Category Archives: Logistics

One Hundred and Forty Five Years Ago Today

One of the earliest US monopolies, as ruled by the US Supreme Court in 1911 under the Sherman Antitrust Act of 1890, was formed.

Until its dissolution into 33 smaller companies, Standard Oil, formed by John D. Rockefeller, was the largest oil refineries in the world. By 1890, it controlled 88% of the refined oil flows in the U.S. The company, which almost single-handedly innovated the business trust, mastered horizontal and vertical integration, streamlined production and logistics, lowered costs, and consistently undercut competitors. This alone is not a bad thing, as all supply chains should strive for this, but, as noted by the US Department of Justice, Standard Oil offered

Rebates, preferences, and other discriminatory practices in favor of the combination by railroad companies; restraint and monopolization by control of pipe lines, and unfair practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; [and] espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent.”

and did what they could to force the competition out of business. This is monopolistic, illegal under the Sherman Anti-trust act, and, to be blunt, unfair. If your processes are efficient enough, your products good enough, and your costs low enough, the public will choose you on their own — there is no need for discriminatory practices or a refusal to work with suppliers that will also work with your competition. Plus, as some of us know all too well, some customers aren’t profitable and monopolies get stuck with those problem customers, but lean, mean, supply-chain machines don’t.

Standard Oil is a good business case to keep in the back of your mind. They did a lot right, and a lot wrong. Take the good, and leave the bad, and your business — and supply chain — might be better for it.

80 Years Ago Today

The foundations for faster air travel were laid when American aviator Wiley Harderman Post was credited with discovering the jet stream (in a search for the equatorial smoke stream phenomenon that was mapped by weather watchers after the 1883 eruption of Krakatoa and detected by Wasaburo Oishi in the 1920s using pilot balloons released near Mount Fuji). (History Channel)

On an experimental high-altitude flight on 7 December 1934, Wiley manoeuvred his aeroplane into a fast-moving air current, resulting in a significant increase in ground speed. The discovery proved a pivotal moment in aviation history, as it opened the door for high-altitude, ultra high-speed air travel.

As a memory refresher, jet streams are super fast flowing, narrow air currents found in the atmospheres of some planets, including Earth. (Wikipedia) While the speed is dependent upon the disparity between colliding warm and cold air systems, jet streams, which typically occur between 7 and and 16 km above the earth, have been recorded as flowing at a speed that is anywhere between 90 and 400 kph. Planes that take advantage of these streams and the force they provide can fly much faster and further than planes that don’t. For most of the year, there are two sets of distinct jet stream systems in each hemisphere of Earth: one at the pole and one at the sub-tropic, and that’s why many inter-continental flights take these routes.

80 Years Ago Today

Land transportation reached a new record when the Flying Scotsman became the first steam locomotive to be authenticated as reaching 100 mph. While slow by today’s standards (with the TGV being clocked at 357 mph in 2007), this was phenomenal back in 1934 when many goods were still shipped horse and buggy (with the average walking speed of a horse pulling a cart being 4 mph) and the average speed of a railroad freight shipment (at least before the introduction of the streamliner) was estimated to be about 5 mph (lafn.org).


I’ve got the freight train blues
Oh, lawdy mama got ’em
On the bottom of my ramblin’ shoes
And when the whistle blows, I gotta go
Baby, don’t you know
It looks like I’m never gonna lose
The freight train blues

Procurement Trend #32: Globalization

As per yesterday’s post, we need to discuss in detail each and every “future” trend that we debunked in our Future of Procurement series on old-blues and ongoing news. Until you not only understand why the historians are still talking about these trends, but why they are still relevant to many Procurement organizations that are stuck in the past with the historians, as well as what you need to do to prevent staying in the past with your organizational “peers”, we can’t risk ignoring them simply because we’re fed up of them. We have to make sure that each and every organization that wants to claw its way out of the past and into the present has the knowledge it needs to do so. So without further ado, we move on to trend number thirty-two.

