May 13th, 2013 by Julian Blumenthal
I recently heard a presentation at a joint Chicagoland Chamber of Commerce- Chicago Roundtable CSCMP by Andrea Farris, Vice President of Inventory and In Stock at Walgreens and Dan Smolensky, Principle at the Modal Group. The Modal Group is a commercial real estate companuy in Chicago.
Both speakers said the e-commerce has changed the supply chain, logistics and warehouse markets. Consumer’s value prompt delivery. In the past it was about getting of truckloads of products to stores. That is still true. But now individual item (SKU) is also needed to be picked at a warehouse to serve e-commence customers. To be effective in this, more warehouses or distribution centers are needed to serve the market effectively to meet the needs of the e-commerce business.
The implications to this is when you are designing your logistics processes. Lets use the issue warehouse locations planning to illustrate this.
If you have fixed assets like stores you are shipping to you can design a distribution process for them that might functional for the longer term. Multi-year leases for warehousing are less costly per year but limits your flexibility, but may be the most cost effective in that situation. Where a firm needs flexibility such as e-commerce, limited term leases for warehouses and distribution would be appropriate. Not only will customer needs change frequently but technology would be quickly changing too.
Designing your logistics system to allow flexibility where it is needed is the key. It is a way to handle the volatility of the marketplace.
May 3rd, 2013 by Julian Blumenthal
I recently attended an export seminar on electrical equipment at the Industrial Council of Nearwest Chicago (ICNC). It is an organization to promote small businesses, particularly manufacturers and distributors in some industrial buildings west of the Loop, Chicago downtown area. While the “1871″ gets out the headlines as the virtual business generator in the Merchandise Mart, it is not the only way to grow a business and employment in the Chicago area.
At the seminar, John Allen of Product Safety Consulting and Margie Heffernan of Cretors talked about the electrical safety standards custom officials in foreign countries demand which includes many certificates of safety by established testing groups. Some people relatives new to the business were surprise to learn about the export requirements. One asked doesn’t the 3PL do this?
The short answer is no but they can help. Those new to international logistics and shipping start off with an assumption they don’t know they are even making that shipping goods internationally is like shipping goods from Illinois to Iowa. Both exporting and importing requires one doing one’s homework to understand what the rules are for shipping your particular goods across the border. In the case of electrical goods, a US based safety certification like from Underwriters Laboratories (UL) may not fly in a foreign country, they may need local certification. If you ship to that country, your goods will be stopped at the border and never get to the intended consignee if local country rules are not met. Your 3PL may have enough knowledge to tell you what the requirements are but your firm will need to do the actual activities required.
The real important upside in doing your homework is your firm will smoothly get your products across the border.
Our jobs as logistics and supply chain people is to make sure the appropriate people in the organization know what is necessary to get products across the border.
April 21st, 2013 by Julian Blumenthal
I recently finished H. Edwards Deming last book, The New Economics. I thought of particular interest to Logistics / Supply Chain Managers was the discuss of common versus special variance. Two particularly interesting examples of each.
Common variance: A salesman comes into the office every day from 10 to 24 minutes late. Always a new excuse. To correct this type of variance problem a process change is necessary. The correction is rather simple, leave home earlier.That moves the center of the variance line on the graft to the left, and outcomes start moving to the on time area.
Special variance: A school child did a chart on how often the bus arrives at his home on time. Twenty points are all within 5 minutes of each other. Three points are beyond the 5 minute line caused by a bus breakdown, extreme weather, and a discipline problem. None of these problems can be handled by improving the bus schedule process, they need to be addressed individually.
Logistics / Supply Chain / Transportation managers are constantly facing difficulties and challenges in their operation. What these two variance types say that the solution to common variance issues is a process change, but some problems should be recognized as not being part of the process.
April 12th, 2013 by Julian Blumenthal
On July 1 of this year a revision of the Hours of Service (HOS) regulations will occur. The inspiration for this blog post is an article in the February 2013 DC Velocity magazine found here; http://www.dcvelocity.com/articles/20130219-bearing-down/
I have been through a number of regulatory changes. Probably none were bigger than the deregulation of trucking and rail services. The trucking regulations caused a almost wholesale change in company’s in business, with many older companies dying and new ones coming to take their place. The rail regulation change caused railroads to completely change the way they operate with many becoming much more entrepreneurial. The key though here is the ones that survived and even thrived managed their way through the changes.
The new Hours of Service changes the so called “34 Hour Restart rule” requiring at least two 1 AM to 5AM periods be covered effectively in practice extending the restart of hours by several hours. Also after 8 hours driving, the driver needs to take a 30 minute rest. These changes will decrease productivity in some studies by up to 12%. Not really, because people will manager around the changes. Drivers usage will be planned differently. Some shippers or receivers of goods will need to change dock hours to efficiently use the resource. That has been my experience.
