RESPONSES TO NORTH AMERICAN TRANS-RESPONSES TO NORTH AMERICAN TRANS-BORDER SUPPLY CHAIN CHALLENGES: BORDER SUPPLY CHAIN CHALLENGES:

PRIVATE SECTOR INITIATIVES AND PRIVATE SECTOR INITIATIVES AND KNOWLEDGE BUILDINGKNOWLEDGE BUILDING

byMichael A. Haughton

North American Center for Transborder StudiesArizona State University

Research Seminar: November 17th, 2008

THE CONCEPT: A HIGH-LEVEL VIEWTHE CONCEPT: A HIGH-LEVEL VIEW

Obstacles to supply chain efficiency1. Regulatory obstacles

2. Infrastructure obstacles

3. Service operations obstacles

Transborder sector’s response1. Government program participation

2. Objective appeals to government

3. Complementary initiatives

Supply chain performance

Supply chain performance

System-wide Impacts

ASSESSMENT FRAMEWORKASSESSMENT FRAMEWORKSYSTEM-WIDE IMPACT

NONE POSITIVE NEGATIVE

NONE

SUPPLY CHAIN IMPACT

POSITIVE

NEGATIVE

Oil company

Oil company

CerealProducerCereal

ProducerFarmerFarmer

ForestForest

ChemicalProcessorChemicalProcessor

PolyethyleneBag Mfr.

PolyethyleneBag Mfr.

LumberSupplierLumberSupplier

CorrugatedMfr.

CorrugatedMfr.

FlourMill

FlourMill

DISTRIBUTOR

DISTRIBUTOR

RETAILER

RETAILER

CONSUMER

CONSUMER

A Supply Chain for Cereal

InformationProductFunds

Nodes:Nodes: Links:Links:

What SCM Professionals Do

Plan, organize, and control the production, transportation, and storage operations to ensure that the right products arrive at the right place, at the right time in the right condition, at the right price.

1 2

3 4

5

INTERNATIONAL SUPPLY CHAIN CHALLENGEINTERNATIONAL SUPPLY CHAIN CHALLENGE(Source: http://www.chainlinkresearch.com/parallaxview/articles/tec_IntlTrade_ITLadopt.htm)

OECD Report on security in Maritime Transport (2005): Security vulnerability points Administrative and

Procedural and delays

EVOLUTIONARY SKETCH OF TRADEGOVERNANCE PHILOSOPHY

The Pre-World Trade Organization (WTO) Era (General Agreement on Tariffs and Trade: GATT

Era)

Fiscal emphasis (collection of duties)The WTO Ascension – the Free Trade Era

Facilitate legitimate trade through efficient border operations (ACROSS, CADEX, PARS)

The Post-9/11 Security hypersensitivity Era

Emphasis on national and supply chain security (ACI, AMS, CSI, C-TPAT, FAST)

Source: National policy framework for strategic gateways and corridors (Accessed February 12th, 2008 at Transport Canada website: www.tc.gc.ca)

o National income and mutual trade dependence Ontario-USA trade ($324B) exceeds Japan-USA trade

($236B) Typically, 70% of Canada’s trade is with the USA Each country is the other’s largest trading partner Canada is the leading export market for 36 of the 50

states and ranked in the top 3 for 10 other states At least 40% of trade estimated to be intra-firm

o Investment: the stock of U.S. foreign direct investment in Canada was

$289B at the end of 2007 (59% of total FDI in Canada) Canada is the fifth largest* foreign investor in the U.S. At

the end of 2006, the U.S. Commerce Department estimates that Canadian investment in the US was $159B at historical cost basis.

o Employment Canada-USA trade supported over 7.1 million US jobs in

2006 (up from 5.1 million in 2001) and 3 million jobs in Canada

o Other: 80% of Canadians live within 200 miles of the border; 300,000 cross the border daily

THE ECONOMIC IMPORTANCE THE ECONOMIC IMPORTANCE OF CANADA-USA RELATIONSHIPOF CANADA-USA RELATIONSHIP

THE ECONOMIC IMPORTANCE THE ECONOMIC IMPORTANCE OF SURFACE TRADEOF SURFACE TRADE

MODE Value % Weight %Truck 235 61.8% 126 35.3%Rail 60 15.8% 77 21.6%Water 26 6.8% 69 19.3%Air 25 6.6% 0.3 0.1%Pipeline 9 2.4% 84 23.5%Other 25 6.6% 0.6 0.2%Total 380 100% 356.9 100%

