Category Archives: Logistics

Supply Chain Security Is Becoming More Important By The Day: Part II

Yesterday we reminded you of the benefits of supply chain security, and then noted good supply chain security has gone from a nice to have to an absolute must have.

In fact, your entire supply chain now needs to be designed with security in mind as well as risk. It’s not just lowest cost and availability of supply any more. It doesn’t matter if the supplier is lowest cost, highest quality, able to produce more than you need in the best market conditions, and guaranteed component and material supply from local distributors and mines if you can’t get the products from their factory halfway around the world to your local warehouse.

In other words, you can’t choose a supplier:

  • in a sanctioned country
  • if the only shipping routes include war zones

… without a backup (for when something inevitably goes wrong):

  • where there are active trade wars between their country and your HQ or target country
  • where the majority of shipping lanes are currently high risk (of disaster, piracy, and/or theft)
  • where the government is pursuing an isolationist agenda that could significantly impact exports
  • where the available transportation companies don’t have good security measures

Then, once you select that supplier, you need to focus on ensuring you have end-to-end security. This involves ensuring that:

  • you use suppliers with good plant security
  • … who use carriers with good security
  • … and sub-tier suppliers with good plant/mine/farm security
  • you have (near) real time GPS (cell/satelite) tracking on every vehicle
  • you have RFID tracking on every pallet
  • you ship food and drink in tamper proof packaging
  • you ship electronics or dangerous products in tamper aware packaging
  • you have documented chain of custody for every pallet from supplier factory to your warehouse
  • you have physical security for valuable goods (and especially those that are hot targets, like truckloads of iPhones)
  • … this includes the use of ocean freight carriers, that spend a lot of time in international waters, that have their own private security force to deter piracy / terrorism

Otherwise, you’ll have an insecure supply chain and it’s just a matter of time before you get blocked, seized, pirated, terrorized, or sunk.

Supply Chain Security Is Becoming More Important By The Day: Part I

We’ve known for decades the benefits of good supply chain security. (We talked about many of them 20 years ago on this blog.)

They included:

  • higher supply chain visibility
  • improved supply chain efficiency
  • better customer satisfaction
  • improved inventory management
  • reduced cycle and shipping time
  • improved product safety
  • improved inventory management
  • improved product handling
  • process time reduction
  • efficient clearance
  • better customer satisfaction
  • resilience

However, good supply chain security is now now just a nice to have, it’s an absolute must. Supply chains are as fragile as they have been in decades and, even worse, today’s prime targets for theft, sabotage, and terrorism. Including of the legal variety. Let’s discuss.

  • tariffs, trade wars, and trade barriers:
    in the midst of these spats, governments are looking for reasons to block or seize shipments — and a lack of security (where you can’t prove the goods weren’t swapped for counterfeit or sabotaged) can increase your chances that your goods will be turned away, stuck in customs indefinitely, seized, or even destroyed
  • pillaging pirates:
    the pirates are back on the Ivory Coast with a vengeance (they never really went away, but for a while they were less active as the generation of the 2000s retired)
  • military target proxies:
    we’ve already seen this in the Red Sea and the Strait of Hormuz in particular, the Strait’s open, then it’s not, and if you’re a ship registered, or going to, the US or Iran, you’re a target
  • terrorism targets:
    sales and purchases of large quantities of fertilizer and other chemicals and materials that can be used to make bombs are carefully tracked in most developed countries, and flags are (supposed to be) raised, so it’s pretty hard to do a domestic bombing and get away with it; on the other hand, most private food shipments are not well tracked, even by the shipping companies, so it’s a lot easier to break into a truck when the driver stops to eat or sleep (and keep him that way with the help of chloroform) and inject a few hundred almond cakes with cyanide; spray the lettuce with a concentrated salmonella mist; replace the shipment of grain alcohol with methanol; etc. twenty years ago warnings were everywhere about next generation terrorism (and we discussed some of them here) — now that terrorism is on the rise again, the methods, and mass impact, is going to be much worse
  • natural disasters:
    they’re not going away — with the weather getting more extreme, plan on more (flash) fires, floods, tornados, hurricanes, tsunamis, etc. especially in routes traditionally at higher risk

In other words, your supply chain is under constant (threat of) attack, which makes security paramount. So what do you do?

Part 2 tomorrow!

Supply Chain 2026 or Supply Chain 2008? Part II

Still continuing our “the more things change, the more things stay the same” theme, back in 2008, the Supply Chain Digest published an article on Key Trends Impacting Supply Chain Management and Logistics for 2008 where it asked a number of leading academics and practitioners what they saw coming. (Their responses are summarized in this SI post.)

Nine (9) experts weighed in and provided 24 thoughts on what they saw coming in 2008. Those thoughts more-or-less fell into seven themes, and for the most part, those themes are the same themes today. Moreover, the specific concepts addressed are more-or-less the concepts being addressed today. Let’s continue to take them theme by theme.

