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!