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Canada as a Suitable Nation for Distribution and Supply Chain Management

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Canada as a Suitable Nation for Distribution and Supply Chain Management

Introduction

According to Roy (2012), Canada ranked ninth among OECD nations in 2009 with a per capita GDP of $46, 243. In the same year, Canada’s main trading partner, the United States, ranked third among other OECD countries with a per capita GDP of $56, 109. Between the years 1984 and 2006, growth in labor productivity in Canada emanated mainly from the services sector, including a substantial contribution from the retail and wholesale sectors. Nonetheless, virtually none of this growth was attributed to the warehousing and transportation industry. More recently, the increased labor activity in the retail sector is significantly higher than the private sector mean. This shift in performance can be attributed to the investments made by organizations in the retail sector, particularly in logistics management and innovative practices (Roy, 2012). Thus, it is vital to compare explore and compare Canada’s distribution and supply chain management performance both in terms of the domestic market and the international market. This individual country project explores Canada’s suitability as an ideal nation for distribution and supply chain management.

Canada’s Demographic Merits-Canada as a Suitable Nation for Distribution and Supply Chain Management

Canada has a population of 37.1 million and a GDP of $1.7 trillion (World Population Review, 2018). This GDP represents a 1.2% growth in GDP from the previous year, following an average growth rate of 1.8% for the last five years. The nation has a significantly low unemployment rate of 7.1% and inflation rate of 1.4% as indicated in the Heritage Foundation (2018) report.

 

Canada’s Economic Freedom-Canada as a Suitable Nation for Distribution and Supply Chain Management

According to the Heritage Foundation (2018), Canada’s economic freedom score is 77.7. This score makes Canada’s economy the ninth freest in the world based on the 2018 Index. Canada’s overall score has decreased by 0.8 points, with other decreases in government integrity, judicial effectiveness and labor freedom, superseding a meager improvement in fiscal health. In the America region, Canada is ranked as the first nation among thirty-two countries in terms of economic freedom and its overall score is well above the world and regional averages. It is vital to note that Canada’s economic competitiveness has been sustained by fervent rule of law and ethical considerations, as well as, solid institutional foundations of an open-market system. In addition, the government of Canada is keen on bringing about massive infrastructure spending, including via a proposed infrastructure bank to foster logistics and supply chain in the nation accompanied by the accelerated growth rates that increase its revenue (Heritage Foundation, 2018). However, top tax rates in the country have risen nationally and in certain provinces, forcing the government to scale back the intended small-business tax reform due to string opposition. Also, the call for renegotiation talks by the United States on the NAFTA trade deal has resulted in considerable economic uncertainty.

Government Size

Based on the report by the Heritage Foundation (2018), the top federal personal income tax rate is thirty-three percent while the top corporate tax rate is fifteen percent. Other taxes generating revenue for the government include property taxes and value-added taxes. Therefore, the overall tax burden in Canada is equivalent of 31.9% of the total domestic income (Heritage Foundation, 2018). It is imperative to note that over the last three years, government spending has contributed 39.9% of the GDP or total output and the budget deficits have averaged one percent of the GDP. The implication of this government expenditure and budget deficit is that Canada’s public debt equals 92.3% of the Gross Domestic Product as stated in the Heritage Foundation (2018) report.

Rule of Law-Canada as a Suitable Nation for Distribution and Supply Chain Management

Legislation is extremely vital when it comes to ethical considerations for business and distributors operating in Canada. As such, foreign investors have complete and fair access to Canada’s legal system and the prerogatives to private property are restricted only by the government’s prerogatives to expropriate and establish monopolies for public purposes (Heritage Foundation, 2018). Companies also do not have to worry about copyright infringement and intellectual property rights in the supply chain since the protection offered by Canada meets that of world standards. Since Canada has a transparent and autonomous judicial system, corruption cases are normally prosecuted vigorously.

Open Markets

Trade is crucial to Canada’s economy as evident in the combined value of imports and exports that equal sixty-four percent of the country’s GDP. According to the Heritage Foundation (2018), the average applied tariff rate is one percent, meaning that government policies do not interfere with foreign investment significantly. This attribute renders Canada a suitable nation for distribution and supply chain development. Also, Canada’s financial sector offers a vast array of competitive services such as banks and supply chain management to suit various business needs.

Regulatory Efficiency-Canada as a Suitable Nation for Distribution and Supply Chain Management

Based on the report by the Heritage Foundation (2018), the transparent regulatory framework in Canada facilitated robust and dynamic business creation and operation while adhering to ethical standards. Moreover, relatively flexible labor regulations foster employment growth. A significant portion of Canada’s labor force is employed in the services sector. This attribute renders Canada as an ideal nation for finding people and businesses with adequate experience in distribution and supply chain management. The Heritage Foundation (2018) adds that under the leadership of the liberals, the federal government has provided immense subsidies to production companies and imposed rent controls.

