It Was the Fastest of Times, It Was the Slowest of Times

One of the lessons of MODEX is that being smarter trumps being faster.

On the show floor of the new MODEX trade show, held earlier this month in Atlanta’s sprawling World Congress Center, vendors were introducing the latest and greatest tools and solutions aimed at speeding the flow of goods into, out of and throughout warehouses and distribution centers. Time is money, and the quicker you can move stuff through the supply chain, the more money you'll make. Right?

Maybe not, or at least not all the time. Elsewhere in the convention center, illustrating if nothing else the schizophrenic nature of the supply chain in 2012, logistics strategists offered suggestions on how companies could best cope with the relatively recent phenomenon known as slow steaming. Cargo ship operators have found that by deliberately reducing their speed, they can reap significant savings on fuel. This, despite the fact that slow steaming effectively lengthens trans-ocean delivery times by days, or even by more than a week in some cases, such as from China to the U.S. East Coast. The slower the ships go, the better the bottom line of the container lines.

MODEX keynote speaker Alberto Aleman Zubieta, CEO of the Panama Canal Authority, spoke with pride about the expansion of the canal, which began in 2007 and is scheduled to be completed in 2014. Similarly, a century ago, the original canal took ten years to build (1904-1914), using the equipment and technology of the day. However, he added with a tone of dismay, he’s observed economic development adminstrators at unnamed U.S. ports take at least a decade or more just on feasibility studies at their sites, with not a single shovelful of dirt being moved in that time. Noting the opportunities for growth when the new Panama Canal is open for business, Aleman said pointedly, “If U.S. ports take 10 years to study and then expand their operations to take advantage of the increase in business from the Canal, it will be too late.” Paralysis by analysis, indeed.

Citing statistics compiled by the National Retail Federation, Curtis Spencer, president of supply chain consulting firm IMS Worldwide and keynote speaker at the collocated Georgia Logistics Summit, noted that retail growth in 2012 is predicted to be 3.4%, down sharply from 4.7% growth in 2011. However, while retail sales overall are slowing, the percentage of sales that will be coming from e-retail is on a soaring growth rate. By 2025, an estimated 30% of all retail sales will be from e-retailers.

Spencer sees e-retail splintering into three different forms:
➤ Traditional e-commerce, where the medium of
transaction is typically a laptop or desktop computer.
➤ M-commerce, for mobile, where transactions are carried
out via cellphones, tablets, or e-readers.
➤ S-commerce, for social as in social networks (Facebook, Twitter, Groupon, etc.).

In a panel discussion of retail industry supply chain practitioners, Bill Connell of department store chain Macy’s observed that the macys.com and bloomingdales.com websites are the fastest part of their business. One of their newest initiatives is known as OmniChannel, which takes as its mission the idea that any Macy’s customer should be able to buy any Macy’s product through any channel.

And yet, Devon Rifkin, CEO of e-retailer Hangers.com, pointed out that it is very tough for an online vendor to make money, since consumers are demanding a wider variety of products, delivered at quicker speeds, at lower prices and a preferred shipping cost of zero. As fast as some U.S. companies are opting to nearshore their sourcing closer to home, just as quickly are other companies moving their operations overseas, to China, Southeast Asia, Central America and other low-cost centers, in an ever-elusive chase for profitability as margins get squeezed ever tighter.

Maybe, then, it’s not really all about speed at all. Maybe the real lesson of MODEX 2012, in fact the real lesson of the supply chain itself, is that it’s all about making the right choices—for your company, for your industry, for your supply chain partners. It’s not about moving fast or moving slow—it’s about moving smart.

Follow me on Twitter @supplychaindave.

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