A groundbreaking study just released by Industry Canada should have everyone involved in the transportation and logistics industry taking notice.
Over the past few years, many companies have come to realize they can differentiate themselves by just how well they can manage getting their raw materials from source to plant and from the manufacturing plant to final destination – how fast, how timely, and how cost effectively.
Yet one of the more important findings of the study, which was conducted in partnership with Supply Chain & Logistics Canada, was that combined logistics costs for all three major business sectors – wholesale, retail and manufacturing – are higher in Canada compared to the US.
Specifically, total costs are 22% higher in wholesale; 16% higher in retail; and 2% higher in manufacturing.
Why should we care if shippers have higher logistics costs in Canada than their counterparts in the US?
Because, quite simply, Canadian companies can’t compete effectively against their US counterparts when a significant part of their costs is so much higher, particularly when they are also facing the double whammy of a rising dollar and high energy costs.
The lacklustre performance of many manufacturers in Central Ontario and the dire straits many pulp and paper companies find themselves in these days are strong examples of the pressures manufacturers already face.
Sure enough, a good portion of the blame for the higher logistics can be placed on the shoulders of shippers. Many studies have shown that small- and medium-sized companies that invest in technology to better manage their logistics practices reap significant improvements in their costs.
Yet the Industry Canada study found that technology adoption is still in its infancy in Canada.
Close to 54% of Canadian firms still have no supply chain management solution in place and, worse, have no near-term plan to do so.
But there are inefficiencies that lead to higher costs on the carrier side as well.
Unfortunately, Canadian carriers are powerless to address one of the most persistent inefficiencies: the inability to take full advantage of triangulation with the base of the triangle in the US because of cabotage restrictions. There’s an interesting proposal on the cabotage issue that’s worth consideration.
The “Open Prairies” proposal – penned by Bob Dolyniuk, general manager of Manitoba Trucking Association, Barry Prentice, professor at the University of Manitoba Transportation Institute and Richard Beilock, professor at the University of Florida – calls for cabotage to be permitted within the three Canadian Prairie provinces as well as several Upper Great Plains states. (Their report can be viewed on trucknews.com in the Special Supplements section).
While cabotage restrictions need to be lifted across Canada and the US, the Open Prairies proposal provides a safe testing ground – a good way to pacify all those protectionists that have stood in the way of such proposals on a national basis in the past.
If Canadian carriers were able to transport goods from point to point in the US it would make an important impact on reducing empty miles, improving truck utilization and so reducing transportation costs in a financially intelligent manner.