Mar 20

Big data and management

I had an opportunity to hear Krish Krishnan Monday evening March 20, 2014 speak on his subject Big Data to the Chicago area Logistics, Operations and Supply Chain Professionals (LOSC). He has worked with many leading companies.  If you get the chance to hear do so.

He defines Big Data as data problems too complex for basic Oracle and Microsoft software. As a way to make big data a little less complex to understand, he asked us to think about Google’s index mathematical model as way of seeing how bid data number crunching works.  A key issue is somehow arranging disparate data.

When there is a big data need, management must not punt on this process. Clarity on what the issue is the key to avoiding spending big bucks on wasted efforts. Your organization’s IT department cannot make those type of decisions for management.  Management must determine what is important to find out and why.  The if skills are needed to carry out the mechanics of the process, talent can be found at a price. It is management’s decision if the cost is worthwhile.

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Mar 14

Electronic Logs

Within the next few days. the Federal Motor Carrier Safety Administration will put out a proposal for electronic logs for all heavy duty trucks and buses.

Yes, it will cost money to put these devices in tractors, however  electronic logs will be not only useful for enforcing safety regulations, but also useful for managing the fleet with important data information on drivers performance. There will be significant improvement both in performance and management cost in replacing manual review of logs with electronic review.

The American Trucking Association is supporting the concept of electronic logs, I am sure primarily because the benefits sited above.

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Feb 20

Arthimetic in the Supply Chain

One of the study themes of my blog is that numbers are a tool that needs to used wisely. Let me use a non-logistics / supply chain example to illustrate this.

This week there was in the Chicago Tribune an article on the opening of a new Mariano’s grocery store in the Chicago area; This was former Dominick’s store as Dominick’s chain was closed by Safeway. Dominick’s closed most of its stores in December 2013 while a very few closed in January this year.

Some background first; for generations Dominick’s was one of the major grocery chains in the Chicago area. The independent chain was sold to Safeway in 1995. Safeway cut labor and raised prices. Lower costs and higher revenues the arithmetic said it should mean greater profits. It didn’t. Some years later after the sale, Mr. Mariano who use to run Dominick’s before it was sold, became President of Roundy’s and decided Dominick’s was vulnerable. It was very vulnerable.

When Dominick’s closed its 72 stores it laid off more than 6000 people. Mariano’s bought 11 stores and is hiring 3000 people. Dominick’s lost significant dollars and Roundy’s, the chain owing Mariano’s is profitable. Perhaps Dominick’s was understaffed to save money? Here was a case were a smaller staff cost less, but was harmful to profitability.  Mariano’s had a market focus that better customer service using more associates not only attracted customers to the store but also encourages to buy higher margin items. Mariano’s basic grocery line is competitive to the market, thus lower than Dominick’s prices were. It specialty products, which are the first items you see when you go into the store, gives the store the higher profits.

The lesson for the supply chain is this. The purpose of the supply chain is not to make good numbers. The numbers will measure how efficient a particular process is doing, but unless it helps the business be successful, focusing on those numbers will harm the business not help it. A classic logistic example: a cheap carrier comes into the market. The carrier takes the business away from the high service incumbent. The price is lower, but the customer is not timely served and many deliveries are late. The business is likely to be loss and management’s valuable time is used to resolve the problem, when it should have been focused on making the process better. Metrics needed to be reviewed to see if the focus is on the numbers or helping the business be successful.

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Jan 31

What Atlanta can teach the Supply Chain

Early this week Atlanta came to a complete halt. What can this event teach a person in supply chain and logistics? In truth, most supply chain / logistics people must be secretly smiling themselves because they have experienced minor versions of this themselves when demand spiked beyond all dreams and plans. There is a good description of what happening during a snow storm in Atlanta which can be found here:

Melissa Fay Green’s article describes the moment everyone in Atlanta saw a snowflake about 1:30 PM Tuesday January 28, 2014, they all decided to jump in the cars at once to beat the storm going home. They did not succeed.  This for just about 3 inches of snow. It is safe to assume that people in the Atlanta area had previously had experience when snow storms and knew the government infrastructure could not cope the problem. This is why they started home then.

