What is all the Fuss About With chatGPT? My Conversation WITH it…

Yes, I am saying my chat WITH it as I had a very interesting chat about the trucking business. I have a lot to think about relative to chatGPT and one thing is for sure. This is real and I can already think of many use cases for this tool. So, if you are not using it, you may want to think about it. A couple of observations from my conversation below:

1. Think of this as another version of a search tool but rather than giving me a list of websites to go to, this actually answers questions for me in conversational English. 
2. Notice my somewhat random follow on questions. I asked about trucking, then a follow up question on drivers, then e-commerce and then the impact on climate. The responses were perfect and very conversational. 
3. It is not just a screen scrape of another website as it brought disparate information together. 

NOTE: This post is about the viability of this new technology and I am sure people will take exception with some of its answers. That is not the point. The point is that the world is changing and you need to understand it. 

Here is my recent conversation with my new friend:

Me: Is trucking a viable business?

ChatGPT: Trucking can be a viable business, as it is an essential industry for the transportation of goods and materials. However, like any business, it can have its own set of challenges and obstacles to overcome, such as competition, regulation, and fluctuating demand. Additionally, the industry is currently facing a shortage of drivers, which can make it more difficult for trucking businesses to operate efficiently. It is important for those interested in starting a trucking business to conduct thorough research and have a well-crafted business plan in place to increase their chances of success.

Me: Why are they short drivers (I did not use a question mark so apparently punctuation is dead).

ChatGPT: The trucking industry is currently facing a shortage of drivers for a few reasons. One reason is that the job can be physically and mentally demanding, which can deter some people from pursuing it as a career. Additionally, the lifestyle of a truck driver, which often involves long periods of time away from home, can be unappealing to some.

Another reason for the driver shortage is the aging demographic of current drivers. Many experienced drivers are nearing retirement age, and not enough new drivers are entering the industry to replace them.

In addition, the industry has been facing a significant increase in demand due to the e-commerce boom, which has led to an increase in shipping and logistics, putting further strain on the limited pool of drivers.

Finally, the pandemic has also played a role in driver shortage, as many drivers were forced to stay home due to quarantine restrictions, and trucking companies were forced to limit the number of drivers on the road.

All these factors have contributed to the current driver shortage in the trucking industry.

Me: How big is the e-commerce boom (again, no punctuation):

ChatGPT: The e-commerce boom has been significant in recent years. According to recent data, global e-commerce sales are projected to surpass $4 trillion by 2020 and continue to grow rapidly in the coming years. This growth is being driven by factors such as increasing internet penetration, the proliferation of smartphones, and the convenience of online shopping.

In the US specifically, e-commerce sales as a percentage of total retail sales have been steadily increasing, reaching 16.1% in 2021. Online sales growth has accelerated during the pandemic, as many consumers were forced to shop online due to store closures and social distancing measures.

This e-commerce boom has also led to a significant increase in demand for shipping and logistics services, as more goods are being purchased online and need to be delivered to customers. This has put pressure on the trucking industry, which is a key component of the supply chain for e-commerce businesses.

Overall, the e-commerce boom is having a big impact on the economy and the way we shop, and it is expected to continue to drive growth in the coming years.

Me: What are the global warming issues related to e-commerce (The question mark is dead):

ChatGPT: E-commerce has several global warming-related issues associated with it.

1. Increased transportation emissions: The increase in e-commerce has led to an increase in the number of delivery trucks on the road, which contributes to air pollution and greenhouse gas emissions.

2. Energy consumption: Online retailers and delivery companies consume a lot of energy to power their warehouses, data centers, and transportation. This energy consumption can lead to higher carbon emissions.

3. Packaging waste: E-commerce often generates a lot of packaging waste, especially from the use of single-use packaging materials such as plastic bags, bubble wraps and cartons. These materials are not easily recyclable and end up in landfills and oceans, releasing methane, a potent greenhouse gas.

4. Returned goods: A large percentage of e-commerce purchases are returned, which can lead to additional transportation emissions and packaging waste.

5. Air freight: Some e-commerce companies rely on air freight to meet fast delivery expectations, which generates high carbon emissions and contributes to climate change.

To address these issues, e-commerce companies are exploring ways to reduce their environmental impact, such as investing in electric delivery vehicles, implementing more sustainable packaging materials, and increasing the efficiency of their warehouses and data centers.

This is where I ended the conversation.

More thoughts later on the use case for this but let this sink in a bit. The biggest use case I can think of right now is the threat to the google search engine. Rather than me asking for and getting a list of sites that I may have been able to get this information from, the system returned to me, in natural language, the answer to my question.

More to come…

Scenario Planning - Face it You are WRONG!

 I want to discuss some thoughts I have on scenario planning and why I think this skill is the future of supply chain management and planning. But first, let’s cover one thing and that is something you have to come to grips with: YOU ARE WRONG. 

As great supply chain managers, we all like to show how great we are with math and how great we are with developing algorithms to come up with “the number”. “The number” could be an ESOP number showing inventory requirements after detailed and exhaustive analysis of demand requirements or it could be something like what transportation or labor capacity I need to satisfy expected demand in the up coming months. Coming up with these numbers requires a lot of thought, a lot of data collection and the inevitable crunching of numbers. We then like to show everyone that these numbers are “the answer”.  As you can tell from what I titled this entry, I do not believe they are the answer. 

