Aug 10

That blank stare

I was emailing with a well known consultant about reducing transportation costs. His response was if you cut inventory you will cut your transportation costs. In other words, take a holistic view of the supply chain.

Almost anybody’s jobs involves numerous day to day activities, budgets, memos, processes, fires, and distractions.  The trees are visible but not the forest. If you are so focus on cutting transportation costs by lower rates, you might not think of other processes in the supply chain which will have a higher impact on your overall total costs.

How do you avoid getting into those ruts. The simple answer is devote time to learning. Learning can come in many ways, professional periodicals, networking with others in the field, professional organizations, universities and colleges.

I must admit when I suggest to this to some people there sort of blank stare. You can guess what they are thinking. I too busy for this. Why waster my time on article in professional publications different from my field expertise. There is a cure for those blank stares, it is a love of learning.

Ultimately we live in a supply chain world of change.  Just as our bodies need physical  exercise, for us to see around the corner, brain “exercise” is needed. From learning and education we can learn how not to limit our focus just to the immediate facts in front of us but to a wider world.

 

 

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Jul 27

Plant visit

Much of the literature of the supply chain is on the exciting stuff of grand overviews and the latest amazing software tools. There is a place for that. Little is written in most of these book, articles and web blogs about the people out of the field forced to use this stuff, once implemented.  Because that is area often ignored, it is fertile ground for me to cover.

Unlike the corporate world, where there is frequent turnover, plants and warehouses tend to keep employees for years and sometimes for decades if they are reasonably well managed.  There is formal or informal process of continuous improvement at these facilities. Many times the machines in their operations are one of a kind designed by the plant management and plant engineers.  Most importantly there is usually a direct connection between that facility and the end customer.

That last line is the most important business reason for corporate headquarters to regularly and continually send it corporate supply chain and logistics personnel to operational facilities. No new major plan can be fully successful with the support and understanding of the people in the field.  Their knowledge of the customer and their operation needs to be added to the planning process of all major and many minor changes.

Another way of looking at this sustainability. Sustainability is not just being environmentally responsible, though it is important, but its higher level purpose to allow the company to survive responsibly, through the ever changing environment. I seen too many management plans not succeed in meeting the plan’s goals for lack of information from the field. In extreme cases, it has put a company out of business. But when all cylinders are running, it is change that allows the company to move up to the next level.

 

Posted in Inventory planning, Learning from failure, Logistics, Logistics IT Security, Logistics Software, Management, Process Management, Supply Chain, Sustainability | Tagged | Leave a comment
Jul 13

Sondheim’s philosophy works in the supply chain too

Recently before the Grant Park Concert in Chicago which features works by Stephen Sondheim, I heard a presentation before the concert. The conductor of the program, Paul Gemignani said that Sondheim was the most collaborative composer, he knew. He was always willing to listen to anyone to improve and gain new insights into his work.

Collaboration is a word, you probably heard too much when reading or talking about the supply chain. It is the key to running the process most efficiently. To be successful in collaboration, listening is a must.

So who did you listen to? Your first thought is probably you need to listen to your boss and his boss also. But listening does not stop there. Anybody impacted by a supply chain action needs to be heard. What are the concerns in the field about new software implementation?  When a problem occurs, does most involve need to be heard. Proactively decide who needs to be heard.  Many times, because of past negative experiences, the person who needs to be heard is silent.

Listening oddly enough sometimes requires you to speak. A timely and thoughtful question will focus the person talking and will improve the answer.  So part of any project is asking the question whom needs to be listen, and what information might be gained to improve the process.  And like Sondheim who listened to others, the end result will yield superior performances in the final product.

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Jun 29

C.S. for your own

Emails come, the phone rings, instant messages pop up and you have deadlines. You wonder how am I ever going to get anything done. You think to yourself, I will close off the world except maybe if my boss contacts me or a really large customer.

When you ignore a customer buying products from business, they will go elsewhere. Maybe that is not so bad for your “C” customers. But that type of habit easily spreads over to your biggest “A” customers. So grudgingly you respond to those emails and calls.

So it is easy when the work is overloaded, outside customers are screaming, to ignore the people in your own firm who happen not be your boss, contacting you to resolve problems. Ignoring them repeatedly, though, has risks.

The people in your company contacting you are just as much your customers and the outside purchasers of your product. They have jobs to do, and if you are preventing them from doing their job timely, then they will directly or indirectly complain to your boss of a regular lack of response. Repeated complaints weigh heavily on your boss.

Now, I have run into bosses, who encourage and sometimes order you to ignore the pleas from the field. In many cases, the complaints catch up to them too.

So set up some time to respond to others who are contacting you. Many times they will work with you if have to delay a request. And by responding and telling them what is going on, you are respecting them, and that respect will be returned.

 

 

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Jun 16

Realistic Transportation Contracts

Think about transportation contracts between a carrier and a shipper. They are in three parts, two of which receive a lot of scrutiny, and the last part not so much. These three parts are liability considerations, rates, and the last process management.

