On a chilly Toronto evening this January, four presidents from leading Canadian companies, each renowned for their foresight, business acumen and leadership, gathered to share their views with a roomful of delegates comprised primarily of professional logisticians at a conference organized by the Council of Logistics Managements’ Toronto Roundtable.
The roundtable symposium, entitled “Redefining Business Issues in Transportation: A President’s Perspective” took place with a measure of economic change in the air, and while plummeting stocks weren’t acknowledged except tacitly by these well heeled speakers, there seemed to be a consensus that the unbridled business optimism of the last five years may be yielding to a new phase in the industry’s development. The Council of Logistics Management: “The Council of Logistics Management is a professional business organization of individuals throughout the world who have interests and/or responsibilities in logistics and related functions that make up the logistics profession. The CLM membership consists of 15,000 women and men from a diverse worldwide population.”
At least one of the speakers suggested, however, an economic change, even if it reflects a downward turn and a departure from the phase equilibrium we’ve enjoyed, is important for sound business development. In fact, prolonged equilibrium may be a precursor for failure, whether it happens due to the economic business climate or unwittingly. After all, the means to be agile in business can atrophy during these periods of relative equilibrium.
David Faoro, director of transportation, Unisource Canada, and past president of CLM Toronto Roundtable, chaired the panel and began the evening by pointing to the widespread change in logistics as shown by the mandate of the evening’s roundtable. In addition to introducing each guest panel member, he noted the mission of the Council of Logistics Management, the preeminent organization of its kind, worldwide.
The panel of keynote speakers, which included Scott Corrigan, president, UPS Canada, Peter Jamieson, president, Wheels International Freight Systems, Allan Robison, president & CEO of Reimer Express Lines Ltd., Ron Tepper, president and CEO, Consolidated Fastfrate Inc., offered candid and insightful views about the fast changing landscape in transportation and logistics. In doing so the panel shared several commonalities with regard to their visions of the future of the supply chain, the impact of E-business and opinions about some of the greatest hurdles converging upon their industry.
For example, on the cusp of an overall shift in the economy, each speaker signalled that irrespective of the most recent news, a new phase is beginning in the logistics and transportation marketplace that mirrors what logistics professionals have so often called for. It has come on the heels of a phase of stabilization in the industry, Mr. Robison noted. Today, we’re entering a phase he dubbed “the squeeze years,” to reflect the broadening role of many carriers.
As a result, carriers are more involved with coalition building, instead of strictly adhering to the go-it-alone, Lone Ranger competitive direction upheld by many. In this new phase alliances are one of the key ways many in the field of transportation are embracing the information driven E-business economy and globalization in order to fulfill their integral role as carriers in the overall supply chain. In addition, several of the keynote speakers, such as Mr. Corrigan and Mr. Robison, emphasized contending with the converging challenges has prompted the traditional roles that providers once assumed, from freight carriers to logistics providers, to often blur.
Mr. Corrigan, who has been associated with UPS for 27 years and president of UPS Canada Canada Ltd. since 1997, began the series of four presentations by identifying three primary issues impacting the transportation industry, namely, globalization, the internet as a pervasive force in commerce and the constantly rising value of logistics to all businesses of all types and sizes.
In particular, he referred to two factors as impactful on transportation in today’s complex global market. “First, this market is not entirely open at least not yet and second it is linked by technology,” he said, citing customs regulations as not keeping up with the pace of change and needlessly slowing the customs clearance process.
“For example,” Corrigan elaborated, “customs thresholds are obsolete in many countries including Canada. The deminimus level is currently set at (CD)$20, one-tenth that of the United States. The low value shipment threshold is set at (CD)$1,600 compared to (U.S.)$2,000. Obviously, these thresholds affect the majority of cross border shipments, which needlessly complicates and slows customs clearance.”
His remarks about transborder challenges were clearly echoed by other panel members. It’s a message, though, that has percolated throughout the industry and there are signs that governments, worldwide, are at least beginning to respond.
Reimer Express Lines president & CEO Allan Robison also acknowledged there are border related elements that can slow freight, as evidenced by the fact that Reimer Express Lines has developed border offices on both the Mexican and Canadian-U. S. borders to ensure cross-border shipments proceed smoothly.
“With customers concerned about the challenge of crossing borders, we have border ambassadors that clear every shipment for our customers at each border. We have done such a good job at the Canadian border that the Mexican Customs people came to see why it is so successful.”
Large transportation companies, such a UPS and Reimer Roadway, as well as small organizations, even those possessing only a few vehicles, have collectively found that despite the North American Free Trade Agreement (NAFTA), signed in 1994, and its aim to improve the flow of goods, Customs remains an impediment. The impact on transborder freight is massive. After all, up to an estimated 80 percent of the goods carried across borders on the North American continent is carried on 18 wheel vehicles, according to the U.S. Department of Transportation.
