Managing with the Supply Chain in Mind

By Jim Romeo

Jeff Karrenbauer, Ph.D., is president and co-founder of INSIGHT, Inc. in Manassas, Va. His firm consults in supply chain and logistics management practices. We spoke to Dr. Karrenbauer about issues and concerns facing our leaders and managers at world ports and cargo handling facilities.

What is your perspective on fuel prices with regard to supply chain logistics and transportation?

Karrenbauer: The rapid escalation of fuel prices last year put tremendous cost pressure on all types of carriers, as well as other providers of logistics services. This was especially apparent for those involved in international supply chains, and it served as a catalyst (among many others) for companies to re-examine their international strategic outsourcing strategies.

This, in turn, spawned such new (and totally unnecessary) terms such as “near-shoring” and “right-shoring” but the meaning was clear. In my opinion, the fuel price retreat is temporary and has already shown signs of firming.

Once the economic recovery is underway, I expect to see steady increases in the cost of fuel. Indeed, there are clear signs that the majors have significantly slowed investments in exploration and development, which means that we can expect a return to supply shortages and cost pressures for the foreseeable future.

How important is terminal and facility design in bringing efficiencies to the supply chain? Do you have any examples to illustrate your viewpoint?

Karrenbauer: A well-designed supply chain strategy considers ALL costs of operation, including warehousing, transportation, procurement, manufacturing, international finance (duties, taxes, in-transit inventory, port handling), etc.
As part of a strategic supply chain design project, our clients include port-handling charges, which in turn, are related to the efficiency of the facilities. We have done studies where the principal focus was port selection, and port handling charges were an important input to the analysis.

What characterizes a successful supply chain, and how do cargo handling improvements add to that success?

Karrenbauer: Entire textbooks are essentially devoted to this topic. A truly successful supply chain is responsive, flexible, and efficient. Obviously, one needs suitable metrics for each of these characteristics, such as order-to-cash cycle, profitability, lead times, inventory investment/turns, perfect order percentage, and so on.

Cargo handling at terminals/ports contributes to all of these metrics. There is considerable concern among shippers with respect to responsiveness, especially at traditional choke points such as Long Beach. In addition, there is a gradually increasing awareness of supply chain vulnerability issues, especially when a shipper relies too much on any one provider, whether outsourced manufacturer, carrier, port, terminal, or whatever.

Looking ahead three to five years, what will be the greatest concern of supply chain and logistics managers, and how can cargo handlers prepare for such concerns?

Karrenbauer: [Four key concerns are] end-to-end supply chain visibility; supply chain vulnerability/hardening; responsiveness versus cost; and green initiatives.

I believe that cargo handlers/ports have to demonstrate a real commitment to cost containment, responsiveness (especially in ports traditionally subject to bottlenecks), information sharing, mitigating strategies with respect to security concerns, and carbon emission reduction. None of this is new, and I do not believe that the concerns of supply chain managers will change appreciably in the next five years, save for increased emphasis on green.

We are already seeing a much greater interest in, and specific questions about, green policies when shippers procure supply chain goods and services. This issue is NOT going to disappear and service providers will be required to demonstrate genuine commitment and specific initiatives with respect to carbon emission and energy reduction as an integral part of the bidder qualification process.

If you had to narrow down all the issues that logistics managers have to deal with, which issue do you believe is their greatest topic in terms of revenues and costs?

Karrenbauer: The tradeoffs between responsiveness and efficiency/cost reduction. Everyone wants maximum responsiveness at rock-bottom cost but this is clearly not possible. A friend of mine often quotes an old adage: “good, fast, cheap…pick any two.”

In This Issue

News, Trends & Analysis
New Items

Glimmer of Recovery

Supply Chain
A Quick Primer on Site Selection

Managing with the Supply Chain in Mind

Compliance Corner: Trade Compliance Requires a Focus on Information Gathering

How to Green Up Your Logistics Operation

Supply Chain product review
Trucking Software

Special Section
Creating the Extraordinary — the Prince Rupert Story

Features
Building a Future from Drayage Wreckage

Gateway at a Glance Pacific Northwest

Ports & infrastructure
Stimulus Bill Has Cash for Ports . . . for the Right Projects

What Shippers Need from Inland Ports

Port Product Review
Lift Trucks

Commentary
New Trends Driving Transpacific Trade

Who, What, Where, When

Final Say