Hofstede Cultural Dimensions of Canada

In the same way that values in various workplaces in different nations are impacted by culture, distribution and supply chain management are also influenced by the cultural aspects of the host country. Such cultural aspects are elaborated in six dimension of national culture put forward by Professor Geert Hofstede. In this regard, an evaluation of Canada’s culture from the perspective of the six dimensions can aid in determining the viability and suitability of Canada as a nation for distribution and supply chain management. Moreover, Hofstede’s cultural dimensions of Canada compare the country’s culture to the cultures of other competing countries.

Indulgence Canada as a Suitable Nation for Distribution and Supply Chain Management

According to Hofstede Insights (2018), the dimension “Indulgence” stands for a society that enables relatively free satisfaction of natural and basic human drives that are connected to the enjoyment of life and having fun. The opposite of indulgence is restraint which related to a society that suppresses the satisfaction of basic human needs and regulates it through means of strict social norms. A key challenge in the society today is the extent to which small children are socialized. There is a concern that the advancement of technology has resulted in immense immobility and suppression of face-to-face socialization. In this case, the dimension of indulgence is concerned with the extent to which individuals try to control their impulses and desires based on their discordant upbringing. As such, relatively weak control is referred to as indulgence while relatively strong control is referred to as restraint.

Based on the report by Hofstede Insights (2018), the high score of sixty-eight in the dimension of Indulgence means that Canadian culture is deemed as being indulgent. Individuals in the society categorized by a high score in Indulgence generally display a willingness to gratify their desires and impulses when it comes to having fun and enjoying life. This means that people in Canada have a tendency towards optimism and possess a positive attitude. In addition, they accord significant prominence to leisure time, spend money as they please and act as they wish.

Uncertainty Avoidance Canada as a Suitable Nation for Distribution and Supply Chain Management

Hofstede Insights (2018) states that the dimension of ‘Uncertainty Avoidance” evinces the extent to which the members of a society feel comfortable with ambiguity and uncertainty. The fundamental issue in this dimension pertains to how a society deals with the fact that the future is uncertain, thus, people incessantly face the dilemma of trying to control the future or just letting things happen naturally. Such ambiguity causes anxiety and distinct cultures have learned to deal with this anxiety in discordant ways. Countries that have a strong uncertainty avoidance index maintain rigid codes of demeanor and belief and tend to be more tolerant of unorthodox concepts and demeanor. On the other hand, nations that have a weak uncertainty avoidance index maintain a more relaxed attitude in which practice is prioritized more than precepts.

Based on the report by Hofstede Insights (2018), Canadian culture is more accepting of uncertainty due to its score of 48 on this dimension. This attribute shows that people and businesses in Canada are more accepting of innovative products, novel concepts and are more willing to try something different or new be it that which relates to business practice, technology or consumer products. Hofstede Insights (2018) further indicate that Canadians are tolerant of opinions or ideas form anyone and allow them sufficient freedom of expression. This means that individuals and businesses are open to suggestions and partnerships with other people and businesses, including foreign businesses in various fields. Since distribution and supply chain management applies to many businesses and companies, Canada provides an ideal operations and sales environment for businesses seeking distribution services for their products and services. It is also vital to note that Canadian culture is not rules-oriented. Thus, Canadians tend to express fewer emotions than cultures that have higher scores in the dimension of uncertainty avoidance.

Impact of Canada’s culture and practices on distribution and supply chain management on the negotiation process

Companies that adopt innovative and best practices for distribution and supply chain management enjoy a higher organizational performance level than others that do not. As such, it is vital to evaluate the nature of such practices and determine the extent to which companies in Canada use these practices. There are various proposals of supply chain management best practices. When it comes to determining their impact on the negotiation process, the objective is not to formulate an exhaustive list of such nomenclatures; rather, it is to provide an overview of the core practices that in the organization’s perspective have garnered fairly wide consensus. Examples of such distribution and supply chain management best practices are cooperation between supply chain partners, the utilization of various supply chain management technologies, approaches for assessing and improving performance and outsourcing of logistic services.

Green Logistics-Canada as a Suitable Nation for Distribution and Supply Chain Management

There is also increasing concern regarding sustainable development and environmental conservation in the society. Canada’s highest producer of greenhouse gases is its transportation sector. Based on this understanding, logistics can enhance sustainable development by formulating supply chains that decrease transportation needs. It is also advantageous for companies to design environmentally friendly products and processes. Since numerous companies in Canada have environmental certification, they fit the desired partners for distribution and supply chain management that the organization seeks in the negotiation process.

