eastern Seaboard. Our terminal operator (Ports America) is a key industry player in the U.S. It is one thing to land these ships, however, it is quite another to offload and deploy them to their destinations. Our port will be the most modern, efficient and uncongested port on the East Coast. Similar to Prince Rupert, we will move containers very cost effectively,” she said. While SHIP searches the globe for a major carrier, the Sydney port is dealing with a few side issues important to Novaporte and Novazone development—a connecting rail line and new navigational aids system for the port’s ©Arpad Benedek/iStock
EAST COAST GATEWAYS
There was $2 million left over from the dredging project which was originally marked for the navigational aids project but most of that money has been directed to other projects. The port has been negotiating with the Canadian Coast Guard to install the new system, which now has an estimated cost of $3.5 million. CS
Veteran journalist Tom Peters has been writing about transportation issues, specifically marine, for the past 25 years. After 41 years with The Halifax Herald, Tom now freelances for several marine industry publications. Sackville, NS.
The Novaporte and Novazone projects will encompass over 800 hectares.
harbour entrance channel. The Cape Breton & Central Nova Scotia Railway, a shortline owned and operated by American rail company Genesee & Wyoming, connects Sydney to the CN mainline, approximately 385 kilometres away in Truro. However, G&W ended service on the Cape Breton portion of the line (St. Peter’s Junction to Sydney) a few years ago due to a lack of business. The company had plans to apply to the Nova Scotia Utility and Review Board to abandon that portion of the railway. Those plans have been put on hold pending possible terminal development at the port. However, the Cape Breton portion of the rail line has fallen into disrepair and a study has been launched by the port to determine the cost of bringing the line up to required standards not only on the Cape Breton portion but all the way to Truro. Usher says Hatch Engineering will carry out the study, which was expected to be completed by the end of summer or early fall. The cost is less than $400,000. “The port is the main contributor, however, we are seeking support from other stakeholders,” she says. The navigational aids issue has been dragging on since the dredging of the harbour entrance channel was completed in 2012. The channel was dredged to 17 metres to accommodate deep draft vessels such as container ships and coal boats. Nova Scotia Power (NSP) brings coal into Sydney for its power plants. NSP contributed to the dredge project so it could bring in more coal on each ship. Following the dredging new navigational aids were required in the channel. Port of Sydney Development Corporation
www.canadianshipper.com September/October 2017 31
CYBERSECURITY
The recent cyberattack that crippled A.P. Moller-Maersk earlier this year is a clarion call for carriers and shippers alike to elevate cybersecurity to a top priority BY JOHN TENPENNY
I
n the aftermath of the Peyta cyberattack that paralyzed computer systems around the world and is estimated to have cost A.P. Moller-Maersk nearly $300 million, cyber threats at sea are now on shippers’ radar. The June 27 malware attack was distributed through Ukrainian accounting software with backdoors into the networks of users. It was contained the following day, according to Maersk. The businesses “were significantly affected,” CEO Soeren Skou told the Associted Press, but there was “no data breach or data loss.” When the Danish shipping giant’s computer system was attacked, it led to disruption in transport across the planet, including delays at the Port of New York and New Jersey, the Port of Los Angeles, Europe’s largest port in Rotterdam, and India’s largest container port near Mumbai, according to reports. That’s because Maersk is the world’s largest shipping company with 600 container vessels handling 15 per cent of the world’s seaborne manufactured trade. It also owns port operator APM Terminals with 76 port and terminal facilities in 59 countries around the globe. According to Captain Andrew Kinsey, Senior Marine Risk Consultant with Allianz Global Corporate & Specialty (AGCS), Maersk was not targeted, they were impacted. “It truly shows that if it can happen to
Maersk, a company that carries one in seven containers out there, it can happen to anyone,” said Kinsey, who spent 20 years sailing with Maersk, including as Master of three different container ships. “The reality is that Maersk is one of the most prepared of the maritime shippers.” Kinsey stresses that cyber threats are a global issue for shippers. “Don’t think that just because you work in a particular area you won’t be impacted. If you’re plugged into the Internet in any way, shape or form, it can impact you. “There are no borders, everything is simply an IP address—once it’s out there, it can go anywhere.” According to AGCS’s Safety and Shipping Review 2017, cyberattacks are largely regarded as onshore affairs. And compared with the retail, healthcare and banking sectors there have been relatively few public examples of shipping incidents to date, although their number has been increasing in recent years (see page 35). In 2013, researchers at the University of Texas showed how easy it can be to take charge of vessels cruising near coastal regions: they seized the IT system of a large yacht and managed to take it off course. If such risks are not appropriately addressed, it is only a matter of time before the maritime sector suffers a major cyberattack of this nature, believes Rahul Khanna, Global Head of Marine Risk Consulting.