The story given by statistics about the cost of the border and trade are staggering. In 1997, industries spent an estimated $3.2 billion just to file the proper papers with U.S. federal agencies monitoring what comes into and goes out of the United States. The U.S. government spends an estimated $11.4 billion to $20 billion to process the paperwork annually.
Dozens of government agency approvals remain in place and border checks cost plenty of downtime. But the good news is that to help diminish the paperwork at the U.S.-Canada and U.S. Mexican borders, a pilot project called the North American Trade Automation Project (NATAP) has been initiated along the Mexican and U.S. border, and the next phase is the U.S. Customs Service International Trade Data System, opening in June at the Peace Bridge border crossing at Buffalo, N.Y. The U.S. government has identified Laredo, Texas, where a truck now crosses the border every 30 seconds, as the next test location.
In an international marketplace, however, where UPS delivers more than 13 million packages and documents daily in more than 200 countries and territories using 140,000 vehicles, and also has the world’s ninth largest airline, innovation and agility are essential. In fact, the company has recently reached back to its past in 1907 and begun a pilot project in downtown Atlanta, by introducing the use
“The way we look at it, the more information we share in common with each customer, the more opportunities we create in electronic commerce and supply chain management.” - Scott Corrigan.
of a fleet of 24-speed all aluminum mountain bikes, not to save time, but money in congested urban areas.
Not surprisingly, Mr. Corrigan not only noted issues concerning surface transportation but also alluded to the issue of open skies as a continuing and daunting issue between countries in efforts to create freer trade.
In referring to the role of technology in world commerce and logistics, he pointed out that there is a difficult reconciliation taking place between the seemingly limitless world afforded by E-commerce “with the realities of moving goods by road, rail and air within the limits of the physical world.”
In other words, accepting an order, complete with SKU verification to disbursement of an order, assembling a product and then packing, and shipping them in the right order will continue to grow in importance with heightened pressure largely due to the rising usage of the internet, at least until companies learn how to send car parts, furniture and widgets through the phone line.
There was also tacit acknowledgement that in today’s warp speed economy, making logistics professionals accept new visionary ideas isn’t always the most difficult issue. Getting them to leave old practices behind can be just as challenging when it comes to finding opportunities pertaining to notions such as the elimination of distance through technology.
Peter Jamieson, who has earned the Canadian Professional Logistics Institute’s designation as a professional logistician and joined Wheels in 1997 as a vice president after holding a variety of progressive business positions with several international companies, urged CLM delegates to consider the next generation of professionals, instead of taking stock of the internet from his business perspective. “What’s really important is to think of how our children and young people in university see things. They are the ones that will truly drive this forward with increasing speed.”
The pace of change was also acknowledged by Mr. Corrigan as somewhat bedazzling. “It took 74 years for the telephone to attract 50 million users, 38 years for the radio and 16 years for the personal computer. It took the Web just four years to reach the same level of penetration.”
UPS, which has spent more than $10 billion on technology over the last decade, and continues to spend up to $1 billion annually on technology, has transformed UPS “from a package delivery company into an enabler of global commerce.”
While technology is a challenge, it also represents an opportunity, all of the delegates agreed, though not a panacea to mitigate all of the issues facing the industry today, stated Jamieson. Wheels International, which provides intermodal rail, highway, ocean and air transportation, and specializes in supply chain consulting services as well as full outsourced program implementation, spoke with brutal candor about us all having heard the “let’s change the world together” rhetoric from so many e-solutions providers. People, he emphasized, are the crucial factor in driving business forward. Not surprisingly, Wheels has been named one of Canada’s best 50 privately managed companies for four consecutive years.
In this context, the value of transportation appears to be rising in the logistics field, and in tandem with this there is a trend for different types of competitors to converge on the same market areas, both Mr. Corrigan and Mr. Robison acknowledged. Freight carriers, express shippers, logistics providers and information systems consultants are all aiming for the same market and there has been a resultant spate of mergers, acquisition and alliances. “That will continue as companies strive to flesh out their offerings and fine tune their operations to increase the value they bring to the customer,” Mr. Corrigan stated.
Mr. Robison concurred with his reference to these being the “squeeze years.” He elaborated: “The package industry is moving into the bottom of the bottom of the Less-Than-Truckload (LTL) area and the trucking people are moving from being truckload and picking up at the top end of the LTL, and LTL carriers are moving out and becoming expedited, that is, they are staking out new ground in air transportation and doing things much faster than they have in the past.”
Consolidated Fastfrate’s Ron Tepper, whose company is Canada’s largest privately owned freight forwarder with 17 branches and 1,000 employees, noted that consolidation, however, has not only been initiated by transportation providers. Mr. Tepper pointed out wide spread and global mergers by customers has had to be mirrored, to an extent, by their transportation providers.