Two factors at work is people dislike change and dislike even more one government makes a rule. But they do adjust. If the regulations go through and not stopped by a court lawsuit, two years from now the rules will be defact0 standard. And people would get up in arms if that is changed.
April 2nd, 2013 by Julian Blumenthal
Last week a Bloomburg News story came out about Wal-Mart shelves not being stocked. The story can be found here: http://bloom.bg/13s6n3v
The article contends that the are many reports of shelves of Wal-Mart being empty, primarily because there was not enough labor in the store to stock the shelves. Responded Wal-Mart spokesperson Brooke Buchanan in the article: “Our in stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country.”
Let me do some speculation here. Despite contrary opinions from the reporter reporting the stores are reporting out of stocks and the Wal-Mart spokesperson saying stocking levels I think they both right, but statistics Wal-Mart uses lead to conclusions which is beyond the scope of the data.
I remember Wal-Mart in the 1970′s and 1980′s almost literately laughing at its major competitor, K-Mart, as it improved its logistics processes and kept in shelves fill while K-Mart did not. The supply chain processes got the product into the store. With a management who understood how to staff a store the products made the leap from the back room to the shelves. However there was no real to measure getting product from the backroom of the store to the shelf. Today, RFID could do that, but it is expensive and used only on limited items by Wal-Mart. My guess the current statistics only show that the product has reached the store, not that it is on the shelf for the customer to buy. So with all the wonderful supply chain talent they have, they can argue that their stock levels are up significantly but that does not mean they are at a place the customer can buy them. You measure business by numbers, but they all have limitations and you must manage around those limitations.
I do have some knowledge how Big Box stores work. In many cases the amount of labor budgeted is based on the store sales forecast. If they are not reached, the store manager is compelled to reduce the labor budget. It can reach a point were labor is cost so much there is not enough personnel to man the cash registers, keep the store orderly, put out displays, and keep the shelves filled. If H. Edward Deming was still around, he would call sub-optimizing the system. It makes the profits look good in the short term while hurting long term sales and profits. Home Depot experienced this last decade. It allowed its competitor, Lowe’s, to experience high growth as customers switched due to poor service and missing products on the shelves of Home Depot . Once a new management came in, labor policies changed, and Home Depot resumed its growth.
March 29th, 2013 by Julian Blumenthal
The Supply Chain Quarterly features an article by MIT’s Chris Caplice on the future of transportation. It can be found here: http://bit.ly/15n91D8. The four main points of the article are:
Natural Gas will slow fuel inflation. My research based on publications I have read is that fuel cost savings on large tractor trailer, class 8 trucks is about 20%. with payback for extra cost of natural gas engines being covered in two years. As these engines become more common they will undoubtedly command less of a premium over diesel engines. Many truck lines are hesitate to spend the capital costs for natural gas engines but I believe the market will force changes particularly for local delivering sooner rather than later. Mr. Caplice wonders if this will slow to switch from truck to intermodal. I suspect that if the cost savings are there for rail, they would switch to natural gas also, than it will be slower than trucks whose capital costs are spread over many owners.
The Panama Canal expansion will not affect containers anywhere near as much as bulk sourcing. Larger bulk vessels going through the canal may create new markets for products, particularly those bulk products originating in South America
The growth of rail movements from interior China to Europe. Mr Capline points to growth of manufacturing in western China. There is infrastructure in place to ship rail from these areas, almost better than shipping within China to the congested East. This coordinator which goes through Russia will be of increasing importance.
Lastly the changes in software. Cloud computing will open new data analysis and operational functions to smaller shippers. One area of future growth will be in data visibility not so much in being able to see the data, but in making sense of the massive amount of numbers.
March 11th, 2013 by Julian Blumenthal
When one reads the logistics and supply chain magazines, blogs or social media comments, one sees many thoughts. Words like “the end of warehouses”, “preemptive distribution”, and “3D Printers” causing the demise the supply chain, keep flashing at you. By being dramatic the creators of this information hope to catch your attention. What does all this mean to the organization and its success? In supply chain, after “change” is what we do.
Supply Chain and Logistics has the word “change” imbedded in its existence. Markets change. Suppliers change. Production changes occur. There is both small change and big change. In the course of my career, industrial transportation has changed from a regulated industry to deregulated one, for cost center to a business optimization strategy, from a stand alone silo to an integral part of the supplier chain. To deal with this level of change, a solely internal focus to the organization will not work. The world of ideas can provide an approach and a context to deal with a changing world.
As managers we know that any change requires energy, time, money and commitment.There is cost efficiency one there is not constant change in the organization. So it is important to spend the time educating one self about what is going on. Yes, healthy skepticism is good. With that there is a context so you can understand the changes in the marketplace and the world. Then you will have information to determine is change is worthwhile.
