Today we offer a guest post by Don Dougan, a Supply Chain Executive from Argentus’ network with a multitude of experience in the Transportation field. He offered some insights about why Supply Chain has taken on new prominence, the evolution of North American transportation networks, and the onshoring trend in North American manufacturing.
“For decades, businesses have been doing a very good job of reducing costs with technological developments, innovation, and productivity improvements. Now, the focus for reducing costs is on supply chains.”
Supply Chains have become one of the most fascinating aspects of business today. There are a multitude of reasons, but probably the most interesting is the fact that Supply Chains are so all-encompassing. It is easy to say that supply chains simply move things from the raw material source right through to the end user. But there is a lot more going on than most people realize in order to not only get it right, but to be able to do it in the most efficient and effective manner.
For decades businesses have been doing a very good job of reducing costs with technological developments, innovation, and productivity improvements. Now, the focus for reducing costs is on supply chains. A few years ago, it may have been acceptable for the distribution costs on a flat screen TV to be as much as $100 per unit. But in the last 5 years, when the price of a 50” TV has fallen by more than 60%, the percent of distribution cost for the same TV had to decrease at a similar rate. The irony is that while we are trying to lower overall total distribution costs, we are making these goods in locations farther away from the markets in which they are sold. It wasn’t long ago that one could assume that the further the distance, the higher the transportation cost. But through consolidations and improvements in technology, we have overcome this major cost driver. The challenge will be to continue these improvements in spite of continuously rising fuel costs.
North American Supply Chains used to be configured for East to West distribution, since the majority of manufactured goods were made in the eastern portions of both Canada and the US. As more manufacturing has shifted to offshore locations, supply chains have responded to more goods arriving on the West Coasts of Canada and the US to be moved to the main populations in the East. As a result of free trade agreements there have been significant increases in the movement of goods from Mexico and South America into the US and Canada. So, we have migrated from predominantly East to West to a combination of West to East, and South to North. And to a large extent, this transition is still a work in progress.
Recently an announcement was made that WalMart has committed to onshoring $250 Billion of manufactured goods over the next 10 years back to domestic production. Not only will this create local manufacturing jobs, but it will require adjustments in supply chains to accommodate the flow of these goods. This is a very exciting initiative because it should lead to other competitors doing the same. It will also mean that all of us involved in supply chains will have yet another challenge to meet as we move forward. What a great time to be working in such a dynamic industry!
Don Dougan is an award-winning Supply Chain leader known for getting amazing results with people, process, and planning. Don has spent his entire career meeting the challenges of Supply Chains in both Canada and the US, and is keenly interested in developing sustainable solutions for the efficient movement of goods in all modes of transport from source to end users. When he is not researching new methods for service and productivity improvements, he is mentoring others to fully utilize their skills in Supply Chain efficiencies.
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