<$MTBlogName$

Channel stuffing on an international scale

By Steve Geary | 11/25/2018 | 9:20 AM

The impacts of U.S. trade tensions with China are starting to show up in the numbers.

According the Census Bureau, an unbiased provider of trade data, in September of 2018 the United States imported over $50 billion in goods from China. Compare that figure to 2017, when it was a little over $45 billion. That $50 billion is an all-time monthly record.

A look at the Census Bureau statistics for manufacturer’s inventories shows where many of those imports are going. Year over year, US manufactures inventories are up 6.7%. 

There will be no debate here on whether or not the tariffs imposed by the Trump administration are a good or bad. What is clear is that because of the tariff situation uncertainty is creeping into the supply chain. Uncertainty makes me nervous.

Anybody who relies on China as a source of supply is looking at the risk profile. Long term, there is a need to realign global supply chains with a more deliberate view toward supply chain risk. Tariff uncertainty is a part of that equation.

We are already seeing the pragmatists react to the uncertainty. They are stuffing their DC’s, as shown in the Census Bureau numbers.  There is no choice but to hedge against supply chain risk by stuffing the pipeline with inbound supplies. 

Build a buffer, stuff the warehouses, and buy a hedge. 

Then say a prayer that the politicians in Washington and Beijing find a way out.

The United States Army has a vision.  Do you?

By Steve Geary | 11/20/2018 | 3:29 PM

The headline for an Army News Service article reads, “Army must update logistics operations as part of modernization efforts.” The article details remarks made to an Association of the United States Army Institute Land Warfare breakfast in early November by Lieutenant General Aundre Piggee.

Piggee’s opinion matters: he is the Army's deputy chief of staff for logistics.

He drove home four points:

  1. Self-Sustaining Brigade Combat Teams. Translating this into commercial terms, we need to delegate responsibility and authority to operating teams, and let the team run with it.
  1. Additive Manufacturing, or 3D Printing, is a “game changer.” The benefit to an operating force operating thousands of miles down the supply line is real. The same opportunity exists in the private sector. A seismic shift may is coming. This technology might actually be more fundamental than Block Chain.
  1. Global Supply Visibility: the Army has been working on this for years, and their system is now fully fielded. That was the easy part. Now that they have global near real time data, what are they going to do with it? Once again, the general is on target, saying “we have to make sure we are using all this data that we're pumping out to make good decisions."
  1. Autonomic vehicles enabled by Artificial Intelligence are within reach, and some would argue that they are already here. How does this capability reshape logistics and material handling? Piggee offered an idea: autonomous vehicles could be a key element in resupply. Are we going to be able to do the same thing in the private sector? If we can't do it over the road, can we do it in the warehouse?

We have to give the General credit, and his thoughts should serve as a catalyst for any logistician.

Gartner Academic Rankings for Supply Chain Academic Programs

By Steve Geary | 11/04/2018 | 10:38 AM

If you are getting ready to search college campuses for Supply Chain talent, Gartner has a list.  

The top 25, according to Gartner, are:  Pennsylvania State University, the University of Michigan, the University of Tennessee, Michigan State University, Rutgers University, the University of Minnesota, he Massachusetts Institute of Technology, Arizona State University, The University of Texas at Dallas, the University of Wisconsin-Madison, the Georgia Institute of Technology, Indiana University, Northeastern University, the Ohio State University, North Carolina State University, Texas Christian University, Wayne State University, the University of Southern California, Howard University, The University of Texas at Austin, University of South Carolina, Syracuse University, University of Houston, the University of Washington, and the University of San Diego.

All are solid, so if you want to go looking for freshly minted talent, these schools are a great place to start.  An article in the October issue of DCV highlights the top school on the list, but if you are searching for talent in today’s tight market don’t ignore the other schools on the list.  They’re all over the country.

 (disclosure:  the author is on faculty at the University of Tennessee, which clocked in at number 3 on the Gartner list.)

Supply Chain Risk Management: the Feds are moving in the right direction.

By Steve Geary | 08/31/2018 | 2:45 PM

A competent logistician takes a holistic, not a transactional, view of Supply Chain Risk Management (SCRM).  Congress is moving the Department of Defense in that direction.  And that means if you do business with the federal government, get ready to answer the mail.

Supply Chain Risk Management rides on four vectors.  There are strategic risks we logisticians worry about, like foreign market fluctuations or economic dislocations.  There are operational risks, like diminishing manufacturing sources and material shortages (DMSMS).  There are physical risks, like the driver shortage, port closures, or weather disruptions.  There are financial risks, like currency fluctuations or price volatility.

President Trump signed the annual defense budget – the “John S. McCain National Defense Authorization Act for Fiscal Year 2019” – on August 13.  It is over a thousand pages long.  Buried in the bill (Section 881) is a definition of Supply Chain Risk for the Department of Defense.

That section says, “The term ‘supply chain risk’ means the risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of a covered system so as to surveil, deny, disrupt, or otherwise degrade the function, use, or operation of such system.”

