CSCB Report
Global Logistics Online: Now the Real Fun Begins
The world’s two biggest automakers, Ford and General Motors, have big plans for e- commerce next year. Whether you are involved with the auto industry or not, those plans will affect you. Anyone involved in logistics should be paying attention.
Both companies have announced that they will put their purchasing operations online next year. Each initiative on its own would create a virtual marketplace on the Internet larger than anything we’ve seen before, handling billions of transactions a year with Ford and GM suppliers around the world. Ford buys about $80 billion worth of components and materials annually. Since suppliers will also use the system to buy and sell to each other, Ford predicts that it will be handling transactions online worth $200 billion within a few years. GM is not releasing figures, but has hinted that its online operation will be much larger than Ford’s.
Why is this important outside the auto industry? First, it marks a breakthrough in the scale of electronic commerce. According to the Financial Times, this breakthrough will transform the internet “into a central part of the operations of traditional manufacturing industries.” While there have been virtual marketplaces on the internet for some time, none of them have been backed by the purchasing power and global footprint of manufacturers like Ford and GM.
Second, entire industries will follow the moves by Ford and GM. Oracle, the U.S. software partner in Ford’s initiative, has already said it will soon announce another electronic commerce venture in a different, as yet unnamed industry, one that will rival the size of the automotive venture. The airline industry is also taking a hard look at the Ford and GM plans as a model for their own purchasing operations.
Third, as business-to-business electronic commerce goes mainstream in one industry after another, technological innovation and economic forces will combine to transform the global marketplace. The speed and efficiency of the virtual marketplace online will create one marketplace, open to anyone, anywhere, simultaneously. As far as bidding, contracting, buying and selling are concerned, geography simply loses its meaning. If you are not online, then you aren’t even in the game.
Of course, geography will still matter. Those of us involved in that business have to provide the interface – that point in the supply chain where the virtual world of e-commerce bumps up against the hard reality of logistics. And as every other part of the supply chain cycle becomes faster and more global, we will face greater pressure than ever before.
How do we prepare for that kind of pressure? We start by using technology to leverage the efficiency of our operations. This means linking as much of our business as possible into the internet. It’s where you will be if your business is going to thrive. That’s why the Canadian Society of Customs Brokers developed the CSCB E-Gateway earlier this year. We are working to make sure that the basic internet infrastructure is in place for internet-based commerce in the transportation and logistics industry.
Leveraging technology also means keeping up with new innovations in the systems that tie logistics into the entire business cycle. The technology for supply chain management is changing and pundits, in fact, have declared this to be the next boom in the software industry, with the market for online supply management systems growing 50 percent annually, to more than $18 billion in 2003 from $2.6 billion in 1998.
You also need to have the global reach to respond to logistic needs anywhere in the world, anytime. This doesn’t mean opening branch offices, everywhere. It means starting now to build a global network of trusted partners, making sure you include the expertise of customs brokers.
The framework for these business relationships in the logistics industry is defined, at least in part, by the framework of different regulatory environments around the world. Associations such as the Canadian Society of Customs Brokers have been working hard with authorities and industry associations in other countries, to ensure that the regulatory framework fits together on a global scale, with as little friction as possible. I encourage anyone involved in logistics or transportation to take part in this effort, so that our industry can respond to the new world of global commerce.
Just five years ago, there was no such thing as the World Wide Web. Today, the total value of business transactions on the Web is forecast to reach more than $300 billion for 1999. Five years from now, an International Data Corporation report says it will reach $2.8 trillion.
The figures are astounding. So is the challenge for logistics. But for those who prepare now to meet the challenge, the fun is just about to begin.