Category Archives: Logistics

If You Think You Have Supply Chain Problems, Think About Poor Santa! (Repost)

Santa, who has to travel 2,860 miles per second in order to visit 1,700 homes per second to deliver over 2 Million Tonnes of gifts to boys and girls around the world, has supply chains and logistics challenges that put even the logistics challenges of the largest multi-national or US military (that has to support almost 1.5 Million people on active duty around the world that need everything from food and clothes to jeeps, tanks, and aircraft to do their job) to shame.

Reviewing a few simple stats, that we can compile from this article on The Science of Christmas in the Telegraph, this article on Santa’s Logistics Challenge in the Bangkok Post, and this article that asked What if Santa Had a Supply Chain Problem over on Open Kitchen, we find out that:

  • There are approx. 1.9 Billion children in the world.
  • Approximately 33% of these children have Christian parents.
  • The majority (defined as 90%) will be deemed nice by Santa.
  • In total, about 570 Million children need gifts.
  • If there are 3 children per household, on average, about 190 Million households will need to be visited.
  • Since Santa likely cannot start delivering gifts safely before 9 pm in a household, and since some children will not sleep more than 7 hours (on Christmas Eve), Santa has only 31 hours to make his deliveries.
  • This says he must visit almost 1,700 homes per second.
  • Since Christianity pervades our planet, he’ll have to cross most of the 510,000,000 kms of the planet’s surface.
  • Assuming the houses are equi-distant (which is a fair approximation as they’ll be dense in the city are far apart in rural areas), Santa will have approximately 2.7 km to travel between households.
  • That’s 513 M kms of travel in 31 hours.
  • That’s equivalent to 4,600 kms per second.
  • But this is just the delivery. He also needs to acquire the toys to deliver.
  • Let’s assume 2 toys per child, or 1.04 Billion toys.
  • Assuming a distribution where popular toys are distributed to
    tens of thousands, hundreds of thousands, or millions of children and where unpopular ones go to thousands, or hundreds, of children, we are probably looking at 10 Million toys.
  • While some vendors may produce 100 types of toys, others will produce one, and we can settle at about 10 toys per vendor.
  • That’s 10 Million vendors to manage!
  • If they are scattered all over the earth, and if each toy can go direct or through nearby 3PLs, and if each toy can go by a mix of truck, rail, sea, and air, that’s probably between 2 and 20 lanes per vendor, with 5 being a good number.
  • That’s 50 Million lanes by which goods could be arriving.
  • No wonder Santa needs a Super Spaceship and an army of elves!

Your Supply Chain Is Only As Safe As the Most Insecure Point

Just like a chain is only as strong as the weakest link, your supply chain is only as safe as the most insecure point – and the surprising thing (to you) is that it’s probably not where you think it is (at least not if you do business the local way).

As per this recent article over on the Logistics Briefing Blog on Transport Intelligence, “2012 is a record breaking year for freight criminals”. It was bound to happen sooner or later. As the article points out, with an average electronics shipment valued between 3 Million and 30 Million, these shipments are worth a lot more than most shipments of drugs or even guns, and are more valuable to thieves in more ways than one.

  1. The margins are higher.
    The cost of an operation to steal one of these shipments is typically 10% of the value, or less. It truly is a steal.
  2. The risk are lower.
    Most law enforcement agencies haven’t realized just how attractive these shipments are to criminals.
  3. The downside is much lower.
    If you do get caught, and it’s a first offence, it’s unlikely that you’ll end up in jail (unless the theft was violent and someone got hurt). In comparison, if you’re running drugs, you’re going to jail. Even if it’s just a few ounces of marijuana. (Plus, the chances of being hunted down by a heavily armed SWAT team are miniscule in comparison.)

But what is really going to surprise you is where the crime is picking up. Many of the significant thefts are in the EU! A recent theft in Hungary involved about €3 Million worth of smart-phones. Theft in the Netherlands shot up when the U.K. launched “Operation Grafton” to reduce thefts in Heathrow. And freight crime in Belgium has increased 90%.

