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The line between disorder and order lies in logistics.

By Steve Geary | 01/02/2018 | 2:04 PM

Sun Tzu said, "The line between disorder and order lies in logistics."  That idea is as relevant today as it was when he wrote it twenty-five hundred years ago.

Managing that line matters.  That activity – managing Sun Tzu’s line between disorder and order – is Supply Chain Risk Management (SCRM).

Twenty-five years ago SCM was innovative, vibrant, and led to fresh ideas in business integration.  Today this art has become a science and universities teach SCM at the undergraduate level. So where is the nexus of artful innovation in SCM taking place today? 

Innovation lives in the “R” of SCRM. In a time where margin is key - whether its financial profit margin or big data margin of error - we all must push our supply chains to be focused, efficient, and effective. We cross Sun Tzu’s “disorder” line when we fail to anticipate the negative impacts of running too lean or expediting too often or stockpiling just in case.

Supply Chain Risk Management should be a standard topic in your operations reviews. 

Almost a decade ago, Wieland and Wallenburg published an original document exploring Supply Chain Risk Management.  According to Weiland and Wallenburg, Supply-chain Risk Management (SCRM) is "the implementation of strategies to manage both every day and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity".  Some risk is inherent in any supply chain, others emerge when we push our supply chains to go faster, leaner, cheaper, or push the envelope in some other way. Regardless of why the risks exist, they must be managed to maintain the order we all desire.

Supply Chain Risk Management is where the original thought and original research is taking place in the Supply Chain today.  And today, there are many geopolitical issues that every logistics practitioner needs to be thinking about:

  • How exposed to risk is the supply chain? The world seems to be a more dangerous place these days.  From weather to ISIS, the landscape is changing.
  • How resilient is the supply chain? Trusted partners are great, but single threads in the supply chain carry risk.  That risk needs to be measured, managed, and evaluated.
  • Now nimble is the supply chain? If a link shuts down – say, the Korean situation leads to sanctions on China – how quickly can you recover?  Have you mapped your contingency plans?
  • Is there a rational and structured approach to measuring risk? Trade policy is shifting in the United States, and where it will ultimately land, is a question mark.  And have you taken action with an eye on containing or mitigating the risks?

If you live in the Supply Chain, you are nimble at planning.  But often that performance – live a high performance car speeding around the track in Indianapolis - creates other risks across the network. 

If you have not done it already, it’s time to take the next step, and assemble a Supply Chain Risk Management Plan that helps ensure your critical operations do not cross the line into disorder.

Simple logic says we may have a complex problem on the way.

By Steve Geary | 12/09/2017 | 4:58 PM

We spend a lot of time doing supply chain analysis, identifying key indicators, and then developing plans based on the picture those indicators paint.

Consider, as of December 9:

  • For the first time in over a decade, the US Navy has seven of its eleven aircraft carrier fleets at sea.
  • Of the seven, five are in the Pacific.
  • Of the five in the Pacific, three are in the Western Pacific.
  • Korea sits between the Yellow Sea and the Sea of Japan, which are in the Western Pacific.
  • The three in the Western Pacific are fully staffed, fully equipped, and combat ready.
  • The carriers in the Western Pacific have full air wings, including F-35’s, and combat ready carrier escorts.

Forget the talking heads on the evening news. Instead of listening to what they are saying, look at what the Navy is doing.  Read a map.  Apply some simple logic.

Readiness is everything in the military.  It sure looks like the logisticians have the pieces in place to go into battle with North Korea.  That’s what a military logistician means when talking about readiness.  And there are four other carrier groups in place around the world in the event that somebody else – the names Putin and Erdoğan come to mind – sense an opportunity for mischief.

Are commercial logisticians also ready if the curtain goes up?  Many of us rely on logistics connections with China, or elsewhere in Southeast Asia.  Do you have a contingency plan if things take a nasty turn?