Automation / Tech

Three (3) of the nine (9) experts centered on automation/tech as a core theme and stated that they believed:

  • Enhanced Visibility and Automation will take hold in logistics
  • The firms that recognize that a fresh approach focussed on value, cash flow, and light, non-intrusive, web-service-based, value-add software components that work with existing solutions and technologies will be the ones that make progress.
  • Successful supply chain technologies will become solution/results focussed, not just technology-focussed.
  • On-Demand / SaaS will continue to gain traction – particularly in TMS

Enhanced visibility is now needed across the entire supply chain. If you don’t identify a disruption at the source three levels down your supply chain (mine collapse, plant fire, etc. resulting in a material or part shortage), you won’t have time to recover by the time your tier 1 supplier misses the delivery date.

The best solutions are those that plug-and-play with the ones you already have — that connect out of the box. That’s why I2O (the “term-du-jour”) solutions are so hot — they help an organization plug and play disparate systems together.

The real leaders are those that use technology as an enabler, not a talent replacement, and definitely not as the ultimate solution. They focus on next generation tech that augments intelligence and makes their talent more efficient.

Despite all the hype that Agentic AI will take over, since the majority of it is based on hallucinatory Gen-AI and failures are becoming commonplace enough that organizations are losing faith in the hype, organizations will soon return to trustworty multi-tenant SaaS based on (A)RPA and deterministically controlled/gated agents, and efficient, affordably priced next-gen SaaS will soon come to the forefront again.

Logistics

Two (2) of the nine (9) experts centered heavily on logistics as a core theme and stated that they believed:

  • The need for Integrated Logistics will increase.
  • Carrier bankruptcies will increase in 2008.
  • The biggest challenge carriers will face is staying afloat as lower volumes and reduced margins crunch their cash-flow.
  • The biggest challenge for shippers will be maintaining service levels as carriers exit unprofitable markets and lanes.

The need for integrated logistics is still increasing as the constant interruptions across the global supply chains come fast and furious. We’re in a reality where you need to re-route shipments on the fly at not only every cross-dock and modal interchange point, but at every intermediate stop. Major road, bridge and border closures will force new routes; port, canal, and strait closures will force alternative shipping options or a switch to air cargo; sanctions will force entirely new carriers, routes, and supply chains; and so on. Once you head down the wrong route, it can take days to backtrack and select a new one, potentially causing perishable cargo to be wasted. Once your cargo is boarded on a ship that might be halted mid-route, it’s too late to have any hope of getting it on time. Once it gets into the hands of a now sanctioned carrier or hits a port in a sanctioned country, you’re never getting it back.

Carrier bankruptcies are a regular occurrence every time recessions cause a significant drop in spending and bookings drop, oil prices shoot up, insurance rates shoot up, or global pandemics prevent critical maintenance parts from being obtained and too much of the fleet goes offline. We’ve had multiple instances of mass carrier shutdowns and bankruptcies over the past 20 years (2008 recession, introduction of Map-21 in 2013 [RIP-21], COVID, and now the tariff crisis (with carrier shutdowns in 2025 almost equalling the closure rate of RIP-21: about 8,000 last year compared to about 10,000 during RIP-21).

Now that volumes are still down on many lanes and in many sectors due to the tariff crisis and rising oil costs are crushing their margins again, carriers are again desperately struggling to stay afloat.

Maintaining service levels is a considerable challenge with declining margins and the need to maintain secondary lanes that will never operate at capacity in order to secure major contracts.

When a Conflict Starts, It’s Already Too Late For Procurement To Pay Attention!

Supply Chains are not only hurting, they are breaking, and they have been since the US and Israel renewed the conflict with Iran and more-or-less brought the Strait of Hormuz to a close for pretty much every western country that is associated with the US.

A Strait that is critical not only for

  • global energy (as it normally sees 20% to 25% of global oil passing through it daily)

but also for

  • natural gas (up to 25%, at least it will further delay the AI Data Centers)
  • fertilizer (as it saw up to 50% of urea, ammonia, and sulphur supply passing through it daily, with the former a key fertilizer component)
  • methanol (but at least bootleggers will have to use real grain alcohol now) and petrochemicals
  • etc.

In other words, the Strait being close off is not just a logistics nightmare for the shipments you were expecting that needed to pass through the Strait on time, it’s a nightmare across your entire supply chain as all of your suppliers dependent on the oil, natural gas, chemicals, gasses, etc. that normally pass through the Strait daily are also suffering their own nightmares. Delays will compound through the chain for the lucky ones, and the rest will see shipments just stop.

And articles that tell you this is a leadership moment are missing the point.

Where it was critical, you should already have known your exposure, had monitoring in place, and been alerted the day the conflict started that an issue was coming your way.