So for those of you worried about India and China, think again. (And, as mentioned in the first paragraph, if you’re willing to do business the traditional way in those countries, and grease a few palms, your cargo will be quite safe. SI is not endorsing this, especially if you’re in the U.S. or the U.K. where such actions might be seen as violating the FCPA or the Bribery Act, but just noting that, statistically these countries are safer to ship in than a number of countries in Europe and can be much safer than just about anywhere in the world with the right preparations. The point is that your first instinct is probably not the right one when it comes to judging safe shipping zones.)

If You’re Depending on Taft, Then You Are Really Daft!

A recent article in the Supply Chain Management Review that stated the obvious fact that retailers’ supply chains [are] in jeopardy if [the] port strike is not averted noted that the NRF (National Retail Federation) and the RILA (Retail Industry Leaders Association) are calling upon President Obama to engage directly in contract negotiations between the ILA (International Longshoremen’s Association) and the USMA (United States Maritime Alliance) and invoke the Taft Hartley.

Why? The strike, which could take place on December 29, would impact all international trade and commerce at 14 of the nation’s East and Gulf Coast container ports that account for 95% of all containerized shipments offloaded on the Eastern Shipboard.

Should he? I don’t think so. It is Obama’s job to support legislation that opens the borders to free trade and to reach out and begin negotiations with leaders around the world – not to settle labour disputes. It’s not his problem that the West Coast work stoppage in 2002 caused an estimated $15 Billion in losses or that the 8 day work stoppage at the ports of LA and Long Beach last month caused shipping delays for hundreds of millions of dollars of cargo. That is an issue caused by the inability of two sides to reach an agreement, and, to be honest, by the unwillingness of the union to accept that it’s the twenty-first century and adapt appropriately.

As per this article in the LA Times earlier this month, the port strike was part of a bigger fight. The union is not happy with the fact that cargo companies want to cut costs and automate operations to compete with aggressive rival ports in South America and Canada and are fighting tooth and nail to prevent automation to preserve as many of the (extraordinarily) high-paying jobs for their middle-class members as they can. (And these are high paying jobs. An article in the Pittsburgh Post-Gazette back in 2006 noted that the 100,000 members of the two longshoremen unions had an average salary topping $120,000 a year, making them the highest paid blue-collar workers in the U.S. who earned 65% more than an average auto worker at a big three. Post Gazette.)

While I’m sure the cargo companies and ports are being too aggressive in terms of target cost and job reduction (as transition takes time to be non-disruptive), at this point I’m sure the union is being, at the very least, equally unreasonable. The economy is still in the dumps, the unemployment rate is still close to 8%, and ports North and South of the border are adding enough capacity to take all their business if they don’t smarten up. They average worker is doing a job that could be done by a high school graduate and earning more than I was when I was a Chief Scientist / Chief Architect, that required a PhD. In fact, they earn considerably more than the average software developer or engineer who requires 4-5 years of advanced schooling and 5-10 years of experience to their jobs. I personally think something is wrong with this picture. I’m all about fair pay for fair work, but as they are already getting ridiculous pay for the work they’re doing, relatively speaking, I can’t sympathize with them.

However, while I certainly understand the position of the people calling for the invocation of Taft, I don’t think it’s the President’s job to intervene. If this means a strike is inevitable, then it has to happen. After both sides lose, they’ll come to their senses and strike a reasonable deal.

I know this will probably hurt a number of retailers, but it’s their own fault. Retail, in my view, has been too slow to adopt proactive Risk Management strategies just as they were too slow to adopt e-Sourcing and e-Procurement technology. If a retail chain was actively identifying and managing risk, it’d already be hedging its bets by sending a percentage of its shipments to the closest Canadian, Mexican, or even South American port and then trucking it into the nearest U.S. distribution center so that, should a stoppage (be likely to) occur along the east or west coast, it could just divert all shipments to the Canadian, Mexican, or South American port and not be impacted in the least. To be honest, it’s a shame this isn’t the case for most major Retailers. This is why the ILA and the LWU (International Longshore and Warehouse Union) have so much power. Retailers are not taking appropriate advantage of Northern and Southern FTZs and using foreign ports to mitigate risk. As such, they are depending on TAFT and, in doing so, being really daft. (Especially when, as I pointed out back in September in The Looming Strike Might Cost Billions – But You Don’t Have to Lose a Dime !, Canadian and Mexican east-coast ports are adding capacity hand over fist and ready to take your shipments.)

