The COVID-19 pandemic, extreme weather events and record e-commerce demand have shone a spotlight on the world’s supply chains. The journey of how we receive “stuff” is quite complicated—and fragile. Luckily, the power of technologies such as automation, renewable energy and data are helping to both streamline and “green” Canada’s supply chains.
Goods valued at more than $275 billion pass through the Port of Vancouver every year, making it the fourth largest logistics hub in North America and a key anchor for the supply chains Canadians tend to take for granted.
On this episode of Disruptors, an RBC Podcast, host John Stackhouse is joined by special guest co-host Naomi Powell, Managing Editor of Economics & Thought Leadership at RBC, to speak with Peter Xotta, Vice-President, Operations and Supply Chains at Vancouver Fraser Port Authority.
For more information about the Vancouver Fraser Port Authority, click here.
To learn more about Assent, a global supply chain software solutions provider, check out their website.
Speaker 1 [00:00:00] Hi, it’s John here. Returning to the pod this week is my colleague Naomi Powell from RBC’s Economics and Thought Leadership Group. Naomi, welcome back!
Speaker 2 [00:00:10] Thanks for having me back, John. It is great to be here today. We are going to be talking about supply chains and more specifically, the Port of Vancouver. And you were lucky enough to just be out there having a look at the port’s major transformation.
Speaker 1 [00:00:23] Yeah, Naomi, I was lucky to be in Vancouver, one of my favorite places in Canada, if not the world. And it’s always intriguing to me to see this massive port. Of course, it’s overshadowed by those even more massive mountains, but it is the gateway of our economy to the world and has been that way for generations. It’s always striking and in some ways inspiring to see all that one would expect to see in a port. The big ships, the cranes, the rail cars that are going to go to the far ends of Canada with all sorts of stuff from around the world, as well as bringing stuff from every part of Canada to Vancouver to ship out across the Pacific to some of the world’s best markets. But the most exciting thing that’s going on right now in the Port of Vancouver is not really visible to the eye. It’s the digital transformation of ports and shipping that is going to transform supply chains and in many ways, every part of the economy. And that’s what we’re going to talk about today.
Speaker 2 [00:01:22] Yeah, John. Supply chains are things we don’t think about when they’re working well, but over the last few years, we’ve had the pandemic. We’ve had that catastrophic flooding out west Ukraine more. And they’ve given us all, I think, a brutal education and just how important supply chains are and how they work. The pandemic, I think, was distinguished by how abruptly so much economic activity was shoved online overnight. We were shopping for groceries for our kids, toys for our clothes, all of it digitally. But then almost as abruptly, we became aware how much of that is actually dependent on the nuts and bolts of physical supply chains?
Speaker 1 [00:02:02] That’s right. Now, I mean, we have all sorts of physical constraints on the economy, including the number of ports. There’s only a few ports that connect Canada with the world. But now we have the power of technology, whether it’s automation, renewable energy or data, lots of data that can transform the way we operate that infrastructure. And there’s no better place to see that transformation that’s underway than Vancouver. This is Disruptors. An RBC podcast. I’m John Stackhouse. Today on the show, we’re talking all things supply chains and the digital innovation, making the marine shipping industry both greener and more efficient. Joining us today is Peter Exeter, who’s vice president of operations and supply chains at Vancouver Fraser Port Authority, where he oversees land and marine operations and supply chain optimization. Peter, welcome to Disruptors.
Speaker 3 [00:03:16] Thanks for having me.
Speaker 1 [00:03:17] You and I actually met last year in Toronto when there was a Japanese business delegation traveling through Canada talking about their interests and concerns over the coming decades. And for me, it was a really crystallizing moment to hear these Japanese business leaders outline all the things they want from Canada, whether it was canola or natural gas. And to have that 25 year view, they could tell you largely what they might need in 2040. And they really want to get all that from Canada. We are a reliable, trusted, credible producer of many things that the Japanese and many others want, but they also have concerns about our ability to deliver, and that’s on a number of fronts. It includes our infrastructure are choked up, rail lines are overworked ports. They were wondering what’s Canada’s game plan for the next 25 years? I wonder if I can take you back to that moment, Peter, and get your thoughts on what it meant to you.
