APRIL 2016

CANADA’S SUPPLY MANAGEMENT MAGAZINE

MRP’S NEXT EVOLUTION Demand Driven Materials Requirements Planning roundtable

The rise of autonomous vehicles

Courier services

PB2B_Apr2016_issue_AMS_V2.indd 1 2016-04-14 2:36 PM Staples page 2 Make More Happen

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Purchasing_Staples_April.inddPB2B_Apr2016_issue_AMS_V2.indd 1 2 2016-04-112016-04-14 1:352:36 PM Vol. 58, No. 2 • APRIL 2016 Table of Contents

10 COURIER SERVICES Tips for saving money on courier services 10 and small package delivery.

12 BUYING SAFETY Advice for purchasing security systems.

15 THE NEXT STEP IN MRP Roundtable participants weigh in on Demand Driven Materials Requirements Planning.

22 MRO BUYING

Is there more procurement should know ©shutterstock about maintenance, repair and operations? 15 Also inside 4 UP FRONT 8 PUBLIC PROCUREMENT

5 BUSINESS FRONT 25 IN THE FIELD

7 FINANCE CORNER 26 WTHE LA

Make More Happen 24 Supplement inside: © ©Roger Yip Photography © ©Roger Yip Safety in the sun. Connect With Us Online We encourage you to visit us online to stay in touch ™ with what’s happening in your industry and to .ca At Staples Business Advantage , we know heat protection takes priority. From safety vests and PurchasingB2B.ca @PurchasingB2B Michael Power view enhanced articles. cool drinks to sunscreen and eye protection, we have everything you need to keep your employees cool and safe all summer long. Features

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PurchasingB2B.ca | April 2016 | 3

Purchasing_Staples_April.indd 1 2016-04-11 1:35 PM PB2B_Apr2016_issue_AMS_V2.indd 3 2016-04-14 2:36 PM Up Front

80 VALLEYBROOK DRIVE TORONTO, ONTARIO M3B 2S9 www.PurchasingB2B.ca PUBLISHER/ADVERTISING SALES Dorothy Jakovina 416-510-6899, [email protected]

Innovate EDITOR Michael Power Or else! 416-442-5600 ext 3259, [email protected] ART DIRECTOR Andrea M. Smith

nnovation ranks high among business buzzwords these days. At least to me, the word ACCOUNT COORDINATOR brings up images of doing things better, faster, leaner, cheaper, et cetera. I also think Tracey Hanson I of improved technology use. 416-510-6762, [email protected] It’s a theme I hear often when talking to people across various industries. I recently CIRCULATION MANAGER talked to Barrie Kirk, from the Canadian Automated Vehicles Centre of Excellence Barbara Adelt 416-442-5600 x 3546, [email protected] (CAVCOE) about driverless cars. You can read a story highlighting our conversation on page 4 of our Canadian Automotive Review (CAR) supplement in this issue. ANNEX PRINTING & PUBLISHING INC. In the not-too-distant future, Kirk sees the confluence of autonomous vehicles (AVs) VICE-PRESIDENT: T im Dimopoulos (416)510-5100, with other innovative vehicle technologies, namely hydrogen power and vehicle con- [email protected] PRESIDENT & CEO: Mike Fredericks, [email protected] nectivity (the so-called connected car). Also, at the Canadian Aboriginal & Minority Suppliers Council (CAMSC) Diversity For over 57 years, PurchasingB2B has been a trusted source of Procurement Fair on April 12-13, Jahan Ali, CEO of mobileLIVE, spoke in an edu- information for Canadian purchasing/supply chain management professionals in the private and public sectors. Special features cation session about innovations involving the Internet of Everything (IoE), Artificial and supplements include Fleet Management, Canadian Automotive Intelligence (AI), big data and omni-channel coming together to provide us with a con- Review (CAR), PurchasingB2G, and Travel Management Canada.

sumer experience we only dreamed of just a few years ago PurchasingB2B is published six times a year, except for occasional These changes are, apparently, much closer than many of us realize. Kirk notes that combined, expanded or premium issues which count as two subscrip- by 2015, AVs could account for the bulk of our taxi trips. Meanwhile, Ali said that by tion issues, by Annex Business Media. 2018 there will be 22 billion IoT devices out there. © Contents of this publication are protected and may not be Often, such changes are an answer to challenges that arise in our daily lives. reproduced, in whole or in part, without the written consent of the publisher or editor. Certainly, procurement professionals know that the supply chain has gotten faster and NOTICE: PurchasingB2B accepts no responsibility or liability for claims more complex in recent years. made for any product or service reported or advertised in this issue. To look at solutions for this trend, we recently took a look at a relatively new meth- PurchasingB2B receives unsolicited materials including letters to the odology to handle inventory during a roundtable conversation we held on March editor, press releases, promotional items and images from time to time.PurchasingB2B, its affiliates and assignees may use, reproduce, 10 in partnership with SYSPRO Canada. Demand Driven Materials Requirements publish, re-publish, distribute, store and archive such unsolicited Planning (DDMRP), the topic of our roundtable discussion, provides a new way of submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. dealing with the MRP process. You can read the report on the discussion beginning on p. 15. The methodology SUBSCRIPTION SERVICES: To subscribe, renew your subscription, or to change your address or information, contact us at 416-510-5713 or provides procurement professionals with an innovative way to forecast inventory that’s 1-866-543-7888, ext 3258, [email protected], or visit us at designed to remove some of the distractions from the daily lives of procurement profes- www.PurchasingB2B.ca. Subscription price per year: $99.95 CDN; Outside Canada per year: $172.95 US; Single issue Canada: $18 CDN. sionals. Certainly, that strikes me as innovative. Annual Supply Chain Survey issue, Canada: $45; Outside Canada: $70 Change is all around us these days, and it’s more important than ever to innovate. US. Taxes extra.

According to the Conference Board of Canada (as of 2013), Canada ranked 13th From time to time we make our subscription list available to select among 16 countries in innovation. Countries that are more innovative are passing us companies and organizations whose product or service may interest on income per capita, productivity and the quality of social programs. you. If you do not wish your contact information to be made available, please contact us via one of the following methods: It’s up to us to keep up with new methodologies, advancing technology and so on Phone: 1-800-668-2374, Fax: 416-442-2200 lest we’re left behind. Mail to: Privacy Officer, 80 Valleybrook Drive, Toronto, ON M3B 2S9 Printed in Canada. ISSN: 1497-1569 (print); 1929-6479 (digital) Publications Mail Agreement No. 40065710

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4 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 4 2016-04-14 2:36 PM Business Front

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

By Michael Hlinka

consider myself a child of the 1960s. I was born blog called The People Who Share to get the skivvy. According to them, in 1958 into a household that most would char- the name sort of gives it away. The sharing economy is nothing more and I acterize as being extremely conservative. My not less than people co-operatively coming together and sharing resources, father owned his own small business. He was a hard in order that they are used more efficiently. It’s an interesting development. worker and diligent saver. My mother stayed at home Part of the ideology is Hippie-inspired. But there’s also a much more prag- until my older sister and I were both in high school. matic, bottom-line realization that in an economy where growth is slowing, (Back in those days, at least in my neighbourhood, it makes hard-core business sense to use resources as productively as possible. it was common practice for public school children One of the outputs of the sharing economy is the transportation service to go home for lunch.) There wasn’t anything in my Uber. There is a clear divide about how it’s seen by politicians and the pub- upbringing that could have been considered the least lic. Politicians hate it. The city council in my hometown, Toronto, is doing bit radical, or anti-authoritarian. everything it can to put it out of business. People, on the other hand, love That being said, everyone in North America was it, voting with their wallets and cellphones to direct business to it and away impacted by the hippie phenomenon. Its ethos was from the traditional taxi and limousine services that are both heavily regu- “do your own thing”, that is, as long as you weren’t lated and highly taxed (in the form of required licenses). And this is the rea- son the political classes despise Uber: they “The sharing economy is nothing more and can’t expropriate value from it. Another example of the sharing econ- not less than people co-operatively coming omy is crowd funding. This is a means together and sharing resources, in order for ordinary people to invest in a variety that they are used more efficiently.” of start-up companies. Its promise is that it has never been more possible for small hurting anyone else while you were doing whatever it enterprises to get the money they need. At the same time, the options for was that was your thing. The movement was in part individuals are unprecedented. But standing in its way are establishment inspired by opposition to the Vietnam War. Kids forces—vested interests that in the guise of “protecting the public” are didn’t want to be told by elders to fight a war they shackling entrepreneurs and investors both. Is it possible that some fraud- didn’t believe in. And it was also a protest against the sters might use crowd funding? Of course—but shouldn’t adults be respon- perceived materialism and shallowness of that era. sible for making adult decisions with their money? Hippies believed in living off the land and consum- The greatest impediment to the sharing economy and a flourishing of ing only as much as was necessary to live. Communes economic activity is government, which by its nature is a profoundly reac- sprang up across this continent and sharing was con- tionary force, always backward looking. Business on the other hand, is sidered a virtue, because it meant that instead of (for profoundly progressive. Years ago, Joseph Schumpter talked about the example) each household having its own automobile, “creative destruction” of capitalism. Uber only became possible because of one could serve three. cellphone technology that allowed customers and providers to link seam- All of these memories flooded back to me several lessly. Crowd funding thrives with the Internet and social media, where days ago when I read a report generated by MaRS. community isn’t as much about geography as it is about shared values. It’s difficult to pigeonhole exactly what MaRS does, Yes, Uber’s development is at the expense of the traditional taxi indus- but it provides a forum for entrepreneurs to meet try. Yes, crowd funding means the traditional financiers become increas- with other key stakeholders and perhaps partners: ingly irrelevant. But it’s because these two traditional businesses don’t Politicians, investors and mentors are just a few par- create the value that they expropriate. And for that reason, they turn to ties that come to mind. The MaRS building is in political forces to frustrate the market and what people would like to do downtown Toronto, located just off the University of freely. But the sharing economy is the future—and the sooner the mullahs Toronto campus and just steps away from Ontario’s and apparatchiks do the honourable thing, which is to recognize their per- parliament building. And the MaRS report was dis- sonal irrelevance and do something useful (like maybe drive an Uber), the cussing regulation in the sharing economy. better it will be for everyone else. What exactly is the sharing economy? I went to a Folks should be allowed to do their own thing! B2B

PurchasingB2B.ca | April 2016 | 5

PB2B_Apr2016_issue_AMS_V2.indd 5 2016-04-14 2:36 PM Professional Development Directory

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SCMO_Corp Training Ad_7x4.875_FINAL.indd 1 2014-09-25 4:32 PM Purchasing_SCMAO_April.inddGoing 1 on May 31st! 2016-04-05 9:54 AM The 2016 Annual Procurement and Supply Chain Professional Survey • What are the trends, challenges and opportunities that are affecting the profession? • How are economic factors shaping the role of procurement within the supply chain? • What are the average salaries from a regional and industry perspective? Thank you for your participation. Your insights on these topics and more will help shape the results of this survey.

Coming to your Inbox on Tuesday, May 31st! And available on www.PurchasingB2B.ca

Survey results will be published in a future issue of PurchasingB2B.

6 | April 2016 | PurchasingB2B.ca

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PB2B_Apr2016_issue_AMS_V2.indd 6 2016-04-14 2:36 PM Finance Corner

Card program Steve Pedersen is vice-president and head acceptance of North American corporate Eliminating the sticker shock that can card products at BMO accompany card payments Financial Group.

By Steve Pedersen

he steady recovery of the North American at any time, which allows suppliers to have a better view of their expenses economy since the 2008 financial crisis has and pull data reports at the click of a button. Additional automation comes T allowed many organizations to invest inter- in the form of control and security. Corporate card programs enable cen- nally and scale-back austerity policies. However, to tralized spend control, automatic fraud and card misuse protection, as stay competitive in a fast-paced business landscape, well as providing visibility into spending. Paper invoices do not have these companies remain focused on attempting to increase capabilities. When all of these processes are automated, companies can efficiency, and—as a byproduct of more effective reallocate resources that were previously mired in these operations. practices—cut costs. Many organizations are realiz- When clients are late to pay their invoices, the entire supply chain ing significant cost savings in the payables depart- suffers from the withholding of funds needed to keep operations run- ment, as more suppliers are beginning to accept ning smoothly. With a corporate card program, suppliers are given corporate cards as a form of payment from their cus- revenue assurance and can collect accounts receivable faster, reduc- tomers in an effort to streamline the payables process. ing the days sales outstanding (DSO) and providing more cash flow for Despite the many benefits for companies, some reinvestment. suppliers are still hesitant to accept payment card In addition to increasing on-time payments, accepting payment cards programs because of the fees they incur with each could increase the frequency and size of orders, translating to an increase card transaction, which can be more expensive than in the bottom-line. According to a 2012 study by MasterCard and Kaiser Associates, Acceptance Matters, and Now We “End-users benefit from corporate card acceptance Know by How Much, 49 percent of buy- ers indicated an intent to spend more by dealing with fewer vendors, and suppliers benefit with their current supplier if they started from increased loyalty with their existing customers.” accepting cards, and 57 percent indi- cated that card acceptance would prompt traditional clearing and processing. Many assume them to order more often. Therefore, end-users benefit from corporate that cheques and automated clearing house (ACH) card acceptance by dealing with fewer vendors, and suppliers benefit from payments are the cheapest options to process without increased loyalty with their existing customers. exception, and therefore cannot justify an amend- Instead of processing individual invoices, payments teams can easily pro- ment to their accepted forms of payment to accom- cess payments in large quantities electronically to reduce paper waste and modate payment cards. administrative costs. This removes the need for potentially inefficient While cheques and ACH may be appropriate for manual inputting, reduces human error and allows employers to reallo- some accounts receivable programs, the sweeping cate the time and skills of their workforce. In fact, according to RPMG assumption that corporate card acceptance is univer- Research, companies see an average 77 percent cost reduction when mov- sally more expensive is unfounded, and causes suppli- ing from a manual invoicing system to a corporate card program. ers to overlook the opportunities to reduce costs and increase productivity. Specifically, accepting corpo- When less is more rate card programs can be beneficial in the long run With many organizations increasingly leaning on corporate payment by increasing productivity, security and loyalty. card solutions, especially now that Apple Pay is beginning to accept cor- porate payments, suppliers can stay ahead of the competition by accept- Streamlining processes ing corporate cards. Although suppliers may assume that restructuring Accepting payment card programs virtually elimi- accounts receivable to accommodate payment cards is an effort that may nates the need to process cheques and payments with not pay off, when weighed against the potential benefits of card accep- manual input systems such as Excel spreadsheets, tance, a shortsighted approach to payment management can dig suppliers which simplifies the process for both the end-user into a financial hole. As demand for corporate card acceptance increases, and the payment processing team. Transactions via businesses can build a streamlined, efficient program that reduces admin- payment card are stored electronically and tend to be istrative burdens and strengthens the buyer-supplier relationship to the recorded in an online platform that can be accessed benefit of both parties. B2B

