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Global supply chain disruptions have had a silver lining for Canadian companies able to offer solutions that strike a better balance between traditional priorities like speed and cost, with resilience and sustainability.gorodenkoff

The pandemic exposed cracks in the global supply chain and businesses are eager to adopt solutions, creating new opportunities for Canadian startups.

Oshoma Momoh, chief technical advisor for the MaRS Discovery District in Toronto, says most of the conversations around supply chain innovation prior to the pandemic focused on reducing costs and increasing speed of delivery. That strategy resulted in lower inventory levels and a greater reliance on fewer suppliers and distributors, which was ultimately harder to manage in the face of sudden disruption.

With the onset of COVID-19, Mr. Momoh says businesses suddenly had “trouble with demand prediction, or having enough supply to deal with a shock to the system. Or could no longer predict the routes for how to move items as well as they could before, or depended on too few suppliers of critical components.”

He describes those conditions as huge problems, “but also a big opportunity for people to solve.”

In the nearly three years since the start of the pandemic, a smattering of Canadian startups have emerged to address these issues. The industry – made up of a complex web of manufacturers, buyers, sellers and transporters – is racing to modernize. It’s adopting the latest tools in artificial intelligence (AI) and the Internet of Things (IoT) as it seeks a better balance between traditional priorities like speed and cost, with new ones such as resilience and sustainability. With this effort gaining momentum, Canadian startups enjoy a few unique advantages.

The country’s relatively small population means that startups looking to offer new solutions to the global supply chain often need to look outside of the country’s borders to find their first customers. “Canada is not a fast adopter of tech itself, so often our start-ups find that they have to sell internationally in order to get their first sale, or their first ten sales,” says Mr. Momoh.

At the same time, the Canadian government has invested heavily in AI research and development, specifically in the form of the technology supercluster Scale AI, which was established to help accelerate the adoption of AI technologies. The project has received over $280 million from the federal and Quebec governments to date, invested across six focus areas, including Supply AI, which is dedicated to enhancing supply chain innovation, developed in partnership with MaRS.

“As a country we have been investing in AI for decades; we’re one of the world’s leaders in AI research,” Mr. Momoh says. “Now we’re taking the research and putting it into concrete applications.”

He adds that companies are “using AI to optimize operations in supply chains, make them operate more efficiently to save costs, or make better decisions about things like demand forecasting or inventory restocking, or using AI to improve sustainability.”

One historically wasteful corner of the global supply chain is the food industry. About 58 per cent of the food produced in Canada is wasted each year, of which 86 per cent is lost along the supply chain, and about 45 per cent is avoidable, according to Vancouver-based startup FoodMesh. At the same time, it notes, roughly one in eight Canadian families are food insecure.

The B2B platform seeks to make it easier for food businesses in Canada to redistribute unused food to those in need. Edible unsold food is routed through a network of charities and food banks, while food that’s unsold is diverted to alternative markets, according to best and highest use, including the agricultural sector for animal feed, with the remainder going to compost.

“Our job is to make sure that unsold food is getting to where it needs to go, depending on the circumstance and location,” says the company’s CEO and co-founder Jessica Regan. “Currently we’re helping divert about a million meals a month.”

The online marketplace connects, coordinates, tracks and redistributes unsold food across roughly 900 Canadian organizations. The effort is part of a trend toward creating a more “circular supply chain,” where unused products or even by-products are “upcycled,” or fed back into circulation, rather than disposed of. Ms. Regan gives the example of a beer maker using its spent grain to create flour or baked goods with a unique flavour profile.

“That’s the most exciting evolution in the supply chain, that there’s this new market segment that’s growing very quickly, and innovators and entrepreneurs that are using aspects of the supply chain that were waste products and recirculating them back into the supply chain, and making businesses out of it,” she says. “It’s freaking cool, and I’m very excited about it.”

That trend, she adds, would not be possible without software platforms that can match those with excess supply or by-products with those who can upcycle them in a timely and efficient manner.

FoodMesh has been in business since 2016, but Ms. Regan says things really took off in the wake of the pandemic, when restaurant suppliers found themselves without customers for bulk food items. Furthermore, while food waste has long been a global challenge, the industry has gotten more serious about reducing its environmental impact over time.

“If food waste was a country, it would be the third largest contributor of greenhouse gas,” says Ms. Regan. “It’s really about removing the complexities to help businesses do the right thing.”

Ms. Regan is optimistic about the future of Canadian innovation in the supply chain industry but warns that progress has historically been slow and steady.

Until recently, many aspects of the supply chain have failed to keep up with the pace of innovation and have yet to adopt solutions that have widely been embraced elsewhere in the economy.

“The issue isn’t creating the new thing; it’s packaging the old thing in a way that can be adopted,” explains Martin Sendyk, president and CEO of Lytica, which provides pricing data to the electronic components industry. The Ottawa-based startup was founded during the pandemic and it has seen steady growth year over year. According to Mr. Sendyk, the roughly $500-billion electronics-components industry has long struggled with a price transparency problem, resulting in costs and supply levels that vary widely between customers.

Previously, buyers in the industry worked on handshake deals, paper contracts and frantic phone calls to places around the world in search of suppliers. By equipping purchasers with real-time market data, Mr. Sendyk says they are able to source electronic components faster, with the knowhow needed to negotiate a better price.

Mr. Sendyk says Lytica’s software-as-a-service solution is the first to offer purchasers of electronic components real-time pricing information, resulting in an average savings of 10 per cent on procurement.

“They say ‘necessity is the mother of all invention,’ but it should be ‘necessity is the mother of all adoption,’” he says. “There’s a lot of necessity right now, and so a lot of Canadian innovation and technology is being adopted.”

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