State of Logistics
During his 14th Annual State of Logistics Report, presented at the National Press Club in Washington, DC, Bob Delaney made “The Case for Reconfiguration” his theme. Delaney, vice president, Cass Information Systems, and consultant for ProLogis, noted that during the past three years, U.S. retail prices have declined by two percent annually. This deflation is forcing companies to lower operating costs, and that means inventory reduction.
“When prices are falling, earnings improvement must come from supply chain operating efficiencies,” Delaney said. “This supports the case for reconfiguration of product lines, production and distribution networks and operating systems.” Those are prerequisites for a successful supply chain collaboration, he argues.
He cited Unilever, the Anglo-Dutch consumer goods giant, to make his case. Its “Path to Growth” program calls for slashing the number of its brands from more than 1,600 to 400 by 2004. By 2005, the disposal of lagging brands and promotion of stronger brands, along with reconfiguration of its production and distribution network, are expected to increase annual revenues by five to six percent and help it achieve an operating profit margin of 16 percent.
Apparently Unilever’s strategy is working. In February it reported a 16 percent increase in 2002 profit and an 18 percent increase on earnings per share on lower sales revenue because of the disposal of weaker brands. Fourth-quarter sales of the company’s leading brands grew 8.5 percent, with 9.8 percent growth coming from the home and personal care products and 7.3 percent from food.
Unilever has also reconfigured its distribution network from 15 warehouses into five “super-regional” distribution centers totaling 4.8 million square feet. This enables it to deliver to most U.S. customers in one day. That accounts for a 15 percent improvement in customer service and annual savings of seven percent in transportation, administration and facility cost.
“Let’s reconfigure our businesses operationally as a first step before considering the benefits and risks of collaboration,” Delaney advised. “In our experience, you should collaborate from a position of strength, not weakness.” For more on Bob Delaney’s State of Logistics Report, go to www.cassinfo.com and click on Delaney’s Dugout.
... On the Other Hand
Another report on the state of the logistics industry creates a slightly different picture than the above study by Robert Delaney. The question of product innovation and supporting the accelerated rate of getting new products to market is an increasing challenge for supply chain executives.
The first phase of the Global Supply Chain Management study from Deloitte & Touche confirms manufacturer’s supply chains are becoming enormously complex “as a result of three primary forces,” says Dick Gabrys, global manufacturing leader, Deloitte & Touche.
The study indicates that manufacturers are spreading supply chain operations across the world, yet most still appear to be optimizing their supply chains on a “local” basis. This means they are losing opportunities for large-scale efficiencies.
Another paradox cited in the study is that few companies collaborate with customers across key areas, from strategic planning and forecasting to inventory management and cost reduction. In essence, says the report, manufacturers are looking backward to collaborate with suppliers rather than forward to collaborate with customers.
Also, given that supply chain activities are increasingly being dispersed, the speed or velocity of getting products to market quickly and efficiently is being tested.
For further information, contact Deloitte & Touche at www.deloitte.com.
Crown Scores in Design Awards
BMW, Siemens, Daimler Chrysler, Bombardier, Porsche, Audi, Honda, Jaguar, Crown Equipment. What do all of these companies have in common? All were awarded top positions in this year’s prestigious Ranking: Design awards. Crown placed third in both the “Special Use Vehicles” category and “Manufacturers” categories, outranking many companies known for strong design such as Audi, Jaguar and Porsche.
Ranking: Design, published annually by design.net AG in Germany, is now in its sixth year and has established itself as an independent benchmark for internationally-acknowledged design competence. It provides an overview of design competence in Europe and pays tribute to outstanding achievements of design-oriented manufacturers and industrial designers.
Cool Solution for Hot Distribution Location
Here’s an item we picked up from several news sources, including the Anchorage (Alaska) Daily News. The Anchorage Economic Development Council (AEDC) has awarded its $450,000 three-year contract to Development Counsellors International, according to Kevin Pearson, vice president, AEDC. “We reviewed the credentials of eight firms,” he said, “but the decision to go with DCI was a ‘no-brainer.’ DCI is the only firm that specializes in economic development, and I like its track record.”
DCI will reposition Anchorage as being in “the middle of nowhere” to “the middle of everywhere,” said Rob DeRocker, DCI executive vice president. “Anchorage is a good place for companies in the global logistics game.”
Anchorage, with its 270,000 people, is perfect for companies marketing their wares in Europe, Asia and North America, according to DeRocker, noting that Federal Express and United Parcel Service have distribution hubs there. DeRocker said Anchorage is a six-hour flight from Tokyo and an eight-hour flight (over the North Pole) to Frankfurt.
One challenge facing DCI is to overcome the long-time tourism pitch, touting Alaska’s remoteness and rugged countryside. “We did see two moose walking down the street,” said DeRocker.