PurchasingB2B.ca | April 2016 | 7

PB2B_Apr2016_issue_AMS_V2.indd 7 2016-04-14 2:36 PM Healthcare procurement PUBLIC PROCUREMENT Recent trends in the world of buying for hospitals and other healthcare facilities By Nicola Raycraft

promising recent trend within of value analysis that incorporates qual- sis is required. How do you pursue com- public procurement and supply ity first (patient care), and then reviews mon value, when the concept could be A chain management is the shift to pricing to determine value. But with val- unique to all involved? An approach is a more flexible approach to contractual ue-based procurement came a new chal- required to meet all or individual stake- obligations, which allows procurement lenge: what does “value” mean? holder needs. The concept of over- professionals to use their skills to control Webster defines value as “the regard all value or return is not new; however, costs. At the time of the Supreme Court that something is held to deserve; the it has been increasingly questioned as of Canada ruling in the seminal Ron importance, worth, or usefulness of a result of trending strategies herald- Engineering case of 1981, the common something”. This definition is subjective, ing value as the ultimate outcome of an practice within public procurement had placing notions of value in the eye of the RFX. In these situations, could value been to tender RFX (a catch-all term beholder. If value is subjective, how do be defined as sustainable solutions that that includes: Request for Information, we incorporate this concept into supply meet the requirements of regulation, end [RFI], Request for Proposal [RFP], chain strategies, especially when there users and the best patient care at the low- Request for Quote (RFQ), and Request are multiple stakeholders? est total cost? for Bid [RFB]) using a contract A/B for- Value in healthcare could be described If there is agreement that there mat. The healthcare sector was no differ- as any of the following: are several definitions of value, one ent than any other public procurement » best clinical outcome; approach could be to create strategies agency until a few years ago, when pro- » best provider of support and educa- that allow more than one solution. The curement lawyer Paul Emanuelli worked tion for the products tendered; idea of awarding more than one con- with the University of Toronto to pro- » suppliers that invest in R&D and pub- tract to meet individual stakeholder duce what’s known as a “flexible for- lications that aid in education of clini- needs complicates the winner-take-all mat” or, more commonly, a “negotiated cal resources within our hospitals; world of competitive bidding. One of approach to RFX”. » lowest cost to conversion; the tradeoffs is a potential increase in It wasn’t long before we saw organiza- » continuity of supply; and landed cost. Traditionally, aggregation tions begin to publish and offer educa- » logistics infrastructure. and single award strategies are designed tion sessions for healthcare supply chain These differences in how value can be to produce the best landed costs from the professionals on value-based procure- understood demonstrate a challenge to marketplace, creating economies of scale ment—also known as “value analysis value-based analysis, which is that value enjoyed by suppliers. The challenge for and negotiations”. These new trends in is not always the same for everyone. So supply chain professionals, therefore, healthcare procurement led to new ques- how do supply chain professionals pro- will be to determine when a value anal- tions and concerns about RFX strategies. vide value when there is more than one ysis strategy should be employed, and The traditional strategy was a sin- stakeholder, with different definitions of when standard RFX strategies are more gle awarded contract for the supply of value and different expectations? suitable. products and services. This would mean Much of the benefit provided by orga- Traditionally, where value analysis one contract and only one solution. nizations such as SSOs, GPOs and buy- has been used within manufacturing or The introduction of value-based pro- ing consortiums resides in their ability assembly operations, the focus has been curement represented a shift away from to collect and analyze spend data for on the entire process and has included awarding to lowest cost and highest scor- the purpose of aggregating demand. elements of throughput and productiv-

ing proponents, toward the development Challenges arise when true value analy- ity. In the medical community there is so Moscaliuk—Fotolia ©Sergii

8 | April 2016 | PurchasingB2B.ca | PUBLIC PROCUREMENT

PB2B_Apr2016_issue_AMS_V2.indd 8 2016-04-14 2:36 PM PUBLIC PROCUREMENT

much variance in process, due to a range cost of switching and the dependency on healthcare sector as a result of this evo- of skills and preferences associated with service gives these suppliers power. The lution are multiple contract awards that physicians and surgeons, that it becomes ability to mitigate this kind depends on meet the requirements of patient care, much more complex to assess. If we are several factors. Can education and train- clinical needs and best value for tax pay- relying on the marketplace to estab- ing be supported internally? Can the ers dollars, while adhering to procure- lish best price, our procurement strat- unique product component be costed and ment regulations. egy needs to focus on how the items we dissected to arrive? If so, what is a reason- Another approach to identifying risk are buying are costed and if the tender- able profit model for the supplier? would be a spin-off of the “propensi- ing process is giving us the lowest mar- ty-to-partner” model. The picture below ket price. Buying power provides a model for sourcing-risk identi- Organizations may need to develop a If items are considered highly complex fication, as well as potential solutions to matrix or risk assessment to determine and you cannot drive to a single award, mitigate risk with a single award involv- what strategy is best for the procure- there is risk to the best price and there- ing high risk products, which support ment process. Products or services that fore less power to the buyer. This is where healthcare procedures of high clinical are commodities, have little risk through expertise in manufacturing and procure- sensitivity. fewer competitors and post little risk to ment expertise can lead to the devel- There are a number of options to reduce healthcare costs, and while the procurement of medical supplies “Political support and legislative changes are is a small percentage of overall health needed to place more power with buyers and supply chain system dollars, an incremental focus professionals, allowing them to have a meaningful on these elements through VA/VE approaches could have a significant impact on costs and suppliers.” impact. Political support and legisla- tive changes are needed to place more patients could undergo a more tradi- opment of more effective control on the power with buyers and supply chain tional procurement approach. By con- cost of highly engineered medical com- professionals, allowing them to have a trast, items associated with a high degree ponents. Establishing target pricing as meaningful impact on costs and suppli- of clinical sensitivity; have sufficient com- part of an RFX could provide incentive ers. Also required is a paradigm shift petition and availability of substitutes; for ongoing cost reductions and value from the belief that a free market is the require education; and have different improvement. best method for controlling costs. This applications but produce similar clinical is particularly important with health- outcomes could require a value analysis Competitive rivalry care products of high clinical sensitiv- approach to procurement. The development of new suppliers with ity. The ideal of one awarded contract The use of business models such as support from hospitals is a potential to put is only acceptable for commodity items Porter’s Five Forces can also help supply pressure in the marketplace. If we create a and very low-risk products, like those chain professionals frame the discussion. virtual make or buy option for the hospi- that don’t touch patients. This model is commonly used to under- tal we could have an impact on the mar- Finally, hospitals and buying groups— stand the balance of power within a mar- ketplace for specialty manufactured or in collaboration with the private sector, ketplace or business situation, and can be engineered medical components. and combined with government support used as a tool to determine the complexity and oversight—should invest in the sup- of a market and link it to developed sourc- Threat of substitution ply chain profession. This would mean ing strategies. The development of new suppliers, or more dynamic and robust procurement research into manufacturing options can strategies, offering significant gains for Supplier power create a threat of substitutes. the healthcare industry. How many suppliers are there within the market that can supply the breadth of New entrant Nicola Raycraft is manager, strategic product required? Some suppliers can use The opening of new markets and sup- sourcing for MedBuy their proprietary attributes and designs to pliers from low-cost countries off shore Corporation. drive higher prices. These suppliers tend could also present challenges, especially to provide superior service and education within healthcare. to surgeons within hospitals. The high What we see emerging today within the

PUBLIC PROCUREMENT | PurchasingB2B.ca | April 2016 | 9

PB2B_Apr2016_issue_AMS_V2.indd 9 2016-04-14 2:36 PM DELIVERING VALUE Ten ways your company can save money on its

courier and small package budget By Darryl Nelson lthough Canadian procurement and supply chain pro- that present aggregated data. The absence of clean and detailed fessionals have made great strides in improved control shipment data hamstrings effective management. A of supply chain expenses over the years, one area of business that continues to not be fully understood, as well as to Complex pricing structures offer opportunities, is courier and small package spend man- We sometimes hear from clients that “we have the best rates in agement. The industry in Canada generates over $10 billion town” or “we haven’t had a rate increase in 3 years”. This usu- per year in revenue, and as e-commerce becomes a more sig- ally indicates the client has been overpaying and does not fully nificant channel in consumer experience the industry continues understand its shipping profile relative to its current pricing to grow and become more sophisticated. Below is a top-ten list agreement. The courier and small package industry has com- of root causes of overspending in this area and scenarios where plex pricing structure, including: leading practices could bring significant benefits. • Division of countries, provinces, regions into zones; • Multitude of tariffs based on origin zone, destination zones Absence of internal technical knowledge determined by distance from origin, service requirement, and and focus packaging type; Many years ago, the traffic manager was responsible for trans- • Dimensional weight rules—the calculation of a “theoretical portation spend—the internal technical expert, albeit with very weight” based not on the actual weight of the shipment but the few tools and, typically, with an unpolished approach. Since dimensions of the shipment; then, in an effort to get lean, many companies have rationalized • Variable fuel surcharges; that oversight and have become knowledge dependent on the • Additional fees for ancillary services, such as off hours or companies that are providing them these services. The service weekend service, rural service, residential service, oversized providers, armed with better information and tools, develop a packages, corrective administration, et cetera; and more intimate understanding of the Shipper’s business, putting • Methodology, tariff structure, rules and application that vary most shippers in a disadvantaged position when it comes time from carrier to carrier. for negotiation or program review. Complicated application of increases Ownership of shipment data and reporting When assessing pricing increases, we also hear clients say that “the Many shippers are not generating and monitoring courier spend new rates represent a three-percent increase” only to find that the and activity reporting at a detailed enough level to understand pricing will result in a much greater spend. This indicates pric- their shipment profile and trends, and to identify and react to ing has not been adjusted uniformly. The following explains the changes. Some shippers rely on the service providers to provide difference between “uniform” and “non-uniform” rate increases:

reporting, but this often comes in the form of canned reports • Uniformly: the same rate increase is applied to all rates within ©shutterstock

10 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 10 2016-04-14 2:36 PM the rate table (i.e.: rates across each weight band and to each required for economies of scale to get the lower costs through destination all increased three percent year over year)—this consolidation. would generate a three percent increase for the shipper; • Non-uniformly: rates for different weight bands and differ- Packaging sub-optimization ent destination zones at increased to varying degrees (i.e.: Have you ever received an e-commerce shipment and found rates to zones one and three were increased one percent while a small item in a large box? Or, multiple packages that have rates to zone two were increased five percent, or rates for ship- been crushed because of unutilized empty space within the ments weighing one-to-10lbs were increased 15 percent while boxes? Because of dimensional weight rules, this wastes spend all other weight bands were increased one percent). This may on unutilized cube through a lack of controls and packaging still present an overall average increase of three percent in the standards. A review of standard packaging, and the implemen- table, but in application means a much higher increase for a tation of controls and audits can help minimize overspending. shipper whose profile is one-to-10lb shipments into zone two. “The best option Misunderstood shipment profiles When procuring any freight service, the shipper must under- isn’t necessarily the lowest stand the shipment profile to evaluate and select the most com- petitive and appropriate pricing model. cost option.” • Shipment profile would consider the volume, geographic dis- tribution, size of shipments, density of shipments, handling Poor audit control between operations and requirement. payables for payment • Volume: discounts off the carrier’s base tariff are available Without an efficient process, clear accountabilities, and the and one factor in determining the degree of the discount is the required information, overpayments take place. Industry potential revenue of the account. reports, both in the US and in Canada, claim that invoice • Geographic distribution: primary shipping lanes, urban ver- errors could represent two-to-five percent of total spend. There sus rural delivery. are professional freight audit services available to shippers • Size of shipments: the mix of letters, packages, multi-package wanting to outsource this function. and pallet-sized shipments. • Density: shippers of relatively light product are often caught off Market due diligence guard by the impact of dimensional weight rules. It’s import- Every shipper should be conducting its market due diligence ant for shippers to understand the density of their shipments through an (RFP) process every two-to-three years. Even when and the dimensional weight rules of their carrier. A side-by- the shipper opts to remain with its incumbent service providers, side rate comparison of two competing carriers will not reveal the process is a validation that the relationship is solid, the solu- the “lower” price without understanding and applying each tion or program remains viable, and the pricing is competitive. carrier’s dimensional weight rules. In fact, one carrier may With market conditions and business requirements changing appear less expensive than another based on the rate table, rapidly, through any combination of mergers/acquisitions, new but prove more expensive once the dimensional weight is lanes, new services and fuel volatility, it makes sense to ensure applied. Dimensional weight rules are negotiable. alignment and strategic fit on regular basis.

