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Larson joins Purchasing b2b's editorial advisory board
Winnipeg—Purchasing b2b is pleased to welcome Paul Larson to its editorial advisory board. Larson is a professor of supply chain management at the University of Manitoba’s Asper School of Business. He’s also head of the Supply Chain Management Department and the new director of the Transport Institute.
Larson earned his MBA and Ph.D degrees in the US, and previously taught at the University of Alberta. His award-winning doctoral dissertation was funded by the former National Association of Purchasing Management (now the Institute for Supply Management).
Larson has also taught purchasing, logistics and supply chain management at the University of Nevada, and Iowa State University. He has published more than 40 articles in leading supply chain management, logistics, purchasing and transportation publications.
Survey shows more focus on purchasing
Markham, Ont.—Senior executives want to increase the focus on procurement to find savings, according to the 2005 Chief Purchasing Officer survey by IBM.
According to the survey—which included 300 executives responsible for purchasing decisions—procurement will be an important factor in driving competitiveness and growth. About 75 per cent of respondents expected to generate savings through purchasing.
However, these executives feel buying items at the best price is no longer good enough. Instead, procurement staff are being asked to buy “capabilities,” such as entire supply chains.
“As CEOs look to transform their business processes to boost competitiveness, procurement is in the spotlight and CPOs need to become more responsive and focused around equipping their staff with the required skills,” said David Stevens, partner and supply chain management lead with IBM Canada Business Consulting Services.
The report also included the following points:
• China rated as the number one destination for finding better-value suppliers, according to 60 per cent of executives. A similar number believe their organizations do not have the required skills to conduct sourcing from China.
• Only 38 per cent of senior executives responsible for purchasing were actively managing a significant portion of their direct materials supplier base, showing a lack of strategic supplier management.
• People are a focus of improvement. The top three criteria for improving procurement centred on skills development, talent retention and people management. Sixty-five per cent of senior executives noted a fundamental need to upgrade their staff’s skills.
Cargojet lands award
Mississauga, Ont.—Cargojet lands award
Mississauga, Ont.—Cargojet, a domestic overnight air cargo network in Mississauga, Ont., has won the Air Cargo World Excellence Award.
The award is presented annually by the publication Air Cargo World. It recognized Cargojet’s positive ratings from customers in four key areas: customer service, performance, value-added services and information technology.
“Cargojet has received outstanding scores from customers in the air cargo category, leading the service category with the highest global ratings of any air cargo carriers,” said Steve Prince, of Air Cargo World.
In May, the carrier achieved its highest on-time performance levels, exceeding 99.1 per cent. It operates in 13 major cities, carrying more than 500,000 lbs. of cargo per night.
Retailers shipping through Halifax
Halifax—A group of major Canadian retailers have decided to ship cargo from Asia into the Port of Halifax. The retailers include Sears Canada Inc., Sony of Canada Ltd., and Reitmans (Canada)—all members of the Canadian Retail Shippers’ Association (CRSA), which represents 11 companies.
The companies said they would start importing apparel, electronics and furniture from Southeast Asia and the Indian sub-continent via all-water routes over the Suez Canal, starting July 1. “The deal is a major vote of confidence in the Port of Halifax as a smart gateway for Asian trade to enter North America,” said Karen Oldfield, president and CEO of the Halifax Port Authority.
The CRSA members are shipping 4,000 TEUs (20-foot equivalent units) per year through Halifax. Canadian National Railway (CN) and Armour Transportation Systems will deliver the goods to warehouses in central Canada.
“Over the next few weeks our people will undertake specialized training at CRSA logistics operations on the west coast,” said Wesley Armour, president and CEO of Armour Transportation Systems.
Atlantic exporters are expected to benefit from the influx of containers, which will be available for their use on outbound shipments. “We see this as a value-added growth opportunity for Halifax with respect to Asian cargo, as more North American ports are experiencing congestion,” said Oldfield.
ECCC officially changes name
Toronto—Toronto—After announcing plans to change its name earlier this year, the Electronic Commerce Council of Canada (ECCC) is now officially called GS1 Canada.
The name change signifies ECCC’s joining the global GS1 organization, which is the largest e-commerce standards association in the world. The new partnership forms a worldwide network of member organization in more than 100 countries, aimed at developing a seamless global supply chain.
Purchasing activity expanding
Toronto
Toronto—Purchasing activity in the Canadian economy expanded in June at a faster pace than May, according to the Ivey Purchasing Managers Index.
The index—a joint project of the Purchasing Management Association of Canada (PMAC) and the Richard Ivey School of Business—rose to 63.3 in June, from 62.0 in May. The Ivey inventories index rose, while supplier deliveries were slower in June than in May.
The Ivey index is based on figures from 175 members of PMAC.
