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VIEWPOINT: Are we ready to do what it takes to become a global supply chain leader?


As Canadians can we legitimately be accused of too often shooting for the bronze rather than reaching for the gold in our business decisions?

That was the charge made by Perrin Beatty, president and CEO of the Canadian Manufacturers and Exporters, and a former cabinet minister of the Brian Mulroney government, at the recent Transportation and Outlook Conference held by the Chartered Institute of Logistics & Transport in Ottawa. Its strong criticism from a man whose background gives him the legitimacy necessary to make it. Ive got to admit, the comment left me thinking, forcing me to piece together concerning threads of evidence Ive been picking up over the past year.

Consider for example the remarks of Richard Simpson, director general, electronic commerce for Industry Canada. In a world growing flatter by the minute with business waking up to the benefits of increasing market reach and improving coordination with suppliers to enhance supply chain efficiency, strong technology platforms and an open mind when it comes to adoption of new technologies are key to competitiveness. But Simpson is concerned that Canada is not keeping up.

We are very far behind the US and increasingly trailing our US competitors. RFID adoption is no exception to this, Simpson told the annual RFID Canada conference last month, adding that the degree of separation between Canada and Europe, and even smaller economies, when it comes to RFID adoption is widening. In fact, he said if you look at the numbers too much you can go from the trough of disillusionment to the valley of despair.

While a small number of industries are making headway with RFID and other leading technologies, Simpson said meetings with business leaders showed that very few businesses in Canada at this point see a business case for RFID adoption.

Simpsons concern was hauntingly similar to the concerns raised about the competitiveness of Canadian supply chains by the excellent research conducted by Industry Canada last year. The research found that Canadian manufacturers would have to increase inventory turns for raw materials by 35% to reach current US inventory turns. Canadian wholesalers have a 17% agility gap with the US; retailers have 41% gap with the US. Total logistics costs, in part due to the impact of slower turns, are higher in Canada than in the US for all three major sectors: Wholesale (22% higher); Retail (16% higher); Manufacturing (2% higher).

Efficiency improvements will no doubt require investment in technology yet the research also found that close to 54% of Canadian firms have no supply chain management solution in place and no short-term plans to do so.

And, of course, weve been hearing for some time now about how ridiculous it is for a country as dependent on trade as Canada happens to be, to not have a national infrastructure strategy. About 60% of our infrastructure is between 50 and 150 years old, and more than half of the systems have reached 80% of their service life. Estimates of our infrastructure deficit the difference between what is being spent and what actually needs to be spent range from $50 billion to $125 billion. And dont even get me started on the Windsor crossing debacle.

As Beatty himself pointed out: You can have the best product in the world, but you will lose if you cant guarantee it getting there on time. Ultimately, supply chains are only as good as the infrastructure that supports them.

Transshipments of US-bound goods through Canadian ports have been a thriving business over the last decade. About 10% of the trade between North America and Asia goes through Canada. Beatty believes we should be aiming to have that total hit 30% by 2020 but that to do so would require a national strategy for a leading-edge logistics system.

And while capturing that large a share of transshipments may seem ambitious, and the creation of a national logistics strategy unlikely based on past government indifference, Beatty urged us to look at all the advantages we have in our favor: the luxury of having access to three oceans; being a next door neighbor to what is still the largest economy in the world; and an educated workforce. There are few countries that have so many advantages.

But, as Beatty pointed out, the rest of the world wont simply stand still while Canada comes to understand it shouldnt take such advantages for granted.

WORTH REPEATING

The risk today is NOT doing anything.
Prof. Charles McMillan
Schulich School of Business
York University