32 September/October 2017 www.canadianshipper.com
“We can’t put IT security on the backburner. Just imagine if hackers were able to take control of a large container ship on an important route. They could block transits for a long period of time, causing significant economic damage,” he stated in the report. AGCS tells clients that the first step in assessing cyber threats is to understand them and identify them. “Do an assessment of what on board the vessel or in the office is connected to the Internet,” explains Kinsey. “With IoT [the Internet of Things] today there are systems on board vessels that the operators may not realize are actually transmitting data over an IP address. “It could be navigation-related, cargorelated, main engine-related, auxiliary systems, all these things are sending and receiving update, transmitted data behind the scenes.” The use by carriers of commercial offthe-shelf (COTS) software for elements that were not previously Internet-connected can make networks vulnerable, says Michela Menting, Digital Security Research Director with ABI Research. “The transport industry is quickly becoming aware of the dangers of not implementing the highest standards of security, even in systems deemed of ‘lesser’ risk than other, more critical control systems.” Maritime operations are also undergoing significant change, according to ©xijian/iStock
CYBERSECURITY CYBERSECU
Menting, with ICT (includes communications technology) systems progressively underpinning port management and ship communications. Cargo management systems, for example, are being upgraded digitally, enabling interface with a variety of systems such as shipment tracking tools, but also bridge systems on board ships, notably ship navigation systems. Ships are increasingly using systems that rely on digitization, integration, and automation, which calls for cyber risk management on board. As technology continues to develop, information technology (IT) and operational technology (OT) onboard ships are being networked together—and more frequently connected to the Internet. This brings the greater risk of unauthorized access or malicious attacks to ships’ systems and networks. “The convergence of digital technologies with operational ones faces significant shortcomings in cybersecurity because efforts in digital protection of legacy industrial control systems (ICS) is severely limited,” says Menting. “While the transportation sector places heavy reliance on functional safety and physical security, the cyber-protection of connected OT is inadequate.” Wireless communications and smart device integration in aircrafts, vehicles, trains, and ships mean that these no longer function as closed systems. Today, they are often remotely linked and managed through open platforms and standardized equipment via public and private networks. The increased automation of systems, both in crafts and in ports and stations, means that a successful attack against one may well have a domino effect on interconnected adjacent systems, says Menting. This state of affairs is rendered even more dire by the fact that communications between crafts and ports are often unencrypted, allowing for potential interception and interference. “The imperative for adopting and implementing common cybersecurity standards and practices is critical because the efficiencies and cost savings delivered by OT will be significant,” she says. Chris Tuberville, AGCS’s Head of Macontinued
Five steps to cyber risk management onboard
1
IDENTIFY
2
PROTECT
3 4
DETECT
5
RECOVER
Define personnel roles and responsibilities for cyber risk management and identify the systems, assets, and data that, when disrupted, pose risks to ship operations
Implement risk control processes and measures, and contingency planning to protect against a cyber event and ensure continuity of shipping operations
Develop and implement activities necessary to detect a cyber event in a timely manner
RESPOND
Develop and implement activities and plans to provide resilience and to restore systems necessary for operations or services impaired due to a cyber event
Identify measures to back-up and restore cyber systems necessary for operations impacted by a cyber event.
Source: IMO Guidelines on maritime cyber risk management
www.canadianshipper.com September/October 2017 2017 33
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CYBERSECURITY
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rine Hull and Liabilities in the UK, agrees that with increasing use of technology and connected devices, the maritime sector will need to speed up the development of cybersecurity standards. “In the maritime industry there is no one regulation or standard for IT systems and cybersecurity that shipowners and operators have to comply with. There needs to be industry codes and best practices developed, as well as minimum regulatory standards,” he says. The timing of June’s cyberattack followed on the heels of the International Maritime Organization’s (IMO) adoption of their guidelines on cyber risk management. The Baltic and International Maritime Council (BIMCO) also updated their guidelines for cybersecurity onboard ships to reflect and align with the IMO guidelines. “They’ve rewritten a several chapters, most importantly, contingency planning and responding to and recovering from cyber incidents,” says Kinsey. “They’re aimed at what they call ‘remote conditions’ that a ship faces—that they're out there on their own. “From our point of view, it’s also important that they’ve added a new subchapter on insurance—looking at the coverage issue.” When AGCS sits down with the assured [the beneficiary under a policy] the broker and underwriter look at what coverage they have and what coverage they need to protect their interests. “What we look at from loss control is to keep them running and get them back up and running and the key to recovery is backing up,” says Kinsey. “Literally, it starts with passwords, backing up and evaluation. As well, you have to understand what your risks are—you have to know what your exposure is before you can even begin to defend against them.” Kinsey says he’s confident that the industry will take recent events as an opportunity to learn. “The silver lining in this is the fact that we have a major incident with a marine carrier that’s occurred and we are getting this information out, because in the past getting information regarding marine cyber incidents has been difficult because it can be a tight-vested, close-knit community that doesn’t like to let things out.” CS © takenobu/iStock
CYBER LOG INCIDENTS TO DATE Up until now, the global maritime community has, largely, managed to stay out of the hacker’s cross hairs. However, there have been a number of incidents over the past five years which have caused alarm: • Iran Shipping Lines was the victim of an attack that crashed its system and resulted in the loss of data tracking its carriers. This led to significant disruption in operations, financial losses, and lost cargo • Criminal syndicate penetrates cargo systems operated by Australian Customs and Border Protection • Danish Maritime Authorities discovered that they had been subjected to a successful attack • World Fuel Services falls victim to an online bunkering scam costing around $18 million • Port of Long Beach reported several large scale distributed denial of service (DDoS) attacks • Drug traffickers recruited hackers to breach IT systems at the port of Antwerp in Belgium that controlled the movement and location of containers • Malware dubbed “Zombie Zero” was preinstalled and hidden within Chinese-made scanner hardware used by shipping and logistic firms. The malware compromised at least eight companies • Hackers stole hundreds of thousands of dollars from a Limassolbased shipping company through a phishing attack. • U.S. Coast Guard officials say GPS interference disrupted operations at an undisclosed port for several hours • South Korea reported that hundreds of its vessels had to return to the port, as their GPS signals were jammed due to a cyberattack initiated by North Korea • Criminals download bills of lading from a container company’s servers. Pirates then board a number of vessels and target these specific high-value containers. Source: Safety and Shipping Review 2017 (Allianz Global Corporate & Speciality) www.canadianshipper.com September/October 2017 35
AUTOMOTIVE SUPPLY CHAIN
RAMPING UP Despite the uncertain outcome of NAFTA negotiations hanging over its head, the auto industry, long a driving force in the Canadian economy, continues to grow and evolve, along with automotive logistics BY JOHN TENPENNY
F
orget milk and wood, the No. 1 priority for the U.S. in a renegotiated NAFTA deal is automobiles. Blamed by the Trump administration for thousands of lost manufacturing jobs, North America’s auto industry has gotten considerable attention from the President’s trade czar Robert Lighthizer, who made public America’s four priorities for the sector: • A higher North American content requirement to avoid a tariff. The current rule of origin calls for 62.5 per cent of a car’s parts to be made in North America. • Substantial U.S. content in cars. It was unclear whether he was advocating a new, specific requirement for U.S. content—a move that would surely be controversial—or whether he was simply stating that the desired changes should positively affect the region, with more cars being made in the U.S. • Stricter monitoring to make sure companies comply with the 36 September/October 2017 www.canadianshipper.com
rules of origin. Lighthizer said country of origin “should be verified, not deemed.” Labour provisions should be included in the agreement and be as strong as possible. • Tougher labour standards. Some insiders in Canada and the U.S. suggest better worker conditions in Mexico, and more pay, would not only be good for Mexicans but also for making nonMexican production more cost-effective and preserving vehicle production in Canada and the U.S. Canada has pushed back, with Canada’s Foreign Affairs Minister Chrystia Freeland saying that the specific national content rules are extremely complex and that any changes would have to be made with great care to ensure they don’t disrupt supply chains. The Latin Experience Behind the headlines, the industry continues to move forward as
Photo: Henry Lin/Alpha Presse
AUTOMOTIVE SUPPLY CHAIN
Current NAFTA content requirements stipulate that in order to avoid a tariff 62.5 per cent of a car's parts must be made in North America.