Rather, the supply chain manager should think of the number as the first step in a multi-step process to develop and document different scenarios which could occur. Think of this first number, not as the answer, but rather as the “base case”. It is a hypothesis. If all your assumptions come true then this number will likely be “the number”. Of course, in life, and in supply chain, all the assumptions almost never come true or develop as you planned them. I submit that almost every major event in the last 20 years in supply chain (2008 recession, 2020 COVID, etc.) were not in anyone’s base case assumption. 

Now that you are thinking of this number as just one possible outcome, what do you do next? Well, you build scenarios and you calculate what “the number” will be under all the different scenarios. You assign probabilities to those scenarios and, in some cases, you build out contingency plans to deal with specific scenarios, in advance, in case those scenarios come to fruition. 

There are many documented ways to think about this and for those who are academically inclined, I point you to a great research paper titled, “Next Generation Supply Chains” where they discuss the Gausmeier-approach to scenario planning and the Applied Approach to scenario planning. It is a great read to get the more academic base on scenario planning especially in supply chains. However I would suggest, after reading this article, you discover what will work in your company. How can you simplify it and bring it to the practical level.

I believe if you do this work, in advance, you will be much quicker in executing well thought out plans for each scenario that could develop. You will have thought about it in advance when you were not under undue pressure, you will have documented the assumptions and potential scenarios, you will have assigned responsibilities and tasks. All when you could think much more clearly. 

After all this is done, just like a great NFL quarterback, you can call the play and audible out of it with confidence and conviction that you have planned for the change of events and you have practiced it. 

Yes, getting “the number” is important. But, what is more important is that you admit that the number is wrong, and you plan for it. 

Go to Market Strategy before Supply Chain Strategy

This article is directed mostly towards practitioners who operate supply chains within companies which market and sell products. I have done a lot of thinking recently about the discussions going on concerning "is just in time dead" or "on-shoring / near shoring" etc. There are a lot of conversations happening relative to all sorts of strategies for supply chains (and no lack of consultants who want to sell you on the latest and greatest ideas). My thesis here is that the first thing you have to develop and fully understand is your business' go to market strategy. Then, after that is completely articulated and written down, you can discuss your supply chain strategy. 

So, what is a go to market strategy? It is simply writing down what products you will provide, what markets will you provide them into, who are your competitors, who are your customers and how will you compete? In a 1993 Harvard Business Review article (and subsequently in his book Double Digit Growth) Micheal Treacy and his co-author Fred Wiersema argue that most companies have to pick one strategy they will really excel at and exploit it. The three strategies, from which a company picks are: 1) Customer Intimacy 2) Operational Excellence 3) Product Innovation. It is a fairly rare unicorn which can "master two".

Just by the names of these strategies and without reading the book (Although I highly encourage you to read it) the reader can understand the implications for your supply chain strategy:

1. Customer Intimacy - High service is the calling card. Maybe not service at any cost, but high service nonetheless. The thesis here is that if you provide a truly differentiated and incredible service level, customers will be loyal and they will buy more from you. You will also keep your competitors away as they likely cannot functionally or financially compete against you. 
   
   
2. Operational Excellence - This is low cost. You will compete on cost and every nickel counts. Your customers do not want (and certainly will not pay for) extra bells and whistles. Just do what you say you will do. At this year's CSCMP Edge conference I attended a great presentation with one of the returnable pallet providers. Their strategy was all about efficiency and low-cost. 
   
   It is not "bad" to be in a low cost industry. You have to know it and embrace it and that is what this person did in his presentation. The company's network design, systems and operations were totally geared towards efficiency. They will do exactly what they say they will do with no frills, bells or whistles and they will do no more. The customer gets what they need at rock bottom prices. 
   
   
3. Product Leadership - Think Apple. This is where the product is so good that customers, while they want efficiency, will actually "pay up" or even wait for the product because that product is so good and desirable. Everyone uses the iPhone as an example of this and so some may think only Apple can do this. Let me use another example: The Kitchenaid Standmixer. I worked specifically for this division of Whirlpool for over a year and I can tell you, people will wait for that product. It is iconic. Everyone wants one. Mother's took bus tours of the plant with their daughters before they got married. So, yes, if you truly do have an exceptional and differentiated product, you do not need to be Apple to win. 

So, what does this have to do with supply chain? My submission is it has everything to do with supply chain because you first have to understand which of the three your company is doing to determine what your supply chain strategy will be. Imagine if the person from the pallet company decided his supply chain strategy was going to be "Customer Intimacy" and he built a highly responsive, high service and high cost supply chain. This would be a complete mismatch to the customer's desires and expectations of a low cost and highly efficient supply chain. The supply chain leader needs to fully understand the "go to market" strategy of the company before s/he can build out the supply chain strategy. 

