Final Report
Greater Halifax Distribution Study
Presented to
Greater Halifax Partnership
and
Halifax Port Authority
by
©MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
i
Table of Contents
Executive Summary
ii
1.0 Background
1
2.0 Introduction to Distribution Centres
3
3.0 Case Studies of Canadian Importers and Retailers
11
4.0 U.S. Case Studies
28
5.0 Halifax Trade Patterns
37
6.0 Prospects for 3PLs and Logistics Service Providers
49
7.0 Value Added Service and Non-Containerized Cargo
59
8.0 Port Case Study
76
9.0 Location Cost Comparison
80
10.0 Conclusions and Recommendations
83
List of Contacts
86
Appendices
87
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Executive Summary
In September 2002, The Halifax Port Authority initiated its SmartPort Strategic Planning
initiative. Out of the first session, it was decided to focus on five key issues: 1) Marketing
and Strategy; 2) Productivity and Competitiveness; 3) IT / E-Commerce; 4) Value added
/ Distribution; 5) Security. The port's subsequent Container Growth Strategy identified
the fourth item as one of the keys to future growth.
Atlantic Canada only has a population of 2.4 million people, of whom 650,000 live
within two hours of the Port of Halifax. However, Tthe port's hinterland now comprises
Atlantic Canada, Quebec, Ontario, the U.S. mid-west and New England. Distribution
activity, tends to serve the needs of the immediate region. The port's location on the Great
Circle Route and its function as a lightening and topping off port for vessels on the way
to or from New York, provides it and the immediate region with a myriad of shipping
services to and from many world-wide destinations.
Can this location and these services be leveraged to enhance the port's and the HalifaxMoncton Corridor's role as a North American distribution centre? Can niche freight or
logistics fulfillment be linked to regional strengths in call centre/customer solution
centres building on existing telecom and human resource capabilities/capacities?
The United States has, in the past few decades, seen continued growth of large
manufacturing and retail distribution centres in port cities such as Savannah and Norfolk,
and in areas that are well-connected and thereby suitable locations to connect the regional
and national wholesale and retail outlets.
The choice of location for DCs can be based on many factors, most notably:
Proximity to transportation infrastructure (by sea, truck, and rail);
Proximity to suitable, skilled workforce;
Proximity to related manufacturing and wholesale/retail outlets (linking manufacturing
with distribution);
The presence of locating and expansion incentives (income and property tax incentives,
land grants, government subsidies);
The presence of industry clusters (companies in similar industries who share knowledge,
information, inputs, etc – often in the high-tech sector);
Favorable business conditions (tax rates, property prices, occupancy rates, urban/regional
setting);
Efficient and reliable scheduling of transportation (one-day turnaround, etc); and,
The presence of free trade zones (FTZs), which allow product to be exported to not be
subjected to import duties if that product is not to remain in the country.
Due to Canada’s geography, most retailers operate a centralized location in Ontario and
have regional sites in Calgary or Montreal to service these markets. Retailers have also
been cross-docking items and deconsolidating containers in Vancouver, and then loading
domestic rail piggyback trailers or containers, to be distributed to their networks across
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western Canada. Retailers with cross-docking in Vancouver include: Sears; Canadian
Tire; Home Hardware and Hudson Bay Company
Regional DCs are situated across Canada in western Canada; (Calgary, Winnipeg) and in
Atlantic Canada (Moncton and Halifax). Transload container sites are situated at the port
cities of Vancouver and Montreal and Halifax. At these sites inbound containers are destuffed and loaded onto domestic equipment for direct shipment to stores. Companies’
transload locations are based upon frequency and products sourced from various trade
corridors.
By assessing the growth of the Top 100 Ports in the World by TEUs handled from 1996
to 2000 illustrates which ports were growing at the fastest rates. Once we identified the
top growth ports we compared which container lines provide service to and from Halifax.
From this assessment we then identified the countries and whether there were large
import-trade houses that represented shippers, manufacturers or wholesalers, which could
be approached by the Partnership and HPA as candidates for the development of DCs or
transload facilities, or indeed, shipping through the port.
It appears that Halifax would have first mover advantage by developing shipping links
and relationships with retailers and 3PLs in the Indian sub-continent. Halifax is also
unique in North America in that it handles more exports to the far East than imports from
that region. This is an opportunity to balance this situation out with additional imports.
Based on early interview results, and the impression that traditional DC activity was not
likely to occur in the Halifax-Moncton Growth Corridor, the consultants and the client
decided to focus on the potential for attracting so-called third party logistics providers
(3PLs) to the corridor. Key suppliers and importers of consumer goods and logistic
services for various commercial retail and wholesale sectors may offer some growth
opportunities for Halifax. We evaluated some of the larger companies as well as smaller
local 3PLs that provide these services and their views of growth opportunities that drive
their business, which may provide Halifax with a window to see other opportunities.
Although there are cases where the particular needs to be met justify a distribution centre
in the Atlantic Provinces, mainstream distribution centres are likely to continue to
concentrate in Central Canada. There are however a number of niche markets that can be
well served out of Atlantic Canada, the Halifax area in particular. One source of niche
opportunities lies in value added logistics, defined in this context by somehow increasing
the value of the goods while in the transportation chain.
If one looks beyond domestic transportation, and beyond retail distribution to
international logistics, wholesale and exports, Halifax has many advantages to offer.
Halifax’s geographic position has always been at the heart of its success in transportation.
Halifax is situated along some of the busiest trade lanes in the world. It is just hours off
the great circle route for most ships crossing the Atlantic and in a nearly direct line
between Europe and the East Coast of North America.
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Several ports have seized upon the potential of attracting distribution activity close to
port facilities, thus attracting shipping lines carrying cargo destined for those distribution
facilities. If shipping lines want to serve these customers, they need to incorporate these
ports of call. This phenomenon, plus congestion at west coast ports is leading to the reestablishment of all-water services from the Far East through the Panama Canal to east
coast destinations, including Savannah, Charleston, Norfolk and New York.
Our research, however, found that Halifax is not very competitive in a number of very
basic areas, in terms of locating distribution centres. This could help explain why HRM
has thus far only attracted DCs that serve the local market. Real estate taxes and
provincial income taxes are significantly higher in Halifax than, say, Calgary, where
HBC is looking at locating a DC. They are also higher than Vancouver where a number
of companies have trans-load facilities. With respect to comparable Canadian cities,
Halifax is only competitive with Winnipeg.
There exist a number of financial incentives in other jurisdictions that have clearly
contributed to DC location, and that the GHP and perhaps the province or the HRM
should investigate the available options should they find a prospective company to locate
in the Halifax-Moncton Growth Corridor.
There are some immediate and longer term opportunities for the GHP, the HPA and their
various study partners to follow up.
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1.0 BACKGROUND
In September 2002, The Halifax Port Authority initiated its SmartPort Strategic Planning
initiative. Out of the first session, it was decided to focus on five key issues: 1) Marketing
and Strategy; 2) Productivity and Competitiveness; 3) IT / E-Commerce; 4) Value added
/ Distribution; 5) Security. The port's subsequent Container Growth Strategy identified
the fourth item as one of the keys to future growth.
Coincidentally, the Greater Halifax Partnership, Enterprise Greater Moncton and Atlantic
Canada Opportunities Agency undertook to assess strategic assets that are present along
the corridor between Halifax and Moncton, which comprises the largest population base
in Atlantic Canada.
This study seeks to evaluate the potential for fulfillment centre activities along the
Halifax-Moncton Corridor, leveraging the proximity to the Port of Halifax and multimodal transportation connections to New England and Central Canada. The Partnership is
interested in attracting high wage jobs that are uniquely suited to the port and which
result in the high value usage of port lands. It seeks to leverage the existing strengths of
the Port of Halifax, along with the burgeoning call centre and customer fulfillment sector,
by marrying it with logistics and shipping.
The notion that the Port of Halifax could serve as a North American gateway is not new.
However, in the present context it was envisioned at the outset of containerization that
goods would be brought to Halifax, processed and then distributed to points inland. This
issue was examined in detail by Arthur D. Little and Associates in 1978.
Since the advent of containerisation at Halifax, however, very little of this type of activity
actually occurs in Nova Scotia. Notable exceptions are Michelin Tire, which imports raw
and synthetic rubber and then exports finished tires to North American and worldwide
markets. Another exception is Moirs Chocolates at Dartmouth, which imports raw
chocolate and then processes it into finished product for the North American market.
In the past twenty years, however, Burnside Industrial Park, and Lakeside Industrial Park
emerged as distribution centres for both the Halifax and Nova Scotia markets. Likewise,
Moncton and Dieppe emerged as distribution points for south and north east New
Brunswick. Home Hardware also established a large warehouse in Debert, Nova Scotia
serving the Atlantic region. In most cases, this activity has involved distributing goods
shipped from Central Canada or the United States to points in the Maritimes and
Newfoundland.
In 1991, Booz Allen and Hamilton Inc., in their Strategic Analysis of Nova Scotia’s
Trade Facilities and Services briefly examined the potential to attract additional
distribution activity to Nova Scotia. Three case studies looked at Canadian Tire, Sobey’s
and Howard Industries. At the time, Canadian Tire was moving most Far East imports
through Halifax, railing them to Toronto, and then trucking goods on a store-wide basis
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back to the Maritimes. The company acknowledged that it was less expensive to
distribute them from a point in the Maritimes, but it was just completing the second of
two 1 million sq. ft distribution facilities north of Toronto.
Atlantic Canada only has a population of 2.4 million people, of whom 650,000 live
within two hours of the Port of Halifax. The port's hinterland now comprises Atlantic
Canada, Quebec, Ontario, the U.S. mid-west and New England.
Distribution activity, however, tends to serve the needs of the immediate region. The
port's location on the Great Circle Route and its function as a lightening and topping off
port for vessels on the way to or from New York, provides it and the immediate region
with a myriad of shipping services to and from many world-wide destinations. Can this
location and these services be leveraged to enhance the port's and the Halifax-Moncton
Corridor's role as a North American distribution centre? Can niche freight or logistics
fulfillment be linked to regional strengths in call centre/customer solution centres
building on existing telecom and human resource capabilities/capacities?
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2.0 INTRODUCTION
The United States has, in the past few decades, seen continued growth of large
manufacturing and retail distribution centres in port cities, and in areas that are wellconnected and thereby suitable locations to connect the regional and national wholesale
and retail outlets.
2.1 Selecting Sites for Distribution Centers
The choice of location for DCs can be based on many factors, most notably:
Proximity to transportation infrastructure (by sea, truck, and rail);
Proximity to suitable, skilled workforce;
Proximity to related manufacturing and wholesale/retail outlets (linking manufacturing
with distribution);
The presence of locating and expansion incentives (income and property tax incentives,
land grants, government subsidies);
The presence of industry clusters (companies in similar industries who share knowledge,
information, inputs, etc – often in the high-tech sector);
Favorable business conditions (tax rates, property prices, occupancy rates, urban/regional
setting);
Efficient and reliable scheduling of transportation (one-day turnaround, etc); and,
The presence of free trade zones (FTZs), which allow product to be exported to not be
subjected to import duties if that product is not to remain in the country.
Many port authorities claim that through on-site cargo handling capabilities, or through a
combination of distribution activities, handling and transport times can be minimized. For
instance, the inland port of Columbus, Ohio reports that containerized cargo can be moved from
New York via rail to Columbus, clear customs and be shipped back to New York in less time than
it would take to clear customs in New York. Other key influencing factors are the efficiency of
interstate highways at various locations, and cost-effective warehousing and transportation.
The article, “How to Select an Optimal Distribution Site”1, outlines seven tips to make
the site selection process more productive.
1. Define the Acceptable limits of “on time”: Reasonable turnaround times vary by
industry, and by customer.
2. Determine how many distribution centers you want: With the national average
somewhere between three and four distribution centers, answering this question will help
you choose between locating one distribution center in a major urban center, or many
distribution points in geographically dispersed markets.
1
:Site Selection Magazine, September 1999
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3. Select distribution markets: - based on proximity to customers, the cost of reaching
customers, the potential workforce, access to transportation, the quality of transportation
infrastructure, and the weather.
4. Compare facilities within markets: Compare individual facilities according to access to
roadways, number of truck doors, cleanliness of facilities, and climate control.
5. Compare costs, but be careful: Factor in all costs and benefits to find the overall most
cost-effective location, based on a variety of facility and geographic location costs.
6. Improve your flexibility and compromising skills: When the best facility or location
cannot be secured, weigh other short and medium term options.
7. Don’t assume you’re through: be adaptable and engage in re-evaluations frequently,
even up to every two years.
In addition, there are other external items due to the ever-changing demands of global
supply chains, investment and trade corridors. As world trade shifts between country and
ports and as transportation carriers enter and exit markets, companies must continuously
re-examine their distribution networks. New regulations and shifts in government policies
also impact the competitiveness of ports and transportation carriers that provide services
to manufacturers, imports and exporters. If companies and ports do not benchmark
themselves every year they miss out on key future growth opportunities.
Studies from the European Union (EU), for instance, cite the role of both public and
private investment in infrastructure development as being critical to the long-term
sustainability of economic growth. The EU public policy regarding infrastructure
development indicates incentives are necessary to encourage location site investment by
private companies. Both the private and public sectors have different time lines in terms
of determining and evaluating the yield from investment. Most private companies view
the long term as 5 years and compared to 10 years for public sector.
2.2. Recent US Distribution Centre Investments
There is a rich and extensive literature on the subject of Distribution Centres and their location
theory. The following illustrates a number of companies who have located or recently expanded
operations in the United States, where they located, and some of the key factors cited for locating
in these areas.
Company: Bose Corp.
Location: Columbia, South Carolina
Influencing Factors: Incentives such as the Rural Development Act (lower property
taxes, job development incentives for infrastructure improvement, job income tax
credits), proximity to Columbia Metropolitan Airport, fully subsidized state-trained
employee pool (a 1995 initiative)
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Company: BMW
Location: Port of Charleston, South Carolina
Influencing Factors: Proximity to their manufacturing plant (for the Z3 roadster model,
first plant located outside Germany), modern container facilities, intermodal capabilities,
extensive interstate highway network. The port is tied to CSX International and NorfolkSouthern railroads. Recently, CSX eliminated layovers in Atlanta, cutting travel times by
a day.)
Company: Turbana
Location: Gulfport, Mississippi
Influencing Factors: A state-owned port which was recently dredged to 36 feet,
Gulfport is said to be the largest handler of tropical fruit. Also, as one of two federally
designated Foreign Trade Zones in Mississippi, Gulfport users benefit from duty and tax
savings. A recently built air cargo facility improves transportation capabilities from
Central and South America
Company: Columbia Sportswear
Location: Dixon, Kentucky
Influencing Factors: The center is situated in the 4 Star Industrial Park (900 acres), a
cooperative venture of four Kentucky counties which promotes regional cooperation and
growth. The park purchased 51 acres of land from an adjacent tenant to accommodate
Columbia, as well as financing the development of the site through the issuing of bonds,
repayable by Columbia until all bonds are retired. The arrangement will result in
Columbia not being required to pay property taxes for the 25-year payoff period, though
they will pay the Henderson County school property tax for that period. The Delta
Regional authority was to pay for installation of sewer lines, and other state and federal
grants are available for park development aid.
Company: Reebok International
Location: Boston and Carlton, Massachusetts
Influencing Factors: The all water routes (China and Hong Kong to Boston) used by
Reebok are seen as highly reliable, despite the increase in transit time. A single carrier
can retain custody of shipments from origin to destination.
Company: Wal-Mart
Location: Louisa County, Virginia
Influencing Factors: Proximal to regional headquarters of CSX Corp and Norfolk
Southern Corp railroads, with major cities such as New York, Philadelphia, Washington,
Pittsburgh, Charlotte and Charleston are within 350 miles (560 km). The county boasts a
large local workforce who was previously commuting outside the county for work, and
state and local regional development partnerships funding transportation projects and
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developing industry clusters. Wal-Mart operates 3 distribution centers in Virginia, in
addition to 52 Supercenters, 21 Discount Stores and 13 Sam’s Clubs.
Company: Staples
Location: Washington County, Maryland
Influencing Factors: County and State incentives packages and the establishment of a
developed industrial corridor adjacent to Interstate Highway 81 (I-81) helped the
Maryland location win out over Virginia. Maryland boasts Baltimore as “less than a day’s
drive from one-third of the country’s population.”
Company: Home Depot
Location: Hagerstown, Maryland
Influencing Factors: Recently announced (2004) plans to open a 454,000 sq. ft.
distribution center to employ 230, following last year’s opening of a major retail outlet in
Hagerstown. Incentives are reportedly over $400,000 in state and local packages
(Washington County), including $330,000, which could be converted to grants if the
company reaches its hiring targets, as well as a $75,000 training grant from the Maryland
Dept of Economic Development.
Company: Williams-Sonoma (expansion of distribution center)
Location: Memphis, Tennessee area
Influencing Factors: Memphis sells its location as having the word’s largest air cargo
airport, the third largest rail center in the US, and the 4th largest inland port in the US.
Many distribution centers in the Memphis area are undergoing expansion.
Company: IKEA
Location: Perryville, Maryland
Influencing Factors: Cecil County’s labour force and access to the Port of Baltimore are
reportedly major factors, as well as the ability to supply the Maryland, Washington DC and
Pennsylvania regions. Ikea will benefit from income and property tax credits due to the
designation of a state enterprise zone, which offsets the $5 million IKEA spent in acquiring a site
larger than required.
Company: Wal-Mart
Location: Houston
Influencing Factors: In the period since this study commenced, Wal-Mart has announced that
it is building a 2m ft.² DC near the port of Houston. It is located on a 50 acre site at the
intersection of two major highways. The State of Texas will purchase the building and property
for $80m and lease it back for the next 30 years for $187m, providing Wal-Mart with a sizable
property tax break.
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2.3 Canadian Commercial Retail Logistics and Supply Chain Models
The application of logistics and supply chain management theory by retail companies is
very pronounced in North America and Canada. The use of technology for order
placement & tracking and inventory management by retail companies is widespread
between wholesalers, distributors and manufacturers. Retail companies have been driven
to reduce costs and to constantly update their networks to maximize cost reduction
opportunities. With the introduction of Wal-Mart stores in Canada in the 1990s, the other
major retailers; Sears, HBC / Zellers are responding to the fiercely competitive logistic
and retail challenge that Wal-Mart represents.
Canadian retailers have also adjusted to new consumer demands, whereby purchases can
be made by visiting a store or by ordering from the Internet. Both of these business
models support different supply chains.
2..4 Classic Supply Chain Model for Retail Stores
The retail supply chain model is to fulfill orders from a store. Typically in this model,
stores are either stocked from a centralized Distribution Centre (DC) or supplied by
Direct Sales Delivery (DSD) from a manufacturer. A centralized Distribution Centre
would stock all line items that a store would carry and supply stores within a 1-day time
delivery window. Distribution Centres are either supplied from regional transload sites at
a port or from a supplier / wholesaler warehouse. Most centralized Distribution Centres
can carry over 50,000 SKU (stock keeping units) items. The SKU items that have the
greatest demand may be cross-docked at the Distribution Centre or shipped directly from
a manufacturer to the store. This is known as DSD delivery and is common for the
following food items: canned soft drinks, milk, bread, cookies, snacks, beer, ice cream
and wine. DSD objectives are to reduce inventory at both DCs and stores, and to improve
customer service.
The location of DCs in Canada has been concentrated in Southern Ontario and Montreal
due to the large concentration of retail stores in the Windsor-Quebec City Corridor.
Figures 1 and 2 compare the differences in store concentrations between southern Ontario
and Eastern Canada. Figure 3 shows the locations of DCs in southern Ontario and
Quebec. These figures illustrate the market retail forces that have resulted in the location
of DCs in close proximity to the highest concentration of stores (and people).
The major retail chains have centralized distribution centres and are concentrated in
Southern Ontario due to the large concentration of stores in this market.
Most companies do freight consolidation from their Distribution Centres.
Figure 1 shows this concentration by the number of key retail stores by town across
Eastern Canada. Note the distribution of stores is population driven for both food and
commercial items.
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Figure 1 shows the locations of stores in this area.
Figure 2 compares the concentration of stores across Eastern Canada.
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Figure 3: Location of DCs in Southern Ontario
These centralized Distribution Centres are also augmented by Regional DCs and
Transload Container sites which also supply goods to the centralized DCs.
Due to Canada’s geography, most retailers operate a centralized location in Ontario and
have regional sites in Calgary or Montreal to service these markets.