Utilization of strategic solutions Not utilizing courier and small In addition to pursuing competitive pricing and highest value package providers strategically proposition, shippers must also consider alternative strategies The best option isn’t necessarily the lowest cost option. to mitigate freight spend where economies of scale exist: Through the due diligence of a periodic RFP process, shippers • Consolidation; can assess the value proposition of various service providers, • Parcels shipped to the same destination on the same day, and including technology and tools, reporting and data, perfor- utilizing the same service, should be consolidated and rated as mance and customer service, coverage area, strategic solu- a single shipment; and tions, value added services, and, of course, pricing. • Where deliveries can only be made Monday to Friday, there Acquired smartly, your service providers need not simply can be accumulation of shipments in destination terminals represent the other side of a series of tactical transactions, but over weekends that some carriers will consolidate into single rather, they should be looked upon as a strategic partner pro- deliveries at a reduced rate. viding access to sophisticated tools, visibility and critical busi- Zone Skipping: this is used by shippers with a significant ness data; access to regional, and, even global markets through number of shipments into a zone of moderate to significant their network; and, as a means to improve speed to market and/ distance from the origin. The practice is to consolidate par- or a lower “total delivered cost” via alternative shipping options cel shipments into either an LTL or TL shipment for a reduced and service solutions. B2B line haul cost, then break bulk and distribute those shipments Darryl Nelson ([email protected]) is a Principal with from within the destination zone. The volume and distance is Supply Chain Alliance.

PurchasingB2B.ca | April 2016 | 11

PB2B_Apr2016_issue_AMS_V2.indd 11 2016-04-15 10:41 AM Purchasing a security system that meets the needs of your organization

ment like tape-based recording towards Internet protocol (IP) sys- tems. That means better quality, an increased ability to compress and to construct networks to view cameras at multiple locations, including offsite. But procurement professionals are rarely security experts, Hyde notes. That employees, like multi- can leave purchasers at the mercy of the tenant offices or banks. installer and their knowledge, prefer- “It’s a way of restricting ences and which systems they can make access but also logging who the most money from rather than what came and went,” he says. best meets a client’s needs. Purchasers Now more than ever, Hyde says, may not know what level of surveillance these systems can be integrated for syn- their organizations require. For sizeable ime was, a security system meant ergy and to leverage each other, thus installations, Hyde recommends hiring a getting a video camera and rigging amplifying their benefits. Video surveil- consultant to help determine what equip- T it up at the office front door. But lance gear is ubiquitous and mainstream, ment is needed. If the installation will cost these days, purchasing such equipment Hyde notes, and its purchase transcends over $10,000, Hyde suggests using about requires research and knowing enough all industries and businesses in both the 10 percent of that on consultancy. For about options to make a decision that’s private and public sectors. higher priced installations, hiring consul- right for a specific organization. New “It has really become very omnipres- tants to handle the RFP and go through technology—think digital recording and ent, very universal, especially with the the procurement process on behalf of an Internet connectivity—has influenced advent of the internet where it’s a lot eas- organization is an option. “An indepen- the choices purchasers have when looking ier now to put up a camera and have it dent party can help to establish what’s to keep their organizations secure. streaming and watch it,” he says. “I’d say required, provide some basic operational The term “surveillance system” usu- the video surveillance piece has become and technical requirements and give the ally refers to cameras positioned in strate- very pervasive, whether it’s a doctor’s installer something to align with so that gic locations, says David Hyde, a security office waiting room, a store, an industrial when somebody gets a few bids they’re expert and owner and principal consul- location, or pharmaceutical use. No mat- not comparing an apple to an orange to tant with David Hyde & Associates. Also ter what it is—retail, commercial, indus- a pear,” he says. “Be open to retaining included in the term is electronic access trial, agricultural, farmland—virtually the advice of an independent party who control—card readers and other creden- all businesses that have any size or have understands the security and the systems tials allowing personnel into buildings or assets to protect very often have cameras and the needs, and who can translate the other areas—as well as intrusion systems in place to provide a layer of protection.” client’s needs into operational or techni- or burglar alarms. Access control tends That ubiquity has increased along cal criteria so that we at least have some- to be more specialized, Hyde says. Such with technology advances, Hyde notes. thing to aim for.”

equipment is used for offices with multiple Systems have shifted from analog equip- Organizations sometimes fail to define ©alice-photo/Getty Images/iStockphoto

12 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 12 2016-04-14 2:36 PM Have there been any major develop- Q: ments in technology in the past few years that buyers should be aware of? “The technology is consistently chang- what they’re trying to products are from a reputable manu- ing, especially in the world of IP cam- achieve and go right from facturer. “There are a lot of options A: eras. The technology available today is problem to solution with- in the marketplace when it comes to amazing and is always making advancements. out considering the broader video, and like in most industries, price We are seeing cameras that are capable of impact, he says. Cameras are shouldn’t always be the only factor in definitions up to 30MP, allowing for single cam- one option, but so are security your decision,” he says. “I would sug- eras to take in large fields of view and then patrols, alarm systems, better gest that you work with an experienced offer incredible detail on playback when zoom- locks, lighting and other equipment. installer-integrator who has experi- ing in to specific areas. Access card systems Technology isn’t always the answer. ence installing the same or similar sys- have remained fairly standard as the equip- But when it is, define what you want tem that you are looking to purchase.” ment technology has needed to change much, from the system. Look for an installer that is certi- you still need a card reader; some sort of elec- While there are electrical standards fied by the manufacturer to install and tric locking device that will release; a door con- associated with installation, Hyde says commission the system you plan to tact; and some sort of an exit motion detector no legal standards exist to regulate buy, Haley notes. As well, reach out to (as a standard door setup); and then the soft- ware which is gathering live the data from the security and surveillance equipment. the system manufacturer to get some reader boards. Where we are seeing changes The Canadian Security Association insight on the latest products on the is the reader technology and the advance- has a few “quasi-standards” and most market, as well as to ask about certi- ments on the handshake that takes place reputable installers are members of fied or reputable installers and deal- between the reader and the credential. The that organization. ers of their products, Haley says. “You information encryption and the level of detail may also want to look for manufactur- between the two have come a long way. The What to look for ers that don’t sell proprietary systems, other advancement with card access sys- Look to non-proprietary equipment but have open platforms which allow tems is the use of Bluetooth technology where when purchasing electronic security you to add bits and pieces from vari- you are able to use your smart phone to gain systems, says Greg Brazas, account ous manufacturers,” he says. “Another access through a door instead of a traditional manager at Electricity Security option is to work with manufacturers credential. Lastly, the advancement of wireless Canada. There’s little available from a who manufacture end-to-end solutions locksets which are battery powered and Wi-Fi proprietary system made by an inte- but at the same time offer an open connected which lower the cost of installation grator (installer) that would take the platform system.” by requiring no wiring from the door back to reader board like conventional card access place of the features of an off-the- This allows a purchaser to get a sys- systems.” shelf manufactured product. As well, tem from a single manufacturer, which —Greg Brazas, Electricity Security Canada try to find an integrator that’s facto- can keep costs down and allow for ry-trained on the systems and has a improved functionality, Haley says. It track record for implementing them. also allows for the addition or removal Has the popularity of various sys- Brazas also recommends partnering of parts from a system based on what’s Q: tems increased along with advances with an integrator that has good refer- needed. When searching for a video in technology? What other changes has ences and responds quickly when ques- solution, look for a product that con- advancing technology brought? tions or problems arise. From there, sit forms with ONVIF (Open Network “Regarding video surveillance systems down with them to find out what tech- Video Interface Forum), which is a A: (CCTV), the popularity of an IP-based nology exists and to discuss individual global standard allowing inter-opera- system has definitely been one of the biggest needs and build a comprehensive solu- bility between products regardless of changes over the past few years. I have seen tion. “Service is the key factor here,” the manufacturer. a steady decline in the interest of analog sys- tems and organizations moving towards an IP he says. “Product is product and can Finally, buyers who are researching based video system. The IP system can allow be obtained through numerous ave- security and surveillance systems can for the latest technology such as high-defi- nues, but the post installation follow up check out several Internet resources, nition or mega-pixel cameras, along with and service needs are what will cause a Haley says. Manufacturers, system increased software features and capabilities buyer the most amount of pain.” integrators, installers and consultants that allow the system user to locate video Regarding video surveillance all provide online information, while clips within seconds or minutes, versus watch- CCTV systems, Glen Haley, regional several security-based tradeshows ing hours of video footage. High-definition or sales manager with Mississauga-based across North America can be valuable mega-pixel cameras provide a much clearer IndigoVision recommends that pur- resources. video image as compared to an image from an chasers research the products they plan There is no shortage of bases to cover analog resolution camera. It’s similar to when to buy and the organization they’ll buy when purchasing security systems. But you upgrade your TV at home from a tube- from. Like Brazas, he suggests buying with some guidance and research it’s based television to an HD flat screen—quite a equipment from an experienced sys- possible to find a solution that suits the difference in video resolution between them.” —Glen Haley, IndigoVision tem integrator and installer, and that needs of any organization. B2B

PurchasingB2B.ca | April 2016 | 13

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PB2B_Syspro_April.inddPB2B_Apr2016_issue_AMS_V2.indd 1 14 2016-03-312016-04-14 1:412:36 PM April 2016 Vol. 18, No. 1

Look Ma, NO HANDS! Driverless vehicles could arrive sooner than you think IN THIS ISSUE: 4 Autonomous Vehicles 8 Small, efficient cars 10 Spring Road Tips 13 Ram Promaster 2500

CAR_Apr2016_AMS all pages.indd 1 2016-04-13 2:33 PM Our line of work. Built to help yours.

Since 1896, we’ve been at work building a line of commercial vans that has no equal. We built the Sprinter, and revolutionized the Canadian van market. We built the groundbreaking Sprinter 4x4, Canada’s only 4-wheel drive commercial van. And now, we’ve introduced Canada’s only mid-size work van, the Mercedes-Benz Metris. This is innovation at work. See how it can work for you at Mercedes-Benz-Vans.ca.

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CAR_Apr2016_AMS all pages.indd 2 2016-04-13 2:33 PM CarSupp_Mercedes_April.indd 1 2016-04-06 2:37 PM Masaharu Kondo named Toyota forms company to Mazda Canada president make technology simpler Mazda Canada Inc. has appointed Masaharu Kondo Toyota is forming a new data science company in partnership with as president of MCI, effective April 1. Kondo, formerly Microsoft that’s designed to free customers “from the tyranny of deputy general manager of global sales and marketing technology.” division at Mazda Motor Corporation (MC), will suc- The company—called Toyota Connected—has a goal of simplifying ceed Shusuke “Kory” Koreeda, who is being trans- technology so it’s easier to use, perhaps even getting rid of distracting ferred to Mazda North American operations. With 28 and complicated touch screens that now are in most cars and replac- years’ experience at Mazda, Kondo has served in several executive ing them with heads-up or voice-activated technology, said Zack positions at Mazda’s headquarters in Hiroshima, Japan and with Hicks, the company’s CEO who also is Toyota Motor America’s chief Mazda Motor Europe, including overseeing Mazda Motor Poland as information officer. Managing Director. Like other automakers, Toyota Connected will research connecting “I would like to express my gratitude to Kory for his leadership and cars to each other and to homes, as well as telematics features that the contributions he has made to Mazda in Canada,” said Akira learn and anticipate a driver’s habits. The company will explore trans- Marumoto, executive VP; assistant to president; oversight of opera- mitting a driver’s health data to a doctor or driving patterns to an in- tions in the Americas and corporate planning domain for Mazda Mo- surance company so people are insured based on where they travel, tor Corporation. “I am confident that Kondo’s wealth of international Toyota said. Also, it will look at linking with other vehicles so they can experience will ensure continued success in Canada and help take report weather and traffic conditions to people driving the same route. the company into the next phase of our global strategy.” Toyota says the new company will support research into artificial Kondo has spent most of his career in international markets in intelligence and robots, as well as analyze data from vehicle sensors various sales and marketing roles, including GM of the market sup- and cameras so algorithms can be developed for self-driving cars. port for overseas sales divisions at MC, responsible for product Drivers would have to opt in to all of the data reporting, and Toyota marketing, new model launches and customer satisfaction initiatives would disclose what data is being shared, the company said. for Asia, the Middle East, Africa, and Latin America. Microsoft engineers will work with the company at its headquarters in Plano, Texas, where Toyota is moving its U.S. operations. Microsoft bought a 5 per cent equity stake in the startup company, Toyota said, but the full price wasn’t disclosed. Toyota Connect will use Microsoft’s Azure cloud computing platform to collect and analyze data. 80 VALLEYBROOK DR, TORONTO, ONTARIO M3B 2S9 PHONE: 416-442-5600 FAX: 416-510-5140 www.PurchasingB2B.ca Our line of work. Vol. 18, No. 01 April 2016 Windsor assembly plant EDITOR: Michael Power (416) 442-5600, ext. 3259, [email protected] ART DIRECTOR: Andrea M. Smith begins 2017 Chrysler PUBLISHER/ADVERTISING SALES: Dorothy Jakovina (416) 510-6899, [email protected] ACCOUNT COORDINATOR: Tracey Hanson (416) 510-6762, [email protected] Pacifica production Built to help yours. CIRCULATION MANAGER: Barbara Adelt (416) 442-5600 x 3546, [email protected] The all-new 2017 Chrysler Pacifica has begun production at its Wind- ANNEX PUBLISHING & PRINTING INC. VICE-PRESIDENT: Tim Dimopoulos (416) 510-5100, [email protected] sor, ON assembly plant, said FCA US LLC. Constructed on an all-new Since 1896, we’ve been at work building a line of commercial vans that PRESIDENT & CEO: Mike Fredericks [email protected] platform, Chrysler Pacifica will deliver ride and handling capabilities has no equal. We built the Sprinter, and revolutionized the Canadian van CAR, established 1991, is published twice annually (April and October), by on par with high-end premium sedans, the company said. market. We built the groundbreaking Sprinter 4x4, Canada’s only 4-wheel Annex Publishing & Printing Inc. The 2017 Chrysler Pacifica © Contents of this publication are protected and may not be reproduced, in is coming to dealer show- drive commercial van. And now, we’ve introduced Canada’s only mid-size whole or in part, without the written consent of the publisher or editor. rooms in spring 2016. work van, the Mercedes-Benz Metris. This is innovation at work. From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish The Windsor assembly See how it can work for you at Mercedes-Benz-Vans.ca. your contact information to be made available, please contact us via one of the following methods. Phone: 1-800-668-2374, Fax: 416-442-2200, Mail: Privacy plant, built in 1928, runs Officer, 80 Valleybrook Drive, Toronto, ON M3B 2S9. three shifts and, in 2013, NOTICE: CAR accepts no responsibility or liability for claims made for any product celebrated 30 years of or service reported or advertised in this issue. CAR receives unsolicited materi- building minivans. More /MercedesBenzVansCA @MBVansCA /MercedesBenzVansCanada als including letters to the editor, press releases, promotional items and images from time to time. CAR, its affiliates and assignees may use, reproduce, publish, than 14 million minivans have been sold since the plant began produc- re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. tion in 1983, with over six million on the road today. The 4.4-million- Printed in Canada sqft Windsor facility holds the silver designation in World Class Manu- Publications Mail Agreement No. 40065710 facturing (WCM), a methodology that focuses on eliminating waste, increasing productivity, and improving quality and safety in a system- atic and organized way. Cover: ©martialred-Fotolia APRIL 2016 CANADIAN AUTOMOTIVE REVIEW | 3

