I recently came across the video which I think is supposed to talk about the huge benefits logistics plays in our economy. And, by this the video defines logistics as transportation (it is a lot more than that but for the most part, this video deals with transportation).
It is a good description of how things get from point A to point B however I could not for the life of me think of a worse example to use: Shipping bottles of water!! Unless you are shipping water from a location of plenty to a drought stricken area, this is the worst example I can think of (except for maybe shipping concrete over long distances).
Bottled water is a perfect example of something which should be created extremely close to the point of consumption ( I even think this video shows a route from Chicago to the West Coast). Whenever a supply person sees that type of route they should be asking why are we shipping this in the first place.
Get the water locally, filter it, and bottle it locally and get it to local stores! It is as simple as that! It is cost effective, it is "green" and it is simple.
As I have always said, don't just reduce costs, eliminate them!
Thursday, October 11, 2012
Tuesday, October 9, 2012
September CASS Freight Index - Year over Year Decline
I will take a day to digest these numbers however the CASS Index is out for September and the results are mixed. Increase month over month is attributed to a bump in activity to avoid a potential longshoreman's strike and even with that the Year over Year numbers for shipments has declined.
Another tidbit in the report is the feeling that inventory levels are elevated and the retailers are sitting on a lot of product which supports my assertion in my last post Macroeconomic Monday® that the sales to inventory levels will go down and will continue to show advantage to the shipper for freight rates and bidding. (Of course, in reality, it advantages no one as lower sales to inventory means sales are down and the shipper's business is less healthy - I use these terms only in relation to the carrier - shipper relationship).
More to follow after I look at this in more depth.
Another tidbit in the report is the feeling that inventory levels are elevated and the retailers are sitting on a lot of product which supports my assertion in my last post Macroeconomic Monday® that the sales to inventory levels will go down and will continue to show advantage to the shipper for freight rates and bidding. (Of course, in reality, it advantages no one as lower sales to inventory means sales are down and the shipper's business is less healthy - I use these terms only in relation to the carrier - shipper relationship).
More to follow after I look at this in more depth.
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| Source: CASS FREIGHT SYSTEMS |
Macroeconomic Monday®
Last week was a heck of a week for the macroeconomic outlook for both the world and the US economy. As everyone who reads this blog knows, I report on this as I firmly believe the macroeconomic outlook is at least as much, and probably more, impact on the logistics industry than just about any other factor.
Unemployment:
First, there is good news on the unemployment front. Conspiracy theories aside, it is clear unemployment is coming down and participation is going up. The good news, for the younger workers, is the long term demographic trend is more people retire which opens up more jobs for the younger workers.
The graphs on the left from the BLS and provided by Northerntrust show the unemployment rate going down and the long term unemployment rate going down.
Both the ISM manufacturing and the ISM non-manufacturing indices were up above expectations which show the economy is still "limping" along but it is, in fact, moving forward. Most expect GDP to grow by less than 2% this year and be somewhere close to 1.25% to 1.75%.
GDP Analysis
This GDP number is very instructive as most in the transportation industry have said the "big capacity crunch" will come when GDP is at 3% or over. These GDP predictions show we are far from this capacity crunch "red line" and therefore shippers should be fairly aggressive in their purchasing methodology. FTR had reported coming into the year that they expected GDP to be 2.5% to 3% and at 3% we would hit a major capacity crunch. Clearly, we will be 1/2 of that number.
Using these numbers, Truckgauge.com is using this data to say the driver shortage and the somewhat fabricated capacity shortage will remain not at a high enough level to "cause undo stress on the transportation system".
Consumer Credit
The most surprising number in the reports last week was the consumer credit number. It looks like people have started feeling comfortable running up the debt levels again (which is not a good thing). Consumer credit was up over $18bl which was significantly more than expected. I say this is not a good thing because I read two things into this number:
Unemployment:
First, there is good news on the unemployment front. Conspiracy theories aside, it is clear unemployment is coming down and participation is going up. The good news, for the younger workers, is the long term demographic trend is more people retire which opens up more jobs for the younger workers.
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| As provided by Northerntrust.com |
Both the ISM manufacturing and the ISM non-manufacturing indices were up above expectations which show the economy is still "limping" along but it is, in fact, moving forward. Most expect GDP to grow by less than 2% this year and be somewhere close to 1.25% to 1.75%.
GDP Analysis
This GDP number is very instructive as most in the transportation industry have said the "big capacity crunch" will come when GDP is at 3% or over. These GDP predictions show we are far from this capacity crunch "red line" and therefore shippers should be fairly aggressive in their purchasing methodology. FTR had reported coming into the year that they expected GDP to be 2.5% to 3% and at 3% we would hit a major capacity crunch. Clearly, we will be 1/2 of that number.
Using these numbers, Truckgauge.com is using this data to say the driver shortage and the somewhat fabricated capacity shortage will remain not at a high enough level to "cause undo stress on the transportation system".
Consumer Credit
The most surprising number in the reports last week was the consumer credit number. It looks like people have started feeling comfortable running up the debt levels again (which is not a good thing). Consumer credit was up over $18bl which was significantly more than expected. I say this is not a good thing because I read two things into this number:
- People are living on the edge. A little slow down here or there and they have to go to credit to make things work.
- If people are already using credit to this level, a bit more of a slowdown (which is likely) will result in a collapse of household balance sheets which was a core driver of the 2008 financial crisis.
The slowing of the economy and the fact that it never seems to get off of first base is partly due to the repair of household balance sheets. Give a family an additional $1,000 and in the past few years most would use it to pay off debt. That helps balance sheets but does nothing for the economy. It is a short term hit but a good long term trend. These consumer credit numbers, if they continue, show that good long term trend is reversing. We shall have to see how it continues.
ADVANTAGE?
One of my additions to this report will be a simple rating deciding which side the numbers favored. we will have 5 potential ratings: Advantage carrier, Slight Advantage carrier, Neutral, Slight Advantage Shipper, Advantage Shipper. While people may argue where we are today, I think it is clear the arguments are centered around a Neutral rating. It swings a little here and there but for now things are balanced, Even the top executives in the trucking industry will say the capacity crunch is coming versus is here. So, we start essentially in the middle.
This week's statistics show "Slight Advantage: Shipper"® (I will start summarizing the data concerning which direction the economic numbers move the shipper / carrier needle). A GDP number below 2%, the growth of credit (which eventually will need to be paid off) are showing the economy slowing. The one positive is the jobs report so that is why this week was only a slight advantage in the direction of the shipper.
Look Ahead:
We will soon get the new sales / inventory numbers which will really be telling concerning the potential of a "restocking" of inventory levels (which we in transportation love even though it is a temporary boost). As a reminder, below was the last release graphed. It shows we have flopped around the 1.25 level for most of this recession and had a bit of an increase at the beginning of this year.
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| Inventory / Sales ratio: US Census |
Remember, going into this year most had thought it was the year of a recovery and 2.5% to 3% was the expected GDP. Given this it was natural to think the inventories would increase in preparation for future sales. This is the second year in a row where the forecasters were wrong and so I anticipate people will not get fooled again and this number will actually decrease as businesses will be a bit timid to increase inventory in anticipation of any future sales. If the restocking does not occur (as I anticipate) then the advantage will continue to swing to the shipper.
Saturday, October 6, 2012
Value Chain or Supply Chain
A fantastic discussion over at Supply Chain Index on the measurable differences between a "Supply Chain" and "Value Chain" (Value Chain vs Supply Chain). Most use these terms interchangeably and this blog post really has given me cause for thinking about these terms. I even realized I did not have a tag or label for "Value Chain" which shows I thought of them as synonyms; Which they clearly are not.
Just as "logistics" has morphed into "supply chain" "supply chain" is now morphing into "value chain" in our industry lexicon. However this blog post makes us think this over.
I am starting to think we have to reemphasize that these three terms are three distinct elements of the overall "cash to cash" cycle and getting goods to market.
Great job by Abby Mayer. Twitter: @indexgirl.
Supply Chain Index - A must read Blog and Twitter Handle: @SCInsightsLLC
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| Abby Mayer |
I am starting to think we have to reemphasize that these three terms are three distinct elements of the overall "cash to cash" cycle and getting goods to market.
Great job by Abby Mayer. Twitter: @indexgirl.
Supply Chain Index - A must read Blog and Twitter Handle: @SCInsightsLLC
Thursday, October 4, 2012
CSCMP 2012 Was A Huge Success - On to CSCMP 2013 in Denver
My blogging has been slow to non existent this week due to the great Council of Supply Chain Management Professionals (CSCMP) 2012 Annual Global Conference in Atlanta. However, I did "burn up" the twitterverse this week (see tweets for logisticsexpert and search for #cscmp2012) as I tried to keep everyone up to date on the happenings at the conference.
It was a fantastic conference and I really enjoyed running track 6 - Energy and Infrastructure. We had great presentations from Walter Zimmermann, the Kansas City Southern Rail, the Environmental Defense Fund, The Port of Long Beach, Smartway (EPA Partnership with Industry) along with case studies on natural gas implementations which occurred at two major shippers. These successful implementations are truly the "win-win-win" where the companies have lowered costs, done great things for the environment and have contributed to our nation's move to a domestic fuel source.
Two highlights of the conference were to hear T. Boone Pickens speak (Read about the Pickens Plan here) and I actually was able to attend a luncheon with him. What a fantastic person and his work to get this country an affordable domestic fuel source should be praised by everyone in the country.
I also was thrilled and excited to see Erik Wahl (The Art of Vision) motivate us about creativity and innovation in a very unique way - he paints incredible pictures during his talk! Below is a Youtube video of him (not the one at CSCMP) and you will immediately see what I mean.
I have been attending these conferences for years and this was the best one I have ever been too. The energy, excitement and pertinent topics were all fantastic. I am already looking forward to Denver 2013!
It was a fantastic conference and I really enjoyed running track 6 - Energy and Infrastructure. We had great presentations from Walter Zimmermann, the Kansas City Southern Rail, the Environmental Defense Fund, The Port of Long Beach, Smartway (EPA Partnership with Industry) along with case studies on natural gas implementations which occurred at two major shippers. These successful implementations are truly the "win-win-win" where the companies have lowered costs, done great things for the environment and have contributed to our nation's move to a domestic fuel source.
I also was thrilled and excited to see Erik Wahl (The Art of Vision) motivate us about creativity and innovation in a very unique way - he paints incredible pictures during his talk! Below is a Youtube video of him (not the one at CSCMP) and you will immediately see what I mean.
