Canadian companies step up to meet supply chain challenges head-on and work toward future solutions.
Originally printed in the October 2022 issue of Produce Business.
Despite taking some hard blows over the past three years, members of Canada’s critical produce supply chain remain steadfast in their mission.
“The supply chain is the invisible part of the food industry, but it is the backbone of the economy,” says Sylvain Charlebois, professor of food distribution and policy at Dalhousie University in Halifax.
Jeremy Smith, operations manager at North American Produce Buyers in Toronto, Ontario, describes the supply chain as robust. “It plays such an important role in getting the produce Canadians consume to the stores,” he says. “Any investment in its growth is a good one.”
The produce industry supply chain supported 249,000 jobs in the Canadian economy in 2019, according to the Canadian Produce Marketing Association (CPMA) in Ottawa. “The produce industry and its supply chain had an estimated economic impact of $13.9 billion in real GDP in 2019,” says Ron Lemaire, CPMA president.
Though the supply chain has done a good job, Charlebois notes it doesn’t mean there isn’t room for improvement. “Is it important to plan for a black-swan event,” he says. “Yes, because there will be more — especially as climate change progresses.”
Stewart Lapage, executive director of operations and logistics at Oppy in Calgary, Alberta, predicts the industry is headed toward a state of balance from these last couple of pandemic-focused years.
“Companies are reassessing their priorities and looking to determine ways to grow moving forward,” he says. “At the same time, you also can’t look at Canada’s produce supply chain in isolation to the U.S., our biggest trading partner. We have ebbed and flowed in tandem.”
As the supply chain has become truly global and more efficient over time, one thing it has been shown to lack is flexibility, explains Tyler Sharp, director of logistics for The Star Group in Saskatoon, Saskatchewan.
“During the global pandemic, we saw when one critical component of the supply chain struggles, there is a compounding effect as other components struggle to compensate,” he says. “This adds even more downstream pressure in a cascade until the entire system becomes unreliable, costs increase and confidence decreases, causing the entire system to contract.”
Guy Milette, executive vice-president at Courchesne Larose in Montréal, Québec, compares the functioning supply chain to a musical piece. “Before COVID, we had a symphony that took decades to fine tune, with a gigantic ballet of containers spinning around the globe in all directions,” he says. “However, the disruptions mean the perfect symphony is gone. While we still have many challenges with this new reality, the world of container freight has regained energy and is improving. We now hear the music, but we are far from a symphony. It may take several years to be back at the level we were before COVID.”
DEFINING THE SUPPLY CHAIN
The constraints of past years have compelled greater thinking about what defines a supply chain and how it’s changing. Lemaire explains CPMA looks at supply chain definition a bit differently. “We operate in a Food Systems Approach,” he says. “It not only incorporates our fruit and vegetable partners — grower, packer, broker, wholesaler and retailer, all the way to consumer — but also includes input companies such as fertilizer and packaging. All the pieces getting product into the system are considered, including financial institutions, government, port authorities, trucking companies and railways. By looking at it as a system, we see how all the pieces integrate and where the weak points are.”
With a systems approach, the industry can work through issues more comprehensively. “Companies must start looking at all the pieces they need to adjust business to,” Lemaire says. “If you don’t take a food systems approach, you may miss a crucial piece and end up paying more to fix it than if you had been proactive.”
Case in point was the ripple effect of these past years, explains Sharp of The Star Group. “We had massive challenges in ocean transport, but that was only part of the story,” he says. “Rail transport was constrained. Air travel ground to a halt, so air cargo became scarce and prices skyrocketed. And, perhaps most importantly, the trucking industry was facing its own set of challenges, from driver shortages to rapidly rising insurance and fuel costs to increased government regulation and COVID restrictions, particularly on border crossings. To add insult to injury, freight companies with an opportunity to scale up and help meet increased demand were unable to do so since wait times to purchase new trucks, heavy equipment and machines such as forklifts went from weeks to months to over a year.”
