Accenture Academy Blog

The essence of a global supply chain is dependent on accessibility and sustainability of commerce, and commerce is dependent on transportation.

For the last five hundred years, international commerce has always been dominated by ocean shipping. Since Admiral Perry opened up Japan-to-America commerce, America has had a geographical advantage with ocean commerce from the East because of the rhumb line from Japan and northeast China locations. The long road through the Suez Canal for European ocean shipping has always had limitation in volume and cost. Now those natural advantages and disadvantages may be eliminated.

China, already a factor in fast rail transit, has plans on the drawing board for a Eurasian rail connection linking the two ends of the Eurasian land mass—Shanghai to Frankfurt—in two days via super fast trains. That will compromise any geographical advantage the United States has with commerce in Asia. It will also limit the United States’ geo-political power in the East.

The cost efficiency inherent in direct train shipments from the heartland of China to the heartland of Europe will give European markets not only access to a wider circle of Asian supply sources, but it will also give an advantage to European suppliers looking to establish commerce partnerships in Asia. Asia, the current world’s workshop, is targeted by the World Bank to be the largest consumer market by 2020. Europe (with one and one half times the domestic consumption population of North America) will no longer be limited by long, costly, and inefficient ocean commerce from the East. The United States will now contend with European sources of supply as they compete for a share of the dynamic growing consumption marketplaces in China and Southeast Asia. China and Southeast Asia will now look to Europe as an alternative marketplace for their products and services.

In the 19th century, the domestic supply strategy of the United States was to be self-sufficient. That was replaced by the 20th century philosophy of global trade and interdependency on global markets and sources of supply. The presence of a key rail line linking Europe and Asia will challenge the economic and political positioning of the United States.

As the European and Asian markets embrace a high-tech rail infrastructure and establish standards based on more than just the metric system, will the United States be content with aging equipment, deteriorating rail beds, outdated technology, and slow rail transits within the United States? Is it feasible to compete against 21st century technology with 19th century equipment and mentality?

Will the United States laboring without a cohesive transportation infrastructure policy and vision lose its competitive edge? Remember competitive edges are honed on efficient infrastructure, especially transportation—and more than just highways.

China’s transportation infrastructure is an extension of the central government, as was the development of the early transportation infrastructure within the United States. Transportation infrastructure is a “natural” monopoly. It is not the function of private industry to develop competing transportation networks and infrastructures, but it is the rightful role and obligation of government.

Unless we significantly upgrade our transportation infrastructure—especially rail—the United States is doomed to second-class commerce status.

What, then, is the strategy and vision for the United States to improve the transportation infrastructure in order to compete in global commerce?

 

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