Retailers have also been cross-docking items and deconsolidating containers in
Vancouver, and then loading domestic rail piggyback trailers or containers, to be
distributed to their networks across western Canada. Retailers with cross-docking in
Vancouver include: Sears; Canadian Tire; Home Hardware and Hudson Bay Company
The retail Internet model is applied when consumers order on-line from their place of
residence or work. Thus there is no store; the retailer will either fulfill the order from a
centralized Distribution Centre or directly from the manufacturer. Shipments are done by
courier services directly from the DC or place of manufacture (i.e. Dell Computers).
Regional DCs are situated across Canada in western Canada; (Calgary, Winnipeg) and in
Atlantic Canada (Moncton and Halifax).
Transload container sites are situated at the port cities of Vancouver and Montreal and
Halifax. At these sites inbound containers are de-stuffed and loaded onto domestic
equipment for direct shipment to stores. Companies’ transload locations are based upon
frequency and products sourced from various trade corridors.
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Materials Management and Distribution reported last year that “in both grocery and fresh
product lines, inventory is going down. Some distribution centres have reduced inventory
by 15-20%. Many food distributors are also currently cross-docking from suppliers to
retail food stores, with 83% of the companies cross-docking products from outside
storage to the main distribution centre.”2 Moreover, Canadian Grocer reported in 1997
“cross-docking with modular pallets can reduce total supply chain costs by 20% for the
SKUs that ship in quantities of 10 cases or more.”3
The future trend in retail logistics is for consolidation with suppliers for Vendor Managed
Inventories (inventory consignment) and increasing use of cross-docking sites to lessen
the warehouse and storage space at both DCs and stores.
Retailers and their suppliers are also increasingly technology driven. They use various
supply chain, inventory management, order processing and tracing software. Any 3PL
provider needs to have the latest technology; retailers will also demand that the 3PL use
their own software to manage their business. Wal-Mart has also recently insisted that its
suppliers move to Radio Frequency Identification Device (RFID) technology by January
2005.
2
‘Sears Moves Into New Service Centre’ (May 2000), Materials Management and Distribution, July 1999,
p.7; ‘Wal-Mart to Open New Distribution Centre’, Canadian Grocer, Jan-Feb 1999, p.13; Robert
Robertson, ‘Big Food Fight: Food Distributors Face Marketplace Changes’, Materials Management and
Distribution, May 2000, pp.31
3
Sally Presky, ‘ECR Report: The Case For Moving Modules’, Canadian Grocer, October 1997, pp.24
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3.0 CASE STUDIES of CANADIAN IMPORTERS and RETAILERS
3.1 Introduction
The next section provides the results of interviews of commercial retailers. We were able
to interview the following companies:
•
•
•
•
•
•
•
•
Hudson Bay / Zellers
Canadian Tire
Home Hardware
Sears
Sobeys / IGA
Kent Building Supplies
Nova Scotia Liquor Commission
Loblaws
We have information about, but were unsuccessful in interviewing one other large
industry player:
•
Wal-Mart
3.1.1 Current Import Logistic Strategies
We examined and interviewed seven (7) major retail companies associated with food,
retail, commercial and hardware goods and services, to determine the future role of the
Port of Halifax as part of their logistics strategy. We assessed each company’s store
location in relation to their current DCs, and asked companies where they are presently
sourcing goods and where future growth opportunities was most likely to occur.
3.2 Hudson Bay Company / Zellers
Hudson Bay Company and Zellers operate two retail store operations. The HBC or Bay
stores locate in larger regional malls in urban areas, whereas the Zellers stores are more
dominant in smaller centres and are marketed to a lower income demographic.
Company: Hudson Bay Company, ON
Headquarters Location: Toronto, ON
Contact: Mike Thomas
Executive VP HBC Logistics,
Toronto, 416.861.6634
1,500-2,000 FEU via Halifax
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
DC Location
Province / # Stores
Montreal
Scarborough
ON 187 PQ 85
NB 14
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Vancouver
12
Mississauga
Vancouver
NS 19
PEI 2
Stores
Hudson Bay operates 272 stores in eastern Canada, including The Bay and Zellers. The
Bay is a larger department store offering higher end goods. Typically the store is located
in higher population centres and in larger regional shopping malls.
Figure 4: Location of Zellers
Figure 5: Location of Bay Stores
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3.2.1 Strategic Logistics Alliance:
HBC has developed a strategic alliance with CP Rail, which Halifax / CN would have to
counter, in order to participate in their business. This alliance is summarized as follows:
•
•
•
•
CP is the major carrier of their domestic intermodal cargo from their Distribution
Centres.
They use 53’ CP Domestic Boxes (Boxes show HBC decals) which are leased by
CP Rail
From the CP terminals CP arranges local cartage with truck carriers. CP Rail also
leases the truck chassis.
CP intermodal services include the cities of Calgary, Saskatoon, Montreal,
Toronto, Winnipeg, Vancouver, Edmonton, Regina
3.3 HBC Distribution
Some distribution centres cater to both companies (one in Vancouver, one in Montreal).
There are two DCs in Toronto for Zellers and one for The Bay, and one for furniture and
appliances.
HBC uses the Port of Halifax a little, for shipments from Bangladesh, India, and
Pakistan: about 1,500 to 2,000 containers per year. All shipments through Halifax go to
Montreal. Goods then return to Atlantic Canada via truck (HBC owns their own trucking
company.) HBC sees this as an unfortunate situation.
The ocean bill to Montreal is approximately the same cost, if not cheaper, than shipping
by rail from Halifax to Montreal. Some time ago, HBC attempted to negotiate freight
rates with CN, but were not offered an attractive rate from Halifax. We verified this
situation with a local freight forwarder who confirmed that the rate with Maersk Sealand
for the shipment of bedding from India is the same for Halifax, Montreal and Toronto,
thus negating any locational advantage.
Some product is kept in the regional distribution centres and some is received from the
vendor in Toronto and shipped to Vancouver. There is no distribution to U.S. cities. The
company makes no use of 3PL warehousing. If costs were appropriate, 3PL warehousing
in the Halifax-Moncton Corridor could be a consideration in the future, but this will
depend heavily on CN rates.
Port selection is driven by cost and transit time. According to HBC, shipping goods from
Asia through Vancouver and then by rail takes 15 days less time than to ship goods
through the Port of Halifax. Consideration of alternative ports, i.e. more use of Halifax,
would be dependent on overall cost savings.
If a DC were to be located near Halifax, it would be approximately 150,000 sq ft.
Currently, there is a study underway comparing various prospective locations for an
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additional regional DC. Recent experience with the Port of Halifax has shown it to be
disorganized, with supply line delays. Vancouver is more efficient with better service at
the port. The use of Halifax could depend on product growth in the European
Community, such as the Czech Republic. At the moment, Asia dominates their imports,
so Vancouver remains the key port.
3.4 Canadian Tire
Canadian Tire (CTC) operates 454 stores, and recently branched into retail clothing
stores, with Marks Work Warehouse operating another 300 stores. CTC also are in the
retail sector for auto parts, operating 130 stores under the Part Source brand.
Company: Canadian Tire
Headquarters Location: Toronto, ON
Contact: Pat Sinnott
VP Logistics,
Toronto
416.480.3489
email: psinnott@cantire.com
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
DC Location
Montreal
Vancouver
Toronto
Halifax
Brampton
Vancouver
Calgary
Montreal
Province / # Stores
ON 194 PQ 91
NB 17
NS 20
PEI 2
NF 11
Canadian Tire has five Distribution Centres in Toronto (3), Calgary (1) and Montreal (1).
It has a transload centre in Vancouver. The table below shows store locations in relation
to DCs.
Figure 6: CTC Store Locations Eastern Canada to DC Sites
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3.4.1 Strategic Logistic Alliances:
CTC has a similar arrangement as HBC does with CP for the domestic supply of
intermodal boxes and carriage of containers using CP leased equipment, and use CP ex
Vancouver, Toronto and Calgary.
In terms of overall distribution strategy, 92% of shipments to stores were on time in
2002. The company has improved the supply chain at the AJ Billes Distribution Centre in
Toronto. It introduced new supply chain technology i.e. software at its DC in Calgary
CTC uses supply chain technology extensively as, from their point of view, the supply
chain starts at the DCs. With orders consolidated the software provides a list of items to
be picked. The model tells them at which bays to load trucks, to which stores, based upon
time and demand allocation models.
It has recently introduced the “20/20 Program” to increase sales by 20% using 20% less
space. It is also reducing warehouse space at CTC Stores, and pushing high volume
products to stores from DCs.
The transload site at Vancouver de-stuffs containers. With the increased payload using
53’ domestic trailers containers with CP rail, the company pays 33% less freight. They
consolidate 2-3 containers which are then shipped to DCs at Calgary or Toronto.
Canadian Tire uses CN for eastbound shipments from Toronto-Montreal to Atlantic
Canada. However, they have a very tight strategic alliance with CP.
In terms of Halifax’s role, the company told us it could potentially attract a transload
site, with the following requirements:
•
•
•
24 hour port access for trucks
Transload site 250,000 sq ft
Need to transfer 200 to 300 containers per week to be feasible
This facility would need to service DCs at Toronto and Montreal. A full DC would not
work in Halifax or the Corridor, as there is not a high concentration of stores in the
service area. They would need to run their network model to see if a transload would be
economical at Halifax.
A potential barrier to Halifax is the extra week from China and the perceived limited
number of carriers calling regarding frequency of service to Halifax. The company is
amenable towards being contacted by the port in the future.
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3.5 Home Hardware
Company: Home Hardware
Headquarters Location: St Jacobs, ON
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
DC Location
Montreal
Vancouver
St Jacobs, ON
Halifax
Province / # Stores
ON 514 PQ 64
NB 54
NS 47
PEI 14
Vancouver
Figure 7 shows location of Home Hardware DC in relation to its retail network in Central
Canada.
Home Hardware’s head office is in St. Jacob’s, Ontario with regional distribution centres
in Debert, NS, Wetaskiwin AB, and Elmira ON; The company has stores throughout
Atlantic Canada, with growth of 3-4 stores annually.
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Most imported goods enter Canada through Vancouver, which is their import office
location. Presently, there is no importing through the Port of Halifax, although there is
some “exporting” to Newfoundland and Saint-Pierre and Miquelon. Truck and rail brings
shipments from the west to St. Jacobs and to Debert. Some cargo is piggybacked to
Halifax, and then taken by truck to Debert.
The Debert, NS warehouse is approximately 8.5 acres or just over 450,000 sq ft.
Distribution from the Debert warehouse is to approximately 190 stores, including
Newfoundland and Labrador (NL), and St. Pierre et Miquelon. Exporting through the
Port of Halifax is described as a “drive on, drive off” operation. Trailers or trucks
(sometimes containers) are shipped and returned from NL and Saint-Pierre et Miquelon.
Halifax is a convenient location from which to reach the NL and Saint-Pierre et Miquelon
markets.
Port selection is based on cost effectiveness and ability to meet the needs of the company.
Oceanex and the feeder to St. Pierre et Miquelon are currently suiting their needs out of
Halifax.
In terms of their site selection process, they looked at Moncton and Halifax 25 years ago,
but decided on Debert, in part because it was close to both rail and the airport. They are
currently not interested in locating near the Port of Halifax. Container freight shipment is
adequate using current methods (through Vancouver, Wetaskiwin, and St. Jacobs). It is
difficult to tell whether circumstances will change in the future (always possible,
depending on suppliers, companies, etc)
3.5.1 Strategic Logistics Alliances:
Home Hardware, like HBC and Canadian Tire, has a strategic alliance with Fastfrate
Truck Company. Fastfrate, in turn, uses Armour Transport in eastern Canada as their
3PL. Fastfrate / Armour has regional terminals in Atlantic Canada that would service
Home Hardware in Moncton, Halifax and St Johns.
3.6 Wal-Mart
Company: Walmart
Headquarters Location: Toronto, ON
Contact: Doug Doust
VP Supply Chain
605.821.2111 ext 4170
n/a
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
DC Location
Montreal
Cornwall
Halifax
Mississauga
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Province / # Stores
ON 75 PQ 44
NB 6
NS 10 PEI 2
NF 8
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18
Belleville
Calgary
MB 11
BC 22
SK 12
AB 29
3.6.1 Strategic Alliances
Wal-Mart Canada also works with Fastfrate across Canada.
Figure 8 : Wal-Mart stores in eastern Canada
Figure 9: Wal-Mart Stores in central Canada
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3.7 Sears Canada
Company: Sears
Headquarters Location: Toronto, ON
Contact: Brian Gerrior
Toronto
416-941-4577
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
DC Location
Montreal
Belleville
Halifax
Calgary
Vancouver
Province / # Stores
ON 71 PQ 40
NB 5
NS 6
PEI 0
NF 2
Sears operates 174 stores across Canada with largest concentration in Eastern Canada, as
follows:
Figure 10: Sears Eastern Canada Network
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In Ontario and Quebec, their store coverage can be illustrated as follows:
The table below compares the two types of retail store outlets operated by Sears by
province as they have removed furniture from the old retail stores and relocated this
service to another retail channel. The retail network is still the dominant feature of their
marketing strategy. Most sites are located in larger urban and regional malls.
AB
BC
MB
NB
NF
NS
ON
QC
SK
Total
Retail
15
14
4
4
2
5
49
28
4
125
Home Furn
6
5
1
1
1
22
12
1
49
Total
21
19
5
5
2
6
71
40
5
174
In the late 1990s Sears built a 870,000 sq. ft warehouse in Vaughan, Ontario “to include
direct-home delivery services, cross-docking and storage of big ticket and replenishment
merchandise” on 77 acres of property, with 212 doors, accommodating 117 trucks in the
parking area. Other DC locations are the Brockville, Ontario, Catalogue Warehouse and
Calgary, AB.
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Sears operates their own Trucking Company SLH, and offer third party freight to others.
CP rail provides use of domestic containers for imports.
CRSA is a third party retail association that provides services for negotiating and
servicing container traffic that Sears uses. They also offers consolidation and
deconsolidation services in exporting countries and in Canada. They have three large
warehouses in Canada operated by Transpacific Corp. across the country. They are
located at Port Coquitlam, Brampton, and La Salle. CRSA will be further discussed in
Future Trade Opportunities.
3.8 Sobeys / IGA
Sobeys are the second largest food retailer in Canada with 1,300 stores with sales of $11
billion.1
Company:
Headquarters Location: Stellarton, NS
Contact:
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
US Port
Cross Dock
Location
Montreal
Halifax
Vancouver
DC Location
Province / # Stores
ON
409
PQ 184 NB 57
NS 149 PEI 17 NF 110
AB
115
SK 35
MB 53
BC 6
Sobeys operates a total of 1,300 Stores, under the following brands: Sobeys, IGA, Garden
Market, Foodland, Needs & Green Gables, Lafond, Lawtons. Their store locations are
illustrated below.
1
2001 Annual Report
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Figure 12: Sobeys and IGA stores
Sobeys has its National Headquarters in Stellarton, Nova Scotia, with another key office
in Middleton, NS.
It has seven (7) Distribution Centres in total, in Middleton, NS, one in Debert, NS,
Stellarton, NS, Oromocto, NB, St. John’s, NL, Grand Falls NL, and Charlottetown, PEI.
The company does some importing through the Port of Halifax, although most goods
come from inland sources by truck.
In 2001 they completed a national distribution and logistics plan to reduce cost and
improve service. They opened new DC in Mississauga and reduced the number of
regional DCs from 11 to 5. IGA used 3PL Management at their Milton warehouse and
now use Sobeys personnel to staff it.
The distance from distribution centre to stores ranges from 5km – 100km+. Most
outgoing shipments are by truck (many different carriers), as rail tends to cut down lead
times on “just in time” inventory. 3PL warehousing might be useful during peak seasons.
Port and DC locating factors mainly include transportation and cost of service.
In terms of Halifax per se, Sobeys looked at Moncton and Halifax 25 years ago, but
decided on Debert, in part because it was close to both rail and airport. The Debert
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facility was recently expanded. They are currently not interested in locating adjacent to
the Port of Halifax, and are working well with their current number of warehouses /
distribution centres.
3.9 Kent Building Supplies
Company:
Headquarters Location:
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
Montreal
Halifax
Halifax
Vancouver
DC Location
Moncton
Province / # Stores
ON
PQ
NB 14
NS 6
PEI
NF 2
Kent’s head office is located in Moncton, NB, and its main distribution centre in also in
Moncton. It is a division of the highly vertically and horizontally integrated Irving Group
of companies and is a regional competitor to Home Depot. Indeed, many of the products
sold in the stores are produced by Irving companies.
KBS makes some use of the Port of Halifax (Halterm), and for shipping to Newfoundland
and Labrador and importing from overseas. All imported goods are transferred to truck,
and then shipped to the Moncton warehouse.
In terms of distribution, all Stores in Atlantic Canada are reached by truck, most likely an
Irving trucking company, either Midland or Sunbury.
Port selection is determined by the overall cost of shipment, and is affected by the
efficiency of port activities. Ease of distribution from the port is key. They have
experienced extremely long wait times, damaged containers, and confusion in loading
trucks at Halterm, which has hurt Halterm’s reputation. With increasing import orders
and shipments, there is a possibility for more issues to arise at Halterm.
3PL warehousing is not currently used, but might be a consideration if shipments were of
sufficient size, and the cost of storage was not prohibitive. Currently, there are no plans to
locate a distribution centre near the Port of Halifax.
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Figure 13 : KBS stores, showing DC in Moncton
3.10 Loblaws / Weston Foods
Loblaws is Canada’s largest food distributor and retailer, with operations across the
country, including Atlantic Canada. Loblaws is one of Canada’s largest private
employers, with over 114,000 employees and $20 billion in sales.2
Loblaws, which operates 637 stores under 18 different ‘banners’ or brands, has the
number one market share in both Canada as a whole, but also in each region in which it
operates – Atlantic Canada, Quebec, Ontario and Western Canada. It was also named one
of the top ten mass-market retailers in the world, even though Canada’s population is a
small fraction of those countries in which the other companies operate.
Loblaws’ growth strategy for the past 4-5 years has been to achieve economies of scale
by increasing market share through the acquisition of other retailers, most notably
Provigo in Quebec. The emphasis has been on growth, and on integrating these other
operations into the Loblaw corporate family. There has been less emphasis placed upon
achieving maximum operating efficiencies.
2
Loblaw Companies Limited, 2000 Annual Report.
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The company operates 1,747 stores, with 1,670 as conventional supermarkets and 77
Warehouse Stores. Store trading names include Atlantic Save Easy, Atlantic Superstore;
Cash & Carry; Extra Foods; Fortinos; Loblaws; Lucky Dollar; Maxi; No Frills; Real
Canadian Superstore; Real Canadian Wholesale Club; Shop Easy; Super Value; Value
Mart; Zehrs . Loblaws has the number one market share in both Canada as a whole, but
also in each region in which it operates – Atlantic Canada, Quebec, Ontario and Western
Canada.
Company:
Headquarters Location:
Contact:
Estimated Import Volume 2002:
Overview of Transport Network:
Canadian or
Cross Dock
US Port
Location
Montreal
Halifax
Vancouver
Weston:
Toronto
DC Location
Toronto
Province / # Stores
ON 391 PQ 149 NB 45
NS 51 PEI 8 NF 7
Atlantic Wholesalers, Loblaws’ distributor in Atlantic Canada, operates five distribution
centres in the Maritimes, with three located within close proximity to each other in
Halifax and two in Moncton, including a new state-of-the-art refrigerated / fresh produce
distribution centre in Caledonia Industrial Park. In terms of overall efficiency, two of
these warehouses are rated # 1 and # 3 in the country.
Figure 14 shows Weston current distribution network in Central Canada.
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The location of stores is concentrated heavily in the southern Ontario marketplace. This
region also is the location of the distribution centres to service their demand.
Atlantic Wholesalers, Loblaws’ distributor in Atlantic Canada, operates five distribution
centres in the Maritimes, with three located within close proximity to each other in
Halifax and two in Moncton, including a new state-of-the-art refrigerated / fresh produce
distribution centre in Caledonia Industrial Park. Each of these Maritime region
warehouses handles approximately $500 million in inventory per year, or $10 million per
week..
It is understood that Loblaws currently imports about 1,000 FEU per annum through the
Port of Halifax. Sixty percent (60%) of this cargo is destined for Halifax and the rest for
Atlantic Canada.