CAR_Apr2016_AMS all pages.indd 3 2016-04-14 7:40 AM CarSupp_Mercedes_April.indd 1 2016-04-06 2:37 PM By Michael Power

DRIVERLESS CAR Fully autonomous vehicles could be a common sight on countdown the roads within a decade. n executive needs to make a trip across town for a While they might offer meeting, so he enlists one of his company’s self- Adriving cars to get him there. The car arrives and, advantages like increased during the 20-minute trip, the executive catches up on checking emails and reviews a few online documents. After road safety, their dropping off the executive, the car heads back to pick up proliferation may also prove other passengers for another driverless trip—one of several it will make that day. disruptive for businesses While autonomous vehicles have made the news recently, the notion of taking daily trips in vehicles without anyone at and passengers alike. the steering wheel—indeed, perhaps without a steering wheel at all—may sound if not like science fiction, then perhaps like technology geared for the distant future. But according to Barrie Kirk, executive director of the Ottawa- based Canadian Automated Vehicles Centre of Excellence

(CAVCOE), the future isn’t as distant as it may seem. ©martialred-Fotolia

4 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016

CAR_Apr2016_AMS all pages.indd 4 2016-04-13 2:33 PM Partially autonomous road vehicles and specialty vehicles are roads. The project, which can change as new technology already on the market, he notes. Low speed, fully autonomous develops, launched at the beginning of this year. Ontario has vehicles for specialized applications are now available in Europe, also recently announced an additional $500,000 in funding to the including 10- to 12-seat electric shuttle buses that travel at about Ontario Centres of Excellence Connected Vehicle/Automated 20 or 25km per hour along a fixed route. Swiss Post, which Vehicle Program, in addition to the $2.45 million previously carries not only mail but also people, has bought two such provided. The program brings academic institutions and vehicles. Another version of the low-speed, specialized fully businesses together to promote and encourage innovative autonomous vehicle is heavy haulers used in the oil sands, like transportation technology. monster dump trucks. Suncor, as an example, has ordered 175 “In the world of transportation, Ontario has the opportunity to such vehicles from Komatsu, he says. “We’re not all the way there to a car that you can “The automated vehicle pilot will ensure get into and say ‘home James,’ but we’re certainly making progress,” he says. that the province’s roads remain safe The year 2020 is roughly when autonomous vehicles will hit showrooms, Kirk predicts. Passen- without creating burdens that stifle gers will be able to program a destination and the investment and innovation in Ontario’s vehicle will take them wherever they want. He sees 2025 as the tipping point, by which time a significant dynamic business environment.” number of car trips will be in self-driving taxis. Steven Del Duca Beyond the next decade, the area of driverless vehicles will take off in a big way. Currently, companies show leadership on automated technology,” such as Ford, Google, Mercedes, Toyota and others says Steven Del Duca, the province’s Minister of have self-driving car programs. Transportation. “Today, Ontario is making its The effects on the average Canadian family will be claim in the global marketplace by taking the significant, Kirk says, with households saving about next steps in automated vehicle innovation. The $3,000 per year by opting for autonomous taxi rides automated vehicle pilot will ensure that the over car ownership. And the introduction of fully province’s roads remain safe without creating driverless technology will be revolutionary and disrup- burdens that stifle investment and innovation in tive for many other aspects of life, including urban Ontario’s dynamic business environment.” planning, the military, healthcare and parking, to name a Fully autonomous vehicles aren’t the only few. CAVCOE and the Conference Board of Canada Ontario’s Minister of Trans- technology change looming on the automotive recently produced a report that says a driverless future portation Steven Del Duca horizon. In the 2020s, Kirk says, three different could save Canadians $65 billion through fewer colli- has announced funding for a technologies will converge: autonomous sions, less traffic congestion, lower fuel costs and less 10-year pilot project allowing vehicles, connected vehicles and electric time behind the wheel. driverless cars on the prov- vehicles. Most of the driving that people do is As well, from a business perspective, corporate cars ince’s roads. around town, he notes. Electric vehicles are well can end up sitting idle much of the time in a company’s suited to that sort of travel, and electric vehicle driveways, garages and parking lots, Kirk says. Autonomous technology is improving by about eight percent each year. Kirk cars used for corporate purposes would stand to see more road calls them “ACE” vehicles: automated, connected and electric. “A time than driver-reliant counterparts. Organizations will perhaps lot of these driverless taxis, both smaller vehicles and larger have the option of owning a fleet of autonomous vehicles or rent ones, will be electric,” he says. “This improves the efficiency and them out from a company, Kirk notes. really helps the environment.” “But these same companies also have the choice—they can Not surprisingly, the automotive industry has taken note of use self-driving taxis,” Kirk says. “I can envisage that some these trends. Industry executives site connectivity and digitiza- entrepreneurs will in fact have fleets of self-driving limos. So you tion as the top trends affecting the industry over the next don’t need to have your own vehicles. If you want a limo for your decade, according to KPMG’s 17th-annual Global Automotive CEO, you just order one on demand from one of these new Executive Survey, released earlier this year. Self-driving capabili- companies providing that.” ties have also become increasingly relevant to the industry, the report notes. Overall, 62 percent of executives surveyed expect Ontario pilot project self-driving technology to become a more important purchasing Those at CAVCOE aren’t the only ones with their sights set on a criterion to consumers in the next 15 years. driverless future. Ontario has launched a new 10-year pilot The new technology could prove as disruptive as cars were to th ©martialred-Fotolia project to allow for the testing of automated vehicles on Ontario the horse and buggy industry in the 20 Century. As customers

APRIL 2016 CANADIAN AUTOMOTIVE REVIEW | 5

CAR_Apr2016_AMS all pages.indd 5 2016-04-13 2:33 PM demand increasingly digital products and services within wind up sharing more information then they had meant to. At a vehicles, the industry must transform their traditional business conference Gogolek chaired in Vancouver last November, one models, the report suggests. Product development cycles, sales attendee told the audience that he had rented a car and plugged and aftersales processes, along with the associated products, his smartphone into the vehicle in order to use Bluetooth. He technologies and services must also change in order to keep up. was surprised to discover that the device was copying the Also not surprisingly, the heightened interest in the technology is contacts on his phone. He also discovered that the previous five driven by consumer expectations of being able to use their Bluetooth users had had their contacts copied over as well. driving time better. But the auto industry executives who “This person was not really thrilled that this was happening,” commented on the survey were not especially optimistic that Gogolek says. “And it’s not entirely clear whether it was the car, traditional automotive companies will be able to dominate the the electronic system or if it was the rental company. They had customer relationship in the connected car, the report suggests. to go through all kinds of hoops to find out what was going on and to remove their contacts.” For businesses using a connected car, Gogolek recommends knowing what the vehicle does and making sure that staff knows what its capabilities are, what defaults it has and how to change them if necessary. “There could be difficulties with people saying, ‘well, I didn’t know it was going to empty out my phone, I have no idea where that went,” he says. “It’s also informing your customers and informing your employees. Businesses will have obligations to customers and to employees, as well as others, under privacy laws.” In terms of those laws, FIPA would like to see a roundtable held in which industry, government, independent service providers and other stakehold- ers sit down to discuss how to comply with Canada’s Personal Information Protection and Mercedes-Benz is one of several companies working on driverless cars, with its F 015 Luxury in Motion Electronic Documents Act (PIPEDA). That act sets concept shown above. out the ground rules for how private sector organi- zations can collect, use or disclose personal According to one-fifth of all respondents, tech companies—es- information while doing business. pecially from Silicon Valley—could gradually take over the “It’s going to be a bit of a process; Canada isn’t an island but customer interface. we do have the requirements that are in our privacy laws right Still, driverless cars will offer several benefits, the consulting now,” Gogolek says. “It hasn’t been tested in the connected car firm says. context. We don’t have rulings from commissioners or from the “Autonomous vehicles will not only allow drivers to use their courts yet. But that will be coming, and the more information travel time as efficiently as possible, but it will bring an element that’s collected and the different ways that this is going to be of safety to the roads that we have never seen before,” says used…it opens up a whole array of serious issues.” Peter Hatges, national automotive sector leader at KPMG. “Over Kirk also admits that the rise of the autonomous and con- the next 15 years as we begin to see partially self-driving cars on nected vehicles will cause disruption. Jobs can be lost when the roads, we will also likely see a reduced and eventually occupations formerly needing a driver are taken over by eliminated risk of accidents on the roads.” autonomous vehicles. As well, the rise represents a lot of change in a short period of time. But that can be as exciting as Connected security it can be disruptive. And what he finds especially exciting is But the notion of connectivity in vehicles can also provide a how developments in the field spill over into so many aspects of cautionary tale with regards to data security, says Vincent our daily life. Gogolek, executive director of BC’s Freedom of Information and “About 30 percent of land use in Toronto is for parking,” he Privacy Association (FIPA). Some technologies, by their nature, says. “And if you’ve got a self driving car that doesn’t need to demand information about the user, he notes. When using a GPS park itself as often, you have a lot of land being freed up. It will system, for example, a driver must let the system know where he be up to the Toronto city council to decide how they use that or she is in order for the device to work. land. Does it become developed? Does it become green space? But in other situations, users should be careful or they can Or what?” C.A.R.

6 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016

CAR_Apr2016_AMS all pages.indd 6 2016-04-13 2:33 PM CarSupp_Toyota_April.indd 1 2016-04-07 3:26 PM CarSupp_Toyota_April.inddCAR_Apr2016_AMS all pages.indd 1 7 2016-04-072016-04-13 3:262:33 PM By Emily Atkins

SMALL PACKAGES

The best compact fuel sippers on the market in 2016 Small really is beautiful these days and little, economical cars prove it. No longer does driving a compact car have to be cramped and slow, nor are they cheaply built.

These cars have come of age, and they

are legion. The Honda Canada Credit: biggest problem HONDA CIVIC consumers have The 2016 Civic is the Automobile Journalists Association of Canada now is choosing (AJAC) Canadian Car of the Year, and the deserved winner of many which one best other best-of awards that are too numerous to mention. Not only suits their has this little gem been vastly improved for this model year in needs. looks, handling and interior, it is also smartly priced, starting at $15,990. The following It comes with a choice of two engines—a 1.5-L Turbo and a 2.0-L. With the continuously variable transmission, these power- are our picks plants offer up fuel economy of 6.7 litres/100km combined and 6.9 of the pack. L/100km, respectively. This is the 10th generation of the best-selling car in Canada for 17 years in a row, and with this overhaul it is likely to remain on top.

