Dimensions of Value Added fVl Addd

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					                    Dimensions of Value Added
                    Di     i     f V l Add d
                    in Gateways and Corridors
                     (Prof) David Gillen
                     YVR Professor of Transportation Policy & Management
                     Director, Centre for Transportation Studies
                     Sauder School of Business
                     University of British Columbia, Vancouver, Canada
                     with
                     Graham Parsons OWEC Regina
                     Barry Prentice University of Manitoba
                     Peter Wallis Van Horne Institute, University of Calgary
                     CTRF Van Horne Conference
22. Oktober 2008   SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA
                     October 24, 2008 Calgary Alberta                          1
Basic questions that underlie my presentation:
            • “Will transportation costs trump trade barriers in
                                 routes?
              driving new trade routes?”

                   Canada’s
            • “ Is Canada s future one of corridors or
              gateways?”

            • “How do we reconcile the old view of volume and
              throughput for firms with value for supply chains?”

22. Oktober 2008         SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   2
      Outline

       • Brief summary of what we learned at a series of
         roundtables and International Vancouver Conference
       • Value adding versus value added and public role in
         value creation
       • Value creation with private public co-investments
       • Lessons from LEAP program




22.10.2008           SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   3
      What have we learned?
      • Gateway and corridor infrastructure are extending the
        regional development process inland but…
             – How does gateway efficiency translate into system efficiency?
      • In 2006 and 2007 there was ‘massive’ congestion at
        g      y                       y    g
        gateways and corridors driven by cargo flows but…
             – The Baltic Dry Index has fallen 85% since May
      • Business respond to delivered prices which are
                                                      value-
        effected by information technology by driving value
        added components but..
             – Prices vary across different gateway-corridor combinations

22.10.2008                  SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   4
      What have we learned – cont’d
   • The mantra of many is ‘more throughput’ but…
        – Full costing is important to obtain socially efficient capacity and
                ti       d     l t    frictions must b counted i ex ante
          operations and regulatory f i ti         t be       t d in       t
          evaluation
   • There is a need for analytical models to provide insights
     into the inter-relationships but..
        – Market structure drives vertical efficiencies
   • Canadian transportation networks can compete and
     complement but..
        – Costs of friction would be diminished with a continental policy

22.10.2008                 SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   5
      Value Adding and Value Streams

       • Three physical functions add value to a product
                             p         y              g process
             – Form value – provided by manufacturing p
             – Time value – provided by coordination via communications
               and information technology
             – Place value – provided by transportation and is composed of
                 • Freight cost, convenience and reliability

       • This combination is the value adding services of a
         supply chain
             – A supply chain is composed of multiple intermediaries and
               gateway investments can effect the value adding activities

22.10.2008                    SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   6
      Value Added and Value Defining

       • Measure of value from four perspectives
             –   Accountingg
             –   Marketing
             –   Operations management
             –   Policy
       • Value defining
             – Value is defined by the whole product, the arbitrator is the
               consumer but..
                  • Intermediaries concentrate on delivering value to their immediate
                    customer


22.10.2008                     SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   7
      Public Role in Value Creation

       • Public investment in gateways may be desirable but
                               pp y
         create value in the supply chain
             – Not all investments remove waste from the value chain
       • Government can increase value by reducing risk and
         loss f i t
         l               di i
              for intermediaries
       • Government can eliminate waste
                                necessary
             – Streamline the ‘necessary’ waste of customs
             – Minimize unnecessary delays or conformity to arbitrary rules
             – If regulate, regulate narrowly and with transparency


22.10.2008                 SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   8
      Value Creation with Public-
              Co investments
      Private Co-investments
       • No longer sufficient for government to own and
          p      gateway corridor combinations
         operate g       y
             – Should create regulatory and market conditions to facilitate
               public-private cooperation
       • Regulation if necessary but not necessarily regulation
             – Low marginal cost mean money losing but low marginal cost
               means market power?
       • The deregulation of infrastructure has not kept pace
         with the deregulation of services
             – (rail, air, water and road)

22.10.2008                  SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA   9
      LEAP Program
       • locally based enterprise advancement program
         [LEAP] was designed to encourage multinational
         enterprises to locate in Singapore and to perform
         value adding activities.
            j             program was to transform Singapore
       • objective of the p g                            g p
         into an advanced logistics, particularly e-logistics
       • LEAP was designed to have four developmental main
                                   development,
         thrusts; manpower skills development business
         process improvement, technology capability
         enhancement and infrastructure development.

22.10.2008            SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 10
      Lessons Learned from LEAP

       • Lesson 1 – geography may be necessary but it is not
         sufficient for success. In an information intensive
         world location is no longer everything, lowest total
         cost trumps low location costs.
         Lesson 2 –application of the PPP model also requires
       • L                li ti    f th         d l l         i
         a change in governance to ensure excellence
          esso        success u       es e a d a age e
       • Lesson 3 – successful investment and management
         requires successful measurement to understand how
         and where progress is being made

22.10.2008            SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 11
      Lessons Learned from LEAP
    • Lesson 4 – core infrastructure investment is a prerequisite to
      successful deployment and the core capital must align with
      the goal of investments
    • Lesson 5 – it is not enough to build roads and bridges,
      investment in skilled labour and education, including
      research is essential to create high value added gateways
      research,                                          gateways.
    • Final lesson - The evolution to e-logistics from conventional
      logistics requires thought leadership and a continual
      investment in research, human capital and skilled manpower
      and information, not simply physical infrastructure.


22.10.2008             SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 12
      Summary and Observations

       • 1. new highly efficient networks of gateway corridor
                                p             propositions for
         combinations offer important value p p
         many parts of the economy, but special challenges
         for the policy frameworks that enable them
             – the interface between multiple levels of government and the
               private sector creates a complex problem for governance,
               regulation and oversight.




22.10.2008                 SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 13
      Summary and Observations – cont’d
       • 2. Public investment is needed to upgrade and
         sustain the transportation infrastructure of gateways
             corridors                                identified.
         and corridors. The pinch points are easily identified
             – At least one part of Canada’s system-wide strategy should
               be to develop human capital capable of creating the
                                        computer driven
               information systems and computer-driven technologies that
               will be in global demand
             – The Transportation Technology & Innovation initiative of
                                               human capital’
               Transport Canada needs such ‘human capital
       • 3. Department of Finance needs to align itself with
         the Build Canada initiatve

22.10.2008                 SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 14
             Thank you for your attention and
              the opportunity to address you

               Merci de votre attention et de
             l'occasion de s'adresser à vous




22.10.2008            SAUDER SCHOOL OF BUSINESS, UNIVERSITY OF BRITISH COLUMBIA 15

				
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