One last bit of advice and warning: Be very leery of a company that wants to be one of the strategies above but is in an industry that demands another strategy. For example, many sales and marketing people want to be in a customer intimate industry because that is what they do. It is fun and energizing. But, this what they want. What do the customers want? If the customers want operational excellence or product leadership then what you will have is chaos. You will never get the supply chain strategy right.

In conclusion:

• Understand your company go to market strategy before you do anything.
• Ensure that stated strategy matches up with the industry you are in. 
• Then, and only then, develop and implement your supply chain strategy. 

After two years of supply chain disruptions and craziness, I tend to think I am Napoleon at Waterloo so tonight, I offer ABBA singing Waterloo:

Zero Dark Thiry, Precision, and Supply Chain

 Last night I re-watched Zero Dark Thirty which is a great Hollywood rendition of the search for and ultimate killing of Osama Bin Laden.  No politics here and I just want to reflect on what the learnings are for us, especially in that final scene where we get to see execution with amazing precision.  

There is a lot to learn here for supply chain professionals and it all revolves around the word precision.  If there was one word which defined that mission, it is that word, precision.  I underline and bold it as it is a word to not forget. Precision is an outcome of two other key words: planning and practice.  This could become a new term in supply chain, or perhaps a new formula:  Prc = Pl*Prct.  Precision = planning multiplied by practice. Let’s look into this:

1. Planning: If the Pandemic taught us nothing else it taught us the importance of scenario planning. This means you look at all the different scenarios which could impact your business and supply chain, you identify those things which are “early warning indicators” to let you know if the scenario is happening or not, you identify what the severity of the issue will be if it occurs, then you plan and execute a mitigation strategy if needed. This is similar to a FMEA except you do this for external events. 
1. Note:  McKinsey and Company reports 37% of supply chains implemented some element of supply chain scenario planning and these were 2.0x more likely to not have supply chain disruptions
2. Practice: This is an area business tends to lack and as the formula would imply, if your planning is 100 but you practice at 0 then your precision will be 0.  It is also something the military does extremely will. Think of the movie I am referencing where they have complete mock ups of where they are going, they knew when they went in the house, even at night, exactly where they were and they knew the name of every occupant.  They knew this because they practiced, and practiced and practiced.  How many companies do you know have great scenario plans but they just sit on a shelf somewhere and no one has looked at them, let a lone practiced them.  

This all leads to precision which is what supply chain is all about. Precision means a process is both reliable and repeatable. It means you do what you say and it means “9x%” is not good enough (Remember, you can be 95% on time but to the customer in the 5% part you are 100% not on time). Precision means each part of the chain can absolutely rely on the other parts of the chain to execute exactly what they are supposed to do without even checking. Another part of the military is when they go on missions and they do minimal or no talking with each other (Radio silence). They just expect you to do your part and there is no checking. 

Precision then leads to a world class customer experience.  Technology and even talent are means to get to precision.  If you have great technology but still cannot get precise in your execution then it was, what I described last week as FOMO technology. Technology which is “cool” but does not accomplishes much. 

So, lesson for today, recommit to precision, never say “good enough”, once you get to one level of precision, spend 5 minutes congratulating yourself and then move to the next level. 

With this, I leave you with the trailer of this incredible movie.  Next time you watch it, watch it with the thought of a precise supply chain in mind. What can you learn?

My Thesis on FOMO for Logistics and Supply Chain Technology Has Stood The Test of Time

Paraphrase:  "We reduce the logistics' cost as % of GDP which results in lower costs for goods and services, which lifts the standard of living for all Americans" - Don Schneider

 

Don Schneider

That phrase, while I many not be getting it word for word, has stuck with me from the day I met him almost 30 years ago. 

First, I apologize as it has been a long time since I put thoughts on the blog about what is going on in the supply chain world.  I should have kept up with it better.  I just went back and looked at my last posting which was on January 19, 2022 and it addressed the issue of supply chain technology. 

Two quotes from that post really stand out:

"The "free money" aspect of the pandemic has also driven an explosion in supply chain / logistics technology. Again, some have driven huge value but by far the vast majority have not.  They have just been the recipients of a lot of money sloshing around in the economy looking for a place to land."

and:

"They [Supply Chain Practitioners] layer technology on top of technology and it still does not get them very far.  This is FOMO.  This is "I am going to try anything and everything because I am afraid I am going to miss out on the latest greatest thing". 

We are starting to see the realization that this technology, without good processes and without assets, is not helping very much. The aggregate outcome metric I like to use is the US Business Logistics Costs as a percent of the nation's GDP. After all the technology improvements we have made, in 2021, this cost was 8% of GDP which, according to the 2022 State of Logistics report issued by CSCMP, has not been this high since 2008.   

Source: CSCMP 2022 SOL Report

Ultimately, we as an industry have to be measured on whether we are delivering value (higher service at lower costs) or not.  This table and information would say we are not doing that.  From the same report, we can trace these costs back to 2012:

Source CSCMP 2022 SOL Report and 10xLogistics Analysis

The graph is up 2bps since 2012 (coming out of a deep recession) and has, more importantly, changed the game significantly since 2018.  Some may say is only 2bps so what does it matter and my point is you would think we could get improvement with all the technology spend we have incurred. 