Loblaws currently imports 5,000 FEU through Halifax, mainly general merchandise from
South East Asia and food products from Europe. About 75% of this cargo is destined for
the local Halifax market. Port selection is driven primarily by price and the cost of transPacific vs. Panama services. Halifax has an advantage for shorter timeline products
originating in Europe. More carriers using the Suez route might result in more volume via
Halifax.
Loblaws is presently having difficulties relating to the CN strike as well as what they
consider to be a more militant and less co-operative union that CP’s. They have had
better luck using Vancouver, which give them pause when it comes to deciding on future
investment at Halifax.
All distribution is handled at the facilities described above. For imports through Halifax
they use Sable Warehousing, which is a 3PL owned by the Day & Ross group. At the
present time, they do not see any change in their existing arrangements, which seems to
contradict the information gleaned above. They will also be looking at doing some more
consolidation further up the supply chain i.e. in the Far East itself.
We have learned, unofficially, that as late as November 2003 Loblaws was examining the
potential to develop a 300,000 sq. ft. transload facility in Halifax to handle European
imports for eastern Canada. The facility could handle as many as 10,000 containers per
annum. Trailers arriving with merchandise eastbound from Toronto and west would be
discharged in this warehouse and the trucks filled with merchandise for western
destinations. This would appear to be a major opportunity for the Port of Halifax.
3.11 Nova Scotia Liquor Commission
The Nova Scotia Liquor Commission has one warehouse, located at Bayer’s Lake
Industrial Park in Halifax. It is a 130,000 sq. ft facility. The Commission has 100 stores,
6 agencies and also provides service to four private stores. It will be opening new stores
in the next 3-5 years, including a larger format attached to Loblaws and Sobeys
supermarkets.
The Commission presently imports about 500 containers per year through the Port of
Halifax and another 500 trailer loads are imported from the U.S. via rail. Containers
arrive at the port, are sent to a 3PL (Cantrax), destuffed, and then shipped to the NSLC
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warehouse. This procedure is costly and somewhat inefficient. They also commented on
the lack of shipping service and especially frequency from some markets which may
necessitate the construction of additional warehouse capacity for inventory storage.
There is no scope for handling the business of other liquor commissions, as thay are
protective of their “turf” and the jobs that are created. NSLC does, however, provide
some service to the PEI commission.
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4.0 U.S. CASE STUDIES
4.1 Target Stores
4.1.1 Overview of International Cargo Volume
Target’s import volume for 2003 was 137,000FEUs, with the largest origin country being
China, which accounted for 65% of its volume. The chart below shows Target’s current
distribution of imports by origin areas.
4%
2%
3%
China
4%
Other NE Asia
9%
SE Asia
ISC
Latin America
13%
65%
Europe
Other
This table illustrates that Target’s largest sourcing area is Northeast Asia (NE Asia), with
78% of its import volume coming from this region.
Currently, Target’s primary ocean carriers are APL, NYK, Evergreen and Hanjin, of
which only NYK is a current Halifax customer. Its main US port areas are on the west
coast with Seattle/Tacoma and Los Angeles/Long Beach handling 98% of the company’s
volume. Almost all of Target’s remaining volume is handled through Norfolk, VA.
4.1.2 Overview of Target’s International Supply Arrangements
Target’snternational supply chain is fairly typical of large retailers, in that it utilizes
Import Processing Centers (IPC) located near the Port of Entry (POE) to link its
international and domestic distribution systems. The diagram below provides an
overview of the structure of Target’s current distribution arrangements.
Foreign Supplier
Foreign Supplier
US Port
Consolidator
Foreign Port
Foreign Supplier
Foreign Supplier
LCL Shipment
FCL Shipment
Ocean Transport
MariNova Consulting Ltd.
Local Drayage
Domestic Trucking
Regional
Distribution
Center
Stores
Regional
Distribution
Center
Stores
Regional
Distribution
Center
Stores
Import
Processing
Center
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For a number of years, Target utilized the Port of Seattle as its exclusive import gateway,
but due to expansion in its store base and container volume, it added an IPC in the Los
Angeles area. In July of 2002, Target also opened an IPC in Suffolk, VA. This facility
allows it to take advantage of all-water services from Asia calling the port of Norfolk.
The shutdown of US west coast ports in 2001 was another factor in adding an east coast
POE/IPC to Target’s international supply chain.
An overview of Target’s POEs/IPCs is shown below.
Tacoma
Ports
Import Distribution Center
Lacey
Norfolk
Suffolk
Ontario
Once containers reach the IPC, they are unloaded and the goods from multiple containers
are reloaded into domestic vans and shipped to Target’s network of Regional Distribution
Centers (RDC), as the map below shows.
These RDCs supply Target’s stores with goods. Target has designed its RDC network so
that all of their stores are only one day’s drive from at least one of its RDCs. Target is
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planning to add three new RDCs in 2004, but its staff were not at liberty to disclose the
location of these new sites at the time of the interview.
4.1.3 Target’s Criteria for Picking a Port Of Entry
Target utilizes seven key factors to review potential POE / IPC locations, which are:
1)
2)
3)
4)
5)
6)
7)
Domestic truckload capacity and demand
Strong rail connections with interlining capabilities
Access to on-dock rail facilities
Deep water with little need for ongoing dredging
Good freeway access
Minimal road congestion
Port operating efficiencies (efficient gate; short truck cues; wheeled
operations; night, weekend and hoot gates; chassis pools; good port
relations with community)
While all of these factors are important, the availability of domestic truck capacity is a
critical element in Target’s, and most large retailers’ selection process for an IPC site, as
trucking is Target’s primary method for moving goods between IPCs and RDCs
4.1.4 Target’s View of Halifax
Target was asked if it would consider utilizing Halifax as a POE and locating a
distribution facility near the port. Its logistic staff stated that the decision to utilize
Halifax would be based on whether there were enough stores in the New York, Baltimore
and Boston region and the demand for direct imports at those stores.
At this time, it is unlikely Target would consider Halifax as an option for an IPC or RDC.
If Halifax was to be considered as a POE, Target would most likely use a 3rd party
transload facility in Maine to handle imported containers from the port, as performing
transloading in Maine is expected to be cheaper, faster and more efficient than doing it in
another city in the Northeast.
If Target were to consider this option they would need to gain a better understanding of
the availability and reliability of intermodal service from Halifax to Maine. They
specifically mentioned rail service, but as direct rail service between Halifax and Maine
does not exist, they should be made aware of rail to Ayer, MA and direct ocean feeder
services from Halifax to Portland, ME.
4.1.5 Service Requirements for Halifax
At some future point, if Target wanted to consider locating an IPC at Halifax, it would
need know what the level of service is, or could be available from north east Asia. Target
would also need to gain a better understanding of the amount of domestic truck capacity
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available in the greater Halifax area, as well as the costs for servicing its network of
RDCs via truck or other modes from Halifax.
Halifax is better positioned to serve as an entry point for cargoes from south east Asia,
the Indian Sub-Continent (ISC) and Europe. These cargoes could then be trucked, railed
or feedered to a transload facility in the northeast US for deconsolidation and shipping to
Target’s RDC network.
4.2 Home Depot
4.2.1 Overview of International Containerized Volume
Home Depot’s import volume for the US and Canada was 113,000FEUs in 2003. While it
would not provide an exact breakdown of its foreign origin regions, it did state that China
represented the largest percentage of its import volume, by a wide margin. However, the
Indian Sub-Continent and Italy did generate a significant percentage of Home Depot’s
2003 import volume and these are areas that Halifax is well positioned to handle. In fact,
Home Depot stated it imported 930 containers via Halifax in 2003, with most of these
shipments originating from Europe.
Home Depot’s primary containerized ocean carriers are Hapag-Lloyd, NYK and MaerskSealand, all of which serve Halifax. The main Ports Of Entry (POEs) for Home Depot in
the US market are Los Angeles, Houston, Savannah and NY/NJ. The company also noted
that it imported 4,270 containers in 2003 exclusively for its Canadian stores, the bulk of
which were handled through Vancouver and NY/NJ.
4.2.2 Overview of Home Depot’s International Supply Arrangements
Home Depot’s international supply chain structure is similar to Target’s, with one major
difference, which is that Home Depot does not operate dedicated IPCs. Instead, it utilizes
RDCs near the POE to handle the deconsolidation of imported containers. Then it either
supplies stores directly from these RDCs, or moves mixed shipments to other RDCs in
the system via domestic truck. The diagram below provides a graphic representation of
Home Depot’s supply chain arrangements.
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Regional
Distribution
Center
Foreign Supplier
Foreign Supplier
Stores
US Port
Consolidator
Foreign Port
Foreign Supplier
Foreign Supplier
LCL Shipment
FCL Shipment
Ocean Transport
Regional
Distribution
Center
Stores
Regional
Distribution
Center
Stores
Local Drayage
Domestic Trucking
Home Depot did not provide a complete listing of its RDC locations, but it did identify
the major POEs and RDC locations where it deconsolidates imported containerized
shipments. The following map provides an overview of this information.
VAN
SEA/TAC
HLF
NY/NJ
LAX/LGB
SAV
HOU
All containerized shipments destined for Home Depot’s Canadian stores are
deconsolidated in Home Depot’s Toronto RDC. The primary POE for Canada is
Vancouver, as the majority of Home Depot’s north east Asian imports move through this
port. Halifax and NY/NJ also handle shipments for Canada. However, most of the
containers these ports handle originate in Europe and South America.
4.2.3 Home Depot’s Criteria for Picking a POE
The company has two primary criteria for choosing a new POE. First, it evaluates the
level of liner service currently available from its primary foreign origins to the potential
POE, in terms of frequency and transit time. The second criteria is the cost of moving
containers between the port and its RDCs. Home Depot’s primary goal is to minimize its
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landed cost. Thus it seeks to utilize ports near RDCs that supply numerous high volume
stores.
4.2.4 Home Depot’s View of Halifax
Home Depot has a good impression of the port of Halifax in that it believes the port’s
overall operational capabilities are good, in terms of vessel and gate productivity. It also
views the port’s labour situation as being stable with few disruptions. Another positive
factor for Halifax is that Home Depot believes that the cost of ocean transport is lower to
Halifax versus other east coast port options.
However, Home Depot would not consider developing a RDC in the Halifax area, due to
the low density of stores in the surrounding area.
4.2.5 Service Requirements for Halifax
Halifax currently competes for cargo from Europe and the Indian Sub-continent. One
option for increasing its share of Home Depot’s volume would be to convince carriers to
add more capacity from NE Asia to the port. The port could also look to quantify its
through costs to Home Depot’s existing RDCs in the North East and Midwest, from
foreign origins where the port has competitive services.
HLF
NY/NJ
Home Depot is also considering doing direct delivery of a limited number of import
products to its stores. Should Home Depot implement direct deliveries this would be an
advantage for the port for stores in Eastern Canada and the US Northeast where Halifax
has an inland cost advantage versus NY/NJ.
4.3 Wal-Mart
Wal-Mart was approached to be interviewed for the study. However, it declined, because
it feels that the company’s supply arrangements represent a major competitive advantage
and as such it does not reveal specific information on its arrangements. However, the
consultants have worked with another US port authority that approached Wal-Mart about
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locating a distribution facility near a greenfield container terminal. Based on this work
and publicly available sources, a high level overview of Wal-Mart’s international supply
chain has been completed below.
4.3.1 Wal-Mart’s Containerized Volume
Wal-Mart is the largest importer, by volume, in the US. Based on PIERS statistics WalMart imported 291,900 TEUS in 2002 and like most large retailers, in excess of 70% of
its volume originated from NE Asia.
4.3.2 Overview of Wal-Mart’s International Supply Arrangements
Wal-Mart uses IPCs as the bridge points between its international and domestic supply
chains. An overview of its current supply chain configuration is shown below.
Foreign Supplier
Foreign Supplier
Foreign Port
Foreign Supplier
Foreign Supplier
LCL Shipment
FCL Shipment
Ocean Transport
Stores
Regional
Distribution
Center
Stores
Regional
Distribution
Center
Stores
Import
Processing
Center
US Port
Consolidator
Regional
Distribution
Center
Local Drayage
Domestic Trucking
While Wal-Mart uses numerous ocean carriers, Maersk-Sealand and APL are believed to
move the largest share of its volume.
For many years, Wal-Mart moved all of its imported cargo via Los Angeles and through
an IPC in Carson, CA. However, over the past four years it has opened several new IPC
locations and will be one of the first companies to have an IPC in the Houston area to
process Asian imports.
Norfolk
Los Angeles
Savannah
Houston
Late 2004
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4.3.3 Wal-Mart’s Criteria for Picking a POE
Wal-Mart’s focus on cost control is well known and this is a critical driver for choosing a
location. However, its experience in California, in terms of labour disruptions and the
under-supply of domestic trucking service has caused Wal-Mart to look at more than just
cost in making site decisions. While working with Wal-Mart on evaluating our client’s
greenfield site, the company made it clear that it could not proceed without quantifying
the amount of domestic truck capacity available from the location.
Another area of concern for Wal-Mart is the labour climate in an area. Wal-Mart has been
faced with several drives to unionize its labour force and does not wish to enter an area
where unions have a strong presence.
4.3.4 Other Large Importers
Importer
Dole Foods Co.
Chiquita Brands
Lowe’s CO.
Heineken
Interbrew (Becks& Bass
Ale). Owns Labatt
Payless ShoeSource
Pier 1 Imports
K-Mart
Samsung Electronics
American Honda
MariNova Consulting Ltd.
Volume 2002
Comments
142,900 Dole’s primary origins are in South and
Central America. Its primary commodity is
fruit. It uses its own ships, which call at ports
near large population centers.
103,200 Also moves fruit from South and Central
America to high population areas
82,900 Main competitor to Home Depot. Its
international supply chain arrangements are
similar to Home Depot.
75,000 Highest volume is from the Netherlands to
US East Coast ports. It likes to ship heavy
containers. Heineken should be considered a
target account for distribution through
Halifax.
60,000 Also a high volume beer importer that should
be considered as a target, especially since
they have significant volumes to Boston.
55,000 Significant volumes of shoes originate in
Southeast Asia and the Mediterranean,
making this account a potential target.
46,700 While it is a retailer with a large portion of
its imports originating in North Asia, it also
imports significant volumes from Souhteast
Asia, Indian Subcontinent and
Mediterranean. It should be studied to assess
its potential.
46,400 Similar to Wal-Mart and Target.
46,200 Electronics primarily from North Asia.
46,200 Most of the volume for Honda is from North
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Big Lots Inc
Ashley Furniture
MariNova Consulting Ltd.
36
Asia and is handled via WC ports.
45,800 Retailer whose primary origin area is North
Asia
45,200 Furniture import mainly from North Asia. It
also tends to use SEA/TAC and transsload
near the port to domestic vans.
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5.0 HALIFAX TRADE PATTERNS
5.1 Introduction
To get a better understanding of Halifax’s position in the international supply chain and
to identify new opportunities for the port within this context, we conducted the following
review:
•
•
•
•
Current trade patterns into Halifax;
Locations of Canadian Custom Bonded warehouses and Terminals;
Growth of Containerization 1996 to 2000 by top 100 Ports
Halifax Service Corridors by Shipping Line
By comparing both the import and export movement of containers and bulk products to
and from Halifax, we identified if products are being used by the retail or manufacturing
sectors. Current trade data shows which product sectors by world region country of origin
are being imported through Halifax.
The locations of Custom Bonded Warehouses by company assisted in identifying the
present locations of DCs and terminals that shippers and importers utilize. This list can
also assist in identifying future contacts for the Partnership and HPA to approach.
By assessing the growth of the Top 100 Ports in the World by TEUs handled from 1996
to 2000 illustrates which ports were growing at the fastest rates. Once we identified the
top growth ports we compared which container lines provide service to and from Halifax.
From this assessment we then identified the countries and whether there were large
import-trade houses that represented shippers, manufacturers or wholesalers, which could
be approached by the Partnership and HPA as candidates for the development of DCs or
transload facilities, or indeed, shipping through the port.
5.2 Current Imports and Exports
Table 1 ranks the current imports of containers by product group and world region. The
world regions are colour coded for ease of identifying which regions are dominant in
world trade.
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Table 1: Imports by Region, Product Group and TEUs
Region
COMMODITY
UK EU
Med
UK EU
Far East
Med
UK EU
UK EU
Med
India Sub
UK EU
Med
UK EU
Med
UK EU
Med
Scandinavia
UK EU
UK EU
UK EU
UK EU
UK EU
India Sub
Med
Scandinavia
India Sub
UK EU
MACHINERY - Machinery, Mechanical Appliances, Parts
BUILDING - Other Ceramic Products
CHEMICALS - Other Inorganic
RUBBER - Natural
BUILDING – Brick, Tile, Ceramic
MISCELLANEOUS MANUFACTURED GOODS
FRUIT - Fruit/Nuts: Other Edible
BEVERAGES - Wine/Cider
CLOTHING - Accessories
PAPER - Other
MACHINERY - Machinery, Mechanical Appliances, Parts
PLASTICS - Other
VEGETABLES - Prepared
FURNITURE / LIGHTS / MATTRESSES
FURNITURE / LIGHTS / MATTRESSES
FURNITURE / LIGHTS / MATTRESSES
MISCELLANEOUS - General, Mail, etc.
BEVERAGES - Beer
VEHICLES - Other Parts
BUILDING - Other Ceramic Products
METAL - Aluminum & Articles
TEXTILES – Cotton
STONE - Monument/Building
MACHINERY - Machinery, Mechanical Appliances, Parts
MISCELLANEOUS MANUFACTURED GOODS
FOOD - Sugar Confectionery
TONNAGE
Est Teu
157,083
70,943
66,279
47,434
36,558
35,398
32,073
31,545
30,060
21,904
20,514
20,416
19,854
19,602
19,216
19,187
18,465
17,675
17,669
17,468
17,370
17,061
16,469
15,061
14,711
14,489
11,220
5,067
4,734
3,388
2,611
2,528
2,291
2,253
2,147
1,565
1,465
1,458
1,418
1,400
1,373
1,371
1,319
1,263
1,262
1,248
1,241
1,219
1,176
1,076
1,051
1,035
The table clearly shows that the EU and UK region is the key trading bloc for Halifax
imports, followed by the Mediterranean region and the India Sub continent.
Machinery products were the top product category. We do not know if this was for parts
of machines or for new projects requiring new equipment.
The key product group from the Mediterranean is Building Products of ceramic or tile.
These commodities would flow to the commercial hardware sector, to stores such as
Home Depot, Home Hardware or to large wholesalers of ceramic materials.
5.3 Growth of Containerization 2000 to 2003
The consultants identified the 146 ports around the world and compared the growth in
container traffic from 1996 to 2003 to the lines that service both Halifax and any of these
ports.
Figures 10, 11 and 12 show the growth in container traffic from 2001 to 2003 to EU,
India and Asia. We identified some of the key ports in each region.
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Figure 10: EU and UK
Not surprisingly, Rotterdam, Antwerp and Bremerhaven-Hamburg have the greatest
share of TEU growth in EU.
Figure 11: India / Mideast
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The ports of Dubai, Mumbai-Jawaharlal, Nhava Sheva and Colombo are key ports found
in this region.
Figure 12: Asia Port Growth
The figures show the rapid increase in TEUs handled by each port and that the greatest
increase in volume was associated with ports in Asia. This phenomenon has lately
become known in the container industry as the “China Effect”.
The following Table identifies the key 50 ports that container lines provide service in
which Halifax is part of their network. The table also shows the number of TEUs handled
by each port from 2000 to 2003.
The ports are listed according to the number of lines that provide service between that
port and Halifax. Accordingly, there are more container services between Singapore,
Hong Kong, and Livorno than Manila and Tokyo.
Halifax has good access and service opportunities to some of the world’s largest ports
and to countries with the fastest growing economies. Future growth opportunities should
focus on India and Mideast and to Southeast China. Halifax should align itself with sister
ports to these areas and work with the shipping lines in these regions to identify key
exporters and importers, as illustrated in the table below.
