Tag Archive: transportation

The Sheer Relevance & Impact of Transportation (A Billion Here, a Billion There)

November 24th, 2018

Recently, I attended Mobility 21, the Southern California transportation coalition, and it reminded me of the sheer relevance of transportation.  No manufacturer can operate without transportation: distributors are out of business without trucks dropping off and picking up, healthcare would stop functioning and our frequent Amazon orders would be a thing of the past.  In essence, everything would come to a grinding halt!     

Certainly, trucks are what we typically think about when it comes to transportation.  They account for $722 billion in freight flows with Canada and Mexico, for example. Whereas rail still accounts for $174 billion (not pocket change).  The ports are our gateway to the rest of the world (and the Los Angeles ports alone bring in 40% of the U.S. volume). Air carries an impressive number of packages especially with the rise of e-commerce. UPS and FedEx are expanding at amazing rates, especially at Ontario airport, the hub of e-commerce activity.  For example, during the 2017 peak season, this region of UPS alone processed 13.1 million packages!

At Mobility 21, there were some interesting statistics throw out:

  • AAA has 60,000 service calls per day
  • Transportation has a $700 billion dollar economic impact on Southern California and accounts for 1/3 of the jobs in Southern CA!  
  • 350 billion miles each year are driven in California
  • The number of trucks is expected to go from 1.8 trillion to 3.9+ trillion by 2045
  • And the list goes on….

What Should We Consider and/or What Impacts Could Arise?
At a minimum, why not take a step back to think about your transportation network?  What does it look like? How do you receive materials and products? Do you use the ports?  Air? Rail? Undoubtedly, you use trucks! How expansive is your network? Are there many players involved?  Since it could cause your operations to cease, it makes sense to find out!

Next, think about what you’d like your transportation network to deliver.  Do your customers expect rapid deliveries and “above and beyond” service? If so, who is your partner in ensuring this occurs?  

Your transportation partners are your last face to your customer. And, in today’s marketplace, there is a significant demand and challenges your transportation partners must navigate.  If you plan to be successful, you must stay on top of your transportation network and partners. Are you attractive to them? Perhaps we better think about that further….



What’s Next in the Supply Chain?

August 10th, 2018

Our most successful clients always ask “What’s next?” as they want to stay ahead of the curve.  It is quite clear that staying on top of current trends and what is expected down-the-road is essential to successfully navigating your business to scalable, profitable growth.

For example, if you think your industry might develop a new way of servicing customers, you need to attack it quickly as you afford to be left in the dust.  Clearly, providing an exceptional customer experience is important but so is developing this new service method in a scalable, profitable way. It will be much harder if behind the eight ball. Are you thinking about what is next?

With our definition of the supply chain from creation to customer, there are countless topics to be thinking about when it comes to What’s Next:

  • New Products and Services: What new products and services will your customers want?  We have found that most customers (just like most of our clients) might not know yet.  You better be thinking about it and prompting ideas!
  • Suppliers: What new materials, components and supplies will you need to improve performance at a lower cost? (These win-win successes require innovation and collaboration.)
  • Transportation: What’s next in transportation?  Think of the relevance – from suppliers to manufacturers, from manufacturers to manufacturers, from manufacturers to distributors, from distributors to end customers, from one facility to another facility, and so on.
  • Technology:  What’s next in technology as it connects each of these people along with equipment, and much more (think IoT) with data and information flows.  We find that this often-times can be the bottleneck to achieving scalability.
  • Manufacturing:  What’s next in manufacturing?  Even if you aren’t thinking about using 3D printing, you should be considering the impacts if your competition, your suppliers, your customers and more start using this additive manufacturing capability.  It is likely to impact every step of the supply chain. What else is likely to happen in your industry?
  • Distribution:  What’s next in distribution?  In your industry, what is essential?  To think about distribution, you must think about your customers’ needs.  You also should be thinking about the rest of your supply chain. For example, if 3D printing takes off, it changes the distribution model.  If e-commerce continues to be important, your entire setup would change if you are more traditional currently. Do customers want you to take over worrying about what to stock and where to stock it?  Perhaps you should suggest taking on VMI/ replenishment.
  • Customers: What’s next with your customers?  How about your customers’ customers? Are you even talking with your customers’ customers?  Do you understand the industry trends throughout your chain? If you aren’t getting out of your office with an internal focus, you won’t.  Who have you called lately? Who have you visited? Do you ask questions? Attend conferences?
  • People:  What’s next with your colleagues and partners?   Nothing else will be achievable if you don’t have the best people on the team.  It wasn’t that long ago we thought virtual meetings were a big deal. Now they occur daily.  (Remember, illennials often-times like coming into the office for the community – and prefer the Google-like environment.)

Thinking about what’s next can distinguish you from your competition.  Eventually, a decision will arise that requires this knowledge. If thinking of the future is part of your daily culture, you’ll pass by the rest!

 



Conflict & Collaboration in the Supply Chain

August 5th, 2018

Have you thought about the role of conflict and collaboration in the supply chain?  When thinking of supply chain from creation to customer, there are many links and connections.  In the current supply chain model, there are connections between and among suppliers, transportation partners, manufacturers, outside processors, distributors, customers, end consumers, and much more.

Within any of these connection points, there are another set of links and connections between new product development/ R&D, sales, operations, finance, HR/ staffing, and any more.  Given the sheer number of variations of connections, it becomes a critical link in achieving success.

