Daily Archives: August 13, 2007

Roll On! (and Keep Those Logistics Wheels Turning)

Roll on highway, roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler, roll on (roll on)
  Alabama, Roll On

Whether or not you like country music (as a general rule, the doctor does not), and whether or not you remember the hey-day of Alabama (where they were not confined to the country music stations, but plastered over music adverts on TV as well), without some proper planning, you too could be singing this refrain over and over if your logistics comes to a screeching halt because there’s no one to drive the truck, no fuel to gas it up, or worse yet, no truck at all – and you are unable to get your goods from the warehouse to the retailers where your customers are waiting.

The sky may not be falling, but without proper planning, given the shortage of truck drivers in North America (which is expected to skyrocket over the next five years since the number of new drivers isn’t even keeping up with demand in most places and some projections have up to 100,000 drivers retiring in the next five years in North America), constantly rising fuel prices, and increasing thefts of expensive automobile – and truck – parts (with a restricted supply) with surging scrap metal prices, without good planning, you could soon find yourself in a situation where it might as well be.

That’s why I was pleased to see AMR tackle the issue in one of their free research pieces a while back – Eight Ways to Keep the Supply Chain Logistics Wheels Turning even if I think it did miss a couple of tips. (It was updated with Nine Ways To Keep the Supply Chain Logistics Wheels Turning about a week later which was no longer free to non-subscribers.)

In the piece, Lora Cecere notes that, as per the Council of Supply Chain Management’s (CSCMP) 17th Annual Report on the Sate of U.S. Logistics, logistics costs rose 15.2% in 2005 to $1.2B, an 8.8% to 9.5% year-over-year leap beyond the nominal gross domestic product (GDP). Furthermore, total logistics costs – transportation, inventory carrying costs, and order administration – have risen more than 50% in the past decade. Thus, you should be taking whatever actions you can to help manage, offset, or absorb the costs. The recommendations provided were the following:

  • Plan Now for Tighter Capacity
    The American Trucking Association (ATA) estimates that the driver shortage will grow to 111,000 by 2014.
  • Manage Fuel as Part of Your Risk Management Strategies
    In 2005, the trucking industry spent $87.7B for diesel fuel, a year-over-year increase of $12B. The ATA forecasts diesel fuel costs will rise to $19B by the end of 2007.
  • Have the Right Supply Chain Planning (SCP) Master Data
    Lead times, transportation costs by lane, loading times, unloading times, and related data are all critical for transportation network optimization.
  • Rethink Customer-PickUp (CPU) Programs
    Customer PickUp programs are improving efficiency by use of drop trailers and scorecards.
  • Diversify Entry Ports
    Many U.S. ports are more than half a century old and showing signs of neglect or obsolescence. The World Shipping Council estimates that more than 800 ocean freight vessels make more than 22,000 calls at U.S. ports every year, which is 60 vessels a day at the nation’s 145 ports. With growth rates of over 10% projected for the next several years, investment for growth is inadequate.
  • Face Reality – Redesign Your Network
    Only 7% of companies analyze their logistics networks more frequently than annually, with 67% evaluating their networks annually and 36% redesigning every two years or more.
  • Get Help From a Good Partner
    Preferably a consulting partner with deep expertise and logistics benchmarking knowledge.
  • Make U.S. Transportation Infrastructure an Item on the National Agenda
    In 2006, the American Society of Civil Engineers gave the nation’s freight transportation system a dismal D+ on its infrastructure report card.

To this, I would add:

  • Use Decision Optimization
    Transportation Network Optimization is not something you can accomplish by hand with a spreadsheet. Make sure you have a good tool that can capture all of the costs and complexity and give you an optimal design for your current situation.
  • Don’t Forget Security
    In addition to the slew of security regulations you have to adhere to these days, especially if you are importing or exporting, depending on the goods you are carrying, both the truck and its content could be more valuable to your average thief than you might think. Make sure there is good security in place everywhere the truck is to be loaded, unloaded, or left unattended for any period of time and that the locks are recent, theft-resistant, and in working order.
  • Invest in Visibility
    Consider networked RFID technology to insure the system is immediately notified anytime something enters or leaves the truck and radio-frequency LoJack tracking technology to make sure you know where the truck is at all times.