Every once a while in a supply chain /logistics professionals career, an unexpected spike demand will occur.  In the Atlanta case, millions of individual decisions led to the capacity of the roads to become a quagmire. In the professional’s case, there is a major advantage, the power to centralize the decision processes.  This is the most important first step in dealing with a sharp pike in demand.

With the ability to plan, comes the ability to process review. What is your capacity to deliver now?  Importantly what are the bottlenecks that limit that demand. Can they be changed to have additional capacity? Once that is understood, the second step then will occur as your organization prioritizes your customers and your process, which is the second step.

Communication with all stakeholders is the important third step.  This is not easy as it sounds. Finding the way to reach stakeholders  which includes the end customers is not always easy. In the Atlanta case, cell phone were missing or out of power, yet some communication was done with social media. Be prepared to be innovative and resourceful.  A strong reaction to that communication has to be anticipated as some customer and production process will be adversely affected.

Lastly after it is over, a review of what was learned is very important. Undoubtedly in retrospect there will be process improvements, costs which could handled better, planning processes which could be more focused. I suspect in Atlanta the review will be very difficult, because anger, political aspirations, budget constraints, and a bias against government.  Your organization will need to handle the review process in a constructive way, because negatives enter enterprise planning also.

In review, the four steps are: 1) Centralize the planning, 2) Prioritize your process and your end user customers, 3) Communicate with the stake holders, and 4) Review the process and events when it is over.






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Jan 24

Planning for New Products

Recently there was an interview with Allyson Hatfield with the Supply Chain Brain, which can be found here:

Allyson Hatfield is responsible for the demand planning for new products at Campbell Soup. Almost all the old line food companies have found that must innovate to survive and grow. That has meant that being able to plan how to handle new products is a key skill.  She brings something very important to job beyond her business skills, that is a joy of discovery, because when something is new one has to be assertive in finding new information.

To plan for a new product,  she starts looking at what products in similar categories are doing in the marketplace.  But she also realizes she needs to physically see the marketplace, going to stores to see how similar products are promoted and sold. She brings a knowledge of the retail customers into her demand planning, so she can plan how they are likely to respond to the new product.

Any new entrepreneur has similar issues.  But with knowledge of similar products and knowledge of the customers, intelligent guesses can be made on business levels. The chance to be successful will increase if you can know what to make and how much.




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Jan 15

Transportation as a commodity

Here is an interesting video on supply chain brain about trends in transportation in a study by the University of Tennessee and Georgia Southern: It is interview of Mary Holcomb of the University of Tennessee by the magazine Supply Chain Brain.

It starts off with a finding that many organizations are joining their procurement (purchasing) departments and transportation into one entity in the organization. It has the effect of commoditizing transportation as just another commodity the firm buys.

The onus is on the transportation staff to point out the importance of value added services of a carrier otherwise it will strictly be on price and meeting service standards. In some cases that may all that is needed. But for many organizations, the carrier’s transportation knowledge of the customer is key selling point. Another key is a commitment to service the account even when there is tight capacity. The last few minutes of the interview, Dr Holcomb discusses these type of issues.





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Jan 03

No demand information

I watched a video of Jarrod Goenzel, Director MIT Humanitarian Response Lab. The link is here:  Early on in the video, Jarrod Goenzel talks about one of the major supply chain / logistics problems in humanitarian logistics being that there is no demand information, not only the amount to be shipped but even what to ship.

When you know demand you can formulate a plan for the volume of goods being moved on an efficient basis. In a humanitarian crisis there may be no direct method of getting demand.

In business, there are times demand is not known, such as situations where there is new business or a new product. Occasionally item with a small demand becomes a fad item and demand sky rockets.