Speaker 3 [00:04:17] At the time that we were having that conversation. No surprise that people were concerned about supply chains globally, including those in Canada. We had a tremendous run up of opportunity that’s led to volume growth and much of that has been centered on Western ports and in Vancouver in particular. So in a way, notwithstanding the pandemic related challenges, a good problem to have that Canada as goods and services are in demand globally. But we do need to continue to invest in capacity to serve those historical and new customers that want to trade with our country.
Speaker 1 [00:04:52] What do we need most?
Speaker 3 [00:04:54] It’s probably a basket of all things, but you and I chatted at that time about the priorities within the Port of Vancouver. It starts with terminal infrastructure. Increasingly, it is supportive infrastructure. It also the roads and rail leading up to the port facilities where terminals make investment and the need for us to optimize the use of the assets that we do have. Often that is through digitization effort. So those three layers of things are kind of a central theme for the port. And I would say for Canada in terms of investment in and modernization of some of the systems that we use to manage our supply chain.
Speaker 2 [00:05:30] It feels like businesses are rethinking the way they’ve done things for a very long time. We’ve seen this shift from just in time supply chains to a little bit more, just in case companies keeping more components on hand, just in case there’s more disruptions. How does that change the demands on what you do at the port? Have you had to rejig your priorities to make that change.
Speaker 3 [00:05:52] Dealing with much greater variability in the supply chain than we have historically has led to people trying to protect their position and metering capacity to make sure they don’t get choked up whether that’s a terminal or a railway. As we move through the pandemic and see, I would say more normal order restored, those kinds of I’ll call it buffer stocks, for example, in in major retailers I think will be drawn down as confidence is restored. Question is how do we build resilience into the supply chain so that we don’t have those kinds of challenges again? I dare say we’re not ready. If we had the kind of shock that we experienced through the pandemic. But it’s clear that these questions are top of mind for government and the private sector alike.
Speaker 1 [00:06:33] Peter, I’m hoping you can give us a sense of where the world of ports is going over the next couple of decades. Then it comes back to that point about both digital capabilities and data to get a sense of where that’s going. We reached out to a supply chain software firm called Ascent, and here’s a bit of what they had to say.
Speaker 4 [00:06:52] Hello, my name is Jared Connors. I’m the director of sustainability here at Assent. We recently did a study where 25% of manufacturers reported having high confidence in the capabilities of their suppliers to support their ESG and sustainability goals. Now, being the cynic that I am that showed me that 75% of companies are basically crossing their fingers when it comes to their confidence level in their supply chains, ability to support their overall mission and not engage in activities that could hit them behind the left ear or cause a regulatory infraction. When I think of supply chain disruption, I always think of operational risk issues cost quality, lead time availability. Companies can’t afford noncompliance concerns. So having the right technology to provide the data, transparency and due diligence and your supply chain is key.
Speaker 1 [00:07:40] It’s really interesting how many companies now are wanting and demanding to understand where the stuff comes from that is moving through your report. Give us a sense, Peter, of where the port world is moving as we accelerate our understanding of ESG.
Speaker 3 [00:07:57] Canada’s value proposition, I think historically was buy our stuff and we’ll get it to you. And that’s kind of table stakes for ports. We thrive in Canada in our supply chains by creating a framework for private investment to happen in the supply chain, whether that’s in productive capacity in the prairies and new potash mines or in rail infrastructure and services, and very much so at the ports. We want terminals to invest to continue to add capacity. And I think again, if you look at the trajectory of volume over the years, clearly that has been happening and we’re at this interesting tipping point of making sure that we continue to move that agenda forward from a demand perspective while we are fully embracing things like reconciliation, environmental issues and social issues because of the impact that goods movement have on local communities. So it’s like we’ve got this great opportunity, but the challenge associated with meeting those obligations or moving meeting those opportunities has also increased in some cases exponentially.
Speaker 1 [00:08:56] I love that line by our staff. I’m sensing an ad campaign coming on. We certainly have a lot of stuff in this country that the world does need and is demanding, and that’s going to put more pressure on our ports, particularly Vancouver. It’s an exciting time for you. The federal government just approved a major expansion. With all this in mind with the Robert Bank Terminal two or ARB T2, as it’s called. I wonder if you can give us a sense of the significance of this announcement.
