Tag Archives: innovation

Avoiding Dead-end Streets As We Build the Future of Supply Chain Planning – Sep 23, 2022

Lora Cecere, the Supply Chain Shaman, has given us once again something to think about– big time. She goes off on some of the current fads in supply chain that she thinks are not worth pursuing.

It’s always wise to listen to Lora. She has a wealth of experience and many years of consulting with top companies to inform her thinking.

Here are some of her dead-end streets that you should be avoiding.

  • Dashboards
  • Lights-out planning
  • Real-time planning
  • DDMRP (demand-driven material requirements planning)
  • Forecast Sharing
  • Sales Forecasting

She believes future applications are adaptive and distributed. Read the article to see what she means, and how those two keywords play out.

The SCOR methodology she claims is useful in devising a new approach to planning. Figure 3 shows an outside-in model of planning for a company.

I’m particularly intrigued by her comments on dashboards. I’ve felt they were more about visibility than improving processes. While some of that is necessary, the real value will be if you can make changes quickly. And most dashboards, I’m afraid, don’t let the operators do that. They look cool but don’t help making critical changes.

Her remarks about real-time planning are also on point. If you rerun too frequently, the plans thrash— they oscillate between one action and another completely different one. There is value in following a consistent pattern and making slow changes rather than swinging back and forth. We saw that in spades during the Covid epidemic. Look at the auto manufacturers who canceled their chip orders and then six months later could not place them again because the capacity had been diverted to other chips that were more profitable as it happened. Acting too quickly caused them anguish that has persisted for three years now. Reruns generate noise that affects partners and destroys relationships.

I also share her skepticism about DDMRP which bases an entire manufacturing progression on orders. It’s better than not looking at orders, but it fails to capture the richness of what might happen in the future. We can point to the same auto manufacturers and see that they have hundreds of cars in an ‘almost-complete’ state while they wait for certain electronics to be delivered.

And she provides some good references on checking how forecasting is improved by getting the customer’s forecast in advance. Statistical tests indicate that for the most part they are not helpful. What characterizes the few that are? That’s worth research.

And finally, salesmen are the worst forecasters. First of all, they’re liars. And the best ones are the worst liars. Why? Especially if they are paid on commission, or via a plan that pays for meeting targets or provides spiffs for beating them, they will try to get the target set low. And for commission sales often they are not guaranteed, as to size especially. So the salesman might predict low-ball, because he’s sure he will get that as a target. Then the big order comes as an extra. But for manufacturing planning, that is not reality. Often big orders do not come exactly when anticipated, so they might not fall at quarter end when the financials are due. Timing is harder to predict than size.

In the past at a mid-size manufacturer, we had better luck eyeballing a steady rate of production from history (moderated by some anticipation of the future market) and then trying to get salespeople to tell us about big orders and when they anticipated them. We laid the big order forecasts on top of the ‘run-rate’ forecast to determine the timing of production. A few days’ change in big order timing didn’t then blow our whole manufacturing plan.

Salespeople are a good source of info about products and customers, but as manufacturing forecasters they are awful. Yet you need to cultivate them to get that key information about their expectations which is valuable.

Here’s a PDF of her post.

Avoiding Dead-end Streets As We Build the Future of Supply Chain Planning

Six Challenges to US Logistics

I received a nice writeup from Kyle Krug, representing Legacy Supply Chain Systems, listing six important challenges shippers face today. Legacy is a 3PL helping customers with their logistics for nearly 40 years. They have been trying to help their customer firms deal with these challenges.

Driving Limitations: Hours of Service (HOS) restrictions and Electronic Logging (ELD) have reduced trucking capacity. Even when the hours of service rules have been waived for essential transport, electronic logging means simply that a driver can’t lie about the time spent behind the wheel. That means they have to stop on time. While it’s true that some drivers may object to the intrusion of ELD, it’s probably better not to have those drivers doing the job anymore. ELD data could be immensely valuable to a dispatcher to determine bottlenecks preventing on-time deliveries, and should allow a 3PL or a shipper to optimize use of the available driving time. And while drivers and shippers may wish for more hours of service, it’s certainly safer to reduce them, and the effect could be moderated by using team driving for long hauls. Actually, drivers may be more inconvenienced by delays at warehouses that are not able to provide a load or unload in timely fashion. The shortage of parking places for heavy-duty trucks also plays a role; planning your HOS stop is much harder than it should be. A carrier software system should certainly be able to allow dispatch to take advantage of what it knows of history and the needs of the shipment to make choices better than manual dispatching, for both the shipper and the driver. That’s something software could take advantage of, for the benefit of both shippers and drivers. A 3PL should choose carriers that offer these options and take advantage of them.

