The world stage—June print edition

Conference boasts over 20 sessions during two days of keynotes, panel and case studies

July 8, 2013
by By Michael Power

Attendees were treated to sessions covering an international scope during the 46th-annual Supply Chain Canada conference, which took place May 14-15 in Mississauga, Ontario. The event, jointly co-organized by SCL and CITA, broadened its program scope for the global approach, with a mix of case studies, panel debates, expert sessions and interactive workshops.

During one education session, Chris Afonso, lawyer at Fernandes Hearn LLP, gave tips on best practices and pitfalls of writing 3PL contracts. The first step is knowing the audience. “It’s supposed to speak to a particular person—it’s different to think of a contract as something persuasive,” he said.

When contract disputes arise, details become important and written words are more important during rough times than smooth, he said. But organizations don’t know what those disputes will be.

He thinks of a judge as the primary audience when writing a contract, Afonso said. Write to an independent third party with legal training who doesn’t know about the relationship between the parties, he advised. Judges are relatively predictable and there are rules regarding how to read a contract and resolve disputes even with room for disagreement on how rules are applied, he said.

Afonso also recommended ensuring that words get meaning from the rest of the contract when discerning what was intended. “Words in the contract are not merely signposts—there’s a significant value in drafting,” he said.

A court will look at the wider context and expectations of the party rather than that party’s subjective intentions, he noted. If the words in the contract aren’t clear, judges look at the context but will not look at either party’s internal beliefs. “The words of the contract are very, very important,” he said.

During a session entitled Going Global II: Prevailing over Pitfalls, Garland Chow, associate professor, Sauder School of Business, University of British Columbia, noted the risks involved in international supply chains. The danger of non-compliance when sourcing overseas is significant, Chow noted, as suppliers have been known to flout fair trade regulations, lack sustainability guidelines and leave safety requirements unfulfilled.

Chow cited the recent collapse of an eight-storey building in Bangladesh that housed factories for products from companies such as Benetton, Loblaw, JC Penny and Monsoon. The building had shoddy construction, the four upper floors were illegally made and the collapse resulted in over 1,000 deaths, Chow said.

Part of the problem lay in lack of control over sub-contractors, he said. In fact, 40 percent of supply chain disruptions come from tier 2 and 3 suppliers. While the reaction from companies varied, Chow noted that Loblaw took responsibility for using the facility. The company sent representatives to Bangladesh to see how to prevent future calamities and vowed to continue to source from Bangladesh.

Anna Petrova, senior manager, supply chain, at Ferrero Canada Ltd., noted that global sourcing is becoming more common. But consider the costs before embarking on the global sourcing path, she advised. Lost sales, foreign legal and tax systems, exchange rates, local import and customs fees as well as port congestion can add risk to the process.

Petrova urged the audience to specify quality expectations, especially as a way for organizations to preserve their public brand. “The link between quality and supply chain is especially important,” she said. Up-front planning, fact-based decisions, disciplined executions and proper resources can help turn that risk into reward, she noted.

Jon Heppenstall, Canadian Director of Strategic Sourcing and Supplier Strategy at Staples Promotional Products, also suggested several strategies to mitigate some of the risks associated with global sourcing. Vendor agreements can show intent and set expectations—even when unenforceable—while a preferred vendor strategy can help build a compliant supplier base. “If you don’t communicate well with your supply chain, we’re unfortunately going to see more problems like we’ve seen in Bangladesh,” he said.

Another panel, International Perspectives and Opportunities, also focused on opportunities abroad. Tony Gostling, director of member services and outreach for the Canada China Business Council, noted that quality and delivery remained two challenges of sourcing from China. The country has become a more sophisticated sourcing destination, he noted, and buyers are responsible for understanding quality issues and must spend time and resources to train suppliers.

Bureaucracy remains a challenge, Gostling said. Unlike the past, China is enforcing regulations more often and forcing buyers to understand the rules. Gostling recommended working to keep good suppliers, since finding them in China can be difficult and expensive. He recommended taking advantage of Canada’s trade commissioner services in the country, which had “a wealth of knowledge” about issues in China.

