Rick Blasgen is responsible for the overall business operations and strategic planning for CSCMP, an organization whose mission is to deliver leading-edge education and research for the supply chain management profession. He was recently designated Chair of the Advisory Committee on Supply Chain Competitiveness by the U.S. Department of Commerce. Blasgen is a member of Northwestern University’s Transportation Center Business Advisory Committee and a past chair of the Grocery Manufacturers Association Logistics Committee, as well as the past president of the Warehousing Education and Research Council.
Bimal Patel joined Amazon in 2012 and has held a variety of leadership positions, including overseeing multiple sites across a region of the U.S. with responsibility for thousands of full-time employees and start-up operations of new buildings in the Amazon fulfillment network. Before joining Amazon, he held leadership positions overseeing large scale operations at Whirlpool, Ford, Delphi Automotive and UPS. Patel holds a BS in civil engineering and an MS in industrial manufacturing engineering management.
Rick Blasgen peppered his presentation with humorous slides and comments to enliven what could have been a dry recitation of statistics. He began the session on national supply chain issues with a quick review of how the field has evolved since the 1950s when it was considered simply physical distribution to its role today as a critical factor in global strategic planning, cost controls and revenue generation.
Current Supply Chain Status
The typical supply chain in the past was a functional flow that involved people, processes and technologies in basic ways to move an item from product sourcing to storage, then to manufacturing, again to storage, on to distributor, retailer and end user. Quoting from the CSCMP’s recent report, in 2015 the cost of U.S. business logistics was $1.4 trillion, or almost 8% of the GDP. Inventory levels and tonnage flattened in 2015, while B2C parcel deliveries rose dramatically, driven by the growth of omnichannel retail, which challenges operating models in last-mile delivery. B2C shipments generate lower-than-average revenue and have higher operating costs. The U.S. Postal Service saw shipping package volume grown 14% in 2015.
Macroeconomic trends also impact shipping. The share of coal-fired electricity generation has fallen dramatically, resulting in a reduction in coal traffic and crude by rail. Cargo capacity increased with the increasing use of wide-body aircraft. Overcapacity in containerized shipping dropped pricing and propelled further consolidation. Labor issues in West Coast container ports drove traffic to other ports and altered seasonal patterns.
State of the Industry
International freight forwarding is a buyer’s market; with 25 global providers and many small firms competing to fill capacity in air and water, intense price competition results. The third party logistics (3PL) market has grown by roughly 7% annually since 2009. Technology will continue to play a significant role with leading logistics providers enabled by a “control tower” and a cloud-based transportation management system.
Logistics is on the cusp of a new era because of four industry disruptors: technology adoption, consumer requirements, macroeconomic trends and operational constraints. Technology developments include autonomous vehicles, robotics, Internet of Things (IoT), Big Data, 3D printing, virtual reality and alternative fuels. Consumer requirements such as “want it now” attitudes, personalization, omnichannel shopping and the needs of aging consumers. Macroeconomic trends include globalization, volatile commodity prices, climate disruptions and urbanization. Operational constraints such as free trade agreements, environmental regulations, safety requirements and resource scarcity influence the scope, scale, reach and ability to perform logistics activities. Forecasting possibilities in these four disruptive quadrants, the CSCMP has created four strategic planning scenarios to map potential trouble spots and positive outcomes.
Blasgen then presented the goals of the Advisory Committee on Supply Chain Competitiveness. This committee represents the first time that America’s businesses and the federal government are collaborating to identify and solve the biggest issues that impact the nation’s supply chain competitiveness. The committee is studying five key areas: finance and infrastructure, freight policy and movement, IT and data, trade and regulatory and workforce development.
Our nation’s freight transportation system is a vast, complex network of almost seven million miles of highways, navigable waterways and pipelines. Not only is the infrastructure of roads and bridges aged and in need of repairs and enhancement, but there is a huge underinvestment in personnel. Due primarily to retirement and turnover, employers will need to hire and train a total of 4.6 million employees, like truck drivers and maintenance technicians, from 2012 to 2022. There are 68% more job openings that the number of students entering the workforce. Supply chain managers coming out of college are getting jobs 8x faster than graduates in other fields and at salaries significantly higher than in more traditional professional paths. Future supply chain professionals will work within the supply chain system that will require skills in inventory management, transportation, warehousing, materials planning, production planning and manufacturing, customer service and procurement.
Challenges in An Omni-Channel World
Today consumers can order from anywhere and suppliers must fulfill from anywhere. A shopper can order in a variety of ways: call center, tablet/mobile, website, brick & mortar stores, catalogs and flash sales, regardless of her physical location. Those products can be retrieved from retail distribution centers, e-commerce distribution centers, outlet locations, brick and mortar stores, pop-up stores and kiosks.
Supply chain management today is a corporate necessity. It can be a vehicle for growth and generate revenue to improve the financial position of companies and economies. The field will require continued innovation and risks to develop new solutions.
Moderator Dan Raftery then posed questions from the audience about Amazon’s operations to Bimal Patel. He provided answers about Amazon’s growing network of fulfillment facilities, the uses of technology for scanning and weighing inbound freight and how they continue to reduce lead times in moving products to their destinations. He credited their excellent parcel delivery partners like FedEx and how they work with vendors to improve Amazon’s processes. He outlined how their sort centers separate large product orders into smaller quantities to ship to several distribution centers. Patel also gave examples of how Amazon collaborated with vendors to create frustration-free packaging for better shelf utilization and with greener materials to reduce waste.
Audience members asked about Amazon’s cargo planes, drone testing and driverless cars. Patel also addressed last-mile delivery methods and options for consumer package pick-ups in retail locations and designated locker sites.
Dan Raftery, Rick Blasgen and audience members engaged in a lively conversation on topics such as freight security, surge capacity needs, communication methods, carrier liabilities and college programs for preparing supply chain managers.
After closing remarks, facilitator Dan Raftery announced that the next CHESS conference will take place October 3-4, 2017, again at the Westin O’Hare.
CHESS 2016 was sponsored by the following business solutions companies:
- LeSaint Logistics, 3PL fulfillment, www.leSaint.com
- E-Power Marketing, OnLine Marketing experts to help you reach your target audience and create impactful online presence to generate measurable results. www.epower.com
- NSF International not-for-profit, non-governmental organization global provider of public health and safety-based risk management. www.nsf.org
- OwnerIQ, transforms audience browsing behavior on your website into rich advertising targets to drive retail outcomes. www.owneriq.com
- Ezcom Software grows your trading partner relationships with this EDI platform. www.eZComsoftware.com
- SmartBrief is a free daily e-newsletter that delivers essential housewares industry news to opt-in subscribers. www.smartbrief.com
- International Housewares Shippers Association (IHSA), not-for-profit shipper association for IHA members, improves total supply chain performance and provides stability and consistent value. www.housewares.org/iha/global/ihsa/aspx