Value in US $Billions

Weight (million tonnes)

Source: US Bureau of Transportation Statistics (data for 2001)

MAJOR TRUCK CROSSINGSMAJOR TRUCK CROSSINGSON THE CANADA-US BORDERON THE CANADA-US BORDER

FACTOID: Of the estimated 140 truck crossings on the 4,000 mile border, the six major ones typically handle nearly 90% of trade value and over 70% of tonnage and trips

The managerial decision cycle

Based on Herbert Simon’s conceptual model of decision making

SearchProcess

Alternatives

Post-choiceEvaluation

ProblemRecognition

ChoiceProcessAnalysis

o PRACTITIONER VOICES203 articles from practitioner journals, newsmagazines, and newspapers meant to capture the perspectives of private stakeholders in Canada-US trade (importers/exporters, carriers, brokers/forwarders, etc.)

o SECTORIAL INTEREST GROUPS:6 reports by organizations including the Conference Board of Canada, the Ontario, Canadian, and US Chambers of Commerce

o COMMISSIONED AND INDEPENDENT “THINK TANK” REPORTS

16 reports (by universities such as ASU, SUNY, UVA, WWU, and non-university centres such as the Hudson Institute)

o ARTICLES IN PURELY SCHOLARLY OUTLETS :11 in academic journals such as Transportation Journal, Supply Chain Management, and Canadian Foreign Policy

o MISCELLANEOUS WEB-BASED ARTICLES:at least 20 articles (many drawn from the CTRF’s monthly TIU)

RESEARCH METHOD: Archival AnalysisRESEARCH METHOD: Archival Analysis

REGULATORY COMPLEXITYo At least 44 different Canadian and US agency have jurisdiction

over border operationso 4,500 new/revised regulations introduced by federal and

provincial governments each year

PROCESSING/ADMINISTRATIVE INEFFICIENCY:o Low risk and certified/trusted companies facing unduly

long and frequent inspectionso Duplicated container inspection (at Canadian port then at

Canada-US border)o CBP border officials collecting Animal and Plant Health

Inspection Service (APHIS) fee {Eastern Border Transp. Coalition}.

BORDER STAFFING:o Insufficient number of booths and open hours

FUNDING ISSUESo $100B (CDN) transportation infrastructure deficit in Ontarioo Tardiness in use of allocated funds; e.g., of the $72.7M Border

Infrastructure Fund allocated in 04-05, $34M remain unused

CAUSE FOR CONCERNCAUSE FOR CONCERN

• Smart border accord 2001= greater security + enhanced trade + risk management

• Security trumps trade• Efficiency benefits of programs like FAST, ACE

have not been fully realized• Layer upon layer:

– Never-ending spate of US measures– More inspections, technology glitches– Cash grabs – APHIS fees; TWIC cards– Canada – Reinventing the wheel?

• Searching TL of auto parts for fresh-cut flowers• Guilty until proven innocent• Carriers/drivers exiting market• Reduced truck traffic, but summer 2007 longest

delays since 2001 (port-a-potties at Sarnia)• Infrastructure – Windsor/Detroit

THICKENING BORDER

Source: presentation by OTA/CTA CEO (David Bradley) on 4/18/08 in Cleveland, OH

One Canadian Carrier’s Increased Annual Costs

from US Security Measures(# trips loaded/unloaded = 1,125/mo., Fleet Size = 400)

Driver Costs ($)

C-TPAT Training 9,000

FAST Cards ($76,000 every 5 yrs) 15,000

Operational Costs ($)

Customs Brokers, Trade Act, FDA Prior Notice, Mgmt of Customs Documents 400,000

Border Processing Delays (CBP Queues) 400,000

Border Crossing Fees + Annual Decal Costs + APHIS Inspection Fees 250,000

High Security Seals + Seal Tracking 10,000

ACE Declaration Costs + ACE EDI Costs 150,000

Increased Telephone/Fax + Satellite 5,000

Additional Conveyance & Trailer Inspection 160,000

Additional Salary Costs 80,000

Add’l Op.Miles, Transit Delays, Route Changes, etc.; from Loss of In-Transit 775,000

