1. Geoffrey Hale Political Science 3170 The University of Lethbridge October 21, 2010

2. Outline What are supply (and value) chains? Supply chains and structural economic change

3. Supply Chains Supply chains the series of value-adding service, processes, information and financial flows that generates final products and distributes them to end users (Stanley). supply chains involve the management of logistics requiring the integration of information, transportation, inventory, warehosing and materials handling systems. Inbound logistics – involves the transportation and warehousing of raw materials and components until needed for manufacturing or processing; Outbound logistics – involves the warehousing and distribution of intermediate and/or finished goods.

4. Supply chains and economic integration The evolution of supply chains reflects both policy changes by governments and broader changes in forms of economic and market organization Policy Changes Pursuit of greater specialization of firms through reduction of trade barriers, extension of trade agreements Increased productivity of freight transportation systems through economic deregulation (elimination of rate regulation, barriers to entry) and greater competition Result: increased decentralization of production and distribution systems through business networks of related and arms-length firms.

5. Supply chains and economic integration Major enabling changes in business environment Information Technology Revolution Clusters of technologies facilitating information management and sharing, including inventory, production and distribution control systems e.g. Bar Codes, point-of-sale/distribution inventory management, tracking of goods shipments, standardization of customs processes, etc. Facilitates “just-in-time” inventory and production systems, global sourcing and distribution of components and products.

6. Supply chains and economic integration Major enabling changes in business environment Containerization Intermodal integration of maritime, rail and truck freight networks Widespread development of private freight terminals Intermodal traffic (US) – 1980: 3 mm.; 1990: 6 mm.; 2006: 12 mm. Global integration of supply chains Rapid growth of Chinese, East Asian container traffic since 1990 Expansion of North American distribution networks Consolidation of Class I Railways across North America 40 in 1980; 7 in 2006 (> $US 346 mm. Revenue), including US subsidiaries of Canadian National, Canadian Pacific Integration of North American oil and gas pipeline networks

7. Supply chains and economic integration Source: American Assn. of Railroads.

8. Growth of container traffic: 1990-2008 ‘000 TEUs. Vancouver LA / PacificMontreal NY/NJ Atlantic Long Beach Coast Coast 1990 383.2 3,714.5 8,659.5 568.1 1,898.4 7,684.7 20001,230.0 9,480.2 17,372.8 1,014.1 3,050.0 13,042.4 20082,492.1 11,816.6 22,597.61,473.9 5,265.1 19,731.7 Source: American Association of Port Authorities, http://www.aapa-ports.org/Industry/content.cfm?ItemNumber=900 (20/10/10)http://www.aapa-ports.org/Industry/content.cfm?ItemNumber=900

