In a world of constrained capacity, astronomical trans-Pacific freight rates and huge shipping delays, retail giant Canadian Tire is taking new steps to own its supply chain.
The company announced in August that it had invested $40 million for a 25 percent stake in Ashcroft Terminals, a private rail terminal that sits in British Columbia’s interior, about 300 kilometres from the Port of Vancouver. Majority-owned by Singapore-based PSA, the largest port operator in the world, it is the the country’s only private facility served by both CN and CP railways. Every train entering and leaving the Vancouver market travels through the terminal.
We sat down with Gary Fast, Canadian Tire’s vice-president, transportation, to learn how and why the company is taking control over more links in the chain.
“We own our distribution centres. We have our own tractor fleet. We own our own container and chassis fleet and, that served us well, but we’ve always gone third-party transloading,” he said.
Redundancy and resiliency
The strategy behind changing this is simple, Fast said. Gaining control of transloading is “another element in the supply chain that you can control, that you have the ability to scale. It’s about ensuring you have the capacity to run your business as well as having redundancy and resiliency.”
While the Ashcroft deal doesn’t give Canadian Tire exclusive access to the facility, it does guarantee capacity, so import containers are not held up in Vancouver. The old process required local transloading in Vancouver, so containers would come off the ship, get trucked to a local transload facility, moved onto domestic 53- or 60-foot containers, and then trucked again to the railhead. Now the vision is for import boxes to be loaded directly onto trains at the marine terminal and travel straight to Ashcroft and transloaded there.
In addition to eliminating two trucking legs from the journey, the location of Ashcroft in the heart of B.C.’s forest industry means the ocean containers can be loaded with lumber for export as soon as they are empty. “You’ve got instant match back capabilities,” Fast noted. Whether that container goes back full or empty, “the steamship lines want to get their box back to Asia as soon as they possibly can, and by transloading I turn the box back within six days. That’s worth gold to them.
“So now you’ve done some mode simplification and elimination. You’ve made things more efficient, and presumably you’re going to do it cost-effectively as a transload because commercial real estate in Vancouver proper is getting more expensive. Labour rates are escalating a lot faster in Vancouver than they are in Ashcroft, and you’ve got this little terminal that’s set up to be a bit of a freight village that’s going to serve both importers and exporters extremely well.”
He added that PSA’s role as the majority owner of Ashcroft confers the added advantages of being partnered with a “global juggernaut that gives you reach right back to your vendor base in Asia, and so you’re getting better visibility in your supply chain, you’re getting better control of your supply chain and you’re partnered with somebody that’s best-in-class in on the global scale for ocean freight, which we all know is in a state of chaos.”
The disarray in the container shipping industry has led Canadian Tire to another strategy – the company has begun to charter its own ships. In mid-September the first vessel discharged about 1,100 sea cans of cargo in Vancouver.
Fast pointed out that as the 14th largest importer of containerized goods into North America, Canadian Tire has “to punch above our weight class,” to secure capacity. “Chartering our own vessels is not something that I would have ever dreamed that we would try to do,” he said. It’s complicated to become a vessel operator. The big lines have a virtual monopoly on containers, and the company had to find the right agents to pull it all together.
“But here’s why I like the concept and why I think it’s not going to go away,” he added. Chartering the vessel, right now solves the problem of capacity, and “it allows me to run a charter year-round lop off my peaks, so that I’m a flat-line customer to the steamship lines, because they don’t like to deal with peaks.”
Fast said the ship charters will likely continue at least through 2022, and possibly beyond. “It’s a capability now that we’ve unlocked. And I think as time goes on, we’re going to get better at that capability.”