I have been attending these conferences for years and this was the best one I have ever been too. The energy, excitement and pertinent topics were all fantastic. I am already looking forward to Denver 2013!
Saturday, September 29, 2012
3D Printing - Don't Reduce Costs - Eliminate Them!
You have heard me say over and over again that the ultimate goal is not just cost reduction it is the actual elimination of costs. Think e-books and iTunes® and think of all the costs which just were totally eliminated. No one figured out how to "reduce" the costs of shipping books rather they just eliminated the shipment all together.
An early trend I am watching now is the idea of 3D printing. This may even be too early to call it a "Mega-trend" however I think it is something we should be aware of. Just like the elimination of shipments of things which have been digitized (books and music) the next frontier are physical "hard" parts.
At the end of this post is a neat little video which explains this technology. Think of it this way: If you need to make something which is made out of one material you could just load the material, load the digital specs and the printer does the rest. The key for Logistics people is the part is printed at the point of use and on demand. This has two implications.
First, as this gets better and better and costs come down for the machines more and more product will be made this way. This means less product is made at some far away factory and shipped. This will result in a continued headwind on shipping volumes.
Second, this will also dramatically reduce or even eliminate inventory. No need to stock 30 days supply of something when you can "print on demand". This also puts downward pressure on freight demands as less and less distribution will be needed (also has huge implications for warehousing).
To the left you can see what these machines look like. I just found these off the Tasman Machinery website (no endorsement just a good picture). Like all electronic machines during their infant stage there is a lot more development to happen and I am sure it will happen.
Here is a picture of actual wearable shoes made with 3D printers and above is a picture of a model / replica of a ship made with 3D printers.
You may look at these products and say there is nothing to worry about as it will take a long time for these types of products to be brought into production. Of course, I would have to remind you this is what people say about all disruptive and new technologies at the beginning.
I think this will develop rapidly and this could be the "new normal" for a lot of manufacturing of sub assemblies and parts. As I said above, this will eliminate the need to ship this product and, of course, lessen the demand for transportation. One can clearly imagine a day when you walk into a store, need a basic product and rather than the hassle of inventory and distribution, the store clerk will just "print on demand" for you in the store. Huge implications for freight costs and demand, inventory and warehousing and S&OP processes.
According to a blog post by Richard Gottlieb at Global Toy News we may be at a tipping point as it relates to the use of 3D printing in the toy industry. He rightfully highlights the implications and benefits of this technology by saying:
Again, this is pre "mega trend" stage but watch it closely as these types of technologies have a way of taking off.
Below is a great little video explaining what this is all about:
An early trend I am watching now is the idea of 3D printing. This may even be too early to call it a "Mega-trend" however I think it is something we should be aware of. Just like the elimination of shipments of things which have been digitized (books and music) the next frontier are physical "hard" parts.
At the end of this post is a neat little video which explains this technology. Think of it this way: If you need to make something which is made out of one material you could just load the material, load the digital specs and the printer does the rest. The key for Logistics people is the part is printed at the point of use and on demand. This has two implications.
First, as this gets better and better and costs come down for the machines more and more product will be made this way. This means less product is made at some far away factory and shipped. This will result in a continued headwind on shipping volumes.
Second, this will also dramatically reduce or even eliminate inventory. No need to stock 30 days supply of something when you can "print on demand". This also puts downward pressure on freight demands as less and less distribution will be needed (also has huge implications for warehousing).
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| 3D Printers from Tasman Machinery |
To the left you can see what these machines look like. I just found these off the Tasman Machinery website (no endorsement just a good picture). Like all electronic machines during their infant stage there is a lot more development to happen and I am sure it will happen. 
Here is a picture of actual wearable shoes made with 3D printers and above is a picture of a model / replica of a ship made with 3D printers. You may look at these products and say there is nothing to worry about as it will take a long time for these types of products to be brought into production. Of course, I would have to remind you this is what people say about all disruptive and new technologies at the beginning.
I think this will develop rapidly and this could be the "new normal" for a lot of manufacturing of sub assemblies and parts. As I said above, this will eliminate the need to ship this product and, of course, lessen the demand for transportation. One can clearly imagine a day when you walk into a store, need a basic product and rather than the hassle of inventory and distribution, the store clerk will just "print on demand" for you in the store. Huge implications for freight costs and demand, inventory and warehousing and S&OP processes.
According to a blog post by Richard Gottlieb at Global Toy News we may be at a tipping point as it relates to the use of 3D printing in the toy industry. He rightfully highlights the implications and benefits of this technology by saying:
- If you own enough 3D printers, why would you need to own any inventory? You could print out on demand. It’s JIT (Just in Time) in its truest sense.
- If you can print out small batches without the need for molds or factories? Anyone can enter the marketplace with a new item. The only cost is for the material.
- If the need for factories and engineers declines, what happens to people who currently hold those jobs?
Again, this is pre "mega trend" stage but watch it closely as these types of technologies have a way of taking off.
Below is a great little video explaining what this is all about:
Truckload Capacity "Readily Available"
Over at the Transplace blog they provide some analysis on the most recent Morgan Stanley release. The words which caught my eye were they now expect truckload capacity to be "readily available" for the remainder of the year.
This has been the trend for a few months with some artificial "greenshoots". While I have been predicting this for the better part of the summer I still believe the issue is companies are really reluctant to bring back inventory. They would much rather error on the side of "running out" than stocking too much and that means less freight is moving.
This has been the trend for a few months with some artificial "greenshoots". While I have been predicting this for the better part of the summer I still believe the issue is companies are really reluctant to bring back inventory. They would much rather error on the side of "running out" than stocking too much and that means less freight is moving.
Get Ready for "Macroeconomic Monday®"!
I will be starting a new feature this week called "Macroeconomic Monday®" where I will be reviewing the macroeconomic trends from the previous week and what is up coming. I will also add commentary as it relates to the logistics industry. Hopefully this will become a "must read" for you every Monday morning.
You can always search for it on my blog by going to the label "Macroeconomic Monday®" and look for it on twitter at #macmonday® (without the ®).
You can always search for it on my blog by going to the label "Macroeconomic Monday®" and look for it on twitter at #macmonday® (without the ®).
Friday, September 28, 2012
Getting Natural Gas Right from The EDF
The Environmental Defense Fund really puts out good science. They are truly non partisan and report the facts as they are known. I just read this posting called "Getting Natural Gas Right" and I was both intrigued and encouraged. The conclusion is simple (and those who take ideological positions on science will not like it): If large amounts of methane are released into the atmosphere due to leakage, the use of Natural Gas will be worse, not better, than what we are doing today.
However, there is great news. If prudent measures are taken to ensure the proper drilling, transportation, storage and combustion then natural gas becomes a fantastic fuel to help us move to a low carbon future.
I like science.
However, there is great news. If prudent measures are taken to ensure the proper drilling, transportation, storage and combustion then natural gas becomes a fantastic fuel to help us move to a low carbon future.
I like science.
Elena Craft Will Be Speaking At Track 6 - CSCMP 2012
I am especially excited to announce to have Elena Craft on our panel. Elena Craft has had a stellar career as a health scientist for the Environmental Defense Fund (EDF) and I am proud to have her on our panel. I have linked to her biography above and I would also encourage you to read her great blog postings at The EDF News and Blogs Section. She will challenge us to think differently about what we are accomplishing.
Her presentation is on Monday afternoon, October 1, 2012 in Track 6 at 4:45.
I am looking forward to seeing you all there!!
Walter Zimmermann
Turning points: United Icap's Walter Zimmermann - Risk.net
An interesting biography of our first speaker at CSCMP Track 6 - Energy and Infrastructure. Looking forward to seeing you all there!
An interesting biography of our first speaker at CSCMP Track 6 - Energy and Infrastructure. Looking forward to seeing you all there!
Council of Supply Chain Management Professionals Annual Conference
I really am looking forward to CSCMP 2012 in Atlanta this year. I am hosting Track 6 - Energy and Infrastructure where we will have a very robust and exciting discussion on the role energy and infrastructure play in your supply chain - and it is a big role.
Energy costs can consume almost 40% of your total transportation cost structure and of course the Country's infrastructure can decide how efficiently you can get goods to market. We will cover everything from the macro economic outlook for energy to two great case studies on how to convert your fleet to natural gas and alternative fuels.
The exciting part of this is we will cover the spectrum. Do not expect to have 8 sessions where people all agree (I remember a saying "If everyone in the room thinks alike, someone is not thinking).
We start with a well known economist on the overall macro outlook for energy in the US: Walter Zimmermann (A very interesting short biography). He has been seen on CNBC and other national news shows and has a very interesting and data driven view on the potential for energy independence and what is happening in the energy markets today.
Following Walter we will have multiple presentations from Rail executives, scientists and practitioners on what is happening in the world of energy and infrastructure. It will be a very exciting and timely topic.
I look forward to seeing everyone at the conference and let's use this to really challenge our thinking, learn and make our industry better!
Energy costs can consume almost 40% of your total transportation cost structure and of course the Country's infrastructure can decide how efficiently you can get goods to market. We will cover everything from the macro economic outlook for energy to two great case studies on how to convert your fleet to natural gas and alternative fuels.
The exciting part of this is we will cover the spectrum. Do not expect to have 8 sessions where people all agree (I remember a saying "If everyone in the room thinks alike, someone is not thinking).
We start with a well known economist on the overall macro outlook for energy in the US: Walter Zimmermann (A very interesting short biography). He has been seen on CNBC and other national news shows and has a very interesting and data driven view on the potential for energy independence and what is happening in the energy markets today.
Following Walter we will have multiple presentations from Rail executives, scientists and practitioners on what is happening in the world of energy and infrastructure. It will be a very exciting and timely topic.
I look forward to seeing everyone at the conference and let's use this to really challenge our thinking, learn and make our industry better!
Tuesday, September 11, 2012
Bid More Frequently, Not Less
I am not sure how I totally missed this great article in DC Velocity entitled "Go Short" however I am glad I ran into it now. I think it is spot on and a great contrarian view from today's prevailing wisdom which is you need to be a "partner" in times of tight capacity. Partner generally is a euphemism for a trucking sales person asking you to give them above market rates to secure some nebulous and not guaranteed insurance policy for capacity in the future.
As this article rightfully points out, this guarantee is anything but that and generally will not stand even after you paid that insurance policy cost. The article states:
This article advocates going shorter on your bid cycle, perhaps one year, and ensuring rates and lanes do not "get stale". Interestingly enough, despite all the discussion from the carrier base about "long term partnerships" this appears to be in their best interest as well.