Sometimes life is about having Plan B ready to go.  Look across your supply chain, one, two, even three tiers way.  Look back to your suppliers, and forward to your customers.  Check out your safety stock levels, your alternate sources of supply, and your backlogs.

Are you vulnerable?

Will the Federal Government ever catch up?

By Steve Geary | 12/03/2017 | 6:37 PM

I read a column by Steve Banker, a fine analyst and advisor in the Supply Chain, “What Was Hot in Supply Chain Technology In 2017.” 

Steve listed 3D Printing of Spare Parts, Artificial Intelligence and Machine Learning in Supply Chain Applications, Autonomous Mobile Robots for the Warehouse, Autonomous Trucks, SNEW data – social media, news, event, and weather data – and the Uberization of Freight.

It’s a good list.

What I find interesting is what happens when you overlay that list against the Federal Government.  There are few touch points.

The military is taking autonomous trucks and robots seriously, as well as 3D printing of spare parts, for obvious reasons.  I sure hope some of the folks in the Three Letter Agencies (CIA, NSA, etc.) are doing something with Artificial Intelligence.  I keep hoping that NASA will do something spectacular like they did in the sixties, but they remain starved for funds. 

This is not a long list.  Where are the other overlaps between innovation and the Federal Government?  It shouldn’t be a hard question.

During World War II, a phrase entered common usage.  Seventy-five years ago, "good enough for Government work" meant it could meet the most rigorous of standards.  That’s not what people mean when they use that phrase today, and that should make all of us sad.

Once upon a time the Federal Government was known for innovation, including achievements in the supply chain.  These are the people who gave us the Post Office, the most formidable last mile delivery capability on the planet.  The Feds figured out how to mobilize the supply chain to win World War II on the other side of the Atlantic, and even more impressively on the other side of the Pacific.  They conceived of and created the interstate highway system; where would we be today without that coast-to-coast network?  ARPA, now DARPA, played a pivotal role in the creation of the internet. 

The list could go on, but I don’t really see much that is meaningful and recent.  Why can’t federal government agencies keep pace with the private sector anymore?  I once had a boss who liked to ask, “What have you done for me lately?” As a Taxpayer and a Supply Chain Professional, I find myself wanting to ask that same question of the Federal Government. 

Can anybody tell me who I should call?

Blockchains for Blockheads.  I think I finally get it, Part II.

By Steve Geary | 11/24/2017 | 7:12 AM

This is the second installment of a series on Blockchain.  Click here to read Part I, a primer in Blockchain.

Remember the Clipper Chip?  In the early 90’s, the NSA made a valiant attempt to insert a back door into private email communication so the government could monitor internet traffic.  The effort began in 1993, and by 1995 the effort was over.

George Santayan said, “Those who cannot remember the past are condemned to repeat it.”  Keep an eye on Blockchain.  When the government realizes what is happening, we may see something like the Clipper Chip initiative all over again.

Over the past several decades, supply chains have evolved from hierarchical organizations with top down command and control to become the continuously evolving amorphous network reaching around the world.

It’s not your grandma’s physical network.  Today, logistics networks are about horizontal cross-functional integration.  That network includes B2B as well as B2C. 

If you order a product over the internet you may just get a box that was packed in China and wholesaled by a US operation, never touched by American hands.  Or, you may get a product including subassemblies sourced from Latin America, Europe, and Asia, assembled somewhere in the United States.

But the associated transactional environment remains stuck in the past.  Blockchain is going to change that.  In fact, it’s already impacting information exchange and transactional execution in the financial world.

I’m a box kicker at heart, so I don’t do well with abstract statements.  What does Blockchain mean to me?  In simple terms, Blockchain is an evolution from a system based on information intermediaries to a system based on protocols.”

Think about a purchase where you use a credit card.  There is a buyer, a seller, and an intermediary, the credit card company.  Everything flows through the credit card company, who is in effect the channel master for the financial pieces.  They are a broker sitting in the middle, in disintermediating the buyer and the seller.

