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Beyond the four walls.

By Steve Geary | 07/13/2019 | 8:16 AM

Risk beyond the four walls of the distribution center – driven by changes in federal government policy - is making fulfillment a lot more complicated.  BlackRock, an investment advisory firm, publishes a “Geopolitical Risk Management Index.” 

That sounds rather abstract, a topic far removed from the distribution center, but all it takes is one glance to see that it isn’t.

The BlackRock June 2019 risk list of top five includes Gulf Tensions, Global Trade Tensions (i.e. tariffs), European Fragmentation, U.S. - China Competition, and South Asia (India/Pakistan) Trade Tensions. 

Each of these risks is climbing. 

Each has a direct impact on distribution. 

Gulf Tensions translates petroleum risks.  That ripples to transportation costs.  Transportation managers must be ready to adapt distribution networks, quickly, if the curtain goes up in the gulf.  Since the middle of June – thirty days ago – crude oil futures prices have risen to over $60 a barrel, a bump of close to 20%.  These costs will ripple across the supply chain.

New tariffs can disrupt the economics of distribution routes, sometimes overnight.  Solid contemporary examples include the plight of soybean farmers who rely on exports, or domestic steel producers who unexpectedly found new opportunities with new tariffs on imports. 

“European Fragmentation,” most notably Brexit, but also active protectionist waves in other nations, are on the table.  Our total trade with the EU exceeds what we do with China.  The headlines fixate on China, but the trade arrangements with the EU and the impact of Brexit may be highly disruptive and possibly more disruptive than what is happening with China.  We won’t know until the dust settles, and how the dust settles includes a visible role for the US Government.

U.S. – China tensions are all over the headlines, and they won’t be resolved soon.  Many companies went all in with a China sourcing strategy.  It might be time to reconsider.

The tensions between Pakistan and India are long standing.  India is a top 10 trading partner.  Border tensions this year escalated to kinetic military incidents.  Pakistan’s political structure is not known for stability.  Prime Minister Modi of India is often cited as the most powerful political leader since Ghandi.  There is far too much uncertainty, and uncertainty means risk.

The spectrum of management in the DC is changing.  Supply Chains are at risk, which mean that we need to be prepared to adapt the DC’s on short notice.  Contingency plans are more important than ever.  Do you have backup plans?  Have you tested them?

It isn’t just about execution inside the four walls of the distribution center anymore.

It’s about Risk Management. What’s in your wallet - and can you afford it if you don’t have a risk management plan?

Your job description has changed.

By Steve Geary | 06/22/2019 | 7:34 AM

Our sister publication, Supply Chain Quarterly (SCQ), published an interesting list in the last issue.  It’s the “’Top 10 Supply Chain Risks of 2019.”  There are serious supply chain risks out there.  Some of them link directly to logistics operations. 

A thread in the SCQ risks involve uncertainties that just a few years ago were not top of mind in distribution centers.  These risks involve government oversight and management of logistics.  Both are pulling distribution managers into new directions.

Logistics managers in the United States are agile at managing international movements.  Unfortunately, the choreography of those moves is shifting.  According to the article in the SCQ, “Companies face the immediate risk of increased cost and customs agents are adapting to new processes.”

We’re talking tariffs.

It’s hard to be agile when shackled by evolving costs outside of the logistician’s control.  Agile distribution means we anticipate as best as we can, but new variables introduced by the federal government without enough runway cause disruption. 

Improvisation – the development and deployment of new processes, no matter how agile you are - implies risk, always. 

We’re in an era of improvisation.

These risks emerging across the international dimension for logistics managers are now driving issues.  Just what are the rules going to be for Mexico?  How will Brexit impact movements to and from Europe?  How and when will the situation stabilize with China?

Risk managers deliver stability.  The government isn’t helping.

All of these “international” issues roll uncertainty into warehouse and distribution operations.  Is there enough space to hold increased buffer inventories?  As inbound and outbound flows evolve – perhaps rapidly – are transportation contracts in place to handle it?  Are customs brokers actively managing the backlogs at the ports as industry – not just your company – scramble to react to moves out of the White House? 

Supply Chain Risk Management is now an issue on the distribution center, not just the corporate offices.   

A sense of mission

By Steve Geary | 06/09/2019 | 1:46 PM

Some people have jobs.  Some have missions.  Sometimes logistics execution is the job at the heart of that mission.

It’s magic when that happens.

It’s around 11 am, and over a dozen people loiter in a church parking lot.  The delivery truck arrives from the central kitchen, and the crew breaks down the load.  The sort happens.  Manifests are checked, and the delivery vehicles are loaded.  The cross-dock operation completes.

Within 15 minutes the parking lot clears.  The delivery vehicles are on their way, fanning out across the county.  By 1 pm around one hundred and fifty deliveries happen, and seniors are sitting down to a hot lunch delivered to their home.  And there is a second cold meal in the bundle, available for dinner later in the day.

