MM&D now posts daily news items to our website and tweets the news on our Twitter feed. We also shoot video.

Below is a list of original MM&D videos. They include demonstrations of innovative technologies at use in the Canadian supply and interviews with key players in the industry.

Supply Chain Canada: Flowcasting and highlights
A discussion at Supply Chain Canada about what flowcasting is and how it works

Racking up a storage solution
Flint Packaging installs mobile pallet racks

Canadian 3PL thinks robots
Think Logistics turns to Kiva robots for a competitive edge

Canadian ports compete fairly: Lisa Raitt
US grievances against Canadian ports are a long-standing issue

Lisa Raitt discusses labour relations in the logistics sector
Says government is watching CN, Chorus and the Port of Montreal

Ports call on Hamilton
Association of Canadian Port Authorities holds annual conference in Ontario

Inside FedEx’s new facility
Business needs drive relocation and construction

Pival Expedite opening
New headquarters part of the company’s plans for growth

Supply Chain Canada: Interview with RF Pathways
Company releases update of its warehouse management software

Supply Chain Canada: Interview with Lean Supply Solutions
iPads ready for warehouse deployment

Supply Chain Canada: Interview with Second Foundation
New ERP system introduced

Interview with 2012 SCL President’s Award recipient Naeem Farooqi
Winner creates program to buy parts for eight transit authorities

Fashionable supply chain
DHL Express Canada helps designers send clothes down the runway at Toronto Fashion Week

A Canadian 3PL, Think Logistics, understands the attraction. The company recently took possession of 15 Kiva robots and has deployed them in its Vaughan, Ontario-based warehouse.

Think Logistics invited MM&D into to its facility for an exclusive, first-look at the system in action.

To read more about Think Logistics and its Kiva robots, check out the cover story from the November-December issue of MM&D.

Step-by-step, the Liquor Control Board of Ontario (LCBO) is making business flow better by moving some core supply chain procedures into the cloud.

The Ontario government agency, responsible for purchasing and retailing wine and spirits in the province, has steadily been looking for ways to streamline procedures, reduce errors, and free up staff from clerical duties so they can perform more complex, higher-value work. To that end it has completely reworked both its purchase order and inbound delivery scheduling systems, and turned them from laborious, inefficient, paper-, fax- and telephone-based processes into Web-based, automated, self-serve systems.

The LCBO buys alcoholic beverages from roughly 2,700 suppliers in 75 countries. Some suppliers are major, multi-national organizations. Others are small artisanal producers who sell only a few cases of wine to the LCBO every year. In total the agency issues about 40,000 purchase orders (PO) annually.

Implementing a system that was both robust enough to handle the number of purchase orders the LCBO issues and simple enough that it could be used by its entire supplier base made choosing the type of platform a pretty easy decision.

“We knew it needed to be Web-based. We knew it needed to be accessible from anywhere in the world, around the clock. It had to provide that PO visibility. It had to be secure, and have a secure protocol for access and it had to provide online training for problem issues and support problem resolution 24/7. We also needed it to provide good audit trail tracking, exception reporting and real time visibility,” says Lisa MacGregor, director of supply chain for the LCBO.

The LCBO was already using a few applications, including its new submission system (NISS), developed and hosted by the Mississauga, Ontario-based QLogitek division of Logitek Data Sciences Ltd, so it returned to that company to create a Web-based purchased order management system, referred to inside the LCBO as WEB PO. WEB PO, however, was was much larger in scope and was to be the first step in a more integrated supply chain management solution.

Because of the vast changes this system would bring, the LCBO knew it had to invest a great deal in supplier training and preparation before the system could go live, says project manager David Collins.

“With 2,700 suppliers around the world, getting them registered was a big task before roll out. That was the main hurdle for the WEB PO rollout. We developed our own in-house application for them to register. We had them sign up an administrator. They would provide their e-mail address and background information. We would verify that. We held back all the passwords and user IDs until the weekend before we actually rolled out so they didn’t lose them ahead of time. After they became an administrator, they could sign up additional people from their own office.”

One of the challenges facing the LCBO was the multilingual nature of its supplier base. The software itself is only available in English, but suppliers who had problems due to language were able to call the QLogitek-run support line and receive assistance delivered in their native languages.

WEB PO has all but eliminated phone calls and faxes for regular transactions. Now only exception-based incidents need to be dealt with manually. The software handles the rest of the normal, everyday transactions.

“If we issue a purchase order to a supplier for 1,000 cases to be delivered for September 1, the supplier can request a change and say, ‘I only have 800 cases and I can’t make September 1 but September 15.’ That then comes back to us for us to approve or reject, and it’s all automated. We don’t have to deal with that manually. An alert goes to our LCBO staff. It’s up to them to accept or reject, but it’s still in the system,” says MacGregor.

“They’ll actually re-issue the PO, then it goes back through the normal channels and the supplier will see a revised PO come through,” adds Collins.

Beyond its automated order handling capabilities, MacGregor says one of WEB PO’s biggest advantages is it now gives the LCBO the ability to track supplier performance.

“We have the audit trail, so we know if suppliers aren’t meeting demands or time frames. That was a key point for us in terms of being able to have good data to track suppliers’ performance. It’s done by data extraction to a vendor scorecard. That process is a little more manual in terms of the data extraction, but at least now we have the data in terms of being able to identify problem vendors.”

Not content to roll out one project at a time, MacGregor says the LCBO and QLogitek began work on the inbound management system (IMS) system while WEB PO was under development.

“They were always intended to be developed somewhat concurrently but WEB PO was the predecessor and IMS was dependent on it. So they were two concurrent projects, with one being integrated first.”

QLogitek’s IMS solution needed more customization than WEB PO, but both pieces relied on information from the LCBO’s internal systems.

“We just had to develop the interfaces from our internal purchase order generating system, from our sales forecasting mainframe systems, our supply chain management systems. A lot of our software isn’t what you would consider the main ones. We use AquiTec. Our forecasting system is Teradata Demand Change Management…not the big players in the market.”

Like WEB PO, IMS was needed to replace all the manual interventions needed to schedule deliveries to LCBO’s warehouses. WEB PO feeds information about purchase orders to IMS, which uses that data to reconcile deliveries. Before IMS, the 17,000 deliveries a year from the LCBO’s North American suppliers were all managed through Excel spreadsheets by staff who answered phone calls from trucking and 3PL firms who called in to make, cancel and reschedule appointments.

As with WEB PO, early training was key to getting adoption from staff and from outside users.

“We trained the carriers in-house because it’s a much smaller subset—about 25 to 30 users. We do have some vendors who book their own appointments, but mainly it’s the carriers who book the appointments. We use a limited number of carriers. The in-house training went very well, therefore we had no issues on the roll-out.

“They were both Big Bang approaches. Once we implemented WEB PO that was the only way you could get a purchase order. Once we implemented IMS that was the only way you could get an appointment. You had to book your own appointment. The carriers loved it. They really like looking after their own appointments. We’ve had nothing but positive feedback from them,” says Collins.

IMS has a great deal of flexibility built into it. Carriers can book and reschedule any delivery up until the warehouse’s cut-off time, typically 3:00pm for an appointment the following day. Originally, they were only allowed to book appointments up to one day late, but the LCBO team found that restriction generated too many phone calls, so now carriers can rebook deliveries up to 30 days late.

IMS includes some tracking functionality, so carriers who consistently fail to meet their delivery dates or constantly reschedule within 48 hour periods aren’t falling under the radar. Currently, the LCBO doesn’t have the ability to produce carrier scorecards, as it does with suppliers, but that’s in the works.

IMS has improved operations at the DCs, says MacGregor.

“We don’t get more appointments in but we have a better handle on visibility and synchronization and forecasting in terms of the number of appointments we need or when are we going to have to schedule a third shift at a warehouse. We have much longer visibility versus having to schedule at the last minute.

“It allows us to redeploy and get better utilization out of resources in other areas too, as other areas would get involved in trying to resolve appointment bookings. It has just streamlined everything and made the process much more visible and removed resource allocation to it to. Most of the resources are either savings or being able to redeploy them into higher value added positions.”

Even though these systems are now live—WEB PO was deployed in spring 2010 and IMS went live in spring 2011, they’re still works in progress.

“We are still going through multiple releases of the systems and making them better. We’re just working on our third release of IMS. WebPO is not as complicated as IMS, so we just went through two releases. I think after this release it will be fairly stable. As we were testing the initial release, a wish list did arise and we’ve been pecking away at that wish list, and I think we’re now at a point where there’s not too much left on the table.”

Just because these projects are nearly finished doesn’t mean the LCBO is done innovating. MacGregor says the team is already thinking about the next project. While some businesses may balk at the prospect of a never-ending stream of major software and computer system upgrades, MacGregor says LBCO executives are usually willing to listen to proposals.

“Senior management here at the LCBO is very supportive and proactive in terms of business efficiencies, improving the business, and making us work better. Once you are able to make a good business case, senior management is pretty good to get behind projects that show that.”

According to its own figures, the agency has realized an annual savings of $731,000 annually through the use of WEB PO and IMS.

Summertime is ice cream season, which means summer is also the busiest time of the year for ice cream distribution and warehousing company TransCold Distribution Ltd.

In the past Delta, British Columbia-based TransCold has had to hire extra staff to find, pick and process outbound orders of vanilla, strawberry and rocky road ice cream. This year, the company didn’t need the extra manpower — not because western Canadians are abstaining from frozen treats, but because of operational efficiencies gained through the company’s newly installed warehouse management system (WMS).

TransCold distributes Breyers ice cream and Popsicle-branded products for Unilever in British Columbia, Alberta, the Yukon, the Northwest Territories, Washington and Oregon, and Chapman’s ice cream lines in British Columbia. It also handles frozen products such as SoGood’s frozen soy desserts and Sara’s ice cream cakes.