Transportation Capacity: Recently there has been a shortage of truck drivers. Experts differ on the reasons. One theory says it’s because shippers and haulage firms have been taking advantage of drivers, making them want to quit. Others point to the aging of the truck driver force; younger people might not see driving as a career option. A third rationale is that especially during Covid, driving schools could not stay open, and the supply of newly trained drivers dried up. Another thought is simply the pay and benefits. Recent use of hiring and staying bonuses and increased pay have helped. And efforts to stop mistreatment of drivers through delays and altered contracts that cause unanticipated delays have helped. I’m not so sure this is as big a problem right now as it was during the height of the Covid pause. How can a 3PL help? By insuring that the carriers it uses have a reliable, fairly compensated workforce and that they don’t specify routes with unconscionable delays built in.

Lack of Flexible Solutions: Shippers have unique needs, and a 3PL needs to be sensitive to them. Excellent management software which supports many and well-qualified options can be a great benefit to shippers when the need varies. Sensitivity to shippers’ requirements for this order is important, and that benefit should be provided by helpful and understanding agents.

Inflation: We hear a lot about inflation right now, though it only seems to be rampant for a few items. However, inflation in fuel, repairs, and labor costs affects the price of transport, and through that prism the cost of everything, since it all needs to be transported. Shippers have limited ability to negotiate shipping costs. They could make a contract with a carrier, but in times of inflation, long-term contracts could be high. A 3PL should be able to help with decision-making on spot versus longer-term contracting, taking advantage of ‘arbitrage’ between the spot market for a route and the contract rate. That’s not the kind of activity a smaller shipper would usually want to get involved with. The 3PL should be able to flex between different options. A good software decision system should be helpful to an agent.

Pandemic Fallout: The pandemic was a new type of challenge. It created outages for suppliers and created congestion in supply chains. These were unforeseen; Covid was a new phenomenon. It taught us that our logistics systems need to be prepared for this type of disruption. A 3PL should be planning for disruptions of this kind, and have plans in place to handle the sorts of issues we saw with Covid. They should be able to share their plans with prospective customers, so shippers would understand how the 3PL will try to deal with the problems that might show up.

Increased Fuel Costs: Fuel surcharges are customary in goods transport. When fuel prices rise, carriers can charge additional sums to cover the excess fuel charges. Insurance, wages, and repairs have also risen. Shippers are only concerned about the total cost of transport. A 3PL can offer deals that insure the shipper is informed about that total cost before they commit to a shipment plan. Full disclosure is best.

I like these six issues. They affect trucking especially, though the same issues also plague other modes. They capture some of the major disruptions we’re seeing. A 3PL can be helpful in dealing with these. In fact, it’s disqualifying if the 3PL can’t or won’t offer solutions for these.

Some parts of the offer are enabled by the software and intelligent data they employ. Some parts can only be enabled by customer agents with the right cooperative attitude and determination to do the best for shippers. Selecting a 3PL means taking both into account, and then monitoring how the 3PL is actually doing.

A New Transportation Model: A 3PL should be able to offer flexibility and clear information to prospective shippers. Good software that can plan effectively, capture and present all the relevant information, measure the results, and make sure the customer is informed, is essential. A 3PL needs the commitment to make sure they can provide the software, and to have agents that work cooperatively with shippers and carriers to achieve their goals.

Logistics is about customer service. We are constantly reminded. Read the article below for more about Legacy 3PL and its notions.

Klaipeda looks to position itself as the Blue Economy capital of the Baltics

Klaipeda is in Lithuania, the only substantial port in that country. Geographically it is well-positioned for the maritime industry of the Baltic Sea. A map is instructive.

Lithuania is close to Russia on the east, and Sweden on the west, and also on routes to Finland, Denmark, Germany, Poland, and Norway. There are many opportunities for trade over the sea here.

The conference planned by Klaipeda is connected with Norway, one of the most important locations for maritime innovation.

I’m planning to attend online. I will be listening especially for green innovations and plans to meet European sustainability and ESG goals for the maritime industry.

The Baltic States area has become more important due to the war in the Crimea. Lithuania blocks access to the Russian port of Kaliningrad, which is in an island of Russian territory separated from the main body of Russia. Recently permission was granted to allow transport across Lithuania to Russia, despite the sanctions on Russian shipping. Lithuania is an EU country.

Press Release.

Klaipeda looks to position itself as the Blue Economy capital of the Baltics – bruce@ahartman.net – ahartman.net Mail