TABLE OF CONTENTS Mar 2014 - 0 comments

On the same page? Getting ready for increased global freight volumes also means ensuring your carriers are up to the task

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By: Lou Smyrlis
2014-03-01

Go global or go home. It’s a business mantra Canada’s supply chain managers have had to increasingly adapt to over the past 20 years as their companies sought to grow by looking beyond their traditional regional and national markets. They’ve had to master operating much longer, much more complex supply chains utilizing a variety of carriers and modes and negotiating the pitfalls of different currencies and customs regulations.

The pace of this change was set back by the Great Recession and the slow recovery but many experts believe the recovery is about to pick up speed. In 2014, exports are expected to lead Canada’s economic growth. They may even surpass the $487 billion record set back in 2008, particularly because of the momentum south of the border.

Yet the best laid supply chain plans can fall apart if the carriers contracted to move this international freight aren’t up to the task. The reality is the nation’s carriers, and in fact carriers around the world, have spent the past five years looking inward trying to reduce costs and capacity. Are they ready to look outward towards an expansion of global freight volumes? Are they ready to translate that into investments in new equipment, systems, staff and services? Our own research has traditionally shown that transportation and logistics CEOs are consistently less optimistic about future growth than their customers.

A recently published PwC survey sheds light on the question. PwC surveyed 1,344 business leaders in 68 countries around the world, including 101 transportation and logistics company CEOs, in the last quarter of 2013. It’s good news that the overall survey found a leap in CEOs’ confidence in the global economy. Similar to our own research findings, the PwC survey found transportation and logistics company CEOs were less optimistic than their peers. But they are more optimistic than they’ve been in the past. Forty-five percent of transportation and logistics CEOs believe the economy will improve in 2014 while just 8% think it will decline. In 2013 this figure was at 38%. Our own survey of Canada’s motor carrier executives found 40% expect freight volume growth in 2014, a 3% increase from the number who thought likewise the previous year. (For more detailed analysis of our research findings see the Modal Update digital issue being e-mailed to your inbox mid March).

But this wouldn’t be transportation if the tailwinds supplied by a global economy growing in strength were not tested by the headwinds created by a series of challenges. PwC also surveyed transportation and logistics company CEOs on their concerns and what they said reveals the obstacles that lie ahead and the role buyers of transportation services must play in dealing with them.

Last year, 61% of T&L CEOs were somewhat or extremely concerned about energy costs. This year that figure jumped to 76%. Since 2001 the price for crude oil has risen fourfold. This can only mean increased upward pressure on fuel surcharges. It will be up to buyers of transportation services to ensure it also means greater emphasis on adoption of fuel efficiency best practices.

Only 43% of transportation and logistics CEOs are concerned about the speed of technological change - fewer than across the overall sample. That’s probably because fewer see product and service innovation as their main route to growth, according to PwC. Lack of innovation does not bode well for improved supply chain communication and efficiency. Buyers of transportation services must push their carriers on this.

Transportation and logistics CEOs overwhelmingly agree they’ll need to change their talent strategies to cope with future trends. But just 19% are already doing so, compared to a third of CEOs across the overall sample, and only 30% believe their HR departments are well prepared. Again, that’s an issue for which buyers of transportation services must demand improvement. All the investments in equipment and systems are for naught if the right people aren’t in place to drive them.



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