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Table 2: Countries and Ports with Service to Halifax
COUNTRY
2000
2001
2002
2003
South Africa
1,169,376
1,223,601
1,302,000
1,500,000
COUNTRY
Japan
Singapore
China
Japan
Taiwan
Malaysia
Taiwan
South Korea
Japan
Japan
China
Phillipines
China
China
China
Japan
Indonesia
2000
2,265,992
17,090,000
18,098,000
2,317,393
1,954,573
3,206,753
7,425,832
7,540,387
1,474,266
1,911,919
716,541
2,288,599
5,613,000
2,120,000
1,708,000
2,898,724
2,476,152
2001
2,150,000
15,571,100
17,826,000
2,363,741
1,815,854
3,759,512
7,540,525
8,072,814
1,724,000
1,872,272
2002
2,378,000
16,940,900
19,140,000
2,364,516
1,918,598
4,533,212
8,493,000
9,453,356
1,700,000
1,872,272
2003
2,390,000
18,410,500
20,010,000
2,469,000
2,001,000
4,800,000
8,840,000
10,366,881
2,298,901
6,334,400
2,638,500
2,059,420
2,968,284
2,524,375
2,462,000
8,620,000
3,410,000
2,408,000
2,712,348
2,700,000
2,552,187
11,280,000
4,240,000
3,000,000
2000
801,040
2001
2002
2003
COUNTRY
Belgium
Germany
Netherlands
United Kingdom
France
United Kingdom
2000
4,082,334
2,712,420
6,274,000
504,000
1,486,108
515,000
2001
4,218,176
2,915,169
6,095,502
513,000
1,523,493
2002
4,777,387
3,031,587
6,515,449
505,000
1,720,549
2003
5,445,437
3,190,707
7,106,778
COUNTRY
Sri Lanka
India
2000
1,732,855
427,591
2001
1,726,605
255,000
2002
1,760,000
254,000
2003
1,950,000
COUNTRY
Italy
Spain
Italy
Egypt
Greece
Spain
Turkey
Israel
2000
501,339
1,363,695
1,500,632
601,987
1,161,099
377,031
574,656
482,000
2001
521,486
1,411,054
1,526,526
2002
546,882
1,461,232
1,531,254
2003
593,000
1,605,946
1,165,797
1,398,346
1,610,000
COUNTRY
Jamaica
MariNova Consulting Ltd.
Ports
Halifax
3
5
8
8
6
3
2
2
2
2
2
1
1
1
1
1
1
2
1,927,244
2,757,513
4
6
6
5
4
2
2
1,977,000
6
6
6
5
5
3
3
3
2
2
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Spain
Spain
France
Malta
Israel
2,009,122
1,308,010
722,445
2,151,770
1,506,805
742,020
2,234,248
1,816,526
808,915
2,515,908
870,432
901,000
906,000
990,000
COUNTRY
Saudi Arabia
Saudi Arabia
United Arab
Emirate
Cote D'Ivoire
Oman
2000
1,054,731
475,000
3,058,866
2001
1,186,351
2002
1,366,902
2003
1,700,000
3,501,820
4,194,264
5,151,955
6
4
3
435,000
1,032,692
543,846
1,187,753
580,000
1,210,000
1,900,000
3
1
2000
392,967
256,386
2001
2002
2003
COUNTRY
Peru
Chile
Ecuador
Argentina
2
2
1
1
1
832,986
3
2
2
2
1,102,189
5.4 Exports and Imports via Halifax
Figure 13 shows the world exports and imports in tonnes from Halifax.
Exports are indicated by red and imports by white in each country’s bar graph. The total
height of the bar graph represents the total volume of trade to or from Halifax by each
country. The greatest trade is with countries in the EU, notably Italy, UK, Spain, the
Netherlands and Belgium.
Figure 13: Import Exports 2002 from Halifax
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Other significant trade is with India, Japan and Thailand. Hong Kong also is similar to
Japan in the amount of trade but is not shown on the map.
The portion of the red bar indicates exports through Halifax to various countries.
Significant exports are to UK, India and China, Japan and Netherlands.
The white portion of the bar shows imports. Key countries exporting to Halifax are
greatest in the EU, Mediterranean and Indian sub-continent.
5.5 Halifax Service Corridors by Line
The following table compares the lines servicing the key market regions of the EU,
Mediterranean, Mideast-India and Southeast Asia, to the exports and imports to countries
found in each of these regions.
5.5.1 EU and United Kingdom
Figure 14: EU Lines Service
The circles are colour coded to the number of shipping lines that provide services to and
from Halifax. For example, there are only two lines servicing Liverpool and Le Havre,
whereas there are more than four (4) lines providing services between Thamesport,
Antwerp and Rotterdam. (These lines are all members of the Grand Alliance).
The volume of 2002 exports and imports from-to Halifax is shown in Figure 15. The bar
graphs represent the tonnes from countries in this region with Halifax.
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Figure 15: EU Imports / Exports via Halifax
Figure 15 indicates that trade to UK is balanced whereas trade with Sweden and
Netherlands and Germany has a far greater amount of imports. Halifax needs to further
identify the key consignees that ship from these countries to approach regarding future
DC or cross-docking options in Halifax. For example, in Sweden it could approach Ikea.
Products imported from UK-EU included machinery, fruits, beverages and building
materials.
5.5.2 Mediterranean
There are six lines that provide services into this region as illustrated in Figure 16.
Figure 16: Mediterranean Shipping Services
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Key competitive ports include Livorno, Barcelona, Genoa, Valencia and Piraeus. Figure
17 shows the current 2002 exports and imports from countries in this region with Halifax.
Figure 17: Mediterranean Export and Imports
This region provides more imports into Halifax than exports back to the region. Key
imported products identified include building material, ceramic tiles, beverages (wine),
vegetables, furniture and machinery. The largest import volumes are from Italy and
Spain.
5.5.3 Mideast and India
There are five key lines servicing to this region, Grand Alliance, ZIM, Maersk Sealand,
Oldendorff Indotrans and National Shipping Company of Saudi Arabia.
Figure 18 : India / Mideast Line Service
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This region has limited container service between different service providers. As growth
increases from this region, future lines may offer additional services to from this region.
The 2002 exports and imports in tonnes between this region and Halifax are shown in
Figure 19. As can be seen exports to this region are greater than imports. However India
is the largest significant exporter back to Canada for commodities. Key trade
commodities included clothing, textiles and miscellaneous manufactured goods.
Figure 19: Mideast India Imports and Exports
The federal government has identified the following list of trade opportunities to India
and Sri Lanka:1
•
•
•
•
•
•
1
Bakery Products
Dairy
Cereals
Frozen food
Canola Oil
Fruit Juices and sauces
South Asia Trade Action Plan, Dept of Foreign Affairs and International Trade, 2001
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5.5.4 Far East
Figure 20 shows the current lines that provide services to key ports in this region. Since
this region has the two largest ports, Hong Kong and Singapore, it is not surprising to see
that these two ports have the greatest number of lines providing servicing to and from
Halifax.
Figure 20: Far East Service to and from Halifax
Figure 20 shows the exports and imports between Halifax and this region for 2002.
Figure 20: Asia Exports and Imports
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Exports to this region from Halifax are the dominant trade flows as compared to imports.
This situation is probably unique to all North American ports and represents a significant
opportunity for Halifax to attract more import cargo. Hong Kong export import bar
graph not shown but is similar to Japan export and imports from Singapore.
Imports from this region back to Halifax are significant from only Singapore and Hong
Kong at over 30,000 mt each. Typical product imported include textiles and clothing and
natural rubber from Malaysia using Singapore or Port Kelang.
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6.0 PROSPECTS for 3PLs and LOGISTICS SERVICE PROVIDERS
6.1 Introduction
Based on early interview results, and the impression that traditional DC activity was not
likely to occur in the Halifax-Moncton Growth Corridor, the consultants and the client
decided to focus on the potential for attracting so-called third party logistics providers
(3PLs) to the corridor.
Key suppliers and importers of consumer goods and logistic services for various
commercial retail and wholesale sectors may offer some growth opportunities for
Halifax.
We evaluated some of the larger companies as well as smaller local 3PLs that provide
these services and their views of growth opportunities that drive their business, which
may provide Halifax with a window to see other opportunities
6.2 3PL Distribution Centres
When the volumes for a particular geographic area are not sufficient to justify a
distribution centre, some or all of the services normally provided by a distribution centre
can be contracted out to warehouse operators. Some third party logistics providers simply
act as forwarders while others offer the full range of services a company-owned
distribution centre would provide; including inventory management, distribution
planning, order processing etc.
There are a number of service providers available both locally and nationally, some of the
more prominent ones have been contacted and the issue of providing a distribution centre
service discussed with them.
6.2.1 Clarke Transport
Clarke Transport is the poolcar division of Clarke Inc. Their principal business is to
consolidate freight into full (railcar, container or truck) loads and to distribute this freight
throughout Canada. Of the national poolcar operators, they have the largest presence in
Atlantic Canada and use all modes of transportation except air. Their operations in
Atlantic Canada are all cross-dock with no warehousing. They provide consolidation /
distribution service to a number of retailers throughout Canada.
6.2.2 Cantrax
Cantrax, a subsidiary of Ucan Universal Transit provide warehousing in Halifax for pallet
type freight. They operate a 45,000 square foot warehouse and distribute locally in the
Halifax area. They do not offer live electronic inventory but reconcile quantities with
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their customers every 3 months. They provide some distribution services for Willemet
Industries (paper products) and have acted in the past as a DC for Canadian Tire for some
200 items of hazardous goods to Newfoundland.
6.2.3 Trebley
Trebley Warehousing is a locally owned company that provides storage and distribution
services. They operate a warehouse of approximately 30,000 square feet, one third of
which is used for bulk (pallet) storage while the other two thirds is racked. They have
computerized inventory control with EDI capability and offer first-in first-out
warehousing. They provide certain DC services to undisclosed retailers. Trebley provide
distribution services within the local market to a number of manufacturers such as
Chester plastics and Bernardin(mason jars). One of the services they offer is palletizing
cargoes that arrive as bulk in containers and transferring pallets into trucks or domestic
containers.
6.2.4 Sable
Sable warehousing and distribution is a division of Day and Ross. They distribute
throughout Atlantic Canada using their own trucks and provide certain DC services to
undisclosed retailers. They do not have live electronic inventory capability but can
produce reports at whatever frequency the customer requests. Their pricing is generally
fixed based on the customer’s profile and reviewed every 6 months or so.
6.2.5 Armour Logistics Services
ALS is a division of Armour Transport. At the moment they are, of the group identified
herein, the most capable of providing full distribution centre services in Atlantic Canada.
Their flagship warehouse is situated in Moncton and offers 300,000 square feet of floor
space, along with full EDI capability. They have provided full distribution services to
Saans and Byway stores, including taking orders directly from the stores, min-max order
points etc.
They also provide 24/ 7days access for some of their customers in the high-tech sector.
Their experience in the full service distribution centre business was that the volumes
started out strong at 4-5 railcars per day but eventually dwindled to 1-2 per week. They
believe that to work properly, a minimum volume needs to be guaranteed. They are
presently nearly full and continue to grow to meet demand for their services. See
Appendix 1 for more information on ALS.
6.2.6 Logisti-Solve Inc.
LSI is a 3PL distribution centre service provider that has an interest in expanding their
operations. They have not considered Halifax although they are quite familiar with the
developments in Vancouver and see how the situations are somewhat similar. LSI
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presently acts as DC provider for Blockbuster Video, Bowrings, and Bargain Shop and
also for suppliers to Wal-Mart, Zellers etc.
They typically provide expedited service to suppliers and scheduled service to retailers.
Their largest facility is in Toronto where they operate two nearby warehouses with a
combined floor space of 400,000 square feet.
As a general rule of thumb, they would like to see 4 or 5 customers as a minimum to
spread the risk and the smallest facility would have to have 100,000 square feet to be
economically viable. A 3PL facility can provide a competitive service to owned DC’s at
$1.25 per case of throughput.
6.2.7 Summary of service providers contacted
3PL Service providers
Service
Warehousing Distribution Region
EDI
Pricing
Armour
300,000+
Yes
Atlantic
Canada
Yes
Cantrax
45,000
Yes
Halifax
No
No
Yes
Canada
No
400,000+
No
Canada
West of
Toronto
Yes
Sable
90,000
Yes
Atlantic
Canada
No
Trebley
30,000
Yes
Atlantic
Canada
Yes Confidential
Clarke
Transport
LSI
Remarks
Variable Former Livingston
with volume Distribution in Moncton
Ucan Universal Transit
division used to do some
DC work for Cdn Tire
National
Contracts
Looking to expand their
National business east to Montreal
Contracts area.
Confidential
6.3 DHL/Danzas
DHL/Danzas is the third party logistics (3PL) arm of Deutsche Post and is consistently
ranked as one of the world’s top three 3PLs, in terms of total revenue and container
volume. Deutsche Post formed its 3PL unit through a series of high profile acquisitions,
which included Danzas, AEI, DHL and Airborne Express.
While in many cases DHL/Danzas’ NVOCC operation does not control the choice of
discharge port or the decision on where deconsolidation is performed, for certain clients it
controls almost all the choices concerning the international supply chain arrangements. In
these cases DHL/Danzas would act as the client’s internal logistics group and thus it
would provide input on the ocean carrier used and the designated POE. For clients that
use DHL/Danzas for logistical support it would also help choose the deconsolidation
point, which could be an existing DHL/Danzas location or a specialized facility with
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DHL/Danzas employees. For example DHL/Danzas recently signed a 5 year contract
with BMW Korea. The contract includes designing, building and operating a purposebuilt vehicle distribution centre (VDC), pre-delivery inspection (PDI) and storage area for
BMW. The facility will be located at the South Korean port of Inchon and has an
expected annual throughput of 10,000 vehicles.
6.3.1 Overview of International Containerized Volume
DHL/Danzas’s total US and Canadian NVOCC volume is estimated to be 55,000FEUs
per year (estimate does not include movements where it is only the forwarder of record).
DHL/Danzas’s primary foreign origin area for the east coast POE is Europe, and the chart
below shows the current distribution of European imports by east coast port.
US Imports from Europe
10%
Canadian Imports from Europe
5%
20%
65%
NY/NY
Montreal
Boston
Halifax
25%
Montreal
Halifax
75%
Most of the US destined cargo move handled through Halifax is destined to cities in the
Midwest. DHL/Danzas also uses Halifax to handle approximately 10% of its Canadian
imports from South America.
6.3.2 DHL/Danzas’s View of Halifax
The company’s overall view of Halifax is good in terms of the port’s operations and
DHL/Danzas also finds that Halifax’s terminal handling charges are lower than certain
US ports, but it would not provide specific examples. However, DHL/Danzas did state
that it preferred Montreal to Halifax, because it had access to both the CP and CN at
Montreal, as well as having access to lower truck costs to Toronto.
Danzas also believes that Canadian consignees prefer CP Rail’s service to CN due to
deterioration in the CN’s service levels over the past year.
6.3.3 Opportunities for Halifax
Should CN be able to measurably improve service levels this would certainly improve
Halifax’s ability to handle DHL/Danzas’s containerized movements to the Mid-west and
Western regions of the US and Canada. Also, if the port could offer a feeder service to
underserved or un-served areas like Boston and New Haven, CT it might stimulate new
volumes.
DHL/Danzas was asked if it would consider establishing a distribution facility in the
greater Halifax area, the company’s management said that it did not see the need for a
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standard facility in the area, due to the area’s small population base, but they would
consider some type of specialized facility like the work they are doing for BMW in
Korea. However, no such opportunity currently exists.
6.4 CRSA
Canadian Retail Shippers Association (CRSA) has operated since 1967, and provides
logistic services to the following retail companies
•
•
•
•
•
•
•
•
Sears
Sony
Reitmans
SAAN
Eddie Bauer
Bargain Shop
Club Monaco
Foot Locker
CRSA’s primary distribution centres are located in:
•
•
•
•
•
•
•
•
•
•
•
•
•
Montreal (St. Laurent)
Belleville
Vaughn
Milton
Etiboke
Mississauga
Whitby
Delta
Coquitlam
Calgary
Edmonton
Regina
Winnipeg
CRSA’s business model is shown in the figure below:
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CRSA provides consolidation of sourcing overseas from various suppliers through
various ports and has third party warehouses in the following countries:
Bangladesh, Pakistan, China, Hong Kong, India, Indonesia, Korea, Malaysia, Mauritius,
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam, Brunei. Most of these
countries have shipping connections to Halifax.
CRSA currently uses the port of Halifax for imports, mainly ready-made garments from
India, Bangladesh, Pakistan, and Sri Lanka. Total volume is about 1,000 containers per
year.
Virtually none of the cargo passing though the port is for the local market; 95% is
destined for Montreal and the balance goes to Toronto (Brampton and Milton). The
company does not have a warehouse in Atlantic Canada. They deal with their members’
distribution centres, who do their own distribution across Canada.
When selecting a site for a new distribution centre, easy and quick rail and road access, as
well as the cost of real estate and labour is very important. They use both CN and CP.
They do not use 3PLs. and do not anticipate using them in the future. They do not
anticipate opening a distribution centre in Halifax because they prefer to be closer to
major population centres, located in central Canada and the West (this logic in relation to
Winnipeg and Regina is somewhat suspect).
Port selection is driven by the shortest transit time from the Indian sub-continent to
eastern Canada, as well as available rail transportation. Their impressions of the Port of
Halifax are not good. Based on their experience, there is frequent yard congestion that
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jeopardizes on-time delivery to their members. And, they are “at the mercy of one rail
service provider”. Also, they pointed out that the port should move containers on a firstcome basis. This is not the case at present. “When the yard is too congested, cargo from
vessels docking are put on rail first because they have no access to older containers.”
These problems may be moot, as CSRA expects more imports to be sourced from China
and their activity on the Indian sub-continent may actually diminish. Their members are
impacted by WTO regulations and China is now a signatory to these rules.
6.5 Li & Fung
This company is over 90 year sold and provides services for sourcing and processing
textile and clothing products in Southeast Asia. They source from over 7,000 companies
in China. It is based in Hong Kong and has over 40 offices worldwide. They have sales of
$40 billion, in 20021 and are one of the world’s largest suppliers of finished clothing to
retailers worldwide. They also expect to see North American retailers such as Target and
Wal-Mart increase their apparel offerings.
6.5.1 Strategic Growth
Li & Fung expect to increase revenues by sixfold to $250 billion by 2004, by providing
more sourcing functions and increasing the margins from materials to logistics. They
have divided the world into four low cost regions and two for proximity to customers for
service.
Low Cost Regions:
o East Asia(Hong Kong, Taiwan, South Korea, China, Mongolia)
o Southeast Asia(Vietnam, Saipan, Thailand, Brunei, Indonesia, Cambodia,
Laos, Malaysia, Myanmar, Philippines, Singapore)
o South Asia (India, Pakistan, Bangladesh, Sri Lanka)
o Southern Africa
Quick Response Areas
o Central America (Guatemala, Honduras to USA)
o Turley, Portugal, Northern Africa, Eastern Europe for EU
They have also found that retailers are ordering in smaller lots. They source fabrics and
product in different regions of the world, taking advantage of trade policies and duties.
For instance, products made in Central America for the US may have Asian textile
fabrics.
1
Textile and Trade Report 10/1/2002, High Beam Research
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They have also discovered that Africa is competitive on knits but not on time, but Africa
is the next growth area, due to expected future trade breaks
China has also increased its market share of US apparel, but in the long term Vietnam
and India may slow China down as new areas of sourcing for apparel goods. (Note: this
seems to contradict CSRA).
6.5.2 Opportunity for Halifax
The opportunity for Halifax is to evaluate the Li & Fung network of distribution services
by port, in the countries that Li & Fung identified as low cost and marry them up with
existing or prospective Halifax shipping lines.
The port could also contact Li & Fung regarding the Port of Halifax and its connectivity
to Li & Fung production and proximity to New York, the Midwest and Central Canada.
The issue of distribution centres or transload facilities could also be explored with them.
6.6 Conclusions
Third party provision of warehouse and other distribution centre services can be
beneficial to retailers for the following reasons: from a retailer’s or shippers point of
view, here are certain strengths associated with 3PLs:
•
No Capital Investment
The most attractive element of 3rd party warehousing for a retailer is the
avoidance of capital investment.
•
Costs
The service provider needs to be able to make a profit and thus the cost to the
retailer is higher than if the facility was owned. Economies of scale or
improvements in efficiency must be sufficient to more than offset the profit
necessary to justify the 3PL’s investment. As the individual retailers grow, the
economies of scale are reduced and retailers inevitably move to their own DCs.
•
Commitment still required
Some form of commitment is required from the retailer, at least until a certain
critical mass is achieved, for the 3 PL provider to remain profitable despite
constant changes in the volumes of individual customers. This sets up somewhat
of a chicken and egg situation.
•
Avoids Ownership Issues
While a co-op type of company can be set up to pool the volumes of certain
retailers and justify a distribution centre, 3rd party investment avoids the conflicts
that can arise when mergers and other changes in ownership occur.