In the humanitarian crisis, demand can be determined from past experience and by viewing social media messages from the area of demand. Procedures can be put place to estimate demand to start the planning and execution process.

In business, demand for new products may be estimated using market surveys or even flat out guesses. Once shipments begin, the demand forecast will need to be revised from actual sales but possibly also information such as social media.

The key to success, success being defined as meeting customer expectations in an efficient operation, is using revised demand forecasts to change your supply chain / logistics plan.






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Dec 27

Holiday shipping

The volume of shipments on the days before Christmas was so high Fed Ex and UPS could not make a significant percentage of  the deliveries promised before the holiday deadline.

Sellers in e-commerce you certainly want every sale they can make. But to keep customers coming back, realistic expectations needs to be established.  A holiday peak demand in the immediate days for the Christmas December 25th holiday can reasonably be expected. Organizations would be wise to not to say they delivery can be made by December 25, when there is a high chance that normal transit times can not be made.  A earlier cut off date for Christmas delivery  is good marketing. It always wise to create reasonable expectations for your customers.

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Dec 27

Limitations of Software

Morgan Stanley puts out an index of truckload volume. In early December 2013, for the shipping index was higher than it was ever been in that period of December. This occurred during a period of apparent lackluster retail growth. Morgan Stanley guessed the reasons for this increase were advanced buying for 2014, bad weather delaying shipments to early December, and a late Thanksgiving creating a compressed holiday shopping season.

Let me add one more guess to this list. Software which incorrectly forecast demand. Slow sales in September and October may have lead to not enough inventory in the pipeline to serve November and December surge demand. Remember the software is biased towards minimizing inventory costs.

There is a lot of literature on the value of software to plan your operations and forecast your demand. And in truth, no large operation of any volume can be remotely successful without this type of software.  Nevertheless software is made by humans to handle perceived situations. Not all changes can be foreseen in the creation process. I have not seen hardly any literature to help one make a decision when they should question the output. In many cases middle managers do so on an intuitive basis, but it be wise in using any software to recognize its limitations and be prepared to act when those situations occur.


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Dec 10

2014 Supply Chain Issues

In 2014, I do not expect Supply Chain and Logistics managers will spend lots of time worrying about shipping by drones, but here are some of the concerns they might have.

The 2013 changes in hours of services have minimal affect on local and short distance regional trucking whose drivers are home every night. Those trucking operations which are overnight, the hours of service regulations has caused driver wages to go down and carries to have is less production, in the neighborhood of 5%. These changes  will increase cost for those type of operations above normal inflationary increases and limit capacity. Intermodal rail have been increasing at a level of twice the economic growth. The raising long distance truck rates are a strong part of this.

Likely the Federal Motor Carrier Safety Administration will issue a requirement of electronic logs. I suspect there will be a large amount of negative public comments, but really electronic logs are a cheaper way to operate for all but the smallest of operations, so I do not see this as having much effect.

I am not convinced that consumers will pay more for same day delivery. But prompt service will be important. So last mile delivery will continue to be key selling factor and will be very important in warehouse location and the services they offer.

The ocean shipping market will continue to be influenced by the 2015 opening of the enlarged Panama Canal. Ports and transportation companies will prepare for these changes and shippers will consider how they impact services and costs. There will be press about other Central American companies creating competitors to the Panama Canal. They are not likely to succeed.  Panama’s government and infrastructure has shown it can handle large projects and the canal (and the associated rail infrastructure) well. The other countries do not have proven expertise in these areas.

The Keystone Pipeline project will likely be approved. I believe President Obama has been using this as a bargaining chip for negotiating with the Republicans on some issue.

Petroleum transport by rail will continue to rise. There will be pressure to improve rail car tank car safety. However really there is no other way to transport the product efficiently to where it is needed. The economics of fracking oil to create jobs and lower costs will be too important to block.

Supply Chain / Logistics Software products will begin to mature. Ease of implementation and use and cost considerations will have a higher priority with customers.







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