It's not every day that you see someone appointed to head up both information technology and the supply chain. But then, Danny Garst isn't exactly your everyday professional.
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.
Just when you think you've heard of every possible route to the top, along comes someone like Danny Garst. Garst breached the upper ranks of supply chain management (he's vice president of supply chain management and information technology for Philips Consumer Electronics North America) not by working his way up from the warehouse floor or taking the MBA route, but by dazzling his superiors with his info tech (IT) acumen.
Garst had toiled away in the backwaters of customer service, operations and logistics at Philips Consumer Electronics (which makes such things as flat-screen TVs and DVD players) for some years when he was handed the challenge of his career: overseeing the replacement of literally a hundred legacy computer systems with SAP's multi-headed enterprise resource planning system. Though Garst claims to have lost a lot of hair during the run-up to the switch, he gained something more important: top management's respect.When the day arrived for Philips to turn off the legacy systems and take the ERP system live, things went off without a hitch. Garst was soon rewarded with a vice presidency—one with responsibility for not just one, but two, areas. Struck by the interdependency of IT and global supply chain operations, top management had decided to bundle the functions and make Garst responsible for both. Today, he oversees strategy development and implementation and has operational responsibility for supply chain and IT.
A member of both the Georgia Tech Executive Supply Chain Forum and the Council of Supply Chain Management Professionals (CSCMP), Garst speaks regularly at local and national meetings. He sat down recently with DC VELOCITY Editorial Director Mitch Mac Donald to discuss his unique position at Philips, what led the company to outsource its delivery operations and why we shouldn't fear change.
Q: When I look at all the jobs you've had throughout your career, the question that comes to mind is: How does an IT guy end up in logistics? What's up with that?
A: Well,my background—a mix of IT and customer service —may be a little strange, but I don't think I'm the only logistics professional out there who has followed this path. The two things called logistics—or maybe more appropriately, supply chain—and IT have really come together in a big way. Over the last few years, Philips realized that at the global level, the IT function and the supply chain function were so closely intertwined that it made sense to put the two functions together.
Q: How is your job structured?
A: My current responsibilities include overseeing NAFTA-related issues, distribution and warehousing, and customer service as well as our event planning and forecasting processes in this region (North America). I'm also a member of the Consumer Electronics Global Supply Chain Board, whose members meet three or four times a year to make global policy decisions. We talk about what systems we're going to use and the priorities for our work. Bringing the board members together several times a year may be expensive, but it's necessary. If we didn't hash out these issues—if all of my counterparts were using their own systems and setting parameters that I wasn't aware of or didn't agree to—we'd have very little chance of succeeding. And, yes, I am also responsible for IT.
Q: What are some of the biggest challenges your operation has faced?
A: I'd say we met a huge challenge two or three years ago when we launched an initiative that would end up transforming our supply chain. It all started with our suspicion that perhaps our DCs weren't performing as well as they could, and in fact they weren't. But as we looked more deeply into it, we realized that the conversation wasn't just about DCs; it was really about transforming our supply chain. As you very well know, the distribution centers are really the execution arm of a very, very long supply chain. If you limit your focus to just part of the chain, like the DCs, you risk sub-optimizing the process as a whole.
That's particularly true today when the supply chain has become a global entity. Things were simpler back when most of our factories were located either here or in Mexico. Now, like so many industries, we find that our supply chain includes Europe, China and other Far Eastern countries. That has greatly complicated the picture and increased our risk of running afoul of the law of unintended consequences. For example, somebody could decide to purchase a certain part from a certain factory to save a penny, but that could generate a whole series of other problems and play havoc with our schedules.
Once we realized we would be tackling the entire supply chain, we got some outside help from IBM's consulting business. With IBM's help, we were able to model the entire supply chain, looking at questions like how much inventory we would need to carry if we wanted to hit this or that service target given the variations in lead times in factories around the world and the amount of demand variability for a single product.
Going forward, I think the biggest challenge will be obtaining a holistic view of our supply chain and managing it from end to end. Another challenge is educating our colleagues in the business to make them understand that the DC isn't necessarily responsible if something isn't delivered to a customer on time.
Q: You talked about some of the problems you encountered in the past. Have they been rectified?
A: Yes. For example, we were fairly sure that our DCs weren't operating efficiently, and that turned out to be the case. We were paying too much, and they weren't performing. After some discussion, we decided to outsource our entire regional logistics operations to Ryder. When we handed over the operations, however, we set very specific inventory accuracy targets.As a result, our inventory location accuracy shot up from the low 80s to over 99 percent. That's a huge turnaround, if you think about the impact on your DC operations, your fill rates and your ability to fulfill a customer's order. Without accurate inventory information, you have no way of knowing if you're out of an item. Or if you do have it, you may not be able to find it or at least find it quickly.
Today Ryder has full responsibility for our deliveries. We basically hand over the orders generated by our enterprise resource planning (ERP) system to them. We give them delivery windows, which are our customers' delivery windows, and we measure their performance on whether they hit the windows or not.
Q: Makes sense.
A: In fact, previously, we couldn't measure how well we were meeting the delivery windows. But now that we have integrated our systems with Ryder's, we're able to do that.
Q: How far back does your direct involvement in logistics date?
A: Well, I'd say my involvement in pure logistics, meaning distribution and transportation, dates back about 10 years.
Q: So you've been around long enough to see how technology can transform an operation. What technologies do you see making the biggest splash in the future?
A: RFID. As I see it, integrating RFID technologies from product manufacture to the retailer's shelf, and getting a return on investment will be our next big challenge.
Q: Is there anything that hasn't changed much in the past decade?
A: The need to meet the customer's requirements hasn't changed. What has changed are the requirements themselves. Customers have always had very definite expectations, but now those expectations are higher. For example, we used to talk about things in monthly buckets. Then we started talking about things in weekly buckets. Now retailers are stating their requirements in days.
Q: What's the biggest logistics challenge you've overcome in your career?
A: I think my answer would depend on which hat I had on at the moment. But I think the biggest challenge, honestly, was implementing an ERP system. We had maybe a hundred legacy systems that we replaced with SAP's ERP system in a "big bang" effort. Almost overnight, we turned off all those legacy systems and replaced them with SAP's financial, order management, material management, and SD (sales and distribution) modules. I lost a lot of hair during that two-year period. It wasn't so much the system; it was getting our people to understand and accept the changeover to the new process.
Q: Looking back, would you take that big bang approach—as opposed to a phased installation— again?
A: Probably not if I had a choice, but we didn't have a choice at the time.
Q: What skills or personal attributes do you draw upon most when you go to work each day?
A: Probably my refusal to be intimidated by change. I have no fear of change. I know that's a crazy thing to say because it's human nature to resist change. But look at what we've been able to accomplish in the last five years: we've implemented the SAP system, we've implemented an i2 [optimization system], we've completely outsourced our logistics operations. If we had been scared off by the prospect of change, we wouldn't have gotten the job done. I would also point to my willingness to lead change efforts. The likelihood of encountering some conflict along the way doesn't discourage me at all.
Q: What have you learned from managing all this change?
A: I think it would be to focus on processes, not systems. To me, if there is one thing we need to do in the supply chain community, it's to stop making our own stuff so darn complicated that you can't even explain it to someone on your own staff. We tend to rattle on about all this complicated stuff that makes CEOs look at us like we're crazy. Let's tone it down and keep it simple.
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."