Written May, 2007
by Keith Biondo
Publisher
Inbound Logistics Magazine
The first job of my post-college career included replenishing inventory at a large book distributor's New York City warehouses.
Like many urban warehouses, the multi-storied building took advantage of a vertical footprint, rather than the horizontal footprint of today's warehouses. All inventory moved in and out via the dreaded "freight elevator." Dim lights, no air, few lift trucks -- what fun.
While these types of warehouses are still in use today in a few places, others continue to evolve. Inbound Logistics has reported on continuing advances in public and private warehouse operations, of course, but we have also covered some unusual developments: "condo" warehouses; FedEx Kinko's and the UPS Stores' new small-business warehousing services; and the old standby for small businesses -- using local mini-storage facilities to hold the stock they sell via the Internet across the United States and around the world.
Now comes Wal-Mart's Site-to-StoreSM service, another Internet-driven "warehousing" evolution. The service offers "a larger assortment of products through our virtual shelf space by combining Wal-Mart's world-class logistics network with its nationwide footprint of more than 3,300 retail locations," according to Mike Smith, Wal-Mart director of store integration.
Here's how it works. Consumers log on to Wal-Mart's web site, and can view 50 flatscreen TV or baby crib choices, rather than the few available in any given store. By having their orders shipped to the store instead of their home, customers save substantial shipping charges.
Once the customer places a web order, the Site-to-Store demand signal melds into Wal-Mart's extremely efficient store delivery process. The customer receives an e-mail alert when the shipment arrives at the local store and is ready for pickup.
Besides having access to many more products than available in Wal-Mart stores, Site-to-Store customers might do some additional shopping of the off-line variety when they pick up their web order.
Customer as Order-Picker?
While this evolution would not be doable without one key element-the Internet-the human element comes into play, too. From accessing inventory and originating the demand signal, to in-store pickup and handling the final mile delivery, the consumer actually becomes part of Wal-Mart's efficient supply chain.
Having Internet-savvy customers self-train to perform these functions in a "world-class logistics network" has helped Wal-Mart open 3,300 mini-warehouses to complement its big box warehouses across America, and allows it to sell many products it doesn't stock in stores.
That's one heck of an evolution in "warehouse" operations.
www.inboundlogistics.com/free
Wednesday, June 13, 2007
Playing Politics with Homeland Security: 100-Percent Wrong
Written March, 2007
by Keith Biondo
Publisher
Inbound Logistics Magazine
If you source or sell anything overseas, you are no doubt aware of Senator Chuck Schumer's (D-NY) efforts to mandate 100-percent scanning of inbound containers through an amendment to the SAFE Port Act.
As part of the effort to get the amendment adopted, Schumer, along with eight other Democratic senators -- Obama, Clinton, Menendez, Kerry, Kennedy, and the rest of the usual suspects -- sent an open letter to Wal-Mart demanding that the largest retail importer end its opposition to 100-percent scanning.
Thankfully, the Schumer measure was rejected by those lawmakers putting your security, our economy, and logic above their own political security. The time for play-acting to get votes on important security issues is past, right?
Wrong. The saga continues like a recurring bad dream.
Senator Robert Menendez (D-NJ) -- one of the Wal-Mart 9 -- has introduced another amendment mandating 100-percent container scanning. "Scanning anything less than 100-percent of cargo containers is reckless security policy," he says.
"Port security has devolved into nothing more than algorithms, which are a sophisticated form of 'eenie-meenie-miney-moe.' I have yet to hear a persuasive argument for why we should not be scanning every cargo container entering our ports," he adds.
The National Customs Brokers and Forwarders Association calls the Menendez amendment a "backdoor mandate" to undo the defeat of the Schumer amendment.
Menendez likes 100-percent defense, but not offense, it seems. Last May, he was looking closely at censuring President Bush to prevent him from "eavesdropping" on suspected terrorist calls to the United States, according to Political Affairs magazine. I guess we can pick and choose which important security measures to support. Eenie-meenie-miney-moe.
Do the Wal-Mart 9 senators really care about your company, your job, or how attacking domestic commerce upsets the lives of everyday people when they are put out of work? Or do they only want to position themselves to get votes by conning those outside the industry into thinking they have their best interests at heart, and that they are "tough" on security?
Efforts to pass the 100-percent solution will continue. If you think playing politics with Homeland Security is wrong, make your voice heard now, before it is too late.
Readers of this column know where I stand on what I term Homeland Security Event Management (HSEM). A PDF of my previous columns on this issue is available at www.inboundlogistics.com/hsem.pdf
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
If you source or sell anything overseas, you are no doubt aware of Senator Chuck Schumer's (D-NY) efforts to mandate 100-percent scanning of inbound containers through an amendment to the SAFE Port Act.
As part of the effort to get the amendment adopted, Schumer, along with eight other Democratic senators -- Obama, Clinton, Menendez, Kerry, Kennedy, and the rest of the usual suspects -- sent an open letter to Wal-Mart demanding that the largest retail importer end its opposition to 100-percent scanning.
Thankfully, the Schumer measure was rejected by those lawmakers putting your security, our economy, and logic above their own political security. The time for play-acting to get votes on important security issues is past, right?
Wrong. The saga continues like a recurring bad dream.
Senator Robert Menendez (D-NJ) -- one of the Wal-Mart 9 -- has introduced another amendment mandating 100-percent container scanning. "Scanning anything less than 100-percent of cargo containers is reckless security policy," he says.
"Port security has devolved into nothing more than algorithms, which are a sophisticated form of 'eenie-meenie-miney-moe.' I have yet to hear a persuasive argument for why we should not be scanning every cargo container entering our ports," he adds.
The National Customs Brokers and Forwarders Association calls the Menendez amendment a "backdoor mandate" to undo the defeat of the Schumer amendment.
Menendez likes 100-percent defense, but not offense, it seems. Last May, he was looking closely at censuring President Bush to prevent him from "eavesdropping" on suspected terrorist calls to the United States, according to Political Affairs magazine. I guess we can pick and choose which important security measures to support. Eenie-meenie-miney-moe.
Do the Wal-Mart 9 senators really care about your company, your job, or how attacking domestic commerce upsets the lives of everyday people when they are put out of work? Or do they only want to position themselves to get votes by conning those outside the industry into thinking they have their best interests at heart, and that they are "tough" on security?
Efforts to pass the 100-percent solution will continue. If you think playing politics with Homeland Security is wrong, make your voice heard now, before it is too late.
Readers of this column know where I stand on what I term Homeland Security Event Management (HSEM). A PDF of my previous columns on this issue is available at www.inboundlogistics.com/hsem.pdf
www.inboundlogistics.com/free
Hidden Heroes Power the Supply Chain
Written January, 2007
by Keith Biondo
Publisher
Inbound Logistics Magazine
Some people manage simple logistics systems. Others face logistics complexities that stretch beyond their ability to master them. Some people oversee logistics flows across the globe. Others run a seemingly never-ending closed loop of highly disciplined product flow within the confines of a single state.
Some logistics managers operate a transport program that flat-lines for most of the year, then suddenly spikes up hard and fast enough to cause a corresponding rise in blood pressure. Lucky people manage a product flow that is so regular and predictable you could set your watch by it.
A common thread ties together all that logistics diversity: People. No matter how stunningly complex or artistically simple the logistics challenge, it is people who master the variability to get the job done.
The people in logistics comprise a unique blend of the practical and visionary; and it falls to them -- to you -- to make good on the brash promises made by others in the enterprise. It could be the over-eager sales department stretching your capabilities to grow your enterprise.
Or perhaps it's the customer service folks trying to smooth over a past, but still painful, missed commitment to a key customer. Sometimes it's your company's visionary dreaming of opening new markets or sources of supply. More often than not it is a customer asking for the near-impossible delivered with blinding speed.
Who then calls upon complex theory and technology, and enlists others to help provide the reliability and muscle needed to sync the desafinado naturally created by this robust activity? Logistics professionals bring order to this chaos and the resultant harmony makes commerce run profitably. You do that.
Yet much of what you do goes unnoticed by the average person or typical consumer. Unmindful of the heroics it sometimes takes to match a want or need with satisfaction, or the larger role our industry plays in overall economic growth, it seems your contribution is sometimes recognized by others only when there is a failure.
From managing regular product fulfillment to crafting a new business in far-off places driven by logistics excellence, the article shows it does not matter if you wrangle compliance paperwork, write the code moving theory into practice, or speak the words to marshal the enthusiasm to accomplish the impossible. Nor does it matter if your career began on a production line, as an engineer, shopkeeper, historian, or lawyer. Logisticians all.
More importantly the under-celebrated status of the profession does not matter to them. Logistics professionals measure success by the job done, commitment kept by commitment kept. That, and the satisfaction that comes from knowing who really runs it all.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Some people manage simple logistics systems. Others face logistics complexities that stretch beyond their ability to master them. Some people oversee logistics flows across the globe. Others run a seemingly never-ending closed loop of highly disciplined product flow within the confines of a single state.
Some logistics managers operate a transport program that flat-lines for most of the year, then suddenly spikes up hard and fast enough to cause a corresponding rise in blood pressure. Lucky people manage a product flow that is so regular and predictable you could set your watch by it.
A common thread ties together all that logistics diversity: People. No matter how stunningly complex or artistically simple the logistics challenge, it is people who master the variability to get the job done.
The people in logistics comprise a unique blend of the practical and visionary; and it falls to them -- to you -- to make good on the brash promises made by others in the enterprise. It could be the over-eager sales department stretching your capabilities to grow your enterprise.
Or perhaps it's the customer service folks trying to smooth over a past, but still painful, missed commitment to a key customer. Sometimes it's your company's visionary dreaming of opening new markets or sources of supply. More often than not it is a customer asking for the near-impossible delivered with blinding speed.
Who then calls upon complex theory and technology, and enlists others to help provide the reliability and muscle needed to sync the desafinado naturally created by this robust activity? Logistics professionals bring order to this chaos and the resultant harmony makes commerce run profitably. You do that.
Yet much of what you do goes unnoticed by the average person or typical consumer. Unmindful of the heroics it sometimes takes to match a want or need with satisfaction, or the larger role our industry plays in overall economic growth, it seems your contribution is sometimes recognized by others only when there is a failure.
From managing regular product fulfillment to crafting a new business in far-off places driven by logistics excellence, the article shows it does not matter if you wrangle compliance paperwork, write the code moving theory into practice, or speak the words to marshal the enthusiasm to accomplish the impossible. Nor does it matter if your career began on a production line, as an engineer, shopkeeper, historian, or lawyer. Logisticians all.
More importantly the under-celebrated status of the profession does not matter to them. Logistics professionals measure success by the job done, commitment kept by commitment kept. That, and the satisfaction that comes from knowing who really runs it all.
www.inboundlogistics.com/free
SAFE, At Home
Written October, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
The shipping community, with government assistance, is the defensive line protecting us from threats caused by nuclear proliferation. Where's the global anti-nuke movement? They must be sitting this one out, waiting for the next power plant to open.
We know exactly where Congress is, however. The Security and Accountability for Every Port Act (SAFE) offers up a multi-layered, risk-based group of protective actions, not just in America but at originating ports around the world.
Here are some of the Act's highlights:
Expanding The Container Security Initiative, which calls for originating ports to notify U.S. officials about inbound cargo. The United States will install more container scanners domestically, but also "loan" radiation scanners to offshore ports and train workers there on how to use them.
Establishing a new office of Cargo Security Policy, which will work with foreign port and security officials to keep bi-directional security information flowing.
Developing and implementing plans to quickly resume commerce should terrorists strike a U.S. port (thank you, Katrina).
Fast-tracking a transport worker identification card system, including a biometric ID system. Perhaps anticipating an ACLU challenge on privacy grounds, the Act does not bar workers with criminal records. Does that include illegal transport workers? It's a DP World, isn't it?
A dust-up is brewing over the law's "authorization vs. appropriation" issue, however. That's where lots of security initiatives are set down on paper, but not backed up by other paper -- greenbacks, that is.
One example is the Port of Oakland, which handles massive inbound container volume. The Port sought funding for cameras, fences, equipment, RFID, and a worker ID system, but was placed in the funding queue alongside Nashville and St. Louis. Homeland Security officials contend that other programs cover Oakland's projects. Prioritizing risk will be continually contentious.
Homeland security grew from a cottage to a mansion industry, but we've dodged the desire by some to make it a government profit center.
Congressman Chuck Schumer (D-NY), for example, wanted to include provisions for security feebates (tax every container), where the shipping community directly foots the bill for homeland security. The feebate concept was lifted from the environmental movement, where the more "bad" you do -- in this case, shipping -- the more you pay. Should Wal-Mart be the guarantor of domestic security?
Joe Lieberman (D-CT) wanted to balloon funding and infrastructure to protect buses and subways. Staying focused, the majority in Congress told Joe no.
The U.S. Coast Guard estimates that money currently allocated by the bill is half of what's needed to secure the ports from threats caused by nuclear proliferation. If that's so, local entities should step up and fill the breach.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
The shipping community, with government assistance, is the defensive line protecting us from threats caused by nuclear proliferation. Where's the global anti-nuke movement? They must be sitting this one out, waiting for the next power plant to open.
We know exactly where Congress is, however. The Security and Accountability for Every Port Act (SAFE) offers up a multi-layered, risk-based group of protective actions, not just in America but at originating ports around the world.
Here are some of the Act's highlights:
Expanding The Container Security Initiative, which calls for originating ports to notify U.S. officials about inbound cargo. The United States will install more container scanners domestically, but also "loan" radiation scanners to offshore ports and train workers there on how to use them.
Establishing a new office of Cargo Security Policy, which will work with foreign port and security officials to keep bi-directional security information flowing.
Developing and implementing plans to quickly resume commerce should terrorists strike a U.S. port (thank you, Katrina).
Fast-tracking a transport worker identification card system, including a biometric ID system. Perhaps anticipating an ACLU challenge on privacy grounds, the Act does not bar workers with criminal records. Does that include illegal transport workers? It's a DP World, isn't it?
A dust-up is brewing over the law's "authorization vs. appropriation" issue, however. That's where lots of security initiatives are set down on paper, but not backed up by other paper -- greenbacks, that is.
One example is the Port of Oakland, which handles massive inbound container volume. The Port sought funding for cameras, fences, equipment, RFID, and a worker ID system, but was placed in the funding queue alongside Nashville and St. Louis. Homeland Security officials contend that other programs cover Oakland's projects. Prioritizing risk will be continually contentious.
Homeland security grew from a cottage to a mansion industry, but we've dodged the desire by some to make it a government profit center.
Congressman Chuck Schumer (D-NY), for example, wanted to include provisions for security feebates (tax every container), where the shipping community directly foots the bill for homeland security. The feebate concept was lifted from the environmental movement, where the more "bad" you do -- in this case, shipping -- the more you pay. Should Wal-Mart be the guarantor of domestic security?
Joe Lieberman (D-CT) wanted to balloon funding and infrastructure to protect buses and subways. Staying focused, the majority in Congress told Joe no.
The U.S. Coast Guard estimates that money currently allocated by the bill is half of what's needed to secure the ports from threats caused by nuclear proliferation. If that's so, local entities should step up and fill the breach.
www.inboundlogistics.com/free
Rising Costs? Lateral Thinking May Help
Written September, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
There are two sides to the rising trucking costs issue -- the carriers' and the shippers'.
Carriers say the confluence of rising diesel prices; the driver shortage; government mandates reducing gas mileage on new equipment and driver productivity; higher taxes, insurance, and compliance costs; and increased security costs for better background checks creates a "perfect storm" for continuing higher transportation costs.
Those directly responsible for managing transport costs see it somewhat differently.