As per our original series, globalization began soon after trade between nations. As far back as 3,000 BC Egypt was trading with Mesopotamia, which was near the end of the known civilized world for most Egyptians at that time, for pottery, lazuli, and obsidian. Then, about 3,000 years later, the Silk Road connected China to India, Africa, the Middle East, and Europe — and that was the known world at that time. Globalization has been with us for thousands of years and isn’t going away either.

So why do so many historians keep pegging it as a future trend? There are a number of reason, but among the top three today are:

  • Post-Panamax Ships and the Panama Canal Widening
  • 767s
  • The New Silk Road

So what does this mean for your organization? How do you blast out of the past and into the present in preparation for planning for the future?

Post-Panamax Ships and the Panama Canal Widening

Current Panamax Ships can accomodate 5,000 TEU (twenty-foot equivalent units), and can hold the equivalent of three-plus football fields, but with the widening of the Panama Canal, expected to be completed next year, the canal will be able to handle post-Panamax ships with a cargo capacity of up to 13,000 TEUs. That’s a 260% increase which will bring the cargo capacity up to about eight football fields. That’s over 20 million pre-packaged ready to sell iPhones on a single ship. Assuming Foxconn can pump them out fast enough, one ship and all of North America’s iPhone needs are met for an entire quarter!

It means that even with increasing oil prices and transportation costs, it will still be cheaper to outsource production of certain goods because the cost per unit will be essentially zero in certain compact high-value goods categories.

787s

Can’t wait 33 days for ocean freight? You don’t have to! The new 787-10 Dreamliner has a 124.4 meters of cargo capacity, which is over 3 TEUs of cargo capacity that can be moved halfway around the world in less than a day! For compact, high-value goods, this also results in outsourcing continuing to be profitable and logical for certain categories despite rising oil costs and rising labour costs in Asia.

The New Slik Road

Despite the almost utter lack of coverage from western media, the new China, Russia, and Germany trade partnership is going to usher in a new era in Eurasian trade, strengthen both the European and Asian economies (and Russia, India, and China in particular – the “RIC” in “BRICS”), and offer a plethora of new opportunities for global expansion both in terms of sourcing and selling — and Procurement organizations need to lead the way. Russia, China, India, and the EU account for about 42% of global GDP, and even though it’s still too early to tell precisely what impacts the new trade agreements are going to have, there’s no way that they are not going to be uber-significant. Not only does it have the potential to biggest boon to supply chain finance this year, if not this decade, but it’s going to change the way you think about trade. In other words, you have to totally reevaluate your global sourcing and procurement strategies to make sure they still make sense in this new era of trade.

That’s two down and twenty-eight to go. It’s going to be a long trek, but we’ll do it!

60 Years Ago Today A New Era in Air Transport Was Born

Sixty (60) years ago saw the first flight of the C-130 Hercules transport aircraft. Originally designed as a troop, medical evacuation, and cargo transport aircraft, the airframe was adapted over the years to airborne assault, search and rescue, scientific research, aerial refuelling, patrol, and aerial firefighting — and now it is the main tactical airliner for military forces around the globe. There are now over 40 models and variants of the Hercules in service in more than sixty (60) countries.

With a range of 1,300 miles or 2,000 kilometers, take-off capability from short and unprepared strips, and the ability to fly with one engine shut down, back in 1954, the new Hercules represented a considerable step forward in supply and transport capability. And this was just the beginning. A number of enhancements have been made to the Hercules over the years to the point where it’s still poised to be the transport vehicle of choice for years to come. Right now, the US Air Mobility Command, Air Force Materiel Command, and the Air Force Research Labs are in the early stages of defining requirements for the C-X next generation airlifted program to replace the C-130s and C-17s. But this isn’t the first time a program has been proposed to replace, rather than improve, the C-130s. Programs to replace the C-130s were proposed as early as the 1980s, but the end result was always improvement of the C-130 design. The most likely outcome is a next generation C-X that takes into account everything learned over the years and produces a next generation Hercules transport vehicle.