Do not get me wrong as there is a lot of good in our newest supply chain technology and there are certain aspects of running a supply chain I could not live without however, in the aggregate, logistics has become more costly for less service. 

My question for the supply chain industry is: "Would Don be Happy with this result"?  I will leave you to answer that on your own.  

This is something the supply chain industry has to address and hopefully people will talk about this at CSCMP EDGE conference this year.  Engage on Twitter with the hashtag #logtech

 

  

Beware FOMO and New Supply Chain Technology

 In November of 2019 I wrote an article entitled "What Do FOMO and LinkedIn Have To Do With Supply Chain". FOMO is short for "Fear of Missing Out" and the general thesis of my article was if you become consumed with chasing every rabbit down every rabbit hole for "fear of missing out" then you will likely not get much done. 

The same can be true about LinkedIn. I wrote this in 2019 and I submit it has become 100x worse than when I wrote this article. 

And yes, we can somewhat blame the pandemic for this phenomenon in supply chain.  Ever since everyone has been home there has been an explosion of podcasts and home grown "T.V." shows discussing supply chains.  Some of them are hosted by people who have worked for a very short time, if at all, as a practitioner of supply chains.  

The "free money" aspect of the pandemic has also driven an explosion in supply chain / logistics technology. Again, some have driven huge value but by far the vast majority have not.  They have just been the recipients of a lot of money sloshing around in the economy looking for a place to land.  

Practitioners have some culpability in this as well.  Many have scrambled to do something - anything to show their leadership they are trying everything to overcome the effects of disruption.  So, what do they do?  They layer technology on top of technology and it still does not get them very far.  This is FOMO.  This is "I am going to try anything and everything because I am afraid I am going to miss out on the latest greatest thing".  Here are my simple few suggestions for the practitioner to avoid this trap:

1. Do the detailed work BEFORE you talk to a technology company:  This means you have to process map out how your business operates.  You need to identify the key metrics you are using and you have to identify what success looks like.  Use the Amazon methodology which is just what Covey taught us when he said, "Begin With The End in Mind".  Write the press release you will release 4 years from now.  What will you have accomplished. 
   
   
2. Operate Manually First if at All Possible:  This will allow you to be incredibly flexible as you "test and learn" all different ways of getting things accomplished. 
   
   
3. Follow the Tom Brady rule of focusing and ignoring all the noise. (See my posting on this: What Separates "Vital Few Metrics" from "Nice to Know" Metrics - And What Can We Learn from Tom Brady...). 
   
   
4. Write the spec! This is not necessarily hard work but some may find it tedious.  This is the work where you get as specific as possible on what you really need and what will really add value to your organization.  The more detailed this is written the more likely it is you will not get enamored by "shiny spinning plates" but rather will identify and get what you really need.  
   
   
5. Then and only then do you start inviting in technology providers and identify which is best to fill the gaps you identified by going through the 4 step process above. 

I am not saying not to "shop around and learn" but look at those interactions as learning - nothing more and nothing less.  Realize that as soon as you step into the bazaar that is a trade show, full of technology shiny toys, you are at high risk of FOMO kicking in and you being distracted by things that you do not need.  Much like going into a high tech electronics store and walking out with $1,000 of technology that you now "absolutely have to have" but 1 day ago you had no idea you "needed", you run the risk of doing the same for your company.  Except in this case, it could cost millions.

When you feel you are starting to get caught up in the FOMO mania, I suggest activating the "breathe app" on your Apple Watch and, just breathe. 

To that end, tonight, let's just meditate:

Great Update from Craig Fuller on Supply Chain in 2022

 I am sure many in this community follow Craig Fuller from Freightwaves.  I thought this was a very good interview on Bloomberg so I thought I would post it here. 

What Separates "Vital Few Metrics" from "Nice to Know" Metrics - And What Can We Learn from Tom Brady...

 I was reading an article about Tom Brady today in the Washington Post and it led me to think about metrics in supply chain.  How could that possibly be, you ask?  What does how a quarterback preforms in football have to do with supply chain?

First, in case there are those who do not know who Tom Brady is I would just ask you to google him.  Whether you like him or not as a fan you have to respect all that he has accomplished.  We literally likely will not see another like him in our lifetime, or maybe ever, as it relates to football and longevity.  9 super bowl appearances,  7 titles and 13 AFC Championship games.  When everyone thought he was done, he went off to Tampa Bay where he promptly won another super bowl.  ( I will not list them all here but if you want to know all the records he holds, I found this website).

The article in the Washington Post was titled: Tom Brady is telling his own story and doing it at his own pace: (May require firewall).  The general theme was the success of Tom Brady (Besides raw talent - which a lot of NFL QBs have had and have been far less successful) can be boiled down to just a few items:

• His ability to focus on the mission in front of him. 
• His ability to ignore all the noise around him in terms of success (fan noise, social media noise, trappings of fame noise).
• His discipline in controlling his time.  Everyone wants a piece of his time but he rarely provides it.  He does not have to be everywhere. 

