Short-term Calgary supply chain challenges ahead from impact of BC floods

Though major highways, rail lines are in ruin after BC floods, supply chain world is agile, said SAIT expert

An image of the current state of Highway 5 in British Columbia between Merrit, B.C. and Hope B.C. BC TRANSPORTATION

Consumers in Calgary are asked to have patience as the fallout from the devastating floods in B.C. impacts transportation of goods to the city.

Currently across B.C., floods have destroyed highways, rail lines, and pipelines that provide vital links from Western Canada to ports on the west coast.

“This is a devastating situation that we’re dealing with,” said Deborah Yedlin, President and CEO of the Calgary Chamber of Commerce.

In the short term, said Yedlin, the collapse of supply chains that go through B.C. is likely to lead to inflationary price hikes on goods. The amounts of goods available for businesses and consumers is also likely to be reduced.

“This is going to cause the price of goods to go up,” she said.

Speaking to the media yesterday, B.C.’s Minister of Transportation Rob Flemming said that reopening highways was a top priority for the province.

“We fully recognize how important it is right now in British Columbia to reopen the connections from the lower mainland to the interior to get supply chains moving again,” he said.

As of yesterday, Bloomberg was reporting that CP and CN rail tracks were out of operation due to mudslides in the province. Significant numbers of mudslides have also damaged or destroyed highways leading into the interior of B.C. The Trans Mountain pipeline was also shut down, ending shipments of approximately 300,000 barrels of oil a day from Alberta to the coast of B.C.

“I think that what we have to recognize is that the value of Alberta’s merchandise exports to British Columbia exceeds goods exports to all of Asia, and B.C. exports more to Alberta than it does to China,” said Yedlin.

Support for local businesses needed from consumers, and the government

Yedlin said that the supply chain issues have already caused issues for local businesses.

"Now we have to recognize that perhaps we have to have a bit more patience to continue to shop local, and to continue to support local businesses, because the reality is this is going to add another layer of stress," she said.

"Please have patience, and if you don't get it today and it takes a couple more weeks, it's not the end of the world."

Yedlin used the example of Kal Tire, a local member of the chamber that has a distribution hub in Burnaby, B.C.

"And so when they have trucks going back and forth to supply their stores in Alberta, that is going to be a big challenge for them," she said.

The Calgary Chamber of Commerce plans on continuing to advocate on behalf of its members to the Alberta provincial government, and to the federal government.

"So now we need to understand what the impact is on those businesses, and again, talk to all levels of government to say, 'this is this is something we didn't expect,'" she said.

"We are probably going to have to look at ways to support our businesses in the short term as they face this."

During city council's Community Development Committee meeting this morning, Ward 7 Coun. Terry Wong asked city administrators what could be done to assist with the crisis in B.C.

Katie Black, General manager for community services, said that Calgary has a "long, proud tradition of helping each other out," and that the Calgary Emergency Management Agency has protocols in place to assist in times of emergency.

"At this point, as you have heard, Calgary is ready, willing, and able, but it's going to be essential that we wait for that formal request to come," she said.

Any formal request made would come direct from the B.C. government to the government of Alberta. Then it woulc come through to CEMA via the Alberta Emergency Management Agency.

Increasing transportation costs

Yedlin said that Chamber of Commerce members had already faced increasing transportation costs this year, largely due to Covid-19. Containers being sent to west coast ports like the one in Vancouver were in excess of $30,000, up from $2,300 to $2,500 last year.

Local businesses relying on a supply chain that would normally see distribution warehouses in Calgary filled from ports and warehouses in B.C. are now having to turn to more expensive alternatives. These include more shipments by air, and through the United States.

"They were already experiencing higher costs and challenges getting the goods that they needed to supply their stores, and get the raw goods to make things as well that they're selling."

Gerry Duffy, a supply chain management expert and instructor with SAIT's School of Business said that the United States is a viable way for Calgary businesses to transport goods in until the B.C. supply chains are re-opened.

"America is the alternative, but what it's going to do is it's going to add additional logistics costs onto what we've got," he said.

The challenge he said is whether companies will be able to find capacity at ports in Los Angeles, Long Beach, or Seattle.

In a statement made by the White House earlier in November, the United States Government has committed to working to free up congestion at those ports.

"One of the key challenges to restoring velocity and fluidity to the Ports of Los Angeles and Long Beach has been the shrinking amount of space on the ports themselves," said the White House.

Yedlin said that some shipments expected by members of the Calgary Chamber of Commerce had begun to bypass American ports due to shipping delays caused by Covid-19.

"The supply chain issues were such that we know that there were cargo ships anchored off the Port of Los Angeles, and some of them had taken an alternate route to come up to the Port of Vancouver for unloading," she said.

Duffy said that another less ideal alternative was air transport.

"Air is an exceptionally expensive way to move products around the world, certainly around the country, and we also have a very small capacity in terms of moving things," he said.

Passing on costs, and shipping delays to consumers

Duffy said businesses would likely pass on increased shipping costs to consumers. It would be up to individual companies to decide on how much of that cost they would pass on.

"It really depends on the company there—every company is going to make their own judgment on this. Is it something we can factor into the cost of doing business? Or is it something that we're going to just pass on to the consumer?" he said.

"I would guess it would be a mix of both."

Another challenge Duffy identified is Calgary operating as a distribution hub for Western Canada, and that storms outside of B.C. have also impacted transportation to those centres.

"Calgary is a great logistics hub of Western Canada. It's just ideally situated," he said.

"So if we were bringing things into Calgary to distribute to Western Canada, then obviously the easiest route would be going up through Idaho or Montana, but they've also been somewhat impacted by these storms," he said.

Local businesses and logistics companies looking to get goods into Calgary may have to turn to longer distribution routes coming east through Saskatchewan, Manitoba, or even other Midwestern U.S. states.

Rebound likely to occur quickly, when it occurs

Duffy said that although the challenges to supply chains will persist in the short term, he said that long-term the chains are likely to rebound.

"I think even though we're going to have seen some short-term impacts, I think we'd be pleasantly surprised at how quickly things go back to normal," he said.

"The logistics world and supply chain world is remarkably agile, they respond very quickly, and they've got an operational focus."

Duffy said that the priority for restoring supply chains should be put on rail transportation due to the large volume of goods trains can carry.

"One container of product can move by a truck, and if we think then of the capacity of a train it can move anywhere between 240 and 300 containers per train," he said.

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