Congress deserves credit for recognizing supply chain risk as an issue.  That said, what about supply chain risk unrelated to an adversary?  Not all national security threats involve an adversary.  The military definition of national security includes “defense posture capable of successfully resisting hostile or destructive action from within or without, overt or covert.”  What about supply chain risk outside of Defense?  There are some pretty complex supply chains run by the government unrelated to the military; just take a look at the State Department, for example.

Supply Chain Risk Management in a government context isn’t just about adversaries, and it isn’t just about war.  The four vectors of risk – strategic, operational, physical, and financial - are all around us.  While it’s good that Congress is taking notice of supply chain risk, it’s clear they are lawyers focused on transactions, not logisticians managing systems.

Congress deserves credit for what they have done, but they haven’t gone far enough in considering the breadth of supply chain risk.  While it is important that DoD embraces SCRM, like the private sector, SCRM should be a “Whole of Government” evolution, not just DoD. 

Things are moving in the right direction, but there is more work to be done.

With uncertainty growing and labor markets tight, think about a different kind of hire.

By Steve Geary | 08/17/2018 | 8:05 AM

The “trade war” talk makes logisticians nervous.  Supply chains can be brittle, and battles – even metaphorical battles – introduce uncertainty.  And with the rhetoric currently flying across the Pacific, uncertainty is certainly getting our attention

You can find candidates trained for this kind of uncertainty.  They come from top schools that graduate global logisticians – often with Masters Degrees – and you might want to think about looking for them as they consider leaving government service: 

Graduates of these schools bring the skills needed to deal with physical conflict and the ensuing uncertainty in the supply chain, not just the metaphorical.  The other thing they bring is leadership skills and operational savviness honed in challenging and diverse conditions, often in complex, chaotic, and austere situations.

There are also solid ROTC programs that develop entry level leaders on campuses across the country.  And let’s not forget the non-commissioned officer pools, who often earn degrees while wearing the uniform.  The point is that if you are looking for leaders in logistics; don’t just think of the traditional college campus. 

Leaders in the military – both uniformed and civilian - know how to make things happen.  Often, they learned how to make things happen when the bullets are flying.  Literally.

They can handle a trade war.

Ripple.

By Steve Geary | 07/23/2018 | 1:47 PM

It’s one thing to read about the macro-economic impact of tariffs.  It’s another when the micro-economic impacts ripple through the pond in the backyard.  Those tariff ripples are now rolling though our logistics networks.

It’s time to pay attention.

Jared is a short order cook at the neighborhood breakfast place four days a week.  On the days when he is not working at the restaurant, Jared works for a lobster wholesaler in Boston.  Jared is riding just one of the ripples flowing through the economy caused by the new tariffs.

In retaliation for the tariffs the US imposed, China has responded with tariffs on an array of American exports.  In particular, China hit American lobster imports with a 25% tariff.  Lobster prices are collapsing.  Those with a strong domestic customer base should surive, but some sort of realignment will take place.

This morning Jared shared that two of his wholesaler’s competitors have closed their doors since the tariffs went into effect.  Jared estimates that the volume at his wholesaler is off about two-thirds since the tariffs hit.  All of these companies were vulnerable, because China exports were a large chunk of their business.

Not every industry is losing.  For domestic steel manufacturers in the Midwest, unlike Jared, it’s a good thing.  Competitive imports are now more expensive, and presumably prices and profits for US steel producers will rise.

The point is that a new factor - higher tariffs - has been injected into the trade equation.  Discernable shifts, large and small, are rippling across the supply chain triggered by these new tariffs.  Some have been imposed by Washington, and some are retaliatory movesby our trading partners.  Across a slew of commodities, market equilibriums are shifting.

Right now, for most of us, it’s a new ripple emerging from the fog.  

What matters to us is that supply chain realignments and adjustments are underway. 

Are you seeing any ripples? Are they big enough to get your attention?  Scan the horizon within your network.  Is there something coming over the horizon worth your attention? Are you prepared to act if that wave becomes a tsunami across your supply chain? 

Trade wars are good, and easy to win.  Really?

By Steve Geary | 07/09/2018 | 5:17 AM

A few months ago we wrote, “There is a storm rolling in.”  Well, it’s here.

We are now in a tariff battle with a long list of countries that includes China, Canada, Mexico, Germany, France, and India, among others.  Those six countries are among America’s top 10 trading partners, accounting for over 50% of our foreign trade.

“Trade wars are good, and easy to win,” according to President Trump

Trade wars are like bar brawls.  Nobody knows who will win.  Things get broken.  Everybody gets hurt.  It takes a long time to clean up.

Economists don’t agree with the President.  An opinion piece published earlier this year in MarketWatch nicely summarizes the opposing viewpoint. 

“It is a standard principle of economics that all individual actors exist within a system, any action taken by one actor will likely result in a response from others.  This means that wise governments, in considering which policies to adopt, must make difficult calculations about how their actions will interact with those of others.  ‘America First’ fails to make these calculations.”