“Years ago, we saw large multinational companies buying other companies outside of their core business. Today, we are seeing the same type of rapid purchase of smaller companies by larger ones, but the difference today is companies are buying other companies in their same core business areas. This is happening in the pharmaceutical industry, grocery chains and other sectors. Also, the difference between the past and future is that large companies today are no longer scattered as technology has enabled them to consolidate their shipping requirements and take advantage of volume shipments.”
Leadership in the new realm of E-commerce and transportation is not only coming from the top of leading edge carriers and
David Faoro, (right-hand side) the evening’s chair, began the CLM roundtable’s question period by asking the panel: “Even though there has been a lot of talk about valued added benefits and partnerships, there are customers that are only looking for a commodity service provider. Is there a conflict between these things and how can such a conflict be resolved?”
their partners, cascading down to the ranks to be implemented in a relatively predictable landscape. This model for decision making is being superseded, Mr. Tepper suggested, and the locus of decision making is coming more from genuine partnerships and discussions to generate solutions for all of the partners.
“I believe that in the near future larger shippers will be willing to share more information with carriers,” he said, adding, “the word ‘partnership’ is used a lot these days, as is the word ‘logistics’ and everyone says they are partners. But the essence of what a partnership can do is not experienced by very many. In business we have many partners, but most are not real partners, as they are not involved in decision making.”
All of the keynote speakers agreed that technology has enhanced partnerships and enabled transportation companies to drive deeper into their customers’ processes, linking information from a provider directly to customers’ internal systems for inventory management, purchasing or accounts receivable.
Mr. Jamieson added to this point, stating that information management and technology are vital in terms of creating value added relationships and solutions for customers. “But the first thing in creating value added relationships is people,” he cautioned. “People still want to deal with people and people still prefer to deal with people that they like and enjoy.”
Mr. Jamieson added: “We have to provide comprehensive solutions to our customers so we must look to partnerships, and add value. It does not matter whether you are an asset based or non-asset-based supplier, this is not about what you do or do not own, it is about the solutions you provide to the customer.”
David Faoro, the evening’s chair, began the roundtable’s question period by focusing on the issue of partnerships by asking the question: “Even though there has been a lot of talk about valued-added benefits and partnerships, there are customers that are only looking for a commodity service provider. Is there a conflict between these things and how can such a conflict be resolved?”
Adding value, not just “doing things the same way over and over, but truly adding value to meet the customer’s requirements,” Mr. Robison noted, is critical, adding: “When you talk about commodity pricing and the lowest price, you had better first know that you are the lowest priced cost provider. If you are not, you are out of business. If you are the lowest gpriced provider you can probably stay in business. Even though people often see this as a commodity we feel there is a lot of value added that we provide and people are willing to pay for it.”
Being a partner, and adding value, are also related to the stature of logistics on the corporate map, Mr. Jamieson suggested. Creating true partnerships in business involving everything from technology design to distribution gpoint design, with shortened product life cycles increasing the need to move products between points faster and more cost effectively, given increasingly fickle customer tastes, isn’t easy. The logistics issues at hand can get glossed over in the corporate boardrooms when it comes to E-commerce discussions even though they are often the main elements that separate companies with high margin repeat business from others. Logistics is behind the buy button that consumers press and with heightened demands on these processes transportation costs are bound to go up.
“Typically, logistics and distribution is in a very reactionary part of the business strategy and program,” Mr. Jamieson said. “A lot of business leaders may not understand it. It may not be as exciting as sales and marketing or even production. It is not very common to find a CEO of a Fortune 500 company that has risen from the supply chain ranks.”
Mr. Jamieson elaborated: “One of the greatest challenges for those in this room is to go from being the tactical servant of a corporation to a true value added business partner. The cost of supply chains range from 20 to 30 percent. So why wouldn’t business leaders recognize and focus on this area? It’s because this is not really a glamorous part of running a business.”
Mr. Jamieson stated logistics professionals should think more strategically and look at business processes and how to improve business leaders’ perception of the supply chain as an opportunity to improve their businesses. “There are only so many ways you can reduce costs but there are many ways to add value,” he added.
All of the keynote speakers agreed with the point highlighted by Mr. Jamieson as central to addressing one of the key problems facing the industry. Mr. Corrigan stated unequivocally: “We must change that because any business you get on price you lose on price and it tends to be a very short relationship. So the challenge is to add value, solutions and integration. You need customized solutions.”
As Mr. Jamieson pointed out, logistics professionals can ill afford to be complacent and remain in a “comfort zone” if they are going heighten the value and perception of this function in companies. Clearly, in this age of E-commerce young and gray haired logistics veterans have a lot of systems to enhance and rethink as they explore opportunities to reshape the perception of logisticians as professionals at the highest levels of the corporate map.
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