Canadian Tire buys part of a shipping port in move to upgrade its supply chain

Discussion
Photos: Getty Images/NicolasMcComber; Ashcroft Terminal
Aug 16, 2021

Canadian Tire Corp. has purchased a 25 percent stake in Ashcroft Terminal Ltd., British Columbia’s largest inland port, to support the retailer’s supply chain flexibility and sustainability goals.

PSA International Pte Ltd., one of the world’s largest container port operators, will continue to operate and retain a majority interest in the 320-acre inland transload and storage terminal.

The $40 million investment is expected to help Canadian Tire lower carbon emissions by allowing the chain to shift volume from trucks to rail in Western Canada, as well as to stage more inventory in British Columbia rather than shipping it back and forth across the country.

Canada’s largest retailer also benefits from shorter lead times and long-term savings.

“The deal secures railway capacity against our future requirements, allowing us to work across a smaller number of partners,” said Greg Hicks, Canadian Tire’s CEO, last week on a quarterly call with analysts.

Working more closely with PSA also promises to improve fulfillment performance.

“We’ve spoken before about how our merchants work with our vendors to get enough product into the country to meet the demand at the right time,” said Mr. Hicks. ”Equally important to our sourcing capabilities is having goods available in the right geography. And that is dependent on our ability to transport goods around the country as effectively, efficiently and sustainably as possible, and our investment in Ashcroft is a step in making that happen.”

Canadian Tire makes the investment as pandemic-driven headwinds around transportation and supply availability forces the company to aggressively chase inventory as well as container, shipping and warehouse capacity.

Major U.S. retailers have made recent investments in fulfillment centers near ports.

Amazon.com announced plans in early August to open a more than one million-square-foot fulfillment center in Port St. Lucie, FL.

Walmart broke ground last December on a three-million-square-foot distribution center near South Carolina’s Port of Charleston.

Greg Smith, Walmart’s EVP of supply chain, said in a statement, “SC Ports’ proven track record of handling high-demand supply chain needs for the automotive industry gives us full confidence in their ability to meet our retail distribution and e-commerce needs.”

DISCUSSION QUESTIONS: What obvious and less obvious benefits do you see coming from Canadian Tire’s equity stake in Ashcroft Terminal and partnership with PSA International? Is forming stronger connections with ports becoming more critical to support retail supply chains?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This gives a whole new level of meaning to being 'vertical.'"
"This is very clear strategic thinking on the part of their management and they should be applauded."
"If it came from Canadian Tire, it’s a good idea."

Join the Discussion!

16 Comments on "Canadian Tire buys part of a shipping port in move to upgrade its supply chain"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

As supply chain challenges persist, it’s not surprising that enterprising retailers will look for ways to improve their situation. This move by Canadian Tire to invest in the Ashcroft Terminal is a good example. It’s hard to say what the long term impacts of the pandemic may have on the supply chain, but it seems like this is a prudent move and one that many large chains that have resources to make these types of investments will look at.

Jeff Sward
BrainTrust

This gives a whole new level of meaning to being “vertical.” I certainly never imagined that a retailer would want to/have to own part of a port in order to guarantee the smooth and predictable flow of product. But here we are. And on the same day that I am reading that the going rate for containers for toys has escalated from $3,000 to $30,000+ — without a guarantee of on-time delivery.

Richard Hernandez
BrainTrust

Jeff, I just came back from a trade show and the price of a container (and finding one) was the main topic of conversation. Vendors are making choices to re-mix their assortment offerings based on the container issue. This is an interesting decision – I am curious to see what other movement this will cause. Most vendors see the increased cost of containers continuing until mid-next year.

Jennifer Bartashus
BrainTrust

A proactive move to help manage the higher transportation costs facing today’s companies makes sense, especially if you believe there are long-term structural challenges facing the industry. Truck, rail and ocean cargo capacity all remain under pressure, with driver and labor issues being key challenges. Canadian Tire’s move could pay off if it can truly lower costs and improve the efficiency of the company’s supply chain. Whether those benefits will persist once transportation capacity and cost issues normalize remains to be seen.

David Weinand
BrainTrust

Walmart rose to prominence in the ’80s on the back of its supply chain efficiencies. They did it better than anyone else. Today, the challenges are even greater and if a major retailer can gain efficiencies through an investment in a port or other links in the supply chain, it should serve to benefit both the retailer and the customer. It will be interesting to see how Canadian Tire’s goods are prioritized or if this will give them a competitive advantage. If other retailers experience greater supply chain disruptions as a consequence, I could see lawsuits, etc.

Bob Amster
BrainTrust

This looks like ownership of part or most of a seaport is going to become a marketable asset with the company that wants it the most, has enough money, will purchase it from the previous owner, and so on. Who would have thought?