TOYOTA YARIS The 2016 Toyota Yaris Hatchback comes in three models: a three- door CE, a five door LE and the five-door SE—each available with a choice of five-speed manual or four-speed automatic transmission. The three-door hatch, starting at $14,775, has a passenger side entry assist to make it easier getting into the rear seats, a 6.1” display audio system with AM/FM, CD and MP3 with USB and Bluetooth capability and four-speakers, power door locks and power windows, all as standard equipment. The LE hatchback, which starts at $16,195, has five doors and adds air conditioning, a tachometer, cruise control, keyless entry, and power-adjustable exterior mirrors. The 106-horsepower 1.5L four-cylinder engine is mated to a 6-speed manual, and delivers 7.7 L/100km city and 6.3 on the

highway in the three-door hatch. Canada Toyota Credit:

8 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016

CAR_Apr2016_AMS all pages.indd 8 2016-04-13 2:33 PM CHEVROLET VOLT The 2016 Volt comes with a special seal of approval: it won the AJAC Green Car of the Year award in March this year. The 2016 Volt is an electric vehicle that now has extend- ed its electric range up to 85 kilometres. It also has a 1.5-L range-extender engine, that when used gives a total combined fuel economy rating of 5.6 L/100km. The car also has a new design this year, with sleek styling that seats five. The catch with the Volt is the price. It may be green car of the year, but it will also cost a lot of green with a base price of $40,090. Credit: GM Canada Credit:

HYUNDAI ACCENT The Accent is a best-selling compact for Hyundai. It’s a fairly peppy, versatile and roomy hatch, with space for five passengers. For the base price of $15,494, you get a 137-HP 1.6-L engine and manual transmission, which beats out a lot of the competition from a power point of view. You also get a car that’s really fun to drive and is extremely well-adapted for small family life in the city. It boasts more cargo space behind the seats—487 litres—than the Micra. With manufacturer-estimated fuel economy of 6.3L/100 km (highway), and numerous available options that you can’t get on other sub-compacts, the Accent offers a desirable upgrade path. Credit: Hyundai Canada Credit:

FORD FIESTA The 2016 Ford Fiesta is available as either hatch or sedan for the same entry price of $16,049. It’s got a 1.6-L engine and manual transmission with fuel economy of 8.5/6.5 L/100Km (City/Hwy). Ford’s really amped up the technology with this car, offering voice- activated SYNC along with AM-FM stereo with CD player and MP3 capability even in the base models. The real beauty of the Fiesta is how much fun it is to drive. It handles extremely well, is maneuverable and feels comfortable on the highway. It’s also a good-looking car with a muscular stance that sets it apart from the other sub-compact hatches. Credit: Ford Motor Company Ford Credit:

NISSAN MICRA Nissan’s little hatch was the least expensive new car you could buy in Canada last year—now it’s been undercut by three dollars—but at $9,998, it can be argued the 2016 Micra is the better car—it’s more powerful than the Chevrolet Spark it’s positioned against. The base car comes with a 5-speed manual, and its 1.6-litre 4-cylinder engine is rated at 109 horsepower. As with any inexpensive car, opting for a plain base model means you’ll give up niceties like power windows and locks, AC, and cruise control. But if economy is your goal, it’s hard to argue with the price and the combined fuel economy rating of 7.8L/100km. And, as a plus, Nissan runs a racing series just for the Micra, which

Credit: Nissan Canada Credit: definitely increases the cool factor.

APRIL 2016 CANADIAN AUTOMOTIVE REVIEW | 9

CAR_Apr2016_AMS all pages.indd 9 2016-04-13 2:33 PM By Kara Kuryllowicz

ROAD BE ABLE TO RELY ON RELIABLE CARS.

Much like a good employee, a good car should not let you down. To make sure your team is in good hands, go for quality cars whose reliability has been widely recognized. Go for award-winning security and residual value. WORK Go for Subaru. Driving tips for dealing with spring road repair and seasonal vehicle maintenance

ationwide, Canadians anticipate information 24/7 in all markets. Whenever resulting from the freeze/thaw cycles and spring and whether their region the device reports traffic, the estimated aside from the uncomfortable jolt experi- N enjoyed a mild winter or slogged time of arrival will be updated accordingly. enced by vehicle occupants, the impact through heavy snow and extreme weather, Canadian Automobile Association can puncture a tire, bend a rim, misalign vehicles require preventive maintenance members benefit from CAA’s TripTik app’s the steering and damage the shocks, and season-specific attention. trips and travel feature, offering GPS-style struts, suspension and exhaust systems. It The bare roads and warmer tempera- navigation powered by Google Maps for all depends on the size and depth of the tures also signal the start of the road and iPhone, iPad and Android users, and gives pothole and the speed at which you hit it. infrastructure improvements that invariably construction and detour information. Ideally, drivers could avoid the worst lead to the lane blockages and reductions If you’re old school, even non-members potholes, but since that’s a challenge, that produce traffic chaos. can take advantage of the CAA’s online multiple OEMs, including Ford and Jaguar “At some point, we all get stuck in a construction and road report information, Land Rover are developing and imple- construction zone—it’s unavoidable, which lists the provincial highway depart- menting pothole mitigation technology. 2016 CROSSTREK 2016 FORESTER frustrating, stressful and negatively affects ments’ websites and phone numbers at For example, Ford’s all-new Fusion V6 productivity, so plan ahead to avoid it http://caaneo.ca/travel/roadtrip-planning/ Sport, a new 2017 model year vehicle, 2016 IMPREZA 5-DOOR whenever possible,” says Bill Jones, construction-and-road-reports. features Ford’s smart new suspension director, product management, Element, You can also check city, municipal and system which detects potholes and which manages 1.6 million vehicles and of regional government websites for con- catches the wheel before it drops all the which 263,749 vehicles are in Canada. struction, accidents, blockages and way into the pothole. Onboard computers Fortunately, most smartphones and weather though it requires more effort. analyze multiple signals collected from 12 navigational devices now offer apps and “Respect the speed limits and the high-resolution sensors. When the edge of features that can show you where traffic is workers in construction zones and if you’re a pothole is detected, the car’s computer heavy and reroute you, whether it’s due to slow or stopped, resist the temptation to adjusts the dampers, faster than the blink construction, an accident or simply catch up on calls and texts,” says Jones. of an eye, to their stiffest settings so the volume. For instance, most of Garmin’s “It’s just too risky unless you have wheel doesn’t fall as far into the pothole.

portable navigators are embedded with hands-free and voice-activated features.” As a result, the tire and wheel won’t strike 1

lifetime traffic updates for the lifecycle of “Driving through a construction zone, the opposite side of the pothole as ®2 the unit and the models that have it feature drivers should slow down, be prepared to harshly. The rear suspension can respond MODELS EQUIPPED WITH EYESIGHT a “T” at the end of the product description. stop, watch for workers at the side of the even faster, with a signal from the front Garmin collects traffic flow data from more road and if possible, move over,” adds wheel providing a pre-warning to the rear than two billion observation points (e.g. Kristine d’Arbelles, manager, public affairs, wheel well before it reaches the pothole. fleet.subaru.ca or call 1-877-293-7272 cell and Garmin owners, incident reports, CAA, Ottawa. Spring is the ideal time to check for news feeds, fixed traffic sensors on major Construction and roadwork often damage, particularly any issues that might 1. Ratings are awarded by the Insurance Institute for Highway Safety (IIHS). Please visit iihs.org for testing methods. 2. EyeSight® is a driver assist system which may not operate optimally under all driving conditions. EyeSight® is not designed as a substitute for due care and attention to the road. The system may not react in every situation. The driver is always responsible for safe and attentive driving. System effectiveness depends on many factors such as vehicle maintenance, weather and road conditions. Finally, even with

roads) every month and broadcasts traffic includes repairing the myriad potholes be related to potholes. Give your vehicle Images ©Brand X Pictures/Getty the advanced technology activated, a driver with good vision and who is paying attention will always be the best safety system. See Owner’s Manual for complete details on system operation and limitations.

10 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016

CAR_Apr2016_AMS all pages.indd 10 2016-04-13 2:33 PM PB2B_Feb16_Subaru_CSA.indd 1 2016-02-04 3:17 PM BE ABLE TO RELY ON RELIABLE CARS.

Much like a good employee, a good car should not let you down. To make sure your team is in good hands, go for quality cars whose reliability has been widely recognized. Go for award-winning security and residual value. Go for Subaru.

2016 CROSSTREK 2016 FORESTER

2016 IMPREZA 5-DOOR

1

MODELS EQUIPPED WITH EYESIGHT®2

or call fleet.subaru.ca 1-877-293-7272 1. Ratings are awarded by the Insurance Institute for Highway Safety (IIHS). Please visit iihs.org for testing methods. 2. EyeSight® is a driver assist system which may not operate optimally under all driving conditions. EyeSight® is not designed as a substitute for due care and attention to the road. The system may not react in every situation. The driver is always responsible for safe and attentive driving. System effectiveness depends on many factors such as vehicle maintenance, weather and road conditions. Finally, even with the advanced technology activated, a driver with good vision and who is paying attention will always be the best safety system. See Owner’s Manual for complete details on system operation and limitations.

CAR_Apr2016_AMSPB2B_Feb16_Subaru_CSA.indd all pages.indd 1 11 2016-04-132016-02-04 2:333:17 PM some quality attention as Element’s Jones if you maintain ideal pressure, you’ll save work as hard as it does during the winter. recommends listening for unusual sounds, money at the pump and prolong tire life. Finally, cleaning is also vital post-winter, being aware of atypical vibrations and Double check belts, hoses and fluids, after the salt and sand season. Spring noting performance issues such as pulling including coolant, and test your air-condi- clean your vehicle, preferably with a visit to one side. A visual check for dents and tioning well before the hot weather hits to to a car wash that offers bays with scratches is also worth the time. avoid the repair shop stampede if it pressure guns for the underside. Washing Tires also take a winter beating so have malfunctions. Top up fluids and change the corrosive salt from all rubber and the alignment checked. If you use winter the oil as required. Ford’s Hollander metal prevents and mitigates rot and rust, tires, switch to all-seasons when tempera- suggests oil changes include new filters which could result in the premature failure tures consistently hit 7°C. If you rely on and that those who switched to thinner oil of brake lines and other metal compo- the same tires year-round, rotate them to for winter to change to thicker oil, such as nents. Ensure wheel wells and the prevent uneven wear since the front tires 10W30 for the warmer months. underside get some attention. bear the brunt of the work. As tempera- Make sure there is plenty of washer “Drive-through is better than nothing tures fluctuate, so will the tires’ air fluid for wet, muddy roads. If front or rear but the machines can’t reach the under- pressure so adjust accordingly to ensure windshield wipers are leaving streaks or side where the bulk of the salt accumu- optimum fuel efficiency and minimize are noisy, if they show signs of wear or lates and where it can do the most wear. Tire pressure will increase as the damage, be sure to replace them. damage,” says Jones. “Spring cleaning is temperatures rise so you may need to Ask your shop to check the battery also the perfect time to get the junk of out release some air. Christine Hollander, posts and connections for dirt, grime and the truck to help reduce the weight and communication manager, Ford of Canada, corrosion because a hot summer and the improve fuel efficiency.” recommends rotating your tires every subsequent demands due to air condi- Once you’re spring and summer ready, 8,000 to 10,000 km regardless and notes tioning requirements can make the battery hit the road and enjoy the season. C.A.R.

Canadian Aboriginal and Conseil canadien des fournisseurs Minority Supplier Council autochtones et de minorites visibles CROSS BORDER B2B FORUM Windsor June 7, 2016 Caboto Club, Meet with a wide range of manufacturing, transportation and indirect suppliers Windsor, serving the automotive sector in both Canada and the USA. Ontario Register Now www.camsc.ca

Sponsors:

12 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016 CARSupp_CAMSC_May.indd 1 2016-04-12 10:36 AM

CAR_Apr2016_AMS all pages.indd 12 2016-04-13 2:33 PM By David Miller STYLISH HAULER

The 2016 Dodge Ram Promaster

n the past, the styling of a commercial van or its driving performance wouldn’t play a big role in the business pur- Ichase, as the focus lent itself towards cargo space, payload and comfort. Ram wants to change all that by adding more style and a new front-wheel drive setup to the cargo van segment with its Ram Promaster. Now in its third-generation and after a refresh in 2014, the Promaster gets away from the old-school clunk box that goes from point A to point B in order to get its duties done and into a van that encompasses not only payload and versatil- ity, but everything else you would want in a regular vehicle. Ram offers a pair of roof heights, three wheelbases and two engine choices, but I went with the middle-range Promaster 2500 with the 159-inch wheelbase and high roof. For an automotive journalist that needs to travel into Toronto and prefers smaller cars, driving this massive boat was a task, but one that left a sense of intrigue. I didn’t haul anything large, tester: comfort, handling, performance and ease of use. so this won’t be a review on its cargo, but one that can offer you First, let’s start out with its exterior. One thing that stands out the other aspects that comes out of a real-world regular vehicle besides it being massive is a surprisingly short hood that is

APRIL 2016 CANADIAN AUTOMOTIVE REVIEW | 13

CAR_Apr2016_AMS all pages.indd 13 2016-04-13 2:33 PM made possible due to its front-wheel drive makeup. New for 2016 moved, there would still be plenty of space back there. is an optional chrome grille, but it wasn’t added to this test Powering my Promaster 2500 is a standard 3.6-litre V-6 engine vehicle, and nor did it need it. The Ram badge showed enough producing 280 hp and 260 lb.-ft. of torque. It’s matched to a chrome as the centrepiece on its simple plastic-slat front grille. six-speed automatic transmission that has a hill-start assist. That simplicity seems to carry on throughout the van with clean Another option to choose from would be its 3.0-litre four-cylinder and subtle lines through its body and only a simple horizontal turbo diesel with 174 hp and 295 lb.-ft. of torque for an additional plastic grey section running towards the bottom of the van gives $6,000. The diesel can handle a bit more weight and provides it some character. Dual sliding doors make life easier to not only better fuel efficiency (I managed to average a combined work with a team, but also unload products with ease. 15.6L/100 km), but the regular V-6 engine manages to muster Inside, the look takes on a more bare bones approach. As you 4,420 pounds of payload. take that big step inside, you’ll notice that the inside dash Even though I was driving this monster around, its quick V-6 engine made me forget on occasion how big it really was. As I pushed down on the gas pedal, acceleration was brisk, forcing me to check up on the throttle from time to time. I expected the drive to be loud with plenty of road noise; instead it provided more of a refined drive albeit with a few bumpy moments along the way.

reflects the same styling as other Ram products. It’s just been toned-down. My test vehicle received the optional Uconnect five-inch touchscreen with satellite radio that totals $925, and seemed to be a worthwhile option considering this van will most likely be utilized on a daily basis and possible long drives. The touchscreen sits on top of three large circular climate control I was surprised by its giddy up, but even more by its handling knobs and to the right of the gearshift. Simple, organized and abilities. For an inexperienced cargo van driver, turns were made exactly what you’re looking for when shipping large cargo and in with ease and precision through light steering and a best-in- no need of distraction. class turning radius. I was blown away by some of the manoeu- Two cloth bucket seats await your presence with a lot of vres I was able to achieve, even though reversing or parking cushion to provide ample comfort. On some bumpy roads, you might need some touching up. It… is about being local and global. will find yourself bouncing up and down, but never side to side, Visibility is always a factor when it comes to cargo vans, and keeping you in control of the vehicle at all times. especially to individuals that are new to this type of ride height ARI is known and trusted by fleet decision-makers throughout Canada to streamline operations and As for the all-important cargo space, the Promaster 2500 with without a rear-view mirror. Visibility in front can’t be topped, and control costs. We know that every customer has unique fleet challenges. Through our six regional the 159-inch wheelbase has 420 cubic feet of space. I did a little as long as you constantly check your side mirrors to stay IKEA shopping and thought this would be perfect to fill-up some in-between the lines—you’ll be just fine. I found the optional rear offices, three 24-7 maintenance call centres and Canada’s largest vendor network—we dig deeper and space in the back, but it was clear that a bookcase, two tables back-up camera to be of big assistance for only $425, as well as go further to deliver customized solutions. Across Canada, North America, and the globe—our fleet and a plant looked like I placed a couple packs of gum in the its power-folding side mirrors for $250 when you need some management expertise is around the corner. trunk of a mid-sized SUV. If you even needed two large sofas extra space to get out or unload on the side. In the end, this 2500 model surely had everything you might AS TESTED: want or need in a cargo van. At a starting price of $38,995, the Learn more about ARI’s professional fleet management services: Price: $49,070 ($38,995 starting price) Promaster 2500 is a modern and reliable hauler with more than 1-800-361-5882 | www.arifleet.ca Engine: 3.6L V-6; 3.5L V6 enough space to manage a large move or heavy machinery. With Power/Torque: 280 hp/ 260 lb.-ft. all of the options, my test vehicle rang in at $49,070, but you can Transmission: six-speed automatic pick and choose out of the options what works best for you. For Observed fuel economy: 15.6L/100 km combined someone who’s not used to a cargo van, this Promaster navi- gated through city streets and was a joy to drive. C.A.R.