•
Choice
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3PL warehouses compete for the business and the retailer generally has a choice
of service providers.
There are also some inherent weaknesses:
•
Costs
The service provider needs to be able to make a profit and thus the cost to the
retailer is higher than if the facility was owned. Economies of scale or
improvements in efficiency must be sufficient to more than offset the profit
necessary to justify the investment. As the individual retailers grow, the
economies of scale are reduced and retailers inevitably move to their own DCs.
•
Commitment still required
Some form of commitment is required from the retailer at least until a certain
critical mass is achieved to still be profitable despite constant changes in the
volumes of individual customers. This sets up somewhat of a chicken and egg
situation.
•
Integration
Even the most sophisticated IT system will not be as well integrated as would be
the retailer’s own system since it would be used for an owned-distribution centre.
•
Control
Retailers cannot exercise the same level of control over their warehousing and
distribution functions without additional costs. This is often an irritant and many
retailers have a strong preference for having their own distribution centres.
There are some significant opportunities within the sector:
•
Micro DC’s
Commercial retail parks such as Bayers Lake are creating a need for micro
distribution within the park to the outlets that are all trying to optimize their
footprint for the retail side of the business and have little room to store product.
Product is delivered to the retail outlets in pallet loads at close to the time it could
be retrieved from in-store storage. This has been a developing trend in Europe for
some time now.
•
Warehouse Rental Only (multi operators)
There may be some advantages to offering space within a large warehousing
complex to retailers so that they can operate their own mini distribution centre
while achieving some of the economies of scale necessary to justify local
distribution. Equipment and other components could be pooled among tenants
without some of the negative aspects of a 3rd party service relationship.
•
Hazardous
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The Cantrax example is an interesting niche market. Presumably Canadian Tire
avoided mixing hazardous cargoes with the other goods in their own trucks. This
keeps the logistics of handling hazardous cargoes simple and reduces costs.
There are, however, also threats to their continued existence:
•
Larger retail stores (box stores)
The ever increasing size of the retail outlets along with the reliability of shipping
and the development of just in time logistics allows freight to be routed directly
from manufacturer to retail outlet in some cases. When this is possible, its
economics are unbeatable.
•
Conference pricing (equalization)
The pricing structure of the conference rates results in the terminal rates being the
same for transportation to Toronto, Montreal or Halifax. While this structure may
be beneficial for carriers calling Halifax in competing for cargo to/from Montreal
and Toronto, it does not allow the advantages of distributing out of Halifax to be
passed on to the retailer.
There are several ways that the GHP and HPA and their partners can promote this
concept.
First of all, however, it is not fully understood what impact if any losing the high(er) level
of contribution on the local Halifax cargo would have on the attractiveness of the Port of
Halifax. The “local” cargo still represents less than 10% of the international freight
moving through Halifax.
That being said, however, significantly higher volumes of freight to/from Halifax would
likely result in a more competitive situation in Halifax that could see the rates reduce to
somewhere near the rates to Montreal/Toronto less the additional inland costs to Central
Canada.
Value added logistics, increased transshipments, creating a free trade zone, distributing
out of Halifax etc. are all methods of increasing the volume of cargo moving to and from
the Halifax area.
Today, much of the cost of calling Halifax is borne by the Halifax cargo as the cargo
to/from Central Canada is competing with alternative routings that have a lower per unit
cost base. Significantly increasing the volume of freight to/from Atlantic Canada could
offset the loss of revenue a reduction in the rates to the local Halifax area may have and
be necessary so as to retain the services that call Halifax today.
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7.0 VALUE-ADDED SERVICE and NON-CONTAINERISED CARGO
7.1 Introduction
With low population levels in Atlantic Canada, the Maritimes are not an obvious choice
for a conventional distribution centre. Ultimately the issue boils down to cost (weighted
cost of moving the goods to market) and time (the time it takes to replenish stocks
following an order). Halifax is disadvantaged in both regards as the bulk of the goods to
be distributed are going to the more populated areas in central Canada.
Those distribution centres that do exist in Atlantic Canada generally need to be close to
all retail outlets (such as Sobeys and Atlantic Superstore and/or serve a large number of
outlets in the region (Home Hardware).
Although there are cases where the particular needs to be met justify a distribution centre
in the Atlantic Provinces, mainstream distribution centres are likely to continue to
concentrate in Central Canada.
There are however a number of niche markets that can be well served out of Atlantic
Canada, the Halifax area in particular. One source of niche opportunities lies in Value
Added Logistics, defined in this context by somehow increasing the value of the goods
while in the transportation chain.
7.2 Types of Value Added Service
Classical distribution centres are simply tools to improve the overall transportation
system’s efficiency. Transportation itself rarely adds value other than ultimately changing
the geographic position of the freight. In most cases, the best one can expect is minimum
deterioration in the quality, functionality or marketability of the product. Value can,
however, be added to products along the transportation chain in a variety of ways. Some
examples of adding value are as follows:
7.2.1 Manufacturing
This is the most common and often the highest value-added way of changing a product.
Typically, a number of components or raw materials converge to the location of the
manufacturing process where a product is created through a combination of assembly and
processing. By definition a manufacturing plant is a distribution centre.
Some local examples are Volvo, Michelin Tire, Helly Hansen, Stanfields, Moirs
Chocolate and the Irving Shipyard etc. Many of these are located close to their roots,
while others have chosen locations that best suit their overall needs.
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7.2.2 Processing
Processing is akin to manufacturing, with the difference that there is generally little or no
assembly required and value is created by modifying the base material in some way.
Some local examples are Dover Mills, Imperial Oil Refinery etc. Often these involve
high volumes of raw materials and of product. Location is crucial; this type of activity is
often located near the source of the raw material or along the transportation chain.
7.2.3 Screening
This process involves some form of sorting or selecting either to concentrate product of
similar quality (colour, size, shape) or to exclude certain undesirable elements. This
second function has exploded in recent years with new and stricter measures
implemented for reasons of security, control of interdicted products and protection
against infection and infestation. Some recent examples are the measures imposed to
prevent the spread of hoof and mouth disease and infestation by Asian long horn beetles.
7.2.4 Warehousing
Despite all the “Just In Time” (JIT) supply chain systems, there is still a requirement to
store goods or supplies for those instances when market conditions change suddenly and
additional sales can only be concluded if the goods are in stock. Warehousing is common
when the production of goods is continuous and the market has ups and downs. As an
example, paper mills tend to use warehousing as a buffer to keep plant production stable.
The traditional role of a distribution centre is warehousing for oneself, while warehousing
implies providing storage facilities for others.
7.2.5 Accumulation
Certain cargoes or commodities can only be transported economically in larger quantities
than they are produced or generated, and need to be accumulated prior to shipment. Often
the commodities that need to be accumulated are of relatively small value, such as scrap
metal or paper waste for recycling. On a small scale, consolidators offer a service of
accumulating a sufficient volume of cargo to have a reasonable cost of transportation.
Even when this involves additional handling, storage and a lot more paperwork, it is often
more economical than the alternative and an entire industry exists to support this type of
activity. A local example of a consolidation service is Clarke Transport which provides
transportation service for less than truck load (LTL) freight by picking up the freight at
origin, bringing it to their nearest cross dock facility where it is combined with other
freight, loaded and transported as a full load to the facility nearest the ultimate
destination, then unloaded, sorted and finally delivered by truck to destination.
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7.2.6 Treating
Another form of adding value is treating certain commodities to enhance their longevity,
transportability etc. Salting, freezing, pickling, drying, impregnating (wood
preservatives), etc are all forms of treating a product that add value. Treating usually
involves a process of some kind but is generally less metamorphic than processing in that
the end product is usually still the same product with certain characteristics enhanced.
There are numerous ways to add value along the transportation chain; what they all have
in common is that they require that a node be created in the transportation chain and as
such create a distribution centre from which the goods are distributed.
Elements or raw materials must converge to the point where the value is added and then
distributed from there. Added value distribution centres can be equally set up for import
or export products. They can often be set-up anywhere along the transportation chain and
the criteria for selecting the best location is frequently very different from the criteria that
would be used to select a location for a classical distribution centre.
7.3 Strengths of Halifax as a Value-added Service Centre
If one looks beyond domestic transportation, and beyond retail distribution to
international logistics, wholesale and exports, Halifax has many advantages to offer:
7.3.1 Geography (world)
Halifax’s geographic position has always been at the heart of its success in transportation.
Halifax is situated along some of the busiest trade lanes in the world. It is just hours off
the great circle route for most ships crossing the Atlantic and in a nearly direct line
between Europe and the East Coast of North America.
7.3.2 Proximity to large market (world scale)
On an international scale, Halifax is close to one of the largest consuming markets in the
world, the US East Coast.
It is closer to this market than Europe, Africa, South East Asia, and most of the East
Coast of South America. It is closer to the main Canadian market than Europe, Africa,
South America, South East Asia and the Caribbean.
7.3.3 Transportation systems
Despite the lack of local population, Halifax has traditionally been a gateway to Central
Canada and more recently to the US Midwest, and is served by a large number of
shipping lines. At last count, 16 shipping lines offered sailings to/from Halifax on 11
separate services. Halifax also has a class 1 railway service and good highway
infrastructure.
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7.3.4 Frequency (time)
The numerous services calling Halifax provide frequent sailings between Halifax and
most major ports in the world. The transit time between two points is a function of both
the distance and the frequency of service.
7.3.5 Space – Land
A consequence of the low population is that land is plentiful in relative proximity to the
main transportation arteries.
7.3.6 Technology
Halifax promotes itself as Canada’s Smart City; it has a number of universities and
research centres, a leading edge biomedical industry, numerous service providers for
telecommunication and information systems, etc.
7.3.7 Reputation
Internationally, Canada is considered a country that maintains high standards, where
corruption is the exception rather than the norm and where the financial institutions can
be trusted.
7.3.8 Exempt from Jones Act
Not being subject to the provisions of the Jones act enables Halifax to ship to any part of
the US without the requirement of using domestic carriers. This in fact makes Halifax
economically closer to the West Coast of the US than say New York.
7.3.9 NAFTA
Processed or manufactured goods that are produced locally can generally enter the North
American market without duty or import taxes. This can constitute a major economic
advantage when the competition is overseas and subject to import duties.
7.4 Weaknesses
7.4.1 No large population base
If there is a single reason for not locating a distribution centre in the Halifax area it would
have to be this one. The entire population of the area that can be served from a retail
distribution centre in the Maritimes is only about 2.5 million. On a North American scale
that is tiny (significantly less than 1%). Even on a national scale our population is small
and not very concentrated.
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Halifax tends to be at the end of the line in terms of domestic transportation, at best a
node at the end of a long spoke; certainly not the hub. The low population levels in
Atlantic Canada tend to make Halifax uncompetitive with other alternatives in terms of
distance, time and costs. Typically the transportation for delivery on a per unit basis (cost
per mile) is significantly higher than the cost to feed the distribution centre because of
economies of scale.
7.5 Opportunities
The business opportunities are endless. One can come up with any number of business
cases that would make sense in Halifax by simply starting with a type of value added
activity paring down the possibilities keeping only those where Halifax has a strength to
build on compared to the existing competition in a particular commercial activity.
For example if one starts with the fact that paper is produced locally, that Halifax has a
greater advantage with heavy cargoes than lighter ones, that it is economically closer to
Los Angeles than is New York, that the best and most efficient technology is available
and that labour costs are generally less in Canada than in the US, then the conclusion may
be that it would make more sense to print books in the Halifax region and distribute them
throughout the US from here rather than from New York. However, it is often more
complicated than that and it can be dangerous to look at such opportunities from a purely
theoretical point of view.
We are not suggesting that identifying opportunities using this type of reasoning is not a
worthwhile activity but rather that the possibilities would be so vast that it would be
difficult to choose and that the task of even identifying all the possibilities is way beyond
the scope of this report.
The examples chosen for further investigation were chosen in part for their relevance but
mainly because they are real and contemporary. They were chosen to demonstrate that
such non-traditional distribution as value added logistics could provide niche markets
well suited to the realities of Halifax, its strengths and its weaknesses.
The examples have little in common other than the fact that they are opportunities that
have already been pursued to some degree in the Maritimes and that there is some local
knowledge available.
7.6 Selected Examples of Value Added Service
• Granite block cutting and polishing
Epoch Rock is a company that was set-up to slab and polish granite blocks in Argentia
Newfoundland. Unfortunately it is no longer in business. It had what many believe was a
sound business case but lacked the financial resources to get through the initial growth
period.
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• Nyjer Seed Sterilization
At least one major importer is presently looking for alternatives to the high cost of
importing Nyjer seed to New York for treatment and then having to transport
domestically, often to the West Coast where many of the bird food bagging plants are
located. (Appendix #4)
• Forklift Refurbishing
A local company specializes in buying forklifts, refurbishing them and selling them in
local and overseas markets. A natural progression of this business would be to import
forklifts, refurbish them and supply them to developing countries.
7.6.1 Epoch Rock Granite slabs
Epoch Rock is a company that was set-up by Jim Radford, a Newfoundland businessman,
to cut and polish granite blocks into slabs for the North American Market. (Appendix #1)
The company cut and polished granite for just under 2 years before closing in September
2003.
The granite was shipped into Argentia, Newfoundland in large blocks of up to 30 tonnes
from all over the world. See figure 1.1 for product origin. Blocks were handled using a
large forklift and the cutting and polishing processes were automated. Slabs were
produced by large gang saws that could take from 48 to 90 hours for a cut depending on
the hardness of the particular granite. The plant could slab and polish some 100 blocks
per month.
Polished granite slabs are used to make counter tops and furniture as well as for
architectural applications. Slabs were produced and polished on demand (based on
orders) and generally shipped to the customer immediately in full truck or container
loads. Much of this type of product is produced in Italy where there is a long tradition of
stone production and cutting. However, many of the Italian quarries are played out and
the cost to quarry the stone blocks often exceeds the cost of importing blocks.
7.6.1.1 Strengths
The original concept for the enterprise was based on a number of advantages the new
venture could offer compared to the existing competition in this market.
a) Quality
The plant built in Argentia was state of the art and used modern equipment and control
systems. The quality of the processing would be as good or better than what most
established plants could produce. The quality of product is very much a function of the
quality of the raw material and the buying of the granite blocks is critical.
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Not only does the colour and grain need to be right, but fractures and inclusions cannot
always be detected. In many instances a thorough knowledge of the past history of a
quarry is the best indication of the actual quality of the stone.
Additionally as the market is very fluid, the value of a particular block can vary
significantly (block prices ranged from $400 to $3500 per cubic metre). Certainly the
buying is more of an art than a science and requires a tremendous amount of experience.
Epoch Rock contracted this function to experienced buyers/surveyors from Italy.
Their strategy was to use only the best quality granite and occasionally had to buy from
Italian block traders that could guarantee the stone quality. They originally felt that a
stock of some 15 main colours/types would be sufficient to satisfy their market, however
29 colours/types were being kept on hand when the company ceased operations even
though at any point in time 5 colours/types would represent 70 to 80 % of sales.
b) Cost of transportation
One of the main reasons for setting up the plant in the Argentia Industrial Park was the
proximity of the Port of Argentia that allowed shipments to be brought to their doorstep
either on a regular liner service provided by Eimskip every 2 weeks or by tramp vessel to
the Port.
The Eimskip service was also expected to carry a significant amount of the product to
market on the Eastern Seaboard. Figure 1.1 is a summary of the countries of origin of the
granite in inventory when the company ceased operations.
Figure 7.1
Country of origin
Brazil
India
Saudi Arabia
Norway
Zimbabwe
South Africa
South Dakota
Total
Colours/types
Percentage of
colours/types
11
38%
10
34%
2
7%
2
7%
2
7%
1
3%
1
3%
29
100%
c) Timeliness of delivery
The time to market was seen as a major advantage, particularly in such a high-end market
as granite counter tops. Typically the requirement for a particular colour/type of stone
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would be identified towards the end of the construction process as part of the overall
decorating plan and a delay in obtaining the right type of slab could hold up the entire
project.
Even the Eimskip connection was not found to be fast enough in many cases and most of
the product was trucked.
e) NAFTA
As part of the North American Free Trade Agreement, polished slabs produced in Canada
would be allowed free access into the US markets, whereas the same product produced in
Italy may be subject to import duties.
f) 15% Surcharge re: fumigation of wood products
At the time when the plant was starting, a surcharge of 15% of the shipping conference
tariff was being charged to cover the cost of ensuring that the wood used for blocking and
bracing was free from infestation.
g) Future development of local quarries
The Province of Newfoundland had identified some 25 granite quarry sites that could be
suitable for commercial exploitation, although the volumes, colour and quality for block
production were not fully known.
Local production of high quality granite would be a bonus to Epoch Rock as local
production is often an exclusive product that can yield better margins.
7.6.1.2 Problems
The company was placed in receivership in September 2003 after just under 2 years of
operation. Some of the reasons for the financial difficulties have been identified as
follows:
a) Insufficient working capital
As is the case with many entrepreneurial companies, cash flow problems are often at the
source of financial difficulties. The original investment was 90% funded by the private
sector, the majority of this amount funded through an Italian Bank.
During construction, there were some overruns on the cost of the building, however the
overruns were within the limits of “normal” and the financing structure was not changed.
The bank however decided to reduce the allowable working capital to maintain their
exposure at the same level overall.
The original financing package had a provision for a maximum of $5 million to be
available to carry the inventory of blocks that have to be imported in relatively large
quantities to benefit from good freight rates.
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The entire $5million was apparently never made available and the bank demanded that
the company reduce their inventory. If anything, the realities of the marketplace required
more inventory than originally anticipated (29 vs. 15 colour/types in stock). Additionally,
the covenants of the financing arrangement did not allow firm orders to be recognized
until the product was produced and shipped.
In some instances, this situation resulted in a disconnect between what the market wanted
and what the plant had to sell as the company had difficulties obtaining the funds to
acquire the right type of block.
b) Knowledge of the business
The management of the company had little knowledge of the stone cutting business when
the business plan was put together. The only employee with direct experience in the
business was the technical director who had been with Breton, one of the main equipment
suppliers, and in the business for over 30 years. Nevertheless, the company operated
successfully for 2 years and was building up market share.
c) Marketing
Stone cutting is an old trade still controlled in large part by Italian companies who have
been in the business forever and have a well-established market. Epoch Rock was new to
the market and had to establish itself as a credible, reliable and high quality producer in a
market that is extremely competitive even for the established players. The market was not
evenly covered to the same extent from the get-go and the lack of experience resulted in
certain markets developing quickly while other larger markets were more difficult to
penetrate. The timing of their arrival in the market was also unfortunate, coinciding with
9-1-1 and a crash in the stock market.
Epoch Rock’s market penetration in Atlanta, Los Angeles and New Orleans before the
larger market of New York is evidence of these difficulties.
d) Equipment problems
Some equipment problems were experienced but were on the way to being resolved and
are not seen to have significantly contributed to the financial difficulties.
e) No (little) local production
Local quarries were not developed in time to help the competitive position of Epoch
Rock.
7.6.1.3 Halifax Strengths
Despite the fact that Epoch Rock did not ultimately succeed, few believe the concept
cannot work. By learning from the mistakes made in the past and building on the
expertise gained over the past 2 years, a solid business case can again be made and
Halifax has some significant advantages in terms of both location and the transportation
services available.
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As the production of the finished product is moved closer to the customer, some of the
onus of carrying inventory shifts from the customer to the processor (cutter) and this
difference needs to be recognized in the business plan. The time between buying the
block and getting paid for the product can be as long as 6 months, particularly when
blocks need to be accumulated to constitute a break-bulk shipment (about 2000 cubic
metres shipped at a time).
A similar industry in Halifax could use the various container services to provide
economical transportation in single block lots (about 12 to 15 cubic metres), thus
eliminating the time required to accumulate blocks for a break bulk shipment and the
risks associated with time chartering of vessels.
There would be some significant advantages in partnering with an established supplier of
granite slabs in terms of both know-how and market access. It would appear that the
processing, in Halifax, of granite blocks from South America would be particularly
advantageous for both the North American and the European markets.
Italian labour costs are reputed to be very high in the granite processing industry and it
would seem that an established producer looking to expand might consider a Maritime
location with the right local partner.
The following table summarizes the competitive position of granite processing for the
North American Market (East Coast in particular).