The credit card company is an information overseer providing validation of the financial transaction.  For this service – undoubtedly valuable – the credit card company takes a few percentage points off the top. 

The costs add up, fast.  Letters of credit.  Reference checks.  Escrow.  You get the picture.  If I owned a credit card company, or a bank, I’d be worried.  Blockchain is a disruptive threat to their core business.

Widen the scope, and you see this sort of similar complexity all over logistics.  In our world, we don’t simply do pairwise transactions.  We are involved in multinational trading networks that evolve over time. 

What if we apply Blockchain innovation – now proven and being widely adopted in the financial world - to logistics information exchanges in general?

We may be on the cusp of a revolution in logistics information exchange.  Does the government understand the change that’s already happening?  Is Blockchain going to trigger an attempt at new regulation, a new incarnation of the Clipper Chip?  

Comments and opinion welcome.

Blockchains for Blockheads.  I think I finally get it.

By Steve Geary | 11/12/2017 | 7:18 AM

I think I finally understand blockchains. Blockchains are a concept that is creeping into the logistics literature. Pay attention; we might be looking at a fundamental shift in how business gets done.

I own a house. It is an interesting house, built three hundred years ago. Yup, the house is older than the United States. It was built in 1718 and is listed in the National Historic Register.

I’ve actually gone to the Registry of Deeds to read the file. It begins with a land grant from the king and that deed is in the file. The original homestead was huge, covering a big chunk of this side of town.

Obviously, I don’t live on an estate of hundreds of acres in suburban Boston. Instead, while I do live in the original house, the residence sits on about a ten thousand square foot plot that is all that remains of the original land grant. The rest of the estate has been peeled away over the years.

Starting from the bottom of the pile of documents at the Registry of Deeds, I can start with the deed from 1718. Stepping through transactional record, on paper, I can walk forward across the chain of actions. I can see every action that connects back through the pile to the original land grant, or block, all the way forward to the current deed on the top of the pile. The piece of paper at the top of the pile is my home.

What blockchain could do is take the paper in the file and make it digital and distributed. Once any transaction is encrypted and shared, there is no need for a central repository at the Registry of Deeds.  Copies of the chain could be shared virtually with all of the participants in the chain. 

Integrity is maintained by links among the copies of the transactions embedded in the chain residing with each participant: If any of the records get out of synch, the distributed technology flags the discrepancy.

Integrity is maintained by encryption: Anybody not involved in the transaction doesn’t have the key.

Integrity is maintained by an architecture that is inherently opaque: People can’t peer inside the transaction and understand what is happening, so hackers attempting crack a pile of encrypted records can’t find the on ramp to a successful hack.

Think of blockchains as information stored in stealth packets; you know that something is out there somewhere but you can’t see it so you can’t hack it.

I think I feel the world shifting. The financial community is leading the pack with block chain, and the supply chain is sure to follow. But we have a slash of the Titans coming. Should the government have the right and the power to read your transactions? Or do individuals have a right to transactional privacy? This is going to get interesting.

For more on this topic, please check out this column by DC Velocity columnist Clifford Lynch.

 

You can’t drive to an island, but you can fly from it.

By Steve Geary | 10/09/2017 | 5:16 AM

 

In a recent article on the devastation in Puerto Rico caused by Hurricane Maria, the Washington Post compared Hurricane Irma in Puerto Rico with the devastation of Irma in Texas.  Quoting Garrett Ingoglia of Americares, a US-based relief organization, the Washington Post wrote, “When Florida was hit by Irma, workers from Americares were able to drive in to deliver supplies and aid. But you know, you can't do that with islands."

Puerto Rico and the US Virgin Islands are over 1,000 miles away from the closest major US seaport, Miami.  That’s comparable to the distance between Chicago, a major distribution hub, and Houston.  The big difference is that you can drive a truck to Chicago from Houston in less than a day, but getting to Puerto Rico from Miami requires loading and sailing a cargo ship.  Cargo ships at full speed typically move at about 25 miles per hour, a lot slower than the 65 mph cruise down the interstate.

