British Columbia floods could have a ripple effect on Quebec’s supply chain

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McGill University professor and logistics specialist John Gradek has a message for Quebecers who keep putting off their Christmas shopping.

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“Whatever you see on the shelves today, get it,” he said in a telephone interview. Gradek coordinates McGill’s aviation management program. “You have thousands of containers off the coast of British Columbia on ships with a lot of Christmas supplies. We have no idea how long it will take to restock the shelves. “

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Extreme rains in British Columbia this month have damaged road and rail connections and cut off access to the Port of Vancouver, Canada’s busiest port. The devastation deals another blow to a supply chain already weakened by 20 months of the COVID-19 pandemic and a series of transportation disruptions compounded by a shortage of truck drivers and other key personnel.

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Most of the large retailers have already received their orders before next week’s Black Friday, which means that “there should not be too many visible impacts in addition to those that are already evident,” said Jean-Guy Côté, director of Quebec Retail. Council. . “We don’t think the problems in Vancouver are making things worse.”

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Manufacturers and retailers across the country have had to overcome multiple supply setbacks in recent times, beginning with a 2019 strike at the Canadian National Railway and continuing with last year’s rail blockades, two work stoppages at the Port of Montreal, and numerous factory closures in Asia, Europe and North America due to the COVID-19 outbreaks.

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Together, these events have led to sharp swings in demand, product shortages, shipping delays, and sharp increases in the prices of raw materials and other key components.

Shipping containers now require 73 days to cross the Pacific Ocean and dock at their destination port, with much of the time spent waiting offshore, according to Freightos.com, a global cargo booking platform. That’s more than double the 20-30 day average that was the norm before last year.

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Costs have also skyrocketed. Shipping a container full of ceramic by ship from Turkey to Quebec costs about $ 20,000, nearly seven times the price before the pandemic, according to Yannick Lapointe, head of business operations at Profil Design, a floor covering retailer in St-Eustache. . The same container now costs $ 30,000 to reach Quebec from Asia, up from $ 5,000 before the pandemic, he said.

“We pay more for transportation than for materials,” Lapointe said in an interview. “It’s crazy.”

Véronique Proulx, Director of Manufacturiers et Exportateurs du Québec, adds: “Our entire ecosystem has been turned upside down and this has been going on for two years.” His group represents some 1,100 Quebec manufacturers.

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While no one is suggesting that staples will be in short supply here, Vancouver’s status as a key entry point for thousands of consumer goods made in Asia means the latest climate-induced disruption will have a ripple effect everywhere in the east. , including Quebec, industry experts and insiders said. This could include temporarily affecting the supply of anything from clothing to sporting goods to toys, they said.

“It has been 20 months that the supply chain has become fragile due to national and international problems,” Francis Mailly, head of Quebec government relations at the Retail Council of Canada, said in an interview. “Many of our members have taken steps to mitigate risks and increase inventory before the holidays, but what is happening in the Port of Vancouver will obviously have an impact. It aggravates an already difficult situation. “

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Supply networks always face increased stress in the run-up to the Christmas season.

“If you’re Christmas shopping on December 24, it can be difficult to find everything you’re looking for, and the pressure this year is even higher,” Mailly said. “So it is a good idea to buy as soon as possible. If you are looking for specific products for the holiday season, it would be a good idea to be flexible. Some people may need to consider alternatives for some gifts because not all may be available. “

Supply chains in the province will likely return to normal in mid-2022, according to estimates by the Quebec Retail Council.

Most experts polled by research firm Oxford Economics in mid-November predicted that global supply chain bottlenecks will end sometime in the second half of 2022 as companies rebuild inventories. Still, risks remain, including a shortage of materials and labor, Oxford Economics said.

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While the problems in Vancouver are probably short-term, “the question is, when will the next outage come?” Gradek said. “The 100-year floods or the 100-year ice storms that we’ve seen in recent years are no longer 100-year events. Will they become five-year events or three-year events in the future? That’s something we need to think about. “

Meanwhile, several Quebec retailers are considering changes to their supply practices.

Some have started buying additional quantities of materials to ensure they can withstand further mishaps. That’s the case with Profil Design, which has tripled ceramic inventories and is renting space in four new warehouses to store the products, Lapointe said.

“Our store has been around for 30 years and we’ve always operated the same way, but now it’s like we have to learn a whole new way of doing business,” he said. “Every month we have to know a new reality.”

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Other companies are exploring alternatives in Mexico and the US to better diversify their supply chain and make it more robust, Côté said.

“We have to reconfigure the supply chains, shorten them, make them more local and define Plan B and Plan C so that you have alternative courses of action if problems arise,” Gradek said. “Supply chains have gotten long and thin. It doesn’t take a lot of force to break them. “

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