well as remind us there is business to be done outside of NAFTA. A recent report from UPS revealed there are opportunities for Canadian automotive suppliers in Latin America and highlighted the importance importers place on logistics and shipping solutions, in addition to considerations on price and quality. The 2017 UPS Business Monitor Export Index Latin America (BMEI) report found that Columbia, Costa Rica and Peru are the three markets with the highest proportion of importers seeking new suppliers. The report also stated that Canadian automotive suppliers targeting importers can differentiate themselves by adopting a closer relationship with their buyers, supplying logistics services to reduce delivery delays and damaged products. According to Samir Deotale, Strategic Development Director of Automotive at UPS Canada, there are two elements Canadian suppliers should keep in mind when dealing with the Latin American market: speed and the customer experience. “If you look at an average car, it has almost 10,000 parts—small and big—that’s why speed and cost play such important roles,” he says. Understanding the customer’s needs is paramount. “Do they need a small package couriered that needs to be there in a couple of days or do they need a slower service that gets there in two weeks? “Every option has a trade-off between cost and speed. The portfolio (air, ocean, courier) is what plays a bigger role here in terms of giving customers options and the ability to customize solutions.” Local knowledge is also very important, says Deotale. “Your
broker or carrier should have extensive knowledge of origin and destination rules and regulations. Having customers already in that market ensures their employees have that local knowledge so they can adapt as situations arise and customize the solutions. “Having a local office plays a bigger role when dealing with foreign customers. If something goes wrong at the destination, local assistance is critical.” It is also important for Canadian suppliers to keep in mind that in a lot of Latin American countries the supply chain is still evolving. And that calls for even more due diligence. Connecting the dots With production of autos shifting throughout North America, consistency and reliability at a competitive price are what customers are looking for from carriers and logistics providers alike. “Each OEM has unique needs and by working together you create a sustainable supply chain with the end customer in mind, that being the buyer of the vehicle,” says Troy, Michigan-based Sarah Slazinski, Director of Sales-Automotive, for CN. According to its 2017 Investor Fact Book, CN handles close to 70 per cent of the finished vehicles sold in Canada and serves 13 assembly plants in Ontario, Michigan and Mississippi. Over the past five years, the company has invested more than $16 million in its auto compounds in Halifax, Toronto, Edmonton, Chicago, Memphis and Jackson, Mississippi. CN also moves containerized imports of auto parts through both its West and East Coast ports dicontinued
©canaran/iStock
www.canadianshipper.com September/October 2017 37
Whether it’s across town or halfway around the world, with every shipment and every project, our customers place their trust in our hands. My hands. Because at some point, every piece of business I touch becomes a personal responsibility. It’s up to me to keep costs down, performance on schedule, and quality at a premium. Someone’s business is riding on it. And I won’t let them down. I am
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AUTOMOTIVE SUPPLY CHAIN
Handling close to 70 per cent of the finished vehicles sold in Canada, CN has over the past five years invested more than $16 million in auto compounds in Halifax (pictured left), Toronto, Edmonton, Chicago, Memphis and Jackson, Mississippi.
rectly to the production centers of Michigan and Ontario, as well as containerized exports of auto parts through Vancouver and Halifax. “What’s interesting is the automotive customers are working to figure out future business models and how they will fit in on a go-forward basis,” says Slazinski. “Since the technology is rapidly changing internally at the OEMs, as a carrier, you want to keep up with it. CN is a transportation and logistics service provider and our role is to provide solutions to safely and efficiently move those vehicles across North America.” With the aforementioned shifting of production, Slazinski says CN is seeing different points of pickup—rather than getting the vehicle at the plant, they’re getting it at a different interchange. “The shift in sales matters in terms of what car type is in demand—do you have the right car in the right place at the right time,” she says. “We move SUVs and pickups on bi-levels where we can get eight to 10 on a railcar. Tri-levels are used to ship 14-15 vehicles per railcar. There are massive changes going on in the automotive industry with the concept of mobility in the next 10 years, says Slazinski. “Some are predicting that as early as 2021 they will be mass producing fully driverless vehicles, which will target ride sharing. The technology for the vehicles is there. It will be interesting to see the timing of the legislation and rules that will govern the new evolution in transportation and how those two will align. For us it’s about staying in lock-step with those developments and being prepared to support what is needed in the industry and lead where we can.” Proactive partners For Mike Galinski, Transportation and Customs Manager at Milton, Ontario’s Karmax Heavy Stamping, a Tier 1 supplier to OEMs, the relationship with carriers is critical.