The bottom line tells the tale, shippers say. Carrier profits are up significantly, leading some shippers to claim that carriers are recapturing more than just higher diesel costs through their aggressive fuel surcharge programs.
While shippers understand the economic realities carriers face, they face harsh realities of their own. Corporate management is hammering many line logistics managers: "For years you've been reducing logistics costs and now you are not managing these costs effectively. Your failure to continue doing a good job in this area is hurting overall company profitability. Fix it."
Carriers can do more to cut costs, shippers say, adding that carriers should optimize operations to better match capacity to demand, thereby creating more capacity and reducing costs.
Carriers claim they are doing that, but it still doesn't offset their other costs. Besides, don't shippers get what they can for their products?
And haven't carriers been riding on the ragged edge of profitability for years? Why shouldn't they salt it away for the coming lean times?
Spare me the history lessons, say shippers, it's the here and now we're dealing with.
Sounds insoluble, doesn't it?
Line logistics and supply chain managers are caught between the hammer of upper management's "unreasonable expectations" and the anvil of transportation costs that will keep rising.
How about some lateral thinking here? The inventor of the concept, Edward DeBono, uses this maxim to explain lateral thinking: you cannot dig a hole in a different place by digging the one you are in, deeper.
By that he means trying harder in the same direction may not always be as useful as changing direction.
If you've challenged your carriers to the max, and truly have done all you can to reduce carrier costs, making sure you share in those savings, and you still can't move that anvil, then go after the hammer.
Go another way.
How many of you have an inbound transportation or logistics program? If you do, how many of you are doing all you can to best align demand to supply?
Take away the hammer of corporate management's "unreasonable expectations" by sharing the carriers' economic realities. Then ramp up that inbound program and you'll replace missing company profitability with some great lateral moves.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
There are two sides to the rising trucking costs issue -- the carriers' and the shippers'.
Carriers say the confluence of rising diesel prices; the driver shortage; government mandates reducing gas mileage on new equipment and driver productivity; higher taxes, insurance, and compliance costs; and increased security costs for better background checks creates a "perfect storm" for continuing higher transportation costs.
Those directly responsible for managing transport costs see it somewhat differently.
The bottom line tells the tale, shippers say. Carrier profits are up significantly, leading some shippers to claim that carriers are recapturing more than just higher diesel costs through their aggressive fuel surcharge programs.
While shippers understand the economic realities carriers face, they face harsh realities of their own. Corporate management is hammering many line logistics managers: "For years you've been reducing logistics costs and now you are not managing these costs effectively. Your failure to continue doing a good job in this area is hurting overall company profitability. Fix it."
Carriers can do more to cut costs, shippers say, adding that carriers should optimize operations to better match capacity to demand, thereby creating more capacity and reducing costs.
Carriers claim they are doing that, but it still doesn't offset their other costs. Besides, don't shippers get what they can for their products?
And haven't carriers been riding on the ragged edge of profitability for years? Why shouldn't they salt it away for the coming lean times?
Spare me the history lessons, say shippers, it's the here and now we're dealing with.
Sounds insoluble, doesn't it?
Line logistics and supply chain managers are caught between the hammer of upper management's "unreasonable expectations" and the anvil of transportation costs that will keep rising.
How about some lateral thinking here? The inventor of the concept, Edward DeBono, uses this maxim to explain lateral thinking: you cannot dig a hole in a different place by digging the one you are in, deeper.
By that he means trying harder in the same direction may not always be as useful as changing direction.
If you've challenged your carriers to the max, and truly have done all you can to reduce carrier costs, making sure you share in those savings, and you still can't move that anvil, then go after the hammer.
Go another way.
How many of you have an inbound transportation or logistics program? If you do, how many of you are doing all you can to best align demand to supply?
Take away the hammer of corporate management's "unreasonable expectations" by sharing the carriers' economic realities. Then ramp up that inbound program and you'll replace missing company profitability with some great lateral moves.
www.inboundlogistics.com/free
Going Above & Beyond: The Norm for Top 3PLs
Written July, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
Whether a third-party logistics provider receives enough reader votes to win an Inbound Logistics Top 10 Excellence Award (page 100), or is chosen by the editors for the Top 100 3PL list (page 128), they share one common attribute -- they go above and beyond the norm to meet, exceed, and in some cases anticipate their customers' supply chain needs.
In these challenging times, 3PLs help us adapt and cope with transportation and logistics issues outside our control. Take costs.
Last year, logistics costs rose more than they have in a long time, partly due to skyrocketing fuel prices and the scarcity of good labor. Costs also rise when businesses increase their complexity by implementing an inbound program, entering a new market, or launching a new product.
Extending the length of supply lines or destination markets for your products bumps transportation, compliance, and local management costs. Creating longer pipeline time for inventory does as well. 3PLs help shippers align supply to demand more efficiently as those points grow further apart.
In the macro sense, 3PLs have found many thousands -- often millions -- of dollars in productivity for shippers. Taken in the aggregate, this adds billions in productivity to the GDP. 3PLs find these dollars in direct savings -- inventory reduction, new technology, lower transport costs.
But some savings come from what I call enablement efficiencies. How do you quantify, GDP-wise, how much a 3PL helps by opening a new business or product line? Or opening a new market for selling your products? Or finding and helping to create a new supply market that, over time, gives you a steady stream of higher quality or less expensive components or raw materials?
You and your 3PL partners are logistics explorers, pushing the boundaries of what is possible, moving beyond the current state of the discipline -- advancing from simple contract warehousing or freight forwarding to a 24/7 global logistics network, for example.
I call it adaptive supply chain evolution. By confronting new demands and diverse needs, you prompt your logistics partners to provide new solutions for your ever-changing challenges. You evolve together.
That dynamic means 3PLs add new capabilities to their skill-set. When combined with the 3PL's existing experience, a critical mass often is achieved, creating new solutions that can be applied across the entire logistics market.
This supply chain or logistics cross-pollination means skill-sets and newly developed capabilities move from one 3PL customer to another, sparking another round of logistics evolution as those ideas are disseminated across many interlinking supply chains.
The bottom line: leading logistics partners help you tactically and strategically, managing your logistics and supply chain challenges in ways you expect, but also acting as business process change agents for your company and the global business community as a whole.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Whether a third-party logistics provider receives enough reader votes to win an Inbound Logistics Top 10 Excellence Award (page 100), or is chosen by the editors for the Top 100 3PL list (page 128), they share one common attribute -- they go above and beyond the norm to meet, exceed, and in some cases anticipate their customers' supply chain needs.
In these challenging times, 3PLs help us adapt and cope with transportation and logistics issues outside our control. Take costs.
Last year, logistics costs rose more than they have in a long time, partly due to skyrocketing fuel prices and the scarcity of good labor. Costs also rise when businesses increase their complexity by implementing an inbound program, entering a new market, or launching a new product.
Extending the length of supply lines or destination markets for your products bumps transportation, compliance, and local management costs. Creating longer pipeline time for inventory does as well. 3PLs help shippers align supply to demand more efficiently as those points grow further apart.
In the macro sense, 3PLs have found many thousands -- often millions -- of dollars in productivity for shippers. Taken in the aggregate, this adds billions in productivity to the GDP. 3PLs find these dollars in direct savings -- inventory reduction, new technology, lower transport costs.
But some savings come from what I call enablement efficiencies. How do you quantify, GDP-wise, how much a 3PL helps by opening a new business or product line? Or opening a new market for selling your products? Or finding and helping to create a new supply market that, over time, gives you a steady stream of higher quality or less expensive components or raw materials?
You and your 3PL partners are logistics explorers, pushing the boundaries of what is possible, moving beyond the current state of the discipline -- advancing from simple contract warehousing or freight forwarding to a 24/7 global logistics network, for example.
I call it adaptive supply chain evolution. By confronting new demands and diverse needs, you prompt your logistics partners to provide new solutions for your ever-changing challenges. You evolve together.
That dynamic means 3PLs add new capabilities to their skill-set. When combined with the 3PL's existing experience, a critical mass often is achieved, creating new solutions that can be applied across the entire logistics market.
This supply chain or logistics cross-pollination means skill-sets and newly developed capabilities move from one 3PL customer to another, sparking another round of logistics evolution as those ideas are disseminated across many interlinking supply chains.
The bottom line: leading logistics partners help you tactically and strategically, managing your logistics and supply chain challenges in ways you expect, but also acting as business process change agents for your company and the global business community as a whole.
www.inboundlogistics.com/free
Self-Criticism and Shared Pain
Written June 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
Jeff Shane shares our pain. Who is he and what is the cause of our shared transportation weltschmertz?
Shane is the Undersecretary for Policy at the Department of Transportation and appeared to be thinking out loud at a recent speech to National Industrial Transportation League members.
Shane was right there with us when we spent much of 2005 lamenting the delay in passing the SAFETEA-LU transportation funding bill. Although Congress did specify more than 5,000 transport projects, he was none too happy about the bill's lack of discretionary funds that would allow the DOT to adapt to our evolving transportation demands.
"It is not an understatement to suggest that we are in the midst of a freight revolution," Shane said in his speech. "Freight sector challenges call for federal leadership."
We agree. It was 50 years ago this month since the United States had any show of national transportation leadership -- during the Eisenhower administration when the Interstate Highway System was built.
During World War I, Ike had to drive across the continental United States in an Army truck. Later, during World War II, he compared driving the German Autobahn to that experience -- it galvanized his resolve to drive the Federal Highway Act through a hostile Congress when he later became president. The highway system has added trillions to our GDP over the intervening decades.
An estimated 75 percent of freight capacity issues are controlled by state DOTs and the private sector, according to Shane. This public/private partnership can partially remedy the federal leadership vacuum.
For example, the rail sector and port authorities are making record investments. That's good, but it does not replace a national sense of transportation purpose. Leadership has to come from the top, and it just has not for the last half century.
Shane thinks we are partially to blame for that vacuum: "The DOT and the industry have failed to communicate the urgency of freight needs to Congress or the general public," he said. Add to that the executive branch.
If this is a case of blaming the victim, let's roll with it by creating some pain of our own. If you care about this industry and its wider impact on the nation, resolve now to call your congressman, then follow up in writing. And then another call and another letter.
Your profession gives you insight into this issue that the general public does not have. If you don't resolve to make noise with some grass-roots transportation leadership, we will likely wait the next half century before we realize the economic potential squandered by this lack of long-range vision and transportation leadership.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Jeff Shane shares our pain. Who is he and what is the cause of our shared transportation weltschmertz?
Shane is the Undersecretary for Policy at the Department of Transportation and appeared to be thinking out loud at a recent speech to National Industrial Transportation League members.
Shane was right there with us when we spent much of 2005 lamenting the delay in passing the SAFETEA-LU transportation funding bill. Although Congress did specify more than 5,000 transport projects, he was none too happy about the bill's lack of discretionary funds that would allow the DOT to adapt to our evolving transportation demands.
"It is not an understatement to suggest that we are in the midst of a freight revolution," Shane said in his speech. "Freight sector challenges call for federal leadership."
We agree. It was 50 years ago this month since the United States had any show of national transportation leadership -- during the Eisenhower administration when the Interstate Highway System was built.
During World War I, Ike had to drive across the continental United States in an Army truck. Later, during World War II, he compared driving the German Autobahn to that experience -- it galvanized his resolve to drive the Federal Highway Act through a hostile Congress when he later became president. The highway system has added trillions to our GDP over the intervening decades.
An estimated 75 percent of freight capacity issues are controlled by state DOTs and the private sector, according to Shane. This public/private partnership can partially remedy the federal leadership vacuum.
For example, the rail sector and port authorities are making record investments. That's good, but it does not replace a national sense of transportation purpose. Leadership has to come from the top, and it just has not for the last half century.
Shane thinks we are partially to blame for that vacuum: "The DOT and the industry have failed to communicate the urgency of freight needs to Congress or the general public," he said. Add to that the executive branch.
If this is a case of blaming the victim, let's roll with it by creating some pain of our own. If you care about this industry and its wider impact on the nation, resolve now to call your congressman, then follow up in writing. And then another call and another letter.
Your profession gives you insight into this issue that the general public does not have. If you don't resolve to make noise with some grass-roots transportation leadership, we will likely wait the next half century before we realize the economic potential squandered by this lack of long-range vision and transportation leadership.
www.inboundlogistics.com/free
Less is Less and Less is More
Written May, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
Two important trends will impact your warehouse operations in the near term.
First, retailers will seek to trim inventory even further to increase profits without reducing customer service standards. Wal-Mart, for example, recently announced its intention to cut $6.5 billion in inventory off an already lean 2:1 inventory-to-sales ratio.
The goal? "Theoretical Zero Inventory." The retailer won't own any inventory until they sell it. Sounds ambitious. Let's take a look.
GMROI (gross margin return on inventory) principles have guided retailers' success for decades. Here's an example. Say a retailer marks up an item by 18 percent. It will need at least six inventory turns to make any money (0.18 x 6 = $1.08). For every dollar invested in that item the retailer needs six turns to capture its investment back and earn eight cents.
Of course eight cents isn't that much. If the retailer wanted to make a buck on its original dollar of investment on that item, it would have to turn it 11 times.
With Wal-Mart's pronouncement, the GMROI calculation gets marginalized (pun intended) because the company is not investing in the actual inventory -- its suppliers are. As Wal-Mart goes, so goes retailing.
And as retailing goes, so goes the nation. CVS and other retailers have already indicated they, too, are moving toward the aggressive Theoretical Zero Inventory model. Analysts speaking to large Wal-Mart suppliers, such as Procter & Gamble and Spectrum Brands, report pressure of another kind from the folks in Bentonville: fewer product lines. If this is true, it brings us to the second trend.
"Choice-crazy consumers are now making endless demands on modern warehouses and logistics," according to the new book Warehouses: Witnesses of Prosperity, published by Lannoo. "With 40,000 different products in each supermarket, the current warehouse is threatened from within: it staggers under the whims of the exacting customer."
Whether you agree with that or not, there is growing pressure for less product diversity and fewer SKUs because inventory complexity increases costs. This strategy pits marketeers against bean counters. Here's why.
SKU creep -- where products sold seemingly multiply before your eyes -- is driven by marketing and sales. The age-old question -- "Is it about cutting costs or selling more?" -- creates tension between those striving to get the efficiencies simplicity provides and those wanting to increase sales and market share, serve customers better, and generate the revenue those complexities create.
Want a perfect illustration of this tension? Let's view the two trends through the Wal-Mart looking glass. At almost the same time Wal-Mart announced the Theoretical Zero Inventory approach, it announced it wants more upscale customers.
Well, unless Wal-Mart is abandoning its base -- low-cost shoppers -- those low-cost SKUs will remain. To attract new shoppers, the retailer will have to add new products for those "choice-crazy consumers." There goes SKU creep.
So Theoretical Zero Inventory proponents converge with SKU cutters. Where's the action at? Why, at a warehouse near you!
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Two important trends will impact your warehouse operations in the near term.
First, retailers will seek to trim inventory even further to increase profits without reducing customer service standards. Wal-Mart, for example, recently announced its intention to cut $6.5 billion in inventory off an already lean 2:1 inventory-to-sales ratio.
The goal? "Theoretical Zero Inventory." The retailer won't own any inventory until they sell it. Sounds ambitious. Let's take a look.
GMROI (gross margin return on inventory) principles have guided retailers' success for decades. Here's an example. Say a retailer marks up an item by 18 percent. It will need at least six inventory turns to make any money (0.18 x 6 = $1.08). For every dollar invested in that item the retailer needs six turns to capture its investment back and earn eight cents.
Of course eight cents isn't that much. If the retailer wanted to make a buck on its original dollar of investment on that item, it would have to turn it 11 times.