This logistics challenge is what some naval friends of mine call the tyranny of distance.

Over three million people live in Puerto Rico, and let’s not forget about the US Virgin Islands, with another 100,000 or so.  The population of Puerto Rico – they are US citizens - ranks in the middle of the pack of US States, with over three million inhabitants.  That makes it comparable to Connecticut.  Not just comparable to Hartford, or New Haven, or Fairfield Country, but comparable to the population of the entire State of Connecticut. 

I’m not sure how to put a disaster of this magnitude in perspective, except by quoting Joe Biden.  This is a “big f**king deal.”

Once the ships arrive in Puerto Rico, there is only one good sized port.  The Port of San Juan is well equipped, and quickly recovered after the storm, but it may be overmatched by the challenge ahead.  In terms of port capacity if ranks just below the ports of Portland, Maine or Albany, New York, and just ahead of that well known seaport of Toledo, Ohio.

It’s fair to say that Puerto Rico has a port capacity issue.

The electrical infrastructure has fallen over across all of Puerto Rico.  According to NPR, it will take months to get the antiquated electrical grid back on-line.  The absence of an electrical grid has a ripple effect.  Without electricity, water pumps are won’t run.  And without pumps, municipal water systems run dry.  People now travel miles to find fresh spring water.

Ben Franklin understood the issue, saying, “When the well's dry, we know the worth of water.” 

In the near term, logisticians have a massive humanitarian relief challenge compounded by distance, the isolation created by the Caribbean Sea, devastation, destroyed infrastructure, and the isolation created by the sea.  But what happens after that?  It will be years before Puerto Rico and to a lesser degree the Virgin Islands get back on their feet.  What happens then?

Almost a century ago, in the 1930s, we had the “Dust Bowl,” devastating over a quarter of a million acres centered in western and central Oklahoma.  That land area is comparable to Puerto Rico.  By some estimates, the Dust Bowl event displaced over 3,000,000 people.  Already charter airlines are leaving San Juan full, every day. The exodus has begun.

We may see another logistics problem on our hands:  mass migration.  The talking heads on television are drawing comparisons to Houston.  Maybe we should be thinking about Haiti, the South Sudan, and Ethiopia.  Except that with Puerto Rico and the US Virgin Islands are the United States of America, so there can be no wall.

The government came up with a logistics innovation first.

By Steve Geary | 09/20/2017 | 7:06 AM

Imitation is the sincerest form of flattery. There was an interesting piece in the June issue of DC Velocity Magazine, “Micro-warehouses bring fulfillment closer to the customer.” Containerized micro warehouses? It’s a great concept, worth putting in the spotlight.

I showed the story to a Veteran who is also a logistician, and he looked me in the eye and said, "Been there, done that, got the t-shirt." 

He's right. The military did it a long time ago. Pre-loaded containers configured as a stockroom are a fantastic timesaver when you are deploying a military force and you have to hit the beach and function.  Transport the box around the world, open the door, and you have a mini-distribution center ready to go. 

These transportable distribution points ride on rail cars. They ride on trucks. They ride on combat amphibious assault ships, and on merchant marine container ships. They are air transportable. They line up nicely on the back of combat transport vehicles for mobility in a battle zone. They can be linked together to create standard 20-foot container configurations. 

The Marines call them quadcons, palcons, and joint modular intermodal containers. The Army has larger truck or rail transportable versions that can deploy, open up, and be a distribution point ready-to-go. Heck, I used to buy coffee out of a container converted to retail and storage space in Iraq. FEMA does something similar for disaster relief, with pre-configured loaded containers deployed around the country, ready to respond immediately to a disaster.