“We’re a very busy plant,” he says. “We stamp parts 24-hours a day, five-and-half days a week and we’re always in launch mode. Right now I’m working on 2019 and 2020 model years.” Because Karmax runs three shifts, each shift has its own planning team, which is constantly working with the OEM, who has their own demands, such as loading times, says Galinski. “When I got here I found the carriers that were in place were dictating what to do,” says Galinski, who joined Karmax, a division of Cosma International, a subsididiary of Auroa, Ontario-based Magna International, in 2012. “It’s important for [us] that we have good business partners. I changed some of our partners because the rates weren’t being justified, the service wasn’t there and we needed proactive partners to keep changing with us as we changed with the OEMs.” According to Galinski, rates drove decision-making before he arrived, but there were a lot of extra charges because of missed deliveries and lost and damaged freight. “I had to do a bit of a culture change in helping all of the departments understand and they got it. “Our rates can’t change, because I can’t change our piece price with the OEM. We need to do some strategic planning with the carrier and say ‘I need pricing that you can hold, including fuel, for the next five to seven years.’ And then we start working from there. “My motto is ‘service will justify rates.’” Being part of an international conglomerate like Magna means there is some overlap, says Galinski. “Quite often Karmax is buying from same the vendor as three or four other Cosma facilities, which dictate and manage their own freight.” This can lead to synergies and can come from anywhere, including the cab of a truck. Galinski, says he encourages feedback from drivers, including those at MacTrans Logistics, which works with Karmax. continued
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www.canadianshipper.com September/October 2017 39
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AUTOMOTIVE SUPPLY CHAIN
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“We make deliveries at those premium service times, but we do it at a price point of a shared network, similar to a regular LTL or courier network pricing model. What’s more is it’s variable: if you don’t use it, you’re not charged,” Aaron Gerber, VP of Sales at Cardinal Couriers
“I like getting feedback from the drivers behind the wheel. They’re the best salespeople out there.” For example, Galinski explains, “A driver will say, ‘I’m at vendor A on Tuesday mornings and you’ve got four other truck carriers coming and picking up freight to haul to the GTA for Cosma plants.’ “A total of five LTLs on a Tuesday morning at vendor A coming into the GTA. Why don’t we combine it all into one load and distribute accordingly,” says Galinski. “And that’s why I like companies like MacTrans. They come to the table with proactive planning, so I don’t have look for those ideas all the time and that’s what I need from our service partners moving forward. The most important thing at the end of the day is clear, consistent communication, irrespective of what’s going on, such as when a truck breaks down. It sucks, but we have the flexibility to make some changes—provided we know.” Being a differentiator When there is no one there to receive a delivery, it poses a unique problem for both shipper and customer. But delivering freight during off hours is how Mississauga, Ontario-based Cardinal Couriers found its business model. “Our ideology is to reduce downtime,” says Aaron Gerber, VP of Sales at Cardinal Couriers, which has been involved in the automotive aftermarket since the early eighties and started working with auto-
A recent study from UPS highlighted the importance Latin America importers place on logistics and shipping solutions, in additon to considerations on price and quality.
motive OEMs in the early nineties. “We’ve got a different operation. Our trucks are operational predominantly at night—as we operate the night network. So when you look at the way we manage supply chain and distribution compared to other transport companies, it’s different because for every truck we have on the road between nine a.m. and five p.m., we have eight trucks on the road between five p.m. and eight in the morning. “We pick up from about 5 p.m. until about 10 p.m. and we’re delivering from 1
a.m. to eight a.m. We deliver to over 6,000 businesses throughout Ontario and Quebec and we do it through an unattended access method.” What makes Cardinal distinctive however, is that they run on a shared network. “We make deliveries at those premium service times, but we do it at a price point of a shared network, similar to a regular LTL or courier network pricing model. What’s more is it’s variable: if you use it, you’re charged for it and if you don’t use it, you’re not charged,” says Gerber. continued
Infographic: UPS
www.canadianshipper.com September/October 2017 41
AUTOMOTIVE SUPPLY CHAIN
continued from page 41
Gerber describes the OEMs as a group that is really well-versed in buying dedicated logistics, but, he says, they pay through the nose for it, especially in outlying areas. “Our increasing business with the OEMs has everything to do with the fact that we are matching the service that they’re getting in the outlying areas on a dedicated basis, but we’re doing it with a shared network and charging them a fraction of the price.” Often in the major city centres the overall service is a bit of a blended model, explains Gerber. “But in the extended areas, which are often the most challenging to service, we put a focus there because it’s an opportunity for us to handle a pain point and be a differentiator for those companies.” Cardinal currently manages aftermarket distribution for Toyota, Hyundai, Kia, Volkswagen, Mercedes-Benz and recently launched a program with BMW. Consolidation is a trend in many industries and transport companies are not immune, says Gerber, who is seeing a desire for carriers to either be either fully-national or bi-national. “Transportation spends are getting consolidated and the OEMs, more so than the aftermarket, want to reduce the number
of service providers that they’re dealing with. At Cardinal, that means making sure we have a robust service offering that goes across the country and that we’re no longer presenting ourselves as a regional player. In some cases we’re partnering and in several other cases we’re adding trucks to the road and offering national solutions because that’s what our customers are asking us to do.” Technology is another industry trend and takes on great meaning for a company that makes deliveries during non-business hours. “There are trickier aspects to delivering freight at night so we leverage technology to help us with that,” says Gerber. “For example, we take a lot of photographs. Our drivers have the ability to see what we’ve catalogued for a specific delivery along with the instructions for that delivery while they’re on their route from a tablet. “We’ve come to the conclusion that there is so much value to managing the supply chain at night that those challenges are worth taking on. The idea that you want freight to be in transit during the evening hours because that’s when it’s not causing delays or disruptions, is a concept much more widely accepted today than it was in the eighties, when we started.” CS
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42 September/October 2017 www.canadianshipper.com
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TECHNOLOGY
FREIGHT INTELLIGENCE IMPROVED ROI AND A BETTER UNDERSTANDING OF THE VALUE OF AUTOMATING SHIPMENT EXECUTION IS DRIVING THE GROWTH OF TRANSPORTATION MANAGEMENT SYSTEMS BY JOHN TENPENNY
S
hipping is a 24-hour business. The supply chain never sleeps and neither does technology, particularly transportation management systems (TMS), which are being increasingly utilized by companies. As the supply chain has evolved, so too has TMS technology. Traditional TMS was costly and complex to implement and maintain, but new developments have made them less expensive, easier to use and more functional, allowing more enterprises to take advantage of the great benefits these systems can provide in cost, data acquisition, efficiency and communication.
