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Surviving the China Rip Tide – Recommendations??

In the last post – Surviving the China Rip Tide – How to profit from the Supply Chain Bottleneck, I reviewed a report (BCG Report : Surviving the China Rip Tide – How to profit from the Supply Chain Bottleneck) by BCG about certain problems that are cropping up in the China centric supply chain.

In this post, I want to get into the recommendations aspect of that report – What to do about this? The authors of the report advise on how to change this problem into an opportunity. So what kind of opportunities are available? And more importantly, for whom?

First, let me succinctly summarize the current situation:

  1. Long lead-time supply chains originating from china based sourcing.
  2. Port congestion at the point of import i.e. US ports

As the authors contend, this is a problem because the lead-times for sourcing from China through congested port infrastructure either on the West coast or East coast of the US are going up. The authors note that,

A leading discount retailer is building distribution centers near the ports of Savannah, GA and Houston, TX in anticipation of the need to redirect its containers from congested west-coast ports.

I agree because in my past role I have executed a number of studies for supply chain network modeling that identified secondary ports and locating distribution centers in relation to these secondary ports that made sense from a distribution point of view. Their recommendations for companies that have yet to go the global sourcing route are as follows:

Reduce minimum production order quantities and reduce cycle times as quickly and as much as possible

In other words, stop batching already and compete on the basis of speed. Thus, produce to demand or transition to a pull model.

Refrain from sourcing or manufacturing in China until management fully understands the dynamics of supply chains.

Or don’t listen to accountants. :grin: Get a handle on total supply chain costs rather than unit costs.

Create an integrated or semi-integrated information flow within the company’s existing supply chain

Cutting out layers of intermediaries and associated inventories and trying to get as close to the customer as possible is one way to factor not only speed into the producer-customer relationship but also responsiveness. And an information system is an invaluable medium. The question as always is how a firm uses its IT resources over acquiring it.

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Logistics Quotient: Midwest USA

LogisticsToday and Expansion Management offers a matrix that summarizes the state of logistics practices, environment and competencies by cities in the Midwestern part of the US – they call it the Logistics Quotient : Midwest.
The methodology,

The Midwest Regional Logistics Quotient matrix provides an overall ranking of each city within the Midwest region, assigning a rank of 5 stars to the top tier, 4 stars to the next group and so on down to a 1-star rank

LogisticsToday and Expansion Management also list their 10 logistics categories in which the midwestern metro areas are ranked. They are:

* Transportation and distribution industry–based on business and employment base providing transportation, distribution, warehousing and related services.
* Work force–geared to existing and available logistics-related workers in the area.
* Road infrastructure–measures factors like available lane miles per capita, interstate highway access, miles of paved
roads etc.
* Road density, congestion and safety–ranks the city on traffic volumes and delays as well as accident statistics and other factors affecting the smooth flow of traffic.
* Road condition–draws on state performance and includes condition of highways and bridges among other measures.
* Interstate highway–includes access to interstate highways, spending on highway construction and maintenance.
* Taxes and fees–provides a measure of logistics-related costs, including highway and fuel taxes and related business activity taxes.
* Railroad–offers a state-based rank of access to Class 1 and other rail services and miles of track.
* Waterborne commerce–includes ocean port capacity as well as inland waterways.
* Air cargo–ranks the city on its access to cargo services, including wide-body passenger service by combination carriers, international and expedited services.

This kind of information is invaluable to me when I engage in Supply Chain Network modeling and consulting on the basis of this. This sort of matrix allows for easy comparison between geographical locations and the costs thereof of operating within them.

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Supply Chain Metrics – A first cut

If you’ve come across the term KPIs or Fill Rate or Inventory turns, chances are that you’re aware that all these terms fall (not exclusively though) under the rubric of a topic called Supply Chain Metrics. In this first post about Supply Chain Metrics (of what I will be hoping is a series of posts), I want to assemble an intersection of the most common Supply Chain Metrics as might be observed in practice. Beware, there is no uniform standard for these metrics across firms and so terms that mean one thing in one firm might mean something approximately the same with slight differences.
Here’s an initial list of metrics that I have assembled
Supplychainmetric.com
1. Back orders
2. Cycle Time
3. Fill Rate
4. Inventory Classification (ABC)
5. Inventory Turns
6. On time shipping and delivery
7. Perfect Order
The Power of Metrics (DMReview)
DMReview organizes supply chain metrics using the following four dimensions:

1. Response-Time Metric (timeliness dimension)
2. Visibility Metric (process efficiency dimension)
3. Productivity Metric (productivity dimension)
4. Shrinkage Metric (profitability dimension)

Building and leveraging Metrics Framework to drive Supply Chain Performance (Infosys)
They outline the key characteristics of the right metric as including – Reliability, Validity, Accessibility and Relevant. They also elaborate that:

• Metrics are most useful when embedded in a metrics model that represents a business process
• The criticality of a metric is determined by the process performance insight that it provides
• Metrics need to be assigned to roles that have process execution, monitoring and tracking responsibilities

Supply Chain Benchmarking (AMR Research)
AMR Research focuses on 8 high-level operational processes:

* Request to quotation
* Order to delivery/cash
* Perfect order fulfillment
* Inventory management
* Source and make (with cash to cash)
* Operational planning
* New product development time
* Supply chain management costs

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A review of Transportation Management System (TMS) players

Inbound Logistics has posted a review of Transportation Management Systems (TMS) players in the market. They note:

Still, at the heart of all TMS products is a software engine that strives to create maximum transportation efficiency for its users.

All the major players are listed as well as whether they offer a licensed or hosted version of their particular solution. Take a saunter that way!

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Update on the Top 3PL listings

First off: Thanks to Logisticsgal who directed me to the Inbound Logistics report on 3PL providers here. Inbound Logistics has assembled a comprehensive chart to identify the capabilities, competencies and specializations of the Top 100 3PLs in N. America. There is no ranking of these 3PL providers though.
Logisticsgal also asserts that Dick Armstrong’s list of top 30 3PL providers is not that useful because those 3PL providers have to pay to be included on the list. That is quite different from the objective of that ranking which is to list those providers by decreasing magnitude of revenues. I did surf the web to find similar reactions to Dick Armstrong’s list – here is one such reaction but about the list from the previous year. There is always a difficulty in estimating the revenues of private 3PL providers and so I agree that the numbers of private 3PL providers should always be taken with a grain of salt as suggested by the contributor on the linked thread.
Logistics Today also has a list of 3PL providers whose capabilities are assessed and listed in a comprehensive manner.

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Top 30 3PLs in 2006

3PLWire alerted me to the publication of the Top 30 3PLs of 2006, a list compiled by Richard Armstrong of Armstrong & Associates released his annual report of the top 3PL providers in North America.

Rankings are based on total annual revenue in N. America.

Well, it looks like GENCO made the list this year and at the #24 position. Well, its good to know that even if it were a Top 25 list, GENCO would have still made it.
The Top 30 3PL list:

1. UPS Supply Chain Solutions
2. C.H. Robinson Worldwide
3. Schenker USA/BAX Global
4. Expeditors International of Washington
5. Schneider Logistics/Dedicated
6. DHL Contract Logistics (Exel)
7. Penske Logistics
8. EGL Eagle Global Logistics
9. UTi Worldwide
10. Kuehne + Nagel Contract Logistics, North America
11. Ryder System
12. Caterpillar Logistics Services
13. Hub Group
14. Menlo Worldwide
15. Meridian IQ
16. J.B. Hunt Dedicated Services
17. TNT Logistics North America
18. Werner Dedicated Services
19. Landstar Global Logistics
20. Greatwide Logistics Services
21. Transplace
22. NFI Industries
23. PBB Global Logistics
24. GENCO
25. Logistics Insight Corporation
26. Ozburn-Hessey Logistics
27. Total Logistics Control
28. BNSF Logistics
29. A.N. Deringer
30. Kelron Logistics

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Former chairman and CEO set to buy back Swift Transportation

Logistics Management reports on the goings on with Swift Transportation (going on since November 2006 if I remember right).

After an unsuccessful attempt to buy truckload carrier Swift Transportation Co. Inc. in November, a group led by the company’s former chairman and CEO Jerry Moyes has entered into a definitive merger agreement to acquire Swift in an all-cash transaction for approximately $2.74 billion

And he’s taking it private?

“Swift has evolved into the operator of the largest truckload fleet in the United States with a dedicated and energetic team of employees, over 17,900 trucks and nearly $3.2 billion in revenues,” said Noyes in a statement. “I am extremely pleased to have reached this agreement with Swift and look forward to building on the unique Swift legacy that has positioned the Company for continued growth and success.”

What can I say? “A swift end to a public Swift truckload carrier.”

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About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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