It is important to outline another extreme which is highlighted in the article. Grough Grubbs, SVP of Distribution and Logistics for Stage Stores says:
One of the concerns I have written about many times is the fear the coordinated industry effort to "scare" shippers by talking about capacity shortfalls and rising prices (a week does not go by where a CEO of a trucking company feels a need to "remind" us that lowering capacity will result in higher prices) would result in the industry actually reinforcing to shippers that this is a commodity business. Again, I do not believe it is a commodity however if all you talk about is the commodity behavior of the pricing scheme then you are essentially educating your customers to treat you as a commodity.
This article, and certainly Mr. Grubbs has taken it to the fullest measure.
As this article rightfully points out, this guarantee is anything but that and generally will not stand even after you paid that insurance policy cost. The article states:
"At the heart of the study's findings is a fact that most who ship and haul for a living already know: that no truckload contract, regardless of duration, can force a shipper to honor a volume commitment, or a carrier to honor a capacity commitment. Because trucking is considered "derived demand"—meaning supply doesn't react unless demands are put on it—a carrier can easily change capacity, and the rate it charges, if it doesn't secure enough high-yield freight on a lane and finds better opportunities elsewhere. In many cases, it will stop accepting freight on a lane altogether."As prices in the market change and as your rates become "stale" the carrier can just stop accepting tenders. They will say to you their "network has changed" and they can no longer support this lane. It happens all the time and it happens with the best and most ethical carriers. I am not accusing them of malpractice but rather I am just accepting what is and this article articulates it well.
This article advocates going shorter on your bid cycle, perhaps one year, and ensuring rates and lanes do not "get stale". Interestingly enough, despite all the discussion from the carrier base about "long term partnerships" this appears to be in their best interest as well.
It is important to outline another extreme which is highlighted in the article. Grough Grubbs, SVP of Distribution and Logistics for Stage Stores says:
"Our rating is dynamic based on competitive bidding, rather than an annual volume bid. This removes the dilemma of 'stale' bids," said Gough Grubbs, Stage's senior vice president, distribution/logistics. "As more competitive bids come in for certain lanes, incumbent carriers are given the opportunity to revise their rates in our system if they choose to. If not, they drop down in the pecking order for future loads."This certainly looks and feels like every day is a new day and the bid cycle essentially never stops. While this ensures market prices every day you would need to identify the trade off of this strategy with the benefits of some sort of stability. That trade off equation would be different for each company and you would have to look at it in the context of your own competitive environment.
One of the concerns I have written about many times is the fear the coordinated industry effort to "scare" shippers by talking about capacity shortfalls and rising prices (a week does not go by where a CEO of a trucking company feels a need to "remind" us that lowering capacity will result in higher prices) would result in the industry actually reinforcing to shippers that this is a commodity business. Again, I do not believe it is a commodity however if all you talk about is the commodity behavior of the pricing scheme then you are essentially educating your customers to treat you as a commodity.
This article, and certainly Mr. Grubbs has taken it to the fullest measure.
Monday, September 10, 2012
Get Ready - CSCMP 2012 in Atlanta
Those who have been in the industry a while know the Council of Supply Chain Management Professionals (CSCMP) is the premier professional organization for our industry. From practitioners to academics, this is the organization to belong to if you want to know what is happening in our industry, networking with top individuals / thought leaders and keep an eye on the mega-trends occurring in supply chain and logistics.
This year I have the honor to co-host Track 6 - Energy and Infrastructure at the Annual Global Conference in Atlanta from September 30 to October 3. This track will have exciting discussions concerning the overall energy marketplace right to how to specifically implement Natural Gas and alternative energy strategies. The track objectives, as stated in the program:
Today, I will highlight the first session we will have which is from 9:45 to 11:15 on Monday, October 1, 2012 entitled: Dispelling the Myths of Energy Independence by Walter Zimmermann, Senior Technical Analyst, United ICAP. The description of this session is:
Mr. Zimmermann is an exciting and dynamic speaker which will make this session very exciting. Bring your questions!
If you would like to see him in action, take a look at this clip from CNBC:
Here is a more recent interview:
This year I have the honor to co-host Track 6 - Energy and Infrastructure at the Annual Global Conference in Atlanta from September 30 to October 3. This track will have exciting discussions concerning the overall energy marketplace right to how to specifically implement Natural Gas and alternative energy strategies. The track objectives, as stated in the program:
"Managing a sustainable supply chain is no longer just a "cool" thing to do; it is expected by the consumer and is an extension of the brand and product being sold. This track will highlight best-in-class practices and emerging technologies to reduce your carbon footprint, enhance your corporate image, and positively impact the bottom line"I highly encourage you to put this on your appointment calendar!
Today, I will highlight the first session we will have which is from 9:45 to 11:15 on Monday, October 1, 2012 entitled: Dispelling the Myths of Energy Independence by Walter Zimmermann, Senior Technical Analyst, United ICAP. The description of this session is:
"US energy independence is a goal that can never be achieved due to the global nature of the economy and the ability to export energy quickly to the higher priced markets. There is a lot of talk about building a stronger economy while at the same time lowering energy prices. This speaker will explain why we can’t have both, and why the financial markets are what actually drive energy price trends. He will reveal what can be done to lower energy costs, and describe how seasonal price cycles can be employed to lock in prices near their annual lows."This will be an exciting session as it will challenge a lot of the current thoughts which exist in our industry about how we are on the beginning of a wave of cheap energy and energy independence. Mr. Zimmermann speaks how the laws of supply and demand are not driving fuel costs but rather the "financialization" of the energy markets are really driving the costs. This session will really challenge you to think different.
Mr. Zimmermann is an exciting and dynamic speaker which will make this session very exciting. Bring your questions!
If you would like to see him in action, take a look at this clip from CNBC:
Here is a more recent interview:
Friday, September 7, 2012
More Data on Slowing ..
As reported at the Transplace blog, Stifel Nicolaus data supports the idea of a slowing environment.
Thursday, September 6, 2012
Cass August Index is Out - What Shall We Learn?
The Cass Freight Index is out for August and the results are not surprising for those of us who stay close to this market every day. Both expenditures and freight volumes have decreased month over month in August signaling a dramatic slowdown and one during a time when some would expect the seasonal surge to start. Remember the idea of seasonal surcharges?
Year over Year and Month over Month, shipment volume has decreased 1.1%. For expenditures, we are still up year over year by 3.8%, mostly driven off of irrational fear instilled in the market during the first quarter (the reality was there was no need for those rate increases however some bought into the fear driven by some industry leaders) but month over month the expenditures are down 1.1%. Some other points made by the people at Cass:
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| Cass Freight Index |
- There have been two straight months of freight contraction
- This is the third time this year, freight volumes are down year over year
- Inventory levels are increasing beyond what is needed for the sales volume in the economy.
- The report says to expect rates to stay firm - I disagree with this and I think the empirical evidence will show this not to be true.
The report continues to say driver pay and fuel is driving higher costs for the carriers. Of course, we know higher fuel costs are burdened on the shipper, not the carrier, due to fuel surcharges. I also have not seen a massive increase in driver pay however we shall see if that starts creeping in. The report says these increased costs have not made it through to the shipper in rates however the long term trend is the costs are passed on. The average operating ratio (OR) has decreased (margin increasing) for the better part of a year now. This means either the carriers are getting great operational efficiencies to offset these cost increases (that would be a good and competitive thing to occur) or the costs are being past through. Impossible for the carrier costs to increase and the OR rate to decrease without one of the two above occurring. As always, it probably is some of each.
So, here are my thoughts for shippers:
- Despite a somewhat coordinated effort across the industry to reduce capacity it appears demand is decreasing even faster. This is a message I have been projecting for the last 6 months and the evidence here continues to reinforce this general message.
- If you are a shipper who was frightened into taking increases at the beginning of the year you may want to review that decision and perhaps run a bid event. You most likely are paying out of market prices.
- The idea that Q3 and Q4 is a bad time to bid may be an idea which is dying. Carriers should be worrying about where the volume in Q12013 will come from now and may be a bit hungry.
- This report continues to reinforce the incredible volatility of the market and the fact every shipper needs to have a very detailed supply base management program to monitor these changes and leverage them when needed.
For carriers I believe:
- May be time to stop a lot of the blustering and start building true relationships with your shippers to lock in shrinking volume. Getting business out of fear is not always a good or defensible long term strategy.
- Offer value added services to ensure you bring more than just transport to the mix. Shippers need overall logistics and supply chain partners to make it through slow times.
- Continue to drive exceptional efficiencies. As an industry we need to ensure that logistics expenses as a % of GDP declines. That is the true measure if our industry is adding value or not. Let's focus on the right things.
- Continue to drive hard for increased fuel mileage and sustainability objectives. This benefits everyone.
In conclusion, the signal this report is sending is things are slowing down and the pace may be accelerating. Get ready for a tough Q42012 and Q12013.
I wish I had better news.
Wednesday, September 5, 2012
Continuing on Cube Utilization - Secondary Cube
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| What if Watermelons were Square? |
I find just about everyone gets the idea that putting more stuff in a trailer will generally reduce your overall costs because you will use less trailers. It is that simple. Miles per unit sold goes down and with that the cost of transportation. Further, your sustainability goals are met far quicker because less miles means less emissions. The easiest way to reduce the cost of anything is just to stop using it. Concentrating on cube utilization accomplishes this.
However, for all the people who know this I find a lot less worry about secondary cube or what some call "liquid cube". This actually takes into account the utilization of the cartons or packaging of product you are loading in the truck. Think of it this way: You may load 1,000 cases of xyz product into your trailer, look at it, and say "wow, did I cube out that trailer"! What you may miss though is the cube utilization of the cases is horrible. Open the cases and you may find a lot of air due to bottles being curved, sizing relative to the case not done properly, or just packaging which is too big for its contents. If you are able to solve that problem (per my previous post, most likely with the marketing and merchandising folks) you may find you can put a lot more product in that same trailer.
So, the journey continues... Once you think you have cubed the trailer, start looking at secondary cube and start solving that problem. Keep packing them tight and ELIMINATE emissions and cost; don't just reduce it.
(Answer to above question: A lot more would fit in a trailer - after all, the rind is merely nature's packaging!)
Packaging and Merchandising Vs. Logistics Efficiency?
Conducting what I call a "walk around" (my wife calls it shopping) in the grocery store this weekend started my mind wandering to ideas about packaging and shelf space. Why would a logistician be thinking of these stereotypical marketing and merchandising topics you may ask? The answer is simple: There is a battle going on in the retail world within companies and it is the battle of the logistician versus the merchandiser.