Market growth There are several key factors contributing to the growth of the TMS market, according to Chris Cunnane, Senior Analyst with Boston-based ARC Advisory Group. “First is the fact that TMS has a proven ROI. Second is the rise of omni-channel. Ecommerce is surging, and it’s not just retailers turning to e-commerce; more brands are selling products directly to the consumer over the Web. A third key factor is the rise of cloud solutions and lower barriers to entry. The freight spend required to invest in a TMS solution is lower than ever. Historically, if a company did not have over $20 million in freight spend, purchasing a TMS was
out of the question. The emergence of SaaS solutions, and less sophisticated on-premise applications, has reduced that number significantly. Now, essentially companies of all sizes can afford a TMS.” An ARC survey on the ROI of TMS found that respondents indicated freight savings of approximately eight per cent with the use of a TMS application, which is two per cent improvement from the last time ARC surveyed TMS users. Of these savings, explains Cunnane, 60 per cent of users indicated that less than 10 per cent of the net savings were absorbed by the TMS. “These freight savings can be attributed to simulation and network decontinued
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www.canadianshipper.com September/October 2017 43
TECHNOLOGY
continued from page 43
“The right TMS can provide transparency and that accompanying business intelligence, which is so necessary to make strategic, fact-based decisions in a company’s supply chain.” Brian Ware, VP, Marketing and Business Development, Transplace Canada.
sign, load consolidation and lower cost mode selections, and multi-stop route optimization,” he says. “The growth we’re seeing in the TMS market is a natural result of two things,” says Brian Ware, VP, Marketing and Business Development with Transplace Canada. “One is an increased range of functionality within the TMS offerings and it’s coupled, with what we don’t speak about very often, which is ongoing market pressures to identify inefficiencies within a company’s supply chain. And that’s what I hear about when I speak to customers and potential customers. “TMS’ have evolved from the fundamentals, which of course is order processing and tendering and dispatching to more robust, even cloud-based systems complete with expanded connectivity with customers, with carriers and even with third-party telematics providers.”
location-based services or application program interface (API) integration with carriers, you going to have near real-time visibility of where loads are and when you put predictive analytics on top of that you can start to predict if a load is going to be arriving on time for pickups and deliveries and with that be much more proactive in your management of your transportation network.” The company recently launched Ryder RyderShare, a cloud-based platform that provides real-time shipment visibility, predictive alerts, and exception dashboards. The technology is accessible through a customer-facing website and mobile application that utilizes cellular
Value-add Companies looking for ways to improve cost and service as well as gain more control over their transportation networks, would be wise to think about the value that can be delivered by the implementation of a TMS, says Dave Belter, VP & GM of Global Transportation Management with Ryder System Inc. “The simplest value is going to be the automation of a lot of the tactical administration of the transportation network.,” he says “You are going to gain greater visibility, especially now with integration of 44 September/October 2017 www.canadianshipper.com
and GPS technology to link shippers with onboard vehicle technologies. “We took an innovative approach in developing Ryder RyderShare by collaborating with several of our customers who were seeking greater network visibility and proactive event management around their shipments,” said Steve Sensing, President of Global Supply Chain Solutions at Ryder. Another advantage of implementing a TMS is to maintain continuity of resources, says Ray West, Senior VP & GM of TMS Solutions for TMW. “In other words, to make sure you know where your resources are at all times—your drivers, tractors, trailers and other assorted equipment. A make sure you have continuous service out of that. You know which trailers are available in a certain yard at a certain time so that you can book freight on those trailers. Knowing where they are from a in-transit visibility standpoint, or if you have to deadhead a tractor from one location to another to make a pickup. You need to be able to account for that deadhead segment because someone will have to pay for that segment, most likely the driver and alternatively you have costs associated with that deadhead segment. “You can’t dispatch a tractor from one location if they’re actually at another location without adding that deadhead segment so that you cover your associated costs—your deadhead mileage and paying the driver for that deadhead ride.”