Capital Costs ($)

Software, Satellite Macro, C-TPAT Application, Bolt Cutters, Fencing, etc 140,000

Total ($) 2,394,000

RECENCY OF THE CONCERNSRECENCY OF THE CONCERNS1. "Overlapping Security Hurting Truckers At U.S. Border, Canadian Officials

Say": Transport Topics, 3/3/08. , Iss. 3782; p. 6

2. "Border Bottlenecks, Regulations Top Concerns for Ontario Shippers, Carriers": Transport Topics. 11/05/07. Iss. 3766, p. 1,10 (2 pp.)

3. "We need harmony in U.S. border security": The Ottawa Citizen. May 23, 2007. p. A15

4. "Panel: U.S.-Canada Trade Profitable, but Difficult ": Transport Topics. 04/16/07. Iss. 3737, p. 43, 1 pg.

5. "Smart border vision blurred.": Truck News. 03/07. Vol. 27, Iss. 3; pg. 44, 2 pgs

6. "FAST needs to become more transparent.": Truck News. 02/07. Vol. 27, Iss. 2; pg. 70, 2 pgs

7. "Border security is border absurdity.": Truck News, 10/06. Vol. 26, Iss. 10, p. 36.

8. "Border boondoggle": Truck News, 11/06. Vol. 26, Iss. 11; pg. A20

9. "Labour Problems at International Bridges Must Be Resolved Now: Truckers, Long Delays Caused by Walk-Outs of Canadian Border Staff.": CCN: Matthews Newswire. Toronto: 11/10/05. p. 1.

"A Hit at the Border": Traffic World. 4/9/07. pg. 1.

REPORTED BENEFITS BY FIRMS1. Faster supply chain flow

• Reduction in (a) number of inspections, lead time, (c) border wait times, (d) inspection time, (e) cargo release time

2. More predictable (consistent) lead times3. Greater supply chain visibility (more able to track orders)

4. Fewer supply chain disruptions5. More opportunities for cost avoidance6. Reduced cargo theft/pilferage7. Greater asset utilization8. Greater security of workforce9. Lower customs penalties and insurance rates10.Increased market share and revenues

Primary source: University of Virginia Center for Survey Research report on C-TPAT cost benefit survey

OVERALL EXPERIENCE WITH C-TPAT

Source: University of Virginia Center for Survey Research report on C-TPAT cost benefit survey

FACTOID: 91.5% of the surveyed companies (comprising importers/exporters, carriers, and trade support service providers such as customs brokers) reported that they never considered leaving the C-TPAT program.

LIKELIHOOD OF STAYING IN THE C-TPAT PROGRAM

Source: University of Virginia Center for Survey Research report on C-TPAT cost benefit survey

Additional benefits businesses wouldlike to see added to the C-TPAT program

Source: University of Virginia Center for Survey Research report on C-TPAT cost benefit survey

Additional benefits desired % of respondents

Less delay/quicker moving shipments through customs/borders 19.2 Want to see other actual benefits/recognition/differentiation from non CTPAT members

16.9

More training, awareness, conferences, and education about the CTPAT program

11.9

Improved communications 11.3 Lower costs or lower taxes if C-TPAT certified 8.6 Less exams, inspections, fines, or penalties if CTPAT certified 8.1 Security related issues 5.6 No additional benefits – the program is currently fine 4.8 No additional benefits – it’s too early to tell 2.9 Other 10.7

Conference Board of Canada (2007), "Is Just-In-Case Replacing Just-In-Time? How Cross-Border Trading Behaviour Has Changed Since 9/11"

Conference Board of Canada (2008), "Ontario-US Border Policies 2008-2009"

NECESSITY FOR NECESSITY FOR COMPLEMENTARY TACTICSCOMPLEMENTARY TACTICS

Steven Globerman and Paul Storer (2006), "The Impacts of 9/11 on Canada-U.S. Trade"; Western Washington University Border Policy Research Institute

Conference Board of Canada (2007), "Tighter Border Security and its Effect on Canadian Exports"

TRADE RELATIONSHIP RESILIENCE?TRADE RELATIONSHIP RESILIENCE?

