The new NAFTA
The new United States-Mexico-Canada Agreement, or USMCA, replaces the 24-year-old North American Free Trade Agreement (NAFTA).
With all the hype around it, the USMCA is being described as a cosmetic change by some analysts. While the structure of the agreement remains largely unchanged, the major items include marginally increased US access to the Canadian dairy market, requirement for increased North American content in automobiles.
Appearing to be a short-term gain for the US, it might cut into longer terms interests, as in the case of automobile production. Additionally, the way in which US approached the subject and the way the talks were conducted, undermining long standing US neighbors and allies, could potentially undermine America’s negotiating position in the future as countries would adjust their strategies accordingly.
The agreement is yet to be ratified into law, a step that is open to the changes form the mid-term election in the US.
TRANSPORTATION – An integral part of Supply Chain
By Naeem Ahmed
Former - Council of Saudi Chambers, Riyadh, KSA.
Affiliate, Business Research and Service Institute, USA
Transportation is an integral part of supply chain. It is a process or method to move people or goods from one place to another. The Oxford dictionary defines it as; ‘The action of transporting someone or something or the process of being transported’
This definition is more general in terms of movement of anything from one place to another. In broad terms, it covers movement of all kinds i.e. people. trade items, goods, animals, liquid, online selling items etc.
For businesses, it is important to understand and adapt the most feasible transportation method in order to avoid negative impact on the business. It correlates with the main concept of supply chain i.e. responsiveness vs. efficiency. A short elucidation of these terms are as follows;
Supply Chain Responsiveness vs. Efficiency
Supply chain responsiveness – ability to respond to wide ranges of quantities demanded
-meet short lead times
-handle a large variety of products
-build highly innovative products
-meet a very high service level
There is a cost to achieving responsiveness
-Supply chain efficiency: cost of making and delivering the product to the customer
-Increasing responsiveness results in higher costs that lower efficiency
Hence, transportation is a process to move the product between stages in the supply chain. It has a great Impact on responsiveness and efficiency of a business, selecting faster transportation allows greater responsiveness but lower efficiency. It effects inventory and facilities also.
If responsiveness is a strategic competitive priority for a business over others, then faster transportation modes can provide greater responsiveness to customers who are willing to pay for it. Businesses can consider slower transportation modes for the customers whose priority is price (cost). There is a possibility to consider both inventory and transportation to find the right balance.
The courier services like Fed-ex, DHL, ARAMEX etc. are good examples. These are complete logistics organizations; and not only courier delivery service. The traditional postal service organizations get tough competition from them. Many postal services have groomed themselves to provide cargo services to improve their service and customer retention by keeping the right balance between responsiveness and efficiency.
Mode of transportation
There are multiple modes of transportation available to cater the market needs;
1. Rail – inexpensive for large quantities
2. Road/Truck – quick & inexpensive, flexibility
3. Air – most expensive, very fast
4. Water – slowest, economical for large overseas shipments
5. Pipeline – transport of oil, gas, and water
6. Digital – music, books etc.
7. Intermodal – combination of modes
It is one of the inexpensive mode of transportation, it requires initial high fixed cost in infrastructure development but when operational it becomes very reliable mode of transportation.
Rail mode is very much economical in the regions where large areas of land are connected from rail network like most of the Europe, USA and Canada.
Canada is stretched far-flung in terms of land, reaching from one end to another sometimes requires days by land transport. The Rail system helps a lot to agriculture industry in Canada. The West part of Canada is more agriculture land, which requires good transportation system to move related products like grains, corn, etc. to the processing units and the other provinces in huge quantities.
The regions like Gulf Cooperation Council (GCC) which comprises of six countries including Saudi Arabia, UAE, Qatar, Bahrain, Kuwait and Oman, has started to develop the rail network within their countries and connecting each other for their long term vision for greater cooperation and high volume trade among themselves.
2. ROAD / TRUCK
Truck is another mode of land transportation. It may be a little expensive than rail but offers huge advantage of shorter delivery time and small packages delivery mode like door-to-door delivery.
Airlines are one of the fastest mode of transportation. It carries both passengers and cargo. It has high fixed cost in infrastructure developments including planes, airports, trained and professional staff, equipment etc. Due to the privatization of most of the airlines, they are now pure commercial companies, hence, having tough competitions from competitors. There is a price war going on currently, in order to get bigger share of the market. This completion is healthy for the customers who depends on the air transportation in terms of travelling or cargo movement.
Water Transport is the slowest mode of transportation for commercial activities. It has certain limitation by its nature, in terms of movement of shipping carriers. The sea shipping is the main course, and there are some regions which use In-land waterway transit system.
Pipeline is used for the transport of oil, gas and water. It is one of the most reliable mode of transportation for such kind of products. There are a lot of successful operations worldwide effectively utilizing pipelines transportation for crude oil from one country to another, sometimes across continents.
With the advent of internet in trade and commerce for almost 2 decades, Digital communication has revolutionized the way of boundary-less trade. It has been proven highly effective business model for many organizations. It carries low fixed cost, fast delivery time and inexpensive method of delivery. The trade items may include music, e-books, movies, live transmission broadcast etc.
Intermodal mode of transportation is defined as the shipments that employ more than one mode in a single through movement from origin to destination. The combination may vary among Rail –Truck, Truck – Air, Truck – Water etc.
-Supply Chain Management, Strategy, Planning and Operation, 4th Edition
-Lycos: GS1KSA Academy, ISCEA, GS1 Global Office
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