The United States government has just ramped up on uncertainty for US business, and business hates uncertainty.  To paraphrase another senior government official named Donald from over a decade ago, there are known knowns, known unknowns, and unknown unknowns.  In my judgement, the known unknowns and unknown unknowns are now dominant.

Bring your key suppliers in and ask them how they are going to be impacted.  Call your top customers, and ask them if how they are impacted.  Draw a map of your supply chain, reaching out at least two levels, and see what it tells you.

Then start loading up the warehouse and keep your fingers crossed.

President Trump is Disrupting. Again.

By Steve Geary | 06/27/2018 | 7:18 AM

Everybody in logistics needs to pay attention when the President talks about tariffs. 

We are entering into an era of increasing uncertainty, and uncertainty breeds risk.  Are American businesses ready if the trade wars escalate?  On the flip side, are American businesses ready if tariffs shrink or or trade barriers disappear?  Many are not. 

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."

Parse that SCRM definition:  manage based on continuous risk assessment, reduce vulnerability, ensure continuity, and, by implication, execute within the operating budget.

Every logistics leader claims to do SCRM, but let’s get real.    Companies may know where their Tier 1 suppliers are, but what about the next level?  Over the past 25 years, the supply chains have become increasingly global.  This means that every business in America is exposed to global risk.

When a supply chain spans the globe, the risk profile for that supply chain shifts.  According to a study by Zurich Insurance several years ago, fully 30% of supply chain disruptions originate at Tier 2 suppliers.  Almost 10% came from a supplier in Tier 3 or even further down the supply chain.

Do you have contingency plans that extend to Tier 2 and Tier 3?  Does your organization know where they are?

Asked to quantify logistics performance, managers will talk about lead times, fill rates, freight costs, and obsolescence.  Yet, if Risk Management is a key element in logistics, SCRM measures should be at the top of the list, too. 

What about time to recover?  Facility risk indices?  Utilities resilience? 

President Trump, by bringing attention to government trade policy and tariffs is doing us a favor.  The potential for a trade war is a warning bell.  Step back and assess.

Then start paying attention to SCRM. 

Tilting at Windmills

By Steve Geary | 06/11/2018 | 1:18 PM

According to the New York Times earlier this month, “Google, hoping to head off a rebellion by employees upset that the technology they were working on could be used for lethal purposes, will not renew a contract with the Pentagon for artificial intelligence work when a current deal expires next year.”

Maybe I have too much imagination, but I can also envision using this technology to find lost hikers, locate migratory herds, or find illegal logging or mining operations.

The technology “uses artificial intelligence to interpret video images.”  That kind of technology could have broad application in logistics, too.  Mapping is often pretty important in the context of designing and operating logistics networks.  Presumably, the technology under development at Google could be pretty useful in a broader logistics context.

What’s next for the employees at Google?  Are they going to boycott boot manufacturers because soldiers wear boots?  Are they going to stop driving on interstate highways because they were funded by the federal government to allow rapid movement of military forces?  Are Google employees going to stop using the internet because defense research created it?

A dictionary definition of hypocrisy is “the practice of claiming to have moral standards or beliefs to which one's own behavior does not conform.”

The definition must be accurate; I googled it.

A Holistic View of Supply Chain Risk

By Steve Geary | 06/04/2018 | 4:20 PM

Allianz – an international insurance firm headquartered in Europe – publishes an annual “Risk Barometer.” 

According to the report, globally, “Business interruption ranks as the most important global risk for the sixth year in a row (42% of responses), due to its tremendous effect on revenues.”

Drilling down into the Americas specifically, in 2018, the top 10 risks identified in the Americas region are:

  1. Cyber Incidents
  2. Business Interruption
  3. Natural Catastrophes
  4. Market Developments
  5. Fire and Explosion
  6. Changes in Legislation and Regulation
  7. Loss of Reputation and Brand Value
  8. New Technologies
  9. Climate Change and Weather Volatility
  10. Talent Shortage

It’s a good list, and Supply Chain Risk Management weaves through all of it.  Logisticians ship, receive, and store things all over the world, so supply chain leaders have to worry about taking a hit in any one of these dimensions.  At the moment, we’re all riding the uncertainty on the domestic regulatory dimension, while chatter about a trade war looms on the horizon. 

The immediate tends to occupy our attention.  That’s natural. The academics call it selection bias.  We focus on what’s in front of us, and have a tougher time thinking about what might be around the corner.

But hurricane season has officially started, unemployment is under 4% so key positions go unfilled, block chain is disrupting traditional business networks, volcanos are being disagreeable in Hawaii, and the FBI is telling us to reboot our servers because of some insidious Russian virus.  And that’s just off the top of my head.  Take a moment and make a list of the “significant” supply chain management risks for your business.

Take a look at your operation through this holistic lens.  Where are your vulnerabilities?  What are your countermeasures?  Do you have a plan?  Are you even capable of executing the plans you have?

Be honest about it, be a little bit intimidated, and then get to work.

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.



Categories

Popular Tags

Subscribe to DC Velocity

Subscribe to DC Velocity Start your FREE subscription to DC Velocity!

Subscribe to DC Velocity
Renew
Go digital
International