Liability, because its potential for big money expense, is what causes both parties to hire lawyers. As the supply chain person you will have some input on this, but this is really lawyer heaven, and they call the shots on how the contract is written ultimately. This covers loss and damage to the freight, who is fiscally responsible for  in an accident or injury. The supply manager input is more setting safety standards and how expeditiously the freight claim process goes. And also giving the carriers a heads up on what your company’s lawyers will allow. This saves a lot of time.

Rates, yes, that is this ultimate reason why the organization sets up a contract. You would think the supply chain person representing the shipper would the top guy in setting up this part of the contract. True, that person’s influence here is substantial.  But RFP’s have become somewhat ritualized on data required, format, and response procedures. The supply chain person must stay in those constraints. There is, of course, a judgement made by the supply chain personnel on whether the bid results are reasonable and which carrier is the winning bid.

Process, probably the most often the least rigorous part of the contract, and the one most often not followed in the real world. Have you ever read a contract and said to yourself no way would anybody actually handle a real world shipment the way the contract is worded. Ultimately, to get paid, the work must be done.

The contract should have a clear process map on how the business will be handled. It should be realistic. The reality is that if the contract can not connect to the real world, the benefits of an organized process will not be realized and its devalues the relationship and the contract itself. Set expectations, but also anticipate how things are  handled when expectations are not being met.  When a shipper or carrier contract is terminated for not meeting expectations, in most cases, it is a failure to clearly work through the process part of the contract.

 

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May 29

What you do counts

In the April 2015 edition of the supply chain magazine, DC Velocity, the lead story was entitled:  “LEED or Follow”  and can be found here: http://www.dcvelocity.com/articles/20150318-leed-or-follow/.  The story is particularly good going over the various details needed to make a “green building” green or in more professional terms: “LEED Certified”.  Getting into the details of the story might obscure the fact, that people took the initiative to environmental sound, it short to make the world a little better, where it was in the interest the firm, something they could of just ignored.

In Hollywood, when it thinks about people working for firms, there is only things that can happen, short of the the film’s hero being heroic, which is they trample and destroy the planet and its people in search of profits, preferably really large profits.  You probably live in a more complicated world where the firm not only has to meet the owner expectations, but customer expectations, governmental expectations, and community expectations.

So if you are designing a warehouse or remodeling one, one can take the initiative to make the facility a more environmentally friendly.  As a for profit corporation, actions must be economically justified.  Some desirable aspects will not make the cost cut. But where you gain efficiency and cost, not only will the environment be cleaner,  the potential for success in the corporation will increase by your taking initiative to put these pieces into the puzzle.

It is something you can be proud of and long term it will help your career by giving you important accomplishments.

 

 

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May 13

Relationship Managers

I recently heard a presentation by Indiana University Professor of International Strategic Management, Dr. Marjorie Lyles, on the growing role of new position, Relationship Managers. Supply Chain is all about relationships with suppliers, transportation carriers and operators, storage facilities and customers. Its important that Supply Chain Managers work with Relationship Managers wherever they exist.  There are many organizations where there is no Relationship Manager, and the Supply Chain/Logistics Manager does this role informally.

Dr. Lyles does much work in China. She reports that many Chinese export firms realizing that in the past there were severe problems in business relationships were actively adding this position to their firm.

I was curious how I could have been in supply chain management many years, a specialty which by definition has outward business relationship focus, and  not remember ever seeing an interview in a supply chain publication with a relationship manager. I looked in several major supply chain magazines and did not find any interviews with company relationship managers.

Dr. Lyles was at meeting which was also promoting the Association of Strategic Alliance Professionals. This organization has a certification program for its members. One place where silos seem to be strong is professional organization. While professional organizations may meet other professional organizations to discover how to run their professional organization better, it does appear rare they work together to promote the common good. Each professional group has their own national convention, but working with other complementary organizations seems to rarely occur.

Supply Chain/Logistics Professionals in working with organizations outside their organization should watch for a position called relationship manager. If that position exists, it needs to be included in the supply chain relationship optimization process.

 

Posted in Logistics, Logistics Networking, Process Management, Public Policy, Supply Chain, Supply Chain Education, Transportation | Tagged | Leave a comment
May 03

Does make economic sense to ship Great Lakes Water to CA?

Sometimes popular press and certainly the internet has a bias to apocalypse now approach to life. It is fun to see if they remotely make practical sense. One of these I was about Governor Brown’s California water rations to cut water usage in California. Somebody then wrote about draining the water out of the Great Lakes to feed California water.

Current treaties with Canada prohibit further diversion of Great Lakes Water. Lets pretend that is not true. Could water be brought economically from the Great Lakes to California to solve its water problems? Spoiler alert, the answer is no.

