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Jun 16

Realistic Transportation Contracts

Posted on June 16, 2015 by Julian Blumenthal

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

Posted on May 29, 2015 by Julian Blumenthal

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.

 

 

Posted in Logistics, Management, Process Management, Public Policy, Supply Chain, Sustainability, Warehousing | Tagged | Leave a comment
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May 13

Relationship Managers

Posted on May 13, 2015 by Julian Blumenthal

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
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May 03

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

Posted on May 3, 2015 by Julian Blumenthal

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

Posted on April 10, 2015 by Julian Blumenthal

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

Posted on April 2, 2015 by Julian Blumenthal

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.

 

Posted in Export, Import, Inventory planning, Logistics, Management, Parcel, Supply Chain, Transportation | Tagged | Leave a comment
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Mar 27

Physical Internet

Posted on March 27, 2015 by Julian Blumenthal

What is the “Physical Internet”? And is it remotely practical from a logistics practitioner’s point of view? Lastly, should we not rename the “Physical Internet” the “Supply Chain of Things”?

Every once in a while one is humbled when a new buzz word is being discussed and you have not heard the term before. This happened to me at ProMat Show this week at McCormick Place. It is marketing show for material handling equipment, software, and assorted supporting industries. This year it was back in Chicago where it is based in every other year. I attended a 45 minute seminar hosted by Professor Kimberly Ellis of Virginia Tech and Professor William Ferrell of Clemson. The “Physical Internet” received significant attention in their presentation.

The Physical Internet is ultimately about busting yet another silo, but first a more formal definition. Most formal definitions such as this one from the Center of Excellence in Logistics and Distribution (CELDi) are fairly similar.

“The Physical Internet (PI) is an open global logistics system founded on
physical, digital and operational interconnectivity through encapsulation, interfaces and protocols.”

 Since the 1980’s, supply chain thought has been about busting the walls between functional areas in the firm, with outside suppliers and with customers, so that the process is optimized. The ultimate goal is the highest profitability of the total process. Silos sub- optimized the process, with each budget center more concerned about looking great rather than make the process efficient on the whole.

The silo to be busted in the Physical Internet is the firm itself. It is taking advantage of working with other shippers to get advantages of scale. In a Physical Internet operation, the truck would have multiple shippers, warehousing would serve multiple accounts and last mile delivery services are shared. Packaging would be standardized (A blog on this concept next week). Software would be standardized and shared.

Dr. Ellis quoted statistics that of the truck moves made today, the average loaded utilization is 42.6%. What the Physical Internet is doing increasing the load utilization of the vehicles by multiple shippers sharing the truckload space, making packaging process overall more efficient, and using data to help optimize the process.

So is any of this remotely possible in an American market? The standardization of the Physical Internet would have the effect of commoditizing the supply chain. With any silo be busted, there is some loss of direct control and one’s own empire in the process. So where is the market need for such a process? If there is a need, what type of organization might put its resources to start and sustain the physical internet?

At the presentation I attended, Professor Ferrell noted the changes foreseen in the Material Handling and Logistics US Roadmap found at www.mhlusroadmap.org. Without going into any detail, these are the bullet points of the change in the supply market place anticipated in that document.

  • The growth of e-commerce
  • Relentless competition
  • Mass personalization
  • Urbanization
  • Mobile and wearable computing
  • Robotics and automation
  • Sensors and the Internet of Things
  • Big Data and predictive analytics
  • The changing workforce
  • Sustainability

So if you are Walmart, Amazon, Proctor Gamble, Dow Chemical, or any other large organization, your organization will have the resources to deal with the changes described above. They probably would find no business reason to invest their resources into this process.

Would any organization have a business reason to invest in this process? Medium and smaller firms who need to have the competitive supply chain abilities of larger organizations to market their products but don’t have the talent and financial resources of a big firm would be candidates to use Physical Internet as a way to be competitive in the business world.