With Wal-Mart's pronouncement, the GMROI calculation gets marginalized (pun intended) because the company is not investing in the actual inventory -- its suppliers are. As Wal-Mart goes, so goes retailing.
And as retailing goes, so goes the nation. CVS and other retailers have already indicated they, too, are moving toward the aggressive Theoretical Zero Inventory model. Analysts speaking to large Wal-Mart suppliers, such as Procter & Gamble and Spectrum Brands, report pressure of another kind from the folks in Bentonville: fewer product lines. If this is true, it brings us to the second trend.
"Choice-crazy consumers are now making endless demands on modern warehouses and logistics," according to the new book Warehouses: Witnesses of Prosperity, published by Lannoo. "With 40,000 different products in each supermarket, the current warehouse is threatened from within: it staggers under the whims of the exacting customer."
Whether you agree with that or not, there is growing pressure for less product diversity and fewer SKUs because inventory complexity increases costs. This strategy pits marketeers against bean counters. Here's why.
SKU creep -- where products sold seemingly multiply before your eyes -- is driven by marketing and sales. The age-old question -- "Is it about cutting costs or selling more?" -- creates tension between those striving to get the efficiencies simplicity provides and those wanting to increase sales and market share, serve customers better, and generate the revenue those complexities create.
Want a perfect illustration of this tension? Let's view the two trends through the Wal-Mart looking glass. At almost the same time Wal-Mart announced the Theoretical Zero Inventory approach, it announced it wants more upscale customers.
Well, unless Wal-Mart is abandoning its base -- low-cost shoppers -- those low-cost SKUs will remain. To attract new shoppers, the retailer will have to add new products for those "choice-crazy consumers." There goes SKU creep.
So Theoretical Zero Inventory proponents converge with SKU cutters. Where's the action at? Why, at a warehouse near you!
www.inboundlogistics.com/free
Stakeholders Share New Value
April, 2006
By Keith Biondo
Publisher
Inbound Logistics Magazine
The CEO of Procter & Gamble, A.G. Lafley, does not talk much about shareholders; instead he talks about "stakeholders." I wondered precisely what he meant, so I did a little online research.
The original meaning of the word stakeholder was a person who holds money while its owner is being determined -- a trustee for a minor, for example, or someone holding the cash until a bet is won.
But in the past few years, the definition, in the progressive business world at least, has evolved to mean someone, anyone, having a perceived beneficial interest in the enterprise.
So who has a stake in P&G? You do, if you fall into this list: P&G employees, retailers, and distributors; suppliers and all their employees; 2.5-plus billion customers, and their families and communities; and finally, P&G stockholders. That's a lot of stakeholding.
Blurring the Lines In our supply chain slice of reality, however, the stakeholder family is more exclusive. Thanks to the collaborative way supply chain theory and practice has evolved in the past 20 years, supplier partners have been brought into the stakeholder fold. Back in the day, it was all about buyer/seller adversarial relationships -- where "more for me" meant "less for you."
There are, always will be -- and always should be -- hard boundaries between who is buying and who is selling, and that is wrapped around who keeps more of the money during the transaction. But those lines have blurred, because of technology's impact on transportation, logistics, and supply management practices.
Supply chain technology helps create supply chain stakeholders. The tension between buyer and seller has not gone away, but logistics technology and the practices it engenders have created another layer of value on top of the existing buy vs. sell layer. The new value is created by the "stakeholder" relationship itself.
Many times this new shared value is soft value, not cold, hard cash. For example, you might say to a vendor or supplier, "Help me serve my customer better and cheaper and I will buy more from you or I will buy in a way that lowers your cost."
How do companies make good on such a promise? By sharing demand and supply information and logistics costs, and jointly acting to streamline those processes to enhance sales. That could be called soft ROI stakeholder value.
But more and more, there is actual gain-sharing in cash -- savings in direct inventory, handling, and transport costs are sometimes parsed out between business partners. That truly makes your vendors stakeholders in your enterprise. This would be very difficult to accomplish without the collaboration that logistics IT creates.
So these days, it is much easier to have stakeholders, though not as many as P&G does, thanks to logistics technology and the practices it empowers.
www.inboundlogistics.com/free
By Keith Biondo
Publisher
Inbound Logistics Magazine
The CEO of Procter & Gamble, A.G. Lafley, does not talk much about shareholders; instead he talks about "stakeholders." I wondered precisely what he meant, so I did a little online research.
The original meaning of the word stakeholder was a person who holds money while its owner is being determined -- a trustee for a minor, for example, or someone holding the cash until a bet is won.
But in the past few years, the definition, in the progressive business world at least, has evolved to mean someone, anyone, having a perceived beneficial interest in the enterprise.
So who has a stake in P&G? You do, if you fall into this list: P&G employees, retailers, and distributors; suppliers and all their employees; 2.5-plus billion customers, and their families and communities; and finally, P&G stockholders. That's a lot of stakeholding.
Blurring the Lines In our supply chain slice of reality, however, the stakeholder family is more exclusive. Thanks to the collaborative way supply chain theory and practice has evolved in the past 20 years, supplier partners have been brought into the stakeholder fold. Back in the day, it was all about buyer/seller adversarial relationships -- where "more for me" meant "less for you."
There are, always will be -- and always should be -- hard boundaries between who is buying and who is selling, and that is wrapped around who keeps more of the money during the transaction. But those lines have blurred, because of technology's impact on transportation, logistics, and supply management practices.
Supply chain technology helps create supply chain stakeholders. The tension between buyer and seller has not gone away, but logistics technology and the practices it engenders have created another layer of value on top of the existing buy vs. sell layer. The new value is created by the "stakeholder" relationship itself.
Many times this new shared value is soft value, not cold, hard cash. For example, you might say to a vendor or supplier, "Help me serve my customer better and cheaper and I will buy more from you or I will buy in a way that lowers your cost."
How do companies make good on such a promise? By sharing demand and supply information and logistics costs, and jointly acting to streamline those processes to enhance sales. That could be called soft ROI stakeholder value.
But more and more, there is actual gain-sharing in cash -- savings in direct inventory, handling, and transport costs are sometimes parsed out between business partners. That truly makes your vendors stakeholders in your enterprise. This would be very difficult to accomplish without the collaboration that logistics IT creates.
So these days, it is much easier to have stakeholders, though not as many as P&G does, thanks to logistics technology and the practices it empowers.
www.inboundlogistics.com/free
Lessons From the Neanderthals
Written March, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
What do global trade, cavemen, and a TV commercial have in common? Stay with me. Did you catch the FedEx ad about a caveman using Brand X Pterosaur to ship an important stick? Instant classic!* The commercial humorously shows that good transportation was as important then as it is now.
Oddly enough, new research by a group of U.S. and Dutch economists makes a similar point. The ability of early humans (homo sapiens) to trade was one key reason why physically stronger contemporaries -- the Neanderthals -- were made extinct.
The research suggests a superior trade-based economy allowed humans to allocate labor to specific tasks such as hunting and gathering, and tool and clothing manufacturing, thereby creating a closed loop where individuals could exchange goods among themselves -- a Middle Paleolithic supply chain. Early man's collaborative approach to trade enabled them to more efficiently fend for food and resources, and create a sustainable livelihood.
Neanderthals, on the other hand, did not tie sticks or clubs to flying dinosaurs as the commercial shows; they simply did not trade. The message is as clear today as it was then: embrace trade or risk extinction.
World-class businesses get the message and are transforming their foraging strategies to be more intuitive. Greater supply chain collaboration allows enterprises to share necessary information with their extended partners seamlessly and in real time so that they can circumvent obstacles when they occur. Collaboration also helps them make better decisions about where to source product or locate offshore manufacturing activities.
While the survival of today's global race no longer hangs in the trade balance, the survival of global enterprises lies in their capacity to adapt supply chain strategies to changing trade winds and create more reliable and resilient pipelines.
Like early trade, logisticians and supply chain professionals have the tools and resources, thanks to innovative communication technologies and enterprising 3PLs and carriers, to facilitate change, transform their go-to-market strategies, and create flexible options for sourcing and distributing product around the world.
The challenge is ever-changing and daunting, which is why we offer our annual Global Logistics Guide, a resource to help you identify countries that are allocating capital and resources to create a more seamless environment for distributing cargo. Some countries have taken a proactive approach to finding innovative transportation solutions and investing in infrastructure, people, and technology to drive their economies. Others take the Neanderthal approach.
Countries or companies that show leadership in this area will stand on the right side of history. Those taking a Neanderthal, wait-and-see approach may find themselves struggling to survive among outcasts.
*www.inboundlogistics.com/stick
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
What do global trade, cavemen, and a TV commercial have in common? Stay with me. Did you catch the FedEx ad about a caveman using Brand X Pterosaur to ship an important stick? Instant classic!* The commercial humorously shows that good transportation was as important then as it is now.
Oddly enough, new research by a group of U.S. and Dutch economists makes a similar point. The ability of early humans (homo sapiens) to trade was one key reason why physically stronger contemporaries -- the Neanderthals -- were made extinct.
The research suggests a superior trade-based economy allowed humans to allocate labor to specific tasks such as hunting and gathering, and tool and clothing manufacturing, thereby creating a closed loop where individuals could exchange goods among themselves -- a Middle Paleolithic supply chain. Early man's collaborative approach to trade enabled them to more efficiently fend for food and resources, and create a sustainable livelihood.
Neanderthals, on the other hand, did not tie sticks or clubs to flying dinosaurs as the commercial shows; they simply did not trade. The message is as clear today as it was then: embrace trade or risk extinction.
World-class businesses get the message and are transforming their foraging strategies to be more intuitive. Greater supply chain collaboration allows enterprises to share necessary information with their extended partners seamlessly and in real time so that they can circumvent obstacles when they occur. Collaboration also helps them make better decisions about where to source product or locate offshore manufacturing activities.
While the survival of today's global race no longer hangs in the trade balance, the survival of global enterprises lies in their capacity to adapt supply chain strategies to changing trade winds and create more reliable and resilient pipelines.
Like early trade, logisticians and supply chain professionals have the tools and resources, thanks to innovative communication technologies and enterprising 3PLs and carriers, to facilitate change, transform their go-to-market strategies, and create flexible options for sourcing and distributing product around the world.
The challenge is ever-changing and daunting, which is why we offer our annual Global Logistics Guide, a resource to help you identify countries that are allocating capital and resources to create a more seamless environment for distributing cargo. Some countries have taken a proactive approach to finding innovative transportation solutions and investing in infrastructure, people, and technology to drive their economies. Others take the Neanderthal approach.
Countries or companies that show leadership in this area will stand on the right side of history. Those taking a Neanderthal, wait-and-see approach may find themselves struggling to survive among outcasts.
*www.inboundlogistics.com/stick
www.inboundlogistics.com/free
Learning for Earnings
Written February, 2006
by Keith Biondo
Publisher
Inbound Logistics Magazine
When this magazine made its commitment to logistics education in 1990, few undergraduate or graduate logistics studies programs were available. That is not the case today.
Logistics undergraduate, post-graduate, and continuing education programs have expanded a hundredfold. MIT, for example, has seen an application growth of 20 percent annually over the last five years, reports Dr. Chris Caplice, executive director, Master of Engineering in Logistics Program.
That is a good thing, given our growing population and corollary need for more high-paying jobs -- both in the United States and by sharing modern logistics practices around the world.
Logistics education continues to change and grow, responding to demand. Here's a report card:
Undergraduate programs. In the past, logistics programs emphasized the theoretical, sometimes leaving grads adrift, or forced to rely on on-the-job training when faced with real logistics tasks.
Today, logistics courses bulk up the practical information, tapping adjunct professors and using internships to provide some grit.
Courses also cover the "basics of transportation," notes John Taylor, assistant professor of logistics, Grand Valley State University. The curricula now tackles global issues as well, says Robert Trent, associate professor of management, Lehigh University.
These curriculum changes translate to real-world benefits. High schools even recommend logistics as a career path, and many companies including Con-Way, CRST, and Cardinal Logistics, offer more logistics scholarships.
Continuing education. Post-graduate and continuing education programs teach old transportation management dogs new tricks, helping them land better jobs, earning higher salaries.
Continuing logistics education helps flesh out real experience with the latest theories and practices, transforming silo experience into strategic know-how.
The result? Employees are more marketable, and often get placed faster if the corporate axe falls. Some decide to hang up a shingle, and feed the growing demand for logistics consultants.
World-class companies now "get" the benefits of paying for their employees' continuing education. "Firms that do not keep abreast of state-of-the art knowledge face a great risk of being left behind," notes Scott Webster, a supply chain management professor at Syracuse University.
Many companies now pay for continuing education; a few even grant time for employees to attend courses. For those who can't leave their desks, online and video logistics courses are readily available, notes Dick Lancioni, logistics professor at Temple University.
If you are involved in logistics education in any way, and want to comment, please drop us a line: publisher@inboundlogistics.com.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
When this magazine made its commitment to logistics education in 1990, few undergraduate or graduate logistics studies programs were available. That is not the case today.
Logistics undergraduate, post-graduate, and continuing education programs have expanded a hundredfold. MIT, for example, has seen an application growth of 20 percent annually over the last five years, reports Dr. Chris Caplice, executive director, Master of Engineering in Logistics Program.
That is a good thing, given our growing population and corollary need for more high-paying jobs -- both in the United States and by sharing modern logistics practices around the world.
Logistics education continues to change and grow, responding to demand. Here's a report card:
Undergraduate programs. In the past, logistics programs emphasized the theoretical, sometimes leaving grads adrift, or forced to rely on on-the-job training when faced with real logistics tasks.
Today, logistics courses bulk up the practical information, tapping adjunct professors and using internships to provide some grit.
Courses also cover the "basics of transportation," notes John Taylor, assistant professor of logistics, Grand Valley State University. The curricula now tackles global issues as well, says Robert Trent, associate professor of management, Lehigh University.
These curriculum changes translate to real-world benefits. High schools even recommend logistics as a career path, and many companies including Con-Way, CRST, and Cardinal Logistics, offer more logistics scholarships.
Continuing education. Post-graduate and continuing education programs teach old transportation management dogs new tricks, helping them land better jobs, earning higher salaries.
Continuing logistics education helps flesh out real experience with the latest theories and practices, transforming silo experience into strategic know-how.
The result? Employees are more marketable, and often get placed faster if the corporate axe falls. Some decide to hang up a shingle, and feed the growing demand for logistics consultants.
World-class companies now "get" the benefits of paying for their employees' continuing education. "Firms that do not keep abreast of state-of-the art knowledge face a great risk of being left behind," notes Scott Webster, a supply chain management professor at Syracuse University.
Many companies now pay for continuing education; a few even grant time for employees to attend courses. For those who can't leave their desks, online and video logistics courses are readily available, notes Dick Lancioni, logistics professor at Temple University.
If you are involved in logistics education in any way, and want to comment, please drop us a line: publisher@inboundlogistics.com.
www.inboundlogistics.com/free
Environmentalists: 'It's My Way, Not the Highway'
Written December, 2005
by Keith Biondo
Publisher
Inbound Logistics Magazine
When it comes to balancing environmental concerns with the need to improve and expand the U.S. transport infrastructure, there is a right way and there is a wrong way. Take California, for example.
While Governor Schwarzenegger was traveling in China on a mission to forge more trading opportunities, I was touring the part of his state that will carry the increased shipments the trade mission will generate.
California has made some improvements -- the Pier Pass program extending the hours ports stay open; the Pacific Gateway Cargo Center; the Ontario airport supplement to LAX; the Southern California Logistics Airport and other development in the Inland Empire by warehouses, 3PLs, and others.
But some "improvements" are band-aids, seeking to finesse the problem instead of attacking it head on.