Figure 7.2
Italy
Know-how
Financing
Quality-processing
Market
Transportation
Time to Market
NAFTA
Time zone
Local resources
Best
Best
Reputable
Established
Economical
Slow
Duty
+5H
Best
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Competitive position summary
into North American Market
Argentia
Halifax
Low
Limited
Good
Needs to be developed
More economical
Good
No Duty
+1.5H
Good
Partnership
Low
Limited
Good
Needs to be developed
Most economical
Best
No Duty
+1H
Better
Best
Better
Best
Partly established
Most economical
Best
No Duty
+1H
Better
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Granite can be found in Nova Scotia, but as in the case of Epoch Rock, it is not known if
the cost/quality is suitable for block production. (Appendix #2)
7.6.2 Nyjer Seed
The next example selected is the sterilization of seeds that are not indigenous to North
America. It is but one small example of a process put in place to prevent contamination
of the continent’s agriculture.
The whole field of “protection” against terrorism, infection, infestation, contamination
etc… is enormous and there are a number of services that could be offered in a strategic
location such as Halifax.
Nyjer seed is one product, among many, that is required to be treated prior to entering
into the US. The type of sterilization used in this process is dry heat. Other methods of
sterilization may be appropriate depending on the application. Steam or wet heat,
Ethylene Oxide Gas (EtO) and other chemical sterilizers, filter and radiation are the most
common sterilization methods in use today, but new methods such as Ultrahigh Pressure
(Uhp), Pulsed Electrical Field (Pef), microwave and Puva Psoralens and Uva are being
developed. (Appendix #3).
Many forms of sterilization are part of normal production processes and go unnoticed
although the subject has recently received more press due to increased worldwide
infection control procedures.
The need to provide safe, effective and economical protection from all forms of potential
threats will continue to affect international transportation systems for many years to
come.
Nyjer seed is cultivated in India primarily as a source of oil. It is also used as bird feed as
its high fat and protein content makes it a favorite food of finches and smaller songbirds.
The seed itself resembles small grains of wild rice and is generally used in special
feeders. It is also a common additive to mixed birdseed as it attracts the more popular
birds.
Retailing between $1.50 and $2.00 US per pound, it is also one of the more expensive
birdseeds.
7.6.2.1 Sterilization
The sterilization process requires that the seed be subjected to dry heat of some 250
degrees Fahrenheit for a period of 15 minutes. This prevents any future germination of
the seed and also any germination of potential weed seeds that could be mixed in with the
product.
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7.6.2.2 Opportunity
Presently Nyjer seed is typically imported through the Port of New York or Baltimore.
Both locations have companies that offer sterilization: ETO Sterilization in Linden, New
Jersey and Import Sterilization Inc (ISI) of Baltimore, Maryland. The seed destined for
Ontario and British Columbia is also routed through New York or Baltimore, even
though Canadian regulations do not require sterilization, since otherwise the producers
could not sell into the US Market.
The seed is generally purchased ex sterilization plants for circa $0.33 US per pound after
treatment and shipped to the birdseed producer. It is estimated that over 3,000 containers
of Nyjer seed were shipped to North America last year.
Many of the birdseed producers are located on the West Coast and the product is shipped
domestically from the East Coast at significant expense.
Inland shipping costs to many of the markets from Halifax are lower than the cost of
shipment from the existing facilities and the cost of shipment using foreign flag vessels to
the West Coast could be significantly less costly. The cost of stevedoring and the local
trucking to the sterilization plant in New York is also higher than in Halifax.
As a result, even if the sterilization is performed for the same rate as the competition
(US$0.07 per pound or US$2,500 per container), there could be a significant cost benefit
to treating the product in Halifax. See figure 7.3.
Figure 7.3
Savings Halifax Vs New York
Item
Stevedoring
Local Trucking
Inland
Transportation
Canada
Mid West
West Coast
$100/container
$100/container
$100/container
$150/container
$150/container
$150/container
$100/container
Same
$300/container
Harbour Mtce
Total
$90/container
$90/container
$90/container
$440.00
$340.00
$640.00
Per pound
$0.012
$0.010
$0.018
7.6.2.3 Strengths to Build Upon
Halifax has, in addition to the cost of transportation described above, a number of
strengths in this field particularly when compared to other possible locations for
sterilizing products such as Nyjer seed.
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The first alternative that comes to mind is to sterilize the seed at source. This has the
potential of avoiding a certain amount of double handling and re-bagging. Labour costs
are also generally very low in India.
While treating at source is possible, Halifax has the following advantages to offer:
a) Reputation
Canada’s reputation for standards and relatively honest government would likely allow
certification of the treatment to be universally accepted, whereas certain areas of the
world are known for corruption and with the cost of sterilizing nearly $2,500 US per
container, it could be very tempting to skip some lots.
A treatment plant outside the US will have to obtain some sort of acceptance from the
regulatory agencies in the USA.
b) Technology
Halifax has an established biotech industry and a number of universities; laboratories and
experts would be readily available for independent verification etc…
c) Geography
In the short term, economics will favour local sterilization at source, however there is a
significant risk that the product may at some point in time be sourced elsewhere and
capital investment in any fixed assets would be at risk.
The geographic advantage of Halifax remains unless the source moves to an area that is
east of Singapore.
7.6.2.4 Distribution Centre
A sterilization facility would de facto become a distribution centre for any product that
would be processed in large quantities. In the case of Nyjer seed, bagging could be
performed locally and the product distributed from Halifax.
In addition to being able to ship containers to the West Coast economically, there is a real
opportunity to take advantage of the domestic transportation backhaul, both with trucks
and railcars.
Nyjer seed is produced over a 3-month period from December to February and a
sterilization facility would need to target other products. The dry heat sterilization
process could be used for many applications from treating other agricultural products to
drying of free flowing bulk materials.
7.6.3 Forklifts
The third example of value added distribution is based on a local company called
Hurricane Industrial Equipment Inc., more specifically a division of this enterprise called
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Steve Gilbert Forklift Company. The company deals in forklifts of all kinds and has
operated in the Halifax area for over 14 years now.
This example considers the opportunity of expanding what the company already does into
a more international market. As the technical ability of the company is proven, the
example is straightforward and uncomplicated by technical details.
The largest part of this business consists of buying used forklifts, refurbishing them and
reselling with or without warranty. This type of transaction accounts for some 60% of
sales. Another part of the business representing about 20% of income involves buying
used forklifts, refurbishing (or not if unnecessary), and renting into the local market. The
remaining 20% of income is derived from buying used equipment and re-selling at a
profit (brokering).
7.6.3.1 Refurbishing
The activity of interest that promotes the concept of a distribution centre is that of
refurbishing. It involves having the equipment moved to the refurbishing centre,
overhauled and distributed back into the market. Refurbishing can be undertaken as a
repair activity where the beneficial owner of the equipment wishes to prolong the life of
the asset, or as a commercial activity of buying and selling after refurbishing.
7.6.3.2 Developing Countries
Many developing countries lack the know-how, the contacts and the experience to rebuild
used equipment. As a consequence, they are continuously acquiring new equipment and
older equipment sits idle often for some relatively minor problem.
The used equipment from these countries will generally have few operating hours and
little wear.
Any forklift should have a useful life of at least 10 years and 10,000 hours of operation.
The larger the forklift, the longer it should last before having to be replaced. Contrary to
automobiles that benefit from the advantages of mass production, design costs spread
over millions of units and the enormous buying power of the manufacturers, forklifts
(particularly the larger ones) are often more expensive than the sum of their components.
A refurbished forklift with a rebuilt engine and transmission, new seat, new controls,
rebuilt hydraulic pumps and cylinders, new tires and a paint job is, from a life expectancy
point of view, not very different than a new forklift; yet the cost is significantly less.
Areas such as the Caribbean, South America and Africa are where the best opportunities
lie as they are all within economic range of Halifax. In fact, it may often cost more to
ship a larger forklift from central Canada to Halifax than from Halifax to some of these
areas.
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From an economic point of view, Halifax is closer to some of these areas than many parts
of Canada and the US.
7.6.3.3 Economics
In order to establish the viability of the concept, the following specifics were chosen as
follows:
•
•
•
Forklift size: 10 Ton capacity. This is sort of middle of the range for forklifts and
should be somewhat representative
Market: Lagos, Nigeria. This was chosen for convenience as Grimaldi, the new
owners of ACL have a Ro-Ro service into Tin Can Island Port in Lagos. See
transportation quote Appendix 5.
Scenario: Refurbish only. This is, from a profitability perspective, the least
attractive scenario and probably the lowest risk alternative.
Figure 7.4
Costs
Refurbish 10 Ton forklift
Item
Lagos- Halifax
Local Halifax
Rebuild
Warranty ( provision)
Local Halifax
Mark-up
Halifax- Lagos
Miscellaneous
Total Cost
Cost
$3,407.25
$150.00
$25,000.00
$6,000.00
$150.00
$5,000.00
$1,972.06
$1,000.00
$42,679.31
Remarks
Exc. rate: 1.3229 and $100 terminal charge
From Ceres to Burnside
Using full door rate
As new warranty
From Burnside to Ceres
Provision for insurance etc.
The price of a new 10 T forklift would be approximately $100,000 Cdn and the retail
value of a recent model refurbished machine with an “as new” warranty is about $63,000
Cdn.
It is expected that the price of new equipment would be some 10% higher than in Canada
to compensate for the extra costs of duty, providing warranty and transportation.
Based on this assumption, a machine could be completely refurbished and given a full
life cycle with warranty for about 40% of the cost of replacing the equipment. If the
equipment is to be sold in North America in a fully reconditioned state it would be worth
some $63,000 on the local market and the cost to refurbish would be $40,457. This means
that one could afford to pay up to $22,000 as is where is and still be profitable.
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7.6.3.4 Aid Programs
Canada has numerous programs to assist developing countries to improve their
infrastructure. Many of these programs involve providing equipment generally sourced in
Canada and sometimes manufactured in Canada. In many cases the equipment can be
found neglected and non-operational after the warranty runs out.
There could be an opportunity to provide refurbishing services and/or refurbished
equipment to these countries instead of new. In the final analysis, what the developing
countries need is operational equipment, parts and training; and refurbishing frequently
will have a higher Canadian content than manufacturing, particularly when equipment is
simply assembled in Canada.
It may be possible to introduce this concept by providing extended warranties and
including a refurbishing cycle in the aid package.
7.6.3.5 Ways to Promote
There are obviously numerous business opportunities that could benefit from the
strengths Halifax has to offer. Many of these opportunities require some level of
investment and carry some risk. Typically there is a barrier to entry into any new business
and often a critical mass is required to achieve profitability. There are however ways of
facilitating the development of the types of businesses considered in the preceding
examples:
a) Free trade zone
Many ports have set up duty free zones to allow value added activities to take place
without the requirement for duty/taxes to be paid on the raw materials. As the majority of
the product is exported, the duty is paid only on the product destined for the domestic
market as it exits the duty free zone.
The zone is similar to a bonded warehouse with the exception that the cargo will
generally have some value added while in the zone. This reduces the cost of raw
materials in some cases and in other cases simply improves cash flow since the duty/taxes
could be recovered anyway when the product is exported. By creating a free trade zone it
would be significantly easier for entrepreneurs to take advantage of the strengths
identified that Halifax has to offer in international trades.
b) Accommodate activities on Port premises
Certain activities could be performed on the premises of the Port of Halifax and kept
within the transportation chain. As an example, sterilizing Nyjer seeds on Port premises
would facilitate keeping the activities part of the transportation chain. There can be some
benefits in keeping such activities part of the overall transportation chain.
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Some activities of this nature already exist and the boundaries would simply be
expanded. Today, inspections, sampling, surveys etc. are carried out without breaking the
transportation chain.
c) Develop “domestic” shipping
Despite the rhetoric about Halifax not being subject to the Jones Act and thus having an
advantage over US ports, using international shipping lines to carry freight to the US has
still not caught on. Most shipments to the US out of the Maritimes are trucked.
Part of the reason for this is that trucking to the US is faster than shipping and the rates
are good because of the backhaul situation. Part of the reason is also the fact that
international shipping and domestic transportation are totally segregated and have little in
common.
Another important factor is the way shipping lines view (price) their business:
•
A shipment is a shipment is a shipment. Shipping lines count TEUs as their
principal measurement of product. Each TEU requires a certain amount of
paperwork, needs a box to be positioned, represents a sale, uses space on the ship,
etc.
•
Pricing tends to be equalized to an expected ocean freight per TEU plus inland
costs. The ocean freight from Hamburg to Savannah (4.8K miles) is the same as
from Liverpool to Halifax (2.5K miles).
•
In their contribution models, each TEU gets an allocated ship cost.
It has been suggested that one way to solve the pricing dilemma is to create an
NVOCC (Non Vessel Operating Common Carrier) and negotiate slot costs from
Halifax to the US and back. This would involve managing and maintaining a fleet of
containers but could be looked at differentially by the shipping lines.
d) Match up Partners
Having established a strategic vision, business opportunities compatible with that vision
could be promoted to both suitable local partners and established international businesses.
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8.0 PORT CASE STUDY
Several ports have seized upon the potential of attracting distribution activity close to
port facilities, thus attracting shipping lines carrying cargo destined for those distribution
facilities.
If shipping lines want to serve these customers, they need to incorporate these ports of
call. This phenomenon, plus congestion at west coast ports is leading to the reestablishment of all-water services from the Far East through the Panama Canal to east
coast destinations, including Savannah, Charleston, Norfolk and New York.
8.1 Port of Savannah
Created in 1945 by an act of the Georgia state legislature, the Georgia Ports Authority is
an instrument of the State of Georgia and a public corporation existing for the express
purpose of developing, maintaining and operating ocean and inland river ports within the
state.
The Georgia Ports Authority owns and operates the Port of Savannah, the Port of
Brunswick, the Bainbridge Inland Barge Terminal and the Columbus Inland Barge
Terminal. Policy guidance and fiscal oversight is provided by a thirteen member Board of
Directors, each of whom is appointed by the Governor to serve a four year term. The
Governor also appoints the GPA’s chief executive, who manages day-to-day operations.
Containership stevedoring activities for the GPA are concentrated at the Garden City
Terminal, just outside of the City of Savannah. The Port also owns and operates a breakbulk/general cargo facility in Savannah, known as Ocean Terminal, with several on-dock
warehouses.
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8.2 Overview of Container Stevedoring Business
The Port of Savannah has experienced consistent, strong volume growth for each of the
past four years, and expects this trend will continue through 2004. In its fiscal year 2002
(ending in June), the port handled over 1.3 million TEUs, making it the nation’s ninth
largest container gateway. A historical review of the Port’s volume levels is presented
below.
Port of Savannah Historical Container Volumes
Volume
% Growth
1997
697.1
-
(000 TEUS)
1998
1999
734.9
793.7
5%
8%
2000
954.4
20%
2001
1,077.5
13%
2002
1,327.9
23%
0.25
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
200.0
0.0
0.2
0.15
0.1
Volume
% Growth
0.05
0
1997 1998 1999 2000 2001 2002
The volume growth shown in the table above has been driven by a number of factors –
notably, an emphasis on all-water services from Asia and a strong push by the GPA in
concert with the Savannah Economic Development Authority (SEDA) to attract new
logistics/import distribution centers to the southeastern Georgia area. It was expected
that Savannah’s 2003 growth rate would be in excess of 10%, thus continuing its doubledigit growth trend. Savannah also receives vessel calls from carriers in the Transatlantic
and South American trades, but as Asian imports represent 65% of the port’s 2002
throughput, the Far East/Panama Canal deployments are the largest component of the
port’s base of liner services.
As with the Port of Houston Authority at Barbours Cut, GPA operates the container yard
at the Garden City Terminal, while a few private stevedoring firms are responsible for
actual loading of vessels. The GPA employs a fixed roster of its own, full-time
employees who perform all direct labor functions (other than stevedoring and gate
operations). A consortium of the stevedores is responsible for gate operations, with the
Port having no direct involvement in that activity. At the present time, Ceres (which
handles the Grand Alliance and MSC) and MTC/Stevens (which handles Hanjin) are the
largest container stevedores in the Port, by volume. SSA (whose main customer is Zim)
is also active in this market.
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8.3 Overview of Key Distribution Facilities Utilizing the Port of Savannah
The following table identifies the major retail companies that have located distribution
facilities in and around Savannah, to handle imported containerized shipments. The table
also shows the total size of these companies’ existing facilities.
Best Buy
700,000 sq. ft. (65, 032 sq. m)
California Cartage/ Kmart
191,216 sq. ft. (17, 765 sq. m)
Dollar Tree
800,000 sq. ft. (74,322 sq. m)
Fred's
600,000 sq. ft. (55, 742 sq. m)
Hugo Boss
165,000 sq. ft. (15,339 sq. m)
Lowe's
750,000 sq. ft. (69,977 sq. m)
Michael's
400,000 sq. ft. (37,161 sq. m)
Pier 1 Imports
800,000 sq. ft. (37,161 sq. m)
The Home Depot
1, 400,000 sq. ft. (130,064 sq. m)
Wal-Mart (Savannah)
1,300,000 sq. ft. (120,774 sq. m)
The Bombay Company
250,000 sq. ft. (23,226 sq. m)
Source: Port Publications
In 1995 Home Depot was one of the first of the major retailers to locate a distribution
facility near the port of Savannah. As previously discussed in the review of this
company’s international supply chain arrangements, Home Depot does not employ
separate IPCs. Thus, its Savannah facility serves as both an IPC and an RDC, which
explains why it is larger than all the other operations in this area.
The bulk of the facilities cited above are located in the Crossroads Business Center,
which is a 2,000 acre site being developed by American Warehousing LLC (AWL),
which is a joint venture between Valdosta-based Rodlock Investments LLC and
Savannah-based Powers Holdings. AWL recently completed an IPC for Michaels Stores,
recognized as the largest US retailer of arts and craft materials. The facility’s footprint is
400,000 sq.ft. and the warehouse covers 250,000 sq.ft. of the site. Michaels expects to
initially to handle approximately 1,000 containers per year through this site, via the port
of Savannah. This facility is expected to generate between 50 to 60 fulltime jobs.
However, it should be pointed out that the facility is run by a third-party, American Port
Services, and this is the norm for these types of operations.
8.4 Overview of Key Advantages
Savannah’s geographic position as the first major port north of the Panama Canal on the
east coast with un-congested access to major highways and Class 1 railroads is a major
advantage. The Port’s location allows carriers to maintain highly competitive transit
times versus other East Coast alternatives. A review of current transit times from major
origin ports is shown on the following page.
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Days
Days
Hong Kong
24 Pusan
25
Kaohsiung
30 Shanghai
28
Keelung
27 Singapore
27
Kobe
25 Tokyo
22
Nagoya
24 Yantian
25
Osaka
25 Yokohama
22
*Source: Carrier Websites
One additional advantage that GPA offers to importers in order to entice them to locate
IPCs and RDCs in the vicinity of the port involves a particular operation to expedite the
pick-up of inbound loads by truckers. Specifically, the port established a separate,
fenced-in portion of the terminal, with its own gate, known as the “Ready-Dispatch
Yard”. Importers fax instructions to the port in advance to mount specific containers on
chassis. Provided that such instructions are furnished to the port before 3:00PM during a
weekday afternoon, the port’s terminal personnel will move the requested boxes out of
their particular stacks within the main terminal during the night shift, mount them onto
the chassis of the ocean carriers responsible for the inbound movement to the Port, and
dray these units over the Ready-Dispatch Yard. These boxes are then positioned for
accelerated pick-up on the following morning, whereby the trucker can enter and exit the
port in 15-20 minutes or less.
The port also benefits from having over 100 domestic trucking companies located in the
area. Another important factor in attracting new distribution operations to Savannah is the
use of tax credits by the SEDA. These credits were established by the state in 1996 to
improve the state’s ability to attract large distribution operations and increase the port’s
competitive position versus Charleston and Norfolk. These credits include:
•
•
•
•
•
$1,000 per job created for five years
$3,000 per job after year one if the importer increases its volume through
Savannah by 10% and creates 25 new jobs. This credit has a life of five years
Five year suspension of county property taxes.
One year suspension of county property taxes and equipment and products.
County will pay for a portion of wetland mitigation cost if required
The use of these credits can substantially lower a company’s tax position for a five year
period. For large operation these benefits could lower its tax cost by as much as $9
million per year over a 5 year period.