By combining the resources of many firms, warehouses, and carriers smaller and medium size firms can be competitive with the large entities and our able to afford a higher level of capabilities. Though if established, the bigger entities might find the Physical Internet useful for the “B” and “C” customers also.

So who has the resources and the energy to put something like this together? 3PL’s are a logistical candidates as they already use multiple carriers and warehouses and have software capabilities. These organizations by being successful are used to changing market place conditions and responding to them. It will take an imaginative mindset to through this. Likely to start it will need to be done in a regional market such as Midwest where there are lots shipments going each way and there can be some balance of shipments in the market.

As a side note. Governments in Europe have been providing research funding to explore the Physical Internet. In Europe, governments are perceived as part of the process, and may be the proactive agent to start this process. That probably would not work on this side of the pond. So we may see Physical Internet work their first before coming to North America.

Lastly, the words “Physical Internet” really do not convey which this really is. Maybe a term like the “Supply Chain of Things (SCOT)” might better explain the interconnectivity of the proposed network.   The “internet of things” is about communication, capabilities and information. “SCOT” would be about connecting multiple supply chains for the common good.

Posted in Infrastructure, Inventory planning, Logistics, Logistics Software, Management, Supply Chain, Sustainability, Transportation, Warehousing | Tagged | Leave a comment
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Mar 11

Keeping an old warehouse humming

Posted on March 11, 2015 by Julian Blumenthal

Last week I had the opportunity to visit the Ulta Warehouse in Romeoville, IL. Ulta having been found in the Chicago area, this warehouse was at one time the only company warehouse. Now there is southeast and southwest warehouse, with a new warehouse coming on line in the Midwest. The building was once the corporate headquarters too, though no longer. Here are some eclectic thoughts about that visit.

The warehouse competitive advantage, Black Friday e-commerce

When Ulta was a startup, warehousing and distribution of its products was not the primary concern and limited resources were devoted to that area. There is only limited IT and mechanization in the warehouse operation. Now the company has been around, successful and profitable, and growing, they have designed their new warehouses to be more state of the art, to improve costing and efficiency. Much manual labor is still used to move products around the warehouse in Romeoville.

But the Romeoville warehouse has one very important competitive advantage in the Ulta system. It has space set aside for the Black Friday pre-Christmas jump in e-commerce. Importantly, it also has had successful process to staff the warehouse using temporary works. The knowledge has been gained on how to successfully train these temporary workers. Interestingly, it appears there is no gradual ramp up in demand for the Black Friday jump in business. The demand line goes straight up that week and the next several weeks following to Christmas. One guesses that this is deliberate approach by the marketing team. Since this is a company marketing strategy and obvious important one, execution of the policy is critical to the success of the firm. The Romeoville warehouse can execute. Other locations are not likely to have flexibility and the temporary personnel to do this.

Software Change

How many awful software upgrades have you been in? Ulta is switching from SAP software to Manhattan software to run their warehouse processes. Kind of a big change.I was impressed when the person leading the tour could explain why the change was an advantage to the company. Often when software changes are being made, the reasons for the change are unclear to the people actually having to deal with the change and responsible for supporting it. Ulta is also testing new software in limited areas and not just going for giant overnight turnover in the system. This will significantly limit the bugs the company will see in a software change. Companies get in big trouble, when a significant software changes are made overnight.

Warehouse Security

In Ulta warehouse, theft prevention and security are primary importance. They report only a half of one percent shrinkage, which is very good given the tens of thousands SKUs going through the warehouse. There is a caged off area for high value products which only a limited number of employees are allowed in. Regular employees in the warehouse have been there for 10 years or more. Dedicated employees are an important component to prevent shrinkage. This is one of the few warehouse tours I have been on were they had an employee follow the rear of the tour, in part I suspect to make sure nobody reaches into a bin and starts taking items.