14 | CANADIAN AUTOMOTIVE REVIEW APRIL 2016

CAR_Apr2016_AMS all pages.indd 14 2016-04-13 2:33 PM It… is about being local and global. ARI is known and trusted by fleet decision-makers throughout Canada to streamline operations and control costs. We know that every customer has unique fleet challenges. Through our six regional offices, three 24-7 maintenance call centres and Canada’s largest vendor network—we dig deeper and go further to deliver customized solutions. Across Canada, North America, and the globe—our fleet management expertise is around the corner.

Learn more about ARI’s professional fleet management services: 1-800-361-5882 | www.arifleet.ca

CAR_Apr2016_AMS all pages.indd 15 2016-04-13 2:33 PM BE UNSTOPPABLE.

WE PUT YOUR TEAM FIRST. A vehicle that drives your business needs to be business-minded, and the new 2017 Escape is that and more. With highlights that include an available adjustable load floor, a 60/40-split rear seat that allows for loads of additional cargo room and three exhilarating engine options, it’s a vehicle that works for you and your business.

Make us the team behind your team. fl eet.ford.ca | 1.800.668.5515

Vehicle(s) may be shown with optional feature(s). ©2016 Ford Motor Company of Canada, Limited. All rights reserved.

CAR_Apr2016_AMS all pages.indd 16 2016-04-13 2:33 PM CARSupp_Ford_April.indd 1 2016-03-31 11:40 AM

_00DP3_66365_MAG_B2B_R0_FleetEscape_8.125x10.875.indd 1 3/29/16 12:57 PM

PRODUCTION: DOCKET # FPE FLE A66365 LIVE: 7” x 10” COLOURS: 4C Heidi Prange DATE INITIAL CREATIVE: Cyan Stephen REGION Magazine Submit TRIM: 8.125” x 10.875” STUDIO Magenta ACCOUNT EXEC: David/Peter Yellow PROJECT MANAGER: BLEED: 8.625” x 11.375” Black PRODUCTION CLIENT: Ford NA JOB DESC.: 2016 Fleet Fact Book STUDIO: Lino Scannapiego FILE NAME: _00DP3_66365_MAG_B2B_R0_FleetEscape_8.125x10.875.indd FOLDED: None CREATIVE PREV. USER: START DATE: 3/24/16 Lane, Jennifer

MOD. DATE: 3-29-2016 12:57 PM DIELINE: NA WRITER

MEDIA TYPE: Magazine

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DISC DATE: April ACCOUNT

FONT DISCLAIMER: The fonts and related font software included with the attached electronic mechanical are owned (“Y&R Proprietary Fonts”) and/or licensed (“Y&R Licensed Fonts”) by The Young & Rubicam Group of Companies ULC. They are provided to you as part of our job order for your services, and are to be used only for the execution and the completion of this job order. You are authorized to use the Y&R Proprietary Fonts in the execution of the job order provided that any and all copies of the Y&R Proprietary Fonts shall be deleted from your systems and destroyed upon completion of this job order. You warrant and represent that you have secured the necessary licenses for the use of Y&R Licensed Fonts in order to execute our job order and will abide by the terms thereof. THOUGHT LEADERSHIP MRP’S NEXT EVOLUTION A new methodology just might take away some of the “noise” in the procurement process By Michael Power Roberta McPhail SYSPRO software is an award-winning, Owner McPhail Enterprises best-of-breed Enterprise Resource Planning (ERP) software solution for

Jeff van Geel cost-effective on-premise and Manager, Sourcing, Accounts Payable and Packaging Engineering cloud-based utilization. 3M Canada

Wael Safwat Director Procviews Management Consulting

Michael Shelton Senior Advisor Value Infinity

A Thought Leadership Roundtable brought to you in partnership with:

Technology experts, consultants and procurement professionals came together in Toronto on March 10 to participate in a thought leadership roundtable focusing on SYSPRO Canada is proud to help Canadian companies grow | www.syspro.com/ca Demand Driven Materials Requirements Planning (DDMRP). The roundtable was a thought leadership partnership between PurchasingB2B and SYSPRO Canada. SYSPRO Steve Bassaw CANADA HEAD OFFICE: 604.451.8889 | CENTRAL CANADA: 905.502.5502 | ATLANTIC CANADA: 902.423.1256 Canada is a leading provider of Enterprise Resource Planning (ERP) software solutions for Product Evangelist manufacturing and distribution. SYSPRO Canada is proud to help Canadian companies SYSPRO Canada grow. For more information on SYSPRO Canada’s products and services visit: www.syspro.com/ca. The following is an editorial report based on the roundtable conversation. All photos: ©Roger Yip Photography All photos: ©Roger Yip

PurchasingB2B.ca | April 2016 | 15

PB2B_Syspro_April.indd 1 2016-03-31 1:41 PM PB2B_Apr2016_issue_AMS_V2.indd 15 2016-04-14 2:36 PM

THOUGHT LEADERSHIP [DDMRP] is trying to take “ the best practices of all these different things and offer a holistic, strategic and tactical methodology that could work. “Roberta McPhail

o doubt, the pace of business has sped up SYSPRO Canada; and Roberta McPhail, Owner of in recent years, and the economic land- McPhail Enterprises. PurchasingB2B editor Michael N scape today is more complex, competitive Power moderated the discussion. and volatile than ever. Procurement organizations often find themselves scrambling to put out day-to- Current methodologies day fires rather than focusing on long-term strategic To begin the conversation, panelists described the goals. This holds equally true in the procurement and methodologies they currently use. For instance, van supply chain worlds, and practitioners have sought to Geel noted that his organization uses SAP. Before adopt methodologies to quell uncertainty and meet employing that, the organization used a homegrown customer demands. system. “We used a lot of spreadsheets and con- Enter Demand Driven Materials Requirements tracts—it worked relatively well,” van Geel said. Planning (DDMRP), a methodology focused on Safwat also noted that he had a history of using a demand-driven approach to supply rather than SAP, having performed three global implemen- the traditional model of pushing inventory using tations with the system. He stressed the complex- MRP solutions. PurchasingB2B, in partnership with ity of demand planning and the level of integration SYSPRO Canada, recently brought together a group required between customer, supplier availabil- of industry experts for a roundtable conversation ity and capacity. For his part, Shelton said he had focused on this new methodology and how it might worked with various MRP systems during several address the challenges that procurement and supply decades in the industry and had also completed two chain face. SAP implementations. His current organization Our panelists included: Jeff van Geel, Manager recently discarded its SAP system and is putting in of Sourcing, Accounts Payable and Packaging place a demand pull replenishment system. “All my Engineering, 3M sourcing operations at 3M Canada; staff members either have to go through the SCMA Michael Shelton, Senior Advisor with Value Infinity; program or get APICS-certified, and that’s in their Wael Safwat, Director of Procviews Management employment contract,” Shelton also added. Consulting; Steve Bassaw, Product Evangelist at Bassaw said he knew of several companies either

16 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 16 2016-04-14 2:36 PM We’ll do a risk assessment “ and have contracts in place or have strategic inventory some place. But this is inventory that “we can funnel to hundreds of different products as well. Michael Shelton

with no system, or using a system but not very well. tegic view on it,” he said. “Make sure it’s tactical, Organizations often use MRP-driven forecasting, workable and you’ve got the right KPIs to make although such a system can be “nervous,” he noted. it achievable. I agree that different organizations “The challenges of the methodologies I’m seeing are have different capabilities. Hence, the capacity of either weak use of a system or using a system but pro- the MRP needs to be different. Touching on collab- curement is still at the mercy of the noise in the sys- oration with the supplier and the capability—hav- tem—so life is a little better but it’s still chaotic, still ing the supply around the corner, whether using a reactive in some ways, still expediting,” he said. vendor management inventory or consignment, et Once implemented, it can take some time for users cetera, again it’s extended capabilities. Understand to become confident with a system, noted van Geel. the concept, define the capability of your business, “SAP plans everything by purchase order, receipts choose the right vehicle, the right Excel sheet or the and lead time,” he said. “Until people become com- right MRP. Make sure people are well-trained and fortable with that, yes, the system knows what it’s that your KPIs are practical and measurable.” doing and when it’s telling me to issue a PO it’s actu- ally the right time—because we’ve got a lot of proj- A new way forward ects around inventory and non-working capital and After discussing systems they currently use or have things like that,” he said. used in the past, the focus turned to DDMRP. In Some systems require a lot of discipline to use prop- introducing the concept to the group, McPhail noted erly, Shelton noted. Those systems can have many that Lean has been around for quite some time and attributes, with most never used. “If you get those is well known. But the challenge that Lean presents things tweaked and working right, the system will is getting the system to cross over into the planning work and drive inception messages,” he added. “The world and its integration with MRP systems. “So issue is that the structure has got to be nailed tight.” they’ve been kind of two different worlds,” she said. While many organizations rely on MRP as a way “The Lean guys haven’t really talked to the MRP to change how they conduct business, Safwat rec- guys. The MRP guys haven’t really talked to the ommended a more holistic approach. “Get a stra- Lean guys.”

PurchasingB2B.ca | April 2016 | 17

PB2B_Apr2016_issue_AMS_V2.indd 17 2016-04-14 2:36 PM THOUGHT LEADERSHIP

And while many small- to medium-sized organiza- she said, DDMRP tries a different strategy where the tions are using planning and MRP systems, McPhail approach to forecasting is less direct. wondered aloud what those systems actually were, McPhail described DDMRP as a multi-echelon since there are several diverse systems available. planning process that approaches inventory as a buf- What DDMRP tries to do, she noted, is bridge the fer. “We buffer for a couple of reasons,” she said. “We gap between divergent philosophies. “At the end of want to dampen that variability. We don’t want to the day, there’s someone who’s got to cut a PO and just blindly pass it through the whole organization. someone’s got to do a work order,” she said. “When Why do we want to dampen it? We buffer the inven- and how do they decide to do that? What informa- tory from a concept of decoupling so the lead time tion streams? between key point to key point is manageable.” While MRP isn’t perfect the concept is sound, All this needs to be manageable with market expec- noted McPhail. “But then the reality is the nervous- tations, she noted. If the market demands a 30-day ness, the direct connecting points are too tight. So lead-time there needs to be a decoupled process people needed this decoupling concept. [DDMRP] is within that 30 days. “So the concept says, let’s posi- trying to take the best practices of all these different tion the buffers in the right strategic points first—and things and offer a holistic, strategic and tactical meth- for most companies that’s going to be finished goods,” odology that could work.” McPhail notes. Demand management forecasting has also been in Those buffers are modified depending on the sea- vogue, with many organizations assuming that if they son and other factors, she added. “It’s not like we just get the forecast right the MRP will work, McPhail set them and leave them alone—we’ll dynamically said. And while forecasts may never be perfect, they adjust them,” she said. “It’s all based on what’s called can get better. Rather than de-emphasizing forecasts, average daily usage, either forward or back. And that’s where we use forecasts to use a calculation of a buffer size.” The system works anywhere there’s inventory, and tries to answer when and how to plan while using a calculation that’s different from the MRP method, McPhail said. DDMRP uses a trigger for planning MRP replenishment orders based on a more con- densed lead-time and actual demand. Rather than forecasting, DDMRP uses real information “It will naturally absorb into those buffer profiles and we shouldn’t have any weird expectations,” she said. “And then we watch those buffers in terms of where they’re performing both from a planning and an on-hand inventory side in a red, green, yellow

zone—very visual, very easy to implement—you can see how the buffers are performing. If the buffers are working you should be just floating nicely in the mid-

dle of the zone of the yellow.” “DDMRP planning has a set of rules that use a calculation that, when the buffer is penetrated at a certain spot—especially from the top of the yellow— “ when the projection to the top of the yellow is trig- I fully agree that different gered then that’s replenishment to bring it back to the top of the green. It’s transparent.” organizations have different The process McPhail laid out is similar to what van capabilities. Hence, the capacity Geel’s organization uses, he said. 3M orders rubber, which has a four-and-a-half month lead time, usually of the MRP needs to be comes from Asia and is seasonal. “We’re buying that out in 2017 already,” he said. “While we’re not phys- absolutely very different. ically taking the stock or the inventory, we’ve finan- “Wael Safwat cially committed to buying it…so, we have that buffer in the supply chain that the broker is doing for us.