Just look at the picture below:
A merchandiser probably sees nice colors to attract the shopper's eyes, good shelf space display, multiple rows of the product to dominate the shopper etc. A logistician sees boxes which are too big for the product which is in them thereby reducing useful cube in a trailer. If you look to the far end of the aisle you will see round and curvy shaped bottles. The logistician thinks these attract the eye but kill you on cube (both primary and secondary) utilization. So, the question is who wins? To this point in my career the merchandiser has won but that is changing with three key changes in the external environment.
First, transportation costs have become so high people are no longer just deferring to the merchandiser. They really need to make a solid business case why that curvy bottle which kills cube utilization is going to drive sales. Otherwise, we will move to optimizing cube.
Second, shelf space is no longer such a driver of consumer preference. When the entire concept of shelf space importance was developed it was the way to advertise to an uneducated consumer. The consumer "learned" about your product by having the product catch her eye then have her read the box (another more practical reason why boxes are so big - need real estate for the writing and graphics) and this would be a major driver of her buying decision (The old adage there are two moments of truth: One when she decides to buy the product and two when she uses the product for the first time). However this has all changed. Many come to the store already knowing what they will buy as they have researched it prior to arriving. Or, if they have not, rather than read the box they will whip out their smartphone and read about it on line (the smart merchandiser will have a QR code on the box so it can be scanned). This is a mega trend for how people shop which is growing and not shrinking. The advent of the smart phone means you no longer have a self contained space to barrage the consumer with colors and splash - the consumer can "virtually" leave your space, find the information they want and need, then reenter your space without you even knowing it.
Third, as stores become smaller (especially if you follow the mega trend of consumers moving back to the cities which changes the entire dynamic of retailing) shelf space is shrinking. With shelf space shrinking you need to figure out how to get your product in front of the consumer, get it to be interesting AND make it small and compact (The tyranny of the "OR" - Good to Great, Jim Collins). For example, if you make laundry detergent and you only get 1' across on a shelf. You can take that up with two giant bottles of non-concentrated detergent or you can concentrate it immensely and get 6-8 bottles across. I personally believe more is better and the the signal the consumer will get is if there is that many on the shelf it must be because people are buying it - perhaps I should try it. This trend supports and is in harmony with the needs of the logistician.
So, what does this mean for the logistician? It means you need to get upstream in the packaging design, merchandising and manufacturing of your product. Get involved in these decisions on the front end and influence the decisions which will meet the needs of the marketer and merchandiser and will also play nicely with cube utilization and transportation costs. The lowest cost transportation is the transportation you do not use and better cube and better secondary cube (a topic I will address in another post) drives the elimination (not just reduction) of transportation cost. This means you need to be intimately involved in the Sales and Operations Planning (S&OP) process and if your company does not have one you should lead and develop one.
I have always said the great logistician spends as much time on these topics as they do on working with carriers. The work with carriers tends to be fun part however this is where the majority of your cost savings will come.
Just look at the picture below:
First, transportation costs have become so high people are no longer just deferring to the merchandiser. They really need to make a solid business case why that curvy bottle which kills cube utilization is going to drive sales. Otherwise, we will move to optimizing cube.
Second, shelf space is no longer such a driver of consumer preference. When the entire concept of shelf space importance was developed it was the way to advertise to an uneducated consumer. The consumer "learned" about your product by having the product catch her eye then have her read the box (another more practical reason why boxes are so big - need real estate for the writing and graphics) and this would be a major driver of her buying decision (The old adage there are two moments of truth: One when she decides to buy the product and two when she uses the product for the first time). However this has all changed. Many come to the store already knowing what they will buy as they have researched it prior to arriving. Or, if they have not, rather than read the box they will whip out their smartphone and read about it on line (the smart merchandiser will have a QR code on the box so it can be scanned). This is a mega trend for how people shop which is growing and not shrinking. The advent of the smart phone means you no longer have a self contained space to barrage the consumer with colors and splash - the consumer can "virtually" leave your space, find the information they want and need, then reenter your space without you even knowing it.
Third, as stores become smaller (especially if you follow the mega trend of consumers moving back to the cities which changes the entire dynamic of retailing) shelf space is shrinking. With shelf space shrinking you need to figure out how to get your product in front of the consumer, get it to be interesting AND make it small and compact (The tyranny of the "OR" - Good to Great, Jim Collins). For example, if you make laundry detergent and you only get 1' across on a shelf. You can take that up with two giant bottles of non-concentrated detergent or you can concentrate it immensely and get 6-8 bottles across. I personally believe more is better and the the signal the consumer will get is if there is that many on the shelf it must be because people are buying it - perhaps I should try it. This trend supports and is in harmony with the needs of the logistician.
So, what does this mean for the logistician? It means you need to get upstream in the packaging design, merchandising and manufacturing of your product. Get involved in these decisions on the front end and influence the decisions which will meet the needs of the marketer and merchandiser and will also play nicely with cube utilization and transportation costs. The lowest cost transportation is the transportation you do not use and better cube and better secondary cube (a topic I will address in another post) drives the elimination (not just reduction) of transportation cost. This means you need to be intimately involved in the Sales and Operations Planning (S&OP) process and if your company does not have one you should lead and develop one.
I have always said the great logistician spends as much time on these topics as they do on working with carriers. The work with carriers tends to be fun part however this is where the majority of your cost savings will come.
Monday, September 3, 2012
Reflections on Labor Day
Our industry, the logistics and supply chain industry, should reflect more on this great day than just about any other industry. We are built on the benefits of the work labor does every day. The number of truck drivers, loaders at rail and air ramps, workers at ports, warehousemen etc. etc. really do drive this industry. I have not done the analysis however the ratio of labor (stereotypical "blue collar") to "management" or managers has to be one of the largest of any industry. Think of it, for every truck there is at least one driver!
This industry also is what moves America. Nothing is built, bought, imported or exported without going through some channel in this industry; and most go through multiple channels in our industry.
So, with that I do reflect on this great industry and the great people who work in it. I hope they get to spend time with their families - although the nature of the industry is many will not.
Thank you for all you do for your companies, this industry and the United States of America!
This industry also is what moves America. Nothing is built, bought, imported or exported without going through some channel in this industry; and most go through multiple channels in our industry.
So, with that I do reflect on this great industry and the great people who work in it. I hope they get to spend time with their families - although the nature of the industry is many will not.
Thank you for all you do for your companies, this industry and the United States of America!
Sunday, August 12, 2012
Operating Cash Flow (OCF) - Should it Be The "King" Metric?
In deference to the great writing at Supply Chain Digest by David Schneider (David K. Schneider and Company) I will not rewrite the premise of the article he wrote over at SCD titled "The One Best Supply Chain Metric". I will only say I highly encourage you to click on the link above and go to the article and read it if you are even remotely interested in a different metric to follow.
Now, on to my opinion (hopefully you have linked over and read the article): Operating cash flow is a "king" metric or an "outcome" metric as some may call it. It is the ultimate scorecard. Are you truly making real money (i.e., Cash) or are you making "paper money" (through income statement shenanigans) and burning through cash? Remember, the only thing which allows you to reinvest in your business is the generation of cash. Measure cash in a big way.
I get very nervous when I hear companies want to "push out payables" not because I think it is just wrong to do but also because of the signal it sends which is their cash from operations is probably going down so they are grabbing a one time cash infusion from suppliers.
Ultimately, cash from operations will determine the success or failure of your business because ultimately you will run out of financing (of which pushing out payables is essentially that - you are financing through your suppliers) and investing options. When that happens, if you are not generating cash from operations, you will find your "Emperor has no clothes".
Now, on to my opinion (hopefully you have linked over and read the article): Operating cash flow is a "king" metric or an "outcome" metric as some may call it. It is the ultimate scorecard. Are you truly making real money (i.e., Cash) or are you making "paper money" (through income statement shenanigans) and burning through cash? Remember, the only thing which allows you to reinvest in your business is the generation of cash. Measure cash in a big way.
I get very nervous when I hear companies want to "push out payables" not because I think it is just wrong to do but also because of the signal it sends which is their cash from operations is probably going down so they are grabbing a one time cash infusion from suppliers.
Ultimately, cash from operations will determine the success or failure of your business because ultimately you will run out of financing (of which pushing out payables is essentially that - you are financing through your suppliers) and investing options. When that happens, if you are not generating cash from operations, you will find your "Emperor has no clothes".
Friday, August 10, 2012
The Divergence of the Dow Transports and the Dow
As if on queue from my posting yesterday, Mark Hulbert (read all his stories here) writes on marketwatch.com about the divergence between the Dow Industrial index and the Dow Transports. He shows a graph which is very interesting and may help answer the questions I raised yesterday when I asked how the economy (as measured by the stock market) could be so high yet freight growth appears to be crawling along. His graph (reproduced below) shows for some time now the Dow Transports have lagged the overall Dow. I suspect if you put in the S&P500 you will see this as well.
So, what does this tell us? Mark believes it may signify the leading indicator of an overall slowdown in the economy (which of course does not bode well for the transportation industry). However an interesting point which I had not followed before is his point around the divergence or the relative performance of the Dow Transports to the Dow overall.
He claims (as apparently it is in Dow Theory) that it is precisely this divergence which indicates the slowdown not specifically the fact that that transports are slowing down.
Perhaps it is best to think about it this way, like a good race horse, the Dow is executing one last gasp then it will stop where as the other race horse (i.e., the transports) already crossed the finish line and is stopped. I don't know if that is a good analogy or not however I will set a favorite to always compare the Dow transports to the Dow overall now and let's see how his analysis plays out.
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| Dow Transports (in Red) Versus Dow |
So, what does this tell us? Mark believes it may signify the leading indicator of an overall slowdown in the economy (which of course does not bode well for the transportation industry). However an interesting point which I had not followed before is his point around the divergence or the relative performance of the Dow Transports to the Dow overall.
He claims (as apparently it is in Dow Theory) that it is precisely this divergence which indicates the slowdown not specifically the fact that that transports are slowing down.
Perhaps it is best to think about it this way, like a good race horse, the Dow is executing one last gasp then it will stop where as the other race horse (i.e., the transports) already crossed the finish line and is stopped. I don't know if that is a good analogy or not however I will set a favorite to always compare the Dow transports to the Dow overall now and let's see how his analysis plays out.
