Trends—November 2012

Trends—November 2012

CSCMP: Notes, Quotes, and Totes

The 2012 Council of Supply Chain Management Professionals (CSCMP) conference in Atlanta was awash with new ideas and strategies, discussions of recurring economic and regulatory challenges, and examples of supply chain best practices.

Logisticians and supply chain practitioners on both sides of the supply/demand coin mingled within the expansive Georgia World Conference Center. Playing host to both CSCMP and the 26th annual International Air Cargo Forum & Exposition, this year’s gathering provided a true intermodal experience that touched on many issues shippers and service providers are grappling with in a challenging global economy.

Based on insights gathered from educational sessions, one-on-one meetings, and hearsay in the hallway, Inbound Logistics offers a man-on-the-ground perspective from this year’s conference.

Supply Chain Labor Pains

While many conference attendees were attuned to the looming truck driver shortage, some also noted a talent gap in supply chain middle management. Some shippers are raising concerns with their service providers about the lack of experienced operations professionals.

Dr. Robert Lieb, professor of supply chain management at Northeastern University and Joe Gallick, senior vice president of sales for Penske Logistics, addressed this challenge in their annual 3PL research study, summarizing data gathered over the past several years that speaks to issues of recruiting, training, and retention.

"From the C-level to distribution center workers, a tremendous amount of turnover is occurring in the business," said Lieb. "We’re challenged to determine the root cause."

The seemingly simple problem is actually quite complex, explained Gallick. Third-party outsourcing was typically a matter of divesting tactical functions involving transportation and warehousing. The evolution of supply chain management in terms of technology and engineering requires more sophisticated skills. Universities have introduced supply chain programs that are producing future talent.

"3PLs now realize we can’t wait until we have a customer, then source talent," added Gallick. "We have to invest in people up front.

"I liken it to a manufacturing company," he continues. "What we produce and sell is an outsourced service, and the raw material we bring in is logistics talent."

Some of the perceived human resources shortfall may simply be a matter of education catching up with the swift pace of change in the industry. The past decade has been a revolution of sorts in that regard.

Many 3PLs are working with universities to attract talent, and provide training, mentorship, and rotational work assignments—tools they need and a career ladder where they can rise within the organization. The talent gap may be more overt among smaller service providers that don’t have the clout or connections to nurture and retain rising talent. Still, opportunities are emerging for companies to help young logisticians cut their teeth in the real world and add value to their organizations.

"Coming through school is a generation of professionals who have set their sights on the logistics sector, versus being pulled into it via other channels," said Lieb.

Predictive Analytics for Changing Times

Among the hot technology trends discussed at the conference was predictive analytics. Several companies mentioned the increasing importance of squeezing actionable information out of raw data, then using it to model or predict future supply chain events or actions. While demand forecasting is by no means a novel concept, shippers today possess infinitely more sources and information channels from which they can collect, digest, analyze, and disseminate data. Cloud networking is predicated on this type of open sourcing that derives value from myriad inputs.

Technology companies are pioneering a path toward greater innovation in this area. LLamasoft, for example, has developed modeling software that allows shippers to envision how their global supply chains might look and operate given different scenarios, distribution and sourcing inputs, or total landed cost filters.

IBM is similarly looking at how to inspire "smarter commerce" by identifying data patterns and optimizing processes. This capability is especially relevant as companies look to mine more intelligence about their supplier networks, and identify problems before they occur.

3PLs, too, are playing the predictive analytics game. Take Coyote Logistics, for example. Its technology is sophisticated enough that it can aggregate data across customers to identify lane pricing shifts, find capacity in a customer’s private fleet and broker it out, and provide value beyond transactional brokerage operations.

With more accurate and objective data coming from myriad internal and external sources, companies can plan and strategize better, which directly feeds their ability to respond to demand and execute more efficiently and economically.

Air Freight Meets Oktoberfest

As media briefings go, sitting around a large oak table with German beer flowing in tune with a Bavarian polka band is as original as it gets. Joining a dozen or so nattily dressed European airfreight executives and journalists offsite at Der Biergarten restaurant presented an up-close and personal perspective of where the global air freight industry is trending from a continental perspective. Lufthansa Cargo Chairman Karl Ulrich Garnadt and Oliver Evans, chief cargo officer for SwissWorld Cargo, demonstrated the collaborative spirit and effort that is enabling carriers to withstand unsettled market conditions.

Global markets are soft, and there is exposure to pure freighters that don’t have the capacity to shift and scale cargo with passenger aircraft, but industry has not yet hit crisis mode, explained Garnadt. Security remains a foremost challenge, and while the industry as a whole has made great strides synchronizing standards and regulations, gaps remain—notably U.S. efforts to apply passenger security measures to cargo.

