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November 6, 2014 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Election 2014, the Supply Chain and Beyond bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & By the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet New Cartoon Caption Contest Begins bullet Trivia      bullet Feedback
bullet Expert Insight and Supply Chain by Design bullet New Videocast/On Demand Videocasts
FREE Calculator: Inbound Shipping Variability Impact on Expensive Safety Stock

first thought


Supply Chain Graphic of the Week:

What Type of Transportation Management System (TMS) Do Companies Have?


Carriers Like 3PL Services a Lot More than Straight Truckload Carriage

Amazon Testing Taxi Deliveries
Troubles and Costs Crossing Mexican Border May be Changing
FedEx Battling Unionization Efforts


November 4, 2014 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Fine Tuning Inventory Levels is Key to Improving the Bottom-line


FREE Calculator: Inbound Shipping Variability Impact on Expensive Safety Stock


Weekly On-Target Newsletter:
November 5, 2014 Edition

New Cartoon, TL Carrier Q3 Review, Sortation Tips, Smart Phone Scanning Software and more

Mexico Facilitates Trade Across Its U.S. Border

by James Giermanski,
Powers International, LLC

Three Supply Chain Lessons from the book Scaling Up Excellence

by Dr. Michael Watson


What does the relatively new technology acronym BYOD stand for?

Answer Found at the
Bottom of the Page

Election 2014, the Supply Chain and Beyond


US elections were held Tuesday, and obviously produced a big night for Republicans, taking back control of the Senate, among other gains.

Here, am going to briefly reflect on the impact this result may have on the supply chain, and then take the opportunity to summarize key legislative and regulatory issues that most of us should at least have passing knowledge of, if not something better than that. I think doing such a review once a year or so makes sense, and why not in conjunction with a major election, especially one that did indeed change the status quo.

As I always say, I try to play this straight down the middle, lest I receive a spate of angry emails from one side or the other, but having said that I will admit to coming at most of these issues from what is good for supply chains and businesses, as this is the audience we serve and at times represent.


"The special Congressional panel on 21st century freight transportation - chaired by a Republican - pushes the goal of moving more US goods by rail and by a revived barge industry."


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In general, I don't think the change in Senate control will have any monumental impact on supply chain related issues. The Republican controlled House had been taken no action on several "bad" bills, such as one which would have allowed ports to take local action on trucking issues, which would have led to a patchwork of costly regulations.

Now, however, legislation the House has passed or is likely to pass will get a hearing and often approval in the Senate and sent to the President for signature or veto, whereas the House bills basically never had an audience in the other chamber in recent years.

Therefore, I would expect the now fully Republican controlled Congress to eventually send the following bills related to the supply chain to Obama:

Approval of the "Keystone Pipeline": The state department has been dithering with this for years, and while I think it is more symbolic than truly consequential in the grand scheme of things, I believe such legislation will be sent to the President, likely with strong Democratic support as well. Obama may just sign it. I think it might even be passed with veto-proof margins. Think we will see other "energy independence" legislation.

Repatriating Offshore Cash: US companies have more than $2 trillion - a staggering figure - stashed overseas. Why? Because unlike most other countries, the US does not let multinationals simply pay the local region's taxes, but rather that plus taxing these profits again at (high) US rates if the money was brought back home. Earlier this year, it was said GE alone had more than $110 billion in such offshore cash.

I expect some bill to be passed that taxes such repatriated cash very modestly. If Obama were to sign it, that "found money" might make its way into the budget you need for that new distribution center, factory, or supply chain planning software that couldn't make the financial cut before, if you are a large company with this issue/opportunity. That could spur some economic growth for all the rest of us too. No idea if the President will sign it - depends on how low the rate. The White House wants a higher rate, with much of the proceeds used to fund infrastructure spending.

Renew Fast Track Trade Agreements Law: The Trade Protection Authority, which allows only straight up or down Congressional votes on trade agreements (no amendments), expired in 2007. Harry Reid in the Senate would not allow a bill to renew that process to come to a vote. That is now likely to change, and the President is likely to sign it. Two pending trade agreements might now move forward: The Trans-Pacific Partnership being negotiated by the US and 11 other countries in the Pacific, and the Transatlantic Trade and Investment Partnership between the US and the European Commission.