Thursday, August 9, 2012
Where is The Freight? - Cass Reports a Slowdown
The Cass Freight Index report for July 2012 was somewhat anti-climatic for those of us who follow freight and knew we were in the depth of the great slowdown of 2012. The "phone bank" report (which measures the direction of phone calls from a fictional transportation manager's desk) reported far more incoming calls from carriers looking for freight than outbound calls searching for trucks and this has been true for at least two months now.
OK, I admit that is not a scientific index however if you are close to the business and have a grasp on that general topic it is a highly effective predictor of freight.
We see from this index that essentially expenditures have leveled off really since June of 2011 with just a little bump at the beginning of Q2 in 2012. I attribute both years' early bumps as price / volume "hype" and not reality. Each of the last two years has begun with a "great hope" of where rates and the economy is going only to become disappointing by summer and a steadying of rates. A good and experienced transportation manager will see this trend and ensure they do not buy into the early year hype every year.
At the beginning of every year the transportation company sales people will show up with all sorts of data to tell you "this is the year" where we will hit a massive capacity crunch so you better "pay up now" to be taken care of later. A great story which makes for great industry journalism however the empirical evidence suggests it is, in fact, all hype and those who remain calm in the face of the story will be better off.
A key question though is how can all these companies (shippers) report great earnings, the market is very high ( Dow at 13,175.64 as of this writing) and yet the shipments and movement of goods is stagnant? I have a few theories (I freely admit these are theories however the data is showing this to be more and more true).
First, the economy is a more services and financial economy than it is a "things" economy. While we still consume the manufactured goods we generally do not make them. This means an entire portion of the former economy shipments is gone and that is inbound to manufacturing. The outbound is still there however the inbound is gone. The inbound freight is in China and Mexico and other low cost countries. Those who say they love being in trucking because their jobs cannot move overseas are wrong. The inbound jobs have moved overseas along with the inbound freight.
This of course follows the manufacturing base so if manufacturing truly does return to the United States (the jury is out on this) then the inbound will follow back.
Second, the great work on sustainability, minimizing packaging, routing efficiencies etc have all led to being able to move the same amount of goods with lesser number of vehicles. This movement is good for all of us in the world however it does decrease the raw demand for trucks. Just think of televisions. If the economy sells a million T.V.s this year (a made up number just to illustrate the point) they are all about 1" thick. 10 years ago if 1 million T.V's were sold they all were about 3 feet deep (packaged). That is a lot of trucks.
There is not only minimization of the product size but there is also the elimination of the physical product (think e-books. iTunes for CDs etc.).
So, my conclusion is you cannot compare the GDP numbers of today relative to prior year GDP numbers as if there is a straight correlation between the level of GDP and the amount of goods moving in terms of cube size (which is the driver of number of boxes needed). Clearly there is some kind of correlation but it is not as direct as it would have been 10 - 15 years ago. The economy can grow with less physical product moving.
Finally, the lesson learned of the last two years is clear: "Be Not Afraid"! at the beginning of the year. Don't buy the hype, be patient, watch the data and let the economy play out. You get no credit (regardless of what the sales person tells you) for being an early mover on rate increases.
OK, I admit that is not a scientific index however if you are close to the business and have a grasp on that general topic it is a highly effective predictor of freight.
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| Cass Freight Index - July 2012 |
At the beginning of every year the transportation company sales people will show up with all sorts of data to tell you "this is the year" where we will hit a massive capacity crunch so you better "pay up now" to be taken care of later. A great story which makes for great industry journalism however the empirical evidence suggests it is, in fact, all hype and those who remain calm in the face of the story will be better off.
A key question though is how can all these companies (shippers) report great earnings, the market is very high ( Dow at 13,175.64 as of this writing) and yet the shipments and movement of goods is stagnant? I have a few theories (I freely admit these are theories however the data is showing this to be more and more true).
First, the economy is a more services and financial economy than it is a "things" economy. While we still consume the manufactured goods we generally do not make them. This means an entire portion of the former economy shipments is gone and that is inbound to manufacturing. The outbound is still there however the inbound is gone. The inbound freight is in China and Mexico and other low cost countries. Those who say they love being in trucking because their jobs cannot move overseas are wrong. The inbound jobs have moved overseas along with the inbound freight.
This of course follows the manufacturing base so if manufacturing truly does return to the United States (the jury is out on this) then the inbound will follow back.
Second, the great work on sustainability, minimizing packaging, routing efficiencies etc have all led to being able to move the same amount of goods with lesser number of vehicles. This movement is good for all of us in the world however it does decrease the raw demand for trucks. Just think of televisions. If the economy sells a million T.V.s this year (a made up number just to illustrate the point) they are all about 1" thick. 10 years ago if 1 million T.V's were sold they all were about 3 feet deep (packaged). That is a lot of trucks.
There is not only minimization of the product size but there is also the elimination of the physical product (think e-books. iTunes for CDs etc.).
So, my conclusion is you cannot compare the GDP numbers of today relative to prior year GDP numbers as if there is a straight correlation between the level of GDP and the amount of goods moving in terms of cube size (which is the driver of number of boxes needed). Clearly there is some kind of correlation but it is not as direct as it would have been 10 - 15 years ago. The economy can grow with less physical product moving.
Finally, the lesson learned of the last two years is clear: "Be Not Afraid"! at the beginning of the year. Don't buy the hype, be patient, watch the data and let the economy play out. You get no credit (regardless of what the sales person tells you) for being an early mover on rate increases.
Friday, August 3, 2012
Looking at Transportation The Way We Look at China's Economy
I have read a lot recently about how you get the real GDP numbers out of China. Don't bother with the government statistics rather just go look at the piles of coal at the electric power plants. As China has said their economy is doing fine, observers of coal piles have seen them grow and grow. Why is this important? The growth of the coal piles signifies a massive slow down in the demand for electricity which, in turns, means factories are idling. When factories idle, you have lower GDP. Voila! It may not be scientific however doing econometrics with raw data which is flawed is a waste of time.
So, I thought I would use this way to look at transportation and I did not like what I saw. Driving through Chicago yesterday passing by the big intermodal yards I saw stacks and stacks of 53' containers which clearly had been "mothballed". They were not at the yard "in transit" rather they were in the yard and parked. They were stacked high and tight. This indicates carriers are parking containers which clearly indicates a massive slowdown in freight pretty close to the time where it should be gearing up for the holidays.
All indications are the economy has softened dramatically and this is just another indicator. I may patent this methodology, go to Chicago every week and take a picture, compare them against previous weeks like you would a bar graph. My guess is this would be just as good as some of the other "analysis" I have seen.
So, I thought I would use this way to look at transportation and I did not like what I saw. Driving through Chicago yesterday passing by the big intermodal yards I saw stacks and stacks of 53' containers which clearly had been "mothballed". They were not at the yard "in transit" rather they were in the yard and parked. They were stacked high and tight. This indicates carriers are parking containers which clearly indicates a massive slowdown in freight pretty close to the time where it should be gearing up for the holidays.
All indications are the economy has softened dramatically and this is just another indicator. I may patent this methodology, go to Chicago every week and take a picture, compare them against previous weeks like you would a bar graph. My guess is this would be just as good as some of the other "analysis" I have seen.
Monday, July 30, 2012
Natural Gas - A Different View
One of my colleagues sent me a very interesting post which was the opening statement of David L. Greene, Oak Ridge National Laboratory to a committee looking into the uses of Natural Gas. While I am a big supporter of natural gas in transportation I think it is always good to get a balanced view to any topic. I have a saying I live by: "Nothing is ever as good as it seems and nothing is ever as bad as it seems". This is almost always true when there is a "gold rush" into anything. It was true of the Internet boom in the late '90s, turned out to be true in a devastating way with real estate and now, most likely, it is true in the natural gas boom. Here are a couple of points:
- Those who think NATGAS will remain wildly below the world price just because it is drilled here in the US may need a lesson in global economics. Fuel / Oil is a very fungible commodity and because gas can be liquefied it can and will be exported if there is an arbitrage opportunity.
- In order to keep up with emissions requirements and total GHG reductions, the entire infrastructure (if built) for NATGAS would need to be dismantled by 2050. I cannot vouch for the accuracy of this statement however it is right in line with what I have heard before which is NATGAS is somewhat of a "bridge" fuel. It does not satisfy our overall objective to get to sustainable fuels and renewable energy. But, and this is a big but, how long / far will the "bridge" be? If you assume 2050 as this article does then it probably does not make sense to build it. However, if you assume longer then it should be built. This requires forecasting, a crystal ball and a bit of luck. None of which I can do very well or possess.
- The differences in energy in NATGAS v. Diesel means a wholesale transition is highly doubtful.
The conclusions of the article are right in line with what I have been advocating all along: Conversion to alternative fuels, such as NATGAS, are engineering questions and should be dealt with in this fashion. A shipper needs to identify specific locations, specific applications and then decide type of fuel, truck etc. etc.
The future is going to be highly complex as there will not be a "one size fits all". Unfortunately, that takes 10X Thinking and we, as a species, tend to see the future through a rear view mirror. We want a new fuel source to replicate the structures of oil and that, I can forecast for sure, will not happen.
Wednesday, July 4, 2012
The Food Supply Chain - "Not in Season" Goes The Way of The Busy Signal
Remember when you would want some fruit or vegetable and your parents would tell you it was not available because it was "not in season".
"Not in season" is not something you hear much anymore; It has gone the way of the busy signal. Everything is in season somewhere in the world and the sophisticated food supply chains now bring it to you, where ever you are, and amazingly at very low cost.
Of course this comes at a cost of sustainability and there is now a big push to buy local. Buying local means, however, you will not get everything all the time. I recently read of a cherry farmer who lost his cherries in Michigan due to the crazy early warm weather we had this year. He was able to secure cherries in Poland! If it were not for a sophisticated supply chain this would not be possible. "Buy local" in this case would mean no cherry pie.
So, thanks to all the great individuals and suppliers working in this supply chain. Your innovation truly has made the world a better place and I really do believe we have "solved world hunger".
Friday, June 29, 2012
The Highway Bill - Is it Re-regulation in Disguise?
For many who have read my postings you know I personally believe there is a quiet re-regulation of the transportation (mostly full truckload) industry going on in the United States. Interestingly enough, this is mostly being led by the trucking companies themselves both indirectly and directly. As regulations have increased the profitability of the trucking companies has increased as well. It is as if they all just decided competing in an unregulated and highly efficient market was just too much to take. It is easier to publish a unified tariff and move on.