The utilization of information and communication technologies

Proper supply chain management requires companies to adopt novel information and communication technologies to foster the incorporation of downstream and upstream activities and facilitate improved collaboration among various stakeholders in the chain. Such technologies include warehouse management systems (WMS), enterprise resource planning (ERP) and transportation management systems (TMS). Based on the report by Roy (2012), there has been a relatively low rate of implementation of electronic information systems in Canada to manage logistics functions. The United States, on the other hand, uses information and communication technologies by a rate of 30% higher than the rate of use in Canada. In as much as the utilization of information and communication technologies in Canada remains low in most sectors, wholesalers have the highest rate of use with thirty-five percent implementing electronic logistics and supply chain management systems. It is vital to integrate electronic information and communication systems to attain excellence in distribution and supply chain management. In this regard, Canadian companies should put greater effort in adopting and integrating electronic management systems to catch up with American companies, improve the quality of client services, enjoy significant savings in logistics costs and gain an advantage over their competitors.

Outsourcing to nations with low production costs

According to Roy (2012), increased international competition and market globalization is prompting firms to focus increasingly on competencies whereby they excel and consequently outsource to third parties the activities that they are less adept in or for which emerging nations have a significant competitive cost advantage.  In Canada, outsourcing mostly affects companies working in conventional sectors such as furniture and clothing. However, the same phenomenon or trend can also be seen in hi-tech sectors. Today, the utilization of outsourcing to nations with low production costs renders it necessary to retain more inventories locally and the number of distribution centers is increasing an extremely fast rate in Canada. Examples of these distribution centers that Roy (2012) highlights include: the novel facilities of The Hockey Company, Canadian Tire, The Aldo Group and the Alimentation Couche-Tard. Nonetheless, barely forty-three percent of these Canadian companies that decided to outsource to other nations with low production costs report successful decrease in overall costs. In order to achieve this substantial reduction in cost brought about by outsourcing, companies in Canada need to adopt certain best practices such as allocation of dedicated human resources, use of air transportation and including supplementary inventory. Other best practices are analysis of total logistics cost and establishment of secondary supply sources.

Recommendations

Contemporary supply chains are intricate structures that facilitate competition, innovation and growth in emerging technologies, industries and sectors. There are certain key areas that should be addressed in the negotiation process involving the organization and its potential distribution and supply chain management partner in Canada including:

  • Warehousing and Inventory: The standards and regulations in inventory and warehousing between jurisdictions in Canada should make it easy for companies to sell their products to retailers and customers all over the country.
  • Technology: As a tool, technology in Canada and companies in Canada should increase cooperation and coordination while also facilitating greater inter-jurisdictional trade.
  • Labor Mobility: Albeit provisions relating to labor mobility pursuant to the Agreement on Internal Trade have fostered the mobility of workers across Canada, it should also do the same for company products and services.
  • Transportation: The regulatory obstacles experienced by the transportation sector influence businesses of all sizes and in different sectors. The organization needs to ensure that territories and provinces cooperate to address the various regulations on legal truck dimensions and weights before embarking on a distribution and supply chain management partnership.
  • Environment: Companies that use “green” or environmental friendly assembly and distribution methods are ideal at a time when climate change is grave issue in the society that companies seek to address.

Conclusion-Canada as a Suitable Nation for Distribution and Supply Chain Management

It has been shown that for organizations, good logistics practices enhance their distribution and supply chain management. When Canada and the United States are compared as ideal nations for distribution and supply management, the former has more manufacturing, wholesale and retail costs compared to the latter. This is because the United States adopts and utilizes electronic systems extensively and outsources logistics activities to certain third party service providers and countries with low production costs. Nonetheless, Canada’s challenges are similar to those that many nations such as Germany face. Thus, with proper government policies, adoption of best practices and benchmarking efforts, Canada is more than a suitable nation for distribution and supply chain management for the organization.

 

 

 

 

 

 

 

References

Heritage Foundation. (2018). Canada Economy: Population, GDP, Inflation, Business, Trade,

FDI, Corruption. Retrieved from https://www.heritage.org/index/country/canada

Hofstede Insights. (2018). Country Comparison – Hofstede Insights. Retrieved from

https://www.hofstede-insights.com/country-comparison/canada/

Hofstede Insights. (2018). National Culture – Hofstede Insights. Retrieved from

https://www.hofstede-insights.com/models/national-culture/

Roy, J. (2012). Logistics and the Competitiveness of Canadian Supply Chains.

World Population Review. (2018). Canada Population 2018. Retrieved from

http://worldpopulationreview.com/countries/canada-population/