Monthly Archives: November 2010

Logistics Carriers: Black Boxes are Coming

As per this recent article over on Logistics Management, all five leading U.S. trucking companies endorse EOBRs for commercial trucks. The rationale: to verify legal duty status of their drivers.

Schneider National, U.S. Xpress, Hunt Transportation Services, Knight Transportation, and Maverick USA are endorsing the “Commercial Driver Compliance Improvement Act” (S. 3884) put forward by Senators Mark Pryor (D-Ark) and Lamar Alexander (R-Tenn) which, if passed, would require (commercial) trucks have electronic on-board recorders (EOBRs) within three years. The companies have formed the industry coalition “Alliance for Driver Safety & Security” to urge Congress to pass legislation designed to improve highway safety.

The alliance believes that EOBRs will improve safety on our nation’s highways by applying technology to document driver compliance to the hours of service rules because early evaluation of the Comprehensive Safety Analysis (CSA 2010) data suggests that carriers with higher levels of hours of service compliance have lower crash involvement.

But will they really verify legal duty status? And, more importantly, will they really improve highway safety? If your truck has two drivers, will a box tell you who was driving? And if a driver really wants to push through, I’m sure it won’t be long before someone figures out a way to bypass them, just like your best car thief can bypass any car alarm or lojack in 60 seconds (or less). But more importantly, how will it directly improve highway safety. While it’s true that a tired driver is more likely to get into an accident than an alert driver, how is a black box going to determine if a driver is tired or not? Every driver is different. If the driver didn’t sleep the night before due to illness or personal stress, the driver might tire in just a few hours on a crowded highway. But if the driver got a great night’s sleep, is rested and relaxed, doesn’t have to deal with demanding driving situations, and breaks every few hours, he or she might be able to easily drive 12 hours in a day, especially if he or she gets the next day off.

While I’m all for safety, I can’t help wondering if there is an ulterior motive by some of the bigger players to bankrupt the smaller players. These boxes are going to cost at least 500 per truck, and there are going to be installation, maintenance, and training costs on top. This could break a small carrier operating on a razor-thin margin, and offer no additional security or safety if the carrier’s drivers are professional self-conscious drivers who always obey the rules and keep good books.

But what do you think?

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Webinars This Week from the #1 Supply Chain Resource Site

Given that American Thanksgiving is this week, and that most of the US shuts down for four (4) days as a result, there aren’t many webinars this week, but here are four that might be of interest to you:

Date & Time Webcast
2010-Nov-23

15:00 GMT/WET		 The four-corner e-invoicing model — discover the benefits of using an open network
  
Sponsor: Basware
2010-Nov-23

12:00 GMT-07:00/MST/PDT		 Take Back the Endpoint: Network Security in the Age of Social Media
  
Sponsor: ES Williams
2010-Nov-25

14:00 GMT		 E-sourcing Logistics – Using E-Sourcing Tools and Techniques to Add Value to Your Supply Chain
  
Sponsor: Trade Extensions
2010-Nov-26

11:00 GMT-05:00/CDT/EST		 Global Economic Update: What Canadian Supply Chain Managers Need to Know in 2011
  
Sponsor: SCL Canada

They are all readily searchable from the comprehensive Site-Search page.

How Much Can You Really Save If You Switch Suppliers?

I was a little flabbergasted by this recent article over on SupplyManagement.com on how switching suppliers will save billions in the UK. While there are often savings to be had if you are willing to switch suppliers, the reality is that the savings, once the total cost is calculated and the total value derived, is never as much as you expect, especially if the product you are buying isn’t a true commodity. And even if it is, there are other considerations. Consider the following categories:

  • Office supplies
    Okay, you can always get a better quote. But remember that delivery charges often aren’t fixed (and will usually increase beyond the average rate of increase by the local delivery company) and the better the deal you get on negotiated SKUs, the more they’ll overcharge you on anything off contract (and, if you’re not watching, charge you even more than what you would pay in the office supply store down the street). The “loss leader” is always designed with your loss in mind.
  • Communications
    Okay, you can always get a cheaper (mobile) plan. But the cheaper the plan, the more you pay on overages, roaming, and long distance (LD). Have an executive with an unpredictable travel schedule? Watch your roaming and LD costs skyrocket! Have an organization where 20% of users don’t fit the basic plan profiles? Watch your overage costs skyrocket! For every penny you save, you’ll lose it somewhere else.
  • Janitorial Services
    You’ll always find someone cheaper. But they won’t necessarily do as thorough a job, and if you’re not careful, they might skip the background check and you might come in some day to replace the backup drive only to realize that the backup drive is gone!
  • Contingent Labour Management (CLM)
    You’ll always get a better quote, but the less a CLM firm gets to fill a position, the less incentive they have to spend the time to find the best person for the job, especially if your competitor is paying them more to fill that same position. And, in the long run, the few hundred you save costs you a few thousand (or tens of thousand) in productivity losses.
  • Custom Manufacturing Services
    You’ll always get a better quote, but what will you sacrifice in quality? And what if they put lead in the paint, melamine in the milk, or bisphenol A in the plastic? Then what?!?
  • Advertising Services
    I’ve no doubt that you can cut any quote in half, but advertising isn’t about cost, it’s about the revenue it helps you generate. Is it really worth hiring a B player at half the cost when the A player is five times as likely to come up with a campaign that helps the organization double sales?