A stark example of this is in the new highway bill. In an article written in Logistics Week Bill Graves, the ATA President hails this bill for doing the following:
A stark example of this is in the new highway bill. In an article written in Logistics Week Bill Graves, the ATA President hails this bill for doing the following:
- Requiring electronic on board recorders for hours of service compliance
- Establishing a central clearing house for Drug and Alcohol testing
- Establishment of standards for systems to provide employers notification of moving violations
- Mandatory testing of new carriers coming into the business around safety (Read: Increase the barrier to entry)
There was a day when any transportation executive would be appalled at the above mainly because it increases regulation, decreases competition and creates barriers to entry to the industry. This will all result in bad news for shippers as the carriers will use these "new regulations" as an excuse to raise rates. The savvy shippers will remember who actually put these regulations in place in the first place: The trucking industry.
One thing the new Highway bill does not do: Fund infrastructure repairs so our roads and highways become less congested and more conducive to transportation.
Next up I will deal with how this is being paid for and here is a little hint: If you think you are getting a defined benefit pension plan, you just contributed!
Tuesday, June 12, 2012
Impact of Mega Trends - Design for Logistics
As transportation rates and capacity go through a major change one trend which is clearly developing is what I have called "Design for Logistics". This "mega trend" ensures the logisticians are involved in the design of the product at the very early stages of development and the reason for this is mostly cube utilization.
We have known for quite some time a critical way to reduce spend is just to consume less. Seems very logical to me and really passes for being a truism in our industry. However, what has not happened until recently (on a large scale) is people thinking about this before the product is actually designed and built. As we all know, once the tooling is in place to make the product the goal of the manufacturing group is to run the tool to death; at that point a change in design becomes very costly and almost impossible to execute.
The solution therefore is to get the logistician involved on the front end. Of course, we do not want to build any "Aztecs" here (really ugly products which were made ugly to make manufacturing and logistics more efficient). First and foremost, the product has to meet customer needs and, in most cases, actually "wow" the customer. However, once we identify the critical components of the product which create that emotion with the consumer, we then take the rest of it and design the hell out of it for efficiency in logistics. This usually means cube utilization.
I heard a high level executive for a major truck stop firm say his fuelings were down by 15% and he was attributing it to more "stuff in the back of the trucks" and therefore less trucks. I am not sure he had real data to support it however given my experience I believe he was right. And this trend will continue. The logical and ultimate conclusion is to eliminate shipments completely (aka, Nook/Kindle e-books and iTunes stores). We know not everything can be digitized however things can be made smaller, packed tighter and assembled at the point of use versus at a factory (Think IKEA furniture).
If you have not instituted this process in your company, and transportation costs are meaningful to your business, you should immediately think about this important topic. It is far more complex than I have written here and there are clearly ways to be successful at this and ways to screw it up however you should start it now.
We have known for quite some time a critical way to reduce spend is just to consume less. Seems very logical to me and really passes for being a truism in our industry. However, what has not happened until recently (on a large scale) is people thinking about this before the product is actually designed and built. As we all know, once the tooling is in place to make the product the goal of the manufacturing group is to run the tool to death; at that point a change in design becomes very costly and almost impossible to execute.
The solution therefore is to get the logistician involved on the front end. Of course, we do not want to build any "Aztecs" here (really ugly products which were made ugly to make manufacturing and logistics more efficient). First and foremost, the product has to meet customer needs and, in most cases, actually "wow" the customer. However, once we identify the critical components of the product which create that emotion with the consumer, we then take the rest of it and design the hell out of it for efficiency in logistics. This usually means cube utilization.
I heard a high level executive for a major truck stop firm say his fuelings were down by 15% and he was attributing it to more "stuff in the back of the trucks" and therefore less trucks. I am not sure he had real data to support it however given my experience I believe he was right. And this trend will continue. The logical and ultimate conclusion is to eliminate shipments completely (aka, Nook/Kindle e-books and iTunes stores). We know not everything can be digitized however things can be made smaller, packed tighter and assembled at the point of use versus at a factory (Think IKEA furniture).
If you have not instituted this process in your company, and transportation costs are meaningful to your business, you should immediately think about this important topic. It is far more complex than I have written here and there are clearly ways to be successful at this and ways to screw it up however you should start it now.
The EPA May Have Got it Right
For the last 4 - 6 years we have heard many people grumbling about the need to clean up diesel trucks from an environmental perspective. All the same arguments heard whenever new goals are set were rolled out: "It will cost a fortune", "It will never work", "The technology doesn't exist"... etc. etc. Same comments made by the automotive companies when the initial clean air act was passed and now we hear them again when it comes to Natural Gas. Now, in an article entitled, The Emissions Dividend in Fleet Owner Magazine, we find out the EPA may have been right. Thank goodness they stuck to their guns.
What is even more fascinating about the data in the article is it seems to suggest now that all these changes may actually end up in reduced costs for the carriers. Engines are lasting a million miles, drain intervals are being extended and other operating costs are improving. Yes, the acquisition costs of the engines may be higher but it appears there is evidence the total cost of ownership (Generally figured by adding: Acquisition costs+ownership cost-residual revenue) may actually be lower. It is certainly improving and this is verified by a presentation I was at where a very large trucking company confirmed this phenomenon.
As a shipper it has to make you wonder what all this talk is of "increased costs"? Yes, there are increased acquisition costs but it is TCO I am concerned about. If TCO is decreasing that is a good thing isn't it.
This reinforces why, as a shipper, you have to understand the costing model of transportation as well or better than anyone in the industry.
Could you imagine what LA would be like from a smog perspective if the EPA had not stuck to its guns all these years? It would have been a disaster. Now, it looks like the same success is coming to the actions concerning diesel trucking. Congratulations EPA... and my future grandchildren thank you.
What is even more fascinating about the data in the article is it seems to suggest now that all these changes may actually end up in reduced costs for the carriers. Engines are lasting a million miles, drain intervals are being extended and other operating costs are improving. Yes, the acquisition costs of the engines may be higher but it appears there is evidence the total cost of ownership (Generally figured by adding: Acquisition costs+ownership cost-residual revenue) may actually be lower. It is certainly improving and this is verified by a presentation I was at where a very large trucking company confirmed this phenomenon.
As a shipper it has to make you wonder what all this talk is of "increased costs"? Yes, there are increased acquisition costs but it is TCO I am concerned about. If TCO is decreasing that is a good thing isn't it.
This reinforces why, as a shipper, you have to understand the costing model of transportation as well or better than anyone in the industry.
Could you imagine what LA would be like from a smog perspective if the EPA had not stuck to its guns all these years? It would have been a disaster. Now, it looks like the same success is coming to the actions concerning diesel trucking. Congratulations EPA... and my future grandchildren thank you.
Thursday, June 7, 2012
Sustainability - Why Not?
I had an interesting revelation today as I drove my hybrid to work. Many people will rationalize why they are not living a sustainable life - leaving a better planet to their heirs than they gained from their parents. They will go through the "personal business case", they will try to deny the science of the changing planet or, some, will hold onto a belief that it is our God given right to do whatever we want to the planet.
Of course, all of those are what we call excuses and rationalizations. My observation is many who do not care about sustainability are the exact people who can afford it and are benefited by it.
So, next time you rationalize your unsustainable behavior ask yourself, why not? Why not take the few extra minutes to recycle? Why not spend an extra $1K to get a sustainable automobile? Why not buy local so things don't have to be transported so far.. etc. etc.
The key question for all of us: Why Not?
Of course, all of those are what we call excuses and rationalizations. My observation is many who do not care about sustainability are the exact people who can afford it and are benefited by it.
So, next time you rationalize your unsustainable behavior ask yourself, why not? Why not take the few extra minutes to recycle? Why not spend an extra $1K to get a sustainable automobile? Why not buy local so things don't have to be transported so far.. etc. etc.
The key question for all of us: Why Not?
Tuesday, May 29, 2012
Leadership in Logistics is As Important as The Technical
I have always believed leadership in the logistics field is as important, and maybe more important, as the technical aspects of the job. As a logistics and supply chain executive you will be responsible for leading many people and, in fact, what you do will be far more about leadership than about your technical expertise. The people you lead will have the technical expertise and the question is can you get them to do what needs to be done and have them use their ingenuity and innovation to go beyond anything you may have thought imaginable. Some of this was discussed in detail in Adrian Gonzales' article: Putting Leadership Development Back on Your Calendar.. and Your Budget! He makes a lot of great points showing how important this is to the logistics and supply chain professional.
There are also many great development programs where you can "sharpen your saw" (Stephen Covey) such as the Executive Masters for International Logistics and Supply Chain Strategy (EMIL-SCS) at Georgia Tech. This will help you gain technical expertise and help you gain leadership expertise.
Having said all of this, I love to listen to Clay Christensen of Harvard University speak. He is brilliant in business (The Innovator's Dilemma), he is a moral and good man and he is a great leader. His new book How Will You Measure Your Life is a "Must Read". Listen to Professor Christensen speak on leadership, a moral compass and a direction to take in life. As yourself what makes the "measure of a man"? How will you judge your life? Will it be by money or by status or will it be by the good you do and what you leave to the rest of the world upon your passing? I ask you, especially if you are starting out, to think deeply about this topic and question. This is the core question to answer.
When answering, don't forget the great words of John Bogle, Founder of Vanguard Group: "Not everything that can be counted counts and not everything that counts can be counted".
There are also many great development programs where you can "sharpen your saw" (Stephen Covey) such as the Executive Masters for International Logistics and Supply Chain Strategy (EMIL-SCS) at Georgia Tech. This will help you gain technical expertise and help you gain leadership expertise.
Having said all of this, I love to listen to Clay Christensen of Harvard University speak. He is brilliant in business (The Innovator's Dilemma), he is a moral and good man and he is a great leader. His new book How Will You Measure Your Life is a "Must Read". Listen to Professor Christensen speak on leadership, a moral compass and a direction to take in life. As yourself what makes the "measure of a man"? How will you judge your life? Will it be by money or by status or will it be by the good you do and what you leave to the rest of the world upon your passing? I ask you, especially if you are starting out, to think deeply about this topic and question. This is the core question to answer.
When answering, don't forget the great words of John Bogle, Founder of Vanguard Group: "Not everything that can be counted counts and not everything that counts can be counted".
Saturday, May 26, 2012
T. Boone Pickens on Morning Joe
I saw Boone on Morning Joe and I finally have got around to posting it. A fantastic interview from a man who is actually working like crazy to save America. Thank goodness for his common sense and I hope Washington will listen.
For those in the logistics industry, come to the CSCMP 2012 meeting in Atlanta and here him keynote!
For those in the logistics industry, come to the CSCMP 2012 meeting in Atlanta and here him keynote!