Until recently, the company, which does over $80 million in sales, had been handling the old-fashioned treats in an old-fashioned manner—manually, using paper-based methods, says Curtis Wright, director of Logistics for TransCold.

“We would order product from our supplier, Unilever. They would send the order to us. We’d have that order in an e-mail and it would be printed for the warehouse to check it off when it was received. Then they would manually write down where it was located in the freezer because we had manually labelled the freezer by aisle and row, so that we knew where vanilla ice cream was sitting all the time — where it was in the pick location and where it was in the storage location,” explains Wright.

“Then we’d have to record all the numbers required by the supplier onto pieces of paper and we’d keep them in a manual, which we duplicated so we could have one in the office and one in the warehouse. What was happening was we were finding it more difficult to locate smaller amounts of products.”

The system TransCold chose came from Avalanche Food Inc, an Oakville, Ontario-based technology service provider for the frozen food industry. Avalanche has experience working with SOCS, the order entry system used by TransCold’s main supplier. Integrating that and TransCold’s Accpac invoicing system was crucial. Avalanche also offered features that TransCold hadn’t even considered, such as being able to enter expiry dates automatically.

The new system uses handheld scanners instead of paper and pencils to record product information. Because of the freezer environment, Avalanche had to ensure the technology would work in the low temperatures, says Alan Bush, president of Avalanche Food.

“We used really old technology because it’s the most reliable in the cold. And the little handhelds we’re using can handle really low data rates. So that kind of interface is pretty inexpensive. We used old Cisco wireless access points that are only A-band. It’s old and slow, but the terminals we’re using are emulating VT220 terminals so they’re like old green screens from the ’70s. We don’t need the speed. What we want is the reliability and the ability to withstand the cold.”

Information captured by the handhelds is used to feed the cloud-based WMS. Data from the warehouse floor feeds the WMS, which in turn reigns supreme over the company’s other systems, adds Wright.

The cloud-based WMS has been implemented in the company’s main warehouse in Delta, British Columbia. Next it will be rolled out in the Calgary, Alberta warehouse, then in the Nanaimo, British Columbia facility.

TransCold is also working to expand the system’s capabilities. Besides storing frozen foods, the company handles dry goods such as waffle cones and even equipment such as display freezers used in retail outlets. Currently these items aren’t accounted for in the system, explains Wright.

“We didn’t even think of it at the beginning, and then a light bulb went off and we said, ‘Hey why can’t we do everything?’ So Avalanche is working on those modules. In fact I received an e-mail, and all I have to do is approve it and they’ll go ahead.”

Congestion, particularly in the Greater Toronto Area and around any of Canada’s major metropolitan centres, is an issue facing fleet operators as they target operating efficiencies and associated costs.

Metrolinx, a Government of Ontario agency focused on transportation in the Greater Toronto and Hamilton area, concluded in a report (Costs of Road Congestion in the Greater Toronto and Hamilton Area) that the annual cost of congestion to commuters in 2006 was $3.3 billion as a result of environmental impact, increased vehicle costs due to travel delays and the greater risk of vehicle collisions. In addition, these annual costs were expected to climb to $7.2 billion by 2031.

“The supply chain industry, which is more sophisticated than it’s ever been, is facing a variety of challenges around congestion and our industry would be well advised to solve this issue before governments feel the need to intervene,” says John Dolbec, president and CEO at TransHub Ontario, a membership-based, economic development corporation aimed at attracting businesses that rely on or provide transportation and logistics to the Hamilton-Burlington-Niagara hub. “It’s simply not acceptable for goods or human resources to be tied up due to congestion while in transit in today’s highly competitive universe.”

Government and big business have been looking at congestion, and while they unanimously agree that expanding the existing infrastructure is not an option due to the stratospheric costs involved, no to mention the lack of available land, there’s been a lot of talk with little concrete action.

For instance, in February 2011, Metrolinx released a report that states trucking is the GTHA’s most prominent urban freight mode for short- and long-distance hauling. Virtually everything sold to the public relies on a truck for part of its journey. While the report acknowledges the myriad challenges, it also recommends multiple actions, including the investigation of better managing curbside delivery space, intelligent lane utilization and truck-only lanes, incentives to encourage off-peak deliveries and exploring flexible freight delivery times.

Feasibility study
Last year, Nestlé Canada took it a step forward when the company asked University of Waterloo students, Taufiq Ramji, Jessica McPhee and Ari Paunonen—who have all since graduated from the Management Engineering program—to further investigate the viability of off-peak ice-cream deliveries in the high-traffic geographic area that runs from Oshawa to Fort Erie and Newmarket to Lake Ontario. They would also look at the impact on customers who run the gamut from major chains like Mac’s, Sobeys and Metro to independent mom-and-pop operators.

Joe Malon, Nestlé’s leader of alternative routes to market, is well aware of the costs of congestion and the associated delays to the company and its employees, suppliers and partners in terms of lost productivity and capital (fixed assets) and operating costs, such as manpower, fuel, maintenance and parking tickets.

“Our drivers and their trucks spend a significant portion of every day in heavy traffic—imagine the impact if a percentage of the national truck fleet were shifted to off-peak hours?” says Malon.

While off-peak deliveries would benefit municipalities by reducing emissions and the load on infrastructure, they might also facilitate corporations’ best possible use of fixed assets while containing the operating costs tied to fuel consumption, maintenance, repairs and parking violations.

“We could do more with the same size fleet or handle the same volume of deliveries with half the fleet,” notes Malon.
Yet as TransHub’s Dolbec points out, in an industry facing critical driver shortages, off-peak shifts could further exacerbate that problem. While some drivers might appreciate the night shift and the benefits it brings, others might refuse it or demand significant compensation for it. In addition, the impact on drivers’ health and safety also needs to be recognized and a commitment made to regular shifts to allow consistent sleep schedules.

The UW team researched City of Toronto bylaws, Nestlé Canada’s current policies and customer-specific mandates such as approved delivery times, signature requirements and the various types of preferred payment.

Challenges
Yet as the UW researchers soon discovered, the many benefits were offset by a variety of challenges, many of which could be addressed with a little creativity and flexibility. In certain residential or quiet zones, loading/unloading noise may be prohibited during certain times and on particular days, but regardless, organizations may need to consider noise abatement systems such as “hush kits” on rolling doors and dampening material on the floors of the refrigerated boxes to maintain a positive relationship with residents. The UW team suggested the trucks carry signage indicating that noise abatement systems were in place on those vehicles. After all, it’s best to be proactive and take the initiative in an effort to preempt and avoid any complaints about back-up indicators, cooling systems or metal doors late at night or as dawn breaks.

Safety and security are also a concern, and retailers might need to agree to non-cash payments for safety’s sake or consider allowing someone other than a manager to sign for the off-peak deliveries. Off-peak, trucks should be staffed or locked at all times, although Malon points out that should be the policy anytime. Also, smaller stores frequently have only one staff member on duty for the late shift, making it a challenge to move the new stock into cold storage after it’s delivered.

Of course, any organization would need to carefully assess customer interest and acceptance, then determine whether the volume warrants an off-peak shift. Despite Nestlé Canada’s interest and commitment, a customer survey in 2011 indicated that of the 166 retailers surveyed, 82 were open to off-peak deliveries, provided they were able to switch from cash to charge payments, received the deliveries within certain time windows, adjusted staffing and were able to obtain direction/approval from head office. The 63 who rejected the proposed off-peak deliveries were concerned about local by-laws, timing, wanted to personally check the deliveries or didn’t trust night staff. Close to 20 didn’t respond.

“When the industry shifted to just-in-time delivery, we faced similar obstacles and issues, but we overcame them together because we could all see that JIT was here to stay,” says Dolbec. “Ultimately, whoever pays the bills determines when and how the goods are shipped, but in the end, the customers don’t want their goods sitting in traffic any more than anyone else. Sooner or later, the government will take fairly drastic measures to ease congestion. I’d rather see our industry take the initiative.”          b2b

As a professional engineer by trade, Suli Braunshtein brings a wide variety of technical skills and experience to his job as director of manufacturing and chief engineer at CMS Ontario Inc. These skills came in handy when the food producer decided to raise the roof.

CMS makes fruit and cheese fillings for its major customer, frozen food producer Fiera Foods Company. Toronto, Ontario-based CMS produces its fillings and stores them a 4,645sqm (50,000sqf) facility. Half of the building is devoted to manufacturing and half is warehouse space. Althoughthe manufacturing half is adequate for the company’s current production needs, the warehousing space had become tight.

This meant there were two options, move or renovate to increase the storage area. The company didn’t want to move, so Braunshtein started looking at ways to renovate.

“As a professional engineer, when I look at something, I think of it from an engineer’s point of view: how to use square footage more lucratively than it is right now, how to improve the facility.”

The decision he arrived at was to keep the building’s existing footprint but to expand vertically by increasing the height of the roof and installing taller racking equipment inside the warehouse.

Before the renovation

“Originally the building was 14ft high. Now it’s 24ft. The racking is up to 20ft in height. Before it was 10ft to 12ft. So we’ve doubled it.

“We use the same equipment to reach it—we have forklifts—only now we’re using it more efficiently. We didn’t use our material handling equipment in its fullest capacity before. Now we are, and we can go high.”

Braunshtein says the former storage capacity topped out at 2,000 skids. Today the company is storing 2,500 with lots of room to add more.

After making the decision (in full consultation with company owners and executives) that raising the roof was the way to go, the company hired a contractor, Eugene Slutsky, who brought RoofLifters Canada Ltd into the project.

The Toronto-based company requested drawings of the CMS facility in order to prepare preliminary sketches and do projections about the scope of the renovation project.

Then, over the course of a few months, RoofLifters created detailed plans, performed the engineering calculations, got the building permits, and won approval from city hall for the renovation.

