“To be competitive in today’s global economy, U.S. companies need to be able to move products and goods securely, quickly and efficiently within our borders and beyond. America cannot compete successfully in the 21st century with a 20th century infrastructure.” –U.S. Commerce Secretary Gary Locke
The term “supply chain management” has long been an afterthought to much of the general public. Let’s face it: unless you are involved in the transportation industry, few people recognize the global effort required to stock the shelves of the supermarket, the Home Depot, the automotive repair facility, and on down the line.
So much of what we need and use every single day wends its way to where we obtain it though a complex web of factories, docks, warehouses, ships, planes, trucks, and countless human hands. Until I started covering the air cargo markets almost a decade ago, I myself didn’t realize how many fresh flowers or nice cutlets of farm-raised salmon came in fresh every day from countries like Brazil and New Zealand, respectively.
It came as quite a shock to me to literally sit up and realize that such fresh delicacies traveled distances that consumed the lives of famous explorers such as Ferdinand Magellan for years – in his case, leading to his death – in the span of a single day.
Yet that attitude is changing – and changing fast. Take the extraordinary meeting held in Washington D.C. the other day at the Ronald Regan Building. Entitled Game Changers in the Supply Chain Infrastructure: Are We Ready to Play? and hosted by BOTH the Department of Commerce and Transportation, it explored the importance of robust and efficient supply chain systems to the U.S. economy – and how the federal government is preparing to help reinvigorate such networks so America can be more competitive.
“At its most basic, a competitive domestic supply chain infrastructure represents our ability as an economy—as a nation—to move products and goods,” said Commerce Secretary Gary Locke in his written remarks.
“As governor of Washington State, I saw first-hand the importance of a strong supply chain infrastructure,” he said. “The exports and imports that flowed through the supply chains in Washington supported more than 10 percent of our private sector jobs. And 90 percent of Washington’s exporting companies were small and medium-sized enterprises, with fewer than 500 employees.”
While much of the debate over supply chain infrastructure focuses on international trade, he said, the fact is that domestic commerce is responsible for more than 85 percent of what passes through U.S. rail, trucking, air, and marine systems.
“What this means is that America’s supply chain infrastructure deficiencies don’t only impact the competitiveness of our foreign trade,” Secretary Locke emphasized. “They affect the strength of the entire American economy.”
Several experts were on hand to give their views on this subject – veterans of the supply chain trenches, as it were. They included Angel Mendez, Sr. VP of global supply chain management for Cisco; Douglas Oberhelman, group president for Caterpillar; Ron Lewis, VP-supply chain for Coca Cola Enterprises; and General Duncan J. McNabb, USAF, Commander of the U.S. Transportation Command.
Secretary Locke went on to say that the logistics sector today represents about 10 percent of U.S. GDP [gross domestic product] by itself – yet, by international standards, that’s considered relatively low, suggesting a high degree of efficiency, especially in comparison with other important economies that spend as much as 20 percent or more of GDP on logistics and transport.
“However, America’s job prospects depend on the health of the infrastructure that supports our domestic and international supply chains,” he stressed. “Of five major industry sectors that represent over 80 percent of the U.S. economy, four—manufacturing, retail, services, and agriculture and natural resources—are critically dependent on transportation. The fifth sector is the transportation and distribution sector itself.”
Last year, he noted that the U.S. Chamber of Commerce reported that employment in these four transportation-dependent sectors accounted for some 99 million U.S. jobs, or nearly 71 percent of the U.S. workforce. The transportation and distribution sector—including direct transportation, warehousing, and wholesale trade—account for an additional 7.5 percent of America’s workforce, nearly 11 million jobs.
“Our nation has long enjoyed a world-class transport infrastructure. But we are placing rapidly growing demands on aging infrastructure systems,” Secretary Locke warned. “We need to find new methods to move products more efficiently if we are to keep pace with the rest of the world.”
That means viewing the relationship between trade and transportation more broadly, in interconnected and interrelated ways that are much more complex. “Old solutions are not enough,” he said. “Supply chains today are being changed dramatically by forces that go beyond traditional transportation remedies."
At every level of a supply chain, one sees more advanced information technology applications, more sophisticated equipment, more integrated business processes, the secretary noted – and these developments require higher levels of education and training, plus some means to fund them.
“Our challenge is to explore supply chain issues in an interconnected, intermodal way that cuts across the broad range of national priorities and sets the path to future success,” he said.
A bold vision, indeed. Now, however, the challenge is coming up with the blood, sweat, tears and funds to make it become reality.