"we've got to find ways to be prepared": interview with Chris Caplice
In the old days, even the abstract theorists at MIT dismissed uncertainty planning as an impractical blue-skies quest, says researcher Chris Caplice. Those days are over.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
When the poet Robert Burns wrote that the best-laid schemes of mice and men often go awry, he could just as easily have been writing about the 21st century supply chain. As Hurricanes Katrina and Rita so powerfully reminded us, disruption to the smooth flow of goods is inevitable—it's just a question of where and when. And it doesn't take a disaster on the scale of Hurricane Katrina or the 9/11 attacks to wreak havoc on a supply chain; a collapse can be triggered by something as ordinary as a broken-down truck.
How do you prepare for the unforeseen? How do you come up with contingencies without knowing where the next disruption will occur? Corporate America may be reluctant to confront these questions, but not the folks at the Massachusetts Institute of Technology's transportation think tank. Researchers at the Cambridge, Mass.-based institute's Center for Transportation & Logistics grapple each day with the problems of how to build a more resilient supply chain, one that can withstand disruption whether it's caused by forces of nature, forces of evil, or anything else that might come along.
One of those researchers is Dr. Chris Caplice, who is both a principal research associate at the center and executive director of the school's Master of Engineering in Logistics (MLOG) Program. Caplice and his students right now are engaged in research about how to build a more resilient company—one that can bounce back from catastrophes like the 9/11 attacks or Hurricane Katrina as well as the more ordinary setbacks (say, a highway closure) that occur in the daily course of business. And importantly, they're working to get the message out into the real world.
Caplice, who earned a bachelor's degree in civil engineering from the Virginia Military Institute and a master's in civil engineering from the University of Texas, received a Ph.D. in transportation and logistics systems from MIT in 1996. His dissertation, "An Optimization Based Bidding Process: A New Framework for Shipper-Carrier Relationships," was selected as the winner of the Council of Logistics Management Doctoral Dissertation Award. Prior to joining MIT, Caplice held senior management positions in supply chain consulting, product development and professional services at several companies, including Chainalytics LLC and Logistics.com. Caplice also served five years in the Army Corps of Engineers, attaining the rank of captain.
DC VELOCITY Editorial Director Mitch Mac Donald caught up with Caplice this fall to discuss the need to prepare for uncertainty, why he makes it a point to get his students involved in his research (no, it's not about cheap labor), and the virtues of what he calls "friendly freight."
Q: Can you tell us a little bit about how MIT sees its role in the push to advance the logistics profession and describe your own role in the quest?
A: There's really no MIT perspective per se because there are so many different players at the institute. Every professor is essentially a cottage industry unto himself. I myself am with MIT's Center for Transportation and Logistics, or CTL, which was founded in the '70s as the Center for Transportation Studies.
What we do at CTL can really be boiled down to three things. The first is research. We receive approximately $10 million in research funding each year from both private industry and the government. As part of that, we run a vibrant corporate exchange program in which member companies trade information and best practices.
Second, we have an education track. The primary education track is the program that I run called the Master of Engineering in Logistics, or MLOG, program.
Third, we're trying to develop new supply chain knowledge and disseminate that knowledge. We try to spread that knowledge not just via the academic literature, which is very important, but also by getting it into practice. That's why our corporate exchange and outreach program is so critical. We really try to get new ideas out, bring people together and disseminate new ideas. The knowledge transfer, the technology transfer, that's the big focus.
That said, it's important to us to tie those three branches—research, outreach and education—together. My main role is leading the education track, but I also do research, predominantly in transportation. I also make it a point to involve the students in that research. These are the people who will populate the profession and supply chain for the next 10, 20, 30 years. That is really just another way of disseminating—by feeding the profession, if you will.
Q: Based on what you've learned from your research and your corporate exchange program, what do you see as the top two or three issues facing the profession right now?
A: That's a good question. Certainly one of the key issues is the ongoing quest to raise awareness of the importance of operations, which is really what the supply chain is all about, at the senior level. That's not to say the supply chain profession hasn't been gaining visibility. Lucent, for example, has a supply chain officer who's one of the lead corporate officers now. Yet we still have a ways to go. When I held a transportation symposium here in April, one of the key questions we were unable to get answered dealt with what your boss knows. We spent considerable time discussing the problems we face right now with transportation capacity and all that, but the thing is, very few people could say for certain the extent to which the upper level executives in the company were aware of this particular challenge or understood how deeply it could impact operations.
The other thing we're hearing a lot more about lately is the need to prepare for uncertainty. The way we used to approach it was by ignoring it. In all of our optimization models, we would assume away a lot of things. There has been more and more evidence, though, that it can't just be ignored. Whether it's a factory shutdown, a labor strike at a port or something as unpredictable as the 9/11 attacks, we've got to find ways to be prepared.
These big things get our attention and make us think. It's important, though, to recognize that it's not just about preparedness for these large events; it's also about being prepared for snarls in everyday operations. It's about building a more resilient company in general. I'm seeing more and more focus on that and the development of better tools, approaches and methodologies to handle that within an organization.
Q: What do you see percolating to the top? Have you identified some best practices for dealing with uncertainty?