HISTORY LESSON:The road congestion obstacle

Victoria Transport Policy Institute.

Online Transportation Demand Management Encyclopedia (http://www.vtpi.org/tdm/tdm16.htm) Accessed November 4, 2008

1. Cost effective participation in (compliance with) trade security and shipment expediting programs

2. Strategic, tactical, and operational program-independent adjustments to border realities

MINIMIZING DELETERIOUS IMPACTS MINIMIZING DELETERIOUS IMPACTS ON SUPPLY CHAIN PERFORMANCEON SUPPLY CHAIN PERFORMANCE

COMPLEMETARY RESPONSESCOMPLEMETARY RESPONSESo INVENTORY MANAGEMENT

Stockpile safety stocks in USA as a contingency against excessive delaysInventory sharing (speculated in the academic literature based on Indian firms)

o SHIPMENT SCHEDULING AND ROUTING:e.g., switch from Windsor to Sarnia (more FAST lines); switch to different times; delay deliveries to accumulate truckload quantities

o RECONFIGURE SUPPLY CHAIN NETWORK:realign production facilities to minimize trans-border flows of WIP (speculated);

o INFORMATION SYSTEMS: Outsourcing pre-clearance IT a là the pay per use model

o DOMESTICATION: Sourcing (speculated as early as 2001); Carrier operations

o TRANS-BORDER MERGERSTrucking mergers: maximize load factors on joint front/back-haul tripsNon-trucking mergers: Transcore (USA) acquisition of Canada’s Link logistics to create the continent’s largest Internet freight exchange

o DRIVER STAFFING ADJUSTMENTSDedicated FAST pool; Use driver team to avoid HOS violations

o MODAL SHIFT: Utilize rail (speculated as early as 2001)

Original (Preferred): Chatham-DTW/AB-Pontiac = 1:54 (82 miles)

Alternative: Chatham-PH/BWB-Pontiac = 2:33 (111 miles)

WHAT IF THE MICHIGAN DESTINATION IS ROMULUS?

Original (Preferred): via Windsor’s Ambassador BridgeEstimated Time = 1 hour and 51 minutes (1:51)Estimated Distance = 76 miles

Alternative via Sarnia’s Port Huron/Bluewater BridgeEstimated Time = 2 hours and 40 minutes (2:40)Estimated Distance = 131 miles

BORDER DELAY STATISTICS (2007)

COV FAST COV FAST12:00 AM 1:00 AM 1.8 1.1 7.2 0.2

1:00 AM 2:00 AM 1.5 0.8 6.2 0.12:00 AM 3:00 AM 1.3 0.6 5 0.13:00 AM 4:00 AM 0.9 0.4 4.3 0.24:00 AM 5:00 AM 0.6 0.2 5.8 0.55:00 AM 6:00 AM 0.7 0.3 8.1 16:00 AM 7:00 AM 3 2.5 10.7 1.47:00 AM 8:00 AM 3.6 2.8 9.3 18:00 AM 9:00 AM 4 3.1 9.7 0.59:00 AM 10:00 AM 5.2 3.8 10.5 0.4

10:00 AM 11:00 AM 7.2 5.1 12.5 0.411:00 AM 12:00 PM 8.6 6.5 14.5 0.412:00 PM 1:00 PM 9.6 7.2 17.9 0.5

1:00 PM 2:00 PM 9.8 7.4 20.1 0.72:00 PM 3:00 PM 11.4 9.4 21.8 0.83:00 PM 4:00 PM 11.5 9.7 22.7 0.74:00 PM 5:00 PM 11.1 9.9 23.3 0.55:00 PM 6:00 PM 10.7 9.8 22.5 0.46:00 PM 7:00 PM 10.3 9.3 20.8 0.47:00 PM 8:00 PM 10.2 9.2 16.7 0.48:00 PM 9:00 PM 9.2 8.2 13.5 0.29:00 PM 10:00 PM 7.4 6.7 10.5 0.2