“One of the most valuable things inside companies today is the data because the data shows the history of the lanes that you’ve made profit on and the lanes that you’ve lost money on. … Everything is about the data.” Ray West, Senior VP & GM of TMS Solutions, TMW
TECHNOLOGY
According to Belter, it’s not unheard of that a shipper could achieve 10 per cent ROI, depending on their current condition and whether they are centralized or decentralized in how they manage their transportation. “We’ve worked with customers that were entirely decentralized where they have all of the transportation decisions being made at the local level and the don’t have control over any kind of a route guide compliance and the local operators that are making decisions and they have no centralized view of what their costs are and why their costs are what they are. “Other customers are much more sophisticated in that they’ve already centralized some stuff, but they’re looking at TMS to get to the next level of automation and maybe the business intelligence. “Investments that have been made over the last five years or so and what’s available today in terms of business intelligence capabilities has really been huge in the TMS space because if I’m working at a strategic level I can clearly see the performance of the network and understand where the network is underperforming as well as start to put some predictive elements into the business intelligence where I can begin to understand where my surges are occurring and be better prepared to handle seasonal surges than maybe I had in the past.” Many shippers who already have TMS may now be looking to upgrade or replace their technology and according to West, there are usually a couple of tipping points behind the decision. “Perhaps your business has changed, you’ve gone from long haul to short haul or you’ve gone from flatbed to van or added reefers,” says West. “You could also be on a legacy system that is out of date or perhaps a homegrown system. A generational change sometimes causes that change where they might have an older mainframe computer-based system and the newer generation wants a Windows or webbased system. “Or it could be that you’ve maintained a custom system for years and it’s hard to find programmers anymore and you want out of the business of having a custom
TMS Benefits Keeping Shippers Sailing High
Reduction in headcount transpor77% Efficiency 36% Better tation rates 30% transpor- 57% Data accuracy 38% Better tation service
Training required to maximize value of platform
22%
Cost to invest in the platform
44%
48%
Lack of integration between global transportation platform and systems from external service providers
Lack of integration between global transportation platform and other internal systems
61%
TMS Challenges Weighing Down Shippers According to the American Shipper Transportation Planning and Execution Benchmark Study the biggest transportation management challenge faced by shippers is the integration between TMS and other systems.
system that only you can maintain and support and you want to go with a commercial software provider and gain all of the efficiencies that they’ve provided for hundreds of other customers across the market.” West believes one of the most valuable things inside companies today is the data because, “The data shows the history of the lanes that you’ve made profit on, the lanes that you’ve lost money on. What the best freight mix, who are the best customers, which vehicles do you have lower service rates with or higher costs per mile with. Everything is about the data.” According to West, TMW is doing a lot of consolidation of data across multiple fleets to provide freight lane indexes and the ability for customers to look not only within their own four walls, but also out-
side of that to see what the rates are for a particular lane or what the market will bear in a certain area so they can determine whether those are profitable lanes or not. Intelligent decisions The right TMS can provide transparency and that accompanying business intelligence, which is so necessary today to make strategic, fact-based decisions in a company’s supply chain, according to Ware. “Where you can have concerns with some companies is where they don’t have access to that intelligence and they may be making decisions on the fly that may not be in the best interests of their company. “And these decisions are so important to supporting cost reduction and avoidcontinued
Infographic: American Shipper 2017 Transportation Planning and Execution Benchmark Study
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TECHNOLOGY
continued from page 45
“One of the critical value drivers is all of the intellectual capital that you wrap around these technologies and processes to support the shipper’s journey and effectively meet the requirements of their supply chain.” Dave Belter, VP & GM of Global Transportation Management , Ryder System Inc.
ance, but ultimately it’s there to strengthen support for business growth and TMS can be an effective tool for that.”
The return on investment of TMS can be found, Ware says, in cost reduction and avoidance, which come in many
forms, such as data centre and software development costs and lower IT costs opposed to a homegrown system where the company is making updates and changes, weekly, if not daily. “A TMS can also provide visibility to financial metrics and that’s important, not just at a macro level, but getting down to some granularity because those metrics will allow for optimization within a company’s transportation network.” A TMS can also provide access to reporting, which brings a greater focus on carrier compliance and that focus can often lessen the sting of non-compliance fines and penalties. All of that is prefaced by using the “right TMS,” reiterates Ware, which when combined with the right people and process—the three-legged stool— will pay for itself. “What we’re seeing is a high demand for that enhanced track and trace feature.
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46 September/October 2017 www.canadianshipper.com
TECHNOLOGY
One of the things we’ve had success with is dynamic routing and auto tendering. We hear a lot about the interface as well. ‘Is it friendly?’ because a TMS is going to be used at all levels of your organization, not just on frontline operational staff, so a user-friendly interface that allows for ease of access to reporting, dashboards, key performance indicators, etc., that’s what we continue to see as features that are in high demand from our customers and potential customers.” Supply chain optimization According to Belter, the value of various TMS features and functions are going to vary by type of supply chain. “For example,” he says, “If I’m an inbound network my ability to manage my POs and gain optimal visibility of my suppliers’ compliance to ship and release my material on time and in full is critical. “The integration of location-based