Speaker 3 [00:09:22] We are continuing to grow at a pace that consuming available capacity and anticipated to consume the available capacity by late this decade or early into the next one. And so we’ve been working to deliver this new facility. We currently have four container terminals operated by two companies. This development would be a land reclamation project. So essentially building an island, building more Canada, as I like to say. And on top of that would be a 2.4 million TEU capacity facility, and the cost is estimated to be over $3 billion. We need to get moving on the construction of that. So it’s available in the early 2030s and this would give us a 50 or so percent increase in our container capacity. It would serve Canada’s west coast for quite a number of years.
Speaker 1 [00:10:15] We’ve talked a lot on the podcast about the potential, indeed the imperative for Canada to produce more food, which our farmers are excellent at. What do we need from our ports to ensure that if we are to produce, let’s say, 25% more food, we can get it efficiently to the world?
Speaker 3 [00:10:31] It’s not good enough to have terminal facilities if they can’t access the rail services that they need for that volume to be realized. Agriculture is also sensitive to loading in the rain, which we get a fair bit of in Vancouver. So improving technology to make sure that we’re not losing time to weather. And then coordination of vessel arrivals, which is also something with the growth of all volumes. But agriculture in particular has created some congestion on the vessel side of things that we need to remedy. A lot of these things are hard infrastructure at that terminals or lengthening rail lines and building overpasses. But some of it is the processes and the systems that we use to coordinate activities in the ports. And I think that’s where some of the digitization initiatives that Canada has in mind and that the port is advocating and working on will help us make sure that all of the capacity that we have, we’re using it as efficiently as possible.
Speaker 2 [00:11:24] I wanted to ask you about the flooding out West, which had a huge impact on the port and had a huge impact on agricultural exporters. And I was curious to know extreme weather events are more frequent all the time. How much is that playing into your thinking as you’re planning for the next ten years? The next 20 years?
Speaker 3 [00:11:41] Absolutely. It was a very significant event and taking out the supply chain, essentially severing it for several days. Clearly, we don’t want to go through those kinds of events. Again, a big part of what the port has been doing is really thinking about the other things that we need to do with sea level rise and where there are opportunities to build more resiliency into our supply chain. We’re anxious to see investment continue to occur in the core parts of the supply chain. Those roads and rail lines and overpasses are really critical. There was a recommendation for a supply chain and infrastructure strategy. I’m anxious to see or we are anxious to see what comes from that. Also, establishment of a supply chain office, I believe, will occur in in western Canada. All of these things, I think, to bring greater focus to how the supply chain is performing, do a better job of anticipating when there may be events, emergency or otherwise, that we need to. Coordinate around. And then again, I’d say senior government need to focus on where are the targeted investments that can build resiliency into the physical supply chain.
Speaker 1 [00:12:49] Of course, all this can’t be done. Expansion can’t be done without considering sustainability. The global shipping industry in its current form is responsible for about 3% of global greenhouse gas emissions, and the shipping industry’s regulator, the IMO or IMO, has set a target of cutting greenhouse gas emissions in half by 2050. And Port of Vancouver has also set an ambitious goal of becoming net zero by 2050. Peter, I wonder if you can give us a sense of what your team’s top priorities are to get there.
Speaker 3 [00:13:21] Certainly, as you mentioned, the IMO and rules and regulations with respect to shipping is a big step forward. We’re also partnering though, with industry and with local and provincial government on initiatives to introduce cleaner fuels to equipment that’s used more domestically, whether that’s tugs and ferries. Our own harbor patrol, for example, we’re slapping biodiesel into those pieces of infrastructure. We continue to expand. As another example, we’re just on the cusp of another cruise season shore power at our cruise facility because we’re trying to get to a place where more and more of the cruise vessels have both the capability and the opportunity to plug in to shore power. We’re probably hovering around 50% in terms of our strike rate when the ship is in the right location and has the capability, we’d like that to increase. And of course, we’re very focused on the marine ecosystem and protection of endangered species. Some of the conditions attached to that terminal to approval that we receive have specifically to do with Southern resident killer whales that are an endangered species and slowing vessels down or suspending operations when they’re in proximity to that industrial activity so that they are impacted. And then finally, I would say doing our part with respect to reporting and visibility and transparency of all of those efforts so that we are as an organization and a catalyst for trade in this region, demonstrating those communities and interest groups that are concerned about these things that we’re doing everything that is possible to protect the environment that we cherish here.