9. Canadian Ports by Cargo Tonnage, 2007 thousands of metric tons TOTAL TRADE INTERNATIONAL TRADE DOMESTIC TRADE PORTS (PROVINCE) TONS PORTS (PROVINCE) TONS PORTS (PROVINCE) TONS 1 Vancouver (BC) 81,442 Vancouver (BC) 80,182 Newfoundland Offshore (NF) 17,210 2 Come-By-Chance (NF) 34,269 Port Hawkesbury (NS) 28,709 Come-By-Chance (NF) 15,888 3 Port Hawkesbury (NS) 31,641 Québec/Lévis (QU) 22,221 Fraser River (BC) 7,090 4 Québec/Lévis (QU) 26,606 Saint John (NB) 20,710 Thunder Bay (ON) 5,652 5 Saint John (NB) 26,105 Montréal/Contrecoeur (QU) 20,397 Hamilton (ON) 5,639 6 Montréal/Contrecoeur (QU) 25,577 Sept-Îles/Pointe-Noire (QU) 18,747 Saint John (NB) 5,395 7 Sept-Îles/Pointe-Noire (QU) 21,433 Come-By-Chance (NF) 18,382 Port-Cartier (QU) 5,327 8 Port-Cartier (QU) 20,035 Port-Cartier (QU) 14,708 Montréal/Contrecoeur (QU) 5,181 9 Newfoundland Offshore (NF) 18,847 Nanticoke (ON) 11,438 East Coast Vancouver Island (BC) 4,577 10 Nanticoke (ON) 13,038 Prince Rupert (BC) 10,465 Québec/Lévis (QU) 4,386 11 Halifax (NS) 12,592 Halifax (NS) 9,922 Howe Sound (BC) 3,713 12 Hamilton (ON) 11,531 Hamilton (ON) 5,893 Port Hawkesbury (NS) 2,932 13 Fraser River (BC) 11,195 Port-Alfred (QU) 4,742 North Arm Fraser River (BC) 2,788 14 Prince Rupert (BC) 10,465 Sault-Ste-Marie (ON) 4,423 Sarnia (ON) 2,772 15 Thunder Bay (ON) 8,485 Baie-Comeau (QU) 4,384 Sept-Îles/Pointe-Noire (QU) 2,686 16 Baie-Comeau (QU) 6,556 Fraser River (BC) 4,105 Halifax (NS) 2,671 17 East Coast Vancouver Island (BC) 5,770 Thunder Bay (ON) 2,833 Clarkson (ON) 2,425 18 Sorel (QU) 5,039 Sorel (QU) 2,796 Sorel (QU) 2,243 19 Sault-Ste-Marie (ON) 5,003 Goderich (ON) 2,764 Baie-Comeau (QU) 2,172 20 Windsor (ON) 4,850 Windsor (ON) 2,706 Windsor (ON) 2,144 Grand Total468,624 333,737 - 71.2% 134,887 – 28.8% Source: American Association of Port Authorities ; http://aapa.files.cms-plus.com/Statistics/PORTSOFCANADA2007.pdf (20/10/10)http://aapa.files.cms-plus.com/Statistics/PORTSOFCANADA2007.pdf

10. Sectoral Integration of Supply Chains Food processing Emergence of North America-wide food processing networks e.g. consolidation of beef processing industry in Alberta. Automotive Geographic, ownership diversification of North American auto sector before industry collapse, consolidation of 2008-09. Energy Emergence of integrated North American production and distribution networks for oil, natural gas, electricity (enabled by regulatory changes, driven by price shifts: 1985-99).

11. Policy Challenges for Supply Chain Integration Capacity constraints Growing port, rail bottlenecks, esp. on West Coast, major Great Lakes bridges Cdn. Response: “Gateway Strategies” – major investments in port infrastructure, esp. Ports of Vancouver, Prince Rupert; Windsor / Sarnia Gateways (bridge twinning at Sarnia; plans for Detroit- Windsor Bridge) Eased mildly by 2008-09 recession; substantial rebound in 2010.

12. Policy Challenges for Supply Chain Integration Security Bottlenecks Major fears of post 9/11 WMD attacks lead to “thickening” of U.S. Borders Policy Response: Smart Border Accord (Dec. 2001)  coordination of security measures, trusted shipper programs (FAST, etc.) with dedicated lanes at major border crossings, BUT... Progressive decline in coordination after 2004, largely due to independent Congressional action (WHTI, Safe Ports Act, etc.) Partial shift from “Just-in-Time” to “Just-in-Case” inventory management (Goldfarb, 2007).

13. Policy Challenges for Supply Chain Integration Lack of strategic policy coordination on national transportation and infrastructure strategies Separate national approaches in U.S., Canada, Mexico. U.S. initiatives dominated by log-rolling, earmarks for local projects in Congress No policy capacity for cross-border coordination, with limited project-based exceptions (e.g. Champlain and Blaine border crossings; St. Stephen-Calais bridge; Detroit-Windsor Bridge... in progress) Major cross-border initiatives driven by private sector independently of government (e.g. strategic partnerships in rail freight)