Alternative Energy and ACT Expo in Long Beach
A week ago I attended the ACTexpo in Long Beach and I came away more excited about alternative energy solutions than I was before the event. The lessons learned and the excitement around alternative energy (Mostly CNG and LNG) were fantastic.
The first item I was genuinely excited about was the transition to these fuels will not be government subsidy driven. Rather, the pure economics of the conversion will take precedent and those who see the value will convert on their own. We will truly do "Good for the planet while doing Good for our companies"
The second item and the clear overarching lesson is when a company is going to move to alternative fuels it truly is an engineered solution. By far, the biggest question was: Is it LNG or CNG for the future? Most respondents would make blanket answers as if it was an all or nothing. I continue to say you have to think of this as akin to a stock portfolio: Some bonds, some cash, some stocks. And you adjust based on the economics and your personal situation.
Alternative fuels are exactly the same: Some LNG, some CNG, a lot of diesel, maybe some hybrid (we will see where this goes - the hybrid discussions were the most disappointing). A company thinking of an alternative fuels strategy needs to do deep and INDEPENDENT analysis on what their applications are now and anticipated to be, the pros and cons of each application, the economics and then start putting the program together. My feeling is those who just jump in because it is "cool" and it makes them look like they are doing "something" may find their portfolio all upside down and it will be tough to correct.
I highly encourage this conference. A great place to learn a lot. Just keep your thinking cap on and understand a lot of people are there to sell what they have. The true answer is analyzing what the shipper wants and then finding the right mix.
The first item I was genuinely excited about was the transition to these fuels will not be government subsidy driven. Rather, the pure economics of the conversion will take precedent and those who see the value will convert on their own. We will truly do "Good for the planet while doing Good for our companies"
The second item and the clear overarching lesson is when a company is going to move to alternative fuels it truly is an engineered solution. By far, the biggest question was: Is it LNG or CNG for the future? Most respondents would make blanket answers as if it was an all or nothing. I continue to say you have to think of this as akin to a stock portfolio: Some bonds, some cash, some stocks. And you adjust based on the economics and your personal situation.
Alternative fuels are exactly the same: Some LNG, some CNG, a lot of diesel, maybe some hybrid (we will see where this goes - the hybrid discussions were the most disappointing). A company thinking of an alternative fuels strategy needs to do deep and INDEPENDENT analysis on what their applications are now and anticipated to be, the pros and cons of each application, the economics and then start putting the program together. My feeling is those who just jump in because it is "cool" and it makes them look like they are doing "something" may find their portfolio all upside down and it will be tough to correct.
I highly encourage this conference. A great place to learn a lot. Just keep your thinking cap on and understand a lot of people are there to sell what they have. The true answer is analyzing what the shipper wants and then finding the right mix.
Thursday, May 3, 2012
Cost Cutting or Restructuring?
I heard the silliest argument on CNBC today asking whether a company is engaged in "cost cutting" or "restructuring". What the heck is the difference you ask? A person went on to explain a convoluted explanation when, in fact, they are one and the same thing: Cost Management.
Cost management is to continually look for the most efficient manner in getting products or services to market. It is that simple.. You get more units of output for every unit of input. Whether that input be capital or labor it does not matter in the financial equation.
Further, every company should always be doing this. It is, in fact, why you are in business and why you "add value" and how you gain competitive advantage.
So, let's stop the silly arguments of what we call it, realize it for what it is and move on. I could have saved CNBC 5 minutes of their silly showtime.
Cost management is to continually look for the most efficient manner in getting products or services to market. It is that simple.. You get more units of output for every unit of input. Whether that input be capital or labor it does not matter in the financial equation.
Further, every company should always be doing this. It is, in fact, why you are in business and why you "add value" and how you gain competitive advantage.
So, let's stop the silly arguments of what we call it, realize it for what it is and move on. I could have saved CNBC 5 minutes of their silly showtime.
Thursday, April 26, 2012
Turning Over Procurement of Carriers to a 3PL?
I have met many companies recently who not only have outsourced their operations to a 3PL but they have also turned over the procurement and carrier relations functions as well. I think this is a bad idea.
I believe this for at least three reasons. First, and the most obvious, is you have turned over the entire budget to a company which, most likely, has conflicting interests to your own. At some level, the 3PL is interested in making money for their company and many times actions which accomplish this do not also help the client company. Can you develop complex gainshare algorithms which limit this problem? Yes, but it is very unlikely you will get them to work.
Second, you limit your ability to exit the 3PL relationship if needed. Everyone goes into 3PL relationships thinking they will never end and this makes sense. You do not get married and immediately plan on getting a divorce. However, in business, ensuring you have an exit strategy is a good and prudent thing to do. When you turn over the procurement portion to the 3PL you have complicated any exit if needed.
Finally, you will lose critical intellectual capital. When dealing with a 3PL it is important the shipper maintain the intellectual capital needed to fully understand the areas of warehousing and transportation management.
For all these reasons I would highly recommend shippers retain the procurement function. Just seems to make sense to me.
I believe this for at least three reasons. First, and the most obvious, is you have turned over the entire budget to a company which, most likely, has conflicting interests to your own. At some level, the 3PL is interested in making money for their company and many times actions which accomplish this do not also help the client company. Can you develop complex gainshare algorithms which limit this problem? Yes, but it is very unlikely you will get them to work.
Second, you limit your ability to exit the 3PL relationship if needed. Everyone goes into 3PL relationships thinking they will never end and this makes sense. You do not get married and immediately plan on getting a divorce. However, in business, ensuring you have an exit strategy is a good and prudent thing to do. When you turn over the procurement portion to the 3PL you have complicated any exit if needed.
Finally, you will lose critical intellectual capital. When dealing with a 3PL it is important the shipper maintain the intellectual capital needed to fully understand the areas of warehousing and transportation management.
For all these reasons I would highly recommend shippers retain the procurement function. Just seems to make sense to me.
Sunday, April 22, 2012
Are You Truly Dedicated to Sustainability?
This is a question I ponder all the time. While I am thrilled when people do anything to help the planet, regardless of motives, I do wonder what would happen if people really were dedicated to this important initiative. While we all know the "big things" to do (i.e., alternative fuels, recycle, etc.) I wonder how much impact we could make if we all just did some of the small things. So here are just a few things you can do starting TODAY to make the planet a better place:
1. Regardless of the type of vehicle you own, drive the speed limit. Reduces emissions and saves gas. Nothing infuriates me more than to see a hybrid drive driving 80 - 90 miles an hour.
2. Recycle, recycle, recycle.. Including composting
3. Buy less stuff.. Everything you buy comes to you on a truck, using fuel and will eventually have to be disposed of. Less stuff means less of all that.
4. Go on a diet and eat locally grown items. This is an amazing task which is great for everyone. You will be healthier (I know, I am one to talk but I have lost a lot of weight and will continue!), less food will need to be grown, and less trucks needed to drive all that food around if you buy locally.
Here is a small example: We are spreading mulch to make our garden better and hopefully return oxygen to the environment. We needed to put down weed blocker and rather than go buy it, we used old newspaper to do this. It got rid of waste, we saved money and it eliminated the need for the weed blocker which means one less roll needed to be shipped. If everyone did this and we reduced the need by thousands (Sorry if you are in the weed blocker industry) then we could actually take trucks off the road, reduce emissions and reduce the need for diesel fuel.
Here are some other ideas from The Wall Street Journal.
This is the way we can all contribute on a small level as we all work hard to make big changes as well.
Just a thought...
Happy Earth Day!!
1. Regardless of the type of vehicle you own, drive the speed limit. Reduces emissions and saves gas. Nothing infuriates me more than to see a hybrid drive driving 80 - 90 miles an hour.
2. Recycle, recycle, recycle.. Including composting
3. Buy less stuff.. Everything you buy comes to you on a truck, using fuel and will eventually have to be disposed of. Less stuff means less of all that.
4. Go on a diet and eat locally grown items. This is an amazing task which is great for everyone. You will be healthier (I know, I am one to talk but I have lost a lot of weight and will continue!), less food will need to be grown, and less trucks needed to drive all that food around if you buy locally.
Here is a small example: We are spreading mulch to make our garden better and hopefully return oxygen to the environment. We needed to put down weed blocker and rather than go buy it, we used old newspaper to do this. It got rid of waste, we saved money and it eliminated the need for the weed blocker which means one less roll needed to be shipped. If everyone did this and we reduced the need by thousands (Sorry if you are in the weed blocker industry) then we could actually take trucks off the road, reduce emissions and reduce the need for diesel fuel.
Here are some other ideas from The Wall Street Journal.
This is the way we can all contribute on a small level as we all work hard to make big changes as well.
Just a thought...
Happy Earth Day!!
Friday, April 20, 2012
Sustainability - It is About A Complete and Holistic Strategy
I am somewhat fascinated when I discuss sustainable supply chains with people. I usually either get an "all or nothing" answer, an answer which is tied to a pet project, or the occasional "sustainability does not matter" answer (thankfully those people now are few and far between).
The clear proposal is good sustainable supply chain programs have to encompass a holistic view involving everything from how products are designed and packaged, how they are shipped, the type of fuel used when shipped and how the product is recovered at the end of life. You cannot have a true sustainability program without looking at at least all the attributes listed above (they are not all inclusive).
So, the next time you address this topic make sure the "all or nothing" group does not rule the conversation. Break the problem down into small pieces and attack each one. This is your best solution.
The clear proposal is good sustainable supply chain programs have to encompass a holistic view involving everything from how products are designed and packaged, how they are shipped, the type of fuel used when shipped and how the product is recovered at the end of life. You cannot have a true sustainability program without looking at at least all the attributes listed above (they are not all inclusive).
So, the next time you address this topic make sure the "all or nothing" group does not rule the conversation. Break the problem down into small pieces and attack each one. This is your best solution.
Monday, April 16, 2012
Ryder Launches Military Veteran Site
Great progress from Ryder Corporation. I guest blogged on Logistics Viewpoints recently about how great companies will leverage the returning veterans as a great base of fantastic employees. This week Ryder announced (as reported on Logistics Viewpoints) a new employment website targeted at military veterans. Apparently you can put in your MOS (Military Occupational Specialty) and it will filter to the jobs available for your skill.
Congratulations to Ryder for "getting it" and leveraging the skills of our returning veterans.
Congratulations to Ryder for "getting it" and leveraging the skills of our returning veterans.
Monday, March 26, 2012
Driver Wages - Really Going Up or "Signaling"?
An interesting article trying to quantify what driver wages would have to hit to be at the equilibrium point. However, this data is meaningless unless you determine what the target price is for transportation services? At what point to shippers move to substitutes to offset transportation increases?