Speaker 2 [00:14:52] Okay. We’re going to take a quick break. But coming up, John and I explore the various technologies and innovations at Canada’s largest ports. Welcome back. Peter, I was really interested to learn that you’re trialing the use of renewable diesel and biofuels in and around the port. What can you tell us about that?
Speaker 3 [00:15:18] The transition to fuels, whether it’s in deep sea vessels or local service industries, is something that we want to find a way to move forward with. And these are trends that are happening globally at other ports. And so we’re trying to do our part to Pathfinder and lead, but also we’re happy if someone has some success to take those and implement them in our gateway as well. A big trend that is occurring is the replacement of fuels in deep sea vessels from heavy diesel or heavy marine fuels to other forms of energy. One of the ones that is, I’d say a transitional fuel is LNG. We’re seeing that as probably being a good proportion of the global fleet is adopting that as part of their kind of pathway to meeting those longer term objectives. So we expect that to that will be fairly common in the port and we’re taking steps to support those that are setting up the systems to provide that fuel within the gateway.
Speaker 1 [00:16:13] That’s such an interesting example. We talk a lot about fuel substitution and fuel transitions and going from the heavy fuels that ships rely on, ironically, to get a lot of products to us. Consumers here in North America can be replaced with a cleaner fuel like LNG, and on it goes from there. But there’s all sorts of onshore technologies as well and technologies within the port that can add to sustainability. You’ve referenced a couple of them, Peter, but I wonder if you can help our listeners better understand a few of these technologies and maybe I can just throw two or three at you and get some quick explainers from you as we try to understand how the world of ports are transforming. Let’s start with semi automation. What’s that about?
Speaker 3 [00:16:55] Often what you’re finding at ports, what they’re doing is they’re focused on modernization through densification. So stacking higher and doing other things to increase their throughput and reliability, looking at ways to take those jobs that are particularly challenging as maybe less safe and removing the argument from the actual mobile equipment and putting them in a control room, for example, where they actually still perform the function but in a safe, temperature controlled environment. This has created, you know, concern on the part of labor groups that, you know, where does this start and where does it end? And often I would say just my observation is it’s an economic calculus to some extent of what’s possible in the footprint that’s available.
Speaker 1 [00:17:42] Maybe we can shift to shore power. BC, of course, has an abundance of hydroelectricity and you’ve got a lot of ships, as we’ve been discussing, a lot of cruise ships coming into Vancouver. How far off is it before we see the electric vehicle equivalent of cruise ships pulling into ports like Vancouver and plugging in for their charge?
Speaker 3 [00:18:03] You’ll see globally the focus is often on cruise and container vessels. They have the greatest onboard electrical draw or electrical requirements. So in our case, both container and cruise terminals have a shore power capability to some extent. The idea is to try and get that more fully deployed, particularly a cruise first, where the highest draw of electricity is or highest potential transmission is. And then at each of the container terminals. And big challenge that ports have is particularly where they are upgrading facilities in legacy jurisdictions. While there might be an abundance of electrical power in the country, it may not be immediately adjacent to those facilities that are looking to transition. And, you know, normal course of things in most jurisdictions is if you’re building a new house and you want electrical power, you go to the utility and that you are doing that, you bring the power to that location. Often this is an impediment to the electrification of some of these systems, hence transitional opportunities like LNG or even leapfrogging to new technologies like hydrogen for some of the terminal equipment where if the adjacent grid doesn’t have power to immediately go to proven technologies like electrification on, those are pieces of equipment they’re testing whether they can get to those emission reductions by bypassing electricity altogether and going to two different systems. So it’s a smattering, I’d say, of things that are going on in our port. And what that does is it kind of mirrors what’s happening globally in circumstances like ours, which are unique in every port.
Speaker 2 [00:19:36] So just to go back to emissions reductions, tell us about the eco action program and how you’re working with shipping companies to try and shrink their environmental footprint.
Speaker 3 [00:19:46] Yeah. So the port runs a suite of environmental programs, one is called Eco Action, that really incents the use of low sulfur or low emission fuels and other technologies that reduce the impact on the environment. And increasingly the vessels coming into and out of the port will be members or participants in global organizations that give them ratings. Ratings for low noise, ratings for other technologies that they might have deployed. And we want to recognize that so that as much as possible, what we’re doing is incenting good behavior rather than trying to turn around and punish bad behavior.