10:00 PM 11:00 PM 5.3 4.7 9.9 0.311:00 PM 12:00 AM 4.4 3.8 7.9 0.1

6.22 5.10 12.98 0.48

Detroit/Ambassador Bridge

Port Huron/Bluewater Bridge

Time of day

Averages

Source:US Bureau of Transportation Statistics

IF THE TRIP IS DOVER CITY TO PONTIAC THEN:

Original (Preferred): via DTW/ABTime = 1:56 and Distance =92

Alternative via Sarnia’s PH/BwBTime = 2:05 and Distance = 100

Spreadsheet Application of Queueing Theory ModelINPUT DATAMean Service Time in minutes: TS 3.5Standard deviation of Service Time: sTS 3.50Mean Service Rate (1/TS): m 0.286

Availabe booths at Detroit-Windsor (DTW) 13Number of open booths (DTW capacity is 13 booths) 11

Mean daily Southbound traffic volume through DTW 2815Number of daily hours during which trucks arrive 15Ratio of peak volume to average volume within a day 1Duration of within-day peak (assume peak is at the start of the day) 1Ratio of peak volume to average volume within a week 1Mean Inter-arrival Time in minutes: TA 0.32

Standard deviation of Inter-arrival Time: sTA 0.00

Mean (effective) Arrival Rate (1/TA): l 3.13

OUTPUT DATA (Average traffic)Minimum number of booths required to avoid constantly rising congestion 11Estimated time in hours to clear traffic 16.15Mean waiting time (in minutes) in the queue (pre-service time): Wq 4.97Mean waiting time (in minutes) in the system (queue time plus service time): Ws 8.47Mean number waiting to be served (pre-service delay): Lq 16Mean number in the system (number waiting plus number being served): Ls 2695TH PERCENTILE 10.52

What if a random arrival pattern is stabilized?Gamma distributed inter-arrival times with () = (0.125, 2.56) so average =

0.32 minutes (19 seconds) between truck arrivals or 3.13 trucks per minute

Extra average waiting time in the queue if arrivals are random versus stable

Key NotesBased on estimated DTW volume (2815 loaded southbound trucks per day)

Random arrivals based on a coefficient of variation (CV) = 2.8 for inter-arrival time, stable arrivals based on CV = 0.

Number of primary booths determined as Min{13, ROUNDUP (lm,0)}

Empty cells depict booth requirements > 13

Key ConclusionTime savings are attainable if truckers can stabilize their arrival.

Open Hours 6 9 12 15 24l (per minute) = 7.82 5.21 3.91 3.13 1.95Average Service Time

0.25 3 1 7 4 1

0.50 3 3 7 4 6

0.75 3 5 7 4 3

1.00 3 3 7 4 14

1.25 3 5 7 9 7

1.50 3 5 7 8 14

1.75 4 7 7 9

2.00 5 7 7 13

2.25 5 7 6 10

2.50 7 9 13

2.75 7 8 11

3.00 7 8 13

3.25 7 7 11

3.50 9 13

3.75 9 12

4.00 8 13

4.25 12

4.50 13

4.75 12

5.00 13

EXTRA MEAN WAITING FROM RANDOMVS. STABLE ARRIVAL

95th percentiles of queue time distribution

Key ConclusionDownstream planning is significantly more reliable if truckers can stabilize their arrival.

Open Hours 6 9 12 15 24 Open Hours 6 9 12 15 24l (per minute) = 7.82 5.21 3.91 3.13 1.95 l (per minute) = 7.82 5.21 3.91 3.13 1.95Average Service Time

Average Service Time

0.25 8 4 21 10 5 0.25 3 0 7 1 00.50 8 9 21 10 41 0.50 3 2 7 1 130.75 8 15 21 10 14 0.75 3 5 7 1 21.00 8 9 21 10 41 1.00 3 2 7 1 12

1.25 7 12 21 26 19 1.25 3 3 7 8 3

1.50 10 15 21 12 41 1.50 3 5 7 5 12

1.75 11 21 19 23 1.75 1 7 4 4

2.00 13 21 17 41 2.00 4 7 3 132.25 15 21 16 26 2.25 5 7 3 5

2.50 21 26 41 2.50 7 8 132.75 21 23 28 2.75 7 6 63.00 21 21 41 3.00 7 5 133.25 21 20 30 3.25 7 5 63.50 28 41 3.50 11 133.75 26 31 3.75 8 74.00 24 41 4.00 7 134.25 32 4.25 74.50 41 4.50 134.75 33 4.75 85.00 41 5.00 13