A cubic foot of fresh water weights 62.4 and contains 7.48 gallons. A tank car typically can handle up to 263,000 lbs of weight. So a tank car would ship approximately 4200 gallons.

A train load of 32 foot tanker cars would be 200 car loads, about a mile and quarter long. So a unit train could handle about 840,000 gallons. The average individual it is estimated uses 80 to 100 gallons a day, so lets use 90 gallons. This is enough water to  cover 9,333 individuals. Water usage is suppose to be cut by 25%. So lets say the shipments just cover that. That is the population equivalent of 9,250,000. So that is 832,500,000 gallons of water, or 991 trains worth per day. The rail system is currently struggling with the current several hundred trains a day, so rail shipping would not make a significant dent in the water shortage.

But would it be economical? Rail rates are for the most part in secret contracts, but we can estimate the rail rate as 75% of the truck rate.  A tank truck might go for $2.50 a mile from Chicago to Los Angeles.  That is a distance of 2015 miles. At $2.50 a mile, that is a charge of $5037 which we will round to $5000.   A tank truck would haul about 775 gallons.  So the cost per gallon on a truck would be about $6.45 per gallon. Lets assume rail will be 75% of the truck rate, so the rail rate would be roughly $4.85 a gallon. Cost to desalt sea water is any where from $.22 to $.30 a gallon, assuming plant construction costs are factored in.  So it does not make economic sense to ship water either.

So if it were legal, it would not make economic and rail capacity sense to ship large amounts of water from the midwest to the west.  Supply Chain/logistics/transportation managers make these type of judgements all of the time. Unlike this fun little example, they would be wise to understand what they do would affect production costs and marketing initiatives, not just transportation costs.

 

 

 

 

 

 

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Apr 10

Infrastructure Vision

I recently heard the President and CEO of the Illinois Road and Transportation Builders speak. As an organization promoting transportation infrastructure, it finds itself in interesting times.

In the good old days, infrastructure fuel taxes could be sold to voters and legislatures as a user fee, and not really at tax, since you only paid when you used it. Now it seen by many, primarily those in the Republican Party, as just another tax to keep big government big.  There is even opposition among those who oppose infrastructure taxes to the alternative tolling highways since this infrastructure so it should be free for use. Yes, there are logical inconsistencies to that position.

In Illinois things are more confused with on going dire state and local budget problems. In the next couple months, a 2016 budget is be developed.  One outcome might be for legislative negotiations between the Democrats controlling the legislature and the Republican governor is that a compromise will be reached for some increased “user” taxes to pay the cost of infrastructure.

Infrastructure opponents have been somewhat successful in making the case that transportation infrastructure is just another big government spending waste. Those of us who think maintaining and modernizing transportation structure need to make the case that future economic health requires to invest in our country. More effort to clarify this vision is needed and yes, it needs to be marketed.  To often politicians incorrectly highlight as first benefit putting people to work, which is why the opponents infrastructure  seem to be winning the battle.

There is a role in government to invest in what the private sector could not justify because of the long time frame for payment. Two cases in point. The interstate highway program cost billions, but it lead to a creation millions of jobs and billions in profits and taxes to the country over a 30 year time span while the system was being built. More recently the Port of Miami, a public agency, has invested in dredging a 50 foot channel to keep in competitive in the larger mega-ship container ocean vessel era. It will start seeing these benefits when the expanded Panama Canal project opens next year, but work was done several years in advance of the canal opening.  Yes there is risk, but without some risk there is no potential for reward.

 

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Apr 02

Standardized Packaging Going Against the Grain

Last week I attended the ProMat convention, a material handling convention featuring vendors of sort of products from machines to software related to material handling.  Among the educational seminars I attended was an educational session where the Physical Internet and the role of standardized packaging was discussed.  .

At the convention, there were all sorts of lectures and product demonstrations about specialized packaging to meet their needs. Going against the grain on packaging, was the Physical Internet lecture I attended. There, packaging into 18 exterior different box types was discussed. By limiting packaging to these 18 sizes, multiple vendor products could be loaded on one pallet, yet the pallet would be a standard height, which would enable the shipping vehicle capacity to be better utilized.  While more air would be shipped in the standardized boxes, that inefficiency would be easily offset by the transportation cost savings. In fact shippers are use to standardized packaging on a macro scale, because that what an intermodal container is, a large standardized “package” to move freight.

I volunteer at a food bank. I manually load pallets frequently. When the boxes are in a standardized format, it makes a square “pretty” pallet, which could with strong enough packaging materials can be top loaded by another pallet in transportation. I have also load pallets with multiple box types upon occasion. This is not so pretty with the pallet looking like bid city skyline on top. This really prevents efficient utilization.  In a food bank, sometimes you have to make do.

The  Physical Internet format is for multiple shippers share trucks, warehousing and software. Standardized packaging is key element to allow this to efficiently happen. It will be interesting to see if such process can be workable and viable in the future. My guess is that if large enough group of shippers can be found to work together it will happen.

 

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