Men Working in a Women Managed Operation

About a year ago, I visited the Chicago area Mary Kay warehouse and now the Utla warehouse. Both of these cosmetics companies, have a female majority of their management and non-management personnel. I observed the men working in this atypical environment. It was clear they felt comfortable and productive in this environment. One important commonality with both companies was that management does put effort in treating their employees well. In popular literature, I have not found much written about men working in this type female majority environment. As women had to adjust working in a male environment, so surely men had to adjust to working in a female environment. Clearly, though it can be done successfully.

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Mar 03

Fighting the Last War

Posted on March 3, 2015 by Julian Blumenthal

So after five months of decreasing through put, the West Coast Ports have an agreement and for the most part are going full bore to clean up the backup, which is expected to take several months. Finally! Assuming the union members ratify the agreement, which is likely, it will be five years before the port contract expires.

So for the last five months, while the dock production was slowing  down, inventory did not arrive as planned, transportation costs increased with delays and congestion fees, and all sorts of alternatives were tried.

What does this mean? It is always tempting to continue to resolve the last problem you had, much as military establishes theorizes how to win the last war. When the next war comes they are not fully prepared because techniques and strategies change. Planning on change was not a priority, winning the last war was.

So now the west coast ports are operating, don’t continue to fight the west coast shut down in your planning.  It is a known problem. Sometimes you have to follow former Defense Secretary Donald Rumsfeld’s advise and plan for the “known unknowns”.

It certainly tempting to plan for the west coast ports becoming dysfunctional again. Any supply chain strategy should recognize that various options have benefits and costs. Likely there is a role from the west coast ports in your organization’s supply chains and take advantage of it.  So do what your firm would normally do a cost planning basis which might be use west coast ports despite their past problems. But be wise, have supply chain agility because there will be problems out there somewhere.  Since transportation and logistics is a relationship business in times of stress, it will mean sometime, it will be real important to have business relationships with alternatives.  Give your organization, options in stressful times.

 

 

 

 

 

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Feb 13

Can Staffing Services Help A Firm Hire Supply Chain Talent?

Posted on February 13, 2015 by Julian Blumenthal

Dealing with growth of a small and medium size firm is quite an undertaking. One of the most difficult processes occurs when it is desirable to hire additional help to bring in more business. In midst of growth spurt, the soon-to-be-hiring manager will find herself time constrained just trying to keep up, not allowing much time to seek a new employee.

Earlier this week, in my role as co-chair of an informal networking group, Chicago area Logistics, Operations and Supply Chain Professionals (LOSC) a staffing agency, Ajilon Professional Staffing, spoke to us on their role in the process. Additionally since many of our members in our transition, it was a potential source of talent for the staffing agency. I came away from the meeting with a clearer understanding of when it is advantageous to use a staffing service.

When does it make sense to use a staffing agency rather than just go in house with your Human Resources Department? Where will make sense to spend the money for this service?

Does your Human Resource Department in your small to medium size firm have its disposal the resources to find the right employee for the supply chain position? That is the initial question that needs to be asked once a need for additional employee is determined and approved by upper management. My personal experience is some HR Departments do have the right skills and knowledge, and can develop the appropriate questions to ask the hiring manager and the applicants. But my guess is that most HR departments really do not understand the supply chain position or are able to ask the right questions of the hiring manager to high have a high percentage of hiring potential good candidates for a managerial supply chain position.

Let’s examine why even well-run human resources operation might be better to outsource the supply hiring process. One reason the limited resources a HR department might have to spend time on this project. More importantly, supply chain is a complicated field, requiring knowledge of supply chain organizational processes that HR may not be familiar with. In hiring, the knowledge and skills needed will be identified and candidates for the position would match these. A staffing agency specializing in supply chain will have the experience and skills that many times the firm’s HR department do not.

Most staffing agencies will prepare the candidate for the interview unlike your organization’s HR department. This will mean interview time will be more efficiently spent.

The hiring manager should gain in the preparation process for the staffing agency to choose hires. The hiring questions of the hiring manager can be used for preparation for future interviews with candidates

Making the hiring process more efficient and effective can significantly increase the success of an organization.

 

 

 

 

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