18 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 18 2016-04-14 2:36 PM And we just don’t physically take it until much closer to when we’re going to need it.” Shelton noted that he has used a similar strat- egy to van Geel. Commodity managers on his team look at the commodities, monitor the lead time and markets and see what geographic zone they’re in as well. “We’ll do a risk assessment and have contracts

in place or have strategic inventory some place,” he said. “But this is inventory that we can funnel to hun- dreds of different products as well. And we’ll do the

risk management.” The concepts of buffer and safety stock are import- ant in oil and gas, Safwat said, noting he has previ- ously worked in that industry. However, the element of aggregation wasn’t there. “Always, the focus is, get “ the safety stock, keep it moving and that’s it. You’re absolutely very safe,” Safwat said. “There has been The software that people have significant reliance on vendor management inven- right now probably has most of tory and consignment…you’re running an operation in different remote areas, you’ve got the vendors to the data you need [to support deliver the consignments on these areas.” Bassaw stressed that DDMRP isn’t based on soft- DDMRP]. You just need to pull ware and doesn’t rely on software to operate. Rather, it out in a different way. it’s a new way of looking at processes, and decoupling “ supply from demand, he said. “Yes, software can Steve Bassaw enable that,” Bassaw added. “The software that peo- ple have right now probably has most of the data you You may not need to use some of the classic MRP need. You just need to pull it out in a different way. functions of your software, and some of them you’ll still use, but some you might not.” Procurement professionals can become accus- tomed to reacting to forecast changes or changes What is a Demand Driven in falling below reorder points, Bassaw said. This Operating Model? can create “noise” that DDMRP can do away with since users are reacting to the buffer status. “It’s not A demand-driven operating model is a safety stock, it’s not a reorder point,” he said. “It’s a supply order generation, operational reacting to actual demand and that will then pene- scheduling and execution model utilizing trate the buffer and you watch the buffer. The buffer actual demand in combination with stra- is the traffic light—red, green and yellow.” tegic decoupling and control points and In employing DDMRP, Bassaw recommended first getting educated in the methodology and figuring out stock, time and capacity buffers in order what numbers need to be pulled to feed into the new to create a predictable and agile system calculations. Then, it’s a matter of figuring out where that promotes and protects the flow of rel- to find those numbers. “But I do preach with people evant information and materials within the when adopting any new methodology, get educated tactical relevant operational range (hourly, first,” he stressed. With the roll out of any new methodology, Sawfat daily and weekly). Such a model’s key recommended running a maturity assessment and parameters are set through the demand extending that assessment to suppliers. “Obviously, driven sales and operations planning pro- you approve the concept, you make people aware of cess to meet business and market objec- it, but that’s all internally within the organization,” tives while minimizing working capital and he said. “But clearly your supplier may not have the same capacity to digest this. So it’s very beneficial to expedite related expenses. include the supplier capability in the maturity assess- ment because, at the end of the day, you’ve got the

PurchasingB2B.ca | April 2016 | 19

PB2B_Apr2016_issue_AMS_V2.indd 19 2016-04-14 2:36 PM THOUGHT LEADERSHIP

mended procurement focus on the return on invest- ment for any new initiative. “That, to me, would be the most challenging question from the C-suite.” Consultants can help with DDMRP implemen- tation and there is a formal, two-day class to get qualified in the methodology, McPhail said. But the system isn’t overly complex or complicated. She also recommended piloting the system through a spread- sheet using SKUs with various activity levels to get a sense of the profile. “You can turn off the MRP

plan orders, or you can leave them and use a paral- lel process and very easily pilot it for a couple weeks with a new model—it’s not that hard to do,” she said.

“That’s what we suggest to do as an implementation first step.” The main challenge, McPhail said, was a philo- We’re buying [certain commodities sophical one. Organizations using an MRP or Lean “ system that decide to use DDMRP as an adjunct sys- for] 2017 already. While we’re tem can experience challenges in bridging a perceived not physically taking the stock gap. “I think it’s just a matter of trying it and learning and getting experiential learning on it,” she said, not- or the inventory, we’ve financially ing that online groups and conferences on DDMRP can supply information on the subject. committed to buying it…so, In wrapping up the conversation, the group agreed “ DDMRP was an interesting evolution in MRP. we have that buffer in McPhail noted DDMRP has roots in a pull—rather the supply chain. than push—system and is therefore the opposite of Jeff van Geel how MRP has been viewed. And while that system was created in the 1960s and 70s, business has evolved. “We have to be faster, quicker, smarter,” she said. concept, the vehicle to implement the concept and “The product mix is crazy and supply chains are more you’ve got the people who will run it.” complex. We’re dealing with SKU proliferation. Bassaw noted the importance of support from the We’re inundated with data, big data, too much C-suite, as well as finding enthusiastic champions, for data—hopefully, this is a way to fit some solutions any implementation project. But getting senior sup- into that new normal.” port can be tricky and can depend on an organiza- Bassaw added no one should latch onto DDMRP tion’s culture. “Some upper management are very as a “be all and end all” to solve every procurement entrepreneurial and quirky because it’s the guy who problem. “Understand that this is a new way of think- founded the company who’s still running it years ing,” he said. “It’s a new tool—just like any other tool later,” he said. “Other times it’s more of a large com- in your box—to help you run your business better.” pany and [the challenge is] getting to the board.” Safwat agreed that as with any new methodology, Along with senior management, it’s important DDMRP would come with its own challenges but to get those at the tactical level on board with an would also present opportunities. Businesses should implementation, Safwat noted. Organizations he’s be open to evaluating those opportunities. “Definitely worked for have run workshops in which lower-level there’s a learning opportunity and this is how the employees—who actually run the process—can business—in my view, leadership, management—we share their views on a project or implementation. have to try to see how things move. So, the more that “This is not working, that is not going to fly, these we take the risk, the more that we’ll be able to really are the challenges, et cetera,” Safwat said. “Having explore different ways of doing things.” this feedback, you’ve already got a lot of solu- In summary, the group agreed that the DDMRP tions for so many problems by listening to people.” concept represented an interesting new methodol- Holding such workshops and gathering feedback ogy. Procurement professionals would do well to helps give a sense of ownership to those ultimately explore and benefit from this unique way of dealing working with the new system. Safwat also recom- with their supply chains. B2B

20 | April 2016 | PurchasingB2B.ca

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PurchasingB2B.ca | April 2016 | 21

PB2B_Apr2016_issue_AMS_V2.indd 21 2016-04-14 2:36 PM Industrial Buying

Larry Berglund, SCMP, MBA is the author of Good Planets Are Hard To Buy: Savings in MRO A Management Handbook for Creating Is there more that procurement should know about Conscious Capitalism, Sustainability maintenance, repairs and operations? Principles and Supply Chain Excellence.

By Larry Berglund

aintenance, repair and operating supplies (MRO) are a supply One of the challenges in managing MRO costs is cost where more strategic attention should be given. MRO items the change in prices and volumes of individual SKUs Mare not directly attached to finished goods—they are consumed over a period of time. These are affected by usage in the production process. They have a lower profile in the organization and variable market fluctuations. It becomes too dif- yet can be significant in terms of indirect costs. ficult to develop trends based on line items—so we An MRO inventory strategy ensures the supplies are managed effi- need a better model. The price index model is well ciently and in a cost-effective manner. With potentially thousands of suited to develop trends to manage and report out on SKUs in multiple locations with several suppliers, it can be difficult to MRO supply costs. assess how well MRO items are being managed financially. One of the A price index for MRO supplies within an orga- fundamental MRO-isms is the 80/20 rule—20 percent of the items will nization uses a simple method of collecting and ana- account for 80 percent of the annual spend, which are the “A” items. An lyzing data to measure incremental changes to prices A-B-C analysis quickly segregates the three classes. Organizations can and then uses this as a basis to create an index value waste an inordinate amount of time trying to find lower cost “C” items at for comparative periods. Index values can be run the loss of attention to the “A” item investment. over any time period. There are many variations on the strategies and tactics used to address By way of example, looking at an MRO category MRO costs. In addition to vendor managed inventory these can include: for safety supplies, Table one provides a company’s • equipment standardization programs; costs for ten SKUs over three years (see table on the • bundling like goods to get the lowest cost per item; next page). The actual volumes for the first year are • as part of a category management model; • combined with preventive maintenance “With potentially thousands of SKUs in multiple programs or planned maintenance locations with several suppliers, it can be difficult to programs; assess how well MRO items are managed financially.” • vending machines to dispense goods; and • common support services can be outsourced such as solvent parts wash- given. By looking at the table it is difficult to see how ers, transmission repairs, or tire repair services. these price changes affected costs over three years. Further savings associated with MRO can be shared between the par- But by using this information, we can trend the ties as part of a business process improvement strategy. Moving to paper- MRO costs for these SKUs by creating a price index. less systems between the buyer and seller; automated replenishment The first item in year one as a total cost was ($50,000 systems; smart labels or tags; RFID bar code scanning from shop floor to x $4) = $200,000; in year two it was $195,000; and in seller; or consignment MRO goods with a procure-to-pay (P2P) process year three it was $212,500. If we extended the price being triggered based on actual demand. Establishing a long-term rela- for each of the 10 items we would find the aggregate tionship allows the parties to invest in technologies that are not financially value for year one was $3,850,000; year two was viable with short-term agreements. In many instances the actual cost of $4,052,000; and year three was $4,153,250. We can the MRO items is as low as possible for the forecast demand and state of now see the difference in aggregate values but the technology. The only option is to look into business process improvements data still requires further context to put it into per- to find savings. spective for a senior manager. No matter which hybrid variation an organization chooses to use in The year-one aggregate value becomes our year order to address MRO costs, reporting out to senior management is a one index value, which we can set at one. Now we necessity. Senior management is less concerned with the MRO line items can compare the subsequent years against year one as opposed to the aggregated costs. The aggregated costs can be broken and see that year two as an index value is 1.052; and down by type such as MRO for fleet services or safety supplies or fuels and year three is an index value of 1.079. lubricants. The basic premise of a price index model is that we

22 | April 2016 | PurchasingB2B.ca

PB2B_Apr2016_issue_AMS_V2.indd 22 2016-04-14 2:36 PM Industrial Buying

lock in the volume from year one to measure incre- year period increased by 7.9 percent. If we compared our in-house price mental price changes for the same goods over time. index to that of the producer price index and found that the PPI rate of In our example, the same MRO items over a three- inflation was only 5 percent for the same period, we would surmise that we could be doing better on manag- VOLUME BY UNIT COST ing our MRO supplies by $110,235 per year! Item Year One Year One Year Two Year Three I’ve used the price index model 1 #12 glove 50,000 4.00 3.90 4.25 with private and public sector orga- 2 #3 safety kit 10,000 25.00 25.50 27.0 0 nizations for procurement and for sales analytics. In some cases we have 3 Tool belt 5,000 18.60 17.0 0 18.25 tracked over 100 SKUs for MRO 4 #12 boot 20,000 95.00 98.00 100.00 items to develop trends and measure 5 5 meter ladder 1,000 85.00 90.00 90.00 performance for a seven-year period. Having this information in the form 6 J8 respirator 500 250.00 265.00 265.00 of an index value was helpful in pri- 7 J8 mask 1,500 45.00 48.00 48.00 oritizing where cost savings should be 8 OS hearing protector 10,000 12.00 13.00 13.00 focused. So I say yes, there is more to know about MRO and how we man- 9 Hi-Viz vest - L 45,000 8.00 8.50 9.00 age these costs should be reported 10 Hard hat - L 100,000 6.50 7.50 7.50 objectively. B2B 16_0071 Purchasing B2B_APR Mod: January 11, 2016 8:17 AM Print: 02/02/16 9:17:08 AM page 1 v7 π SHIPPING SUPPLY SPECIALISTS