The MHM take on this is that creating a major distribution hub in Anchorage will be a definite boost for Santa and his just-in-time manufacturing operations further to the north.
TMS: The Road Has Changed
The Transportation Management Systems (TMS) market grew by almost seven percent in 2002, a respectable accomplishment considering the weak economy and reduction in IT budgets. Although the future remains bright for this market, the road to success has changed and many vendors will have a difficult time getting back on track.
According to Adrian Gonzalez, director of ARC’s logistics executive council and author of the new study Transportation Management Systems Worldwide Outlook, long-term success will be defined by four factors:
- Scope of solution (expanding beyond basic transportation functionality);
- Net value (realized benefits minus total cost of ownership);
- Financial stability of the solution provider;
- Having a global presence.
ARC is forecasting a Cumulative Annual Growth Rate (CAGR) of 11.6 percent over the next five years, from $860 million in 2002 to over $1,489 million in 2007.
Can a standalone TMS vendor survive in the future when customers are demanding holistic solutions that incorporate order management, order fulfillment and performance management capabilities? The future is uncertain for vendors unable to meet these expectations. “The competition will intensify as vendors with broader footprints, such as ERP and SCM vendors, as well as third-party logistics providers (3PLs), place a stronger emphasis on this market,” adds Gonzalez.
While most companies are using TMS to manage outbound operations, a growing number are beginning to shift their focus to inbound. “The economic environment and competitive landscape are forcing companies to find new ways to reduce costs and improve productivity,” explains Gonzalez, “and taking greater control of your inbound processes is the low hanging fruit, especially for retailers that are trying to keep pace with Wal-Mart.” About 20 percent of the TMS revenues generated in 2002 were for implementations that focused on inbound operations.
Additional information on this study can be found at: www.arcweb.com/research/ent/tms.asp.
George Henry Webb
George Henry Webb, chairman of the board, Jervis B. Webb Company, died April 21 at age 83. Mr. Webb is survived by his wife of 58 years, Barbara McCain Webb and their four daughters. Mr. Webb is also survived by his sister, six grandchildren and six great-grandchildren.
Mr. Webb joined his father’s company full time upon graduation from college in 1942. Throughout his 61 year career with the company, Mr. Webb held many positions within the organization. He was a member of the American Society of Mechanical Engineers, the Society of Automotive Engineers and the Engineering Society of Detroit.
Provia Software Joins Auto-ID Center
Provia Software, a provider of order-to-delivery supply chain execution software, announced it has joined the Auto-ID Center, a global research or-ganization building critical elements for a unique product numbering system called the Electronic Product Code (EPC) Network.
Established in 1999 and headquartered at the Massachusetts Institute of Technology, the Auto-ID Center and its 90 members have been working to create standards and technology solutions needed to establish a new network for tracking items that use Radio Frequency Identification (RFID) tags. The EPC Network RFID tags are designed to help companies better track and control inventory — from warehouses, to loading docks, to trucks and even on store shelves.
Provia’s decision to join the Auto-ID Center comes as part of an ongoing RFID project with The Gillette Company — a founding member of the Auto-ID Center.
“Becoming a member of the Auto-ID Center allows Provia to take a leadership role in developing RFID standards and solutions,” says Ken Lewis, president and CEO of Provia. “By working with Gillette on this first full-scale RFID project, Provia will be the first supply chain execution company with real-world experience in RFID.”
Associations Making News
The Reusable Pallet and Container Coalition (RPCC) is implementing a national grass-roots campaign to promote the cost savings and waste reduction made possible by the use of reusable materials, it was announced today.
“In the past, waste reduction efforts cost businesses extra time and money to implement,” says Ken Smith, president of the RPCC. “However, today, reusables actually save money because they reduce damage to the contents housed inside, and there is no waste generated.”
Reusable containers have the potential to save money in the long term, echoes Greg Murphy, corporate category manager for produce/floral at SuperValu Inc., the nation’s leading food distributor. SuperValu began using reusable containers in its produce department several years ago. “We have less damage to produce than we did with our corrugated boxes and wooden wire-bound containers; and we have reduced disposal costs. Also, the reusable containers require less manpower for stocking and display,” says Murphy.
The Conveyor Equipment Manufacturers Association reported that its March 2003 booked orders index was 203, up 70 points, or an increase of 34 percent, from February’s index. The March index also reflects an increase of 40 percent from the March 2002 index.
Letters to the Editors
Dear Mr. Witt:
I’ve come to look forward to your monthly work. Your May subject editorial had me going there for a minute. As I read on I thought “Something’s happening here. What it is ain’t exactly clear.” I enjoy mystery/thrillers with twists in the plots. May’s editorial read like a well-crafted whodunit, all revealed in the last paragraph!