He trains in February to win the Superbowl a year later.  That is what we would call medium to long term thinking and that is what metrics allow us to do in supply chain.  If we focus on a few, remove all the noise by ignoring the "nice to know", eliminate our natural FOMO (Fear of missing out) instincts, identify the critical outcome (spoken in the terms of a customer) and then relentlessly monitor and improve, we can be like Tom Brady and win a lot of supply chain super bowls. 

I believe people get in trouble in three areas when they devise metrics:

• They are inwardly focused and not from the view of a customer
• The critical few are not separated out from the "nice to know"
• They do not have one or two (no more) clear outcome metrics.  Using our football analogy, think of the outcome metric as the score of the game.  All the individual stats that are produced (proudly by AWS) during the game are just input or driving metrics.  They only matter if they indicate and predict what the outcome of the game will be. 

Finally, we learn from Tom Brady (and Bill Belichick, the coach of New England) that it is all about improving.  You win the superbowl by winning one game at a time and not dwelling on the negatives.  My favorite press conference was after New England got destroyed by Kansas City one year and at the post game presser all Belichick said was, "We are on to Cincinnati".  Meaning, the game with KC is done, over, now it is about improving and winning the next game.  (Patriots ended up beating Cincinnati 43-17 and went on to win the Super Bowl)

Too often people are looking at "rear view mirror" metrics so much that while they are constantly reviewing the metrics they forget to look in the windshield to see what is coming next (Cincinnati).  Sometimes you have to just learn then move on.  A critical few metrics, where you isolate and ignore all the noise, will ensure you do this.   

In honor of Bill Belichick, below is the press conference I reference.  (You will have to go to YouTube to see these)

Have a great week!

As an added bonus, if you want to have a lot of laughs, here is a montage of all his press conferences which are epic:

Supply Chain Update - Hint: Disruption is Not Going Away and as The Who Warned Us: Don’t Get Fooled Again

I am traveling for the last time this year and when I am on the road I get to reflect a lot on what is actually going on within supply chains and what we can expect into the future.  Here are some things I have reflected on and believe for 2022:

Disruption is not Going Away:

Short of a major economic turndown, the container issues, ship issues, port issues, driver and transportation issues all will continue through 2022 and into 2023.  There is no evidence that until significant ship and container capacity comes on line (2023) there will be much improvement.  As we have learned this last few weeks, the “appearance” of improvement has been somewhat of a mirage.  Ships are slowing down and they are at anchor just further out at sea.  

COVID Is Moving from a Pandemic to an Endemic:

The definition of an endemic is something that is around us and never going away.  Covid will be around us, at a baseline level for the foreseeable future.  The next time you hear someone say to you, “When this is over… “ , remind them we are going into our 3d year. This is the “way it is” and masks, vaccines and therapeutics will be needed likely for the remainder of my life.  Supply chains cannot “wait until this is over “  to implement change and execute process improvements.  We have to learn to work within it. 

Shippers Will Continue To Take More Control of The Assets:

We all have seen the stories of big companies leasing ships but who would have thought a large furniture company would buy a large trucking company?  This is a perfect example where shippers will be adjusting their supply chains to deal with the massive margin inflation in purchasing of supply chain services.  It takes a while but supply chains will adjust.  Product will be on-shored, assets will be insourced, and networks will be redesigned to adjust and mitigate the inflation.  

This was started by Amazon when they bought Kiva Robots and they have progressively taken control of their own destiny.  Amazon will surpass UPS and FEDEX as the largest package shipper (on their own assets) sometime next year.  The massive margin inflation passed to shippers this year is not sustainable and it will end. 

We Will See 3 Interest Rate Hikes in 2022:

This is breaking news as it was today the Fed had their press conference after the December FOMC meeting.  You decide what this means for your business but suffice to say the “punch bowl” is going to be removed from this economy.  I personally believe this will mean a number of “zombie” companies will struggle to survive.  The easy money will be gone and companies which generate no profit will not continue to be valued at such high levels as they are today.  

A Few Charts:

Those who know me know I track the FRED Inventory to Sales ratios as an indicator telling us what stage the restocking and the “normalization” of supply chain is in.  The news is that we are still dramatically lower than we need to be and this means restocking will continue for the foreseeable future (See Disruption is Not Going Away above):

Below is a great visualization showing what is happening with COVID and is updated through today, December 15th:

Over the next few weeks I will get a bit more granular on my predictions however this provides a good high level overview of what 2023 looks like. 

With this information it really makes sense to play The WHO:  Don’t Get Fooled Again!

Thursday Note on THE Supply Chain - Birth Rate in The United States

 This is just a quick note on some learnings from the last few days.  While there are a lot of issues in supply chain which are well documented both here and other places (i.e., international capacity, truck capacity, shortages of materials etc.) the single biggest issue I hear from all my peers is the labor issue.  So, why is this such a big issue?

First, it appears to be a very systemic issue which is pervasive and has no easy fix.  A lot is discussed about pay rates but the reality is America is running out of workers.  it is simple math.  The chart below from MacroTrends (Source United Nations) shows it clearly:

The birth rate of the United States is the problem.  Combine that with a very restrictive immigration policy of late and you can see the problem.  This was not an unforeseen problem.  5 years ago, at a HBS reunion I heard the head of the Dallas Federal Reserve say this was coming.  Is it COVID related?  Well, like all things, COVID did not help, but this was coming for a long time.  We are just now here.