Before the construction started, Braunshtein spent a week moving all of the stock into another facility.

“I rented an adjacent building for storage during this period of time and transferred all the storage material and packaging material, everything I used to keep here, to the adjacent building. Freezers I had in another premises. I took everything out so when the building was free, we could work. I had to disconnect all electrical power supply, all security. Everything was disconnected. Then afterward I had to bring everything back. So it was a big job.”

CMS managed to keep its production lines operating during the entire operation, as they were in a separate part of the building.

The actual lifting the roof took about four months, as the RoofLifters process increases the height of the roof 15cm to 30cm (6in to 12in) per hour. [See below for details about the process.]

Once the roof reached its final height, the walls were built up to reconnect the roof to the structure. CMS opted for new brick to match the existing building. Internal systems, wiring and plumbing weren’t fundamentally changed.

“We didn’t have any problems. We made all the wires flexible, so we just straightened out the loops of electrical cables. They just straightened out and were put in the right place.”

The basic structure of the roof was kept the same although since the old roofing surface was leaking, a new surface was installed.

“It was a smart move because we improved the quality of our facility. We made a better looking building from the outside with better working conditions. We put in new lights, a new roof with a 25 year guarantee, new walls and it looks fantastic—a brand new building from an old one. I’m happy with it. Sometimes you waste your time and money, but in this case we didn’t.”

Braunshtein estimates that with the increased roof height, the value of the building has increased 25 percent. And he adds that when CMS is ready to expand and buy an additional facility, he’ll recommend looking for a less expensive building with a low roof and repeating the process.

The mechanics of roof lifting

Marty Shiff, CEO of RoofLifters Canada, describes what his company does in ecological terms: “What we do is we recycle older buildings. Rather than knocking them down and sending the materials to the landfills, we rebuild them.

“We recycle and reuse 90 percent of the materials in the building. All the walls remain, all the steel in the building remains, all the roof remains. It’s only being added to.”

The process of lifting the roof is pretty simple.

“What we do is separate the roof from the perimeter walls, shore up the outside walls and then raise the whole roof structure.”

And “raise” is exactly what Shiff means. Computer-controlled hydraulic hoists, known as cribposts, are set up beside the existing columns in the interior of the building.

“Once they all get pressurized, we are taking all of the load off the columns and transferring it to our cribposts. So once we’ve transferred all the load, we cut the columns. Then we are in control of that whole roof. They are all hydraulically controlled by one or two central control panels, and they will all go up at the same time.”

Then the steel columns get infilled after the roof reaches its final height.

“Depending on how high you go, you might be required to replace full columns. We don’t do any underground work. What happens is we’ll cut the column at about six inches from the top where it connects to the existing beam and girder structure, because that’s a tough thing to duplicate. And we cut it about an inch from the floor. We’ll actually slide a square column—an HSS column we call it over the existing steel, so it’s a steel-to-steel connection which transfers all the load down into the existing footing.

“The old roof just lowers back down onto the existing structure. So any of the sprinkler lines that were attached to the existing roof structure, any of the heaters, any of the lighting that was attached to the roof would go up with the roof lift and get reconnected at the higher height.” MM&D

That doesn’t mean the module’s not functioning, but as the company’s CIO Peter Burns said in a presentation at the 2012 PMAC national conference on June 8, “The only way to eat an elephant is one bite at a time.” In other words, the development and refinement of the procurement module has been an ongoing process.

High Liner is a global company with almost $1 billion in sales. It styles itself the largest North American vendor of “value-added” seafood, but it has no fishing fleet of its own, instead sourcing from around the world and processing the catch in six North American manufacturing sites. Its brands include: Viking, High Liner, Icelandic, Mirabel and FPI.

The company buys 215 million pounds of seafood each year, spending approximately $600 million. This includes 30 species purchased from 30 countries. It is the world’s largest procurer of cod.

The procurement team is located throughout the 30 countries and they deal with a limited number of trusted suppliers. All product High Liner buys is inspected at the source and suppliers are required to comply with the Global Food Safety Initiative regulations.

The need for the sourcing hub was identified as a strategic objective for the company, Burns said, and the company’s leadership was focused on the change. The objective was to use technology as a differentiator from the competition.

The web-based system allows all the stakeholders in the inbound supply chain to see each step in the process. For example, suppliers can see the specifications for all the products they are making through the procurement system interface. Product can be tracked right through from the supplier to when it clears Customs to when the truck is scheduled to arrive at the plant. The visibility is so good that the location of specific products can be pinpointed within the container they are arriving in, a feature which Burns says is crucial for saving time in the quality control process. Suppliers can also check on how the quality inspections went, and they can see when an invoice has been paid.

According to Burns, High Liner is benefiting from the system through better communications, fewer errors, saved time that allows for a focus on improving products and processes, faster decisions, more accurate inventory control, better quality and smoother supplier management. It also supports sustainability and traceability efforts.

Success was achieved, Burns said, because it was a procurement project from the start — not an IT project. The Information Services department was brought in as a business partner in the project, supporting the procurement team. Everyone involved was fully empowered to make suggestions and had the power to effect change.

They used a prototyping methodology, avoiding traditional programming modes, and worked from a model of continuous improvement. Process improvements were led by the business experts, not the IS department team members. The catchphrase was: Simplify, Standardize, Centralize and Automate.

For Burns, the lessons to share from this experience are:

• Procurement must own the project, not IT.
• Create the right working relationships.
• Project management is key. Their team still meets monthly to discuss progress and changing business needs.
• Training is critical – time spent on training saves time later.  High Liner found that suppliers in remote areas may not have same skill sets as people in the home office so you need intuitive and easy systems and they need to be atrained on them.
• Eat the elephant one bite at a time. That’s why the project is a journey of continuous improvement.

Distributing food to its various member food banks is now a SNAP for the Ontario Association of Food Banks (OAFB).

In December the OAFB went live with a web-based distribution system. The Smarter Needs Allocation Program (SNAP) allows the association, which is responsible for acquiring food and sending it to four distribution centres—in Kitchener-Waterloo, Ottawa, Sudbury and Toronto—and 120 food banks across the province, to move away from the paper, fax and e-mail-based system it had been relying upon to determine food allocation.

Even though the system has only been running for a few months, OAFB executive director Bill Laidlaw says it has completely changed the way the association operates.

“We at the food banks in Ontario have to be more diligent, more strategic, more assertive and more street-smart in figuring out ways to service close to half a million Ontarians who use our food on a regular basis,” he says. “What this system allows us to do is spend less time in the detailed administrative work and more time looking at how we’re going to acquire more foods.”

The system is the result of a grant from IBM Canada Ltd, which donated $250,000 in services to the OAFB in order to develop and implement the project. IBM staff worked with the OAFB throughout the 12-week process, which was broken into 10 weeks of development and two weeks of production support.

Jennifer Nolan, an advisory IT architect with IBM Canada, was team leader on the project and says the first step was learning how the OAFB operates and what the system needed to be capable of doing.

“When we first talked with them, they knew they needed an online system,” explains Nolan. “They knew what their requirements were but they couldn’t really put it together. We had a lot of working sessions with them so we could really understand the business problems they face, what they were trying to achieve and how the existing system worked so we could design the new system so that it would really meet what they needed.”

Nolan says technology costs for the project were kept to a minimum. “We developed it using open source software called Ruby on Rails, which runs with a MySQL database on Linux. We installed it on a server in the cloud. It’s on an external network, with a Linux hosting provider.”

The system, which is the first of its kind for Canadian food banks, allows the OAFB to send out notifications of what food is available and then take requests from the member food banks for how much of the food they’d like to receive. Food banks are also permitted to offer excess food they receive in peer-to-peer transactions.

Allocation decisions are based on a number of factors, but the food bank’s Hunger Count plays a key role. The Hunger Count is determined through an annual survey of how many people use the services of each local food bank in the course of a month.

“We record the Hunger Count of each food bank for each fiscal year. We also include an allocation percentage by weight. SNAP will see what percentage of food they’ve been allocated based on their Hunger Count,” Nolan explains. “So if they have five percent of the Hunger Count, then they should be receiving five percent of the allocations by weight. It will highlight them in red if they’re under and black if they’re over. And the application will recommend that at the top to promote equality.”

SNAP has been such a success that Laidlaw sees it having a grander future than originally envisioned.

“I think it might expand through the rest of Canada, which is an interesting possibility,” he says, adding that the OAFB has other improvement projects in the works as well. “The next step for us is for us to improve our distribution system so we can be more effective and efficient getting food to our food banks. We also want to make sure all our facilities with frozen product freezers and fridges have capabilities to allow them to get fresh produce.”

Right now Kubota’s national distribution and logistics manager, Doug Ward, is overseeing two major projects designed to improve the way the warehouse operates.

Kubota numbers

•5,575sqm (60,000sqf) warehouse
•78,000 SKUs
•$30 million in parts sales in 2011
•20 percent sales increase in 2012
•4 Kardex Remstar Shuttle VLMs
•6 horizontal carousels
•200-225 lines per hour (horizontal)
•80-100 lines per hour (vertical)

But making continuous improvements is nothing new to Ward. It’s pretty much his standard business practice—and it’s a practice that is easily reflected in the company’s bottom line.

“With the growth we’ve experienced, going from roughly $10 million [in parts sales] twelve years ago to $30 million last year in 2011, that’s quite an increase in sales, but we’ve really only thrown an extra three bodies into the employee pool,” says Ward.

According to Ward, the main reason the tractor and equipment manufacturer can keep up with the growing demands on its parts supply chain is the automated storage and retrieval equipment the company is installing.

Six months ago Kubota purchased two vertical lifts—Kardex Remstar Shuttle VLMs from Mississauga, Ontario-based Johnston Equipment. Even though they’ve been in the warehouse a while now, they still aren’t fully stocked.