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9.0 LOCATION COST COMPARISON
As the table below indicates, Halifax is not very competitive in a number of very basic
areas, in terms of locating distribution centres. This could help explain why HRM has
thus far only attracted DCs that serve the local market. Real estate taxes and provincial
income taxes are significantly higher in Halifax than, say, Calgary, where HBC is looking
at locating a DC. They are also higher than Vancouver where a number of companies
have trans-load facilities. With respect to comparable Canadian cities, Halifax is only
competitive with Winnipeg.1
Table 9.1: Comparison of Selected US and Canadian Cities
Real
Estate /
Property
Tax
City
Pop.
(2000)
Norfolk, Virginia
234,403
Savannah, Georgia
131,510
Halifax, Nova Scotia
359,183A
Calgary, Alberta
951,395
Kitchener-Waterloo,
Ontario
438,515
Winnipeg, Manitoba
671,274
Edmonton, Alberta
937,845
Vancouver, British
Columbia
1,986,965
(per $100 of
assessed
value)
$1.88
CAD
$1.78
CAD
$5.59
CAD
$3.08
CAD
$5.90
CAD
$5.55
CAD
$3.00
CAD
$2.49
CAD
Federal
Income
Tax
Provincial /
State
Income Tax
Unemploy
ment Rate
Min. Wage
34.00 %
6.00 %
4.2 %
$6.91 CAD
34.00 %
6.00 %
3.9 %
$6.91 CAD
22.12 %
16.00 %
7.2 % B
$5.80 - $6.25
CADB
22.12 %
11.75 %
4.9 % C
$5.90 CAD
22.12 %
14.00 %
5.3 %
$6.40 - $7.15
CADC
22.12 %
15.50 %
5.6 %
$6.75 CAD
22.12 %
11.75 %
5.5 %
$5.90 CAD
22.12 %
13.50 %
7.2 %
$8.00 CAD
(per hour)
Exchange rate $1 USD= $1.342 CAD as of March 17, 2004
A
Halifax Census Metropolitan Area, 2001 Census
B
Workers in Nova Scotia with less than three months of experience are subject to the lower wage rate.
C
Employees under 18 may receive the lower minimum wage
A number of key points were raised in both the KPMG Study entitled “Competitive
Alternatives (2002)”, and a document prepared for the Greater Halifax Partnership,
1
See: http://www.norfolk.gov; http://www.chathamcounty.org; http://www.competitivealternatives.com;
http://www.aflcio.org/yourjobeconomy/minimumwage/staterates.cfm;
http://www.ceridian.ca/en/resources/leg_standards.html; http://www.bls.gov (US Bureau of Labor Statistics)
http://www.xe.com (current exchange rates)
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Enterprise Greater Moncton and the Atlantic Canada Opportunities Agency (ACOA)
entitled “Halifax-Moncton Growth Corridor Asset Mapping”2 These key points and
comments are presented herein to add depth to the table above and to provide alternate
comparison on a selected-city basis.
•
•
•
•
•
•
•
Cost of Land: It should be noted the cost of land is less than Calgary and
Vancouver, but not less than Winnipeg, Hamilton, Moncton or Truro (in that
order)
Cost of Construction: The cost of construction is less than in Truro, Vancouver,
Calgary, Winnipeg, Moncton, and many international cities.
Property Taxes: Property taxes vary from $3-$4.50 per $100 of value (does not
include occupancy taxes as KPMG did)
Lease Rates: Office lease rates are less than Calgary, Toronto and Vancouver
(but not less than Moncton)
Hourly Wages by Occupation: Corridor average hourly wage rates for 12
selected occupations are lower than Calgary and Toronto, as well as Boston,
Houston, Jacksonville, Minneapolis and Seattle. (Note: this study did not survey
average wages, only reported as an indicator the minimum wage rate –some jobs
would not be affected by minimum wages)
Fringe Benefits: Fringe benefit costs in Halifax are lower than Calgary,
Winnipeg, Vancouver, and Toronto, but not lower than Moncton or Truro (for
Manufacturing Facilities) -- for Shared Services Facilities, Truro, Moncton and
Halifax were the three lowest (Truro being the lowest) in terms of cost of Total
Benefits.
Corporate Taxation: As stated in the Growth Corridor report, one of the
operating cost areas where the Corridor is not as competitive is in the area of
corporate taxation. From the KPMG Competitive Alternatives report, the three
Corridor communities were among the highest cost locations for corporate
taxation. Table 9.1 summarizes the total income taxes paid for the average
manufacturing facility. The figures include all national, provincial/regional and
local corporate taxes.
In this study, total corporate income taxes paid in the Corridor were 20%-40%
higher than other Canadian locations and as much as 3-4 times higher than the
U.S. locations. A significant portion of this higher amount was due to the higher
pre-tax profitability attributed to Corridor locations in the study. For virtually all
scenarios, Corridor communities were among the most profitable in the study.
Higher profitability leads to higher total taxes paid. The higher taxation
differential did erode the overall cost competitiveness of the Corridor but it was
still, by far, more cost competitive than most of the other locations.
Shipping Costs: Shipping costs for Typical Manufacturing Facilities appear to be
highly competitive in Halifax, Moncton and Truro, when compared with cities
outside major population centres.
2
ShiftCentral, Julaux Consultants and Cossette Atlantic, January 2003
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Utilities: Total utilities costs (electricity, gas, telecom) were lower in Halifax than
Truro and Toronto, but not lower than Calgary, Moncton, Vancouver and
Winnipeg (Winnipeg being the lowest combined cost), according to the KPMG
report
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10.0 Conclusions / Recommendations
There are some immediate and longer term opportunities for the GHP, the HPA and their
various study partners to follow up.
In terms of overall findings, we can conclude:
•
Large distribution centres that support the larger retail stores in Canada are
located in close proximity to the stores that they service with a large cluster of
locations in central Canada.
•
3 PLs provide a critical link in the overall supply chain strategy of retail
companies. There are strategic alliances between truck companies, rail and
warehouse and transload operations.
•
In Canada it would appear that CP Rail with Fastfrate Canada have strong market
shares in the provision of services to major retailers including Sears, Canadian
Tire, and Hudson Bay-Zellers. A similar, but not as well developed relationship
exists between CN and both Armour Transportation and Clarke Transport.
In the initial stages of the project, we saw few opportunities for the GHP and HPA in this
sector. Indeed, some of the GIS data appeared to confirm this notion. However, with
additional interviews and analysis, the study found that there are several immediate
opportunities worth following up:
•
Loblaws is apparently investigating the potential for a 300,000 sq.ft. transload
facility in Halifax, which would handle import containers and domestic freight.
•
Canadian Tire is always re-evaluating their supply chains and should
be contacted with respect to potential site opportunities for a
transload. They need more data regarding lines and transit times of
services.
•
Hudson’s Bay Company is examining sites for new DCs in Calgary and Halifax.
•
Target Stores is examining the potential for a DC in Maine, to serve the northeast. This DC could potentially be fed via the Port of Halifax on a cost
competitive basis compared with Boston or New York.
MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
84
•
Wal-Mart, which is very secretive, is “reviewing” its network of DCs, including
those in Canada.
•
DHL/Danzas sees potential for feeding Boston and Connecticut from Halifax.
(They are obviously not aware of the existing Halifax-Boston feeder, as was the
case with Target). There are ports in Connecticut that could be served by feeder
too.
•
There are numerous smaller 3PLs that could be approached about either
expanding operations or investing in new ones.
In terms of port development, it is unlikely we will see the kind of DC activity spring up
around the Port of Halifax as has happened around Savannah and Norfolk. However,
based on an analysis of trade data and shipping patterns, as well as future growth
expectations, there are some very real opportunities at hand. These include:
•
Emerging markets on the Indian sub-continent, for both imports and exports. In
terms of transit times, Halifax has a distinct advantage over competing ports on
the west coast and US east coast.
•
The existence of numerous shipping services between Halifax and the
Mediterranean
There are also some opportunities in terms of the large importers we contacted, such as
HBC, Canadian Tire and CRSA. At the present time, their image of Halifax is not very
positive. Perhaps in conjunction with CN, the port could work with them to improve the
level of service provided to them.
•
We also recommend that the port examine its shipper data to determine the
existing top 10 importers and exporters on at least three trade routes: UK/
Continent; Mediterranean and Indian sub-continent. It should apply some of the
same GIS analysis we have provided in this report to determine where this cargo
is destined and where it originates. There may be some cross-dock or transload
opportunities that emerge in doing so. Moreover, the port can then work with
these shippers to increase their volume of business through the port.
•
We also believe there is considerable value in the Port of Halifax and GHP
developing relationships with Indian exporters and consolidators as this market is
not yet as well developed as China. There may be some “first mover advantage”
for the port in this market.
MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
85
In terms of value-added opportunities, we have provided a number of case studies that
require additional follow up, including granite, Nyjer seed and refurbishment of
transportation equipment. The issue of security and biological protection for import
cargoes such as Nyjer seed are worthy of follow up.
There exist a number of financial incentives in other jurisdictions that have clearly
contributed to DC location, and that the GHP and perhaps the province or the HRM
should investigate the available options should they find a prospective company to locate
in the Halifax-Moncton Growth Corridor.
MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
86
List of Contacts
1. Canadian Retailers
Sobeys Atlantic
John MacDonald
902-752-8371
Larry Romain (importing): ext 8105
Charlie Steele (Director of Warehousing): ext 8342
Kent Building Supplies
Eric Lloyd
506-632-4100
HBC/Zellers
Mike Thomas
VP Logistics
416-861-6334
Home Hardware
Harvey Gullon
902-662-2800
Loblaws (offshore freight)
Rob Wiebe
403-291-7866
Canadian Tire Corporation
Pat Sinnon
VP Logistics
416-480-3489
Wal-Mart
Doug Doust
VP Supply Chain
605-821-2111 ext. 4170
Kent Building Supplies (Moncton)
Eric Lloyd
506-632-4100
Nova Scotia Liquor Corporation
Craig Sutherland
Director of Distribution
2. U.S. Retailers
MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
87
Home Depot
John Demarin
Director of Divisional Logistics for Canada
416-412-6842
Lee Bandlow
Vice President of Distribution
770-384-3002
Target Stores
Rick Gabrielson
Senior Manager, Import Operations
612-696-1746
3. 3PLs and DCs
DHL/Danzas
Philippe C. Rathgeb
Vice President, Ocean freight, North America
800-225-5345
CSRA
Li&Fung
Armour Transportation
Brian Killen
1-800-561-0984
Logistic-Solve Inc
Peter Reaume
416-247-4257
4. Value-added Commodities
Hurricane Industrial Equipment Inc.
Steve Gilbert
902-468-8518
Epoch Rock
Gerry Hines
709-227-1700
N.S. Natural Resources
MariNova Consulting Ltd.
March 2004
Greater Halifax Distribution Study
88
Philip Fink
902-424-2521
Ref. Nyjer seed
Stephen Aron
941-358-7927
MariNova Consulting Ltd.
March 2004
NLIS 5
August 1, 2000
(Development and Rural Renewal)
Official start of granite processing plant in Argentia
Federal, provincial, municipal and private sector officials were on hand today to take part in a sodturning ceremony to officially start construction of a new multi-million dollar modern granite processing
plant in Argentia. The project is expected to employ approximately 80 people.
The company - Epoch Rock Incorporated - will import 15 to 30 ton granite blocks from various
countries in the world, cut and polish them into two and three centimetre slabs for export into the
United States. The focus will be on the 15 top selling types and colours of stone.
The facility will stimulate the development of Newfoundland granite quarries and provide a market for
locally quarried raw material. The project costs include construction of the processing facility and
equipment and start-up working capital.
While approximately 90 per cent of the financing for the $20 million project will come from the private
sector, the federal and provincial governments are also participating in the venture. The Department of
Development and Rural Renewal is providing a $500,000 loan; ACOA is providing a $500,000
repayable loan; the Argentia Management Authority is contributing a $450,000 loan; the Department of
Mines and Energy is providing a $300,000 contribution and the Department of Industry, Trade and
Technology is providing Economic Diversification and Growth Enterprises (EDGE) status. The Town of
Placentia is providing a five-year tax exemption to the company. Also, HRDC is contributing $500,000
towards the initiative. This project has been approved to ensure that HRDC’s funding is in compliance
with the department’s improved administration of its grants and contributions programs.
George Baker, Minister of Veterans Affairs and Minister of State for the Atlantic Canada Opportunities
Agency (ACOA), welcomed the announcement. "This facility will support the province’s expanding
dimension stone industry by working closely with local businesses to establish quarries and process
domestic sources of granite and marble."
Beaton Tulk, Minister of Development and Rural Renewal, said the provincial government is delighted
to partner with the federal government and the private sector to make this project a reality. "This facility
is a good example of how our dimension stone industry represents an opportunity for significant
investment in rural areas. This will not only strengthen and diversify the economy of the Argentia area,
but will have longer term benefits for the development of the dimension stone industry in other areas of
the province."
"Epoch Rock is a great example of the innovative and dynamic companies in rural Newfoundland and
Labrador that are helping to diversify and strengthen the economy," said Sandra Kelly, Minister of
Industry, Trade and Technology. "As the province’s latest EDGE company, Epoch Rock is proving the
EDGE program is working to attract investment in regions across Newfoundland and Labrador."
James Radford, President and CEO of Epoch Rock Incorporated, said the sod turning ceremony is
just the start of a project that will benefit the economy of the Argentia area and the province as a
whole. "This industry has tremendous potential and I’m fully confident that this initiative will be a major
success."
Harvey Mercer, chairperson of the Argentia Management Authority, said the new facility will be one of
the largest and most modern in eastern North America. "The construction and operation of this facility
here at Argentia sends another clear signal to the business community, not only here in Newfoundland
and Labrador, but around the world that Argentia is an excellent place to establish business
operations."
Construction of the new facility is expected to start immediately.
Media contact:
James Radford
President/CEO
Epoch Rock Inc
(709) 781-6443
Doug Burgess
ACOA
(709) 772-2935
Bonnie Pope
HRDC
(709) 772-5346
Josephine Cheeseman
Department of Development and Rural Renewal
(709) 729-4570
Jackie Simon
Department of Industry, Trade and Technology
(709) 729-6573
Harvey Mercer
AMA
(709) 227-5502
2000 08 01
4:05 p.m.
All material copyright the Government of Newfoundland and Labrador. No unauthorized copying or redeployment permitted. The
Government assumes no responsibility for the accuracy of any material deployed on an unauthorized server.
Granite
Granites are the most universally used monumental and building stones and are widely
used as cladding panels, pavers, thresholds, steps and risers, and for monument black and
press rollers.
A large portion of Nova Scotia is underlain by granitic rocks. Past granite production has
exploited the South Mountain Batholith and its related satellite plutons in areas such as
Shelburne, Nictaux, Halifax and Terence Bay.
The eastern shore region of the Province boasts a number of plutons of "black granite".
The old black granite quarry at West Erinville produced thin slabs of a good quality black
granite (gabbro) for the monument industry.
Recent studies have outlined significant reserves of granite at the following locations.
1. Terence Bay
Two types of granite are available in the Terence Bay area. A white monzogranite
containing less than 10% mafic minerals is present on the shoreline directly across
the Terence Bay River from the village of Terence Bay. Farther inland the
monzogranite is more grey in colour and typically has more mafic minerals.
Recent drilling has outlined 220,000 m3 of granite to a depth of 14 m. There is no
over-burden cover and the resource is considered to be open in all directions.
2. Nictaux
Near the village of West Nictaux, which is located a short distance from the town
of Middleton, Annapolis County, a medium- to fine-grained, blue-grey granite is
presently being quarried. Heritage Memorials Ltd. quarries about 1,500 tonnes of
blue granite per year for use as monument bases, blanks and other specialty
products.
3. Quarry Lake (Halifax Area)
Past granite production from the Halifax area occurred along the margin of the
granite pluton which covers a very large area west of the city. The rock is a grey,
medium- to coarse-grained porphyritic granodiorite which contains abundant
xenoliths or "knots" of slate. Large quantities of the stone have been used in
building construction, and for curbstone and paving blocks. Although the Quarry
Lake area has not been drilled, it appears to contain a large reserve of granite
suitable for building stone.
4. Shelburne
Past production of granite for monuments and building construction took place
near the Shelburne Harbour area. The rock is a fine- to medium-grained, grey
muscovite- biotite granodiorite to monzogranite. Although there is no production
from the area at the present time, the stone has proven very suitable for
architectural work in the past.
5. Erinville
Past production of "black granite" (gabbro) for monuments took place at Erinville,
Guysborough County, in the early 1930s and again in the early 1960s. The gabbro
consists of a fine- to medium-grained dark grey to black rock composed of
labradorite, pyroxene and amphibole with minor amounts of ilmenite and apatite.
Recent drilling has outlined a small gabbroic plug about 300 m in diameter which
may be suitable for the production of quarry blocks
Building Stone Producers
•
Heritage Memorials Ltd.
P. O. Box 308
Windsor, Nova Scotia
B0N 2T0
902-798-4780
•
Wallace Quarries Ltd.
P. O. Box 208
Wallace, Nova Scotia
B0K 1YO
902-257-2014
Secondary Manufacturers
•
Arsenault Monumental Works Ltd.
P. O. Box 1475
Antigonish, Nova Scotia
B2G 2L7
•
Canstone Inc.
Suite 510, World Trade & Convention Centre
1800 Argyle Street
Halifax, Nova Scotia
B3J 3N8
902-420-0692
•
Dauphinee Memorial Art (1984) Ltd.
P. O. Box 68
Shelburne, Nova Scotia
B0T 1W0
902-875-3179
•
Demone's Monuments Ltd.
P. O. Box 447
Lunenburg, Nova Scotia
B0J 2C0
902-634-4621
•
Heritage Memorials Ltd.
P. O. Box 308
Windsor, Nova Scotia
B0N 2T0
902-798-4780
•
John D. Steele's &Sons Ltd.
P. O. Box 173
North Sydney, Nova Scotia
B2A 3M3
902-794-2713
•
Tingley Monuments Ltd.
P. O. Box 432
Amherst, Nova Scotia
B4H 3Z5
902-667-2861
Sterilization Technologies Advancing into the 21st
Century
Published by Business Communications Co.
September 2000
R2-427
Description
INTRODUCTION
STUDY GOALS AND OBJECTIVES
The objective of this report is to describe and discuss changes in the sterilization industry since
BCC last looked at it in July 1993. The products and services provided by this industry have
greatly increased in demand as a result of worldwide growth in commercial applications of
infection control.
BCC's major objective is to estimate U.S. sales of sterilization products and revenues from
sterilization services. In addition, we will forecast product sales and service revenues through
2004. The overall goal is to provide the reader with insights and data of a professional nature for
a complete understanding of this industry.
REASONS FOR DOING THIS STUDY
Sterilization is an unrecognized element in a vast number of industries and manufacturing
processes and there is an ongoing need for effective, safe, rapid and economic methods. Many
products are regulated and monitored by the government for microbe control procedures and
contamination levels and they cannot be sold unless they are sterilized. Other products benefit
from sterilization, even if not mandated by law.
Sterilization methods are more than a century old. Processes for performing sterilization
basically have remained unchanged, but the efficiency and performance of devices is changing
and evolving, as are the materials that are being sterilized. Therefore, it is important to
understand the various sterilization methods and their uses and to know the changes and
directions sterilization technology is taking.
CONTRIBUTIONS OF THE STUDY AND FOR WHOM
This report should prove of particular value to both sterilization market participants, suppliers
and observers, as well as to investors and venture capitalists, since it provides details on the
United States sterilization industry market, including:
•
•
•
•
•
market size, structure and dynamics, both current and through 2004
changes in traditional practices
new marketing concepts and trends
changes in technology
impact of outside influences such as government regulators with particular emphasis on
the identification of potential market barriers
•
•
•
identification and analysis of new distribution systems with particular emphasis on their
cost-saving benefits to drug consumers
corporate strategies
international aspects of the market.
SCOPE AND FORMAT
In preparing this report, the entire sterilization industry was examined, with particular emphasis
on those companies developing innovative technologies and those employing innovative
marketing strategies to become the market leaders of the 21st century.
The study focuses on sterilization processes, including:
•
•
•
•
heating methods: autoclaving, retorting, pasteurization and others.
gas sterilization: ethylene oxide and other gases
radiation sterilization: gamma, electron-beam, x-ray and ultraviolet sterilization
filter sterilization.
This report attempts to discuss all areas of the market and to identify significant suppliers, end
market size and government and regulatory factors. Participating companies will be discussed
with regard to relative market share, marketing strengths, participation in new segments and
innovative marketing practices.
METHODOLOGY
Data for this study were collected using both primary and secondary data research techniques.