So, if you are young and fertile… get at it and do your patriotic duty and have kids. 

Second, I hear over and over again from friends in almost every industry in America:  They cannot produce fast enough to meet the demand for everything.  Thus, there is a shortage of everything.  Given how long it takes to spin up large capital projects I would just say we have to learn to live with it.  

Finally, the trend of the markets valuing and investing in technology instead of assets continues.  Flock Freight is now the newest unicorn according to TechCrunch.  Another app to try to help me find capacity.  This, I will admit is a bit unique in that it is not just another brokerage app but more assistance in co-loading.  Co-loading has been the holy grail for 30 years so I will watch this closely but so far, app or no app, no one has seemed to be able to make this work.  

OK, that is it and the song for tonight is in honor of these unicorn companies getting 100’s of millions of dollars:  Winner Take It All, by Abba:

Wednesday - Mid Week General Thoughts

 Here is just a quick summary of some things I am looking at this week and also some things which just make you go ... hmmmmmm:

1. California Ports 24-Hour Operation is Going Unused - WSJ).  So far the 24 hour out gate at the ports of LA/LB are considered a total bust.  Unfortunately, those making these rules don't understand the "chain" in supply chain.  It is not just about time available.  It is about trucks, drivers, port space, all sorts of workers, chassis and a myriad of other things.  If nothing is done on those fronts, the chain breaks and no amount of extra "open" time will fix it.  More to come but so far I rate the 24 hour port plan a F-.  
   
   
2. Driving up and down the highways at night allows you to see a big part of the problem.  Trucks parked all over the highway as they run out of hours and there is no parking for them.  Is anyone addressing this issue?  Does anyone think that parking on the side of the road, with no facilities and with no safety will attract people to the trucking industry?  Remember, for in trucking for every "machine" you employ you have to employ at least one person.  It is not like manufacturing where a "machine" eliminates the need for a number of people.  In trucking the capital employed to human is 1:1.  Treatment of Drivers: F.
   
   
3. Anyone been to Costco lately?  I have been in one in Michigan and one in Georgia recently and guess what?  The toilet paper shortage appears to be coming back.  This time I think it is more about lack of trucking capacity than anything.  Come on Costco, you can get restocked!
   
   
4. Inventory to Sales Ratios both total and just retail show little to no improvement.  This means my "when will this get better" meter is moving to the beginning of 2023 when I had it pegged at mid year 2022.  Still not coming off of the 2022 but the likelihood of it going into 2023 is getting more real. Likelihood of a quick resolution to the supply chain issues in America ending soon - D
   
   Total Inventory to Sales:
   
   
   
   
   

   Retail Inventory to Sales:
   
   

   

   
   
   
   
5. Port of Savannah is still the best port out there by far however it has been "found" by some big retailers who are slow to move their boxes off the port.  This has meant some ocean carriers have cancelled calls to Savannah and added the Ports of Jacksonville and Charleston.  I think just about everyone is starting to look at "over the water" movements to the East Coast versus getting into the mess of LA/LB then trying to move it over ground. Port of Savannah is an A
   
   
6. JB Hunt  (Stock information: JBHT)is the best run trucking company in America by far.  They knocked their quarter out of the park and they have even better days ahead.  They have transformed from an old school, irregular route trucking company to a high tech, well disciplined supply chain company.  And, the market is rewarding them for it as they have a P/E that values it like a tech company and just about everyone upgraded their stock this week.  YTD J.B. Hunt is up 44.64% as compared to Schneider (SNDR) who is up 19.7%.  (See comparison chart here).  JB Hunt is an A+
   
   
7. Costs continue to rise in all facets of the supply chain:  Various data sources tell us that yes Virginia, there is inflation, and a lot of it. 

OK, I just wanted to pass on some thoughts for mid-week.  Things I am working on include: 

1. Why is the market not putting capital into asset companies?  Just today another $200M investment in a tech company that is supposed to help you find a truck.  So, we keep building apps but we don't staff trucks.  Not helpful but the folks doing investing must know something I do not know. 
   
   
2. Should there be a reserve corps for Supply Chain Professionals?  I am really thinking we need this.  People join just like you would join the Army reserve except it is a national supply chain corps.  You would get the same protections the old "Soldiers and Sailors Relief act" provided and you would get called up as needed.  This would accomplish the same thing as calling up "the military" but you would get a lot more professionals to join as they would not have to do all the "Army Stuff"

More on those topics later.    I thought it fitting to end this post with "Bad Moon Rising" by Credence Clearwater Revival.  This should be the theme song for all supply chain experts!

This is Not Just COVID - Supply Chain Disruption Has Been Building for Years

 I will not bore you with all the pictures and the discussion of how many ships are off the coast of LA waiting to get unloaded.  If you are reading this, you already know that fact.  What I do want to discuss is the real problem with supply chains and the root cause of this mess. 