Shutdown delays for Ontario coal plants
Toronto—Ontario’s provincial government has extended its deadline to close all its coal-fired generation plants.
In 2003, it promised to have all five plants closed by the end of 2007. But the largest of the plants—Nanticoke GS, which generates a whopping 3,938 megawatts—will now remain open until early 2009. The delay will give the government more time to find reliable replacement sources of energy, according to a Ministry press release.
The Ontario Chamber of Commerce (OCC), which represents more than 57,000 businesses, called the delay a “brave step,” and urged McGuinty to ensure adequate sources of energy are available before the coal plants are mothballed.
“Keeping Ontario’s air clean is a worthwhile objective,” said Len Crispino, president and CEO. “But this Minister must also consider how to keep the cost of power affordable while increasing supply.”
OCC members are concerned “replacement” energy will be more expensive, which could dramatically increase the cost of doing business in Ontario. “Without ensuring a healthy mix of supply sources, this Minister is risking Ontario’s competitive position,” Crispino added.
A significant show of support for the delay was offered by Jack Gibbons, chairman of the Ontario Clean Air Alliance.
“While there is a delay for the complete phase-out of coal relative to the original forecast, we believe it is worth taking the extra time necessary to do the job right and ensure an orderly and sustained shutdown,” Gibbons said.
Ontario’s coal-fired plants are the largest industrial source of greenhouse gas emissions in the province. The government recently put out requests for proposals for clean energy, and is reviewing the potential capacity of nuclear energy.
Chinese production accelerates
Beijing—Growth of industrial output in China quickened in April, up 16 per cent over last year’s figures, according to ProPurchaser.com.
The acceleration indicates the Chinese government’s efforts to curb lending and investment over the past year were still not gaining full traction in slowing the pace of expansion, Propurchaser reports. The government is trying to prevent the economy from overheating.
China is also under pressure to increase the value of its currency, amid claims that the current peg-level to the US dollar (8.28 to 1) is giving Chinese manufacturers an unfair competitive advantage in world trade.
For more information, visit http://www.propurchaser.com
Letter to the editor
I agree with your editorial in the June issue of Purchasing b2b. Leave the name purchasing alone. Supply chain or other names don’t cut it and never will.
Ron Neatby
Manager of Purchasing Services
Waterloo Region District School Board
Funding allowed for ports
Ottawa—The Canadian government is backtracking on a rule that forbids public funding for maritime hubs, according to a report in the Journal of Commerce Online.
In June, federal Transport Minister Jean Lapierre introduced a bill of amendments to allow for federal contributions to the country’s 19 largest ports, for infrastructure improvements and capacity expansion. The amendment would also increase (on a case-by-case basis) the strict limits on borrowing imposed by port authorities.
“It is important that Canada’s ports be modern, efficient and competitive and able to respond quickly to emerging global opportunities…with China and other markets,” said Transport Minister Jean Lapierre, in a press release.
In February, Lapierre increased the amount the Port of Vancouver may borrow from $231 million to $285 million, to help pay for container terminal expansion, the Journal reports. The decision followed intense lobbying by the marine shipping industry, which is faced with surging trade volumes and competition from rival US ports.
At press time, the bill still had to pass through Parliament. The ports of Montreal and Halifax are also expected to benefit from the new legislation.
BUSINESS FRONT
Brother, can you spare $2.5 trillion?
By Michael Hlinka
The US is the richest country in the world—both in absolute and per capita terms. Nothing new there. But what might surprise you is that at the same time, it’s also the most heavily indebted nation on the planet.
At the end of 2004, foreign citizens owned approximately $2.5 trillion more in US assets such as stocks, bonds and real estate than Americans possessed in foreign assets. Not only that, but its net debt increased by an astonishing 15 per cent last year…and it continues to rise.
For those of my generation, this is nothing less than astonishing. When I was a teenager, the US was widely reviled for owning too much of the rest of the world’s productive assets. There were fears in this country that everything we owned (all our companies and natural resources) would be purchased by our southern neighbour, threatening not only our economic future but our political sovereignty as well.
As it turns out, the opposite has occurred. Canadians currently own a lot more of America than Americans own of Canada. The reason is the US continues to consume a lot more than it produces. We see that every month in the trade numbers. It’s really that simple.
Inevitably, there will be developments in the US that will impact the rest of the world. American current account deficits (and matching Canadian current account surpluses) can’t go on forever. America cannot and will not continue to sell its capital assets at an increasing rate of 15 per cent per annum!
However, there’s still the problem of how to deal with the outstanding debts. My guess is there will be increased calls for protectionism by our southern neighbours to protect various industries. Closing off the borders to Canadian beef and hindering the import of softwood lumber may be extended to other goods and services, with suitable excuses always found. And, finally, it seems utterly logical that there will be a sharp devaluation of the American currency in the years to come.