Two tandem shifts in the supply chain also affect its composition, according to Lapage. “First, there is a consolidation trend over the last 10 years among both retail and wholesale,” he says. “At the end of the day, retail consolidation has changed the buying landscape with fewer players in the marketplace. And, secondly, we have more importers and shippers than ever before trying to gain access to different regions; it’s made for a hyper-competitive marketplace.”
Consolidation leads to constriction of the supply chain. “In Canada, we’ve seen a lot of consolidation in retail and distribution,” says Charlebois. “The market is dominated by a handful of grocers. Compared to the U.S. it’s much more national, less regionalized, and those retailers have a lot of power. Consolidation on the wholesale side is just a natural evolution of the business, given the retail consolidation. It has forced other sectors up the food chain to restructure.”
And yet, supply chain constraints result in a need for options provided by a multi-faceted industry. “Small to medium companies provide flexibility in the supply chain, but they are the ones really being squeezed now,” says Maria Cavazos, manager at MC Produce in Montreal.
Canada is a difficult market to service. “It’s a wide market with disconnected areas,” says Dalhousie University’s Charlebois. “We don’t have the same population concentrations as the U.S. Canada essentially has four different regions. The Atlantic is a remote, hard-to-service area. The center of the country includes the largest provinces of Ontario and Quebec. The western prairie is essentially farming. And last, British Columbia has about 6 million people, but transacts a lot with the U.S., especially California.”
The supply chain, in general, has dozens and dozens of layers and can be very complex, explains Milette at Courchesne Larose. “When disruption happens, it causes many issues across the world and the consequences are everywhere.”
This past year is the most challenging year Cavazos has seen in her 19 years in business. “Produce is harder to get,” she says. “We have constraints by our shippers, as demand is shrinking. For example, normally we get 50 or 60 loads of mango from one of our shippers, this year we only got around five or six loads.”
These past years have been unique because the issues were worldwide, says Christian Sarraino, chief marketing officer for Fresh Taste Produce in Toronto, Ontario. “Fortunately, while the economic environment caused price increases throughout the industry and beyond, we were able to accomplish the most important tasks to secure product for Canadian and American consumers. Historically we have had great success dealing with supply chain issues, as we are a vertically integrated organization, globally.”
CPMA’s Lemaire notes the supply chain is currently dealing with ongoing disruptions, such as driver shortages, fuel cost increases, pallet shortage and port issues. “It’s also looking at the challenge of access to packaging and cost of packaging due to the broader global supply chain issues,” he says. “We are still adjusting daily to dealing with issues.”
Currently, Smith sees a big concern at the ports with their capacity to move goods. “Another concern is having enough trucks available to handle the peak volumes as they come,” he says. “There are still labor shortages in the trucking sector and these will be more prominent as the volume increases.”
Adapting, coordinating and understanding the risks are essential to moving ahead. “As we look at the increasing number of suppliers and companies with a presence across Canada, those who find more efficiencies, have the best service levels, and adapt and react to changes in supply or demand will come out on top,” says Oppy’s Lapage. “There’s never been a more important time to think outside the box on how to get products in the hands of consumers efficiently and cost-effectively. We’re investing in innovation where we can, across all areas of Oppy’s business, to help control costs and stay ahead of the curve.”
Businesses will continue to be creative in moving goods, states Smith. “From using multiple trucks on a short-haul basis or sharing a truck going across the country with another company in order to fill it and share the cost — all options are on the table,” he says. “The ports are working hard to build capacity through equipment and manpower. On the trucking side of things, we are seeing more capacity come online both from the ports and for national distribution, but the shortage of people entering the workforce will play a role still for some time.”