My fear is everyone is attributing everything to covid-19 and covid-19 certainly did not help.  Covid-19 dramatically changed the buying patterns across the world (from experiences to things) and that impacted supply chains tremendously.  However, like a lot of things related to covid-19, the impact merely accelerated a trend which was already growing.  My thesis is this:  The infrastructure of global supply chains was cracking and breaking and Covid-19 sped it up.  What is included in infrastructure:

1. Driver capacity
2. Lack of investment in highway infrastructure (just look at the trucks parked all over every night)
3. Lack of investment in port infrastructure
4. Lack of connectivity in systems (i.e., you book a container to come to the US but the people on the ground don't know when or even if it is coming)
5. Lack of a cohesive strategy on chassis management
6. Massive disruption and economic distortion with "on again and off again" tariffs. 
7. Lack of investment in real assets.  A lot of money going into apps and other systems for visibility etc. but what we need our trucks, drivers, trailers, containers and ships. 

My belief is until we get a comprehensive national strategy to deal with these issues, much like we have a national security strategy, petroleum reserve strategy etc. we will have these problems forever and what you see now may actually be the "new normal".  If you look at the group that is meeting now with the White House they still signal their belief that this is just a temporary covid-19 problem.  Their newest idea?  Keep the ports open longer!  Will that help? Yes, but does that deal with the core problems?  Absolutely not.  It is the aspirin for a headache which is actually caused by high blood pressure.  Your head will feel better but eventually your heart will burst.  

As much as we may dislike it or may hold an "all things government does is bad" idea we have to develop a national strategy to address these issues.  Remember, the Interstate Highway Network was a project the federal government did, with private industry, to ensure we could defend the country and it had the effect of enabling smooth frictionless commerce.  We need a big idea like that now.  

Don't let the excuse of covid-19 cover up all the issues in the supply chain in the United States. Despite all the billions of dollars invested in technology over the last 5 years, the global and national supply chains are performing worse than ever. 

And, for those of you who just cannot get enough of it, I will provide the obligatory picture of ships backed up at port. 

Is the Chief Supply Chain Officer now A Chief Crisis Manager

The last two years have been incredibly challenging for anyone in supply chain.  It started with a supply disruption out of China in late 2019 / early 2020.  We then went into a demand crisis in April / May of 2020 and then for many industries it very quickly turned right back to a supply crisis.  Both with inventories being low and then the entire country trying to restock at the same time which led to too much demand and not enough capacity to move global products.  Even US based products were effected because whether made in the US or not, many of the components come over seas. 

One hidden part of the capacity issues was the fact that passenger planes stopped flying.  In the "belly" of passenger planes flies a lot of cargo and when those planes stopped flying, cargo which normally went by air had to find another way to travel.  This added to the supply chain issues.  

Much of this has been covered and many articles written so I will not rehash them here.  However, what have we learned?  What will we do differently?  The first thing I think about is crisis management.  It turns out, if you are going to be a great supply chain leader,  you need to be a crisis manager.  That has somewhat always been the case but in the last two years it has gone "mainstream".  So, what does it take to be a good crisis manager.  Here are my 4 learnings from the last few years:

1. Honesty - Be Honest and Straightforward in Communication:  This is akin to the idea that you will never solve a problem or deal with a problem unless and until you face up to it and admit it.  In your company you need to honest with your executives, your associates, sales and even, yes, your customers.  
   
   When these supply issues hit hard two companies stood out: Peloton and Ikea.  Both companies went public early on, described what the problem was, what they were doing about it and what people could expect.  "Bad news does not get better with age" applies here.  
   
   This also applies to associates.  Make sure you are honest and straightforward with them as well. 
   
   
2. Be Calm and Do Not Panic:  Panic is a flight response to an issue that is somewhat embedded in our DNA.  However, we as humans can control our responses to anything.  This is the time when you have to lead with calmness and strength.  Stay focused on the mission(s) at hand.  Focus on solving problems. 
   
   
3. Be Decisive:  You will not have all the facts by the time you need to make a decision.  You need to get as much data as possible but when the time comes you are going to have to "make a call".  And this is where the job can get lonely - YOU need to make that call.  As Matt Damon says in Ford v. Ferrari, "You cannot win a race by committee".  You then need to have all your antenna up to read new and conflicting information, synthesize it quickly and adjust if necessary.  Procrastination is not a decision.  
   
   
4. Provide a Vision of the Future:  Most people understand when a crisis hits and they understand the work is going to get difficult and they are OK with working incredibly hard if they see what the end vision looks like.  For example, out of this pandemic and supply chain crisis we will have actions in place to get us through even more difficult times should they come up in the future.  The company is going to do great when the consumer hits the great reopening period.  Those are two examples of hope and vision.  

Finally, as Toyota taught us a long time ago, use a crisis as a major learning event.  A lot of "rocks" were uncovered during this period in business, in government and, in some cases, in personal lives.  Don't cover those rocks with water again - use this as a learning period and fix them.  

To learn this, and for some entertainment, I offer you the lessons of Carroll Shelby in Ford V. Ferrari about lessons learned and how to go forward.  Notice how Carroll Shelby applies all of these - Especially at the end when he gives Henry Ford II a vision of the future when "the only thing that didn't break were the brakes":

What Does The Ever Given Episode Teach Us?