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PB2B_Apr2016_issue_AMS_V2.indd 23 2016-04-14 2:36 PM Trends In Strategic Meetings Management A focus on visibility and control, adoption by SMEs among developments in meetings management By Betsy Bondurant

here are two trends that before there’s a contractual relationship in interest for several reasons: I’m seeing more frequently place. This manifests in a strategic meet- »  This spend is decentralized so it’s when discussing strategic ings management program (SMMP). The difficult to quantify total category meetings management foundation of such a program is a formal opportunity; (SMM) with my clients and registration and approval process for all »  Fragmented ownership—along with industryT colleagues: meetings and events. formal meetings department, many » T he impetus of SMM is shifting from Once a meeting is registered it’s auto- other occasional, power and informal cost savings and risk mitigation to vis- matically forwarded into an electronic planners that are hard to identify; and ibility and control; and queue for approval. The person authoriz- »  Other categories of spend had more »  More interest in developing SMM ing the meeting or event varies based on visibility and interest for the CPO. programs by small- to medium-sized meeting type. The meetings or procure- Once on the radar, many chief pro- companies. ment department likely approves small, curement officers went to the travel Let’s begin by examine the factors simple internal meetings. Meanwhile, a manager to enlist their support in har- attributing to the first trend regarding the compliance department usually approves nessing meeting spend. The CPO sought motivation for SMM programs shifting meetings in the regulated category, and out travel managers, as they had a track from cost savings and risk mitigation to customer events may need to be autho- record of developing policy, outsourcing visibility and control. Several of my cli- rized by the chief marketing officer and services, reducing costs and using data to ents have seen their competitors singled make rational business decisions. At the out for a meeting that seemed extrava- "Once on the radar, many time, few meeting managers were focused gant or inappropriate to the general pub- on strategically controlling the enter- lic. This unwanted media attention had a chief procurement officers prise-wide meetings and events in the negative effect on their brand. went to the travel manager company, as they were concentrating on When the CEO begins to examine how delivering successful outcomes for each meetings and events are planned, they to get support in harnessing meeting. Certainly, attention to meeting quickly discover that no process exists to meeting spend." outcomes is critical to the organization, manage this category of spend. Therefore, but the time has come for holistic over- meetings and events are planned by just perhaps even CEO. Once the meeting or sight of meetings and events for all size of about anyone in the company, at any event is initially approved, there may be companies in a variety of sectors. location, with limited financial oversight. secondary approval to get agreement on Since this spend is decentralized, a cou- The meetings are only visible to leader- the specific hotel or venue to be booked. ple of industry accepted calculations can ship when they are invited to attend. There are different factors driving help to estimate meeting and event spend, Another scenario involves meetings the increased interest in strategic meet- which can be one to three percent of a conducted in regulated industries, like ings management programs by small- to corporation’s annual revenue, or calcu- at pharmaceutical and financial. For medium-sized companies. SMM got a late 60 percent of corporate travel. This is example, in the pharmaceutical sector, foothold initially with large Fortune 500 by no means an exact science, but it gives meetings with healthcare professionals corporations with a high volume of meet- us a starting point for comparison and a attending are to be held at “appropri- ings. The financial, insurance and phar- hypothesis of what the meeting and event ate” locations with “reasonable” food and maceutical sectors were the first to deploy spend could be for the company. B2B beverage. If these guidelines are not fol- strategies and technologies to centralize lowed, companies can be disciplined for management of their meeting and event Betsy Bondurant, CMM, non-compliance. Clearly, there is a need spend some 20 years ago. CTE has over 30 years to monitor the sourcing and planning of As procurement departments grew in of industry experience in SMM, hotel sales, these meetings before they operate. importance, the meeting spend category meeting, travel & trade As a result, there is a desire for control came on their radar about 10 years ago. show management. of and visibility into meetings and events It has taken so long to become an area of

24 | April 2016 | PurchasingB2B.ca | TRAVEL MANAGEMENT CANADA

PB2B_Apr2016_issue_AMS_V2.indd 24 2016-04-14 2:36 PM In the Field

Monica Feregrino Procurement is senior director, purchasing and supplier evolution development at Is moving from tactical to strategic sourcing Westport. right for you?

By Monica Feregrino

efore discussing tactical and strategic sourcing, skills to shift from tactical to strategic purchasing. Their priority is keep- let’s examine both so we can better understand ing the business running, and tactical sourcing is the best choice—it’s the Bhow procurement justifies one over another. appropriate approach to “do things right” at these companies. Strategic sourcing involves acquiring goods at the Compare this to another organization, where procurement has access lowest cost of ownership and lowest risk to the sup- to technology and commodity teams. Procurement would downsize the ply chain. It creates a cross-functional approach to vendor base by selecting a few “preferred suppliers” after evaluating their supplier selection and ensures continuous improve- capabilities and alignment of expectations. Procurement teams in this sce- ment in quality, delivery, cost and service, while pro- nario have the IT support to run spend reports, perform spend analysis viding the means to achieve optimal efficiencies in and conduct market research on various commodities; therefore they can for the customer and supplier. There are three com- understand supply and demand dynamics. With these tools and talents, ponents of strategic sourcing: spend analysis, mar- procurement would have negotiated lowest total cost of ownership while ket research and supplier evaluation/selection and considering quality, delivery, lead times and other critical terms. Buyers relationship management. Tactical sourcing is trans- would use only approved suppliers based on an understanding of the orga- actional. It takes a routine and sometimes reactive nization’s needs and requirements. Strategic sourcing is “doing the right thing” for this purchasing organization. “No one solution applies to all companies and to insist To ensure your company gets the prod- on only one strategy for all purchasing could limit ucts and supplies it needs, you must have a specific sourcing strategy. How you pur- the ability to make decisions on the fly.” chase has a lot to do with the size of your organization, your technology and long- approach using quick quote and order processes to term strategy. You can leverage tactical or strategic sourcing—both offer support operations. The main goal is to ensure the benefits and challenges and specific situations may point to one as stronger. organization has the right material at the right price Should you move to strategic sourcing? To answer this, look at your situ- and right time. Unlike strategic sourcing, it doesn’t ation: are you ready to move from a transactional approach to focusing on focus on the requirements of the entire organization the operational base and alignment to business strategy? Strategic sourc- or strive to understand vendors’ core capabilities to ing won’t react to day-to-day critical operational aspects; it will consider support a company’s broader needs. The purchaser the organization’s direction and provide balance between external and isn’t focused on continuous improvement or contrib- internal activities, services and knowledge. uting to goals established by executive management. The move from tactical to strategic could be difficult. Step one is to We often ask which is applicable for our organiza- understand where the organization is going and how your suppliers fit into tions. Many agree strategic sourcing is better known the success of the organization because it’s common that establishing stra- than tactical, so why do some companies choose tegic sourcing comes with C-suite support, whereas a lack of understand- to use this sub-optimal sourcing process instead of ing can lead to a tactical approach. embracing the best practice of strategic sourcing? No one solution applies to all companies and to insist on only one strat- Let’s look at some examples to understand better. egy for all purchasing could limit the ability to make decisions on the fly. Consider a medium-sized manufacturing com- You must have tactical sourcing guidelines so you can react and strategic pany where purchasing has the flexibility to use any sourcing guidelines to direct spending overall. supplier in its supply base. Typically, buyers in these Our approach at Westport is a hybrid procurement system supported situations use their best judgment to place the order by a small team of commodity managers. By working to the transition with the supplier who offers the lowest price and best of duties and separation of responsibilities, we ensure operational sup- delivery dates. This scenario plays out when buyers port and strategic focus on a small number of key commodities. By “doing don’t have the luxury of ample time. Managing day- things right” or “doing the right thing” depending on the situation, this to-day operations is different from managing long- structure can support the business strategy and produce wins that enhance term strategic responsibilities. Sometimes, these the value of tactical and strategic procurement. We need both to create a buyers don’t have the procurement technology or the strong team that can ensure day-to-day operations run flawlessly. B2B

PurchasingB2B.ca | April 2016 | 25

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By Sarah Alexander

n the world of auctions, the bidder with the highest bid is deemed win- The University of California ran its first reverse HEAR FROM INSPIRING KEYNOTE SPEAKERS ner. Prices are driven up to the seller’s benefit and the auction winner auction to purchase 25,000 gallons of ethyl alcohol I comes out often paying more than expected. What if this process were for their research centers. It had previously spent reversed, to drive down prices for the buyer’s benefit so that the lowest bid- $400,000 per year on the commodity and through LINDA EDGECOMBE RON BUIST PETER HALL der is the winner? How could this be done, and what would be the benefits its reverse auctions it was reportedly able to reduce of introducing reverse auctions into the procurement process? its costs to $125,000 per year. As these examples illus- As this article explains, advancements in technology have created a new trate, leveraging technological innovation and imple- space for supply chain management to revolutionize their sourcing strat- menting advanced procurement processes can result egies and practices through electronic reverse auctions (reverse auctions). in significant savings for purchasing institutions. In the future, this game-changing technology will revolutionize the way purchasing institutions conduct their procurement processes, offering the Enhanced competition benefits of increased cost-savings and enhanced competition. Along with cost savings, reverse auctions increase transparent competition through a real-time virtual What are reverse auctions? space for suppliers to view competing bids. When Holy Crap I’m Busy: Changing Learn How Tim Hortons Became The Economic Outlook: Reverse auctions are real-time online bidding events between a purchas- compared to the anachronism of traditional one-shot our Culture from Chaos to Calm a Marketing Giant Is Growth Its Own Worst Enemy? ing institution and prequalified suppliers for a range of products and ser- physical bids, this creates a more competitive envi- Linda Edgecombe, CSP, Ron Buist, Marketing Expert, Peter Hall, Vice‐President vices—anything from rock salt to office furniture. Suppliers can see the bids ronment that encourages suppliers to outbid their Hall of Fame Speaker Inventor of “Roll Up The Rim and Chief Economist, of other suppliers and decrease their selling prices to secure the purchas- competition. This direct dynamic also provides the To Win” Export Development Canada ing institution’s business, until an optimal market price has been reached. opportunity for the parties to reduce transaction As the Institute for Supply Management Generate New Ideas with 500 of Canada’s supply chain leaders! Build and enhance your professional network explains, reverse auctions involve only “Advancements in technology have created a new prequalified suppliers selected through space for supply chain management to revolutionize CHOOSE FROM 25 THOUGHT‐PROVOKING EDUCATION SESSIONS a prequalification process, and suppliers their sourcing strategies and practices through “compete in presenting bids to the buyer • Reverse logistics: What’s your remarketing strategy? • From best price to best practices: Evolving procurement for the supply of goods or services whose electronic reverse auctions.” • Creating a supply chain centre of excellence needs for managed services • What is the next big thing in supply chain management? • Internship and future employment pool specifications for design, quantity, quality, delivery and related terms and time since many reverse auctions conclude within • Omni‐channel: Corporate buzzword vs. corporate buy‐in • Contractor management: Using safety analytics and conditions have been clearly defined.” Leveraging technology, reverse three to eight hours. For example, American Airlines • Say YES to unleashing the full potential of your L.E.A.D.E.R.S. insurance benchmarking auctions are accessed online through web browsers via private software reportedly used reverse auctions to reduce its price • The Canada-US Perimeter Security & Economic Competitiveness • E‐bidding: A 360 degree perspective companies known as “market makers”. These market makers facilitate the negotiation time from three weeks to 20 minutes. Agreement: Streamlining Cross Border Processes • Five lessons learned in public sector competitive bidding auction process for purchasing institutions, and provide support, training Market and process efficiency are enhanced and software to suppliers participating in the bidding process. through reverse auctions by removing the barrier HIT THE GROUND RUNNING WITH A PRE‐CONFERENCE SEMINAR of geographic limitations and opening the procure- • Procurement best practices: Measuring against 30 indicators of best procurement practices in the world Cost savings ment process to a global search for best price. While • Supply chain risk management: Identifying, assessing, mitigating & managing supply chain risk Embracing innovation has its benefits. From the reduction of purchasing traditional bidding often bottlenecks opportunities costs to increased efficiency, reverse auctions go beyond traditional meth- to local suppliers who are best positioned to submit THANK YOU TO OUR SPONSORS FOR THEIR GENEROUS SUPPORT! ods of procurement by enhancing the procurement process and poten- physical bids within tight timeframes, reserve auc- tially accessing a global supplier base in dynamic real-time competition. tions allow suppliers around the globe to compete. Executive Bronze Lead Media Partner Notably, reducing purchasing costs is a priority for institutions. The sav- This increases competitor volume and, as noted by ings from reverse auctions are not to be understated, as they can have a the Office of Federal Procurement Policy, reverse

significant impact on reducing purchasing costs. Within the United States, auctions allow smaller companies room to compete. 2016 FEBRUARY which is seen as a leading jurisdiction for the use of reverse auctions, As illustrated by US examples, reverse auctions Silver Media Partners research indicates that average cost savings range between 10 and 40 per- offer the opportunity to reduce costs, decrease nego-

Western University’s cent. For example, the Department of General Services in the State of tiation time and enhance competition. Given their new P2P system Pennsylvania was the first government entity in the US to use reverse auc- benefits, it is a matter of time before reverse auctions tions. It reportedly saved $2.5 million on a $30 million rock salt purchase. spread to other jurisdictions. B2B

26 | April 2016 | PurchasingB2B.ca [email protected] I 1.877.799.0877 I SCMA.COM/NationalConference

PB2B_Apr2016_issue_AMS_V2.indd 26 2016-04-14 2:37 PM Purchasing_April_SCMA.indd 1 2016-03-08 2:34 PM #SCMA16 JOIN US JUNE 15‐17 IN NIAGARA FALLS FOR THE 2016 SCMA NATIONAL CONFERENCE Canada’s largest, premier event for professionals in supply chain management

HEAR FROM INSPIRING KEYNOTE SPEAKERS

LINDA EDGECOMBE RON BUIST PETER HALL

Holy Crap I’m Busy: Changing Learn How Tim Hortons Became The Economic Outlook: our Culture from Chaos to Calm a Marketing Giant Is Growth Its Own Worst Enemy?

Linda Edgecombe, CSP, Ron Buist, Marketing Expert, Peter Hall, Vice‐President Hall of Fame Speaker Inventor of “Roll Up The Rim and Chief Economist, To Win” Export Development Canada

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• Reverse logistics: What’s your remarketing strategy? • From best price to best practices: Evolving procurement • Creating a supply chain centre of excellence needs for managed services • What is the next big thing in supply chain management? • Internship and future employment pool • Omni‐channel: Corporate buzzword vs. corporate buy‐in • Contractor management: Using safety analytics and • Say YES to unleashing the full potential of your L.E.A.D.E.R.S. insurance benchmarking • The Canada-US Perimeter Security & Economic Competitiveness • E‐bidding: A 360 degree perspective Agreement: Streamlining Cross Border Processes • Five lessons learned in public sector competitive bidding

HIT THE GROUND RUNNING WITH A PRE‐CONFERENCE SEMINAR • Procurement best practices: Measuring against 30 indicators of best procurement practices in the world • Supply chain risk management: Identifying, assessing, mitigating & managing supply chain risk

THANK YOU TO OUR SPONSORS FOR THEIR GENEROUS SUPPORT!

Executive Bronze Lead Media Partner FEBRUARY 2016 FEBRUARY

Silver Media Partners

Western University’s new P2P system

[email protected] I 1.877.799.0877 I SCMA.COM/NationalConference

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