While overseas missions to build trade opportunities generate press coverage, and blue ribbon commissions study what makes companies such as Nissan move its North American headquarters from Carson, Calif., to Nashville, Tenn., 1,500 jobs lost, some policy-makers are missing-in-action on the real mission -- modernizing transport infrastructure in California and all across America.
On one hand, politicians and public administrators need the tax revenues and jobs that real transport infrastructure improvements create. But on the other hand, environmentalists and the usual media suspects, along with some fringe politicians, cow those same policy-makers into defeating or deflecting many important actions that would expand and improve infrastructure.
Here's one example. Environmentalists and labor interests recently opposed a plan for the Port of Oakland to answer its urgent need for expansion by using the long-ailing Port of Sacramento's under-utilized facilities. Fuel savings to transport goods to large DCs in the area could be tenfold, according to Wilson Lacy, the Port of Oakland's director of maritime operations.
That would make for better air quality, wouldn't it? More jobs and tax revenues? Lower supply chain costs for companies and their consumers all across the United States?
Why labor interests joined the environmental industrial complex and opposed this initiative is beyond me. Expanding port capacity creates well-paying jobs. If you don't do it in California, companies will just take their business elsewhere -- maybe to Alabama, for example.
Why do some environmental groups oppose improving transportation infrastructure? It's likely that even the most rapacious industrialists among us don't really want to be environmental evil-doers. We all breathe. We all want to hand off a nice looking, nice smelling country to the next generation.
Yet my California trip makes me think that some enviro-activists don't want any transportation improvement.
Example? For years, California enviros have been extolling the virtues of intermodalism to take trucks off overcrowded highways. They actually call the busiest lanes "diesel death zones."
Yet in a complete about-face to the pro-intermodal position, they recently succeeded in blocking expansion of intermodal facilities in the region. Working with enviros is like taking a swing at fog; you can see their position but you just can't get your hands on it.
I don't want to pick on the Left Coast. Improving transportation infrastructure is a national issue. To be fair, though, it is more magnified in California because of the product volume its infrastructure must bear.
In Choctaw Point, Mobile, Ala., the enviros at Mobile Bay Watch waged a three-year legal and media battle to prevent investment in transportation infrastructure. The fight is over, and it happily ended with a new container terminal project that may create up to 500 new jobs, many paying up to $65,753 per year. Capacity could increase from 75,000 to 750,000 containers over 10 years.
Announcing the Mobile Container Terminal deal, Gov. Bob Riley said, "the Port is more important than it has ever been." Leaders of both parties agreed, and took action. That's how they do it in Alabama.
That kind of action is anathema to some, with luxury housing and another waterfront shopping mall being more acceptable to the Bay Watch crowd.
Not far away in New Orleans, environmental lawsuits over the past 30 years stopped several planned improvements to the lock systems protecting the city. I wonder what the result of Hurricane Katrina would have been if U.S. District Judge Charles Schwartz, Jr., never issued that 1977 injunction against the Army Corps of Engineers' project to install floodgates on Lake Pontchartrain.
"Plaintiffs herein have demonstrated that they, and in fact all persons in this area, will be irreparably harmed if the barrier project...is allowed to continue," he wrote.
While that kind of lawsuit helped produce catastrophic results visible to all, many irrational environmental lawsuits create catastrophic economic results almost to the same monetary scale when taken in the aggregate -- just not all at once, and therefore not as visible.
Federal, state, and local community leaders should look to our industry and the improvements it needs to fill the current job-gap breech that will only grow wider. Policy-makers have a need to feed the voracious tax machines that have been created over the past four decades. Economic growth is the result of transport infrastructure investment and expansion, an environmental bad thing to a small and powerful few, but a good thing to most of us.
When it comes to balancing environmental concerns with the need to improve and expand the U.S. transport infrastructure, there is a right way, a wrong way, and maybe even a SmartWay (www.epa.gov/smartway). Public/ private partnerships such as the EPA's SmartWay Transport program -- alliances between business and government to responsibly improve, expand, and upgrade transport infrastructure -- are needed.
Union and non-union labor also need to get on board because the choice to those interested in labor issues is clear: minimum-wage retail jobs at the next waterfront mall, or good jobs in an expanding industry that benefits the workers directly and the overall economy as well? Policy-makers should show a little more gumption and stand up to irrational environmental demands.
When the enviro invective blares from your TV, change the channel. When the anti-business, anti-jobs, environmental industrial complex files the next round of irrational lawsuits against needed transportation improvement projects, there's only one thing to do, and that's fight.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
When it comes to balancing environmental concerns with the need to improve and expand the U.S. transport infrastructure, there is a right way and there is a wrong way. Take California, for example.
While Governor Schwarzenegger was traveling in China on a mission to forge more trading opportunities, I was touring the part of his state that will carry the increased shipments the trade mission will generate.
California has made some improvements -- the Pier Pass program extending the hours ports stay open; the Pacific Gateway Cargo Center; the Ontario airport supplement to LAX; the Southern California Logistics Airport and other development in the Inland Empire by warehouses, 3PLs, and others.
But some "improvements" are band-aids, seeking to finesse the problem instead of attacking it head on.
While overseas missions to build trade opportunities generate press coverage, and blue ribbon commissions study what makes companies such as Nissan move its North American headquarters from Carson, Calif., to Nashville, Tenn., 1,500 jobs lost, some policy-makers are missing-in-action on the real mission -- modernizing transport infrastructure in California and all across America.
On one hand, politicians and public administrators need the tax revenues and jobs that real transport infrastructure improvements create. But on the other hand, environmentalists and the usual media suspects, along with some fringe politicians, cow those same policy-makers into defeating or deflecting many important actions that would expand and improve infrastructure.
Here's one example. Environmentalists and labor interests recently opposed a plan for the Port of Oakland to answer its urgent need for expansion by using the long-ailing Port of Sacramento's under-utilized facilities. Fuel savings to transport goods to large DCs in the area could be tenfold, according to Wilson Lacy, the Port of Oakland's director of maritime operations.
That would make for better air quality, wouldn't it? More jobs and tax revenues? Lower supply chain costs for companies and their consumers all across the United States?
Why labor interests joined the environmental industrial complex and opposed this initiative is beyond me. Expanding port capacity creates well-paying jobs. If you don't do it in California, companies will just take their business elsewhere -- maybe to Alabama, for example.
Why do some environmental groups oppose improving transportation infrastructure? It's likely that even the most rapacious industrialists among us don't really want to be environmental evil-doers. We all breathe. We all want to hand off a nice looking, nice smelling country to the next generation.
Yet my California trip makes me think that some enviro-activists don't want any transportation improvement.
Example? For years, California enviros have been extolling the virtues of intermodalism to take trucks off overcrowded highways. They actually call the busiest lanes "diesel death zones."
Yet in a complete about-face to the pro-intermodal position, they recently succeeded in blocking expansion of intermodal facilities in the region. Working with enviros is like taking a swing at fog; you can see their position but you just can't get your hands on it.
I don't want to pick on the Left Coast. Improving transportation infrastructure is a national issue. To be fair, though, it is more magnified in California because of the product volume its infrastructure must bear.
In Choctaw Point, Mobile, Ala., the enviros at Mobile Bay Watch waged a three-year legal and media battle to prevent investment in transportation infrastructure. The fight is over, and it happily ended with a new container terminal project that may create up to 500 new jobs, many paying up to $65,753 per year. Capacity could increase from 75,000 to 750,000 containers over 10 years.
Announcing the Mobile Container Terminal deal, Gov. Bob Riley said, "the Port is more important than it has ever been." Leaders of both parties agreed, and took action. That's how they do it in Alabama.
That kind of action is anathema to some, with luxury housing and another waterfront shopping mall being more acceptable to the Bay Watch crowd.
Not far away in New Orleans, environmental lawsuits over the past 30 years stopped several planned improvements to the lock systems protecting the city. I wonder what the result of Hurricane Katrina would have been if U.S. District Judge Charles Schwartz, Jr., never issued that 1977 injunction against the Army Corps of Engineers' project to install floodgates on Lake Pontchartrain.
"Plaintiffs herein have demonstrated that they, and in fact all persons in this area, will be irreparably harmed if the barrier project...is allowed to continue," he wrote.
While that kind of lawsuit helped produce catastrophic results visible to all, many irrational environmental lawsuits create catastrophic economic results almost to the same monetary scale when taken in the aggregate -- just not all at once, and therefore not as visible.
Federal, state, and local community leaders should look to our industry and the improvements it needs to fill the current job-gap breech that will only grow wider. Policy-makers have a need to feed the voracious tax machines that have been created over the past four decades. Economic growth is the result of transport infrastructure investment and expansion, an environmental bad thing to a small and powerful few, but a good thing to most of us.
When it comes to balancing environmental concerns with the need to improve and expand the U.S. transport infrastructure, there is a right way, a wrong way, and maybe even a SmartWay (www.epa.gov/smartway). Public/ private partnerships such as the EPA's SmartWay Transport program -- alliances between business and government to responsibly improve, expand, and upgrade transport infrastructure -- are needed.
Union and non-union labor also need to get on board because the choice to those interested in labor issues is clear: minimum-wage retail jobs at the next waterfront mall, or good jobs in an expanding industry that benefits the workers directly and the overall economy as well? Policy-makers should show a little more gumption and stand up to irrational environmental demands.
When the enviro invective blares from your TV, change the channel. When the anti-business, anti-jobs, environmental industrial complex files the next round of irrational lawsuits against needed transportation improvement projects, there's only one thing to do, and that's fight.
www.inboundlogistics.com/free
Supply Chain Security: Fact vs. Fiction
Written October, 2005
by Keith Biondo
Publisher
Inbound Logistics Magazine
Man has always been intrigued by transmutation -- transforming one element into another. In days of old, we tried changing lead into gold. Today, some are trying to convert the public's fear of supply chain vulnerabilities into political currency, or solid gold votes.
While concern is warranted, some choose to grandstand by floating obviously impossible solutions against the threat. That is dangerous.
One grandstanding example is Stephen Flynn's book America the Vulnerable, which I wrote about here in August 2004. I just finished reading a book by another Flynn, Vince.
In his Memorial Day, terrorists become credible "known shippers" and use our ports and border crossings as a conveyance to attack the United States. Vince is the smarter Flynn, giving artistic representation to my view that securing the global supply chain is a binary task. Unlike Stephen, Vince Flynn portrays the task of searching every inbound container as impossible. Both Flynn works are fiction to me.
On the factual side, I recently read a whitepaper published by UNISYS, entitled Secure Commerce RoadMap. Here are some key takeaways:
"Congress must stop advocating 100-percent inspection rates for inbound cargo, which is impossible and undermines credibility with industry."
"We are ignoring other maritime vulnerabilities. Ninety percent of the current discussion focuses on containers, even though other shipment types represent an equal or greater threat."
"We need a plan for an incident response and re-start." See Katrina.
The debate over global security standards is sometimes used as a red herring by those who wish to throw up impediments because they disagree with whatever policy is being suggested at the time.
NIMBY should stop. "The container contents are not my concern. I just move the box." "My company will not do anything until legislation is passed."
Maritime insurance rates can incent "safe shipper" compliance.
Complacency is setting in, the further away we move from Sept. 11.
"Stuffing security at overseas DCs is a necessity, period."
The most vulnerable node is overseas inland drayage.
UNISYS ought to be recognized for putting forth a practical, frank, and workable start point that, in my view, is the clearest for dealing with supply chain security. For anyone involved, even tangentially, in global commerce and trade, this whitepaper is a must read. Find it at www.unisys.com or call 800-874-8647.
With recommendations like this whitepaper, and recent initiatives such as the partnership between IBM and Maersk Logistics enabling increased security through highly intelligent wireless tracking devices enhancing global supply chain visibility, perhaps we can work some transmutation magic on polemics like America the Vulnerable and end up with America the Secure.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Man has always been intrigued by transmutation -- transforming one element into another. In days of old, we tried changing lead into gold. Today, some are trying to convert the public's fear of supply chain vulnerabilities into political currency, or solid gold votes.
While concern is warranted, some choose to grandstand by floating obviously impossible solutions against the threat. That is dangerous.
One grandstanding example is Stephen Flynn's book America the Vulnerable, which I wrote about here in August 2004. I just finished reading a book by another Flynn, Vince.
In his Memorial Day, terrorists become credible "known shippers" and use our ports and border crossings as a conveyance to attack the United States. Vince is the smarter Flynn, giving artistic representation to my view that securing the global supply chain is a binary task. Unlike Stephen, Vince Flynn portrays the task of searching every inbound container as impossible. Both Flynn works are fiction to me.
On the factual side, I recently read a whitepaper published by UNISYS, entitled Secure Commerce RoadMap. Here are some key takeaways:
"Congress must stop advocating 100-percent inspection rates for inbound cargo, which is impossible and undermines credibility with industry."
"We are ignoring other maritime vulnerabilities. Ninety percent of the current discussion focuses on containers, even though other shipment types represent an equal or greater threat."
"We need a plan for an incident response and re-start." See Katrina.
The debate over global security standards is sometimes used as a red herring by those who wish to throw up impediments because they disagree with whatever policy is being suggested at the time.
NIMBY should stop. "The container contents are not my concern. I just move the box." "My company will not do anything until legislation is passed."
Maritime insurance rates can incent "safe shipper" compliance.
Complacency is setting in, the further away we move from Sept. 11.
"Stuffing security at overseas DCs is a necessity, period."
The most vulnerable node is overseas inland drayage.
UNISYS ought to be recognized for putting forth a practical, frank, and workable start point that, in my view, is the clearest for dealing with supply chain security. For anyone involved, even tangentially, in global commerce and trade, this whitepaper is a must read. Find it at www.unisys.com or call 800-874-8647.
With recommendations like this whitepaper, and recent initiatives such as the partnership between IBM and Maersk Logistics enabling increased security through highly intelligent wireless tracking devices enhancing global supply chain visibility, perhaps we can work some transmutation magic on polemics like America the Vulnerable and end up with America the Secure.
www.inboundlogistics.com/free
More Lift, Less Drag
Written August, 2005
by Keith Biondo
Publisher
Inbound Logistics Magazine
There is an inexplicable failure on the part of many in Washington, D.C., to understand that airlines are in business to make money, according to Air Transport Association of America President James May.
May's recent comments to The Wings Club of New York piqued my interest as I sometimes get the impression that our airline industry is treated like a utility that holds a monopoly.
To illustrate what must be done to ensure the air system's long-term health, May uses aeronautics analogies: An aircraft can increase payload by reducing drag, he says -- so too can the airline industry, by reducing the weight and drag of excessive taxes and regulations.
What you tax, you get less of, May says, and asks: is that in the shipping public's best interest, the general public's best interest?
One certain way to "boost lift and thrust" of today's air industry is to get rid of the air traffic control system, says May. "The antiquated system should be retired to the Smithsonian where it can be admired as one of the marvels of 1950's technology," he suggests.
Perhaps before GPS becomes obsolete, the people controlling the purse strings will realize that a new ATC system will optimize air traffic flow by better matching demand to supply, much like you do every day with your hard assets and inventory.
Dealing with high fuel costs is another thing you do every day. The airline industry faces the same issue -- the cost of jet fuel has doubled in the past three years.
Yet, with all these challenges, several areas of improvement in the air segment help companies create real value and become better global competitors:
Continuing investment in technology by the airlines, integrators, forwarders, and all-cargo carriers.
Substantial growth in the all-cargo segment and Pac Rim airlines.
The successful move to airline alliances in the past five years, which will likely continue as airlines find mutual efficiencies to help them deal with current business realities.
Retasking military airports and infrastructure for commercial cargo use and joint military/civilian use.