 Many have focused on the Ever Given episode as a symbol for the dangers of international shipping.  Some have discussed it in terms of "choke points" such as the Suez Canal where when one thing goes wrong entire supply chains are disrupted.  And, some have taken it as an opportunity to discuss the topic of the size of the ships.  Have ships become too big?  What happens when there is a problem with a 20K TEU ship?

All of these are very important questions and are being addressed however I believe the question is even bigger.  It is about how we structure our supply chains.  It is about the age old debate of efficiency v. resilience.  Basically, how much insurance are you willing to buy to mitigate the potential of disruption? 

Start with inventory.  What is inventory?  As I have discussed previously, inventory is merely a buffer of product to substitute for the lack of perfect information. In fact, Lean teachings tell us that inventory is considered waste.  What do good managers do with waste?  They try and eliminate it.  

So, as we have done over the years companies have fallen in love with the idea of eliminating inventory because it makes the balance sheet look amazing.  But, is inventory really waste?

I submit that inventory is not waste just like your fire and auto insurance is not waste.  Think of your insurance policies.  You may pay a couple hundred dollars a month for a product you hope you will never use!  Wouldn't you consider that waste?  Well, not if you are protecting your portfolio you wouldn't.  

So, now, let's go back to the Ever Given.  The lesson here is we need more insurance (read: resilience) in global supply chains.  If we have learned anything in the last year we have learned things will go wrong.  Buffer stocks help mitigate this.  

The next question is whether we will learn that lesson from this incident.  My answer is, I doubt it.  Efficiency drives short term results and effectiveness is for the long term.  Most businesses will not be able to resist the allure of the efficient.  Even if in the short term they sacrifice efficiency for effectiveness most will eventually look for efficiency.  Not only are businesses likely to do it on their own but Wall Street will demand it for the publicly traded companies.  Another reason private companies will always have an advantage. 

What can a supply chain manager do?  Well, first, we can strike from our "lists of wastes" the word inventory.  Inventory, as I have hypothesized above, is not waste, it is insurance.  Second, become a story teller.  Supply chains in the age of COVID and Ever Given should be remembered for what they have become - stretched to the limit.  The mantra of "Never Forget" comes to mind. 

If you have doubt of my position look at my favorite graph (posted here for years) measuring, for the United States, our sales to inventory ratio:

Notice the far right of this graph.  Here you will see our inventories in the US relative to our sales is at the lowest point since April of 2012.  This is what leads us, as consumers, to scramble for everything.  

Let's not make it so every generation has to learn the same lesson.  Let's build resilient supply chains.  

Why The Chief Supply Chain Officer Needs to Understand Customer Experience in Detail

 Thesis:  The Chief Supply Chain Officer (CSCO) needs to be very close to the Chief Customer Officer or whoever in the enterprise is responsible for the customer experience. 

Discussion: 

This article is for those who are working supply chain within a company that makes or sells things.  We know the 3PL world needs to have a customer experience strategy but what about the CSCO within a manufacturer or retailer?  Isn't their job to just reduce costs and become "efficient"?  NO!  For those who have read my writings over the last 5 years you know I believe the single biggest job of the CSCO is to drive revenue.  In this day and age you drive it through customer experience (CX) even more than through product.  

Let's look at the big advancements which have propelled massive sales growth for key players during the pandemic.  A few examples:

1. Buy on line and pick up in store
2. Buy on line and have curbside pick-up
3. Use your smartphone to activate and pay for fuel at key gas stations (I do this a lot at Shell).
4. Use of stores as micro fulfillment centers

I could go on and on but all of these are supply chain solutions, empowered by technology to drive customer experience.  Notice nothing in that list had anything to do with product but rather had to do with how a customer or consumer acquires the product.  If you are back in the supply chain don't think you are immune from this trend because your customer has the same needs as a consumer.  They want a frictionless experience to make their business more impactful to the consumer.  You can help them with that and that will endear you more to your customer, they will buy more and they will be more loyal.   So, a quick conclusion for CSCO's to take action in this space:

1. Get to know and partner with the person in your company who is in charge of the customer experience.  A lot of times this is in the sales or marketing area.}
   
2. If your company does not have a person who owns this then take extreme ownership and take charge of it. 
3. Ensure your supply chain strategy supports everything your company is promising in their go to market and customer experience plans.  Nothing is worse than a supply chain strategy which is different than the go to market strategy. 
4. Consistently come back to the customer experience and use data such as net promoter scores (NPS) to determine if your supply chain is meeting the customer expectations.  

The customer and the consumer have the power.  You will differentiate yourself and your company if your supply chain focuses on the customer experience and "wow'ing" them each and every day. 

Post Script:  I think of this today and had to write about it industry lost a legend this week:  Tony Hsieh.  Tony founded Zappos and with it founded a company which was legendary for differentiating itself through customer experience.  How do you differentiate the selling of shoes?  Through Customer Experience! He built the company from nothing and sold it to Amazon for over $1bl.  We should all focus on CX like Tony did. 

 Rest in Peace, Tony Hsieh.  

By Charlie Llewellin from Austin, USA - tony hsieh, ceo, zappos.comUploaded by Edward, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=97091081