So while you should definitely be willing to change suppliers, don’t rush a decision and be sure to let your current supplier compete in the go-to-market if they have been serving you well. Sometimes all they need to find savings (either by being more aggressive on margin or on innovation and finding more creative ways to serve you at a lower price point) is a little incentive. And remember, it’s not worth switching for 5% that will never materialize unless it’s a multi-million dollar contract. And even then …

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What’s the Fastest Way to Lose a Supplier?

It’s a good question, but is it one that has a statistically backed up answer? I have to admit, I don’t know, but I’d like to.

Recently, I came across this article over on the Get Satisfaction blog on the fastest way to lose customers. According to the article, the top three reasons that customers leave a company are because:

  • they move to the competition
  • they are dissatisfied with the products and service
  • they don’t like the treatment they received

However, most of the time, it’s because they don’t like the treatment they received. In fact, that’s the case seven (7) out of ten (10) times.

But how often does a supplier leave when they don’t like the treatment they receive? My guess is not very often. As long as the bills get paid, suppliers will put up with a lot more than customers, even if they shouldn’t. However, go long enough without paying your bills, and your suppliers will probably bolt faster than lightening after serving you with a summons. However, depending on order size and frequency, it could take a while before the amount owed is enough for the supplier to drop you.

So what is the fastest way to lose a supplier? And how do you prevent it from ever happening?

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Don’t Exclude Natural Disasters from Continuity Planning

Even though the probability of certain events may only be once every one hundred years, the reality is that they’re going to happen eventually, and now that your supply chain is global, the chances of being affected by a natural disaster, even half a world away, are many times greater than they were even twenty (20) or thirty (30) years ago. Plus, as per this recent article over on the ISM site on being in the eye of natural disasters, the Emergency Events Database (EM-DAT), managed by the Centre for Research on Epidemiology of Disasters (CRED), recorded 3,770 natural disasters worldwide recorded between 2000 and 2009 with an economic impact of over $863 Billion. In other words, on average, there are 377 natural disasters a year costing the supply chain 229 Million each — more than enough to bankrupt even your average large company if it is operating on a razor-thin margin and unprepared for the disaster!

You need a plan for major disruptions caused by natural disasters, be they local to your operations or halfway around the world where they are local to your raw material / component / contract manufacturing suppliers. A natural disaster in either location, or anywhere in between along your normal distribution routes, will knock out your supply chain for an indeterminate amount of time. Thus, as suggested by Bernie Hart, an Executive Director of J.P. Morgan, supply management professionals should be assigning weights to specific transactions of components and products in the supply chain and planning appropriately. What-if scenario simulations are imperative for anything with a significant weight, such as high-volume shipments, high-value shipments, customer-critical components or shipments with delivery penalties associated with them. These simulations should include participants throughout the supply chain to ensure a uniform understanding of what is critical for the business, where the key process triggers are and how suppliers will meet your commitments in the event of a mass-scale interruption.

You need to be planning proactively and putting plans in place for contingencies when your operations get knocked out by a natural disaster — especially considering disasters of all types (hurricanes, tsunamis, volcanic eruptions, etc.) seem to be increasing in recent years. You don’t necessarily have to spend money preparing for execution until the need arises, but you have to spend money creating and fleshing out the plans that will allow you to act fast when a disruption does occur. And, as the article suggests, you should invest in the appropriate analysis technologies to help you identify the biggest risks upon which your contingency plans should focus.

The article is very well written and I would suggest you check it out — it also has some good ideas for contingency plan components. If you are unsure where to start, consider bringing in some outside help who are experts at continuity and disaster recovery planning who can bring with them additional benefits. After all, consultants are cheap.

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