A: There are some technical things that are coming along. For instance, we're integrating some simulation models in real-world operations to create robust optimization scenarios. There are also some technical approaches that are getting a little more visibility, and being applied a little more, that aim to measure the true cost of activities across the supply chain. The results often point out why it's not always best to go with the low-cost solution. Then there are the various methods of disseminating information up the ladder and of convincing people of the need to plan for these potential risks.
Q: What do you see percolating to the top? Have you identified some best practices for dealing with uncertainty?
A: There are some technical things that are coming along. For instance, we're integrating some simulation models in real-world operations to create robust optimization scenarios. There are also some technical approaches that are getting a little more visibility, and being applied a little more, that aim to measure the true cost of activities across the supply chain. The results often point out why it's not always best to go with the low-cost solution. Then there are the various methods of disseminating information up the ladder and of convincing people of the need to plan for these potential risks.
Q: Let's drop altitude a little bit and talk about some things of a more tactical nature. I've heard you speak a couple of times and you very often comment on the need for shippers to work cooperatively with their carriers to boost efficiency. You link it to a concept you call "friendly freight."
A: The whole idea—and I've been playing around with this since I wrote my dissertation on shipper/carrier relationships in the early '90s—is that anything you can do to make your freight more carrier-friendly, anything you can do to make their job easier, will help you in the long run. That doesn't mean you have to hand over the farm, but you at least have to be cognizant of opportunities.
I'm seeing more shippers starting to pick up on some of the things that the guys at the warehouse have known for years and years. They're starting to think about what drives carriers' costs. They've figured out that with trucking, the more you keep the truck on the road (that is, not sitting idle at the dock or in the yard), the lower your rates will be. As a result, they're looking at ways to cut dwell time—the time it takes for a trucker to come in and actually get loaded or unloaded—whether it's by setting up a drop-and-hook program or focusing on fast release or fast entry.
Q: The idea is that you have everything to gain by making it as easy as possible for carriers and suppliers to do business with you?
A: No question about it.
Q: Let's talk about today's logistics professional for a moment. Are there any particular skills that today's professionals need that might not have been so important in the past?
A: I'm very biased. I am a structural engineer by undergrad training. I took a circuitous route to where I am today, from structural engineering to transportation engineering to transportation to logistics and supply chain management. With that background, I tend to focus on finding interesting problems and trying to solve them. In civil engineering there are challenges, but there's also a lot of "cookbook" type work going on. It's different with logistics and the supply chain.As you look deeper and deeper into logistics and supply chain issues, you realize there is no "cookbook" yet. I think today's logistics or supply chain professional needs to be a problem-solver—someone who can go in and identify the problem, analyze it, look at what's important, and come up with a solution.
Now, having said that, the biggest weakness of any engineer, myself included, is that we can't write, talk, and, you know, work with others. That's why we approach the M-LOG program the way we do here at MIT. We're really focusing on some of those leadership skills: Can you make an effective presentation? Do you know how to lead? Do you know how to work within a team and with outside parties? I guess I see two skills as being most important. The first is being able to attack a problem, analyze it, come up with a good solution and implement it. The second deals with change; being able to introduce change, manage it and make it actually happen.
Q: Let's look out at the horizon. What's going to rock a logistics professional's world in the next five or 10 years?
A: That's another good question, but really, it's not the specific development that matters so much as the way we react to it. The thing that I love to see now is the way that people have become used to things happening. Change is nothing. It has been constant. Think of all the things we've seen that have brought about change. Right now, it's RFID that's supposed to change our world. Before that it was the Internet. Was it EDI before that or did I miss a revolution?
Q: There might have been a minor skirmish or two along the way as well.
A: A I think the big lesson we've learned is to roll with change. For example, it could be that fuel is going to double in price. If that happens, perhaps we'll all simply open up more DCs and put them closer to the customer.
Q: Yes, the pendulum swings: One year it's "We've got to centralize." Five years later it's "We'd better regionalize."
A: Oh, it always goes back and forth. But based on my discussions with people out in the field, it does appear that manufacturing and sourcing will constantly be in flux in the coming years and we're just going to have to be more flexible.We'll need to be prepared to coordinate across the globe, across multiple players, and, of course, among a changing roster of players.
Q: In other words, as a logistics professional, you must embrace and truly live the notion that the task will never be finished, there will always be changes, there will always be new variables?
A: I would absolutely agree with that.
Q: If you could pick just one thing that you absolutely, positively would want to instill in your students to prepare them for a career in this field, what would it be?
A: Intellectual curiosity—the quality of being inquisitive, of being alert to potential problems and to want to solve those problems. Say you're going through a warehouse and you see a bunch of boxes piled up on the side. I'd want my students to start asking: What's that all about? I urge my students to ask questions instead of just accepting what they've been told.
Q: Before we wrap, I'd like to touch briefly on the implications of the expanding globalization of operations. Where will this trend lead us? Do you think operations will continue to change? Do you think globalization will continue to expand?
A: I think so. I don't know where exactly it's going to expand, but I think it's definitely going to change how things are done. We're also going to see more and more traditional products turn more service oriented. Think of the music business, where many products are now delivered digitally. I live right in downtown Boston. When we moved in three years ago, there were four music stores. Today, there's just one left. Books are probably going to be next. It may take five, 10, or 15 years, but more and more of these data-centered things are going to go digital. It's going to change the way we ship and the way we do business.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."