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.
Every so often, a need to get right with "the infrastructure" rises to the top of the bottle, only it's not necessarily cream. The industry has been railing against infrastructure negligence for decades. After a bare handful of legislative actions at the federal level, even the two major parties' presidential candidates are committing to infrastructure rebuild.
But the most pugnacious fly in the ointment, the estimable and formidable Mitch Mac Donald, has raised a couple of infrastructure issues, namely the physical and enabling technology as priorities. Your 'umble correspondent has waxed eloquent about infrastructure components in the past, but they were different in focus and intensity from Mitch's observations.
The politicians are ready to pounce on yesterday's infrastructure as a sure way to solve tomorrow's challenges, in much the same way that generals study past failures as guides to future victories by learning how to win the last war.
It's not just politicians imagining that Israeli-Palestinian peace is a slam-dunk in an enlightened global community, or generals believing that the Mau-Mau would flee like rabbits when faced with heavy armament, or great minds in control of the exchequer who would invest in rotting bridges (last-mile solutions) or crumbling highways (long-distance movement) when there are constituencies that vote reliably to which they can pander. But candidates and incumbents are determined to spend on yesterday's physical infrastructure, deficits notwithstanding and relevance in question.
Football coaches devise offenses to outsmart the defenses of 30 years ago. Or create defenses to confound offenses abandoned for ineffectiveness 20 years ago. Dude! The Single Wing went out with piston warplanes!
Thus, it makes sense for supply chain management (SCM) professionals to periodically revisit what makes up an SCM infrastructure and what the priorities within infrastructure need to be.
TODAY'S INFRASTRUCTURE HOT BUTTONS
There is a handful of imperatives to be addressed, and now. These are a subset of the fuller list of infrastructure components listed in earlier writing, and they expand on Mitch's concerns regarding the physical elements and the role of consistent, visible, and coherent technology support.
The physical/technology hardware must be brought up to the standards and capabilities and capacities of advanced Western nations. Communications, Internet, everything. The traditional bridge/highway network needs to be elevated to a sustainable high level.
The difference between now and earlier is that the new and remedial work has to be accomplished to a comprehensive plan, a sequence of priorities that recognizes relative GDP (gross domestic product) impacts and ties into a whole, as opposed to a random collection of unrelated make-work projects that reward loyal voters or woo desirable battleground states. Significant attention must be paid, in Willy Loman's words, to long-haul and short-haul movement, including exits, ramps, congestion reduction, smooth transfer interchanges, and easy urban movement. Where appropriate, rail, seaport, inland waterway, and pipeline modes need to be included in the plan—as well as integrated with passenger alternatives.
As to technology, there isn't any without skills development, to be addressed below.
THE HUMAN INFRASTRUCTURE
Important as the physical component is, our supply chains simply won't work without people—people with the right skills, the right education, the right attitudes, and the right roles and responsibilities.
It begins with raw execution. We simply don't have enough forklift drivers, truckers, and order pickers to meet today's needs and customer commitments, and will need Evel Knievel's motorcycle to leap over tomorrow's looming entry-level worker gap. Compounding the challenge, we don't have programs to build and fill an execution labor pipeline, the landscape being littered with bits and pieces of unrelated and uncoordinated initiatives in various corporations and schools.
We are not remotely close to developing the next level of talent—the analysts, planners, and schedulers; the sourcers (not sorcerers, btw) and procurers; the relationship points of the spear; the collegial internal collaborators; the transport mavens; the project managers and S&OP (sales and operations planning) savants; and the like. And creating supply chain managers is largely a game of chance, the luck of right place/right time experience, coupled with fortuitous on-the-job learning.
And in a universe abuzz with drones, the hum of robots, and the clink/clank of sundry material handling contraptions, we are utterly failing at developing designers, repair people, installers, and the coders who make things stop going bump in the night.
The greatest human infrastructure gap? By far, our collective inability to take ordinary people and teach them to do the extraordinary, to become supply chain leaders—passionate visionaries with powers of persuasion and magnetic attraction for followers.
PUTTING THE PIECES TOGETHER
Until and unless we develop people to the extent that we have developed roads and bridges, and technology hardware and software, the other infrastructure imperatives will remain relatively meaningless. So, let's get to it, and figure out how to teach leaders to lead, managers to manage, and technogeeks to make bits and bytes do our bidding.
We cannot afford to cede the output of brainpower to offshore geniuses and let our best and brightest chillax while highly motivated technocrats from other lands learn enough to power their homelands to heights of supply chain excellence.
Time to get real. We can't—and won't in the future—satisfy the consumerist hunger of our home market, nor will we be a commanding player in global competition. Can we afford to become Greece or operate on a par with Portugal? Really? Are those your visions for a supply chain future?
THE ROLE(S) OF EVOLVING INFRASTRUCTURE PRIORITIES
We have a plate overflowing with infrastructure challenges, a legacy of neglect, a history of looking into the rear-view mirror, a failure to see the demands of tomorrow, a distorted view of skills needs, an unrealistic hope that tomorrow's blue-collar, well-paying jobs will translate to the STEM (science, technology, engineering, and mathematics) knowledge that helps define the 21st century economy in a planetary context. Is it too late? One hopes not, but vision, leadership, and individual initiative will be essential to survival, imho.
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.
Global trade will see a moderate rebound in 2025, likely growing by 3.6% in volume terms, helped by companies restocking and households renewing purchases of durable goods while reducing spending on services, according to a forecast from trade credit insurer Allianz Trade.
The end of the year for 2024 will also likely be supported by companies rushing to ship goods in anticipation of the higher tariffs likely to be imposed by the coming Trump administration, and other potential disruptions in the coming quarters, the report said.
However, that tailwind for global trade will likely shift to a headwind once the effects of a renewed but contained trade war are felt from the second half of 2025 and in full in 2026. As a result, Allianz Trade has throttled back its predictions, saying that global trade in volume will grow by 2.8% in 2025 (reduced by 0.2 percentage points vs. its previous forecast) and 2.3% in 2026 (reduced by 0.5 percentage points).
The same logic applies to Allianz Trade’s forecast for export prices in U.S. dollars, which the firm has now revised downward to predict growth reaching 2.3% in 2025 (reduced by 1.7 percentage points) and 4.1% in 2026 (reduced by 0.8 percentage points).
In the meantime, the rush to frontload imports into the U.S. is giving freight carriers an early Christmas present. According to Allianz Trade, data released last week showed Chinese exports rising by a robust 6.7% y/y in November. And imports of some consumer goods that have been threatened with a likely 25% tariff under the new Trump administration have outperformed even more, growing by nearly 20% y/y on average between July and September.