“We have actually suspended the filling of the VLMs due to increased sales—20 percent over last year and continuing this year. We hope to get back at it soon with the addition of some summer students.”

They are the second pair of vertical lifts Kubota has purchased. Three years ago, the company installed its first two vertical lifts, and those lifts were preceded by the purchase of six pick-to-light horizontal carousels, also produced by Kardex Remstar.

“Back in the old days—and I hate to sound like an old guy—before we had any automation, we were picking 18-20 lines per hour, walking them down the stairs and hand-delivering the parts to the packing station. On the horizontal carousels, we are getting 200-225 lines per hour. On the vertical lifts right now we are probably getting in the 80-100 lines per hour range and once we have the vertical lifts fully loaded, we expect to be in the 125 range. As far as manpower goes, we have one person dedicated to the horizontal carousels and one person dedicated to the vertical lifts.”

The vertical lifts improve picking efficiency, but they also solve a problem Kubota’s Markham Ontario warehouse shares with many others: lack of space. The 5,575sqm (60,000sqf) of parts warehouse space was just getting too small. Kubota keeps parts for its tractors and equipment available for 20-years after their date of manufacture. The parts inventory includes over 78,000 SKUs.

Before moving into its current building, the company had a 3,716sqm (40,000sqf) facility, which had also become too small over time. Ward supervised the move from that building to the current one. So when space once again became an issue, he knew he needed to find a solution that didn’t involve renovating or moving. The vertical lifts, which reach 8.5m (28-feet) in the air and bring parts down to work counters 84-cm (33-inches) high, have eliminated the need for extra storage space. Including the picking area, the four lifts and workstations take up 58sqm (620sqft) of space. They replaced 335sqm (3,600 sqft) of shelving.

The carousels contain Kubota’s faster-moving parts. The slower movers are stored in the vertical lifts. In addition, the company still maintains traditional racking to house large tractor components such as hoods and doors and even slower-moving small products.

Figuring out what parts to put where was a challenge. Before parts could be assigned to first the carousel and then to the lifts, information about them had to be compiled, says Johnston Equipment’s system sales manager for Ontario, Brian Rodway.

“They had very limited data on the sizing of parts, so we took a random sampling of their parts and mapped out the bin sizes we felt were going to work and figured out that we should be able to get 26,800 parts into two [vertical lift] machines, and that’s exactly what they stored.

“Doug and I figured 90 percent of the parts were going to fit into a cell that’s 10cm x 10cm x 10cm (4in x 4in x 4in) and then I calculated the trays like that—how many cells we can get on a tray, and then how many trays can a machine can hold? We gave ourselves a buffer of about 20 percent for fluctuation. Doug’s experience of being there for 12 or 13 years and knowing the parts we were dealing with and knowing the sizing, and then just my experience of doing this all the time we just mapped it out that way. Then they basically pulled the parts files of those 26,800 parts and mapped them to a bin and if there was any problem, they’d make an adjustment when they were loading it. But there were very few adjustments. Almost everything fit in those sizes.”

Just because products were mapped once doesn’t mean the job is over. Kubota regularly re-examines its parts data, says Ward.

“We analyze that information once or twice per year in case there are any changes—in case a part picks up in demand, we want to make sure we bring it down from a high spot to a spot that’s easy to access. And vice versa. If a part, for whatever reason, falls out of demand, let’s get it out of that golden zone and put it at a higher height where it’s not being retrieved so often.

“It’s fairly simple. Just a matter of running some reports, putting them into an Excel spreadsheet, and slicing and dicing them the way you want. Then, of course, the rest is down to maintenance. Having an operator go around the warehouse and make the necessary changes.”

Along with parts inventory maintenance, equipment maintenance is a priority at Kubota. Ward keeps a strict schedule.

“We do maintenance every quarter on the horizontal and vertical lifts. That’s probably the key to avoiding any downtime. We’re extremely busy from 2:00pm to 6:30pm, picking orders, packing them and getting them out the door for next day delivery to our dealers. If these things go down, that stops us from making our shipments to our dealers, and if we’re not making shipments to our dealers, the end user has a piece of equipment he can’t use to make his living. So downtime has to be kept to a minimum and for that reason, we’ve opted for the quarterly service calls and service maintenance.

“We’ve scheduled our maintenance so it is done very early in the morning from 7:00am to 10:00am. We’ll do that two days in a row, so all the machines are taken care of in two days. What it does affect is our put-away ability, but we can always catch up on that. We can’t always catch up on our picking ability.”

Ward says that so far, neither the carousels nor the vertical lifts have suffered any unexpected downtime. While that’s to be expected of the brand new lifts, Kubota bought used carousels.

“The carousels we have right now are 25-years-old. We’ve had them for twelve years. They were 13 years old when we bought them. I think they are probably getting towards the end of their lifecycle, but 25 years, that’s a long time.”

Ward hasn’t decided yet what he will do when the carousels are ready for replacement.

“I’ve given it thought. There are two schools of thought on that. One is to replace it with horizontal carousels as is, because we get a much better productivity rate out of them. Or if we really wanted to save some more space, we could add another couple vertical lifts. I’ll just have to cross that bridge when we get there.”

While Ward still has lots of time to make decisions about carousel replacement, he has made one important decision recently: Kubota has purchased a new warehouse management system.

“We have gone with Tecsys. Our first meetings have just concluded and we expect implementation this summer with a go-live date of September first, so we are looking at an extremely busy summer.”

Until then, the company will continue to rely on its existing software.

“Currently we have a system called Nova. Nova is integrated into the horizontal carousels and vertical lifts. So it is operating those and bringing the parts to the operator. But we find with Nova there are certain [things] it just can’t do, such as define golden zones and directed-put away. So as we’ve outgrown the manual processes, we’ve outgrown the Nova system we have, which is really a stock locating system versus a warehouse management system. So with a warehouse management system, we are now going to be able to enjoy further enhancements by having that directed put-away and the golden zone, and perhaps even zone our warehouse.”

Once the software project is over, it may once again be time to start buying more vertical lifts, says Ward.

“I think we maybe be able to pick up another one later this year or early in 2013 because we do have two different business units here. Our other business unit is what we call whole goods, those are the actual power units themselves, the tractors with all the implements, the attachments and the tires. They’ve got a few small parts over on that side I think we can bring into the integration of the current vertical lifts and perhaps store them in another vertical for even more space savings.”

“Customer expectations have changed dramatically and we require certain systems to assure a particular level of service,” says president Vince Tarantini. “I can send my best driver, but how do I maximize my support to the driver and his vehicle? It turns out telematics technology is the answer.”

Since May 2010, Carmen, which runs 70 trucks, has installed Shaw Tracking’s Mobile Computing (MCP) on its 45 over-the-road vehicles to better support its customers and drivers, while maximizing productivity and efficiency.

Since its 1985 debut, the company has embraced available technology such as cell phones and mike radios and finally real-time GPS about five years ago. So why did it take so long to commit to telematics?

“Most transportation companies have basic telematics, but the challenge lies in identifying the manufacturers of the latest, greatest technology with a 12- to 24-month ROI and figuring out how to integrate it into your company’s culture,” says Tarantini.

After selecting Shaw’s MCP, Tarantini homed in on several key applications, one of which is Automated Hours of Service (HOS), in which electronic on-board recorders (EOBRs) automatically update drivers’ logs and other administrative tasks. It replaces paper logs and handles all of the calculations required to tell drivers when they need to rest and for how long, as well as the hours driven and the remaining hours of service.

Access to accurate, real-time data allows Carmen dispatchers and drivers to plan, schedule and immediately adjust daily and weekly plans. As well, management can address behavioral issues immediately, while eliminating the costs associated with the monthly outsourcing of logs and the six- to eight-week wait for their return. When the automated HOS and traditional records were compared, the automated records showed some drivers were rounding up so much they were sacrificing hours of valuable driving time rather than risking thousands of dollars in fines or being pulled off the road.

“They’re drivers, not record-keepers, and HOS gives them the onboard secretary they’ve always wanted,” says Tarantini. “The fact their own recordkeeping often worked against them—indicating they were illegal when they were in fact legal—astonished some of our drivers.”

Thanks to the automated HOS, drivers and vehicles are less idle and more productive and the costs related to warnings, infractions and violations, as well as insurance premiums, have fallen. However, the automation can add costs because better records mean drivers are reimbursed for everything from road and border tolls to the downtime resulting from unexpected maintenance.

HOS has made a significant cultural shift. While most drivers love it, others resent what they see as a loss of control and the freedom to decide when they’ll work. Yet, as HOS continues to produce positive results, Tarantini says that even the non-believers are becoming more accepting.

Carmen already monitors fuel consumption, but the next step is to connect to the vehicle’s ECM, accessing as many sensors as possible to better control downtime and communicate any issues to operations and the driver, along with the location of the nearest service centre and directions via secondary routes.

MCP’s automated vehicle positioning, messaging and onboard scanning integrate into Carmen’s back office to expedite and improve the accuracy of tasks such as order-taking, dispatch and billing. It’s as elemental as ensuring the driver receives the correct address to get the shipment where it’s supposed to go and improving cash flow with same-day invoicing. The signed waybill can be scanned onboard and sent back to head office in order to expedite billing and Customs. Employees can also take on more value-added tasks. “

Human error is reduced and greater automation allows us to expand without new hires,” says Tarantini.

How much money has Carmen saved, or made, with MCP? Despite the fact Tarantini loves figures, he won’t commit to hard numbers. Why? Because as he’s learning, actions that reap savings in one area may incur costs elsewhere. However, overall, productivity gains have been achieved without compromising safety, outsourcing costs have been reduced, DOT fines have been eliminated and Carmen’s carrier score is up.