A literature search of BCC's extensive library was conducted, as well as searches of medical
and business libraries. BCC also conducted extensive interviews with industry personnel,
professional and trade organizations, government agency personnel, observers, scientists and
industry professionals.
All data collected refer to the U.S. or sales by U.S. companies, unless otherwise indicated.
These data were analyzed by BCC personnel for specific findings and forecasts (in constant
dollars through 2004.) Once these forecasts were obtained, they were validated by industry
experts. Consequently, all estimates provided in this report represent a consensus opinion of
BCC personnel, industry participants and industry observers.
INFORMATION SOURCES
Information contained in this report includes data obtained from government agencies, corporate
publications and findings from industry trade associations. Other information sources include
interviews with industry leaders, universities, dentists, dental centers, government and
professional agencies and trade associations. Further information was obtained through an
extensive literature search.
Table of Contents
TABLE OF CONTENTS
Title
INTRODUCTION
STUDY GOAL AND OBJECTIVES
REASONS FOR DOING THIS STUDY
CONTRIBUTIONS OF THE STUDY AND FOR WHOM
SCOPE AND FORMAT
METHODOLOGY
INFORMATION SOURCES
RELATED BCC WORK CREDENTIALS
BCC ON -LINE SERVICES
SUMMARY
OVERVIEW
IMPORTANCE OF STERILIZATION
DEFINITIONS OF STERILITY
CONCEPTUAL STERILIZATION
OPERATIONAL DEFINITION OF STERILITY
DEFINITION OF COMMERCIAL STERILITY
STERILIZATION HALLMARKS
HISTORY OF STERILIZATION TECHNOLOGY
MICROBES AND THEIR RELATIONSHIP TO STERILIZATION
PROBLEMS CAUSED BY MICROBES
Spoilage
Pathogenicity
Physical Interference
Chemical Impurity
MICROBIAL CONTAMINATION SOURCES
MICROBES TYPES AND THEIR SUSCEPTIBILITY TO STERILIZATION
Bacteria
Salmonella
Campylobacter
Escherichia coli
Fungi (Molds and Yeasts)
Protozoa
Toxoplasma gondii
Cryptosporidium parvum
Viruses
Norwalk Virus
Hepatitis A
Spores
Algae
HOW STERILIZATION METHODS ARE JUDGED
FACTORS IMPACTING ON CHOICE OF STERILIZATION METHOD
Relationship of Physical State of Matter To Sterilization Method
Importance of Microbe Death Characteristics
STERILIZATION TREATMENT MODALITIES
TERMINAL STERILIZATION
ASEPTIC PROCESSING
CLEANING AND DISINFECTION
IMPACT OF NEW TESTING TECHNOLOGIES ON STERILIZATION
TYPES OF STERILIZATION METHODS
HOW A STERILIZATION METHOD IS SELECTED
STERILIZATION METHOD MARKET SHARE
MATERIAL COMPATIBILITIES WITH STERILIZATION METHODS
THE STERILIZATION INDUSTRY
INDUSTRY CHARACTERISTICS
STERILIZATION INDUSTRY STRUCTURE
INDUSTRY SIZE
INDUSTRY PARTICIPANTS
Core Products and Original Equipment Manufacturers (OEMs)
Refurbishers, Reconditioners, Resellers and Maintenance Suppliers
Distributors
Consumables and Auxiliary/Supplemental Suppliers
Sterilization Service Firms: Contract Sterilizers
FACTORS INFLUENCING STERILIZATION INDUSTRY DYNAMICS
INFECTIOUS WASTE
REUSE OF SINGLE -USE MEDICAL DEVICES
HORIZONTAL AND VERTICAL INTEGRATION WITHIN THE INDUSTRY
GOVERNMENT AND REGULATORY ENVIRONMENT
NATIONAL EMISSIONS STANDARD FOR HAZARDOUS AIR POLLUTANTS (NESHAP)
INTERNATIONAL STANDARDS ISO 9000 SERIES
THE U.S. CLEAN AIR ACT AND THE MONTREAL PROTOCOL OF THE VIENNA
CONVENTION
FDA APPROVAL OF MEAT IRRADIATION
USDA FINAL RULE ON MEAT AND POULTRY IRRADIATION
HAZARD ANALYSIS AND CRITICAL CONTROL POINT PLAN (HACCP)
COMPANY PROFILES
CONSOLIDATED STILLS & STERILIZERS
CYCLOPPS CORP.
DIXIE CANNER CO.
MDS NORDION
MILLIPORE
PALL CORP.
STERIGENICS INTERNATIONAL INC.
STERIS CORP.
3M
U.S. FILTER
HEATING STERILIZATION METHODS
APPLICATIONS OF HEAT (HIGH TEMPERATURE) STERILIZATION
SUPPLIERS OF HEAT STERILIZATION EQUIPMENT
VOLUMES TREATED BY VARIOUS HEATING METHODS
STEAM STERILIZATION
AUTOCLAVES
The U.S. Autoclave Market
Value and Composition of the U.S. Autoclave Market
Volume of Materials Processed Through Autoclaves
RETORTS
The U.S. Retort Market
Value and Composition of the U.S. Retort Market
Estimated Annual Sales
PASTEURIZERS
The U.S. Pasteurizer Market
Value and Composition of the U.S. Pasteurizer Market
STILLS
What Are Stills?
Market Size
Uses For Water From Stills
DRY HEAT STERILIZATION
HOW DRY HEAT STERILIZATION WORKS
VARIABLES IN DRY HEAT STERILIZATION
PREPARING ITEMS
THE NEED TO MONITOR DRY HEAT STERILIZATION
ADVANTAGES AND DISADVANTAGES OF DRY HEAT STERILIZATION
STERILIZING OVENS
Types of Sterilizing Ovens
Uses For Sterilizing Ovens
Market Size: Sterilizing Ovens
Volume of Material Processed In Sterilizing Ovens
MISCELLANEOUS HEATING EQUIPMENT
HOT -FILL EQUIPMENT
STEAM INJECTORS
INCINERATORS
LOW -TEMPERATURE STEAM AND FORMALDEHYDE
CHEMICAL STERILIZATION
FUNDAMENTALS OF GAS, PLASMA AND LIQUID STERILIZATION
TYPES OF CHEMICAL STERILIZATION METHODS
ETHYLENE OXIDE
Health and Safety Issues Associated With EtO
PERACETIC ACID
OZONE
Use In the Medical Device Industry
Beverage Industry Use
HYDROGEN PEROXIDE
CHLORINE DIOXIDE
CUMULATIVE VALUE OFCHEMICAL STERILIZATION EQUIPMENT
VALUE OF STERILANT GASES
MARKET VOLUME
CHEMICAL STERILIZATION EQUIPMENT AND SUPPLIES VENDORS
FILTER STERILIZATION
PRINCIPLES OF FILTER STERILIZATION
FILTER STERILIZATION VS. OTHER FILTRATION TYPES
VARYING DEFINITIONS OF STERILE FILTRATION
MARKET SIZE AND STERILIZING FILTER SALES
GAS FILTER STERILIZATION
TYPES OF GAS FILTER PRODUCTS
High -efficiency Particulate Air (HEPA) Filters
Compressed Gas Filters
Medical Gas Filters
Vent Filters
MARKET FOR GAS FILTERS
MARKET FOR GAS FILTERS
LIQUID FILTER STERILIZATION
TYPES OF LIQUID FILTER STERILIZATION PRODUCTS
Batch Processing Filters
In line Filters
IV Filters
Syringe Filters
Water Purification Filtration
LIQUID FILTER STERILIZATION BENEFITS
MARKETS FOR LIQUID STERILIZATION FILTERS
Water Filtration
Industrial Manufacturing
Research Applications
Point -of-Use Medical Applications
MARKET FOR LIQUID STERILIZING FILTERS
MARKET FOR LIQUID STERILIZATION FILTERS
MARKET PARTICIPANTS
RADIATION STERILIZATION
HOW RADIATION STERILIZATION WORKS
TYPES OF RADIATION STERILIZATION
GAMMA RADIATION
Gamma Radiation Facilities
ELECTRON -BEAM (E BEAM)
X -RAYS
ULTRAVIOLET LIGHT (UV)
Limitations of UV Sterilization
UV Food Process Applications
UV and Water Sterilization
Air/Surface UV Products
UV Sterilization Product Sales
REGULATIONS IMPACTING ON GAMMA STERILIZATION
REVISED AAMI GUIDELINES FOR RADIATION STERILIZATION
MARKET SEGMENTS FOR IRRADIATION STERILIZATION
FOOD IRRADIATION
Foodborne Illness
Radiation Pasteurization vs. Radiation Sterilization of Food
Approved Methods for Processing Food With Ionizing Radiation
Negative Effects of Radiation on Foods
Potential Market Size for Food Irradiation
MEDICAL DEVICE STERILIZATION
Gamma Radiation and Medical Device Sterilization
E -beam Sterilization of Medical Devices
CONSUMER PRODUCTS
MARKET FOR RADIATION STERILIZATION EQUIPMENT
VOLUME OF PRODUCT PROCESSED BY RADIATION STERILIZATION
CONTRACT STERILIZATION
VERTICAL INTEGRATION
CONTRACT STERILIZATION SERVICE USERS
SIZE AND RELATIVE SHARE OF THE CONTRACT STERILIZATION INDUSTRY
CONTRACT VS. IN -HOUSE STERILIZATION
FACTORS IMPACTING ON USE OF CONTRACT STERILIZERS
EQUIPMENT COST
SAFETY ISSUES
IN -HOUSE CAPACITY
TYPES OF PROCESSING PROVIDED BY CONTRACT PROCESSORS
EMERGING TYPES OF STERILIZATION
ULTRAHIGH PRESSURE (UHP)
CURRENT FOOD INDUSTRY APPLICATIONS
UHP LIMITATIONS
ESTIMATED MARKET SIZE
PULSED ELECTRICAL FIELD (PEF)
MICROWAVE
PSORALENS AND UVA (PUVA)
STEAM AND VACUUM COOLING
APPENDIX 1 CDC -- STERILIZATION OR DISINFECTION OF MEDICAL DEVICES: GENERAL
PRINCIPLES
APPENDIX 2 INFECTIOUS WASTE STERILIZATION TREATMENT
MEDICAL WASTE ISSUES
EMERGING TREATMENT METHODS
ELECTRON BEAM SYSTEMS
HYBRID MICROWAVE TECHNOLGY
LOW -FREQUENCY RADIO WAVES HIGH STRENGTH ELECTRICAL FIELDS
LIST OF TABLES
SUMMARY TABLES:
U.S. MARKET FOR STERILIZATION PRODUCTS AND SERVICES, THROUGH
2004
TREATMENT TYPE USAGE IN THE U.S., THROUGH 2004
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
PROBLEMS CAUSED BY MICROBES IN SELECTED INDUSTRIES
APPLICABILITY OF STERILIATION METHODS TO PHYSICAL STATES
MAJOR USERS OF MAIN STERILIZATION METHODS
DECISION MAKING CRITERIA FOR SYSTEM USE
MATERIAL COMPATIBILITES WITH STERILIZATION METHODS
CUMULATIVE SALES OF STERILIZATION EQUIPMENT, THROUGH 2004
ANTIMICROBIAL TEMPERATURE RANGES
PLASTIC COMPATIBILITY WITH MOIST AND DRY HEAT STERILIZATION
SELECTED LISTING OF HEAT STERILIZATION EQUIPMENT SUPPLIERS
VOLUMES TREATED BY VARIOUS HEATING METHODS IN THE U.S.,
THROUGH 2004
U.S. AUTOCLAVE MARKET: CUMULATIVE PLACEMENTS, THROUGH 2004
U.S. VOLUMES OF MATERIAL PROCESSED THROUGH AUTOCLAVES,
THROUGH 2004
VOLUME OF MATERIALS PROCESSED BY RETORTING IN THE U.S.,
THROUGH 2004
U.S. RETORT MARKET: CUMULATIVE PLACEMENTS, THROUGH 2004
CUMULATIVE PLACEMENTS OF PASTEURIZERS IN THE U.S., THROUGH
2004
VOLUME OF MATERIALS TREATED BY PASTEURIZATION IN THE U.S.,
THROUGH 2004
MARKET VALUE OF STILLS IN THE U.S.: CUMULATIVE PLACEMENTS*,
THROUGH 2004
DISTILLED WATER VOLUME PRO DUCED FROM STILLS IN THE U.S.,
THROUGH 2004
MARKET VALUE OF STERILIZING OVENS IN THE U.S.: CUMULATIVE
PLACEMENTS, THROUGH 2004
U.S. VOLUME OF MATERIALS PROCESSED IN STERILIZING OVENS,
THROUGH 2004
CUMULATIVE VALUE: U.S. CHEMICAL* STERILIZATION EQUIPMENT,
THROUGH 2004
VOLUME OF U.S. CHEMICAL STERILIZATION BY MARKET SEGMENT,
THROUGH 2004
23. CHEMICAL STERILIZATION EQUIPMENT AND SUPPLIES VENDORS BY
SYSTEM TYPE AND SUPPLIES
24. TYPICAL SIZE AND PURPOSE OF FILTERS US ED BY SPECIFIC INDUSTRY
25. STERILIZING FILTER SALES: THROUGH 2004
26. RELATIVE SHARE GAS STERILIZING FILTERS BY END MARKET TYPE*,
THROUGH 2004
27. MARKET SIZE: LIQUID STERILIZATION FILTERS, THROUGH 2004
28. LIQUID AND GAS STERILIZATION FILTER SUPPLIERS
29. ANNUAL SALES OF UV STERILIZATION PRODUCTS BY END MARKET,
THROUGH 2004
30. COMMON FOODBORNE PATHOGENS AND RELATED DISEASES
31. FDA/USDA APPROVED IRRADIATION PROCESSES BY FOOD TYPE
32. SELECTED LISTING OF CONSUMER P RODUCTS STERILIZED BY
RADIATION
33. CUMULATIVE VALUE OF RADIATION STERILIZATION EQUIPMENT IN THE
U.S. AND CANADA*,
34. ROUGH 2004
35. U.S. VOLUME OF RADIATION STERILIZATION, THROUGH 2004
36. COMPANIES PROVIDING IRRADIATION SERVICES/PRODUCTS
37. SIZE AND RELATIVE SHARE OF CONTRACT STERILIZATION VS. IN HOUSE STERILIZATION ETO,
38. MMA AND E -BEAM FOR 1999 AND 2004
39. GROWTH OF CONTRACT AND IN -HOUSE STERILIZATION, THROUGH 2004
40. SELECTED LISTING OF U.S. CONTRACT STERILIZATION PROVIDERS
41. MARKET FOR ULTRAHIGH PRESSURE EQUIPMENT, THROUGH 2004
LIST OF FIGURES
1.
2.
3.
4.
5.
6.
7.
8.
9.
RELATIVE USE OF STERILIZATION METHODS, 1999 AND 2004
MARKET SHARE BY STERILIZATION METHOD, 1999 AND 2004
BASIC STERILIZATION INDUSTRY STRUCTURE
DISTRIBUTION CHANNELS FOR STERILIZATION PRODUCTS
VOLUMES TREATED BY VARIOUS HEATING METHODS IN THE U.S., 1999
AND 2004
RELATIVE AUTOCLAVE USE IN THE U.S BY SEGMENT, 1999 AND 2004
VOLUME OF U.S. CHEMICAL STERILIZATION BY MARKET SEGMENT, 1999
AND 2004
RELATIVE SHARE GAS STERILIZING FILTERS BY END MARKET TYPE*,
1999 AND 2004
RELATIVE SHARE OF LIQUID STERILIZING FILTERS BY END MARKET
TYPE, 1999 AND 2004
MindBranch, Inc., 160 Water St., Williamstown, MA 01267 tel: 1.800.774.4410
fax: 413.458.1706 www.mindbranch.com
Seedsfromindia.com is a US Company based in Florida.
We represent Irene Marketing Services Inc. of Bangalore India that entered
the USA bird feed market last season (2002-2003). We import quality Nyjer
(Niger), Safflower and Sesame Seeds in 20ft sea containers from India
directly to our customers.
Our plant and facilities are based in the center of the growing areas in the
tribal belts of India. We have our own personnel in the region to procure the
pick of the crop from the moment it is harvested ensuring sufficient quantities
to meet all orders at very competitive prices. We have a tight quality control
and customized packaging to the buyer’s specifications.
Nyjer Seeds are generally supplied in 50kg (110.6 lb) polypropylene bags
with 350 Bags to a 20' Container, totaling 17500 kg. These bags are
reloaded into fifty pound three ply paper bags after arrival in the United
States. Fifty bags are then stacked on a 48 X 40 four-way pallet ready for
domestic transportation. All pallets are lined with a slip-sheet to protect the
bottom bags from damage.
Safflower Seeds are generally supplied in 22.6 kg (50lb) polypropylene
bags, with 708 bags to a 20' Container, totaling 16000 kg. If another type of
packing this can usually be arranged at no extra charge. For a small
additional fee we can also offer custom packaging and printing of text, labels
and logo that we are confident will be cheaper than can currently be
obtained in the USA. These bags can also be discharged from the container
onto four way pallets if required.
We are now taking 20foot sea container orders for the upcoming season to
supply of Nyjer Seeds and Safflower Seeds from December 2003 until April
2004. We handle all the US Customs and USDA import requirements then
we deliver the loads right to you.
We would be delighted to give you a firm quotation or answer any questions
you might have. Please email or fax us your requirements.
Contact Information
SeedsfromIndia.com
8006 Collingwood Court,
Bradenton,
Florida 34201-2350
Telephone (941) 358 7816
Fax (941) 358 7927
Email: info@seedsfromindia.com
Armour Logistics Services (ALS) offers cost-effective warehousing solutions to your
business needs. With our recent addition to the Moncton facility, we now offer one of
the largest warehousing facilities in Atlantic Canada. Through this state-of-the-art
expansion, we can provide over 300,000 square feet of warehousing space in
Moncton, N.B., the hub of Atlantic Canada. As well, we have facilities in both
Dartmouth, N.S. (50,000 sq. ft.) and, through a partnership with Cargocan, St. John's,
NFLD (44,000 sq. ft.) to better serve you.
With a customized warehouse software package designed exclusively to improve the
flow of information to the customer, Armour Logistics Services has further
strengthened its commitment to put the customer first. Whatever your warehousing
needs, Armour Logistics Services has the people, processes and technology to make
your job easier without sacrificing quality.
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ALS/2000 Warehousing Software
Warehousing and Storage Facilities
Order Desk Services
Processing and Shipping Orders
Computerized Inventory Tracking
Accounts Receivable Support
Armour Logistics Services
New Brunswick, Nova Scotia and Newfoundland
350 English Drive
Moncton, New Brunswick
E1E 3Y9
Tel: 506-861-0270
800-561-0984
Fax: 506-861-0273
377 English Drive
Moncton, New Brunswick
E1E 3Y8
Tel: 506-861-0270
800-561-0984
Fax: 506-861-0286
Space
14
1
5
Class
-
Space 2 3 1 2 -
224,500 sq.ft. Heated
Dock Level Loading Doors
Ground Level Loading Door
Door Rail Siding
Food Grade
Full Pest Control
Fully Alarmed and Monitored
Full Sprinkler System
35,000 sq.ft. - 20,000 sq.ft. Non Heated
12,000 Heated
3,000 Office
Dock Level Doors
Ground Level Doors
Exterior Rail Platform
Interior Rail Doors
Full Sprinkler System
20-30 Gurholt Drive
Dartmouth, Nova Scotia
B3B 1J9
Tel: 902-468-8857
Fax: 902-468-8859
21 Glencoe Drive
Donovans Industrial Park
Mount Pearl, Newfoundland
A1N 4S5
Tel: 709-368-8341
Fax: 709-368-2107
Space - 50,000 sq.ft. Heated
7 - Loading Doors
1 - Ground Level Door
- No Rail Siding
Class - Food Grade
Full Pest Control
Fully Alarmed and Monitored
Full Sprinkler System
Space - 44,000 sq.ft. Heated
5 - Loading Doors
1 - Ground Level Door
- No Rail Siding
Class - Food Grade
Full Pest Control
Fully Alarmed and Monitored
Full Sprinkler System
The above facilities are all connected to our two computer support systems. ALS2000,
which is a Warehousing System and LTL400 which is a Transportation, Accounting System.
Armour Logistics Services Contacts
General Manager: Angus Armour mailto:%20Aarmour@armour.ca
Manager of Warehouse Operations: Brian Killen mailto:%20logistics@armour.ca