Profile of the Logistics and Transportation Sector in Greater Montreal This report is the result the KPMG consulting team’s efforts that could not have seen the light of day without the support of numerous individuals and other outside resources. We wish to thank Economic Development Canada (EDC) for their financial support for this important initiative, not to mention of course the participation of CargoM, whose activities are funded by the Ministère des Finances et de l'Économie (MFE), the Ministère du Conseil Exécutif (MCE) and the Montreal Metropolitan Community (MMC) and all its members. THANK YOU as well to Transport Canada, to the Ministère des Transports du Québec (MTQ) and to Statistics Canada for their support in obtaining and validating large amounts of information and data. SPECIAL THANKS to the CargoM team for entrusting us with the opportunity to work on this pivotal study and for their support throughout the initiative. Finally, a very special THANK YOU to all the industry specialists who took the time despite very heavy schedules to respond to the surveys and take part in the various focus groups that enabled this study to show the true nature of their activities. Thank you for your passion and your dedication. Acknowledgments CargoM wishes to thank all those who participated and worked on the production of this profile of the logistics and transportation of goods in Greater Montreal. Our thanks to the KPMG team made up of Karine Forget, Thierry Crête, Stéphane Tremblay, Stephan Lauzon and all those involved in carrying out the study. Thanks to all the companies that took the time to respond to the survey. All the answers collected provided information that was invaluable to understanding the challenges faced by the industry. Thanks to those who participated in the focus groups that enabled us to validate the survey results and shed light on certain aspects of the supply chain in the Greater Montreal Area. Thanks to members of CargoM who took part in this study and without whom this work would never have been possible. More specifically, our thanks to Workgroup 2 co-chairs Nicole Trépanier (Sodes) and Frédéric Chevallier (Panalpina). Thanks to our financial backers, the ministère des Finances et de l’Économie (MFE), the ministère du Conseil exécutif (MCE) and the Montreal Metropolitan Community (MMC) for their support and their trust. This study was made possible by funding from: This document prepared by KPMG LLP (“KPMG”) is intended for the use of CargoM (“the Client”) in accordance with the conditions set forth in the engagement contract (“Engagement Contract”) concluded with the Client and dated April 8, 2013. KPMG neither guarantees nor asserts that the information contained in this document is accurate, complete, sufficient or appropriate for use by any person or entity other than the Client or for any purpose other than that set forth in the Engagement Contract. No person or entity other than the Client shall use it as an authoritative source and KPMG hereby specifically declines all liability or obligation toward any person or entity other than the Client that might arise from the use of this document. The results of the surveys and panel discussions as well as all processed and analyzed data are the property of CargoM. No results or recommendations from this study shall be reproduced or quoted without the authorization of CargoM. Table of Contents Executive Summary 3 1 Presentation of the Study 6 1.1 Purpose of the Study 6 1.2 Approach 6 2 Industry Profile 9 2.1 Background 9 2.2 Canada’s Position in the World 11 2.3 The Industry in Canada and Quebec 12 2.4 GMA Industry Profile 20 2.5 Economic Impact Study 28 2.6 Labor and Training 32 3 Survey of GMA Companies 39 3.1 Methodology and Limitations 39 3.2 Earnings of Responding Companies 41 3.3 Logistics Services Offered by Companies 43 3.4 Expenditures 53 3.5 Operational Data 55 3.6 Sectors of Customer Activity 58 3.7 Labor and Training 59 4 GMA Logistics Chain Performance 74 4.1 Background 74 4.2 Survey Responses on Industry Challenges 75 4.3 Presentation of Comments Obtained from Focus Groups 85 4.4 Supply Chain Analysis for Four Industries 89 4.5 Benchmarking Best Practices and Regional Initiatives 94 4.6 International Benchmarking 99 4.7 Dashboard Tool 101 4.8 Recommendations 104 5 Case Study – The Agri-food Industry from the Montreal Viewpoint 108 5.1 Purpose of the Study and Approach Followed 108 5.2 Background 108 5.3 Why Locate in Montreal? 110 5.4 Issues Affecting the Industry 111 5.5 Opportunities for Improvements to the Logistics Chain and Recommendations 114 Appendix A- Greater Montreal Area 115 Appendix B – Differences Between the Definitions Used by Statistics Canada and the Ones Used in This Survey 117 Appendix C – Online Survey Methodology 118 Appendix D – Online Survey Questionnaire 122 Appendix E – List of the Companies Who Received the Invitation to Participate in This Survey 125 Appendix F –Online Survey Answers 127 Appendix G – Training Courses Available for Transportation and Logistics 135 Phase 1 Progress Report- Profile of the Logistics and Transportation Sector in Greater Montreal - CargoM i Glossary 3PL Third party logistics provider that has the responsibility to perform a more or less significant part in the clients’ logistics. It ensures an outsourcing service with particular regard to warehouse management and transportation and all associated and related services. 