Where supplier Force Majeure was unacceptable, you should already have had the flexibility in your contract to shift, pause, or end the contract immediately upon supplier failure.

Where supply was critical, you should have been geographically dual-or-tri sourcing with order escalation clauses built into the contracts so you can quickly secure supply when potential shortages are detected.

Where margins are tight or costs can vary widely based upon external events, your cost models should already be taking this into account, should be monitoring for market price changes, and should be updated upon such changes with immediate alerts if prices shift beyond typical market fluctuations.

And strategic and critical suppliers will already be treated as such. They will be given fair margins, access to buyer expertise that will help them with efficiency and negotiating their own raw material contracts, and placed in a financial position where they too can dual or tri-source and explore optionality in their own supply chains.

Because, as Paul Martyn commented on one of the many articles on why the conflict is apparently time to pay attention and step up (even though, as we stated in our opening, it’s already too late):

If you:

  • defer supplier investment –> you pay in disruption
  • squeeze supplier margin –> you pay in resilience loss
  • ignore (supply chain) optionality –> you pay in constrained decisions and lack of supply

The answer, of course, is to be paying attention to any high risk or high impact category from the day you identify it to the day you end the last product line that uses it. And to use the Busch-Lamoureux Exact Purchasing model to properly place your category, determine which cost factors and risks you need to track, how often, when alerts should be triggered, what mitigations can be taken up front, and what actions need to be taken when an issue likely to cause a disruption arises.

How Do We Fix The Procurement, Logistics and Supply Chain Disconnect? (Part 2)

Yesterday we gave you a history lesson on how we got here, from the time it worked back in 1885 to now where it’s completely broken. The reason? You can’t understand how to fix it if you don’t understand why it broke. (The Short Answer: McKinsey and peers who echoed their thought leadership to break down functions, outsource staff, outsource production, outsource logistics, and downsize until there’s almost nothing left in the organization.)

Procurement was never meant to be divorced from Supply Chain or Logistics. It was all supposed to be an integrated function. Buy. Ship. Manage. Repeat. But it’s not, and because no one will give up a fiefdom, and because almost no one has enough cross-disciplinary training to understand the intricacies of most functions, yet alone manage them, it won’t become part of Supply Chain again (or at least not for a long time — at least not before the fall of the modern house of Usher).

So fixing the disconnect is going to be hard. The departments will remain separate. The business language will remain distinct. The goals and KPIs will be local and different. Procurement is going to want lowest cost from a supplier it believes can supply the necessary volume over the lifetime of the (contract) award. Logistics is going to want suppliers that are on lanes served by existing carriers they have contracts with who have excess capacity and from whom they can get a good rate.

Supply Chain is going to want to utilize warehouses, ocean routes, FTZs, and other networks they have in place that they believe are low risk and high performance — they have to assure supply to manufacturing. Each goal would likely select a different supplier — there will be one supplier that is lowest price, one that is lowest shipping, and one that fits in best with the current network with a high supply assurance rate. Furthermore, if you “work” with them and then select the supplier they don’t want, they’ll think you weren’t actually “working” with them.

But, fortunately, you don’t need to work with them to work with them. You just need their priorities and their data.

You can make the best balanced decision for Procurement, Logistics, and Supply Chain if:

1. You understand the competing objectives AND their relative priority

You sit down with logistics and ask them what their most critical criteria are in supplier selection, ask them to rank them, and ask them to relatively weight them. Then you sit down with supply chain and do the same. Then you take your critical (generic) criteria, rank them, and relatively weight them. Then you create an integrated list based on the relative rankings across your three departments, weight based on C-Suite priorities, and get the final, general purpose, rankings blessed by the CFO and COO.

2. You integrate into all of the internal AND external data sources at your disposal

When you go through this exercise, you’ll realize that multiple factors affect landed cost, supplier risk, supply assurance (and supply chain risk), quality, and other key factors. You’ll realize that the only way to evaluate all of this is to pull in key sets of data from the logistics system, supply chain systems, and external data feeds (so that risk analyses are done on complete, up-to-the-minute, data) and integrate them into a decision matrix.

3. You make a decision that satisfies the objectives subject to the data available

And you do this using modern decision optimization that balances all of the objectives relative to the weightings, hard constraints, soft goals, and supplier offerings. As per our prior article, thanks to the introduction of multiple “buy local” acts (US CHIPS, EU IAA, Chinese local content) , The Time for Optimization is Finally Here as it’s the only way you will be able to satisfy all of these requirements with a single multi-vendor buy as you have to match
procurement decisions with supply chain factory requirements as you have to buy for different requirements and produce to those requirements and produce where its most economical to get those goods to the countries they were produced for.

In other words, you fix the disconnect with:

  1. shared priorities,
  2. integrated data,
  3. integrated decision optimization that takes procurement, production, and logistics requirements into account.

And if you don’t fix the disconnect, your organization’s entire existence may soon come into jeopardy.