Bottom line: containers configured to service as mobile distribution points is a concept the military has long understood. The ability to deliver what is needed when it is needed, even in the most challenging situations. Necessity is the mother of invention.

Interesting times.

By Steve Geary | 09/04/2017 | 3:34 PM

In March I wrote, “Relationships around the world are shifting, which means that the logistician’s world is becoming more uncertain.  Some people make money from uncertainty, but in our world we earn profits by making uncertainty go away.”

Well, things aren’t getting any better.  It's our job to make the supply chain work, to make things move, and it sure looks like the time has arrived to have the contingency plans ready.

According to the US Census Bureau’s 2016 statistics, the Top 3 trading partners of the United States are China, Canada and Mexico.  A few slots below, at Number 7, is South Korea.  The United States is involved in difficult trade discussions with all of them, and things are more than a bit unsettled.

And while trade with Japan is no longer top of mind in our collective consciousness, as it was thirty years ago, they still rank Number 4 on our list of trading partners.  With ICBM’s flying overhead launched by North Korea things feel a little bit more uncertain in Japan these days.

Let’s lump the individual European Union countries together, and we can add Top 10 trading partners the United Kingdom, Germany, Belgium and the Netherlands to the list.  There is more than a little uncertainty over just where Europe is headed as they thrash through Brexit.

The only country on the Top 10 trading partner list we haven’t talked about is Hong Kong.  As each day passes it is harder and harder to think of Hong Kong as somehow distinct from China, so I’m going to lump Hong Kong into the a bucket of radioactive uncertainty that includes Hong Kong, China, Japan, and South Korea.  A little round guy with a funny haircut named Kim Jong-un is putting them the notional shadow of a mushroom cloud and that's not good for trade.

This Top 10 look should be a disturbing perspective for any logistician.  If you are reading this it is a pretty fair bet that you, like me, are a logistician.  It’s our job to remove uncertainty, promote stability, and in general make things flow smoothly, but the world is not cooperating.  My advice is that it is time to start hedging your bets.  If you export heavily, start looking for new markets, hopefully domestic.  If you import heavily, start looking for domestic sources.  And start dual sourcing everything. 

As I said in the March article, “We can deal with uncertainty, but are we descending into chaos or simply witnessing a global realignment?  Either way, it’s going to be interesting.”  We may have passed simply interesting a few stops back.  “May you live in interesting times” is a proverbial Chinese curse.  Logisticians are now living through some very interesting times – getting more interesting by the day - and it surely feels like a curse.

Tunnel Vision.

By Steve Geary | 05/29/2017 | 5:52 AM

Gartner is out with their “Top 25” list of supply chain performers for 2017.  Number 1 is Unilever, followed by McDonalds, Inditex, Cisco Systems, and H&M.  Scroll all the way through and there is no doubt:  it’s an impressive and diverse group of high performing supply chains.

Yet there is a conspicuous gap.  Where are the government supply chains?  Where are the defense folks?  Where are the NGO’s?  In Gartner’s defense, stories of ineffective performance in government, defense, and NGO procurement are common.  But does that mean that all of these supply chains are inherently poor performers?  Or is Gartner the victim of tunnel vision and selection bias?

The government establishment is surely guilty of tunnel vision.  According to Forbes magazine, “The Pentagon has long relied on the incumbent Beltway-centric contractors, which build overpriced, underperforming, custom-made products.”

Insular thinking and tunnel vision are dangerous.

I browsed through the Gartner results sitting in a Starbucks – another company recognized on this year’s Top 25 list.  I was nibbling on a muffin, drinking coffee, and sipping from a carton of milk.  The milk came in one of those boxy cartons, where you push the straw through a hole in the top, using the straw that comes taped to the side of the carton.

Then the light bulb came on.  I first became acquainted with that style of packaging in Iraq, sitting in a Forward Operating Base (FOB) military dining facility (DFAC) eating dinner in 2007.  That fresh milk outside of Baghdad was not sourced locally.  That milk came, along with fresh fruit, vegetables and just about everything else we ate, all the way from the West.