95th PERCENTILE OF WAITING TIME DISTRIBUTION FOR RANDOM ARRIVAL

95th PERCENTILE OF WAITING TIME DISTRIBUTION FOR STABLE ARRIVAL

Pattern of waiting time for the first 1000 trucks for random arrivals if average service time is 1 minute and arrivals occur over a 24-hour period (mean wait = 18.3 minutes).

Pattern of waiting time for the first 1000 trucks for stable arrivals if average service time is 1 minute and arrivals occur over a 24-hour period (mean wait = 6.6 minutes).

Extra average number of trucks waiting in the queue if arrivals are random versus stable

Key NotesBased on estimated DTW volume (2815 loaded southbound trucks per day)

Random arrivals based on a coefficient of variation (CV) = 2.8 for inter-arrival time, stable arrivals based on CV = 0.

Number of primary booths determined as Min{13, ROUNDUP (lm,0)}

Empty cells depict booth requirements > 13

Key ConclusionSignificant congestion reductions are attainable if truckers can stabilize their arrival.

Open Hours 6 9 12 15 24l (per minute) = 7.82 5.21 3.91 3.13 1.95Average Service Time

0.25 27 6 27 12 20.50 27 18 27 12 120.75 27 27 27 12 61.00 27 18 27 12 27

1.25 27 24 27 27 14

1.50 27 27 27 25 27

1.75 22 27 22 18

2.00 25 27 21 252.25 27 27 19 20

2.50 27 27 252.75 27 26 213.00 27 25 253.25 27 22 213.50 27 253.75 27 234.00 26 254.25 234.50 254.75 235.00 25

EXTRA MEAN CONGESTION IF RANDOM VS. STABLE ARRIVAL

Extra primary customs booths under random arrivals to achieve an average waiting time no greater than the value for stable arrivals

Key NotesBased on estimated DTW volume (2815 loaded southbound trucks per day)

Random arrivals based on a coefficient of variation (CV) = 2.8 for inter-arrival time, stable arrivals based on CV = 0.

Red numbers depict instances where extra booths (in excess of 13 would be required)

Empty cells depict booth requirements > 13

Open Hours 6 9 12 15 24l (per minute) = 7.82 5.21 3.91 3.13 1.95Average Service Time

0.25 1 2 1 1 20.50 1 2 1 2 10.75 1 1 1 2 21.00 1 3 1 2 11.25 2 2 1 2 21.50 2 1 1 2 11.75 3 1 2 22.00 3 1 3 12.25 2 2 3 22.50 2 1 12.75 2 2 23.00 2 3 13.25 2 3 23.50 1 13.75 2 34.00 2 14.25 34.50 24.75 35.00 2

EXTRA BOOTHS REQUIRED FOR RANDOM ARIVAL TO HAVE SAME MEAN WAIT AS STABLE ARRIVAL

Key ConclusionRandom arrivals impose a greater burden on customs processing capacity.

Labour hours needed to assure capacity greater than demand for a stable (smoothed) arrival pattern

Key ConclusionLonger opening hours of primary customs booths is not always necessary or even efficient.

Open Hours 6 9 12 15 24l (per minute) = 7.82 5.21 3.91 3.13 1.95Average Service Time

Extra if 24/7

0.25 12 18 12 15 24 120.50 24 27 24 30 24 00.75 36 36 36 45 48 121.00 48 54 48 60 48 01.25 60 63 60 60 72 121.50 72 72 72 75 72 01.75 90 84 90 96 122.00 99 96 105 96 02.25 108 108 120 120 122.50 120 120 120 02.75 132 135 144 123.00 144 150 144 03.25 156 165 168 123.50 165 168 33.75 180 192 124.00 195 192 04.25 216 04.50 216 04.75 240 05.00 240 0

LABOUR HOURS FOR CUSTOMS BOOTHS FOR STABLE ARRIVAL

COST AND SECURITY PRACTICES"CBP recognizes the diverse size and financial abilities of C-TPAT members and this catalog attempts to provide examples of not only advanced security technologies, but of lower cost security practices as well. For example, concerning conveyance tracking …."

