HALIFAX, NS -- Editorial director Lou Smyrlis recently conducted a lengthy interview with Jim Ramsay, vice president, air & ocean freight Canada, UPS Supply Chain Solutions at the Halifax Port Days event. Here is what Ramsay had to say about what will be driving supply chain decisions in 2013.
CT&L: UPS has relationships with many shippers. In your discussions with them, are you seeing a clear pattern emerge at to what will drive their supply chain-related decision making for 2013?
Ramsay: A clear pattern is always hard to find but building on some of the comments from earlier, what we see companies focusing on really comes down to four things. One is the Canadian dollar and what trend that has been on for the last while and what that does for the Canadian exporter, particularly for exporting to the US. The second is what is happening in the US economy. About seventy percent of our exports still go to the US. There are also a lot of things going on with Europe that have an impact on supply chains and capacity and whether or not capital is going to be available and how people are going to finance growth in the future. The final one is the potential slowdown in growth of the emerging markets: Brazil, Russia, India, China, and you can throw South Africa in there as well. We’ve seen a few stumbles this year for those economies and what that is creating for companies I speak to is a high level of uncertainty. And with that uncertainty comes a whole lot of caution. That caution manifests itself in a couple of ways: One is they are not willing to invest as much and secondly what they are really driving towards is being razor thin on inventory levels. The way that is impacting the transportation world is that we are seeing smaller orders. Often it’s the same total volumes we’ve seen in recent years but broken up into smaller quantities. And that comes down to people not being willing to take the risk for the big order, not knowing how quickly they are going to be able to sell that through.
The other thing that I see as a pattern is looking outside Canada’s borders. Not only for new markets for our manufacturing but also for imports. Looking for new sources and new ways of sourcing as we tie in with infrastructure in countries we are not used to dealing with.
CT&L: When I speak with carrier executives they tell me they need to prioritize profitability after having taken some hard knocks during the recession and slow economic rebound. At the same time shippers are also saying they want to keep their costs in line and improve customer satisfaction. Can the priorities between shippers and carriers be brought into sync? What is the best way to do so?
Ramsay: I’m not so sure that when you dig deep enough into an organization that there is that big of a contrast. Many leading organizations are very much focused on sustainability. We often paint sustainability as being green, which is important, but it’s also making sure you have a business model that works not only today but in the future. UPS has been around 105 years; we want to have a business model that gets us to the next 105 years. Our point of view when working with customers is we want to give them that kind of stability. Where you sometimes run into challenges is when during the grind of rate negotiations you forget some of the long term business issues you have. It’s interesting as well the contradiction between wanting to increase customer satisfaction as a key priority at the same time as needing to drive out cost.
I look at it from a couple of perspectives. The first is that it’s about efficiency. Think about how you run your business differently today than you did yesterday and how you will run it tomorrow to improve productivity. And, actually, productivity trends have been pretty good in the transportation business. The other side of that is also making sure your services as a provider help the next person in the supply chain be successful. What is your quantifiable value proposition? What does that mean to your business in quantifiable dollars? Good carriers want to understand their customers’ business and how they can help that business. What that helps the shipper do is have a business model that is sustainable, where you are not just taking the lowest cost supplier, who may nor may not be there for the whole length of the RFP or who doesn’t have the financial strength to deal with major impacts to the supply chain.
There is a lot to it and typically I recommend to people, make sure you know as a supplier who your customer is and as a customer make sure you know your supplier inside and out. Quite often I don’t see people go as deep as they should in those areas.