That high performance supply chain was managed by a private sector service provider under a government contract.  Fresh milk, fresh fruits, and fresh vegetables served in a barren, scorching, desert war zone, delivered by a private sector defense contractor.  Why aren’t there any government supply chain actors on Gartner’s list? 

Consider Boeing.  These are the folks who, among other things, support NASA and help keep the crews on the International Space Station supplied.  Now that’s a logistics challenge that few others have ever tackled.

And then there is Lockheed Martin.  As far as I can tell, LMCO is the last government contractor to crack the Gartner “Top 25” list, back in 2010.  They remain formidable logisticians, providing supply chain services at a high operational tempo, from Korea to Southwest Asia, but they do no crack the list.

And let’s not forget The American Red Cross.  Quoting directly from their website, “From small house fires to multi-state natural disasters, the American Red Cross goes wherever we’re needed, so people can have clean water, safe shelter and hot meals when they need them most.”

Looping back to Gartner’s list, it is impressive and there are lessons to be learned from everybody on that list.  That said, high performance supply chains do not necessarily have high inventory turns or align to “corporate social responsibility goals,” as selected and applied by Gartner.  The metrics used by Gartner may be appropriate for some organizations, but not all sectors fit the Wall Street template.

Supply chains success is about delivering high impact outcomes, and while that may be congruent with commercial success, it is not synonymous.

Government spending accounts for something like a third of Gross Domestic Product, and while not as big as the private sector it is significant.  NGOs perform many “hard to do” functions that save and preserve lives in emergency and austere environments.  To fulfill their missions, government contractors and NGO’s often need world class supply chain capabilities.

To have a full spectrum view of logistics excellence, don’t ignore the Defense Contracts and NGO’s.

What’s in a name? Wrestle over the threat, not what people choose to call it.

By Steve Geary | 05/11/2017 | 6:26 AM

"What's in a name? That which we call a rose by any other name would smell as sweet." - William Shakespeare, Romeo and Juliet

Consider the term “Supply Chain Risk Management,” or the acronym SCRM.  Raise the issue, and a logistics leader will likely ask you to take a seat.

On the other hand, think about “cyber.”  Say that word to a logistician, and you’re likely to be sent down the hall to the folks in IT. 

Cyber considerations are all over the supply chain.  There are times when the first stop in a cyber threat is IT, but there are also a slew of issues where the operators need to lead.

Cyber is a risk, we have to manage it, and it’s in the supply chain.  How do cyber considerations impact sourcing?  Shipping?  Communications?  Subcontracts?  ECO's?  Industrial base management and oversight?  Payment methods and international money transfers?  The list is almost endless, and none of these examples are IT centric and all have a cyber component.

Here’s a citation the Defense Acquisition University offers to help students get their arms around Supply Chain Risk Management.  “Supply chain risk management (SCRM) is ‘the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity.’”

Cyber issues are just one of the risk vectors to consider in SCRM, and a good chunk of responsibility for that risk sits with the operators, not the techies.  If you’re more comfortable grappling with Supply Chain Risk Management, fine. 

On the other hand, if somebody knocks on your door to talk about cyber, ask them to take a seat and shock them with how cultured we are in the Supply Chain:  quote Shakespeare.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Steve Geary

Steve Geary

Steve Geary is an adjunct faculty member at the University of Tennessee's College of Business Administration, and is on the faculty at The Gordon Institute at Tufts University, where he teaches supply chain management. He is the President of the Supply Chain Visions family of companies, and Chief Operating Officer at ROSE Solutions, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly. He is listed in Who's Who in America, Who's Who in the World, Who's Who in Science and Engineering, and Who's Who in Executives and Professionals. In November of 2007, Steve was recognized for "Selfless Service to Our Nation and the People of Iraq" by the Deputy Secretary of Defense.



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