I really thought you were missing the part about the nature of the product and the differences in destinations (limited, or wide-spread). The packaging for heavy product “A” to a handful of destinations would likely and appropriately be different from that for delicate product sent what, world-wide, right? Right. If the product and the distribution can support returnables, I say go for it! I’d wager the economics are there if one pays attention.
On that celebrated “other hand,” if the product, for example rolls of flexible packaging, is shipping hither and yon, to hundreds of locations, the right packaging choice involves the very blend of reusable and (easily re-claimable) expendable material you note. Focusing on either one to the exclusion of the other would make someone wrong.
Thanks for the good read!
N. J. Boone
manager, Process Improvement
Dear George Weimer,
Nice article in May 2003 edition of MHM (U.S. Secretary of Manufacturing, page 41). Would you mind if we sent letters to our federal legislators, Senator DeWine, Voinovich, Congresspersons, LaTourette, Kucinich, Brown, Tubbs-Jones? Asking them to take your lead and do something!
Please advise before we write all of them and attach your editorial. Nice job and maybe you’ll start something!
Roger J. Sustar
I like the way you think! George copied me on your e-mail, and I think it would be great if you started a grass-roots campaign using George’s column as a catalyst. Please copy us on your efforts so we can let the rest of our readers in on what you’re doing. Maybe we can get a whole lot of grass growing! Thanks for reading MHM.
Tom Andel, chief editor
Dear George Weimer,
As a corrugated box manufacturer in Chicago, I couldn’t agree with you more.
(U.S. Secretary of Manufacturing, May, page 41). We have lost too many jobs to China and will continue to do so until it is too late. We never get the wake up call until it is too late! I am sending your article to our trade association so we can promote the idea. www.aiccbox.org
Dear Christopher Trunk,
I read with interest your article concerning the Boeing - Long Beach Facility (March, page 20). I understand that the crux of the story is about component flow but what I found interesting was in your list of suppliers. Nowhere in your list is the supplier of what may be the largest pieces of material handling equipment in your pictures and in the facility, the overhead cranes.
I am a little disappointed that the supplier of the material handling equipment that handles the largest and heaviest material does not even get a mention in the “Suppliers to Boeing” section. It would be interesting to see what type of production this facility would achieve if the cranes were not there.
TC/American Monorail, Inc.
My sources at the Boeing B-17 facility tell me they use TC/American Monorail overhead cranes in the manufacturing of their aircraft. It was an oversight that cranes weren’t included in the products listed. Be assured that without those massive cranes, the heavy lifting at Boeing would be a lot more difficult. Christopher Trunk, managing editor
Companies Making News
SJF Material Handling Inc. has announced the formation of a new division, headquartered in East Hanover, New Jersey, to provide turnkey material handling solutions to the marketplace. Called Genesis Systems, the new division will offer state-of-the-art technology and equipment, backed by the 30 year project history and strong financial support of SJF. Genesis Systems is headed up by Jack Lehr.
To meet the growing demand in Mexico for distribution of consumer and industrial products, APL Logistics — a global provider of supply-chain management services — has opened one of Mexico’s more modern, secure and efficient logistics centers.
The 11,800-square-meter (127,000-square-foot) facility provides freight consolidation and deconsolidation, purchase-order management, shipment repackaging, crossdock work, warehousing and other value-added logistics services, says Manny Fernandez, head of Latin America activities for APL and its sister container transportation company, APL.
Managers Making News
David Demers, co-founder and chief strategy officer, Avicon, has been elected to the Supply Chain Council North America leadership team. Demers will serve on the newly formed leadership team for two years.
Kurt Salmon Associates (KSA), the management consulting firm specializing in retailing, consumer products and health care, announced that Gary Cochran has joined the firm. He is a senior principal and director of information technology deployment service development. Cochran joins KSA from The Home Depot where he was vice president, information services.
John W. Davis, former publisher of Material Handling Management, has launched a company to provide marketing services for trade show exhibitors. The new firm, Guys on the Ground, combines a variety of marketing activities that successful trade show exhibitors frequently employ, into one program. Thomas J. Harmon, former marketing director at Penton Media, is managing director of the new venture.
Clark Material Handling Company has appointed Brian C. Butler, president, to the position of CEO. Kevin Reardon has been appointed vice chairman of the lift truck division of Young An.
At Orbis, Patrick Feeney has been named plant manager of the company’s Urbana, Ohio, manufacturing plant. Also, Joe Weiss has been named director of manufacturing for the pallet and bulk division.
Constantino Lannes has been appointed president of Sennebogen LLC, manufacturers of material handling equipment.