Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
If you move the couch at home and change your mind, that's one thing.
But change your mind about the site you chose for your newly built distribution center, and well, you'll probably have plenty of time to spend on the couch after that.
There are a couple of levels of detail—and criticality—to the subject of locating a new DC. It's one thing to be concerned about which side of the tracks to build a new facility. That's as close to a slam-dunk as things get these days. If you've been charged with deploying facilities in a complex supply chain—or even a global operation—that's a different story. And even when the network appears settled, in today's dynamic business environment, it may not be settled for long.
A number of situations can plunge you into a distribution network design/redesign—an acquisition (or being acquired), a line of business added or dropped, expansion into new geographical markets, a shortage of space, a change in strategy toward centralization (or decentralization), or radical sourcing changes, to name but a few.
If none of those sounds like a reasonable prospect, read no further—you're not in the game. If any of them seems likely, press on.
There are really two components to the question. One is obvious, "where." The other, and first, question is "why." Distribution network structure is fundamental to the ultimate strategic commitment to customer service levels. The strategic view of the network provides the basis for distribution locations, facility missions and inventory deployment.
The devil enters the room
Of course, once the magic word "network" has been invoked, there's a tendency to get overheated about the subject of network modeling. Truth is, once you get beyond a couple of locations, modeling can be enormously helpful for number crunching and quick assessments of alternatives. But be warned: There's an unfortunate tendency at this point for geeks and executives alike to get all caught up in the esoterica of modeling. This is unfortunate, because there's so much more to the question that modeling packages aren't equipped to address. In fact, the modeling tool only begins to answer the critical questions in the overall assessment; other tools and analyses are needed to get at things like strategic approaches to markets or channels, facility size and cost issues, the potential to outsource at least some operations, and questions of whether to automate and to what degree. Modeling does not necessarily provide solid, realistic total cost analysis, implementation planning, or business case development.
In addition, while a number of modeling tools are available for network and facility design, the choice of which to use is far less important than how it's used. The model is merely a tool, ultimately sensitive to the quality of questions posed to it, the reliability of data employed in the solution, and the business context of the exercise. The real keys to successful network modeling lie in asking the right questions, using the right data and aggregating them to the right level, and having enough data and auxiliary tools to evaluate the complete solution.
It's also important to keep in mind that there is often a big difference between an optimal solution and a practical one—and models can't make that distinction. They'll change a solution for a one-dollar cost advantage. Further, it's often true that a majority of savings or benefits come from a sub-set of the modeled solution—and models don't know how to fragment their solutions to find the "bang for the buck" payback. In short, they can't edit or interpret their work, which places a powerful burden on the user.
In addition, models are often tough to build, difficult to verify, and consume data as if an information famine were imminent. Some newer products are somewhat more user- and data-friendly, but modeling is not an exercise for the faint of heart or the resource-constrained. That said, modeling tools are indispensable in solving complex network/facility location questions. Just remember they're only tools, not oracles. They can't answer questions that you can't ask; they can't solve problems that you can't define, and they can't think outside the box.
Selecting the right site for a facility adds another major set of considerations to DC network design. Those include such things as tradeoffs between inventory and transportation. The Von Thunen theory suggests that high-value items, such as gemstones, can be shipped relatively economically from almost anywhere in the world. The inverse is that low-value commodities, such as salt, need to be shipped from quite near the point of consumption. Another element is the potential for postponement, in which it might turn out that the best location for finished-product shipment is not the best location for postponement execution.
House hunting
Once the strategic elements are in place, the process of specific site selection begins. But be sure to have requirements defined before launching the search. Making them up based on what you're seeing is self-delusion of a dangerous kind. As Lewis Carroll reminds us, "If you don't know where you're going, any road will get you there."
The site selection process begins with a Requirements Definition, which prioritizes the factors that are important in a new facility or construction site. Examples include access to specific transportation modes (such as rail sidings or water transport), the labor environment, tax issues, and the ability to expand. Don't forget some other important factors, such as community attitudes—little in business life is more fearsome than the NIMBY lobby. And financing alternatives can radically affect build-or-buy decisions.
Site/facility selection is one activity in which taking all the outside advice you can get is probably a good thing. You can save time and leverage the experience of many advisors—and you can preserve anonymity, a very good thing in a run-up to negotiations. Some sources of help include real estate brokers or developers' consulting divisions, warehouse sales representatives, carrier representatives (especially rail), chambers of commerce, state and local development agencies, and consultants.
When you're ready to make the final pick, be sure to check multiple sources for information and opinions. Aggressively look for indicators of potential trouble, such as floods, seismic activity, soil problems, and access difficulties.
In short, be organized, be creative, and document, document, document.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."