Supply chain management is an industry we simply take for granted.
But when you sit in your office and look at everything in front of you – the desk, your coffee, the computer, your bag lunch – it all had to arrive somehow. It was manufactured somewhere and a process along the road helped it reach your desk.
Although taken for granted, there is a very efficient system in place that’s getting all of those items to consumers and businesses.
That process is supply chain management and it’s become a burgeoning sector in Calgary – a critical component in the economic system, ensuring products are delivered from point of manufacture to their consumer destination. It’s been a strong sector here for many years; more than people realize. And the Calgary region is poised to further grow, enhance and develop the sector because the city has developed into a major logistics hub for Western Canada and the Pacific Northwest.
In fact, it is a gateway to regional and global markets through its well-established multi-modal logistics network servicing air, rail and road.
‘‘There’s so much growth…. We have excellent multi-modal connections to North American and global markets,’’ says Deana Haley, vice-president of business development and workforce innovation with Calgary Economic Development. ‘‘We have a strong transportation and logistics market labour force. We benefit from a competitive tax environment. We have available serviced and un-serviced ready-for-construction industrial land so that we can attract more of those types of companies like distribution centres [and] manufacturers. This leads to a strong regional critical mass of the sector.’’
Supply chain management falls under the umbrella of the transportation, logistics and warehousing industry – a sector of the economy that has been doing fairly well in the past couple of years despite the economic collapse of 2015 and 2016 when the city suffered through a gut-wrenching recession creating thousands of job losses, many collapsed businesses and a general pessimistic mood about the future.
The Calgary region is blessed with more than 4,700 transportation and logistics companies. According to Calgary Economic Development, 50 million consumers can be reached from Calgary to locations in Western North America within two days by road. Supply chain can reach 16 million consumers in one day from a one-direction trucking route. Inland Calgary is within 2.5 days from West Coast ports by rail. The region also has connections to international markets for all commodities and sizes of air cargo.
The share of direct employment in the Calgary CMA in 2015 was six per cent in transportation and warehousing which is nearly 50,000 jobs of about 800,000 employed in the region.
The share of direct GDP in the Calgary CMA in 2015 for this sector was five per cent of $115 billion in the total economy.
According to the Alberta government, in February there were 140,700 people employed in the transportation and warehousing sector in the province, up from 138,400 in January and 128,100 in February 2016.
Supply chain management is an enabler of all industries and because of that professionals in the field are now seen more as a core function of an operation rather than just in a support role.
‘‘In general, supply chain professionals have the skills to allow better informed decisions to be made within the supply chain. This results in both cost savings and more effective operations,’’ says Jaydeep Balakrishnan, professor, operations and supply chain management director, Canadian Centre for Advanced Supply Chain Management and Logistics, Haskayne School of Business, University of Calgary. ‘‘With the growth of globalization and technology, supply chains have become more complex to manage…. Professionals perform a variety of functions within supply chain management from the inbound side to the outbound side.’’
Professionals come from different backgrounds such as business, engineering and law. Courses in supply chain management can be taken at several post-secondary institutions such as SAIT, Mount Royal University and the University of Calgary.
Supply chain management is now seen as a competitive weapon. For example, Walmart and Toyota became formidable global companies as a result of excellence in this area, explains Balakrishnan. When it comes to global supply chains, the cost of the logistics of delivering a product to a customer can be greater than the cost of manufacturing the product itself. With fierce competition, many companies in these turbulent economic times are looking for every opportunity to find cost savings.
Because of this, sophistication is evolving in the sector. It’s all about the transportation and distribution of the goods and for Calgary the future indeed looks bright. It has experienced significant growth over the past two decades due to the uptick in the oil and gas industry and the boom in Calgary becoming a major logistics hub with companies such as Walmart and Canadian Tire setting up distribution centres in the region. Also, service organizations like Alberta Health and universities have created supply chain organizations to reduce costs and streamline operations.
‘‘In fact I believe the existence of a strong logistics industry has probably blunted the effect of low oil and gas prices,’’ says Balakrishnan.
Patrick Etokudo, vice-president of the board and director of industry with the Supply Chain Management Association of Alberta and director of supply chain planning and governance at Enbridge, says this segment of the transportation and logistics sector is becoming a more important part of the Alberta economy.
Research indicates that association members control more than $130 billion in annual spending.
‘‘Companies are realizing, especially after going through the downturn of three years now, it is way easier to manage your costs and impact the bottom line than it is to increase your sales to improve the bottom line,” says Etokudo. ‘‘So you are seeing more companies refocus on supply chain competencies. You hear of a couple of companies appointing supply chain officers – building supply chain capacity within their firms and for the first time actually bringing supply chain roles to board and senior leadership levels across the industry.”
Keith Lambert, owner of Supply Chain Amplified, who has been in the industry for 35 years including a number of years with Sobeys and the Forzani Group, says there’s a trend towards omni-channel retailing, providing consumers the choice of product delivery.
They can still go to a store to buy a product because they like to feel, touch, taste and smell it before purchase. But a growing number are choosing direct shipment where the customer orders a product over the Internet and has it either delivered to their home or to a store location where they can pick it up. Amazon’s success is a clear indication more people are doing this.
‘‘It’s changing dramatically because consumer demand is changing dramatically. If a company was doing three to five per cent of their business online in Canada a few years ago that would have been deemed to be normal but in the U.S. those numbers were in the 15 to 25 per cent range. U.S. consumers have adapted more readily to online shopping than Canadian consumers have. But that’s all changed in Canada and it’s changing rapidly,’’ says Lambert.
The Calgary region is a premier inland port for Western Canada. The right infrastructure is in place. Municipalities are working together to make sure activities are aligned. Advanced information, manufacturing and transportation technologies have developed. That has all helped the sector grow to its current level and created the springboard for continued success in the future.