“No one can discount the complexity of a fully integrated approach, but real-time, dynamic data turned into knowledge allows you to make better business decisions that do more than grow the top and bottom lines,” says Tarantini.        b2b

Christie Digital Systems is just one customer, but the Kitchener, Ontario-based company’s 3PL needs seem to exemplify the changes taking place in the industry.

Christie makes movie projectors for cinemas and digital displays found in museums and on tradeshow floors. The company’s main manufacturing facility is in Kitchener, but it recently opened up a second plant in China. It also has a large service centre in California. Christie has sales offices in over 25 countries and sells its products into over 100 different nations.

This year, Christie is making some changes to the way it handles its 3PL needs.

Ihor Stech

“The days when 3PLs were responsible for just storing our products in the warehouse and shipping them in trucks is gone,” says Christie’s vice-president global operations, Ihor Stech.

Because of the company’s increasingly global manufacturing and supply chain, there has been a change in shipping times.

“Our lead times are longer. Now they’re four to five to six weeks. And the good 3PL companies are able to make small changes to our inventory themselves. They are able to open the boxes, drop in pallet codes and close the boxes, and do it all neatly, cleanly and professionally. We expect the 3PL to truly be a partner with the us, the manufacturer.”

Stech said Christie needs this type of service if it decides, for example, to change an instruction manual after the product has already been shipped out of the manufacturing facility.

With more countries opening up to trade, Stech says Christie expects its 3PL partners to have optimal locations worldwide and to open up distribution centres in whatever countries offer the most legal, regulatory, or geographical advantages.

Over the next twelve to eighteen months, he said that even though Christie is happy with its 3PL partners, it will be re-evaluating its current 3PL arrangements.

“For us it’s time to streamline some of the movement of materials. Rather than having a historical reason for doing business with a company, now we have to have a true business reason.”

To that end, he said Christie seems to be drawn toward two types of carriers: larger companies with a truly global reach for the majority of the work and smaller organizations that offer specialized services reaching into Europe and Asia when needed.

Part of that streamlining involves deciding how products will be moved. While the company tries to maximize surface transportation options as much as possible, it doesn’t want to eliminate air freight entirely, and any 3PL partners need to be able to accommodate all modes of transportation.

“We often want to be more responsive to our customers than what is expected of us.”

Technology will play a key role in determining the business value of 3PL relationships. He said Christie wants to partner with companies that have computer systems it can integrate with its own. Ideally, the 3PL would run on the identical management software. He said Christie will even work with the 3PL to build a bridge connecting the two companies’ systems.

“It’s imperative we have immediate access to our inventory.”

Currently Christie’s main concern is with inbound inventory, not outbound, partly because the company has a strong inbound logistics team in-house, but mainly because it needs to ensure it has the necessary parts on hand to accommodate tight manufacturing schedules.

“We have thousands of SKUs coming in that become dozens of saleable products.”

Overall, Stech says that having a good relationship with 3PLs is important.

“We treat those companies are partners, and while we demand service, we gladly accept advice from them. We are building very satisfactory and beneficial relations with them.”

In 2004, SNC Lavalin/Serco was awarded the contract to construct and manage Canada’s first direct airport rapid transit system. The Canada Line was Vancouver’s largest transportation infrastructure project for the 2010 Winter Olympic Games and, as a result, the most visible, not only to the two million inhabitants of the city but to all Canadians. SNC Lavalin ultimately decided to award the entire rail vehicle contract to Hyundai Rotem from South Korea on November 25, 2005.

A three-year production window was given to manufacture 40 made-to-specification rail vehicles. The system was built with a capacity of 15,000 passengers per hour, per direction. The vehicles needed to reach a maximum travel time between the airport and downtown Vancouver of 24 minutes at speeds of up to 90kph. Each rail vehicle weighed 40 tonnes and was just over 20 metres in length. They would be fully assembled in South Korea and shipped to Canada in batches of eight vehicles at a time. They were due on site no later than November 2008.

Winning the contract
When Hyundai Rotem went shopping for a logistics company in Canada to handle the movement of these 40 rail vehicles, they were looking for a transportation professional who could advise them on how to enter the Canadian market with their product. They had no experience in North America—let alone Canada—and this project was the proverbial foot-in-the-door they needed to win larger contracts in the future.

After meeting with many other logistics companies, large and small, national and international, Hyundai Rotem ultimately chose Canaan Transport Group Inc. We got the contract on September 30, 2007 with the first eight rail vehicles delivered in December 2007.

Managing the transportation
With the contract signed, we ramped up our internal activity to finalize requirements in order to accomplish the move successfully. We finalized the shipping, trucking, crane, Customs and other arrangements. We planned and ran the route the rail vehicles would follow while ensuring escorts, police, fire, ambulance and utility concerns were taken care of.

Canaan also co-ordinated with the BC Ministry of Transportation and other regulatory agencies—as well as various suppliers and stakeholders—to ensure a smooth move. Our senior management traveled to the factory in South Korea to supervise the loading of the first eight rail vehicles. We also ensured tariff advanced rulings were submitted and approved by Canada Border Services Agency for the vehicles.

With a shipment of eight vehicles per ship, the 40 vehicles needed a total of five ocean trips and 10 trips by road, spread over a year, to ensure they were on site in late 2008. With each move, the timeline was the same:

Day one

• 6am: Vessel docks at the Port of Vancouver.

• 7am: Canaan in attendance with stakeholder representatives.

• 8am to 10pm: Cranes unload eight rail vehicles from the ship and place them onto special flat deck extendable trucks.

Day two

• 12am to 5am: Four truck drivers and 12 escort vehicles arrive to start the night move. Due to city restrictions, Canaan was only allowed to move four rail vehicles each night and we could only be on public roads between 12am and 5am on certain nights. The original 21-km direct route was extended to 49km due to height and traffic restrictions. The travel time of five hours (at a maximum of 40kph with some sections as slow as 2kph) left no room for error or delay.

• 9am to 7pm: Rail vehicles were moved from the truck and placed onto the complete and electrified rail track.

Day three

• 12am to 5am: The remaining four rail vehicles take the same route to the final destination.

• 9am to 7pm: Once again, the four rail vehicles are offloaded from the trucks and placed directly onto the rail track.

The results
With the world watching, we delivered the rail vehicles on time and on budget, allowing the Canada Line to open in the fall of 2009, three-and-a-half months ahead of schedule. That’s almost a full six months before the start of the 2010 Winter Olympics. Originally built to a capacity of 100,000 boardings a day by 2013, the Canada Line has exceeded all expectations by handling 228,190 riders per day during the 2010 Winter Olympics. MM&D

Perry Lo, CITT, is a chartered accountant and transportation professional with a licensed Customs broker designation. He is the founder of Canaan Transport Group Inc.

MM&D recently toured UPS’s campus in Burlington, Ontario. The three-building complex houses products stored at temperatures ranging from -25C to room temperature. Michael Power dons his earmuffs and goes inside.

There’s a clear and vitally important message all UPS employees receive when dealing with pharmaceutical and medical products handled at the company’s distribution centre in Burlington, Ontario. In fact, the message hangs from signs inside the DC for all to see: It’s not a package, it’s a patient.

The message is so clearly visible because compromising some of those products within the facility could mean compromising the health of the end users—patients who rely on medical products such as vaccines and other pharmaceuticals for their treatment and care. Reg Sheen, vice-president of operations at UPS Supply Chain Solutions, isn’t about to let that happen.

“This is the mantra that we as an organization—right from executive levels to the hourly folks on the floor—this is what we live and die by as far as our healthcare facility is concerned,” Sheen says. “We don’t treat every package as a package—we treat it as a patient. It’s actually going to somebody to help them with the medical issue they’re dealing with. That’s how we treat the handling of those products.”

The UPS Burlington facility is located just north of the Queen Elizabeth Way and within striking distance of international airports in Buffalo, Hamilton and Toronto. The campus is close to the major highway arteries in the Southern Ontario corridor. And with 44 healthcare clients across Canada, Sheen points out the decision to locate the facility in the heart of the Greater Toronto Area was a strategic one.

About six years ago, Sheen says UPS made the decision to invest in three of the company’s key strategic markets, one in Louisville, Kentucky, another in the Netherlands and a third in Burlington. The company invested $77 million in the Ontario location, which includes two buildings (called Building One and Building Three) owned by UPS. The company leased another building—known as Building Four—about four years ago. The original design of the campus included a Building Three on an adjacent piece of land that remains empty. Plans to build a 300,000-sqf facility on that land were shelved temporarily when the opportunity to lease Building Four came up, Sheen explains.

Height matters
Building One focuses mainly on consumer products, Sheen says. But the facility also has a small high-tech returns operation, as well as dealing with medical devices that don’t require specialized temperature controls. This is part of the facility boasts more than 100 dock doors and is where shipments are consolidated. Although it changes throughout the year, the operation can receive several hundred orders each day.

“It’s our largest building and supports a number of work streams,” says Maria Thomas, director of operations, distribution, at UPS Supply Chain Solutions. “But it also supports medical devices, which would be any components that aren’t pharmaceuticals; anything that doesn’t need a temperature controlled environment (like syringes or diabetic socks).”

An added draw of not storing and shipping these products through Building Two, which is dedicated to pharmaceutical products, is that it costs less, says Sheen. Facilities focused on pharmaceuticals and other temperature-controlled products simply cost more to use. “We utilize a better solution by using Building One for those medical device accounts,” he says.

One of the First things a visitor to Building One notices is the height of the ceiling that, with a clearance of 36.5 feet, allows for pallets to be stacked six high. That allows clients to take advantage of space in a more efficient manner, says Sheen. “It’s a 20-percent increase in the amount of storage space just by having that capability,” he notes.

Several products that go through Building One require specialized ticketing such as a specific label size or a price attached to the side of a box—a service UPS provides. UPS also handles the e-commerce for one of its clients (a home and garden centre) through the Burlington campus. If a customer of that client orders a product online from the client’s website, that product is shipped directly from the Burlington campus.