Supply chain security best practices catalog (pp. 1-2)

"Detecting false walls/compartments: A Highway carrier uses several low cost, commercially available laser measuring devices to detect false walls/compartments, and hidden contraband. One device…..A mirror is used to inspect the undercarriage…."

Supply chain security best practices catalog (pp. 17-18)

COST AND SECURITY PRACTICES

SOURCEVoluntary supply chain securityprogram impacts: an empiricalstudy with BASC member companiesXimena Gutiérrez, Juha Hintsa, Philippe Wieser and Ari-Pekka Hameri

INSIGHTS FROM JC PENNEY1. Examination of internal security operation compliance

2. Formed an implementation team comprising personnel from legal, logistics, quality control, loss-prevention, and supply chain departments

3. Created a compliance manual specifying different aspects of supply chain collaboration and a questionnaire to be completed by all foreign suppliers

4. Collected security measures and evaluated suppliers’ security measures

5. Educated/trained suppliers on optimal security procedures

6. Rigorous and regular inspections of suppliers’ facilities

7. 90-day grace period for suppliers to rectify security problems

8. Bi-annual supplier summits to update suppliers on emerging developments and security issues in the retail industry

SEARCH FOR INNOVATION: Trucking

Commercial Carrier Journal: http://www.ccjdigital.com/

VALUE – Why?IMMEDIATE VALUE

More fruitful process of searching for private sector solutions

More thorough analysis of alternative solutions

More cost-effective choices

Greater clarity about what to seek from government

More rationally prioritized wish list of government actions

SUSTAINING VALUE: Knowledge Building

The race towards solving North America’s border problems is not a sprint but a relay: run a good leg and make a clean hand-off so the next runner can run an even better leg.

Country A’sGovernment

Officials

Country B’sGovernment

Officials

Country A’sBusinessLeaders

Country B’sBusinessLeaders

Country A’sSCM Scholars

Country B’sSCM Scholars

SUSTAINING VALUE: A look to the future

Building Knowledge: Initiatives by Academia and Others

Term projects based on the Search and Choice Process stages of the managerial decision cycle

Utilize the Canadian government’s Accelerate program initiative (http://www.acceleratecanada.ca/)

Respond to the Canadian government’s Supply Chain Sector Council initiative to build human capital in SCM (http://www.supplychaincanada.org/en/)

2008 Canada-Latin America and the Caribbean Research Exchange Grants (LACREG)

http://www.aucc.ca/programs/intprograms/latincarib_e.html

LOOKING AHEADLOOKING AHEAD1) Extend queuing model to reflect (i) secondary

inspection, (ii) trucking industry consolidation/realignment, (iii) modal shifts (to rail) and (iv) 100% C-TPAT participation

2) Assess inventory sharing vs. stockpiling; network redesign

3) Model/quantify operational benefits of mergers4) Viability of private sector initiatives under "BIF"

stimuli5) Lessons from the TQM movement6) Stories of innovative and cost-effective security

practices7) Response to EDC loan program to fund C-TPAT

certification for small exporters

LOOKING AHEADLOOKING AHEAD

If 65% of the nearly 6000 SME companies served by EDC are loaned the estimated $100K C-TPAT implementation cost for SMEs ($100K) at an interest rate of 12% p.a. over 5 yrs. then annual payment » $104M

Trucks typically carry 61.5% of Canadian exports of $300B/year to the US so if border related waste cost these SMEs just 1% of truck-based exports then annual total cost of waste = $1.85B (17 times loan repayment)

INFRASTRUCTURE STILL INFRASTRUCTURE STILL

MATTERSMATTERSIf the Canadian economy loses just half of 1 percent of truck-borne export revenues because of reduced trans-border operations, this amounts to $922 million per year.

If one assumes that the Canadian liberal government’s campaign promise of $4.5B over 10 years for border and gateway infrastructure represents a reasonable estimate of deficit in border/gateway investment then the investment is worthwhile: spend $450 million per year to prevent a loss of $922 million

Thanks for Listening

Questions/Comments?