Another panelist, Peter Sutherland, president and CEO of the Canada-India Business Council, noted that while India’s economy is growing, infrastructure remains the biggest bottleneck to doing business there. India’s large landmass—with 28 states and 11 territories—presents a challenge, while the country’s limited number of paved roads can also be difficult. While air and seaports are improving, it can take longer to unload goods in Mumbai, which translates to higher costs.

To add to India’s challenges, said fellow panellist John Farrow, chairman of LEA Group Holdings, Inc, customs are “a nightmare in and out.” National and state governments don’t always work in harmony and courts are slow and inefficient in resolving disputes. To deal with challenges, Farrow recommended hiring good local support staff and using good international advisors for legal and accounting issues.

Compelling keynotes

As always, the conference offered an impressive keynote speaker line up. Aaron Hutcherson, VP of global supply chain at McCain Foods Ltd, addressed challenges the company faced in trying to sell sweet potato fries in Australia.

A few years ago, Hutcherson said, the company launched the product in Australia. They did research on how the supply chain would work; with the southern US the best area to grow sweet potatos, so the supply of the product went from the southern states to New Brunswick, trucked to New Jersey then shipped through the Panama Canal. It took about 49 days from production to the warehouse in Australia and McCain launched the product with a three-month supply ready.

But while the launch was the most successful in the company’s history, McCain hit a snag when it turned out they weren’t ready for the demand the product would garner. The company tried various ways to get the product to Australia, eventually considering air shipments to keep up with demand. “At this point I said stop,” Hutcherson noted. McCain worked to stem the demand, and it took them five months to ramp it back up.

Jon Heppenstall of Staples Promotional Products speaks during an education session.

McCain learned from the experience, Hutcherson said. When they later launched a baked potato product in the UK, they established a local supply chain as part of the initial design, phased the launch and built product awareness first. McCain has so far been able to handle UK demand for the product, Hutcherson noted.

The keynote for the conference’s second day was Robert Siddall, CFO of Metrolinx. Siddall spoke largely about congestion in the Greater Toronto Area, noting that it takes an average of 82 minutes to arrive at a destination in the region if you’re travelling to work or another destination. By 2031, he noted, that will increase to 109 minutes. Currently, $6 billion in productivity is lost a year due to congestion, an amount that will double if it’s not corrected.

The plan to ease congestion in the GTA—called The Big Move—will change significantly the way people move across the region, Siddall noted. Current projects include 52km of new light rail transit; 8.6km of new subway extension; 59km of new rapid bus transit and an express rail line from Toronto’s Union Station to Pearson International Airport.

Metrolinx’s procurement team has opened itself beyond procurement to supply chain management, he said. They’ve consulted various organizations on how to do things better and is performing a procurement review with help from PwC. A key to the process is integrating areas like supply chain management into business and accountability processes rather than acting within silos. “That’s not how you make decisions,” he said. “You make good decisions by integrating advice. Supply chain management is a great place to do that.”

To wrap up the conference, closing keynote speaker Michael Bloom, VP of organization effectiveness and learning at the Conference Board of Canada, stressed the importance of supply chain to the success of companies. On the international stage, Bloom noted, China will continue to see 7-percent growth—lower than previously—while the EU will continue to be an area of concern. In the US, private-sector recovery is picking up while the government still needs a long-term fiscal plan.

Canada, he said, can expect to see modest growth—about 1.8-percent growth in GDP—while the Bank of Canada likely won’t increase interest rates any time soon. Supply chains increasingly form the backbone of the value chain, he said, and must be well managed and strategic. Organizations must use more tools, remain proactive and think in advance about what might go wrong. The macro-environment means supply chains must remain flexible, Bloom noted.

Keynote speaker Aaron Hutcherson, VP, global supply chain for McCain Foods Inc, highlighted the challenges of supplying a product to an overseas market. Images: Roger Yip

Overall, the conference provided sessions and information with a global scope while keeping the content relevant to its Canadian audience. Attendees left with plenty to consider as they returned to their supply chain and procurement roles