services technology with TMS that gives real-time visibility of where’s my load, becomes a critical feature, not just from the management of perfect execution to pick up and deliver on time, but also from security perspective. Those capabilities can be further enhanced when you can begin to monitor the temperature of your product in transit. You’ll have real-time visibility if a refrigerated unit is beginning to fail and the temperature is rising, so you can do something about it before your product no longer meets your customer’s requirements.” In additon, what type of optimization capabilities does the TMS need have in order to extract the greatest value from a transportation network becomes critical in the decision of what type of TMS a company is going to consider. “Today it’s all about business intelligence and that pure visibility through location-based technologies and API tech-
nologies,” says Belter. “In the future, think about it as a collaboration layer within a TMS, where suppliers and carriers and others all are equal partners in the supply chain.” While technology plays an increasingly important role in transportation, people are still the No. 1 resource for companies, says Ware. “The right TMS can be a very effective tool, but where the rubber hits the road is how that technology is used by people. Skilled operators that well-versed are in the company’s business and supported by stakeholders that are interested in the data and predictive analytics is important, but TMS suppliers like Transplace need to ensure that potential buyers of the service are aware of, not only its overall functionality, but also how it’s going to be continuously supported by people that understand their business and also improved upon.” CS
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www.canadianshipper.com September/October 2017 47
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RETROSPECTIVE
The long and winding road of TMS Canadian Transportation & Logistics’ October 2004 issue featured an article discussing the benefits and savings of companies implementing transportation management systems (TMS). “…TMS are becoming a hot topic since they enable planners to keep score by proving metrics on the functions that keep their companies competitive and profitable,” wrote author Ken Mark, in the piece, entitled “Taking the right road to savings.” Some things never change. One of the trends that is driving the TMS market today is the proven ROI tied to TMS. A TMS saves companies money by lowering their freight spend. A recent survey from Boston-based ARC Advisory Group on the ROI of TMS found that respondents indicated freight savings of approximately 8 per cent with the use of a TMS application, which is two per cent improvement from the last time ARC surveyed TMS users. Of these savings, 60 per cent of users indicated that less than 10 per cent of the net savings were absorbed by the TMS. These freight savings can be attributed to simulation and net-work design, load consolidation and lower cost mode selections, and multi-stop route optimization. Because of this proven ROI, and coupled with the rise of e-commerce and lower barriers to entry, it is not surprising that the TMS market is growing at a substantial rate. As a result, there are more companies pressing to win new deals, and offer a differentiated TMS experience. This can often make it difficult for a TMS buyer to figure out which solution is right for their company. Chris Cunnane of ARC, recently wrote on the company’s blog Logistics Viewpoints, that companies should research their TMS purchases. “Make sure to do your due diligence when shopping for a TMS solution. This means understanding how that specific solution will meet your changing needs. It also means understanding what features and
functionality are most important for your company now, but also over the next 10 years. Every solution is different, with its own unique set of strengths and weaknesses. Companies need to dutifully research these strengths and weaknesses before making a purchase decision.” CS
www.canadianshipper.com September/October 2017 51
INSIDE THE NUMBERS WITH LOU SMYRLIS, MCILT
Percentage of heavy duty fleet anticipate replacing by end of 2017
RAMPING UP FOR RENEWAL Canada’s motor carriers have slowed down their new truck purchases the last couple of years due to concerns about a slow growth economy and overcapacity. However, optimism is building for greater economic growth in 2018 and the results from our just completed annual Equipment Buying Trends Survey indicate that fleet owners across the country are once again ramping up their fleet renewal plans. Almost seven in 10 respondents reported plans to replace at least 10 per cent of their heavy-duty fleet by the end of the year. Close to four in 10 are planning to renew their medium duty fleet.
Trucking industry sector
0%
32% of respondents
30% or more
15%
15%
39%
20% 10%
Percentage of medium duty fleet anticipate replacing by end of 2017
For-hire fleet
0%
51% of respondents
62% of respondents
Lease/rental fleet
3% 8%
6% 37%
Government fleet
8%
30% or more Private fleet
Geographic distribution
Size of heavy duty fleet
0 vehicles
of respondents
1-9 vehicles
28%
1-9 vehicles
49%
10-24 vehicles
21%
10-24 vehicles
13%
25-99 vehicles
29%
25-99 vehicles
9%
100-499 vehicles
12%
100-499 vehicles
5%
500 or more vehicles
8%
500 or more vehicles
4%
62% of respondents
15% Eastern Canada 52 September/October 2017 www.canadianshipper.com
Size of medium duty fleet
3%
0 vehicles
Western Canada
10%
20%
Central Canada
21%
24%
of respondents
21%
COACHING CORNER
Toxic workplaces Remember, unethical does not necessarily mean illegal Q: What can you do when your boss asks you to do ethically questionable things? What happens if they are either the president or have the support of the president? Should I call them out on it? I don’t want to lose my job, but I feel sick to my stomach. I am so frustrated.
A: Sorry to hear you feel your values are being compromised in the process of earning a living. Without knowing the specific transaction and/or business practice in question we will address the different elements in question. Let’s break it down one step at a time. One of the things that often confuses people when witnessing or being party to questionable practices is knowing where the line is between ethics and law. Ethics deal with ideas about what is good and bad behavior. Something that is illegal is against the law, whereas an unlawful act merely contravenes the rules that apply in a particular context, for example a code of conduct. Ethics are not law. They are also subjective. What is ethical for one person may not be for another. They are social or professional standards that a group agrees to, either by social norm or by written charter, which is the case of professional Boards of Ethics. Ethics are about values. In the case of a business, values are part of their culture, often times specified in their mission statement. Values are what a company stands for, but the thing about values is that the same word can mean different things to different people.
©id-work/iStock
By Carolina Billings, CPCC, CHRL, MA-IS
For example, an accounts payable associate gets a call from someone asking for their payment. When that person checks on the status of the cheque they are told to say “it’s in the mail” even though it is sitting on the manager’s desk awaiting their signature. This act is by all intents and purposes unethical. Someone is asking you to lie, but it is not illegal to do so. Forging someone’s signature on
Ethics are not law. They are also subjective. What is ethical for one person may not be for another.