“If you go onto that website and you want to order a garden shed, that garden shed is coming out of our facility,” says Sheen. “No matter where you are in Canada, if you go onto that website, we’ll fulfill that order and get it to your home.”

A pool of part-time staff is kept available to deal with the peaks and valleys the facility experiences throughout the year. Staff is also cross-trained and employees rotate from one area of the facility to another, depending on where they’re needed most. Staff even shifts from the Burlington campus to other nearby UPS facilities, such as one in Oakville.

“We’re multi-client and multi-facility,” says Thomas. “We’re able to deploy our labour well. There’s a lot of seasonal variability and we’re able to move our resources around very effectively. Everyone is close by and trained in UPS policy. If one account doesn’t need so much labour, staff can be moved someplace else.”

Different products, different temperatures
Building Two consists of 200,000sq_ of space devoted to temperature-sensitive healthcare products such as vaccines. The building hosts areas held at different temperatures—from ambient, or room temperature (15 to 25C) to four coolers for products such as vaccines. Each cooler is maintained at as low as 2C and as high as 8C. The temperatures within the building are controlled by an automated system to ensure each section stays within its designated range. The products are timestamped to show how long they’ve been exposed to ambient temperatures.

The building also has two freezer chambers that are maintained at -20C. “Some products need that level of coldness, like certain blood products and certain medical supplies,” Thomas notes. The building supports 15 UPS clients and its 24-hour-a-day operation runs each week from Sunday night until Friday.

The building houses a vault (used to store narcotics and other products with street value or some risk attached) classified by Health Canada as Level 10—the highest security level for such a storage facility. A cage surrounds the vault and the client that uses the facility is licensed by Health Canada to store specific drugs there. Visitors and employees first walk through the cage’s gate before going through the vault’s doors. To meet the Level 10 security requirements, Health Canada says a vault must use a minimum level of electrical detection, an alarm system separate from the rest of the facility and doors, walls and a floor with specific thickness.

How thick? In UPS’s vaults, the concrete floors are three feet thick. The vault’s frame (made entirely of concrete) is built separately from both the rest of the building and the cage that surrounds it. It employs a tremor sensor to deal with situations such as a vehicle driven against the vault in an attempt to steal its contents. Other controls include a background check for employees working within the vault, and product codes, lot numbers and expiry dates are checked before a product leaves the vault towards its destination. Each of the building’s three vaults is dedicated to a single customer.

Vial in
While preparing three small vials for shipment, an employee checks the product against what’s on a piece of paper to ensure the lot number, expiry date and quantity are correct. While packing the vials, the employee puts two ice bricks in the bottom of the container before placing a cardboard divider on top. He then puts in a polar pack, then places the three vials in the box in a separate bag. He places a temperature-monitoring device inside before putting another divider on top. Two more ice bricks go on top, then bubble wrap. The process will keep the product between 2-8C for up to 48 hours.

The worker then time-stamps the box and places “do not freeze” stickers on its sides. A customer copy of the bill of lading is attached to the box, and the employee marks down the box’s order number. Each client has an individual packing procedure, and staff is trained regularly in how to pack boxes. Depending on the product, even pallets provide temperature monitoring to ensure a product stays within a certain range. Some of the pallets can keep a specific temperature for up to 48 hours (although the time varies among clients and products).

“Each customer has their own requirements on how to control the temperature along the way,” says Thomas. “When they ship them out there’s a temperature monitor on the shipment; it could be on the pallet or case itself for inbound shipments. Going out, it’s as close as possible to the product—the customer gives us their specs on how they want us to adhere.”

Lock and key
Given the number of high-value, high-risk products at the facility, UPS has heavy security in place, says Thomas, and the yards surrounding the campus are fully fenced. “We have a security guard on site 24/7, allowing trailers into the yard; and we have strategically placed, closed-circuit cameras,” she says.

Swipe access is needed for any part of the facility, whether it’s an office, warehouse or cooler, notes Thomas. That’s because so many of the products have the potential to be harmful, or are drugs with a street value. Some of the pharmaceuticals can be lifesaving and would take months to reproduce if they disappeared. “You can only access the area you need to access; if you need it for your work you’ll have access on your card,” she says.

The campus also has an automated system that monitors temperatures in the various areas of the campus, Thomas notes. If an area becomes warmer or cooler than it’s supposed to be, visual alarms such as red lights flash outside the coolers. There are also audio alarms, and employees are paged so they can respond to the temperature change. Each building employs a generator so temperatures remain where they should be in the event of a power failure.

As well, the campus uses several auditing systems, adds Sheen. Health Canada audits the facility, as do clients. UPS also has its own internal quality assurance standards and hires external auditors. “There’s a constant flow of audits,” he says. “We’re probably one of the most audited organizations anywhere.” MM&D

For yet another year, it appears that many of you are making a bit more money. As Canada’s economy continues to pull out of recession, the average salary of the country’s supply chain professional has hit $82,800. That’s up from $81,000 in 2010 and $78,100 in 2009.

These are some of the results from the 2011 supply chain salary survey which, for the fourth year in a row, MM&D and Purchasingb2b magazines have produced in partnership with the Purchasing Management Association of Canada (PMAC) to glean information from those in the profession. The survey questionnaire—fielded this summer to PMAC members and supply chain professionals who subscribe to MM&D and Purchasingb2b—drew 1,567 responses, giving us a large pool of data from which to bring you the following report on wages, satisfaction and more.

Sex and the salary

The average salary of the supply chain professional in 2011 was $82,800, up 2.2 percent from last year’s $81,000. Those with larger paycheques appear to be more satisfied with their salaries. For those who listed themselves as “Very/Somewhat Satisfied” with their pay, the average salary was $90,700. Meanwhile, those who considered themselves “Not Very/Not at All Satisfied” had a salary of $64,500 on average.

The average salary for men fell to $88,300 this year, down from $93,600 in 2010—a 5.7-percent drop. The drop comes a year after men’s average salary on average rose a whopping $10,000 (up from $83,600 in 2009). But women’s salaries continue to rise, with the average salary in 2011 topping $74,600. That represents a 4.6-percent rise from $71,300, reported last year.

Overall, the average salary for men ($88,300) was 18.4-percent higher than that for women ($74,600). Across the board, women had lower salaries on average than men regardless of years experience. Women with five or less years pulled in $60,600 (although up 9.7 percent from $55,200 in 2010), while men with the same experienced earned $68,500 which is up slightly—just 0.1 percent—from $68,400 in 2010. After 16 to 20 years on the job, women averaged $72,600—$76,900 in 2010 for a 5.6-percent difference—while men’s average salary towered over that amount at $90,800. That means men in that category earned 25.1-percent more than the women.

Salaries rose along with the education and position, respondents reported. Executives topped the list at $140,000—down 14.9 percent from the $164,600 reported in 2010—while managers pulled in $93,300 annually. Perhaps surprisingly, the average salaries of respondents with an MBA dropped 10.9 percent to $98,700 this year, down from $110,800 in 2010. There was also a drop for supply chain professionals working in manufacturing. In 2010, those professionals earned $83,500, while this year saw them take home $75,400—a difference of $8,100 or 9.7 percent.

Organizations with 5,000 or more workers saw supply chain salaries drop from $94,100 in 2010 to $93,800 this year, 0.3 percent. Also experiencing a drop were companies with 250 to 499 employees, with salaries falling 2.5 percent from $80,700 in 2010 to $78,700 this year.

Those working on a professional SCMP designation saw their salary jump 3.0 percent from $67,200 on average in 2010 to $69,200 this year. When asked about the importance of a professional designation, 77 percent of PMAC member respondents said it was important to get ahead in their jobs. For non-PMAC members, 62 percent said it was important.

PMAC members took a more positive view of the availability of supply chain jobs. In total, 71 percent said there were more jobs in supply chain than five years ago (with 23 percent saying much more). That’s compared to non-PMAC members, 56 percent of which saw more jobs than five years ago.

Increased recognition

Supply chain professionals may also be getting even more recognition within their organizations this year. Among those asked, 76 percent said their companies have come to realize that business couldn’t function without supply chain management professionals. That’s up from 71 percent who responded the same last year.

Supply chain also seems to be attracting increased recognition from the C-suite, with 71 percent saying that during the last year the supply chain role has increased in influence with senior management. That’s up from 57 percent in 2010. For 2011, 45 percent said they have influence at the C-level, up from 39 percent in 2010.

The economy seems to have affected how recognized respondents felt within their organizations, with 76 percent saying they agree that the current economic environment has made their skills and experience more appreciated. Comparatively, 20 percent said they disagree. However, 56 percent said they agree that their compensation hadn’t kept pace with their job responsibilities, and 40 percent disagreed.

This year, 39 percent said they planned to be working in the same job in the next two years, down from 43 percent in 2010. As well, 36 percent said they planned on getting promoted within the same organization while 25 percent said they would be working with another organization. Six percent said they would be changing careers and five percent said they would be self-employed or consulting. When asked why they saw themselves working at another organization in the next two years, 54 percent said the availability of higher compensation, as compared to 52 percent in 2010 who said the same.

The big issues

The top supply chain issue respondents faced during the last year was cost control, with a total of 61 percent mentioning it as their top concern, Going forward, 57 percent saw it as their main concern over the next 12 months. That’s a jump from last year, when 46 percent answered likewise. A total of 39 percent said supplier relationship management would be their top concern in the next 12 months, up from 34 percent in 2010. Risk management came in third at 31 percent, a rise from last year’s 23 percent. Environmental responsibility and sustainability was the top concern of 18 percent of respondents over the last 12 months, while 31 percent saw it as their primary supply chain concern over the next 12 months. In 2011, 80 percent said the sustainability practices of their organization were important.