The airline industry also faces the task of upgrading "stone-age IT systems in parts of the network"—a foremost objective of the global e-freight initiative, in which Lufthansa has taken a leadership role.

Garnadt sees regular seasonality coming back at lower volumes, largely driven by Asia-Europe trade. But in terms of managing variability, "we have to plan and forecast month to month, reduce freighter capacity 20 percent certain weeks, for example, and work three to four weeks out," he added.

Carriers in the Lufthansa Cargo Group—which includes SwissWorld Cargo, Brussels Airlines Cargo, and AeroLogic—are actively managing capacity to maintain load factors and react to changing markets and demand patterns.

Targeting new markets to grow into, where pure freight volumes are steady, has been a point of emphasis for the group. Brussels Airlines, for example, has seen steady progress in its services to Africa, where load factors are consistently greater than 90 percent. Lufthansa has also added to its Americas network with services to Detroit and Montevideo, Uruguay, and has benefitted from vertical-specific lanes such as Houston to Manchester, England, where oil field and engineering equipment is Scotland-bound.

Commenting on North American growth efforts and a struggling euro, SwissWorld Cargo’s Evans commented, "We are happy when they are performing well, because that translates to dollars."

Conference Takeaways

Here are a few more observations from the conference floor:

  • This year’s attendees were noticeably younger, indicating a generational transition in the logistics sector. With many universities now offering undergraduate and postgraduate curricula in myriad supply chain disciplines, there has been an expected swell in the number of students and industry newcomers attending the conference. This can only be seen as a positive.
  • The green movement may be losing its buzz. Many shippers and service providers remain committed to sustainability initiatives and investments. An abundance of case studies and testimonies attest to that fact. Nonetheless, sustainability presents challenges in creating standards and measuring performance beyond the corporation, within the extended supply chain, between verticals, and, most importantly, across borders. While industry at large has demonstrated a business value proposition for reducing waste and becoming more fuel efficient, what’s the next step? Until companies can tie ROI value to green efforts upstream and downstream in the supply chain, the movement will remain muddled in "green tape." Only when sustainability becomes a mark of supply chain excellence—and companies across the supply and demand divide are measured accordingly—will we see a true revolution.
  • Mobile technology is radically changing how people network, for better and worse. Between sessions, nearly everyone had their head bent over a laptop or smart phone—either communicating with the office, reading and responding to emails, or filling the idle ennui that inevitably passes during breaks. An obvious upside exists to communicating remotely in real time, but there is also a disadvantage: the art of communication and networking lags. As one peer noted, gone are the days of chatting with fellow attendees while waiting in line for the pay phone.
  • The term 3PL is blurring beyond recognition. The industry is flooded by companies that now tout third-party-logistics-type capabilities—whether they fit the traditional mold or not. IT companies, freight brokers, consultants, and freight bill audit providers fill execution needs to different degrees. Mining data—and having talented logisticians to analyze that intelligence—is key to demonstrating value as part of continuous improvement-driven partnerships. The ability to capture, interpret, and act on this information is what enables others to play in the 3PL space. Soon enough, if not already, companies with proprietary technology and a skilled team of "executioners" will be touting themselves as asset-based 3PLs.

CSCMP: Tracking Atlanta’s History

The conference’s host city began as a railroad crossroads, and commerce and culture sprouted up in support of this transportation link between Savannah and the U.S. Midwest. One of the Georgia World Conference Center’s (GWCC) unique features is the CSX railroad tracks that run through the middle of the complex. There’s nothing like exiting a session documenting the challenges and opportunities of intermodal transport to find a view of double-stacked containers sitting on the track below.

A short walk from the GWCC, running parallel to the tracks as they weave their way through downtown, is a historical placard marking the original site of Thrasherville, an 1839 settlement planned as the terminus of the Western & Atlantic Railroad.

CSCMP: Lost In Transshipment

Every year, CSCMP and conference sponsors provide attendees with a handy briefcase to tote conference information, notes, brochures, pens, and other necessities. Unfortunately, this year’s bags never arrived—they were on a ship delayed at sea. Talk about managing supply chain exceptions. In their stead, garden-variety, vanilla-colored shop sacks filled the bill.

One item would have been a welcome souvenir from the conference—held during three days of consistent rain: an umbrella. Its absence was a missed opportunity that speaks to a failure in demand forecasting.

CSCMP: Industry Perspective on Partnership

The term "partnership" is liberally and sometimes aimlessly bandied about without really appreciating its true meaning, noted Don Rendulic, director of marketing and communications for third-party logistics provider GENCO.

With regards to contractual obligations between 3PLs and customers, partnership exists when both parties have a vested interest in each other’s success and failure. It’s not an either/or condition where one loses and the other wins. Rather, partnership implies a mutuality that thrives on open communication and trust.

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