Speaker 1 [00:20:22] Peter, as we move to close, I wonder if you can leave us with a thought on what’s at stake if we don’t get this right and don’t do it faster.
Speaker 3 [00:20:30] Sure. You’ve heard the narrative from our organization for many years, Canada, through the Port of Vancouver, trades with about 170 economies around the world, creating well over 115,000 jobs just in the transportation sector. So it’s a really big business in and of itself, but it pales in comparison to the underlying strategy of our country. And we talked about this, you know, about the agriculture, the minerals, the consumer goods that are necessary for us to maintain our standard of living really depend on having a strong core of activity in the supply chain. Because take agriculture as an example. I mean, we produce vast quantities, far in excess of what we could ever consume within this country. Why? Because we want to be a global competitor in agriculture and create those employment opportunities. What’s necessary is encouraging agriculture, companies, railways, etc., to continue to make investments, to not just sustain our capability, but to actually enhance it, to protect and enhance our competitive position as it relates to markets. Think about what’s happened geopolitically and kind of both the challenge and tragedy of some of that, but the opportunity for Canadians, if we were more nimble in terms of being able to turn these things on, which many companies and sectors are trying to do right now, thankfully those opportunities create new markets. They create sustained opportunity for further investment. And it means really having a national strategy around transportation and economy, frankly. But transportation as a component of that and really being thoughtful about how to fund the investments that are necessary to make sure that in our case, the next time a terminal investor wants to come along and plunk down $1,000,000,000, that the question about whether it can access the market, whether that’s the Marine on the Marine side or the inland side is taken off the table, which is historically where we were, there was never any question that if we did these things that I could get my stuff to and from, that’s what we need to restore.
Speaker 1 [00:22:30] What a great message to wrap up on, Peter. Thanks for being on disruptors.
Speaker 3 [00:22:33] Excellent. Thanks very much.
Speaker 2 [00:22:37] John. That was fascinating. What were your biggest takeaways from that.
Speaker 1 [00:22:41] To state the obvious? We all take sports for granted when we talk about inflation. When we talk about growth and jobs, it really does rest a lot on what’s going on or not going on at our ports. But we also take for granted the role the ports can play in both decarbonization and the digitalization of our economy. Two big forces that we talk about a lot on disruptors, and it was really interesting to hear him talk about the need to iterate, that there isn’t a simple solution that you can plug in literally or figuratively. And great to see the Port of Vancouver kind of test and learn. And then lastly, it’s interesting to hear about the power of imagination to imagine what a port can be 25 years from now and what that can mean for the Canadian economy and the global economy in a net zero world. And Port of Vancouver is going to be taking us there.
Speaker 2 [00:23:32] So what I was struck by and I hadn’t thought about before when it comes to ports is the degree of collaboration that’s required. It’s like a supply chain in miniature. One hand relies on the next to take the baton, and there needs to be a degree of consensus, and there needs to be that creativity that comes with many different stakeholders working together and probably different ports. One of the things I was hoping to ask Peter was the degree to which he collaborates with other ports, right? You can create one of these incentive systems saying, here’s an award for low noise or whatever, but if Shanghai is not doing it, do they care? So I just think there’s so much potential and opportunity there, and it’ll be interesting to see how Vancouver takes advantage of it.
Speaker 1 [00:24:12] I suspect we’ve got lots of questions for future episodes on ports. Naomi, it’s been great to have you on the podcast.
Speaker 2 [00:24:18] Thank you so much for having me. This was really fun today. I’m Naomi Powell.
Speaker 1 [00:24:21] And I’m John Stackhouse. This is Disruptors, an RBC podcast. Talk to you soon.
Speaker 2 [00:24:31] Disruptors, an RBC Podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. For more Disruptors content, visit RBC dot com slash disruptors and leave us a five star rating if you like our show.
Jennifer Marron produces "Disruptors, an RBC podcast". Prior to joining RBC, Jennifer spent five years as Community Manager at MaRS Discovery District and cultivated a large network of industry leaders, entrepreneurs and partners to support the Canadian startup ecosystem. Her writing has appeared in The National Post, Financial Post, Techvibes, IT Business, CWTA Magazine and Procter & Gamble’s magazine, Rouge. Follow her on Twitter @J_Marron.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.