Meals on Wheels - a 501(c)(3) tax exempt organization - operates in virtually every community in America to address senior hunger and isolation.  All of these logisticians are volunteers, with an unselfish passion to help their neighbors.  Amazing what can happen when you mix mission, passion, and logistics:   innovation and volunteerism to help others. 

Logistics, mission, passion.

Magic!

What’s your passion?

Qualified truck drivers are in short supply.  Let’s address it.

By Steve Geary | 05/26/2019 | 2:34 PM

Congress is on the right track. The DRIVE-Safe Act (Developing Responsible Individuals for a Vibrant Economy) has been introduced in Congress.  The bill makes sense.

Basic economics tells us two options can bring a labor market into balance.  One option:  increase wages to motivate more people to become qualified truck drivers.  Another option:  reduce unwarranted barriers to qualify as a professional trucker.

Today the federally specified minimum age is an overly stringent limitation.  The federal government requires interstate drivers to be 21 years of age.  Many states set the age requirement for intrastate truck drivers at 18.  Some are lower than that.

DRIVE-Safe opens opportunities to qualify as an interstate trucker right about the time most teens graduate from high school.  Those not headed for college need to earn a living and begin a career.  They can apprentice as a plumber, an electrician, join a union and start earning seniority, or any number of tracks as a skilled practitioner in the trades.  For some reason the feds prohibit high school graduates from becoming a long-haul trucker for another three years.

Call your Senator, call your Representative, and ask them to support the DRIVE-Safe Act [S. 3352 + H.R. 5358]

If it smells like scat, it is scat.

By Steve Geary | 05/18/2019 | 5:24 PM

Understanding data perturbations is essential in Supply Chain Analysis.  Of course, that assumes that those performing the data analysis understand data analysis and the underlying functional and operational relationships.  Unfortunately, that isn’t always the case.

The National Oceanic and Atmospheric Administration (NOAA) just published its intent to award a sole source contract to Florida Atlantic University Harbor Branch Oceanographic Institute.  Specifically, Florida Atlantic University will perform genetic sampling of harbor seal scat samples.  NOAA has published a finding that Florida Atlantic University is uniquely qualified to perform this work.

That’s right.  Florida Atlantic University is uniquely qualified to gather and test seal scat.  That by itself is amusing, certainly, but it gets better. 

NOAA attempts to justify the sole source award, which by statute must be justified.  “A statistical analysis of population structure using microsatellite data from multiple laboratories would require a model with additional parameters to explain any variability due to data collection, which in turn, increases the risks of inflating or masking any differences between populations.”

Notice there is no assertion that Florida Atlantic is better at collecting or analyzing scat than anybody else.  That would be a valid sole source justification.  Instead, NOAA asserts that Florida Atlantic’s results cannot be replicated by anybody else.  In other words, their scat apparently doesn’t stink.

Put it all together, and what we have is sole source justification to analyze scat based on the assertion that other scientists are unable to replicate the results.  “If a finding can't be replicated, it suggests that our current understanding of the study system or our methods of testing are insufficient.

Numbers matter, and so does scat in the real world.  When measuring your “no-scat” operations, make sure the measurements are repeatable and can pass the smell test.  If it smells like scat, it probably is scat.

It’s hard to turn a battleship on a dime, but DoD is changing course. 

By Steve Geary | 05/05/2019 | 4:29 PM

Last September, then Secretary of Defense Jim Mattis issued a memo directing the military services to achieve a dramatic improvement in the readiness rate on four key aircraft.  The memo directed an 80% readiness rate be achieved for the F-35, F-22, F-16 and F-18 fleets by September of 2019.  As icing on the cake, the Secretary also directed a reduction in operating and maintenance costs for those aircraft.

So after more than six months, how is the military doing?

On May 1, in remarks to a House Appropriations Committee panel, acting Defense Secretary Patrick Shanahan hedged.  As reported in Defense News, Real Clear Politics, and several other outlets, Secretary Shanahan said the F-18 is tracking to meet the 80 percent readiness rate benchmark, but it remains unclear to him if the F-35, F-22 or F-16 will be able to meet the mark.

Achieving an 80% readiness rate may not seem like a high hurdle to a supply chain professional operating in the commercial sector.  In the land of fielding leading edge – or in the case of the F-22 and F-35, bleeding edge – systems, it is an aggressive goal.  Progress has been made.  Supply chains have been streamlined.  Perhaps getting to the goal for some of the platforms will roll into 2020, but the military’s progress merits respect. 

We’ll check at the end of the Fiscal Year.

The global supply chain isn’t bilateral.

By Steve Geary | 03/31/2019 | 11:23 AM

President Trump’s tug of war with China continues. Last week the latest round of talks between China and the U.S. kicked off.  The United States is trying address the trade balance between China and the United States in a bilateral fashion. It seems that there isn’t really a bilateral supply chain, as much as the President wants it to be. 