Therefore, the concepts of conflict and collaboration take on an elevated level of importance.  In the modern supply chain, even competitors collaborate. At a recent Harvey Mudd executive roundtable, we had a discussion on competition.  After stimulating the discussion, it turned out that almost everyone had an example of collaborating with the competition in order to thrive in today’s Amazonian, customer-focused marketplace.  

So, the question becomes: Should we encourage conflict or collaboration?  

We say “both”. To keep a healthy debate and focus on evaluating options including those we are likely to dismiss, we must encourage conflict and a difference of opinions.  Our most successful clients put various people from different functions, geographies and backgrounds together to stimulate healthy conflict and new ideas.

For example, in one client, a non-technical person from the office asked the key question that prompted the idea for a technical solution to improve the performance of the key operation that held up orders to customers.

On the other hand, learning the art of collaboration is bedrock to sustainable success.  

For example, in order to find a win-win with a competitor, it requires innovative and collaborative thinking.  Are you deliberately putting you and your team into the position to collaborate with those who might not have the same view?  

So long as you set up guidelines and an overarching high-level objective, they’ll find a way to collaborate to new heights.



There is More to Chicago than Good Pizza. Logistics Anyone?

July 23rd, 2018

 

My aunt worked at CSX rail outside Chicago for her entire career.  Growing up, it sounded like odd, middle of the night shifts was what rail was all about.  Now, rail – and specifically Chicago – have become strategic. As people moved west in the good old days, Chicago became a rail hub, and it remains so today.  

When having supply chain network strategy discussions with clients, Chicago often arises since it connects rail across the country. Now Chicago has expanded beyond rail to become a high-tech logistics hub.  And with transportation rates tight with no end in sight, we better pay attention to the impacts of Chicago logistics!

Chicago logistics is all about connectivity.  Connecting the east with the west, Chicago is a natural hub.  5 international airports, 7 Class I railroads carrying 50% of the nation’s freight (think of the enormity of that figure!), 3rd largest intermodal port in the world, 3rd largest interstate highway system in America, and more.  Chicago is the leader in transportation assets and connectivity. Have you considered what this means to you?

What Should We Consider and/or What Impacts Could Arise?
Perhaps we shouldn’t be too fast to dismiss Chicago’s relevance (even as tempting as this is when it is in the negative digits in the middle of winter).  Location, location, location. Chicago clearly has the location in the middle of the country which puts it in the top position related to connectivity. Connectivity brings power.

Chicago connects the east with the west, rail with rail, rail with trucks, rail with air, high-tech talent with logistics opportunities, products with consumers (as it is also a significant consumer base) and more.  Being at the center of this activity can have a significant impact. For example, in one client’s supply chain strategy project, we hesitated at expanding the volume through Chicago because it frequently “got stuck” and experienced delays which negatively impacted the customer experience.  

We had to account for this extra lead time (and therefore extra inventory and carrying costs) and find creative offsets to the lead time to support customers.  Whether you go through Chicago or not, do any of your suppliers? How about your suppliers’ suppliers? How about your partners?

We are all impacted. The question is by how much!  Contact us to tell us how it worked out for you.



Should I Move?

July 9th, 2018

Our clients frequently call with questions such as:

  1.  Should we renew our lease?
  2.  Should we move to a lower cost area?
  3.  Should we move to a lower cost state?
  4.  What considerations should we think about when evaluating our manufacturing and logistics network?
  5.  Should we outsource?

Thus, we thought it would be prudent to address some questions and themes that should be evaluated from a strategic point-of-view when discussing supply chain network assessments.  

Let’s start by saying that our top clients begin THINKING about these topics several years in advance. Similar to selling a business, it isn’t the best plan to evaluate whether to renew a lease at the last minute or to be forced into a particular partner or location because you started preparing “too late”.   

Instead, why not think ahead….

  1.  Where are your customers?  – As much as we all want to reduce costs especially in today’s Amazonian environment, we also need to remember that customers expect rapid deliveries, change their mind frequently (and expect agility) and desire easy returns.  Thus, where are you located in comparison to your customers?
  2. What are your customers’ expectations?  – Lead times. Personalized service.  Return policies. Vendor managed inventory.  Future forecasts. What will they expect a year from now?  Are you already planning for these needs?
  3.  Where are your suppliers?  – Similar to your customers, it is important to consider where your suppliers are located as well.  Do you receive product from the ports? If so, what volume is related to the ports?
  4.  What access do you have to people? – We evaluated Nevada for one of our clients. However, when we talked with local contacts to estimate building / lease costs, we also discovered that as low as the overhead might be, freight aside, there were no people.  Tesla had absorbed them all and there were requests to supply people from Southern CA to support current workloads. People can certainly be relevant!
  5.  What type of freight partners/ rates are in place? –  No matter how close you might be to your customer, freight can add up – and, more importantly, delays to your customer are VERY costly (lost business, charge backs from customers such as Walmart, ill will and more).  Just because you have carriers with your current situation, it does NOT mean that will be true with your new situation. Freight is tight and rates are going up! And, remember last mile considerations are complex. Last mile. Last minute!
  6. What type of transportation network is required to support your business?  – In addition to freight considerations, will you need to think about parcel, rail, ocean freight, and other modes of transportation?  Or should you be considering these options?
  7.  What inventory levels are built into your network?  – Inventory = cash tied up.  

There is quite a bit more to think about than solely a cost cutting exercise.  Most clients call due to concerns about cost – as important as cost is, taking the strategic / high-level view can ensure your service, total cost (including hidden costs) and cash flow are maximized.  

Have you started thinking ahead?  If you are interested in our newly upgraded service offering in response to the Amazon Effect of warehousing/ supply chain network assessments, contact us.