TORONTO, Ont. – Dealing with rising transportation costs and the shortage of capacity at the same time as meeting company expectations to expand to new markets and boost supply chain efficiencies, will require a great deal of new thinking, editorial director Lou Smyrlis advised members of the Pharmaceutical and Personal Care Logistics Association (PPCLA) yesterday.
"To succeed in this kind of environment, you are going to need friends. There must an evolution towards deeper and more integrated relationships with your service providers a process by which you can progress from tactical to strategic relationships," Smyrlis said in his address to the PPCLA’s general meeting.
Smyrlis also pointed out that pharmaceutical companies can benefit from greater cooperation within their own industry. If the freight patterns of a number of shippers were placed together, there would be greater opportunity to leverage capacity, he advised.
"Perhaps working within a collaborative freight network is worth considering," he said.
The pharmaceutical industry is challenged with many tight control and validation processes for its products. Jointly defining what it expects from carriers would allow their service providers to standardize their processes to provider better service, Smyrlis said.
Smyrlis said supply chain managers will have to adopt new ways of thinking because the trends in capacity and pricing among several modes and the potential long term impact on transportation costs should be of great concern.
More than 60% of shippers responding to the recently completed Transportation Buying Trends Survey said their rates had increased over the previous years, regardless of mode. And 80% of those using truck transport were paying higher rates. The survey, which included the responses of more than 600 shippers of all sizes across Canada, was conducted by Canadian Transportation & Logistics in partnership with the Canadian Industrial Transportation Association and CITT.
Another area of growing concern Smyrlis addressed was shipping into the U.S.
"It’s becoming a very complicated business with a narrow margin for error," he warned..
He pointed to a study conducted by Supply Chain and Logistics Canada and Industry Canada last year that found 40% of respondents reporting crossings taking 1-2 hours longer and almost a third reporting cost increases in the range of $100-$500 as a result of delays.
Smyrlis said the legislative pace is not slowing down. The main program under scrutiny right now is C-TPAT, the Customs-Trade Partnership Against Terrorism. C-TPAT, currently a voluntary program that requires participating supply chain partners to ensure the integrity of their security practices, is a pre-requisite to the all-important FAST border clearance program.
"It was essentially designed to act as the backbone of the partnership between U.S. Customs and the trade community in the fight against terrorism. Well, recent communication from U.S. Customs suggests this backbone is about to get a lot stiffer. There is fundamental debate currently going on whether C-TPAT should remain a voluntary partnership with industry or become a regulated program," Smyrlis said.
He added that while government officials say their intention is to only tighten certain rules for participating in the program, shippers who have seen the "informal" drafts of proposed changes to C-TPAT are wondering just how much of the program will remain voluntary.
"Terms like "should" and "recommend", which permeate the original C-TPAT agreement, have been replaced by the word "shall" in the drafts," he said.
"I think C-TPAT would benefit from more clarity on what is considered a requirement versus what is asked of shippers, carriers and supply chain partners as a best practice. But I think it’s fair that in return supply chain partners expect more from the C-TPAT program," Smyrlis said.
Smyrlis said he is also concerned about the source of the legislation the Department of Homeland Security — because it is still grappling with internal issues. The Department of Homeland Security was created after 9/11 as a response to U.S. federal agencies that did not cooperate or share advance information. Twenty two border security, law enforcement and emergency response agencies, including U.S. Customs, were merged in the biggest American government reshuffling in more than 40 years.
There was a report released at the end of the year on how this is working out, Smyrlis pointed out: It found, that the organization "is weighed down with bureaucratic layers, is rife with turf warfare and lacks a structure for strategic thinking and policy making."
"They are still suffering from the exact same problems they were created to solve," Smyrlis said.
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