Some may think substitutes are only in the mode of transportation however that is the least efficient way to substitute. Shippers are always tweaking around the edges with mode transfers etc. however the most efficient and biggest impact areas for shippers to evaluate are activities such as mfg site selection, load ability, inventory trade offs etc.
At what point do transportation rates get so high that the shipper changes their operational methodologies? Until you know the answer to this question it is hard to determine what wage rate will be the equilibrium / market clearing wage rate.
Some may think substitutes are only in the mode of transportation however that is the least efficient way to substitute. Shippers are always tweaking around the edges with mode transfers etc. however the most efficient and biggest impact areas for shippers to evaluate are activities such as mfg site selection, load ability, inventory trade offs etc.
At what point do transportation rates get so high that the shipper changes their operational methodologies? Until you know the answer to this question it is hard to determine what wage rate will be the equilibrium / market clearing wage rate.
Sunday, March 25, 2012
Is The Trucking Industry Rebounding?
There is anecdotal evidence based on an informal count of trucks on the NJ turnpike showing an increase in truck traffic. I warn you, this informal study reported on CNBC is about as informal and non scientific as you can get however when you tie it to other evidence (i.e, FEDEX financial results - profit doubles) you see some coalescing evidence that the economy is picking up and trucks are moving.
However, if you take the comments by FEDEX CFO Alan Graf at his word, evidence is the economies of the world are not growing fast enough to offset things such as high unemployment
There is a mixed bag I guess. I chose to believe the former rather than the later.
However, if you take the comments by FEDEX CFO Alan Graf at his word, evidence is the economies of the world are not growing fast enough to offset things such as high unemployment
There is a mixed bag I guess. I chose to believe the former rather than the later.
Monday, March 19, 2012
Diesel to $4.14.. Highest since the record setting 2008
Yikes! Perhaps we will now get serious about alternative energies. As a reminder, this is not a supply problem. It is a world market and the price is going up.
Penn Wells Considered Safe by EPA - Fracking Politics
The politics around fracking, the way we are getting natural gas out of the ground, has been somewhat unbearable. Here is the first time I have read good "science" behind the argument and it looks like the politics were much ado about hype than anything.
Keep an eye on this. Natural Gas is the way our Country will get off our addiction to foreign oil. I fully support a strict and detailed EPA enforcement to ensure we do not fix one problem and cause another. However, I want to also ensure we use science and not politics to solve the problem.
Keep an eye on this. Natural Gas is the way our Country will get off our addiction to foreign oil. I fully support a strict and detailed EPA enforcement to ensure we do not fix one problem and cause another. However, I want to also ensure we use science and not politics to solve the problem.
Apple and iPad 3 Put Strain on Airfreight Rates and Capacity
As is being reported by multiple sources, airfreight rates are going up if you can find the capacity at all. This, mostly, is due to Apple and the launch of the iPad 3.
Amazing that one company and just one product can do this but when it is Apple anything is possible. My sources tell me this could continue for 3 - 12 weeks depending on sales. Given that sales are already being pushed out if you order on line (indicating they are already in a backorder situation) my guess and money is on the bigger number.
Amazing that one company and just one product can do this but when it is Apple anything is possible. My sources tell me this could continue for 3 - 12 weeks depending on sales. Given that sales are already being pushed out if you order on line (indicating they are already in a backorder situation) my guess and money is on the bigger number.
Sunday, March 18, 2012
UPS In Tentative Deal to Buy TNT Express
As reported on CNBC, looks like UPS will buy TNT Express after all. My guess is this is all about taking on DHL in Europe however I do not know for sure. I have never been a big fan of logistics companies purchasing others unless there is underlying technology you need.
My guess is UPS does not need any technology TNT has. It is dangerous to buy just for a "customer list". Acquisitions are generally not a "10X idea". They usually occur when management is out of ideas.
My guess is UPS does not need any technology TNT has. It is dangerous to buy just for a "customer list". Acquisitions are generally not a "10X idea". They usually occur when management is out of ideas.
Tuesday, March 13, 2012
The Case for Sustainable and Ethical Supply Chains
For most of my readers it will not come as a surprise I am a bit of liberal when it comes to ownership for the sustainability of your supply chain. It is just a fact that companies must take ownership of this and your customers, more and more, are becoming "sustainable aware" of what it takes to get them your product. Further, they are going to punish you for not caring for the environment.
But, what about ethics? This is the next area and it is more difficult as it is harder to measure. We know slavery is wrong and we know if we see great working conditions that is good. However, what about in between? Does $2 per day seem unethical even though when you account for purchase power parity it may not be too bad? This is the dangerous area and precisely why companies have to take control of their entire supply chain and ensure there is nothing which can even be perceived as being unethical or immoral in how things are made, how people are treated and how the Earth is treated.
This article in Forbes on Sustainable and Ethical Supply Chains sums it up well. Two big examples of problems and then fixes. Nike in the '90s had real issues with this and Apple does today. Both moved and are moving aggressively to tray to stop the unethical behavior and both have brand names that allow them a bit of latitude. Bottom line: They have provided so much value to the customer that the customer will forgive a transgression as long as they actively fix it and fix it fast.
The key question for you is whether your brand is that strong? Most are not. Most will be dead on arrival if they are seen to be exploiting people or the environment for financial gain.
The bottom line: Take control of your supply chain, have a good code of conduct, demand compliance and put in strict audit systems to ensure compliance is occurring. Trust but verify is the name of the game.
Don't let your zeal to jump on the outsourcing bandwagon cause you to put your brand and your entire company's future in jeopardy.
But, what about ethics? This is the next area and it is more difficult as it is harder to measure. We know slavery is wrong and we know if we see great working conditions that is good. However, what about in between? Does $2 per day seem unethical even though when you account for purchase power parity it may not be too bad? This is the dangerous area and precisely why companies have to take control of their entire supply chain and ensure there is nothing which can even be perceived as being unethical or immoral in how things are made, how people are treated and how the Earth is treated.
This article in Forbes on Sustainable and Ethical Supply Chains sums it up well. Two big examples of problems and then fixes. Nike in the '90s had real issues with this and Apple does today. Both moved and are moving aggressively to tray to stop the unethical behavior and both have brand names that allow them a bit of latitude. Bottom line: They have provided so much value to the customer that the customer will forgive a transgression as long as they actively fix it and fix it fast.
The key question for you is whether your brand is that strong? Most are not. Most will be dead on arrival if they are seen to be exploiting people or the environment for financial gain.
The bottom line: Take control of your supply chain, have a good code of conduct, demand compliance and put in strict audit systems to ensure compliance is occurring. Trust but verify is the name of the game.
Don't let your zeal to jump on the outsourcing bandwagon cause you to put your brand and your entire company's future in jeopardy.
Monday, March 12, 2012
CASS Freight Indices
I should have remarked on this earlier although I have been busy, busy, busy! Looks like freight rates have leveled off from the somewhat aggressive increases over the last few months. Intermodal seems flat while truck rates are up a bit. This is what the CASS data would suggest although I personally think generalizing about this is a very dangerous game.
Depending on your freight flows and freight characteristics you may or may not see this trend. If you are a "mega shipper" then perhaps the averages apply however most have specific and unique freight patterns. My advice is to dive deep into those patterns and understand, in depth, regional movements along with nuances in the areas you operate.
Depending on your freight flows and freight characteristics you may or may not see this trend. If you are a "mega shipper" then perhaps the averages apply however most have specific and unique freight patterns. My advice is to dive deep into those patterns and understand, in depth, regional movements along with nuances in the areas you operate.
What Makes Tomorrow's Leaders
I am reading a lot about this subject and I suppose the driving force is I now have a son in college. I wonder what he will want to do ultimately with his life. As I read I see some common threads in tomorrow's leaders no matter what discipline they are in (so, these apply to supply chain people).
First, learn languages! This is an absolute must and one which is tough for Americans to get their arms around. If you cannot speak at least one other language other than English you are essentially toast. Two or three are even better. The best people I see in business today are very comfortable moving between languages.
Second, be prepared, willing and excited about moving globally. I met a person the other day who had run an operation in Russia, is now in China, travels frequently to the US and is a German national. OK, you may not be able to do all that but understand that is who you are competing with. Unfortunately, most people elsewhere in the world are far more comfortable doing this than Americans are.
Third, be a leader. It just does not matter what you do (unless you are going to be a highly skilled technocrat / individual contributor your entire life. No matter what you do in life, you will need to be a leader.
Fourth, never stop learning! When I interview people I ask what book they most recently read and you would be amazed how many really cannot remember one or if they did read it, it is clear they just skimmed it. Reading things such as the Harvard Business Review, The Economist, The NY Times and The Wall Street Journal are a must. Put down the remote, turn off the T.V. and read!
These are just a few of my thoughts on this topic. There are a lot more I know. I wanted to get these out fast.
First, learn languages! This is an absolute must and one which is tough for Americans to get their arms around. If you cannot speak at least one other language other than English you are essentially toast. Two or three are even better. The best people I see in business today are very comfortable moving between languages.
Second, be prepared, willing and excited about moving globally. I met a person the other day who had run an operation in Russia, is now in China, travels frequently to the US and is a German national. OK, you may not be able to do all that but understand that is who you are competing with. Unfortunately, most people elsewhere in the world are far more comfortable doing this than Americans are.
Third, be a leader. It just does not matter what you do (unless you are going to be a highly skilled technocrat / individual contributor your entire life. No matter what you do in life, you will need to be a leader.
Fourth, never stop learning! When I interview people I ask what book they most recently read and you would be amazed how many really cannot remember one or if they did read it, it is clear they just skimmed it. Reading things such as the Harvard Business Review, The Economist, The NY Times and The Wall Street Journal are a must. Put down the remote, turn off the T.V. and read!
These are just a few of my thoughts on this topic. There are a lot more I know. I wanted to get these out fast.
Welcome to SupplyChainBrain: Who’s to Blame for Ocean Carriers’ Losses?
Welcome to SupplyChainBrain: <font size=2>Who’s to Blame for Ocean Carriers’ Losses?</font>
Incredible that this group has allowed this to continue. However they continue to miss the "boat" per se. They talk about exchanging rates for service however most do not provide service levels needed. No value exchange there.
Overall, good article about the state of the container shipping industry.
Incredible that this group has allowed this to continue. However they continue to miss the "boat" per se. They talk about exchanging rates for service however most do not provide service levels needed. No value exchange there.
Overall, good article about the state of the container shipping industry.
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