When answering about their levels of satisfaction regarding various elements of their jobs, 98 percent ranked competitive salary as important—the same as 2010—with 71 percent saying it was “very important.” As well, 27 percent ranked salary as “somewhat important.” Meanwhile, 69 percent of respondents said they were “satisfied” with their salaries. In total, 17 percent said they were “very satisfied”  while 52 percent answered they were “somewhat satisfied.” A total of 22 percent said they were “not very satisfied” and eight percent were “not at all satisfied.”

Ninety-six percent said a healthy work/life balance was important, with 82 percent satisfied with that balance; 91 percent said support for career and professional development was important and 72 percent were satisfied with that support. Job security was important to 91 percent of respondents. The percentage of those who said they were satisfied with that security was 87 percent. Vacation time was important to 93 percent. Most of you also saw on-the-job influence as important, at 95 percent.

Relationships with one’s superiors ranked high among respondents, with 96 percent saying it was important and 63 percent saying “very important.”

The skills you need

To do well in supply chain, 28 percent ranked people skills at the top. But that’s down from 33 percent who said the same in 2010. Next in line were negotiation skills at 13 percent (down from 17 percent in 2010) and followed by a new category this year—strategic leadership—also at 13 percent. Decision making ranked at 12 percent and analysis was cited by nine percent of respondents.

In conclusion, salaries have gone up, along with the recognition supply chain professionals receive from their organizations. The majority—87 percent—said you were satisfied with your jobs overall. The future once again looks bright for supply chain professionals.

In this relationship, there’s a lot at stake for the 3PL. Often, achieving the shipper’s performance objectives means doing everything right while, at the same time, mitigating risks and anticipating problems. Behind the push for supply chain success is an underlying and constant concern for both sides: a shipper’s objective is to save money, while a 3PL is looking to make money.

But it’s worth asking, how much of “doing it right” is open to interpretation? When shopping for 3PL services, almost all shippers will base their buying decisions on price; the company with the lowest quote will most likely win the business.

But when price is king, attempts to get it right can go incredibly wrong. Attempts at cost saving sometimes involve poor decision making. In the worst situations, it can lead to unethical practices.

These unethical practices stem from attempts by businesses to save money, and some organizations will go to great lengths to do so. But they may not be willing to acknowledge how the low price they paid for a service got so low.

For example, to meet consumer demand for the lowest possible price for goods, a manufacturer may outsource production of that good to a distant country with unbeatably low labour costs. While the cost saving advantages are clear, the health and safety laws protecting workers, communities and the environment in that country may not even come close to what Canadians would accept.

Closer to home, shippers sometimes contract carriers and 3PLs with labour and HR tasks. But it’s a daunting and time-consuming task to set up and run a pool of staff that includes full-, part-time, seasonal and casual personnel. To handle these fluctuating workforce demands, 3PLs sometimes look to outsourced HR specialists.

Here’s where the ethical and legal waters can get murky. One of the potential appeals of outsourced labour is the reduced exposure to employment regulation and the legal obligations that come with it. Simply put, not all suppliers follow the rules.

For example, one potential concern comes when workers get paid as if they were independent contractors. That happens when the worker forms a corporation and is then paid by the corporation without contributing to the Canada Pension Plan, employer health tax, employment insurance or statutory holiday pay. These payments are known as “burden”. Generally, the burden portion of payroll ranges up to almost 25 percent of wage cost for the employer. Burden is just one cost associated with payroll, which can also include a group health plan, pension plan, severance packages and other fees.

Sometimes, workers will agree to the misclassification of their services because the independent contractor designation lets them pocket more income in the short-term. But the arrangement also means these employees can’t access employment insurance and other coverage. They may not fully understand the long-term consequences to such an arrangement.

If you hire a service provider who uses independent contractors, or labour that gets paid under an independent contractor payment scheme, bear in mind the risks can stretch beyond insufficient or a complete lack of coverage for workplace safety insurance. Your 3PL-carrier partnership may be at stake if financial penalties result when staffing providers fail to meet payroll contribution obligations and the claim defaults to your business.

Some staffing suppliers offer outsourced labour at prices lower than an employer’s payroll costs could ever be. Shippers be warned, carriers and 3PLs with untouchable rates might be partnered with staffing providers that are using the independent contractor payment model mentioned above. The difference in price offered by a staffing provider that uses an above-the-board payment model and one using the independent contractor model is big. The price advantage exists, but so do attendant risks.

In the long run, it pays to check your sources and make sure your provider has solid employment practices whether it’s on the dock, in the warehouse or on the road.

Tracy Clayson (tracy@in-transit.com) is managing partner, business development, of Mississauga, Ontario-based In Transit Personnel.

Can the provider do that? Has a binding settlement not been drawn up? And will the court enforce the settlement?

The answer to all these questions is the same: it depends. The factual background and context of the settlement agreement as well as the pertinent principles of law—including those relating to contract law, the law of agency, the rules of equity, and rules of procedure—must be understood before reaching any conclusions as to whether there is a binding and enforceable settlement in any given case. Some of these principles are summarized below.

Settlements are special

An agreement that is an explicit settlement of litigation or a compromise of a dispute is a special class of contracts that will generally be enforced by the courts. Since it is in everyone’s interest to conclude the dispute by the agreement made by the parties, the court’s policy is to strongly favour enforcement of the settlement.

Settlements are also contracts

A settlement is a contract formed when the parties agree to the essential terms. Once those terms have been agreed to—freely, voluntarily, and deliberately, well knowing their nature and what effect they will have—contract law requires that the parties be held to what they have promised and to their negotiated bargains.

Strict rules for exceptions

A party looking to set aside a settlement must convince a court with strong evidence that valid grounds exist for doing so. A settlement agreement, like other contracts, can be set aside on several grounds, including misrepresentation, fraud, duress, mistake of fact, lack of capacity, or if the agreement is unconscionable. But the party claiming those grounds must make it clear through evidence what the assertions are based on.

The courts require full compliance with the strict rules that govern when exceptions will be allowed to invalidate, or refuse to enforce, a settlement. The court will refuse bald assertions by the party who wants to set aside the agreement if those assertions don’t meet any of the grounds listed above. That party must therefore support its allegations with evidence that meets the very high threshold set for parties asking the court to set aside a settlement. And frequently, since those parties do not meet the strict requirements to succeed on their claims, they fail in their attempt to have the court set aside their settlement.

Lessons Learned

To achieve a binding and enforceable settlement you have to do it right or don’t settle at all. To minimize the risk of the other side successfully challenging the settlement and therefore costing you money, consider the following:

• Don’t assume the settlement agreement can’t or won’t be challenged by the other side; and
• Don’t settle unless you understand the full nature and effect of the terms of settlement.
• Also, it’s best to:
• Review the nature and effect of the proposed settlement;
• Properly detail, confirm and record the terms and conditions of the settlement; and
• Clearly and concisely draft the settlement documents, including formal minutes of settlement, an indemnification agreement, a release, a confidentiality agreement and a court order (as are appropriate in the circumstances) especially if minors or other special parties are involved.

Challenges to settlement agreements arise frequently. It is better to read about these cases in the media and law reports when they involve others, rather than having to deal with them yourself. To paraphrase an ancient proverb: a wise person should learn from the mistakes made by others, and not from his or her own mistakes.

With the exercise of some due diligence we can maximize opportunities for achieving binding and enforceable settlements. We can minimize the risk of the other side successfully challenging the settlement and having it set aside by the Court.

Marvin Huberman, LLM (www.marvinhuberman.com), is a Toronto lawyer, mediator and arbitrator.

The two bottling sites and the company’s distribution facilities in Hope, Puslinch, Chilliwack, BC, and Laval, Quebec provide bottled water to a network of more than 145 retailers across Canada. The company has introduced a number of innovations into its supply chain to continue to meet consumer and customer demands, and to produce an environmentally friendly product. In fact, the company has diverted 67 percent of its bottles across Canada from landfill sites.

Canadian Food Chain spoke with David Thorpe, director of supply chain for Nestlé Waters Canada, to discuss those innovations and the inside workings of the company’s supply chain and logistics.

Canadian Food Chain: Have there been recent developments in your supply chain?

David Thorpe: We prefer to only handle product once to prevent damage, so we’ll put it right onto a truck and go directly to our customers. About 30 to 35 percent of the time we’re able to do that. It’s called direct line load, and we’ve been doing it for four or five years. You’ve got to be flexible to supply customers this way. And you’ve got to have excellent quality systems. You’re not putting product on hold, doing additional inspections or waiting for testing. It’s a very competitive market out there so it’s critical to create an efficient model and reduce costs.

The idea came from one of our smaller factories in North America that didn’t have a lot of space to store products. The staff needed to come up with some creative ways to deal with their customers. And it does save a lot of time and money.

CFC: What other innovations have you been working on?

Thorpe: We continue to work on lightweighting and reducing the amount of plastic in our products. We used to make a half-litre bottle that was close to 20g of plastic. Now it’s down to 9.1g, the lightest bottle in the industry today. We also introduced recycled PET  (rPET) packaging last year in our Montclair brand. The 500ml bottle is 100 percent rPET and the others are 50 percent rPET.

CFC: Has your supply chain changed over the years?

Thorpe: Twenty years ago the industry was about large-format, five-gallon and one-gallon bottles. Then in the early- to mid-’90s people began looking for alternatives. That’s when the business changed the most. And when companies like Walmart and Costco really boomed they changed the supply chain landscape. These companies wanted to be as efficient as possible, so they wanted to get the most products on a trailer. They challenged us from a supply chain standpoint and they’ve helped grow the business to where it is today. From a supply chain standpoint, packaging is what has changed the most with lightweighting and the challenges that come along with that.

CFC: How have your customers changed in terms of supply chain needs?

Thorpe: Traditionally we would take our product and ship it to a warehouse or distribution centre for our customers. Now they want us to go directly to their stores, which saves them money and time.