PS: Will 3D printers end the supply chain? 3D printers make plastics articles from software. Jay Leno uses a 3D printer to make car parts for his extensive personal car fleet. If the technology becomes cost effective it will have its effect on simple product lines. Really, this not want supply chains in modern companies do most often anyway. The trend in products is for them to become more complex because that is what the market place is demanding. Supply chain is really part of how an organization deals with that complexity, so it is not likely to disappear any time to soon.
February 27th, 2013 by Julian Blumenthal
Dr Paul Dittman writes in the recent Supply Chain Quarterly, that logistics / supply chain must start it processes with the customer. The article is here but you may need to be a member of CSCMP to see it.
To over-simplify is his article, he says the most effective supply chains from both a service point and a cost point start with the customer. Supply chain has not only the end customer, but also internal departments customers and even the suppliers who use the supply chain. To have a successful career in this business your department and leadership must be moving other people’s career forward be they your customers, internal customers, or suppliers. To optimize the company may mean somebody’s else organization may not be optimized for the good of the whole. People will only this that change willing if they know that it will be seen in the best interests of the overall organization. When I speak of leadership is not just the titular boss, it is almost anybody on any level who interacts with the members of the supply chain.
Here is an example. Suppose the customer needs frequent deliveries. It may mean the holders of the warehouse budget may see their costs increase as it may be more economical to deliver in rail or truckload lots and hold the freight until the customer wants it. You may have to deliver with smaller lots more frequently and that adds to the transportation cost budget. Lastly the customer may end up paying more the individual shipments but may get cash and inventory savings, as well as avoiding stockouts which lose revenue and profit for the customer.
Many times it will fall on the supply chain / logistic leader to communicate the overall benefit of doing things for the organizational good. And most importantly, be the catalyst to help everyone in the organization work together to achieve a desirable end. Management support is obviously needed.
Success in a supply chain / logistics persons career in the achievements of “us” much more so than the “I”.
February 13th, 2013 by Julian Blumenthal
Paperwork, regulatory bureaucracy, freight bills, claims, accessorial charges., reports, data entry, emails and calls. For many of us that is really our day at work. If you are in the logistics field, you know inaccurate details can stop a freight shipment in its tracks like a brick wall. But more importantly, that error will take time and energy for the organization to correct. When you budget your logistics costs, many times there is an assumption in those numbers, that a certainly number of things will go wrong. That takes labor time and usually extra transportation costs to resolve.
I am a big picture type of person, but it just as important to look art the small picture. What is using your time. Is it adding value to the firm and is it just keeping things humming?
Lets take a look at one example. Is somebody spending hours reviewing every freight bill that comes your way. One tends to happen is the small errors tend to grab attention and the large cost errors are not handled. Would not you learn more, by looking at the cost totals various the anticipated costs totals on set period of time, like a week? If transportation costs are not what is expected, there is an issue worthy of your time. The individual daily reviews probably is not. Give your accounts some rules on payments, and pay the bills. Mine the data and learn.
In large the operational excellence of your organization will be based on the ability to hand the mundane in a way that adds value to your business.
February 1st, 2013 by Julian Blumenthal
Every year, Logistics / Supply Chain / Transportation Managers are asked to improve costs. Here are four ways to improve your costs. An important question a manager needs to ask oneself is do these cost reductions really help the business be successful?
1) The lease productive way to control costs is, alas, apparently the easiest, get your suppliers to cut their price to you. Most suppliers face increasing costs, so a price drop impairs their profitability. When push come to shove your account may not get the service it needs from your supplier because the profit does not warrant it.
An aside here. Studies have shown that annual bidding of domestic transportation lanes, does improve costs and service. Carrier operations change, the old lanes may not have back hauls they once did. So yearly bidding, takes some of the risk out of the picture for the carrier, and therefore should ultimately reduce your costs.
2) More productive cost control is the continuous improvement process. Tweaking the process will improve your internal costs. Gain sharing where carriers and shippers work together to cut costs and make the process more efficient, allows costs savings and profits to be shared and provides a stronger relationship with suppliers.
3) Process revision, re-thinking how your organization does things. Usually this comes about do the gaps in price or service. Maybe new technology is available to increase the efficient on what you do. Now we are getting into CFO territory where the costs savings may be enough to significantly affect the bottom line of the firm. You can’t re-invent the wheel every year because process revision takes a lot of time and money, but periodic review of process is a good idea.
4) Improve the success of your business. Logistic managers are in unique position to see the business holistically, almost from a CEO perspective since they touch all facets of the business. Inbound materials costs may be significantly reduced if better inbound processes are established. It may mean changes in production or storage procedures which are only indirectly related to logistics. From the outbound side, it may be there is a chance that the customer would be better served by meeting their demands. Logistics costs may go up, but profits might go much higher. Again worthy of a CFO taking note.