Inside Logistics

It’s not over

Canadian supply chain professionals can’t rest yet


December 21, 2011
by Tracy Clayson

MM&D MAGAZINE, NOVEMBER/DECEMBER 2011 PRINT EDITION:

Sometimes, it’s great to be Canadian. Thanks to our stable economy, we have a lower unemployment rate than the US and are benefiting from a growing global demand for our natural resources. As the top economic performer among the G8 countries, we have managed to maintain a strong currency and investment opportunities. While a stronger US economy would help shift stagnant market ratings, it appears the pace of recovery will be slower than hoped.

In spite of the recent decision by the Obama administration to delay approving the Keystone Pipeline—a system to transport synthetic crude oil and diluted bitumen from the Athabasca Oil Sands in northeastern Alberta to various US destinations—there are brighter days ahead for Canada’s global trade for energy products. Prime Minister Stephen Harper is making headway to bring Canada into trade negotiations with the US-led Trans Pacific Pact (TPP) trade agreement. Along with Australia, New Zealand, Malaysia, Singapore, Brunei, Chile and now Japan, Canada is participating in the TPP to better access Asian markets. Given the weak Eurozone economy resulting in many European countries having to bail out the few that lacked fiscal responsibility, expanding Canada’s reach to other emerging markets as an alternative makes sense, but involves many complex challenges. Assessing the risks of doing business in BRIC economies—Brazil, Russia, India and China—is key. While these are regions other countries are engaging with, Canada has room to grow its relations with them as well.

Auto sector woes
This year, the auto sector showed signs of recovery following the market shake up and historic bail out in 2010. Still, there were major setbacks due to delays and shortages from parts suppliers in places affected by natural disasters, such as Japan and Thailand. Assembly plants in North America and dealerships faced abrupt interruptions in production output and delivery that resulted in rising vehicle prices. Sourcing products from overseas markets also resulted in increased transportation costs and service backlogs due to shortages of equipment and drivers. This year also saw a dwindling number of transportation companies in a high merger and acquisition environment.

Increased labour costs and rising debt load forced yet another shake up in the automotive industry when Allied, a major player in the car haul business, pushed the panic button in an attempt to get rate increases. This poorly executed demand by Allied for price increases involved holding back vehicles from delivery and prompted swift action from most auto makers to change haulers and take legal action.

Blackberry service interruptions this year may have encouraged customers to switch to other devices such as the iPhone. This helped prove that tech companies must respond quickly and brace for major losses. Timing for product launches are also a big part of success in capturing larger market share. An example of this was when Apple’s iPhone suffered declining sales due to delays in the release of the iPhone 4, while Google’s Android swept in and grabbed 52 percent of global market share for smart phones. According to Dan Gallagher, technology advisor with Marketwatch, the company accomplished this through marketing efforts, lack of competitive offerings and new operating systems.

Keep that morale up
How can organizations better control company value during times of change, when top players are gone or are perhaps reaching the peak of their performance? Technology companies are bracing for expanding competition with higher demands for innovation, establishing best vendors and reliable supply chains. During unstable times, challenges like employee commitment and morale become another obstacle to continued growth. Loss of key product developers and business leaders can significantly affect consumer confidence. With company shakeups, firms are vulnerable to recruiting raids and staff turnover. As well, losing star employees to competition can mean losing large groups of clients along with them.

JCPenny, the US retailer, has aggressively gone after major talent by hiring former executives from Apple and Target to reinvent the company and attract a wider demographic. Here in Canada, Hudson’s Bay Company sold 220 Zellers stores to Target for their expansion into Canada by 2013, a good sign that US retailers are keenly interested in expanding into Canadian markets. The US still has a lot more buying power compared to Canada. Canadian retailers face unfair competition with US counterparts due to price gaps. The Canadian Senate investigated price disparities and revealed international distributors and manufacturers give better prices to US retailers and have higher tariffs for Canadian retailers. According to the Retail Council of Canada, duty for hockey skates from China to the US is set at three percent, while the duty on Canadian products is between 18 and 22 percent.

How does this affect the supply chain professional? As Canada increases its trading power and global business replaces reliance on US opportunities, today’s supply chain executives must develop their skills. This includes the ability to manage more suppliers, access real time data, negotiate best solutions for clients, control costs with key analytical information and motivate a team of dedicated staff. As well, the MM&D/Purchasingb2b/PMAC 2011 supply chain salary survey shows wage increases ahead for logistics professionals with designations. As always, education equals success. MM&D

Tracy Clayson (tracy@in-transit.com) is managing partner, business development, of Mississauga, Ontario-based In Transit Personnel.