President's Viewpoint
Global Logistics: Opportunity and Challenge
In the 27th Annual Survey of Career Patterns in Logistics, published by the Council of Logistics Management in 1998, global logistics was identified as an emerging focus for U.S. logistics practitioners in the 1990s. As a global philosophy increasingly shapes U.S. business, logistics practitioners face new challenges. Global logistics was identified as one area they would most likely study if they had education release time.
In the Canadian Logistics Labor Market Information Study conducted by the Logistics Institute in 1996 (published in Canadian Logistics Journal, October 1997), 750 Canadian Logistics practitioners identified global competition as the second most significant force affecting their futures, information technology and all associated issues being the first.
Competitive Impacts. Trade changes in the European Union (EU), North America (NAFTA) and South-East Asia are increasingly relevant to supply chain management decisions. The complexity and importance of the logistics function are growing. For example, changes to tariff barriers change the flow of goods; carriers can more easily operate across national boundaries; liberalized foreign investment changes supply/demand of goods and their flow, standardized customs procedures, local content rules, and packaging and labeling. These changes are putting enormous pressure on logistics professionals.
Key Challenges. Communication and transportation lines are extended along with supply lines within and between economic blocks, increasing the complexity of the supply chain. Extended communications and transportation needs mean third-party logistics with domestic and international capacity will grow.
While global sourcing provides advantages for Canadian buyers and sellers, complexity increases in relation to the multiplicity of regulatory jurisdictions that are navigated.
While third-party regulation and cultural “navigators” are available, there are large variations in quality and scope in terms of jurisdictions canvassed by single agencies. There is a market niche for a turnkey, geographically diverse and quality service to assist the Canadian logistics community on an international level.
Logistics personnel also need to become adept at dealing with several interface suppliers. In addition, logistics personnel need to “ramp-up” in terms of international cultural, business and logistics systems, particularly in Asia and South America.
Trends. While the medium- and long-term trends are toward expansion in global sourcing, some senior logistics personnel argued that the short-term scenario will tend toward “within-bloc” consolidation first. For Canadians, this means north-south supply traffic. The introduction of NAFTA has altered the traditional horizontal traffic toward cross-border regionalization. For example, instead of having to operate through distribution gateways such as Toronto, traffic is flowing more freely between regional triangles such as Halifax-Boston-Maine.
Further, the need for U.S. companies to manufacture in Canada is declining and could mean that Canadian distribution centres may grow in size and number. However, this trend should be tempered with increased regionalization. Yet a decline is still predicted in warehousing jobs as inventory turns increase along with the adoption of just-in-time (JIT) production processes.
Competitive pressure rises substantially as markets are made more available to international distribution giants. Supply chain linkages established with large distributors may push the size of competitors up. More than ever, supply chains will be competing with supply chains.
As global sourcing extends supply lines, domestic business ethics, driven by consumer demand for environmental and employment equity (e.g., child and slave labor), are forcing firms to impose Canadian ethical standards on suppliers. This means that logistics personnel must be aware of what those ethical standards are and be capable of ensuring their trading partners adhere to them.
Similarly, increased global sourcing means quality standards are more complex to impose and police, yet more vital to maintain as the key product and service differentiator.
To ensure ethical and quality standards are met, firms are literally placing their own personnel with suppliers and clients alike. This means that logistics personnel must have a solid grasp of the complete logistics functions relevant to supplier/client interaction.
Logistics Professionalism. The importance of navigating diverse systems and cultures means logistics professionals must have language skills, knowledge of foreign regulatory regimes. The logistics professional of tomorrow will increasingly focused on international quality standards, implemented and monitored in multiple cultures, as core to business and competitive success.