Blue and Brown Make Dark Brown

Not Green! Someone over on Supply Chain Digital either needs a refresher course on the visible spectrum, or, if a discussion of electromagnetic radiation is too difficult for them, a kid’s paint set. What am I referring to? This recent article over on Supply Chain digital on how “UPS and USPS Begin Partnership to Reduce Emissions”.

I really like this idea in theory, but in practice, I wonder if it’s really going to reduce emissions or just create a lot of hot air.

Here’s the quandary. If the average UPS and USPS truck is going out half empty, than this is going to reduce the number of trucks on the road, and it’s a good idea. If the average UPS and USPS truck is going out over half fill, USPS will now need two trucks and the emissions will just be shifted from UPS to USPS. The other issue is that the packages have to get from the USPS network to the UPS network. How closely are the networks synced? Not only does a package now have to go through location B to get to C from location A, which means that UPS won’t be able to retire may trucks (as it still has to get the packages to USPS), but if A to B to C is twice as long as A to C, and this is the case for a majority of packages, are emissions really saved?

Also, with respect to the second part of the partnership, will the USPS be able to redesign its network to efficiently take advantage of UPS’ efficient global distribution capabilities? If USPS can, this will be great because UPS is much more efficiently structured to get a package to the right country given its focus. But if USPS can’t, it’s more hot air.

And all hot air does is scorch the earth, and turn it dark brown.

I hope for the best, but what’s the real incentive for these two companies to cooperate to the level necessary to really make a difference?

Let’s be Clear. Logistics Services and Logistics Technology Services Are NOT the Same!

And while the technology they use is important, the initial focus should be on the logistics services and whether the logistics services they offer are sufficient enough for the provider to even be under consideration.

Recently, I came across the headline that offered 5 Essential Technology Questions to Ask Any Logistics Service Provider and, as logistics services are not the same as logistics technology services, I assumed it would focus on judging the logistics provider’s general level of technical competence online and off, but the questions were entirely oriented around the technology solution used by the provider. While a good solution is good, because you need visibility, integration, etc., the first thing you need is to get your goods delivered. The second thing you need is sustainability. Then you need technology – and if the provider is deficient, there’s always the possibility that you can provide the technology. In other words, while the questions were good, I think they were off track. Here were the questions:

  1. What does visibility really mean to the provider?
  2. Can they customize their tools to meet your needs?
  3. What process integration options do they offer?
  4. How many current providers are integrated with their technology?
  5. How mature is their system availability process?

These are important, but I’d start with:

  1. What technology do they use to manage their fulfillment operations?
  2. How sophisticated is the schedule capability? Can it handle last-minute shipment changes?
  3. How much visibility can they give you into their schedules, capacity, and your shipments?
  4. Is the integration format standard and supported by your systems, or will you need some custom integration work?
  5. What is their ability to support their system, or yours if their system does not have the requisite visibility?

    Basically, you want to know that:

    1. They are using a fairly modern tool and have a firm, efficient grasp on their operations.
    2. They can handle dynamic schedules and expedited shipments when needed.
    3. You can get the visibility you need, even if someone has to do some development work.
    4. The integration can be accomplished efficiently and effectively.
    5. They, and you, are not dependent on a third party to manage, support, and query the system.

    A logistics services provider is not going to be an expert in software and systems. That’s not their core strength, so you shouldn’t be asking them questions like they are. That being said, you should make sure they are technologically literate and able to make use of appropriate technology. Find the balance, or you might end up eliminating some potentially great partners.