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.
p>Disclaimer: This is not about Tom Cruise jumping about in his small clothes, as in the movie "Risky Business." Rather, it's about a topic we wrote about in this space a few years back: supply chain resilience. The foundation was built from concepts outlined by Yossi Sheffi of the Massachusetts Institute of Technology in his book The Resilient Enterprise (coincidentally published in the wake of Hurricane Katrina). At the time, the idea hit home, and there was a flurry of activity around planning for operational continuity in the event of unlikely disasters.
But we're not hearing as much about risk management these days. Maybe we made good plans but abandoned them when they were not immediately needed to respond to a crisis. Perhaps we believed that bad things couldn't happen to us. Yet that kind of thinking flies in the face of reality.
It's not just the staggering, widespread, and continuing consequences of the nuclear accident and tsunami in Japan. We've had another volcano in Iceland, earthquakes in New Zealand, tornados in the United States, and so on and so on. Not to mention the Gulf of Mexico's spectacular deep-water oil spill, the BP saga. Oh, wait, then there are the 2011 rains and flooding that shut down water transport on the Mississippi River.
All of these seem to have had supply chain consequences that hadn't been contemplated, that hadn't been addressed by having relevant contingency plans in place. For example, supply chain managers and their manufacturing peers were shaken to the core when the twin disasters of earthquake and tsunami, exacerbated by nuclear uncertainty, shut down the flow of critical parts and materials from Japan in early 2011.
Worth reading and heeding
We're not going to recap the content of Sheffi's The Resilient Enterprise. But it really is worth reading and heeding. In sum, it powerfully demonstrates the value of recognizing that there are so very many unlikely disasters facing every company that it is prudent—and should be mandatory—to proceed as if at least one of the unlikely cases will occur.
As for what's involved in supply chain risk management—and what should be—we recommend an approach similar to what Dr. Sheffi has prescribed. It's hard work, it's resource-intensive, it requires devious minds to imagine the unimaginable, and it demands both disciplined and creative thinking in preparing contingencies, workarounds, alternatives, and substitutes.
But the time spent on tasks like identifying backup sources of supply or alternative distribution nodes could pay off in spades in the event of disaster. We could write a series of mini-cases to illustrate how real-world companies have benefited from contingency planning, but we'd need much of the current issue's space to do that. Suffice it to suggest that the pharmaceutical company sitting atop the San Andreas Fault benefited from setting up alternative distribution 2,000 miles away. And an East Coast technology distributor did itself a lot of good with a California DC that could fill orders long after the shop had closed in New Jersey. In another example, a major retail chain in Ohio developed a second campus just five miles from the first as a hedge against natural disaster wiping out either one.
The bullet points below illustrate some of the things that leading supply chain managers do to proactively address risks associated with suppliers, customers, and operations:
Suppliers
Ensure that every supplier has contingency plans in place to deal with business interruptions of their own.
Identify substitute or alternative suppliers for all products and materials.
Focus early on alternative sources when a single-source supplier has been selected for whatever reason.
Evaluate the pros and cons of hedging and speculative inventory investment when volatile commodities are in play.
Focus early on alternatives when single or limited sources are located in geographies subject to natural disaster, civil unrest, or military action by foes.
Track supplier financial stability on an ongoing basis.
Create joint ventures in situation that could strain supplier finances.
Consider loans/investments for suppliers in temporary financial difficulty.
Fund raw materials purchases for small suppliers trying to fulfill unusually large orders.
Customers
Draft corporate policies regarding how much business any one customer can command.
Limit the amount of capacity that will be devoted to top tier customers.
Track key customers' financial stability on an ongoing basis.
Monitor/manage customer accounts receivable.
Evaluate the mutual benefit of joint ventures with selected customers.
Consider the pros and cons of greater vertical integration with key customers.
Operations
Manage inventory holdings carefully, carrying sufficient stock to maintain high service levels yet avoiding overbuilding. Consider using postponement whenever practical.
Arrange with peers (or even competitors) for overflow storage space availability.
Invest in one or more distribution centers that can take the heat off a disaster at headquarters.
Build a DC network that can support order fulfillment to a single customer from any one of the facilities.
Stay abreast of industrial space markets against future long-term or temporary needs.
Build extra manufacturing capacity into multiple plant sites to allow for shifts in production.
Design plants consistently for ease of handling volume/product shifts.
Pre-arrange backup from third parties to backstop/augment fleet operations.
Maintain carrier portfolios that permit shifting volumes from one to another (without carrying excess candidates and diluting volume economies).
Be "easy to do business with" in dealings with suppliers, customers, service providers (without being a patsy).
Bottom line
In short, be prepared, be proactive, be fair. You will have gone a long way toward blunting the consequences of the myriad events that can interrupt the flow of goods from your suppliers, through you, to your customers.
But don't stop there. Buy time with these interim tactical moves to seriously prepare for "The Big One," as they say in California. Unfortunately, The Big One is not confined to California. We'll all have Big Ones to face sooner or later.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.