Just before this latest round of Sino-American negotiations kicked off, French President Emanuel Macron and China’s President Xi Jinping announced a thirty billion Euro deal—close to thirty-five billion U.S. dollars—for Airbus aircraft. Of the 300 aircraft included by China in the deal, 290 are the single aisle A320 configuration. The A320 happens to be the aircraft that competes directly with Boeing’s grounded 737 Max 8 configuration.

It seems that there isn’t really a bilateral supply chain, as much as the President wants it to be. In a not-so-subtle challenge to U.S. interests, Politico quotes President Xi saying, "a united and prosperous Europe corresponds to our vision of a multipolar world." American businesses with supply chains and logistics threads extending into China need to pay attention.

President Trump’s game of checkers with China has morphed into a game of chess with the world.

China, Trade, and the Ripples

By Steve Geary | 03/10/2019 | 1:24 PM

After establishing new trade surplus record with the U.S. in December, Chinese exports are collapsing. Statistics released on Friday—numbers released by China, not the United States—show that the expected realignment is underway.

China's politically sensitive trade surplus with the U.S. narrowed sharply, to $14.72 billion, in February, from $27.3 billion in January.  Now, these are numbers reported by the Chinese government, so some skepticism is in order.

“Dollar-denominated exports [by China] plunged 20.7 percent for the month of February from a year ago, missing economists' expectations of a 4.8 percent decline, according to a Reuters poll,” reports CNBC.

CNBC continues, “Dollar-denominated imports [by China] fell 5.2 percent in February from a year ago, missing economists' forecast of a 1.4 percent fall.”

The unemployment rate held steady at 3.8%. The latest employment statistics in the United States for February show non-farm job growth at a near standstill, according to the Labor Department; this may be an aberration, but it bears watching.      

U.S. Census Bureau statistics are still lagging due to the month-long government shutdown, so the best government sanctioned balance of trade numbers available are months old.

Bottom line: the supply chain in the United States remains healthy, logisticians appear to have realigned in anticipation of a collapse in Sino-U.S. trade, manufacturers seem to have found new sources of supply, and employment remains strong.

And China is getting nervous.

Think Globally.  Act Locally.

By Steve Geary | 02/03/2019 | 10:31 AM

Davos, officially known as the World Economic Forum, just wrapped up.

The annual meeting is an event where a couple of thousand people getting together and try to solve the world’s problems.  Quoting directly from the legal charter, The World Economic Forum “is an independent organization committed to improving the state of the world.”  These people are not timid in their ambitions.

This year, their report is over a hundred pages long.  According to the report, the five most likely risks are: 

  • extreme weather conditions
  • failure of climate-change mitigation and adaptation
  • natural disasters
  • data fraud or theft
  • cyber-attacks.

The top five in terms of impact are:

  • weapons of mass destruction
  • failure of climate-change mitigation and adaptation
  • extreme weather events
  • water crises
  • natural disasters.

Together these items are a good list.  There is a very important point worth noting: only two of the ten are cyber threats.  Go poke around on the web, search for Supply Chain Risk, and odds are the references will lead to articles on cyber threats.  There is a disconnect in our discourse.

Logisticians need to figure out how to mitigate Supply Chain Risk in operations, not just cyber.  Our challenge is at the micro economic operational level.  The one of the world point of view belongs to Davos.  We can consider how to mitigate the impact of extreme weather, the implications of climate change on logistics, disaster response protocols, water, and natural disasters.  Every one of these operational risks cascades down to the tactical level.

Supply Chain Risk Management is about managing and mitigating these risks across the spectrum.  Supply Chain Risk Management is bigger than cyber.  Supply Chain Risk Management belongs to the operators, not the technical staff.

Look what Santa left under the tree.

By Steve Geary | 01/01/2019 | 8:48 AM

On December 13, the Department of Defense (DoD) issued an update to the governing procedures for supply chain management

“DoD Supply Chain Materiel Management Procedures: Operational Requirements,” gives solid direction for Supply Chain Risk Management (SCRM). 

Too often risk management is overshadowed by cyber threats; the DoD didn’t do that. 

Instead, DoD defines Supply Chain Risk Management (SCRM) as “strategies to identify, assess, and mitigate potential supply chain risks.” 

In other words, risk isn’t just about cyber.  DoD illustrates the landscape of risks by citing vectors like terrorism, cyber threats, [physical] attacks, insufficient quality, unreliable suppliers, imbedded threats, access points, machine break-down, uncertain demand, obsolescence, vulnerability from interruptions and interdiction of supplies, including fuel and electric power, flooding, labor strikes, natural disasters, or large variability in demand.

Put your tax dollars to work.  Adapt and adopt the blueprint the government published and make it your own.  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.



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