Another key trend making a world of difference is that forwarders, who acted as an extension of the airlines in the past, now act more as an extension of your transportation or logistics department. Day in, day out, the increased forwarder role goes a long way toward helping you face your airfreight challenges.
If the air industry is going to be a key driver for U.S. economic growth in the future, and to ensure the air industry can serve your growing needs, shippers and carriers need to roll up their sleeves and work together. One way to start is by contacting the Air Transport Association's government affairs office at 202-626-4006.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
There is an inexplicable failure on the part of many in Washington, D.C., to understand that airlines are in business to make money, according to Air Transport Association of America President James May.
May's recent comments to The Wings Club of New York piqued my interest as I sometimes get the impression that our airline industry is treated like a utility that holds a monopoly.
To illustrate what must be done to ensure the air system's long-term health, May uses aeronautics analogies: An aircraft can increase payload by reducing drag, he says -- so too can the airline industry, by reducing the weight and drag of excessive taxes and regulations.
What you tax, you get less of, May says, and asks: is that in the shipping public's best interest, the general public's best interest?
One certain way to "boost lift and thrust" of today's air industry is to get rid of the air traffic control system, says May. "The antiquated system should be retired to the Smithsonian where it can be admired as one of the marvels of 1950's technology," he suggests.
Perhaps before GPS becomes obsolete, the people controlling the purse strings will realize that a new ATC system will optimize air traffic flow by better matching demand to supply, much like you do every day with your hard assets and inventory.
Dealing with high fuel costs is another thing you do every day. The airline industry faces the same issue -- the cost of jet fuel has doubled in the past three years.
Yet, with all these challenges, several areas of improvement in the air segment help companies create real value and become better global competitors:
Continuing investment in technology by the airlines, integrators, forwarders, and all-cargo carriers.
Substantial growth in the all-cargo segment and Pac Rim airlines.
The successful move to airline alliances in the past five years, which will likely continue as airlines find mutual efficiencies to help them deal with current business realities.
Retasking military airports and infrastructure for commercial cargo use and joint military/civilian use.
Another key trend making a world of difference is that forwarders, who acted as an extension of the airlines in the past, now act more as an extension of your transportation or logistics department. Day in, day out, the increased forwarder role goes a long way toward helping you face your airfreight challenges.
If the air industry is going to be a key driver for U.S. economic growth in the future, and to ensure the air industry can serve your growing needs, shippers and carriers need to roll up their sleeves and work together. One way to start is by contacting the Air Transport Association's government affairs office at 202-626-4006.
www.inboundlogistics.com/free
Here Comes the Judge, There Goes Your Business
Written July, 2005
by Keith Biondo
Publisher
Inbound Logistics Magazine
Judicial activism impacts all business. Not content to legislate from the bench on social issues, the courts have now gone off the legal reservation and applied the activist and collectivist bias to business, your business. Whether or not you agree with the results of an activist decision is not the point. The point is that laws should be made by a democratic process, not by judges.
According to a recent Supreme Court decision, the concept of eminent domain has been rewritten, and the results of this judicial lawmaking can put your business at risk. Here's the issue: local taxing authorities now have the option to apply eminent domain not just for the greater public good, but to get the highest tax revenues.
Eminent domain is an extremely valid concept in terms of economic development. It used to mean that state and local governments could seize your property when building public works projects, such as an interstate or a new dam. Sometimes you were even fairly compensated for the land that stood in the way of the public works project.
This rationale was sound if your business stood in the way of an I-39 extension, for example. Your property rights were recognized but the rights of a greater number of citizens to have a freer flow of commerce trumped your individual rights. Eminent domain is fair, if it is applied fairly. Democracy, right?
Now, however, in response to the unquenchable need for more taxes to fuel our burgeoning, all-encompassing, Matrix-like safety net, you might get a knock on your DC door.
"Hello, we're from the government and we're here to help. Now get out of your DC, your business, and get off our land."
"Why?" you ask. "Are you building a new interstate? Do you want to flood the valley to put up a new hydro-electric power plant that will provide larger economic development opportunities?"
"Nope, we're putting up luxury housing and a Krispy Kreme." Nice.
Where this new precedent will lead no one is certain. But what's clear is that more law suits will pit business against business. And the concept of private property rights, developed over thousands of years of practice and common sense, is left to the mercy of the voracious tax machine.
There is an inherent conflict of interest here because those who make the call on seizing your property are those who get the increased tax revenue.
Here's the best part. You can't fight them in court and win. Who says so? Why, the Supreme Court of the United States! In their zeal to create new pathways for wealth distribution, the Court, in its recent eminent domain ruling, ignored the obvious conflict of interest issue. It's obvious even to me, and I'm no jurist.
Now start packing! It won't be long before some clever insurance underwriter begins offering an eminent domain protection rider to business insurance policies. I'm buying.
If you still think judicial activism doesn't impact your business, the Schramm v. Foster case should strike fear in the hearts of anyone who uses third-party logistics providers. Like the eminent domain decision, it is another case where judges ignore precedent, common law -- even common sense -- to circumvent the messy democratic process and craft a world they think is right and just.
The Schramm v. Foster case arose after a carrier hired by a 3PL was found to have caused an accident that seriously injured two young men. Lawyers for family members sued not only the carrier, but also the 3PL that hired the carrier on behalf of a shipper. Historically, only carriers had been held liable for damages they caused. But in this case, the judge allowed the trial lawyers access to the deeper pockets of the logistics services provider.
In the words of Judge Motz, the deciding judge in the Maryland District Federal Supreme Court, "This is a case in which the law may simply have to catch up with an obligation that...[the 3PL] has voluntarily assumed."
Judge, if the 3PL assumed the liability, why was it contesting the decision in court? In absence of that law -- made by lawmakers, in that messy process that balances the rights of all -- I guess judges must make their own laws for us to follow.
I am surprised the judge did not allow the lawyers to go after the truck manufacturer as well. Or the shipper who hired the 3PL who chose the trucker. Or the customer who ordered the product from the shipper who hired the 3PL who chose the trucker.
Judge Motz's activist stance is a logical extension of the idea that it's OK to get money from anyone, even if they are not directly related to the issue creating the loss. Remember the McDonald's coffee cup? If no law existed, the judge should have thrown the case back to the regulating bodies instead of making his own law.
And it gets even worse. The judge also found, incredibly, that brokers and 3PLs are responsible for safety checks for any trucker they hire, if there is no existing DOT certificate. And, the 3PL has to check every transaction (shipment) with the FMCSA Safestat database -- as if that's up to date. The 3PL involved in Schramm v. Foster runs with more than 20,000 carriers and conducts millions of transactions each year. Get out your overalls and creeper.
If this decision stands, it will create an unjust liability that will impact the use of outsourced logistics providers. This case sets a precedent where anyone in the transportation chain is liable for damages created by anyone else in the chain. Don't think trial lawyers won't jump all over this. Thanks, Judge.
All those concerned in our industry should fight this kind of judicial activism -- redistribution of wealth and blame regardless of culpability, regardless of property rights. Don't sit there and fulminate. Do what you can now to get involved or those who sit above us all, high up on a bench, will hand down decisions that continue to damage business in America.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Judicial activism impacts all business. Not content to legislate from the bench on social issues, the courts have now gone off the legal reservation and applied the activist and collectivist bias to business, your business. Whether or not you agree with the results of an activist decision is not the point. The point is that laws should be made by a democratic process, not by judges.
According to a recent Supreme Court decision, the concept of eminent domain has been rewritten, and the results of this judicial lawmaking can put your business at risk. Here's the issue: local taxing authorities now have the option to apply eminent domain not just for the greater public good, but to get the highest tax revenues.
Eminent domain is an extremely valid concept in terms of economic development. It used to mean that state and local governments could seize your property when building public works projects, such as an interstate or a new dam. Sometimes you were even fairly compensated for the land that stood in the way of the public works project.
This rationale was sound if your business stood in the way of an I-39 extension, for example. Your property rights were recognized but the rights of a greater number of citizens to have a freer flow of commerce trumped your individual rights. Eminent domain is fair, if it is applied fairly. Democracy, right?
Now, however, in response to the unquenchable need for more taxes to fuel our burgeoning, all-encompassing, Matrix-like safety net, you might get a knock on your DC door.
"Hello, we're from the government and we're here to help. Now get out of your DC, your business, and get off our land."
"Why?" you ask. "Are you building a new interstate? Do you want to flood the valley to put up a new hydro-electric power plant that will provide larger economic development opportunities?"
"Nope, we're putting up luxury housing and a Krispy Kreme." Nice.
Where this new precedent will lead no one is certain. But what's clear is that more law suits will pit business against business. And the concept of private property rights, developed over thousands of years of practice and common sense, is left to the mercy of the voracious tax machine.
There is an inherent conflict of interest here because those who make the call on seizing your property are those who get the increased tax revenue.
Here's the best part. You can't fight them in court and win. Who says so? Why, the Supreme Court of the United States! In their zeal to create new pathways for wealth distribution, the Court, in its recent eminent domain ruling, ignored the obvious conflict of interest issue. It's obvious even to me, and I'm no jurist.
Now start packing! It won't be long before some clever insurance underwriter begins offering an eminent domain protection rider to business insurance policies. I'm buying.
If you still think judicial activism doesn't impact your business, the Schramm v. Foster case should strike fear in the hearts of anyone who uses third-party logistics providers. Like the eminent domain decision, it is another case where judges ignore precedent, common law -- even common sense -- to circumvent the messy democratic process and craft a world they think is right and just.
The Schramm v. Foster case arose after a carrier hired by a 3PL was found to have caused an accident that seriously injured two young men. Lawyers for family members sued not only the carrier, but also the 3PL that hired the carrier on behalf of a shipper. Historically, only carriers had been held liable for damages they caused. But in this case, the judge allowed the trial lawyers access to the deeper pockets of the logistics services provider.
In the words of Judge Motz, the deciding judge in the Maryland District Federal Supreme Court, "This is a case in which the law may simply have to catch up with an obligation that...[the 3PL] has voluntarily assumed."
Judge, if the 3PL assumed the liability, why was it contesting the decision in court? In absence of that law -- made by lawmakers, in that messy process that balances the rights of all -- I guess judges must make their own laws for us to follow.
I am surprised the judge did not allow the lawyers to go after the truck manufacturer as well. Or the shipper who hired the 3PL who chose the trucker. Or the customer who ordered the product from the shipper who hired the 3PL who chose the trucker.
Judge Motz's activist stance is a logical extension of the idea that it's OK to get money from anyone, even if they are not directly related to the issue creating the loss. Remember the McDonald's coffee cup? If no law existed, the judge should have thrown the case back to the regulating bodies instead of making his own law.
And it gets even worse. The judge also found, incredibly, that brokers and 3PLs are responsible for safety checks for any trucker they hire, if there is no existing DOT certificate. And, the 3PL has to check every transaction (shipment) with the FMCSA Safestat database -- as if that's up to date. The 3PL involved in Schramm v. Foster runs with more than 20,000 carriers and conducts millions of transactions each year. Get out your overalls and creeper.
If this decision stands, it will create an unjust liability that will impact the use of outsourced logistics providers. This case sets a precedent where anyone in the transportation chain is liable for damages created by anyone else in the chain. Don't think trial lawyers won't jump all over this. Thanks, Judge.
All those concerned in our industry should fight this kind of judicial activism -- redistribution of wealth and blame regardless of culpability, regardless of property rights. Don't sit there and fulminate. Do what you can now to get involved or those who sit above us all, high up on a bench, will hand down decisions that continue to damage business in America.
www.inboundlogistics.com/free
Stick to the Core When Playing Logistics IT Pong
Written April, 2005
by Keith Biondo
Publisher
Inbound Logistics Magazine
Do any of you old-timers recall the first Atari video game, Pong? It was the only video game in the world back then. You just hit a video puck back and forth, forth and back, no matter how long you played it. One reader told us that evaluating the myriad logistics IT choices sometimes feels like playing that game: Pong, this white paper; Pong, that webinar; Pong, this consultant; Pong, that sales pitch; Pong, this magazine article?
Here's a perfect example of this kind of mixed message. According to a recent Reuters article, many leading companies that invested in technology to drive lean inventory initiatives are beginning to think they've overdone it. Pong. At the same time, a major consultant published research indicating that the chief concern of large companies is to use technology to reduce inventory even further. Pong.
The business media, IT salespeople, and consultants continue to produce conflicting, competing, and sometimes contradictory messages on how best to apply logistics technology to your enterprise. As competing advice and information pongs off your forehead, remember this: the core reason for adopting logistics IT is to drive your enterprise's efficiency and effectiveness. But it requires balance.
Early adopters of inbound practices turned to technology to increase efficiency of transport sourcing. Seeking better effectiveness, many companies migrated from push to pull logistics systems, providing fundamental competitive advantages. Sell more, sell faster, sell cheaper, use time as a weapon -- all effective ways to compete. Naturally, logistics technology was needed to manage the increased number of variables and to get the real-time decision support that makes migration successful and the effort maintainable.
But, for example, overdoing IT investment to drive lean inventories for the sake of pure cost-cutting -- without company-wide demand-driven logistics practices in place -- is just another example of optimizing a function and sub-optimizing the whole. You can invest in an awful lot of technology and do more harm than good if your approach is not balanced.
As you contemplate the Pong game of competing and conflicting input, trying to decide which strategy is right for you, try not to get distracted by the biggest new thing. We continue to struggle with IT choices because the payoffs are huge. That's why investment in logistics IT keeps growing. But the risks are huge, too. That's why IT decisions, both good and bad, have such tension attached to them.
Keeping your eye on the mission of enhancing effectiveness and efficiency in a balanced way can help you avoid the Pong effect when making logistics technology choices.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Do any of you old-timers recall the first Atari video game, Pong? It was the only video game in the world back then. You just hit a video puck back and forth, forth and back, no matter how long you played it. One reader told us that evaluating the myriad logistics IT choices sometimes feels like playing that game: Pong, this white paper; Pong, that webinar; Pong, this consultant; Pong, that sales pitch; Pong, this magazine article?
Here's a perfect example of this kind of mixed message. According to a recent Reuters article, many leading companies that invested in technology to drive lean inventory initiatives are beginning to think they've overdone it. Pong. At the same time, a major consultant published research indicating that the chief concern of large companies is to use technology to reduce inventory even further. Pong.
The business media, IT salespeople, and consultants continue to produce conflicting, competing, and sometimes contradictory messages on how best to apply logistics technology to your enterprise. As competing advice and information pongs off your forehead, remember this: the core reason for adopting logistics IT is to drive your enterprise's efficiency and effectiveness. But it requires balance.
Early adopters of inbound practices turned to technology to increase efficiency of transport sourcing. Seeking better effectiveness, many companies migrated from push to pull logistics systems, providing fundamental competitive advantages. Sell more, sell faster, sell cheaper, use time as a weapon -- all effective ways to compete. Naturally, logistics technology was needed to manage the increased number of variables and to get the real-time decision support that makes migration successful and the effort maintainable.
But, for example, overdoing IT investment to drive lean inventories for the sake of pure cost-cutting -- without company-wide demand-driven logistics practices in place -- is just another example of optimizing a function and sub-optimizing the whole. You can invest in an awful lot of technology and do more harm than good if your approach is not balanced.
As you contemplate the Pong game of competing and conflicting input, trying to decide which strategy is right for you, try not to get distracted by the biggest new thing. We continue to struggle with IT choices because the payoffs are huge. That's why investment in logistics IT keeps growing. But the risks are huge, too. That's why IT decisions, both good and bad, have such tension attached to them.
Keeping your eye on the mission of enhancing effectiveness and efficiency in a balanced way can help you avoid the Pong effect when making logistics technology choices.
www.inboundlogistics.com/free
Tipping Point, Again?