Ron Margulis
BrainTrust

This is part of a new trend in logistics to either invest in or own adjacent links in the supply chain. It happened in trucking and air freight a while ago, it’s happening with ports and other modes of transportation now and will happen with manufacturing before too long. For the largest retailers, they understand that controlling as much of the entire value chain as possible is increasingly a competitive advantage and will devote resources to that end.

Lisa Goller
BrainTrust

This move boosts Canadian Tire’s retail power by investing in infrastructure to mitigate the risk of shortages.

Beyond influencing the flow of goods, benefits include speed and sustainability by using rail to serve a vast country. Increasing shipping and warehouse capacity will help Canadian Tire serve more omnichannel shoppers. The retailer’s scale, and tech and logistics partnerships can modernize port operations amid costly congestion.

More retail supply chains will collaborate with ports for efficiencies that benefit businesses and consumers.

Melissa Minkow
BrainTrust

We are going to see more and more investment in supply chain ownership by retailers as time goes on. When one retailer does it, it starts to set that as the competitive standard in the industry. With the recent news that USPS is thinking through holiday order surcharges for retailers, I’d imagine that facet of distribution will be next in terms of creative vertical investments.

Ian Percy
BrainTrust

If it came from Canadian Tire, it’s a good idea.

Just the mention of Canadian Tire brings a tear to the eye of every Canadian living in the U.S. The “mother of all destination stores” before there was even a dream of a Home Depot, Trader Joe’s or Lowe’s. Founded in 1922! They even had their own currency that accumulated in every glove box or dresser drawer that I swear was more treasured than the dollar. As proud as I am of having dual citizenship and living in Arizona, I can’t hold back a sigh for my native land.

David Spear
BrainTrust

Solid business decision by Canadian Tire CEO Greg Hicks. It addresses short term issues that they’re experiencing as a result of the pandemic — and just think of the new ways of working and new disruptive partnerships Canadian Tire can develop in the future. It fosters tremendous business model flexibility and forces the supply chain to innovate around the edges.

Rich Kizer
BrainTrust

Smart move by Canadian Tire. The big challenge is not getting the containers to port. The challenge is getting containers off the ships, getting them inspected, and then finding trailers to make deliveries. If that gets all smoothed out, beautiful.

Andrew Blatherwick
BrainTrust
The strategic value of this type of development could be huge for Canadian Tire. They have always been innovative in their view and operation of their supply chain and this is just another example. We know from the last two years that the supply chain is absolutely central to the success of retailers. The ability to secure inventory and move it efficiently to the right locations can make or break a retailer’s performance. The long term value is the ability to be more in control of that process, having the ability to control the efficient movement of inventory plus be more sustainable as pressure from the environmental issues intensify. This is very clear strategic thinking on the part of their management and they should be applauded. Some will argue that they are retailers and not a transport company and they are not taking over the business just making sure they have some element of control. The additional benefit, which would be a part of the thinking, is that other retailers will have to make greater… Read more »
David Mascitto
BrainTrust

For companies like Canadian Tire, with large volumes of imports, this is a great idea as it gives them “priority” access to the their shipments at the ports they own and can also be seen as an additional revenue stream. It also gives CT an advantage over competing retailers who are currently all vying for the same space and shipping equipment to get their merchandise into warehouses and stores.

Craig Sundstrom
Guest

Canadian Tire, with $15B in sales … so multiplied by, say, ten to get to the U.S. equivalent and we find it’s about fully half the size of WalMart. Translation: it’s big (ou <> for our French-speakers).

Nice fun if you can get it, I think sums this up, but of course few can “get” (afford) it. This is really just a lesson in how — and why — the big keep getting bigger.

Ananda Chakravarty
BrainTrust

Just to be clear, Ashcroft is a dry port — basically a connecting link that allows operations from the sea via internal roadways or rail. The functionality for Canadian Tire would be the same as a large regional distribution center, especially warehousing. The fact that it’s a partial purchase and not bought outright suggests better pricing on storage and reduced port costs (e.g. demurrage costs) for goods shipped into BC. Typically containers are allowed to sit for free for a few days on port property, then demurrage charges kick in if left on the facility. This wouldn’t be unusual for Canada based on the low density of metro areas in the region. Great cost savings for Canadian Tire, more influence on inventory storage including extending its inventory capacity at lower cost and possibly lower distribution costs. I don’t think this would be a trend across most retail supply chains.

wpDiscuz
Braintrust
"This gives a whole new level of meaning to being 'vertical.'"
"This is very clear strategic thinking on the part of their management and they should be applauded."
"If it came from Canadian Tire, it’s a good idea."

Take Our Instant Poll

Is forming stronger ties to ports becoming more critical to support retail supply chains?

View Results

Loading ... Loading ...