4PL Logistics integrator responsible for performing all logistics functions of its clients. It outsources in turn part of the logistics functions he can not achieve. Nevertheless he remains responsible for coordinating all logistics activities outsourced to subcontractors. ACQ Quebec Trucking Association (Association du camionnage du Québec) AEC Attestation of College Studies AEP Attestation of Vocational Studies CPA Canada Port Authorities CLSC Canadian Logistics Skills Committee MMC Montreal Metropolitan Community CN Canadian National CP Canadian Pacific DEC Diploma of College Studies DEP Diploma of Vocational Studies FTE Full-time Equivalent Employee TEU Twenty-Foot Equivalent Unit GMA Greater Montreal Area MM$ Million dollars GDP Gross Domestic Product CMA Census Metropolitan Area NAICS North American Industry Classification System Phase 1 Progress Report- Profile of the Logistics and Transportation Sector in Greater Montreal - CargoM ii Executive Summary This study conducted on behalf of CargoM aims to provide a complete profile of the logistics and transportation industry in the Greater Montreal Area (GMA). Extensive research was first undertaken to collect information from previous studies. However, findings mostly rely on a survey conducted with major GMA companies that provide or use logistics and transportation services. To ensure a better understanding of the issues and identify improvement opportunities, several focus groups were held and a series of interviews were conducted with subject matter experts and important organizations such as Aéroports de Montréal, Port of Montreal, the Quebec Trucking Association, Transports Québec and Transport Canada. Quebec’s logistics and transportation industry represents approximately 20% of Canada’s in terms of jobs, establishments and volume handled by all transport modes: road, rail, air and marine. Research also reveals that 40% of Quebec’s volume transit through the GMA, which represents approximately 8% of Canada. The surveys helped gain more insight into the business perspective of three major areas. Following are some of the highlights: Workforce and training: - The ageing of workforce is a real issue facing organizations; - Most companies expect an increasing demand for labor over the next three years, despite the relative stability of recent years; Industry revenues and expenditures: - 54% of company expenditures in transportation and logistics are incurred on outsourced services; - In turn, providers of these services also subcontract 29% of their logistics expenses; Competitiveness factors of the GMA and its level of performance: - According to the companies surveyed, the three most important competitiveness factors are as follows: 1. Labor costs, which are at an average level (respondents gave it a score of 2.9/5); 2. Quality of GMA road infrastructure received the lowest rating (score: 2/5); 3. Regulation, considered being at a moderate-low level for the GMA (score: 2.5/5). The factor with the best performance review is the quality of port infrastructure. This evaluation is also reinforced by the market and industry experts, based on operations fluidity and productivity. On the other hand, carriers, logistics service providers and local companies share their concerns regarding the worst rated factor: quality of road infrastructure. Ongoing work on roads and bridges has a significant effect on the costs and quality of logistics services and may impact the competitiveness of GMA’s industries. Despite relatively low cargo volumes, air transport plays a strategic role to support companies in developing new products and trading internationally. However, having two separate airports for freight and passenger transportation makes Montreal less attractive to leading airlines. Another disadvantage for Montreal is the low frequency of flights in and out of other major transportation hubs in the world. The arrival of CSX, a new rail line in the Montreal area, is one of the upcoming issues that could have a significant impact on the industry: Competition with two major Canadian lines (CN and CP); Impact on local road transport; More direct rail link with the Southeast American market. Phase 1 Progress Report- Profile of the Logistics and Transportation Sector in Greater Montreal - CargoM 3 Portrait of the industry – Online survey results Services provided Regarding logistics services, focus groups have indicated that the real estate context in Montreal makes it difficult to find land sites or buildings with the required size and quality. Therefore, companies that wish to set up or expand their activities are increasingly turning to other competing cities.