The crunch on the global supply chain is bearing intense impacts daily in every sector. Gridlock rises from practical pandemic impacts and on-the-ground realities of manufacturing capacity, transport congestion and labour pressures. As governments start to review public policy and regulatory options at all levels, it is urgent that businesses consider what steps could ease the pain. On November 30, 2021, McCarthy Tétrault virtually hosted Breaks in the Chain: A Symposium on Supply Chain Disruption, Regulation and Ways Forward to discuss the laws, policies and politics that impact the quest for pragmatic answers.
Awi Sinha, Co-Lead of McCarthy Tétrault's Public Sector Group, hosted the session. Subject matter experts from McCarthy Trétrault Martha Harrison ( International Trade & Regulatory Law), David Blair ( Transportation Law) and Kate McNeill-Keller ( Labour & Employment Law) reviewed the relevant legal structures that govern the supply chain in Canada and frailties exposed by the current disruption.
Gillian Kerr, Co-Lead of the Public Sector Group, led a frank conversation about dealing with current supply chain impacts and crafting immediate strategies for the road through the current disruption with Bill Driegert (Head of Operations and Co-founder, Uber Freight Global), Steven Radewych (SVP, Supply Chain, Spin Master) and Robin Silvester (CEO, Port of Vancouver).
Finally, Awi facilitated a discussion of the economic impacts of supply chain disruption on consumer confidence, innovation and the broader post-pandemic context, featuring Simon Kennedy (Deputy Minister, Innovation Science & Economic Development), Michelle Eaton (Vice President, Public Affairs, Ontario Chamber of Commerce) and Dr. Mike P. Moffatt (Senior Director of Policy, Smart Prosperity Institute / Economics, Ivey School of Business). The symposium provided insight into the causes and potential responses to the current disruption. This article highlights key takeaways from the discussion.
Pre-existing conditions and COVID-19 created a perfect storm for supply chain disruption.
A conflagration of pandemic impacts, manufacturing capacity issues, supply chain congestion and labour pressures all combined to create the supply chain problems we're seeing today. The panel discussed the unanticipated side effects of pausing a global system built for hyper-efficiency.
On the regulatory side, Martha Harrison explained that much delay and expense has been generated where importers have been forced to change supply sources. Due diligence for a new supplier is a time-consuming process, and there is potential for increased duties and transport costs when sourcing from a different country of origin. Early in the pandemic, Canada softened many regulatory rules for importing PPE, such as those for packaging and labelling, in order to meet increased demand and effectively combat COVID-19. Now we're seeing a crunch in other sectors of the market.
While manufacturing and shipping of complex goods ceased for a period of time, demand for goods during the pandemic has skyrocketed on the consumer side. Robin Silvester pointed to a shift in spending patterns from travel to purchase of goods as the heart of the problem. He noted that the Port of Vancouver—Canada's largest port and a major artery for trade to the entire country—made important investments to debottleneck. Nevertheless, lingering issues remain, such as the global shortage of shipping containers and Vancouver's industrial land dearth, that continue to exacerbate the situation.
There is a labour component to the matter as well. According to Kate McNeill-Keller, insufficient numbers of supply chain workers and delays in immigration processes associated with labour have made it difficult to respond quickly to increased demand. The pandemic months have also seen a departure of labour from the workforce due to a combination of work conditions and competing opportunities. Bill Driegert highlighted an example of pre-existing circumstances affecting the freight industry. The industry is struggling with an aging driver population and driver shortages, in part because of difficulties making trucking an attractive job in a competitive labour market. Contributing factors such as these have made it difficult for the supply chain to accommodate the added strain introduced by the pandemic.
Developing resilience, flexibility and the ability to react quickly will be key for ensuring future stability in the supply chain.
The disruption we're seeing presents an opportunity for both public- and private-sector actors to rethink their approach to effective supply chain management. David Blair underlined the key role that regulators hold in this process in that regulation must be able to adapt quickly to urgent and changing circumstances. He cited the response to the rail issues associated with the Lytton Creek Fire as an example of regulatory agility. Martha Harrison and Kate McNeill-Keller highlighted other avenues for adjustment in the public sector as well. One possibility would be for Canada to leverage its trade relations and regroup North America as a multilateral jurisdiction for local sources of supply chain. On the labour side, governments will want to consider ways to attract workers to key jobs in supply chain, potentially by adjusting hour and wage restrictions or employment standards legislation.
Steve Radewych commented that the private sector has also been forced to reformulate what it means to be responsive, particularly in manufacturing. The supply chain for goods such as toys is a complex journey that can span upwards of two years, and it is extremely difficult to adjust the process once it starts moving. Radewych noted that although the sector is generally quite effective at mitigating risk, the last eighteen months have tested manufacturing resiliency. Mike Moffat observed that a part of the problem has been a decades-long preoccupation with extreme efficiency. There is a trade-off between economic efficiency and resiliency according to Moffat, and he commented that it may be time to sacrifice some efficiencies in favour of redundancies that will make the system more resilient as a whole.
Leaders will have to make choices, but a holistic approach is best.
There is a wide range of options open to leaders in responding to the current disruption and preventing future supply chain problems of this scale. Canada could diversify, internationalize, or stick closer to home to reduce future issues. Regardless of method, it will be for important for decision-makers to understand the whole context of the situation and to take a holistic approach that includes investment in infrastructure and incentivizing key jobs, while also dealing with larger national issues such as debt and an aging population.
Some of our panelists suggested that Canada should focus on our ability to manufacture locally and regionally; decisions will need to be made on whether to build redundancies on a national level or even domesticate certain key functions, such as vaccine and therapeutics production. Steve Radewych also stressed the talent retention component that should be considered, noting the paradigm shift on remote work that has resulted from the pandemic. Companies are no longer competing on a local talent market, and key talent may be lost to those companies who allow their employees to work remotely.
There's reason to be optimistic about the supply chain and the economy as a whole.
Despite the challenges of this painful period, it hasn't all been bad and the panel was hopeful for the future of the economy and of supply chain management. Certain industries, such as toys and home entertainment, have experienced a boon during the pandemic. Mike Moffat also pointed out that as far as GDP is concerned, Canada is well ahead of where we thought we would be 9 months ago. Robin Sylvester noted the comparative success the Port of Vancouver has had as compared to international counterparts. Bill Driegert highlighted the benefits of technology and modernization in keeping the supply chain moving.
Finally, the panelists agreed that the current situation opens room for collaboration and cooperation between public and business sectors. Michelle Eaton commented on the tsunami of interrelated issues and noted multiple areas where government and private business can work together toward a solution, such as freight, immigration, and jobs. Simon Kennedy left us with hope for cooperation on an international level as well, observing that although Canada can't necessarily stop harmful mercantilist behavior as a whole, we can make common cause with countries that share our interests and values.
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