With respect to transportation and freight, Milette advises it’s time to be imaginative to maximize transportation fill-rate and efficiency. “Every penny counts,” he says. “More than ever, we try to pre-book freight and make medium-term arrangements to lock in rates and prevent spikes. We now always include a fuel surcharge component to our customer contract to avoid being short prices in a higher cost. We also now include a fuel surcharge clause to our supply contract.”
Lemaire asserts the global supply chain and the various jurisdictions must begin to put produce as first priority. “There has to be a global movement recognizing the perishable nature of our product, so it is treated as a priority when moving through the system,” he says. “Of course, we still want to ensure plant health and safety, but speed shouldn’t be impacted. Prioritizing produce in movement could be done by creating ‘green’ lanes. For example, it’s fine if a dishwasher sits at port for an extra week, but it’s not OK if a load of grapes does. So how do we advocate for that?”
Removing barriers such as restrictive trucking regulations is an important step, says Sharp. “Rebuilding the global supply chain with fewer bottlenecks and more resilience in order to be better equipped to adapt to our ever-changing global economy is necessary to allow the system to remain efficient, but flexible,” he says.
However, resources may present a challenge to Lemaire’s vision. “We need to ensure government is resourced effectively to be able to move product in an expedient way,” he says. “We need to look at practices and policy changes that expedite produce movement and decide which can stay yet still sufficiently protect plant health and national security. The government implemented some effective measures during COVID, so some of those should be implemented permanently.”
Challenges in the supply chain mean greater foresight and collaboration are needed. “Don’t let supply chain be an afterthought,” says Lapage. “Be proactive and determine how to best get product to market before PO’s are rolling in and you’re forced to find ways to service customers.”
It’s important to plan early, says North American’s Smith. “Simply waiting for the next fire to put out will not work,” he says. “Also, provide incentives and training to encourage growth in the areas that need it most.”
Remaining proactive is key, agrees Fresh Taste’s Sarraino. “Much longer lead times means we work further out to ensure arrival times stay accurate.”
Putting together an integrated strategy is more important than ever. “Understand the food system and look at where the collaboration has to happen,” says CPMA’s Lemaire “Realize those may not be natural collaborators from your original plan.”
We’re all in this together, Sarraino points out. “Communication is key, and we all do our part to toe the line,” he says. “Not only is it our passion and priority to fulfill the needs of our partners and customers worldwide, it is our duty.”
Lemaire sees the industry having better planning coming out of COVID, with better communication. “They are understanding the packaging needed, ordering more upfront, and the planning process with supply chain partners has improved,” he says. “We’ve seen emergency plans put into place by major retailers with their wholesalers.”
Canada has been fairly resilient in recent years, even in these unprecedented times, states Lapage. “We want to ensure we keep healthy and nutritious food on the plates of Canadians,” he says. “As an industry, we must look at creative ways to service consumers from a supply chain perspective, because there’s never been a time when we’ve sourced more food from international markets.”
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A Global Coalition Of Fresh Produce
To address supply chain issues on a larger scale, several associations from around the world have formed the Global Coalition Of Fresh Produce to address global supply chain disruptions for fresh produce production and trade.
“This group has come together to find common ground to some of the global supply chain issues,” says Ron Lemaire, president of Canadian Produce Marketing Association (CPMA) in Ottawa. “There are seven organizations now on a global level, which represent just about all the continents.”
The coalition works to demonstrate the need to recognize the sector as essential to the public good, increase issue awareness, and provide solutions associated to supply chain disruptions.
“It’s important to be able to leverage partnerships and collaboration,” says Lemaire. “The world is trying to get back to what business was before the pandemic, but supply chain challenges are still there. The big piece is ongoing collaborative approaches, working through association partners and working with business partners to be proactive instead of reactive.”
Stewart Lapage, executive director of operations and logistics at Oppy in Calgary, Alberta, emphasizes the importance of industry collaboration. “We have so many great produce associations, including CPMA and IFPA, that bring companies from all sectors of the industry together. They can help make tangible change so everyone can be prosperous,” he says.