Written January, 2005
By Keith Biondo
Publisher
Inbound Logistics Magazine
We are at a tipping point in terms of America's ability to compete globally. Go one way and we can expand our economic growth and leverage the trend toward globalization. Go the other and we may reach a point where others drive the well-being of our economy and workers.
And if it is now true that a sine qua non of homeland security depends upon the spread of democracy, (which we bear the cost of), our economic success gains even greater importance.
Time moves slowly, so some do not see, or agree with, the warning signs of a tipping point. Yet incremental occurrences will aggregate, reaching a point that quickly alters the course of events, like other times in our nation's history.
The new America in 1789 was an agrarian society and that's the way many Americans wanted it. "We'll let Europe be our workshop," said Thomas Jefferson when considering the direction -- industrial or pastoral -- our new country should take. (Let others be America's workshop? Does that sound familiar today?)
Others never saw it that way, and even Jefferson later changed his mind. Robert Fulton, his predecessor John Fitch, and Fulton enabler John Livingston, for example, had a vision of an America unleashed by transportation, by steam-powered boats. For more than 20 years, they used their grit to bend America to their vision -- rivers navigable in both directions, oceans made smaller by man, commerce on major rivers, the Louisiana Purchase doubling the size of the United States, and, later, westward expansion.
If we are at a point where Jefferson once was, let's recall that the work done in our workshop has given us all that we have. If diminished, what then drives our economy in the coming years? The capacity to efficiently transport goods was once fundamental to growing our nation's geographic size and economic power. But what is our capacity now to efficiently transport goods in terms of infrastructure, energy policy, mindset?
Infrastructure. We fail to invest, maintain, and grow our infrastructure to keep up with changing demands. Other countries invest billions in new planes, many U.S. air carriers fly on broken wings. Few expand globally, most are contracting here at home.
Others expand sea and airports, investing billions to position their trading ability for the future. But port improvements, highway initiatives, rail investments here? Slim.
China can lay 400 miles of superhighway seemingly overnight. Here, highway projects and improvements stall, and take years to complete at higher costs than needed. Or we spend highway trust funds on under-utilized 'light rail' ventures.
Energy policy. What energy policy? Yet energy is fundamental to the cost of every move, every touch, at every point in the supply chain. A lack of a sound energy policy impacts more than transportation. It affects our trade deficit, our ability to compete for global capital, the ability of our labor to compete globally, and more.
Mindset. A healthy, natural tension exists among players in business relationships. It is, in a natural selection way, purifying. But what of government policies that are more often obstructionist than not? Many view business as somehow divorced from those it gives sustenance to. These are anachronistic attitudes, damaging potential and limiting progress.
Do we have a collective vision of transportation and trade's importance in a post-manufacturing America? Are we aggressively pursuing the kind of education we need to lead in global trade? Are we investing in and crafting the elements that allow us to do that?
Or are we caught up in a cat's cradle of competing concerns, doing little to advance the economic interests of this nation and the people that work for the companies in it?
Without a sense of purpose, without contemporaries like Fitch, Fulton or Livingston, without a shared mission, we could soon reach a point that tips us in the wrong direction. But, we have all the elements -- the power, the capacity, the people -- to move this country in the right direction.
Which way do we go?
www.inboundlogistics.com/free
By Keith Biondo
Publisher
Inbound Logistics Magazine
We are at a tipping point in terms of America's ability to compete globally. Go one way and we can expand our economic growth and leverage the trend toward globalization. Go the other and we may reach a point where others drive the well-being of our economy and workers.
And if it is now true that a sine qua non of homeland security depends upon the spread of democracy, (which we bear the cost of), our economic success gains even greater importance.
Time moves slowly, so some do not see, or agree with, the warning signs of a tipping point. Yet incremental occurrences will aggregate, reaching a point that quickly alters the course of events, like other times in our nation's history.
The new America in 1789 was an agrarian society and that's the way many Americans wanted it. "We'll let Europe be our workshop," said Thomas Jefferson when considering the direction -- industrial or pastoral -- our new country should take. (Let others be America's workshop? Does that sound familiar today?)
Others never saw it that way, and even Jefferson later changed his mind. Robert Fulton, his predecessor John Fitch, and Fulton enabler John Livingston, for example, had a vision of an America unleashed by transportation, by steam-powered boats. For more than 20 years, they used their grit to bend America to their vision -- rivers navigable in both directions, oceans made smaller by man, commerce on major rivers, the Louisiana Purchase doubling the size of the United States, and, later, westward expansion.
If we are at a point where Jefferson once was, let's recall that the work done in our workshop has given us all that we have. If diminished, what then drives our economy in the coming years? The capacity to efficiently transport goods was once fundamental to growing our nation's geographic size and economic power. But what is our capacity now to efficiently transport goods in terms of infrastructure, energy policy, mindset?
Infrastructure. We fail to invest, maintain, and grow our infrastructure to keep up with changing demands. Other countries invest billions in new planes, many U.S. air carriers fly on broken wings. Few expand globally, most are contracting here at home.
Others expand sea and airports, investing billions to position their trading ability for the future. But port improvements, highway initiatives, rail investments here? Slim.
China can lay 400 miles of superhighway seemingly overnight. Here, highway projects and improvements stall, and take years to complete at higher costs than needed. Or we spend highway trust funds on under-utilized 'light rail' ventures.
Energy policy. What energy policy? Yet energy is fundamental to the cost of every move, every touch, at every point in the supply chain. A lack of a sound energy policy impacts more than transportation. It affects our trade deficit, our ability to compete for global capital, the ability of our labor to compete globally, and more.
Mindset. A healthy, natural tension exists among players in business relationships. It is, in a natural selection way, purifying. But what of government policies that are more often obstructionist than not? Many view business as somehow divorced from those it gives sustenance to. These are anachronistic attitudes, damaging potential and limiting progress.
Do we have a collective vision of transportation and trade's importance in a post-manufacturing America? Are we aggressively pursuing the kind of education we need to lead in global trade? Are we investing in and crafting the elements that allow us to do that?
Or are we caught up in a cat's cradle of competing concerns, doing little to advance the economic interests of this nation and the people that work for the companies in it?
Without a sense of purpose, without contemporaries like Fitch, Fulton or Livingston, without a shared mission, we could soon reach a point that tips us in the wrong direction. But, we have all the elements -- the power, the capacity, the people -- to move this country in the right direction.
Which way do we go?
www.inboundlogistics.com/free
Tuesday, June 12, 2007
Outer Limits
Written December, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
"We've reached the limit of what our grandfathers invested in infrastructure." So says one top rail executive.
If you manage supply lines originating overseas, you already know that port and intermodal capacity are sorely strained. An unexpected uptick in imports caused many to come up holding the short end of the intermodal capacity stick. Worse, options for diverting intermodal freight to over-the-road were limited. The capacity crunch there, as well.
Some might say with shadenfreud glee, "You've done your job of tagging demand to supply too well," suggesting we regress back to the days of bloated inventory in warehouses. Can these infrastructure inefficiencies destroy your ability to have true supply chain excellence?
Examples abound. The cost savings one cosmetics company gained by manufacturing in China were eaten up by airfreight charges for shipping from Los Angeles to Target and Wal-Mart. Sharp Electronics flew TV parts in from China. Toys R Us added 10 extra days to its supply chain.
It's not that we have too little inventory on hand; nor should we bulk up as a long-term strategy. It's that finely tuned transport practices expose the lack of attention paid to logistics infrastructure.
As I've said before, when the majority of manufacturing was done in the United States, the domestic transport network alone bore the load. These days, much more manufacturing is offshore and the global gateways must now shoulder this load as well. Add the growth in U.S. population and buying power, and it's no wonder that the infrastructure is sorely strained.
Whose fault is it? Can you really blame the ports? Los Angeles and Long Beach handle about 43 percent of U.S. imports, and import shipments grew 12 percent this year -- three times what was expected.
The Pacific Maritime Association (PMA) blames the longshoreman's union, accusing them of playing capacity-based politics to boost union membership. The union points to the PMA's lack of labor and use of less-skilled "casual" workers.
But playing the blame game is a dead end. For the customer, the only thing that matters is, "Get it here or else."
Demand-driven logistics works hand-in-glove with a global transportation infrastructure able to support this business model. Continued negligence and reluctance to invest will damage our hopes of effectively competing in the global economy.
Having lived through this past holiday shipping rush, many will be tempted to breath a sigh of relief, saying, "Thank goodness that's over." But unless all interested parties act now, we'll be doomed, in "Groundhog Day"-like fashion, to repeat this again next year.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
"We've reached the limit of what our grandfathers invested in infrastructure." So says one top rail executive.
If you manage supply lines originating overseas, you already know that port and intermodal capacity are sorely strained. An unexpected uptick in imports caused many to come up holding the short end of the intermodal capacity stick. Worse, options for diverting intermodal freight to over-the-road were limited. The capacity crunch there, as well.
Some might say with shadenfreud glee, "You've done your job of tagging demand to supply too well," suggesting we regress back to the days of bloated inventory in warehouses. Can these infrastructure inefficiencies destroy your ability to have true supply chain excellence?
Examples abound. The cost savings one cosmetics company gained by manufacturing in China were eaten up by airfreight charges for shipping from Los Angeles to Target and Wal-Mart. Sharp Electronics flew TV parts in from China. Toys R Us added 10 extra days to its supply chain.
It's not that we have too little inventory on hand; nor should we bulk up as a long-term strategy. It's that finely tuned transport practices expose the lack of attention paid to logistics infrastructure.
As I've said before, when the majority of manufacturing was done in the United States, the domestic transport network alone bore the load. These days, much more manufacturing is offshore and the global gateways must now shoulder this load as well. Add the growth in U.S. population and buying power, and it's no wonder that the infrastructure is sorely strained.
Whose fault is it? Can you really blame the ports? Los Angeles and Long Beach handle about 43 percent of U.S. imports, and import shipments grew 12 percent this year -- three times what was expected.
The Pacific Maritime Association (PMA) blames the longshoreman's union, accusing them of playing capacity-based politics to boost union membership. The union points to the PMA's lack of labor and use of less-skilled "casual" workers.
But playing the blame game is a dead end. For the customer, the only thing that matters is, "Get it here or else."
Demand-driven logistics works hand-in-glove with a global transportation infrastructure able to support this business model. Continued negligence and reluctance to invest will damage our hopes of effectively competing in the global economy.
Having lived through this past holiday shipping rush, many will be tempted to breath a sigh of relief, saying, "Thank goodness that's over." But unless all interested parties act now, we'll be doomed, in "Groundhog Day"-like fashion, to repeat this again next year.
www.inboundlogistics.com/free
The Question? Globalization. The Answer? SCM
Written October, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
Mention globalization to a group of Inbound Logistics readers and be prepared to get an earful, as we did at a recent logistics conference.
Globalization challenges vary based on company, trading partners, and markets, but many readers share key areas of convergent concern. Their top three globalization issues are:
China. Capacity and infrastructure issues top the list here, with readers citing port capacity at Shanghai and air cargo lift out of other areas.
In addition, the long-term availability of IT and logistics infrastructure – including skilled mainland logistics partners and a good middle-management labor pool able to administrate complex supply chain and visibility strategies – have many logistics practitioners concerned.
Business continuity, especially as it relates to international lines of supply and ocean transportation. Container security poses a real threat, both in terms of the exposure to catastrophe, and the concomitant business and trade disruption. Compliance, securing long lines of supply, and related information security drives many companies to increase investment in inventory or risk losing sales.
Global partners/alliances. When changing sources, expanding into new markets, or embarking on a program of business continuity risk management, going it alone is sometimes not the best route. The rapidly changing logistics landscape drives many to rely more than ever on forwarders, 3PLs, and transportation partners.
One important and growing practice to help deal with globalization challenges – especially to those who practice inbound logistics – is pre-distribution at the point of origin, or offshore consolidation, which takes control of material sourcing further up in the supply chain.
According to industry experts, a greater percentage of product is being controlled closer to the point of origin than three years ago, and this practice is expected to grow continually over the next few years.
This strategy helps companies in several key areas: business continuity issues such as infrastructure constraints at the point of origin; the efficient purchase of ocean and air transport services; and aligning logistics processes toward demand signals from customers. It also helps with infrastructure issues at destination ports, and with destination intermodal and/or trucking capacity issues.
When offshore consolidation techniques are used, product gets to the North American market and is distributed seamlessly, resulting in less capacity strain on the destination infrastructure.
This is especially beneficial for logistics professionals who have spent the last few years reducing logistics infrastructure to modernize, cut costs, or speed and reduce inventory, but whose growth has remained constant. The last thing they want to do is rebuild destination infrastructure.
Practicing inbound logistics by consolidating or pre-distributing offshore is one way to keep product flow moving quickly without adding destination warehouses and inventory.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Mention globalization to a group of Inbound Logistics readers and be prepared to get an earful, as we did at a recent logistics conference.
Globalization challenges vary based on company, trading partners, and markets, but many readers share key areas of convergent concern. Their top three globalization issues are:
China. Capacity and infrastructure issues top the list here, with readers citing port capacity at Shanghai and air cargo lift out of other areas.
In addition, the long-term availability of IT and logistics infrastructure – including skilled mainland logistics partners and a good middle-management labor pool able to administrate complex supply chain and visibility strategies – have many logistics practitioners concerned.
Business continuity, especially as it relates to international lines of supply and ocean transportation. Container security poses a real threat, both in terms of the exposure to catastrophe, and the concomitant business and trade disruption. Compliance, securing long lines of supply, and related information security drives many companies to increase investment in inventory or risk losing sales.
Global partners/alliances. When changing sources, expanding into new markets, or embarking on a program of business continuity risk management, going it alone is sometimes not the best route. The rapidly changing logistics landscape drives many to rely more than ever on forwarders, 3PLs, and transportation partners.
One important and growing practice to help deal with globalization challenges – especially to those who practice inbound logistics – is pre-distribution at the point of origin, or offshore consolidation, which takes control of material sourcing further up in the supply chain.
According to industry experts, a greater percentage of product is being controlled closer to the point of origin than three years ago, and this practice is expected to grow continually over the next few years.
This strategy helps companies in several key areas: business continuity issues such as infrastructure constraints at the point of origin; the efficient purchase of ocean and air transport services; and aligning logistics processes toward demand signals from customers. It also helps with infrastructure issues at destination ports, and with destination intermodal and/or trucking capacity issues.
When offshore consolidation techniques are used, product gets to the North American market and is distributed seamlessly, resulting in less capacity strain on the destination infrastructure.
This is especially beneficial for logistics professionals who have spent the last few years reducing logistics infrastructure to modernize, cut costs, or speed and reduce inventory, but whose growth has remained constant. The last thing they want to do is rebuild destination infrastructure.
Practicing inbound logistics by consolidating or pre-distributing offshore is one way to keep product flow moving quickly without adding destination warehouses and inventory.
www.inboundlogistics.com/free
Flynn's Folly
Written August, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
I am on my supply chain security rant again, but it's not my fault. Someone recommended I read a new book that is touted as "riveting, chilling and gripping" by a segment of the media. America the Vulnerable: How Our Government is Failing to Protect Us from Terrorism was written by Stephen Flynn, a retired U.S. Coast Guard Commander and senior fellow at the Council on Foreign Relations, a liberal Washington think tank.
Flynn's thesis is that the current administration is not spending enough on security at home and is "delusional" in thinking the real fight against terrorism is overseas. Flynn's solution is to spend billions building Fortress America, protecting the homeland by inspecting every person and inbound shipment, and protecting every chemical plant and sensitive manufacturing facility.
