There are many lessons the transportation industry can learn from what just happened in the world economy, according to David Binks, president of FedEx Express Canada.
“Growth is returning, but the biggest issue was a tremendous failure to manage risk, and that relates to the financial markets. One of the biggest risks for the Canadian market is the reliance on a single international market, i.e. the US. As we tie ourselves so closely to them, we put ourselves on the edge of disaster when the economic cycles go around. When demand for the US drops, its currency drops, Canadian business competitiveness drops and Canada suffers from an export point of view. Almost 50% of GDP in Canada relates to exports, 80 % of which go to US,” Binks said.
Binks was a guest speaker at the recent Conference Board of Canada’s Supply Chain Management Forum in Toronto.
Binks noted that the Canadian government is beginning to take some tentative steps to branch out into other world markets. He called Prime Minister Harper’s trips to India and China “the right sort of move,” because Canada is overdue for new trade agreements, and should take advantage of its “friendly, non-adversarial relationship with much of the world.”
In the area of supply chain management, said Binks, “One of the most impactful trends we’re seeing over the next decade is the rapid growth of the middle class in developing economies around the world; a massive opportunity, with an additional 800 million members in the Asia-Pacific region alone. When you combine that with the Internet, they will use that ability to go online and buy products like crazy. The Internet will also give small businesses in the Asia Pacific region the ability to compete for that market, to reach out for new markets and niches. The big businesses that are around are going to find they have a whole new slew of competitors,” he said.
But the win-win proposition is that the more access developing markets have, the more the economy is going to grow.
“We can’t think about the same problems the same way we used to when we open up access. Traditional perspectives need to move on,” said Binks.
“As we open up access, and create new consumers, we wake up to the fact that those consumers are a totally different consumer. We’ll also begin to realize that the new consumer is from a different generation, from a different culture, from a different country. We’d better be ready and be flexible enough in our supply chains to win that business,” he said.
Sustainability is a proposition that should also not be ignored, noted Binks.
“Sustainability is here to stay because it makes economic sense, it’s a good business decision, and that’s before the politicians get involved in it,” said Binks.
“Forward-looking companies are aggressively managing their waste management, but the companies are starting to turn their attention to their suppliers, asking them what they’re doing about supporting those objectives. I don’t see an RFP or RFQ come across my desk that doesn’t ask what FedEx is doing to manage sustainability.”
How do you get a competitive advantage?
“Have smart, adaptable supply chain strategies. Turn a good marketing strategy into a competitive advantage because of your supply chain. Good strategy provides you access to do business, to interact, communicate and do trade,” he said.
The supply chain also needs to be smarter in trade expertise.
“Governments do have a role to play in this, but even in those places where we have trade agreements, it’s difficult. What amazes me is I actually see more companies going back to the old practices of stockpiling inventory near borders, overstressing the transportation system, getting back to JIT deliveries, and forcing prices up. Here we have truck drivers sitting at the Mexico border for hours to go through six different checks. But we have people reluctant to go near certain markets because of the paperwork. My recommendation is to get savvier about the technology you can use to solve issues around regulatory, trade and compliance issues. We launched electronic trade documents this month which allow customers to attach their documents electronically, winning them some points on their sustainability,” said Binks.
As companies regaining their focus after the economic downturn they should ask themselves if their sight is good enough.
“What hit you on the back of the head is a global market that is totally integrated, creating both risk and opportunity. Don’t assume that the risk of relying on one market is just one of missed opportunity – in this global environment your competitors can be and will be located anywhere. In the Canadian economy, if we’re going to survive we have to expand our horizons, turning supply chain strategy into a competitive edge. When you take a smart supply chain strategy and align it with the other competitive advantages we have in Canada, that will be your opportunity to win in the global economy,” said Binks. MT
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