Our customers don’t have to carry as much inventory and we can ship directly to two or three stores on one truck. That’s called the direct ship model (about 80 percent of the volume in 500ml bottles is direct ship). We do that with Costco, Walmart and Metro.

That’s a major change, which started four or five years ago. Our customers wanted this. It also evolved from promotions. Instead of sending product to a warehouse where the retailers might lose a day or two, we send it right to their store.

CFC: What challenges do you face?

Thorpe: Keeping up with our customers. With lightweighting it’s more challenging to get the product to our customers in one piece. We’ve had to adapt the way we load the trucks. There’s the constant challenge to be better, lightweight, low cost.

You need to listen to your customers—they’ll tell you what they want. Five or six years ago who would have thought we’d be in a recycled PET container? But when our customers said, “We want a recycled container,” we had to get there quickly.

CFC: How did you adapt to transporting lighter-weight bottles?

Thorpe: In the way we make the bottles. We looked at what’s called top load, the ability of that bottle to hold weight. So the way you distribute the plastic throughout the bottle has to be exact.

When you have a heavier bottle, it’s much easier to distribute plastic throughout and get it to hold up. It’s easy to ship. As you lightweight it, you have to be exact as to how you distribute that plastic. Your margin for error becomes very narrow. So you get smarter, and more precise.

It starts with the design, where you put the ribs. There’s a lot of thought behind our Eco-Shape bottle [introduced in 2007]. It took years to finalize it. That bottle looks great and is also functional—and it has to survive the entire supply chain.

Supply chain management has long been viewed as a support function humming along in the background; brought in only after the big decisions around sales, new products and markets have already been made.

But what if supply chain managers were consulted as the business strategy was shaped? The concept has been tested and proven at General Mills Canada Corp of Mississauga, a manufacturer of cereal and related food products.

Supply chain has a voice in the C-suite at General Mills, and the results are impressive—sales are up, inventory is flat, and service levels continue to improve. What’s the trick? That’s what delegates at the recent Supply Chain & Logistics Canada conference came to learn, and they weren’t disappointed.

“We’re at a time here where the supply chain voice has never been more capable, more credible or more necessary, so it’s really up to us how we’re going to leverage that opportunity,” said Fiona Renzi-Fantin, director of logistics and planning with General Mills, during a presentation at the conference.

Her team leveraged the opportunity by coming up with a bold idea. “We said we would not be purchasing any more outside storage. It really made people nervous…were we going to have [boxes of] Cheerios on the side of the road?”

Through diligence and cooperation with forecasting and sales, however, the team managed to eliminate outside storage as promised, reduce safety stock, while growing sales and improving overall service levels.

“We gained a very collaborative relationship with [sales and marketing],” said Renzi-Fantin. “Gone are the days when we’re finding out when the orders hit our system that we’re going to be out of inventory.”

Looking back on the situation, Fiona points to best practices that can be applied anywhere. She advised delegates to bring ideas forward, instead of waiting for instructions from sales and marketing.

“Take initiative in meetings so you’re seen as innovative; not just a support function,” she said. “But we can’t go into a boardroom with a crazy idea. It has to be based on fact…We have to take the first step to show we understand more than our own [function] and how we interact with other [components] of the business.”

Supply chain practitioners must also be ready to show they’ve studied the risks and drafted a mitigation plan. A longer-term view is another key, she said, emphasizing the importance of seeing beyond the next delivery.

“We’re starters and we’re finishers. That’s what we do. We get the job done…[but] your supply chain needs to be more than flawless execution…You have to ask yourself how much time are you going to spend on [business] strategy?”

She advised delegates to shape a three- to five-year plan, involving succession planning, mentoring, and trading off talent between supply chain and other functions such as sales, marketing and forecasting. The plan should also include targets and metrics such as cost savings, inventory and service levels.

“You can’t start out with a three-year plan and abandon it in two years,” she added. Once the plan is in place, managers should make time to re-visit it, even through the hectic day-to-day, and ensure projects and people are aligned.

That kind of senior-level thinking cultivates a voice at the boardroom table, and as General Mills has demonstrated, tangible savings and innovations across the organization.

But now Ford is getting good press and has gained the respect of its suppliers, says Dan Georgescu, global purchasing with Ford Motor Company. Georgescu presented the story of how Ford reinvented business processes today at the PMAC national conference, Reaching New Peaks in Whistler, BC.

Between 2002 and 2005 Toyota gained 32 percent in the opinion of suppliers while Ford lost six percent. Ford and the other US automakers were perceived as being singularly focused on cost reduction, having little regard for supplier survival and not caring about supplier intellectual property.

All these impressions led to adversarial relations with suppliers, and led the suppliers to shift resources to the Japanese car makers and increase product quality for the Japanese manufacturers while only maintain product quality for the US manufacturers. Many suppliers indicated they would like to drop the US companies as customers if they could.

The results of the supplier survey correlated with share value, with Ford experiencing declines, while Toyota increased.

So what did Ford do about it?

In 2005 the company introduced several initiatives to revamp its supply chain.

Under the One Ford strategy they brought in the Aligned Business Framework (ABF) with the objective of rendering long-term strategic partnerships with suppliers. ABF agreements include:

• Ford paying upfront for engineering and development costs;
• Extended relationship with the supplier for the life of a vehicle;
• Improved commonality of parts around the world;
• A bilateral commitment to achieving competitive cost;
• Supplier commitment to bring leading edge technology to Ford;
• Supplier commitment to accelerated achievement of competitive cost structures that will be maintained over the life cycle, leading to less emphasis on cost reduction;
• A commitment to do business with women and minority owned businesses.

Another initiative is called Matched Pairs. This is a program in which the design engineers are paired with procurement people as the face to deal with suppliers on specific projects. This works as they have to present a united front to the supplier. If left alone, Georgescu said, each would have conflicting objectives—to spend and save respectively.

After the introduction of these initiatives, Ford’s ranking in the supplier opinion survey has climbed significantly, while Toyota’s has dropped. Ford has gained marketshare to the point where it now outstrips Toyota. In 2010 Ford climbed from 13^th to 7^th in a global supplier opinion survey.

Did Ford achieve success because of supply chain strategy? The answer is an emphatic yes, says Georgescu.

Back in 2005, managers at Imperial Tobacco felt the business had hit a plateau. A consulting company was brought in to look at the distribution network, and the idea of direct-to-store delivery was born.

Under the old system, employees picked case quantities and sent them to wholesalers. Fast-forward to today, and the company ships directly to 25,000 retail outlets coast-to-coast.

“The speed to market is 24 hours from the time the sales rep gets the order to delivery throughout Canada,” said Pierre Gibello, manager of secondary supply chain with Imperial Tobacco, speaking at the recent Supply Chain & Logistics Canada conference in Mississauga, Ont.

Imperial worked with Ryder Canada to put the direct-to-store network in place. It was an easy decision to make, given Imperial had partnered with Ryder since 1997. Today, Ryder manages seven of Imperial Tobacco’s eight Canadian DCs.

Because cigarettes are sold in multiple package sizes, and Imperial also sells loose tobacco, the DCs carry 150 SKUs. That kind of variety is good for customer satisfaction, but it created hurdles for stage two of Imperial Tobacco’s plan—automation.

“We were looking for a technological breakthrough to [further] improve our productivity,” Gibello said. His team scoped out ideas at other Imperial operations.

In Brazil for example, a DC employs an automatic picking system. But the facility deals with only one product—the king size 24-pack. That specific system wouldn’t suit Imperial’s Canadian operations, where products come in 10 different sizes. “Given the velocity of our market in Canada, this didn’t satisfy our needs,” Gibello said.

Instead, the team decided they needed an automated system to place tobacco products into shipping cases. The question was how would they do it? A request for proposals (RFP) was issued but “the results, unfortunately, were not that exciting,” he said. “The cost of the robot was too expensive [and] there would have been no payback.”

Custom-built
The team realized an off-the-shelf product wouldn’t work. Instead, it brought in two automation companies and put them in a room with Imperial Tobacco staff and Ryder. The companies worked together to craft a new RFP for a non-traditional customized system. The RFP was sent to nine suppliers, but only five bid. Axium Inc. (Montreal) emerged the winner.

“Axium had the software to let the robot know where the [item] had been placed,” Gibello explained. That capability was key to the project, as Imperial didn’t want to invest in vision systems for the robots.

The plan received the board of director’s approval in 2009, and has since been deployed at DCs throughout Canada—the two largest of which are in Montreal and Brampton. In between, there were months of trial and error. “The scope was huge,” Gibello recalled.

“In the spirit of a true partnership, we decided to have two project managers,” he added, referring to the leads from both Imperial Tobacco and Ryder. Project headquarters were at Axium, for a couple of reasons.

“We didn’t want the project to be completely known,” Gibello said. “Plus, Axium has access to all the technology, testing, etc.”

He recalls the team repeatedly watched the line in action, then headed into a boardroom or lab to fine-tune it. Basing the project at Axium allowed for these on-the-fly modifications, he explained.

Aside from taking a pass on the vision system for the robots, Imperial also opted for roller conveyors over rubber strap, to keep costs down further. The project was completed in 15 months. Payback on the system—which included 35 robots (ABB 4600 six-axis)—was realized in two years.

The biggest takeaway from the project, in Gibello’s view, is the collaborative approach.

“Ryder, as a true partner, brought to the table far more than we were expecting. They had to go from a distribution [model] to automatic packing.”

Ryder reported an 83 percent throughput improvement at both the Montreal and Brampton DCs within eight months—a milestone Imperial chalks up to synergies with its partners from day one, diligent selection of technology and the ability to test and re-test off-site before installation.

Taken together, the strategies show it’s possible to radically overhaul a supply chain, reaping savings, productivity and service gains along the way.