Supply Chain Challenges: Stocking The Shelves

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Supply Chain ChallengesStocking The Shelves

• Bob Armstrong C.I.T.P., P.Log
• President
• SCL Canada

Canadian Paint Coating Association CPCA Annual
Conference September 21, 2009
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Discussion Framework

• About SCL
• Background Industry Statistics
• Supply Chain Volatility
• Strategies to Protect cross border supply
  chains during economic downturn
• Questions you should be asking

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Background
Canadian companies involvement in global supply
chains appears still to be limited Conference
Board of Canada, March 2007

• Catalyzing the integrated supply chain in
  Canada
• Building more resilient Canadian companies
• Integrating Canadian companies in global supply
  chains
• EDC Canadian SC research
• SCM is generally tactical
• Key business process gaps exist
• Underinvestment in technology
• Need for coordinated cross response and
  engagement

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Linking Supply Chain Performance to Share Price

• As the chart below shows, companies announcing
  supply chain disruptions had stock prices that
  significantly lagged their peers over a
  three-year period (one year before the
  announcement, through years afterward).

Source Supply Chain Digest Impact of Supply,
2007
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There is a wide range of costs variability within
sectors of the economy

• Compared to the US total SCM and logistics costs
  are
• 12 (Canadian manufacturers)
• 18 (Canadian wholesalers)
• 30 (Canadian retailers)
• Possible factors
• Inventory management practices (20 ICC)
• Service outsourcing
• Size of firms
• Highly qualified personnel
• Regulations (cabotage)

Source SOL Report 2008
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The US outsourced 50 more of its logistics
activities than Canada

• Possible factors
• Mandates
• Innovation
• Value added services
• Regulation
• HQP
• Culture / business model
• Size of firm

Source SOL Report 2008
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Supply chain collaboration is more important than
costs in terms of innovation drivers

• Users (Canadian manufacturers, wholesalers, and
  retailers) are prioritising better co-ordination
  with suppliers and/or customers over lower costs
• The users perceive more benefits from these
  practices both in terms of costs and
  co-ordination than do logistics service providers
  

Source SOL Report 2008
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60 increase in investment in new distribution
innovation and facilities in Canada from 2001-2007

• Complexity of inventory management with supply
  chain partners around the globe
• Strategic investments in advanced deconsolidation
  facilities and innovation

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47 GDP growth for the Canadian logistics service
industry since 1998

• Growth particularly marked in
• Truck transportation
• Increased use of JIT by Canadian firms
• Value added 4-5PL sectors
• More than 10 billion to the Canadian economy
• Return on Equity is directly linked to the value
  added and complexity of the logistics service
  provided
• Trucking (5)
• 3PL (12)
• 4-5PL (20)

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GDP for logistics service providers is expected
to increase by an additional 40 between 2007 and
2015

• 3PL and couriers are expected to integrate 4-5PL
  value added activities
• The increase demand for supply chain agility
  maintain the leading position of trucking

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Annual demand for employees in logistics and SCM
is estimated at 86,330 employees (12.3) over the
next five years

• Logistics and SCM activity requires HQP (20) and
  quality operational (80) workforce to stimulate
  economic growth
• In 2007 Canada counted 590,000 logisticians and
  more than 239,000 truck drivers in total in 2007
• Quebec and Ontario count for 60 of the total
  Canadian logistics workforce

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Supply Chain Strategy Alignment
Survey CSC
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2009 Realities affecting the Canadian Supply Chain

• Volatility is rampant!
• Fuel and Commodity Pricing
• Carrier Capacity
• Consumer Demand
• Currency
• Supplier Stability
• OffshoringNear shoring?

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Responding to the Challenge

• Leadership New strategies effective
  implementation
• Cash Flow Cash management, financing, hedging,
  pricing, contracting, outsourcing
• Cost Reduction Focus on what customers value
  eliminate waste
• Innovation Solutions, specialized products
  services, customization
• New market development In Canada around the
  world
• Logistics Leveraging logistics advantages
• Achieving results through people skills and
  workforce capabilities

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Conclusions reGlobal Economic Challenges

• Recession deep prolonged
• Recovery will reflect a different global economy
• Need to respond to short term challenges
  opportunities
• Need to develop a new long term game plan
• Need to provide value to secure competitive
  position in global supply chains
• Need to focus on customer and supplier success
• Companies no longer compete on their own- Supply
  chains compete in global markets
• Major restructuring of supply chains and supplier
  relationships underway
• New challenges new opportunities as a result of
  supply chain restructuring

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Strategies to Protect Supply Chains from Economic
Downturns

• Strategy One
• Ensure you have truly leveraged the marketplace
  for logistics savings to meet service
  requirements
• Our research indicates that many companies (in
  good times and bad) have not gone through the
  process of collecting the required data,
  understanding their business requirements and
  innovatively streamlining their logistics and
  transportation processes.

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Buyer BewareThe Logistics Services Industry

• Internal technical knowledge has been farmed out
  to service companies (transportation / 3PL)
• Many companies lacking the internal expertise,
  systems, information and time to properly
  understand cost savings opportunities

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Strategies to Protect Supply Chains from Economic
Downturns

• Strategy Two
• Evaluating your distribution competency
• Difficult times have many C-level executives
  seeking ways to offset infrastructure and fixed
  commitments. The O word (Outsourcing) question
  invariably comes up at these times. Each
  business needs to be very clear where its core
  competencies lie and where it can leverage those
  capabilities through a partnership with the right
  Third Party provider. This process, by the way,
  may not lead to a lower cost line per se, but
  can offset assets and risk, which is very
  desirable during a downturn.

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Questions you should be asking

• 1) How certain are you that you are receiving
  the best value from your logistics service
  providers
• 2) Do you have an effective integrated planning
  process (Sales and Operations Planning Process)
• 3) Is Distribution and Logistics a true core
  competency?
• 4) Have you ever looked at business casing a
  distribution outsourcing option
• 5) Could your distribution network deliver
  better customer service at a lower cost?
• 6) How do you manage your cross border supply
  chain?
• 7) Are you and your staff fully aware of both
  Canadian and U.S. customs programs and procedures
  and the impact on your company as an exporter
  and/ or importer?
• 8) Do you outsource the customs clearance
  process? Do you have an agreement with your
  custom broker that clearly details each parties
  responsibilities?

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Comments

• Bob Armstrong
• President of SCL
• 7270 Woodbine Ave, Suite 204
• Markham, Ontario
• L3R 4B9
• 905-513-7300
• barmstrong_at_sclcanada.org