Any reader of this column knows I fall into Flynn's delusional category. Homeland defense is a binary task. To be successful, it must include prudent defensive and offensive measures. Flynn's solution is fatally flawed for two reasons: 1. he uses fuzzy math to estimate the size of the challenge and 2. it is impossible to do what he says.
First let's look at Flynn's math, specifically the scope of the homeland security challenge, in his view. Flynn says 400 million people, 122 million cars, 11 million trucks, and eight million containers come into the United States each year. He leaves out an estimated 50 million air shipments and 10 million bulk shipments. That's approximately 600 million inbound shipments each and every year --and that number is growing.
Now let's look at the practical implications of what I call HSEM or Homeland Security Event Management. We have to clear every person, search and examine every physical inbound shipment, and secure the non-U.S. facilities from whence these shipments originate, according to Flynn.
Flynn's focus is primarily on containerized cargo. Suppose we secure all that. Then, I wonder, are inbound bulk shipments magically immune to security risks? What would stop terrorists from placing something ticking in a tanker of refined petroleum product or molten sulphur? My overarching point here is that nailing down one homeland security risk only drives the determined to find alternative means.
Flynn unintentionally makes this point in his book, citing a 2003 study that shows how vulnerable we are to an anthrax attack from a tall building in a large city. Just two pounds of anthrax can cause 120,000 deaths. So if only 32 of Flynn's 400 million inbound people smuggle one ounce of anthrax, pool their resources in a big city and take an elevator, game over. Lots of time and effort spent looking in some places, but not in all places, to no avail. Too bad I've run out of room before I can show you the rest of Flynn's bad math and what his proposals will cost.
Taking the fight to the terrorist is a messy, dirty, and politically risky venture but it is not delusional. It is the most important element in the binary approach to homeland defense.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
I am on my supply chain security rant again, but it's not my fault. Someone recommended I read a new book that is touted as "riveting, chilling and gripping" by a segment of the media. America the Vulnerable: How Our Government is Failing to Protect Us from Terrorism was written by Stephen Flynn, a retired U.S. Coast Guard Commander and senior fellow at the Council on Foreign Relations, a liberal Washington think tank.
Flynn's thesis is that the current administration is not spending enough on security at home and is "delusional" in thinking the real fight against terrorism is overseas. Flynn's solution is to spend billions building Fortress America, protecting the homeland by inspecting every person and inbound shipment, and protecting every chemical plant and sensitive manufacturing facility.
Any reader of this column knows I fall into Flynn's delusional category. Homeland defense is a binary task. To be successful, it must include prudent defensive and offensive measures. Flynn's solution is fatally flawed for two reasons: 1. he uses fuzzy math to estimate the size of the challenge and 2. it is impossible to do what he says.
First let's look at Flynn's math, specifically the scope of the homeland security challenge, in his view. Flynn says 400 million people, 122 million cars, 11 million trucks, and eight million containers come into the United States each year. He leaves out an estimated 50 million air shipments and 10 million bulk shipments. That's approximately 600 million inbound shipments each and every year --and that number is growing.
Now let's look at the practical implications of what I call HSEM or Homeland Security Event Management. We have to clear every person, search and examine every physical inbound shipment, and secure the non-U.S. facilities from whence these shipments originate, according to Flynn.
Flynn's focus is primarily on containerized cargo. Suppose we secure all that. Then, I wonder, are inbound bulk shipments magically immune to security risks? What would stop terrorists from placing something ticking in a tanker of refined petroleum product or molten sulphur? My overarching point here is that nailing down one homeland security risk only drives the determined to find alternative means.
Flynn unintentionally makes this point in his book, citing a 2003 study that shows how vulnerable we are to an anthrax attack from a tall building in a large city. Just two pounds of anthrax can cause 120,000 deaths. So if only 32 of Flynn's 400 million inbound people smuggle one ounce of anthrax, pool their resources in a big city and take an elevator, game over. Lots of time and effort spent looking in some places, but not in all places, to no avail. Too bad I've run out of room before I can show you the rest of Flynn's bad math and what his proposals will cost.
Taking the fight to the terrorist is a messy, dirty, and politically risky venture but it is not delusional. It is the most important element in the binary approach to homeland defense.
www.inboundlogistics.com/free
Traveling the 3PL Continuum
Written July, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
Grab your Star Trek mug and take another look at this magazine's cover. Then come back because I want to talk to you about parallel 3PL continuums.
Yikes! Back? What did you see? Don't worry, the cover is not a Rorschachian intrusion into your childhood. Rather it is meant to represent the continuing evolution -- from infancy to maturation --of an important segment of the transportation industry, third-party logistics.
In the past decade, the contribution of 3PLs to logistics practice has grown. One way to understand this contribution is to think of it in terms of a continuum.
Two important 3PL continuums are the growth continuum and the progressive continuum. The growth continuum includes the increased usage of 3PLs and growth in 3PL market size (revenue).
The most important step on this continuum is the growth in the number of companies using 3PLs and why that trend occurs. Economic growth, the increasing acceptance of demand-driven logistics practices (SCM), global sourcing, and customer demands for visibility create logistics complexities that drive more business logistics practitioners to turn to 3PLs for help.
In the parallel, progressive 3PL continuum, 3PL customers progress from tactical solutions to enterprise-impacting strategic solutions.
In the feature article on page 93 -- From Tactical to Strategic: The 3PL Continuum -- you'll see a 3PL partnership moving from the transactional, pallet-in/pallet out, to the holistic -- helping to design a lean manufacturing system. The article illustrates how customers and their 3PL partners move along the progressive continuum, going from tactical to holistic impact on the enterprise.
Why does this macro view matter? Because, like with most things in transportation and logistics, you have to know where you are to know where you are headed and understand how to get there.
There's another reason -- many observers look at revenue alone when examining the outsourced logistics segment. This reference point is flawed for a couple of reasons.*
Our abstract, continuum approach sheds new light on the 3PL phenomenon and may help you understand how a 3PL might serve your needs in deeper or different ways.
We hope this annual 3PL issue offers you some guideposts as you travel along your own logistics continuum.
* Space does not allow here but if you email me: publisher@inboundlogistics.com, I will give you my take on this.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Grab your Star Trek mug and take another look at this magazine's cover. Then come back because I want to talk to you about parallel 3PL continuums.
Yikes! Back? What did you see? Don't worry, the cover is not a Rorschachian intrusion into your childhood. Rather it is meant to represent the continuing evolution -- from infancy to maturation --of an important segment of the transportation industry, third-party logistics.
In the past decade, the contribution of 3PLs to logistics practice has grown. One way to understand this contribution is to think of it in terms of a continuum.
Two important 3PL continuums are the growth continuum and the progressive continuum. The growth continuum includes the increased usage of 3PLs and growth in 3PL market size (revenue).
The most important step on this continuum is the growth in the number of companies using 3PLs and why that trend occurs. Economic growth, the increasing acceptance of demand-driven logistics practices (SCM), global sourcing, and customer demands for visibility create logistics complexities that drive more business logistics practitioners to turn to 3PLs for help.
In the parallel, progressive 3PL continuum, 3PL customers progress from tactical solutions to enterprise-impacting strategic solutions.
In the feature article on page 93 -- From Tactical to Strategic: The 3PL Continuum -- you'll see a 3PL partnership moving from the transactional, pallet-in/pallet out, to the holistic -- helping to design a lean manufacturing system. The article illustrates how customers and their 3PL partners move along the progressive continuum, going from tactical to holistic impact on the enterprise.
Why does this macro view matter? Because, like with most things in transportation and logistics, you have to know where you are to know where you are headed and understand how to get there.
There's another reason -- many observers look at revenue alone when examining the outsourced logistics segment. This reference point is flawed for a couple of reasons.*
Our abstract, continuum approach sheds new light on the 3PL phenomenon and may help you understand how a 3PL might serve your needs in deeper or different ways.
We hope this annual 3PL issue offers you some guideposts as you travel along your own logistics continuum.
* Space does not allow here but if you email me: publisher@inboundlogistics.com, I will give you my take on this.
www.inboundlogistics.com/free
Someone is After Your Job...
Written May, 2004
By Keith Biondo,
Publisher
Inbound Logistics Magazine
And they want it to relocate it -- no, not to Mumbai or China, but right here in the United States. Cities, states, and regions are increasingly competing to attract logistics and transportation jobs.
Why? Because U.S. manufacturing jobs, and more recently, service sector jobs, continue to migrate to lower wage, lower tax, lower liability, lower regulation locations in China, India, and elsewhere. That movement seems to be inexorable. How we deal with it is another question.
With other jobs disappearing, competition for the remaining careers is stiff. That's why economic development personnel are considering transportation and logistics even more important to their success now than it has been in past years.
Logistics jobs are important to economic development for several reasons, some positive and some negative.
First, the negatives:
* An accelerated loss of manufacturing jobs to overseas locations. The job loss is augmented by the newer trend of medium- and lower-skilled service sector jobs in key industry segments being outsourced to overseas centers that offer good education and technology infrastructure. Policy-makers must come to terms with at best a static, and in some cases a shrinking, pool of job creation opportunities.
* Immigration trends and domestic educational gaps indicate continued long-term growth of medium- and lower-skilled worker numbers. Policy-makers must deal with this increased workforce, along with the existing workforce, given the challenges noted above.
And the positives:
* Domestic population growth steadily increases demand for products that need to be transported. Many of these products are, and will remain, recession-proof.
* Domestic and international infrastructure strains and security challenges require more transport management personnel to keep product flow constant and safe.
* The complexities of new business practices that recognize the efficiencies of supply chain management (inbound logistics) require more transportation and logistics personnel to drive end-to-end logistics policy strategies and operational changes.
Naturally when the U.S. economy weakens, all sectors suffer to varying degrees. But the value of the logistics market for job creation and economic development is that it is partially immune to the stress factors of other economic sectors. In fact, it is tied to some negative trends in an inverse way.
Why? Because no matter where the product is manufactured, as long as the United States remains the number-one market in the world, product will have to be transported here. That transportation, logistics and supply chain challenge will have to be executed and administered.
The acceptance of demand-driven logistics practices argues for administration personnel to be located close to the market, the demand point, here in the United States. As a result, logistics becomes more and more important in terms of overall economic development activities in our domestic economy.
Beyond that, U.S. transportation and logistics practitioners are widely regarded as the best. Transferring that management skill and experience to offshore workers will be difficult to do quickly, if ever.
Today, logistics in the United States contributes 11 percent to our Gross Domestic Product, and it is expected to grow by 70 percent between now and 2020, according to the U.S. Department of Transportation.
Both an opportunity and a challenge appear to be emerging, which policymakers at the federal, state, and local levels will need to address in the coming months and years. All should act to strengthen and encourage this industry, not tax, regulate, and regard it as one more area of social engineering or wealth transfer scheme by spending funds promised for infrastructure maintenance and improvement on pork and the social safety net.
For their part, state and local governments, as the branches of government closest to the people and to the business community, have begun to respond in a variety of ways. One is flirting with "trickle down" economic ideas by cutting taxes and offering other incentives.
Here's an example that illustrates the importance of the tax issue. Fifteen states -- Alaska, Arkansas, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Ohio, Oklahoma, Rhode Island, Tennessee, Texas, Vermont, Virginia, West Virginia -- currently tax inventory located there. In each state there are proposals to repeal those taxes.
Why, in an era of federal, state, and local government deficits, are policymakers considering repealing taxes? It's about jobs. It's about attracting business. Would cutting taxes actually mean you may need a smaller social safety net? Someone once called that "voodoo economics."
Another interesting idea, which emerged from the Maryland Department of Transportation, is the creation of an Office of Freight Logistics. "Freight is a major economic driver in Maryland, but moving it involves a complex network of private and public sector entities that must be better coordinated," says Robert L. Flanagan, secretary, Maryland Department of Transportation. We agree.
The Office of Freight Logistics will serve as the central location to facilitate interaction between Maryland's various transportation agencies and the private sector logistics community, including maximizing of logistics- related business opportunities. We really agree.
"Maximizing of logistics-related business opportunities" really means they want more logistics, transportation and supply chain jobs in their state. Maryland has taken an important step in recognizing that logistics jobs can significantly contribute to its economic development. Others should follow.
www.inboundlogistics.com/free
By Keith Biondo,
Publisher
Inbound Logistics Magazine
And they want it to relocate it -- no, not to Mumbai or China, but right here in the United States. Cities, states, and regions are increasingly competing to attract logistics and transportation jobs.
Why? Because U.S. manufacturing jobs, and more recently, service sector jobs, continue to migrate to lower wage, lower tax, lower liability, lower regulation locations in China, India, and elsewhere. That movement seems to be inexorable. How we deal with it is another question.
With other jobs disappearing, competition for the remaining careers is stiff. That's why economic development personnel are considering transportation and logistics even more important to their success now than it has been in past years.
Logistics jobs are important to economic development for several reasons, some positive and some negative.
First, the negatives:
* An accelerated loss of manufacturing jobs to overseas locations. The job loss is augmented by the newer trend of medium- and lower-skilled service sector jobs in key industry segments being outsourced to overseas centers that offer good education and technology infrastructure. Policy-makers must come to terms with at best a static, and in some cases a shrinking, pool of job creation opportunities.
* Immigration trends and domestic educational gaps indicate continued long-term growth of medium- and lower-skilled worker numbers. Policy-makers must deal with this increased workforce, along with the existing workforce, given the challenges noted above.
And the positives:
* Domestic population growth steadily increases demand for products that need to be transported. Many of these products are, and will remain, recession-proof.
* Domestic and international infrastructure strains and security challenges require more transport management personnel to keep product flow constant and safe.
* The complexities of new business practices that recognize the efficiencies of supply chain management (inbound logistics) require more transportation and logistics personnel to drive end-to-end logistics policy strategies and operational changes.
Naturally when the U.S. economy weakens, all sectors suffer to varying degrees. But the value of the logistics market for job creation and economic development is that it is partially immune to the stress factors of other economic sectors. In fact, it is tied to some negative trends in an inverse way.
Why? Because no matter where the product is manufactured, as long as the United States remains the number-one market in the world, product will have to be transported here. That transportation, logistics and supply chain challenge will have to be executed and administered.
The acceptance of demand-driven logistics practices argues for administration personnel to be located close to the market, the demand point, here in the United States. As a result, logistics becomes more and more important in terms of overall economic development activities in our domestic economy.
Beyond that, U.S. transportation and logistics practitioners are widely regarded as the best. Transferring that management skill and experience to offshore workers will be difficult to do quickly, if ever.
Today, logistics in the United States contributes 11 percent to our Gross Domestic Product, and it is expected to grow by 70 percent between now and 2020, according to the U.S. Department of Transportation.
Both an opportunity and a challenge appear to be emerging, which policymakers at the federal, state, and local levels will need to address in the coming months and years. All should act to strengthen and encourage this industry, not tax, regulate, and regard it as one more area of social engineering or wealth transfer scheme by spending funds promised for infrastructure maintenance and improvement on pork and the social safety net.
For their part, state and local governments, as the branches of government closest to the people and to the business community, have begun to respond in a variety of ways. One is flirting with "trickle down" economic ideas by cutting taxes and offering other incentives.
Here's an example that illustrates the importance of the tax issue. Fifteen states -- Alaska, Arkansas, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Ohio, Oklahoma, Rhode Island, Tennessee, Texas, Vermont, Virginia, West Virginia -- currently tax inventory located there. In each state there are proposals to repeal those taxes.
Why, in an era of federal, state, and local government deficits, are policymakers considering repealing taxes? It's about jobs. It's about attracting business. Would cutting taxes actually mean you may need a smaller social safety net? Someone once called that "voodoo economics."
Another interesting idea, which emerged from the Maryland Department of Transportation, is the creation of an Office of Freight Logistics. "Freight is a major economic driver in Maryland, but moving it involves a complex network of private and public sector entities that must be better coordinated," says Robert L. Flanagan, secretary, Maryland Department of Transportation. We agree.