that cheque, however would be illegal. There are many questionable practices that are lawful—animal testing, the way some products are marketed or advertising claims—yet the ethics behind them are perceived differently by many. Values play a huge part in the culture of a business. An overly aggressive workplace with values that don’t align with your own could easily be the source of great anxiety, frustration and even physical illness. I can recall the case of a sales executive who refused to handle an account that distributed hunting rifles. It went against his personal values. All the items sold were 100 per cent legal. While the account was given to somebody else,
the owner wanted to demote the employee from their leadership position, which would have been illegal. The best course of action is to first find out what the law says about the specific transaction in question. A lawyer would be the ideal person to ask as there are many business practices that have become best practices, such as giving people sick days which are actually not legally required. Many company policies may turn out to be against the law without them being aware of it. In such instances, bringing it to the attention of your immediate supervisor would be the appropriate thing to do. If after doing so, the policy remains in place, you have a difficult choice to make as it may mean having to look for other employment. Bringing your concerns to the human resources department, if the company has one, is also a good option. Just make sure to document such meetings, in case the company attempts to reprimand you, something that is considered an illegal employment practice. CS Carolina M. Billings is Partner & CEO of a business consulting group and has 15+ years' experience in the fields of Business Development, Human Resources and Finance. She champions leadership initiatives as well as empowering and coaching/ mentoring others to lead. For more information please visit www.thehiveconsulting.ca or email Carolina@thevillagehive.ca
www.canadianshipper.com September/October 2017 53
THE BIGGER PICTURE
NAFTA broken? Says who? The recent announcement by the U.S. administration that it will not be pursuing a border tax on imports from Canada is a reminder of the need for a strong Canadian strategy for the ongoing NAFTA (North American Free Trade Agreement) renegotiations. Let’s start with the premise of a U.S. border tax on Canadian imports. There is no border tax. This is a classic example of the “opening position” in negotiating terms, and a shrewd one at that. Prior to NAFTA talks beginning in Washington, the U.S. scored a psychological victory over its opponent. By publicly stating they would not be implementing a border tax, the U.S. negotiators created an environment where Canadian negotiators may now feel obligated to give something in return. It also gives Canadian negotiators a way to save face if they give away too much during negotiations by being able to say they at least avoided a U.S. border tax! In other words, make it easy for your opponent to lose. The reality is that Canada blinked by not taking a more aggressive stance at this early stage. What would that look like? For starters, Canada should not have tipped its hand by allowing cabinet ministers and parliamentary secretaries to make 175 trips to the U.S. to meet with 300 senior U.S. officials, members of Congress and governors. What kind of leverage did Canada convey in spending hundreds of thousands of dollars to beseech U.S. counter-
parts not to implement something that wasn’t even part of NAFTA? That response demonstrated supplication to an opponent, not strategy. And make no mistake, Canada and the U.S. are opponents in this renegotiation, not partners. Partners don’t begin negotiations by making it clear they want to win at the expense of the other party. NAFTA has benefitted all three trading participants. The U.S. has made it very clear it has only one objective, it wants to win more. To paraphrase an old saying, “one man’s more is another man’s loss.” This is a contest. Presently we’re at the “weighin” stage with lots of verbal jousting. Arm-wrestling began August 16th and fisticuffs (good-natured or otherwise) will likely begin sometime thereafter. Has NAFTA been a success for all three participants? “Yes,” according to the Council on Foreign Relations (CFR) in their assessment “NAFTA’s Economic Impact,” released in January. While CFR presented contrasting views from several economists, the overriding sentiment is that NAFTA has been a success for all three countries. No one disputes that jobs have been lost as a result of NAFTA (in Canada as well as the U.S.). In fact, CFR references a 2014 study by the Peterson Institute for International Economics which estimates that approximately 15,000 jobs are lost in the U.S. each year due to NAFTA.
54 September/October 2017 www.canadianshipper.com
By Laurie Turnbull
However, for each job lost, “… the economy gains roughly $450,000 in the form of higher productivity and lower consumer prices.” Nonetheless, 15,000 jobs is not an insignificant number, especially to those whose jobs are lost. But, taken in perspective, 15,000 jobs is
ported products. More importantly, economists argue that U.S. manufacturing jobs have suffered far greater losses due to trade with China and advances in technology than from NAFTA. What’s needed now is strategy. What would that look like? To begin with, it means not letting your oppo-
“And make no mistake, Canada and the U.S. are opponents in this renegotiation, not partners. Partners don’t begin negotiations by making it clear they want to win at the expense of the other party. not the national catastrophe that U.S. negotiators would have us believe. At least not when one considers that estimates of the total number of jobs relying on NAFTA run as high as 14 million. Furthermore, according to CFR, NAFTA creates about 200,000 new export-related jobs each year, which pay 15 to 20 per cent more than the jobs that were lost. NAFTA critics in the U.S. frequently point to the auto industry which has lost some 350,000 jobs since the advent of NAFTA, claiming many of those jobs went to Mexico. That may well be true, but consumers also benefit from falling prices of those im-
nent frame the negotiations by conceding points that weren’t on the table in the first place. It means not losing our position in terms of exports of automobiles, mineral fuels and machinery, or sacrificing Canada’s supply management system for agriculture and dairy products. It means reminding United States Trade Representative Robert Lighthizer that approximately 50 per cent of all intermediate goods used in U.S. production come from Canada and Mexico. Steve Verheul, Canada’s chief negotiator, needs to look at the bigger picture. NAFTA is not broken just because one party claims it is. CS
Laurie Turnbull, CCLP, P.MM is a supply chain consultant with Cole International, a Canadian logistics company providing Customs brokerage, warehousing and worldwide transportation services. He can be contacted at laurie.turnbull@coleintl.com
©iStock
BUILDING CONNECTIONS WHEREVER WE GO. CP prides itself on building partnerships. We work with our customers, wherever they are, to identify their needs and help meet their objectives, while providing the best service along the way. CP is your full supply-chain solution provider that gets your goods to where they need to be.
Learn more at cpr.ca
The supply chain never sleeps. And neither do we. At Transplace, we are relentless in executing our customers’ transportation and supply chain needs to achieve profitable and predictable results. Continuous improvement and innovation is core to our culture, and we aren’t satisfied until you are. Learn more about our North American logistics and technology solutions at Transplace.com. 1.866.413.9266 | info@transplace.com
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