All of this will have a profound impact on Canadian business. In most respects, it will be a passive observer as events develop. Yes, there will be threats, but new opportunities among them. It will become increasingly difficult to sell into the American market if goods are produced here.
On the other hand, all imports from the US automatically become cheaper as the greenback declines vis-à-vis the loonie. In total, a declining American dollar and the swinging pendulum from American trade deficits to American trade surpluses will be a difficult pill for Canadian business to swallow, but it’s one we’ll have to force down. b2b
Michael Hlinka provides daily business commentary to CBC Radio One and a bi-weekly column that is syndicated across the CBC network. In addition, he conducts financial planning courses.
Gearing up for Asian trade shows
By Manoj Aravindakshan
Singapore—Come September/October, buyers from all around the world descend on Asia for the Fall trade show season. Some of the region’s largest business-to-business trade fairs are held for a range of industries.
Fall is considered the primary sourcing season for consumer electronics, which is apparent from the number of shows held in Asia.
What should buyers focus on? The main shows are the Taipei Electronics Show (TAITRONICS), the Hong Kong Electronics Fair and the Canton Fair in Guangzhou, China. Meanwhile, the China Sourcing Fair: Electronics & Components, a relatively new entrant to the trade show circuit, has quickly established itself as a professionally-organized, high-quality show. As a result, buyers are adding Shanghai to their itineraries.
Of course, the electronics shows in Japan and Korea (CEATEC and KES, respectively) are still well attended, largely because these two countries are known as test-beds and early adopters of the latest digital gadgets. However, the shows in mainland China and the Greater China region overall are starting to take precedence, as buyers begin to view China as the ‘factory of the world’.
According to Christina Leung, a Hong Kong-based buyer for Canadian Tire, the Hong Kong Electronics Fair and the Canton Fair in Guangzhou are particularly important for buyers and importers from Canada. “Buyers look for innovative products for the fall of next year, which is the most important sale season for all retailers. That’s the real significance of these trade shows.”
Electronics are not the only draw to Chinese trade shows. The Canton Fair, the largest trade show in China in terms of the number of exhibitors participating, is an all-encompassing show (including electronics) showcasing the export capabilities of China’s manufacturers. Backed by the ministry of foreign trade, this is also the oldest export-oriented trade show in China.
For a complete list of trade shows coming up in Asia, visit http://tradeshow.globalsources.com
Manoj Aravindakshan is founder of On Target Media (www.ontarget-media.com), a Singapore-based content provider.
Beware the Polish plumber!
Commentary by Sam Tulip
A new survey by Professor Christopher Jahns of the Supply Management Institute at Wiesbaden, Germany, reveals how low-cost country sourcing (LCCS) may wreck the European dream. Ironically, the low-cost craftsman such as the Polish plumber may be among the victims, not the winners.
Professor Jahns surveyed 200 top European countries in the UK, France, Italy, Germany and Spain—the industrial base of ‘old Europe’. He found outsourcing of both direct and indirect supplies is already well-established and will increase massively in the next five years (by 100 per cent in France).
China, and to a lesser extent India, are the likely winners, and while domestic supply bases may be reasonably safe, there is a polarization developing, Jahns found. Future supply will be either seriously close to the buyer, or it may come from anywhere on the planet.
The losers are those neighbouring regions that have just a little cost advantage. Italy is already feeling the cold. Traditionally, it’s been a lower cost provider to Germany, but no longer. The new accession countries, including those fearsome Poles, may also lose out as supply chains jump the neighbours to seek even cheaper sources in Russia and Asia. The UK doesn’t fit the pattern, largely because we always had a more diverse supply base. We are, for example, the only one of the five European states surveyed to use the US as a significant source of supply.
More important to buyers is one of Jahns’ other findings, that all this activity is essentially ad hoc. Fewer than a quarter of these top firms could actually explain their strategy for low cost country sourcing; the majority of buyers have never visited a low cost region, let alone a specific supplier; fewer than a third can actually get a handle on their global spend patterns, by commodity or by supplier and thus predict what is right to source elsewhere, and what isn’t.
LCCS is not without risk (ranging from congested ports and inadequate infrastructure to downright piracy of intellectual property in an office, or armed assassins in the Malacca Straits); nor sourcing from a low cost country necessarily the same as sourcing a low cost product, once total costs have been aggregated. But European industry, Jahns claims, is in herd mode: ‘I must source from China because that’s what my competitors are doing’.
This attitude could blow up in the face of many European businesses. And, for better or worse, it does drastically undermine the logic of the Euro currency. Italy, for example, can no longer devalue itself out of trouble. The effects, evidently, will be impactive. b2b
Sam Tulip is a UK-based business writer.
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