The Office of Freight Logistics will serve as the central location to facilitate interaction between Maryland's various transportation agencies and the private sector logistics community, including maximizing of logistics- related business opportunities. We really agree.
"Maximizing of logistics-related business opportunities" really means they want more logistics, transportation and supply chain jobs in their state. Maryland has taken an important step in recognizing that logistics jobs can significantly contribute to its economic development. Others should follow.
www.inboundlogistics.com/free
IT Does Matter
Written April, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
Arguably the most important development impacting transportation, except for the invention of the wheel, has been the application of information technology. Yes, I know, the nationwide rail network, the excellent interstate highway system, the containerization concept, the Panama Canal ...
But the reason I think logistics IT is preeminently important is because it impacts everyone in the demand/supply chain without regard to transportation purchasing patterns or size of shipper or consignee.
Yet a debate about the value of IT investment has been raging for the past year. The spark igniting the controversy was a May 2003 Harvard Business Review article, IT Doesn't Matter, by business theory iconoclast Nicholas Carr. The title is sensational but Carr makes a compelling case that information technology has matured to the point where it no longer gives companies significant competitive advantage. Arguments like this, especially when made in an economic downturn, give solace to those in management looking for reasons -- any reasons -- to curtail investment.
Among the management experts taking the opposite position are Howard Smith and Peter Fingar. Their book, IT Doesn't Matter, Business Processes Do, presents a well-thought-out, analytical and intellectual rebuttal to Carr's claim. Smith and Fingar divide IT into three stages: IT infrastructure (web tone, for example), business automation (such as data processing, reporting, standardization), and business process management. IT does matter in the last area because it is a business process enabler, say Smith and Fingar.
I'm no intellectual, although I did drive by Harvard once. But I know Carr is wrong for a reason related to business process enablement. I know it because I've witnessed the experience of many readers applying IT to transportation, logistics and demand/supply chain management.
Consider that a lot of business activity occurs outside the Fortune 1000. Larger companies may be further along the continuum where IT's impact is commoditized, offering less differentiation and competitive advantage. But many smaller companies are entering the IT enablement stage now. Until recently, the transportation/logistics function didn't get the IT resources, and some would argue, respect, to reach the enablement stage. This was even the case in some Fortune 1000 companies.
How many in our industry have moved past IT's ability to process supply chain data and have real-time transportation, logistics and supply/demand chain decision support? How many have a dashboard on their desktop allowing them to drive the business process to best advantage? Not many today, but it is coming. That IT-driven ability does matter and as barriers to entry continue to fall, it will matter more.
Inbound Logistics believes IT does matter. So does business process. That's why we produce the annual Logistics IT issue. You'll find solutions that bring IT and business process into alignment, giving you significant competitive advantage.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Arguably the most important development impacting transportation, except for the invention of the wheel, has been the application of information technology. Yes, I know, the nationwide rail network, the excellent interstate highway system, the containerization concept, the Panama Canal ...
But the reason I think logistics IT is preeminently important is because it impacts everyone in the demand/supply chain without regard to transportation purchasing patterns or size of shipper or consignee.
Yet a debate about the value of IT investment has been raging for the past year. The spark igniting the controversy was a May 2003 Harvard Business Review article, IT Doesn't Matter, by business theory iconoclast Nicholas Carr. The title is sensational but Carr makes a compelling case that information technology has matured to the point where it no longer gives companies significant competitive advantage. Arguments like this, especially when made in an economic downturn, give solace to those in management looking for reasons -- any reasons -- to curtail investment.
Among the management experts taking the opposite position are Howard Smith and Peter Fingar. Their book, IT Doesn't Matter, Business Processes Do, presents a well-thought-out, analytical and intellectual rebuttal to Carr's claim. Smith and Fingar divide IT into three stages: IT infrastructure (web tone, for example), business automation (such as data processing, reporting, standardization), and business process management. IT does matter in the last area because it is a business process enabler, say Smith and Fingar.
I'm no intellectual, although I did drive by Harvard once. But I know Carr is wrong for a reason related to business process enablement. I know it because I've witnessed the experience of many readers applying IT to transportation, logistics and demand/supply chain management.
Consider that a lot of business activity occurs outside the Fortune 1000. Larger companies may be further along the continuum where IT's impact is commoditized, offering less differentiation and competitive advantage. But many smaller companies are entering the IT enablement stage now. Until recently, the transportation/logistics function didn't get the IT resources, and some would argue, respect, to reach the enablement stage. This was even the case in some Fortune 1000 companies.
How many in our industry have moved past IT's ability to process supply chain data and have real-time transportation, logistics and supply/demand chain decision support? How many have a dashboard on their desktop allowing them to drive the business process to best advantage? Not many today, but it is coming. That IT-driven ability does matter and as barriers to entry continue to fall, it will matter more.
Inbound Logistics believes IT does matter. So does business process. That's why we produce the annual Logistics IT issue. You'll find solutions that bring IT and business process into alignment, giving you significant competitive advantage.
www.inboundlogistics.com/free
The Politics of Fear
Written March, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
Media-amplified hysteria and politicization of homeland security in certain circles may be driving security policies toward unreality. Some believe that the only way to protect good people from bad people is to lock down the good people instead of aggressively sanctioning the bad.
Are we over-emphasizing security at the expense of interdiction in the war on terror? If so, are policy-makers setting unrealistic expectations of total protection with a paper-based approach to homeland security?
Interesting questions, considering their impact on global trade and transportation and, more importantly, the safety of our people.
Just lend an ear to the mainstream media in this election year and you might guess that most policymakers believe that the only prudent course is to secure boats, planes, trains, and everything they carry. It's Fortress America, with all of us under various levels of lockdown, and at the same time making it politically unpopular to address the other side of the equation -- interdiction and using the Patriot Act and the military to sanction those who would put us in a post-9/11 prison.
But you can lend an ear to other voices, such as Kenneth Button, director of the Center for Transportation Policy at George Mason University, Va. The post-911 scramble to inject security into the U.S. supply chain has not been undertaken in a rational manner, according to Button. And, much of the current security spending is out of line with the threat, he says. Among the problems facing the rational distribution of security resources is the fact that multiple jurisdictions are involved, both domestic and international, private and public.
Supply chain complexity and difficulty in determining the best way to allocate security resources makes it difficult to achieve proper levels of security coverage, Button says. "We're not getting a rational look at security in the United States right now," he notes, adding that security planners are, in many cases, "running around like headless chickens."
There is also no way to measure the effectiveness of security regimes, Button says. A lack of attack, for instance, could mean prevention or simply an absence of attacks. Button warns that because of the many uncertainties, it is important to consider not just prevention, but containment and remediation should things go wrong. Professor Button made his comments at a recent seminar in Singapore.
It is a dangerous world. We must continue to work hard to achieve the important goals of being partners in homeland security. But we must also not shrink from the costly and painful tasks of interdicting those who would destroy us and our economy. One without the other will fail.
The alternative is to lock down the good guys, and likely fail at complete security in the process, stalling one important economic engine needed to build societies that create opportunities instead of terrorists.
Regulations striking at the core of global commerce and transportation are being framed in this environment. Interested? Get your voice heard, and, of course, vote.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Media-amplified hysteria and politicization of homeland security in certain circles may be driving security policies toward unreality. Some believe that the only way to protect good people from bad people is to lock down the good people instead of aggressively sanctioning the bad.
Are we over-emphasizing security at the expense of interdiction in the war on terror? If so, are policy-makers setting unrealistic expectations of total protection with a paper-based approach to homeland security?
Interesting questions, considering their impact on global trade and transportation and, more importantly, the safety of our people.
Just lend an ear to the mainstream media in this election year and you might guess that most policymakers believe that the only prudent course is to secure boats, planes, trains, and everything they carry. It's Fortress America, with all of us under various levels of lockdown, and at the same time making it politically unpopular to address the other side of the equation -- interdiction and using the Patriot Act and the military to sanction those who would put us in a post-9/11 prison.
But you can lend an ear to other voices, such as Kenneth Button, director of the Center for Transportation Policy at George Mason University, Va. The post-911 scramble to inject security into the U.S. supply chain has not been undertaken in a rational manner, according to Button. And, much of the current security spending is out of line with the threat, he says. Among the problems facing the rational distribution of security resources is the fact that multiple jurisdictions are involved, both domestic and international, private and public.
Supply chain complexity and difficulty in determining the best way to allocate security resources makes it difficult to achieve proper levels of security coverage, Button says. "We're not getting a rational look at security in the United States right now," he notes, adding that security planners are, in many cases, "running around like headless chickens."
There is also no way to measure the effectiveness of security regimes, Button says. A lack of attack, for instance, could mean prevention or simply an absence of attacks. Button warns that because of the many uncertainties, it is important to consider not just prevention, but containment and remediation should things go wrong. Professor Button made his comments at a recent seminar in Singapore.
It is a dangerous world. We must continue to work hard to achieve the important goals of being partners in homeland security. But we must also not shrink from the costly and painful tasks of interdicting those who would destroy us and our economy. One without the other will fail.
The alternative is to lock down the good guys, and likely fail at complete security in the process, stalling one important economic engine needed to build societies that create opportunities instead of terrorists.
Regulations striking at the core of global commerce and transportation are being framed in this environment. Interested? Get your voice heard, and, of course, vote.
www.inboundlogistics.com/free
Scale-Ability
Written January, 2004
by Keith Biondo
Publisher
Inbound Logistics Magazine
Can being proficient in supply chain practices position you to benefit when the economy picks up and your sales take off?
Matching demand signals to your supply line will help you save money, but it's only half the story. It is a very big half, considering our never-ending quest to be cost effective or to speed and reduce inventory and its supporting infrastructure, or to reduce the costs associated with stockouts and inventory misallocations.
We tend to focus on the benefits of supply chain management when the economic situation is not good. We should also focus on supply chain management when the economic situation is good and getting better. No business can afford to leave money on the table due to lost sales because product throughput can't keep up with increasing demand. Practicing demand-driven logistics gives you the scalability you need to ramp up your pipeline flow supporting increased sales without melting down your network.
Thinking about logistics scalability is a relevant concern, considering last month's reports from the Institute for Supply Management. ISM found that new manufacturing orders rose in December at the fastest rate in more than 50 years. On the non-manufacturing side, ISM reports "non-manufacturing business activity increased for the ninth consecutive month in December."
"The strength in December's data provides significant encouragement for prospects in the first quarter of 2004," says Norbert Ore, ISM's survey committee chairman. Let's hope he is correct. And if he is, and if your logistics network is demand driven, then you stand a better chance of maximizing your business benefit if/when demand for your product increases quickly and/or exponentially.
One example of supply chain scalability can be found in the Family Dollar Stores. For a while there, Family Dollar was growing at the rate of 500 to 600 new stores each year. With its old network, inbound transportation was decentralized, leading to problems in matching demand to supply, according to Jim Burns, vice president of transportation.
After centralizing the inbound logistics function, cost savings were achieved. But, at least for Family Dollar, more importantly, flexibility and scalability was achieved, enabling it to support continued growth.
Another retailer, AutoZone, achieved similar results. During the past five years, AutoZone's retail network grew exponentially, so fast, in fact, it would have stressed most logistics operations to the breaking point. Scalability to support this growth was achieved by going outside to leverage a 3PL's network, better matching increased demand to supply lines.
Wholesalers and distributors can do it, too. MRO wholesaler W.W. Grainger has ambitious growth plans. Grainger's goals for 2004 and beyond include "aggressively targeting growth," says Chairman and Chief Executive Officer Richard L. Keyser.
To support this aggressive growth, Keyser details some of the planned infrastructure investments for 2004, which include implementing an advanced logistics project. As part of that project Grainger will accelerate completion of its ERP platform, enhancing logistics IT systems to provide visibility needed to match growing demand to supply.
The investment Grainger is making provides the IT backbone and information flexibility garnering logistics scalability. Result? Aggressive growth is possible without logistics meltdown.
Effectively leveraging a logistics IT system works for manufacturers, too. Technuity, which manufactures computer backup power systems, optimized linkage of sales signals to product supply in preparation for its high-volume holiday season. Technuity typically accommodates a 40-percent increase in volume for sourcing, packaging, and distribution for its top retail customers.
Technuity's experience gives us some insight into how supply chain excellence can, given the open-ended scalability unimaginable before those practices were implemented, prove that a rapid 40-percent increase in product throughput across a product line 3,100 strong is doable -- because they did it.
You can do it, too.
www.inboundlogistics.com/free
by Keith Biondo
Publisher
Inbound Logistics Magazine
Can being proficient in supply chain practices position you to benefit when the economy picks up and your sales take off?
Matching demand signals to your supply line will help you save money, but it's only half the story. It is a very big half, considering our never-ending quest to be cost effective or to speed and reduce inventory and its supporting infrastructure, or to reduce the costs associated with stockouts and inventory misallocations.
We tend to focus on the benefits of supply chain management when the economic situation is not good. We should also focus on supply chain management when the economic situation is good and getting better. No business can afford to leave money on the table due to lost sales because product throughput can't keep up with increasing demand. Practicing demand-driven logistics gives you the scalability you need to ramp up your pipeline flow supporting increased sales without melting down your network.
Thinking about logistics scalability is a relevant concern, considering last month's reports from the Institute for Supply Management. ISM found that new manufacturing orders rose in December at the fastest rate in more than 50 years. On the non-manufacturing side, ISM reports "non-manufacturing business activity increased for the ninth consecutive month in December."
"The strength in December's data provides significant encouragement for prospects in the first quarter of 2004," says Norbert Ore, ISM's survey committee chairman. Let's hope he is correct. And if he is, and if your logistics network is demand driven, then you stand a better chance of maximizing your business benefit if/when demand for your product increases quickly and/or exponentially.
One example of supply chain scalability can be found in the Family Dollar Stores. For a while there, Family Dollar was growing at the rate of 500 to 600 new stores each year. With its old network, inbound transportation was decentralized, leading to problems in matching demand to supply, according to Jim Burns, vice president of transportation.
After centralizing the inbound logistics function, cost savings were achieved. But, at least for Family Dollar, more importantly, flexibility and scalability was achieved, enabling it to support continued growth.
Another retailer, AutoZone, achieved similar results. During the past five years, AutoZone's retail network grew exponentially, so fast, in fact, it would have stressed most logistics operations to the breaking point. Scalability to support this growth was achieved by going outside to leverage a 3PL's network, better matching increased demand to supply lines.
Wholesalers and distributors can do it, too. MRO wholesaler W.W. Grainger has ambitious growth plans. Grainger's goals for 2004 and beyond include "aggressively targeting growth," says Chairman and Chief Executive Officer Richard L. Keyser.
To support this aggressive growth, Keyser details some of the planned infrastructure investments for 2004, which include implementing an advanced logistics project. As part of that project Grainger will accelerate completion of its ERP platform, enhancing logistics IT systems to provide visibility needed to match growing demand to supply.
The investment Grainger is making provides the IT backbone and information flexibility garnering logistics scalability. Result? Aggressive growth is possible without logistics meltdown.
Effectively leveraging a logistics IT system works for manufacturers, too. Technuity, which manufactures computer backup power systems, optimized linkage of sales signals to product supply in preparation for its high-volume holiday season. Technuity typically accommodates a 40-percent increase in volume for sourcing, packaging, and distribution for its top retail customers.
Technuity's experience gives us some insight into how supply chain excellence can, given the open-ended scalability unimaginable before those practices were implemented, prove that a rapid 40-percent increase in product throughput across a product line 3,100 strong is doable -- because they did it.
You can do it, too.
www.inboundlogistics.com/free
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