With those relatively brief predictions, here are a series other legislative/regulatory issues and updates with which it might be good to be familiar (thanks to John Cutler, NASSTRAC's legal counsel, for help with this):

New Highway Funding Bill: Last summer, Congress basically again kicked the can down the road, extending the current program, passed in 2012, through May of next year. I expect a longer term proposal will now be developed, with both Houses under Republican control. How long, and where the funding will come from, are as always the key questions. Some funding could come from tax revenue achieved through repatriation of corporate cash, as noted above, and you should expect some very modest at best increase in gas and diesel taxes (which maybe easier to get through with current low oil prices.)

Heavier Truck Proposal Treading Water: The proposal to allow heavier trucks (97,000 pounds) on US highways - with the addition of a sixth axle - was tabled for additional study almost two years ago now, and seems unlikely to see any action until that study is completed by the FMCSA. The last news update from the Coalition for Transportation Productivity, a shipper-backed group that lobbies for the change, was Oct. 1, 2013, which says it all.

That's too bad - it's a good idea that would take trucks off the highways and partly address the driver shortage issue. Key impediments: savvy anti-change tactics from "public interest" groups often backed by the rail industry, and lukewarm support from carriers worried they'll just carry more freight per load for free- and they might just be right about that.

National Labor Relations Board Likely to approve "Microwave" Union Elections Soon: The hearings were already held on proposed rules that would dramatically shorten the time from when a vote to unionize receives sufficient support from workers to when the election actually occurs - the NLRB could announce the new rules any day. The changes also require companies to give more worker contact information to union organizers. The changes are thought to make unionization more likely, in part as companies have less time to mount a counter-offensive. These rules will be changed, but expect a strong challenge in court likely to delay implementation.

US "Strategic Direction" on Transportation is Away from Trucking: The special Congressional panel on 21st century freight transportation - chaired by a Republican - pushes the goal of moving more US goods by rail and by a revived barge industry. This is consistent with the DOT's own strategic plan. Both could impact US government policy, though just how is not yet clear. One path would be heavier taxes to account for full "social costs" trucking, but that will not happen with Republican Congress - unless it can be done by executive order. This is likely to be big issue over next 5-10 years.

Rules Mandating use of "Electronic Data Loggers" by Truckers Coming in 2015: While most large carriers already have such devices deployed, most small and medium carriers do not. Lack of such electronic tracking allows some drivers to skirt Hours of Service Rules. Some predict when the data loggers prevent that, there will be more customer service issues than shippers currently realize. Be ready.

Contract Truck Drivers being Classified as Employees: This is being pushed from several directions - state law (e.g., New York), recent court decisions, recent labor protests by some drayage drivers in California, etc. States often in favor of this change, as it would drive revenue gains (taxes, workers comp, etc.). Hot button issue for Teamsters, others. Would raise carrier costs substantially, as much as 30% per driver. One to watch for sure.

Coming FMCSA Rules on Driver "Coercion": Hearings have been held on these rules that could fine shippers for somehow coercing a driver to take a load that would force him or her to violate HOS or other regulations - apparently sometimes if the shipper doesn't even know that's the case. The rules might also mean it is coercion if a company takes a load from a driver who doesn't have enough hours left and gives it to another (financial coercion). Strange stuff - we'll keep you posted.

I am out of space. Other important legislative/regulatory issues: new regulations on so-called "bottleneck pricing" by rail carriers (long expected); new funding for improvements at US ports; further expansion of the Mexican trucker program, the mandate for 100% cargo screening that was delayed again last summer; final rules stemming from the Compliance, Safety, Accountability (CSA) initiative, which could take many drivers out of the market and subject shippers more liability.

I am sure there is more, but that's about all I can wrap my head around. Make your voice heard - one shipper reaching out to a Congressperson is worth about 10 carriers doing so. Every DC you operate is in someone's Congressional district.

What is your reaction to our summary of key legislative-regulatory issues? Anything important we've left out? Let us know your thoughts at the Feedback button (email) or section (web form) below.

View Web/Printable Version of this Column

New Videocast:

Why Now Is the Time to Close the 3PL "IT Gap"

How Leading Logistics Service Providers Can Move to the Next Level of Technology Enablement to Win New Business and Get More Strategic with Clients

Gene Tyndall, former VP of Supply Chain Solutions at Ryder, SCDigest's Dan Gilmore, and Todd Johnson of JDA Software.

Thursday, Dec. 4, 2014

On Demand Videocast:

The Impact of Vendor Lead Times and Variability on Inventory Levels

Introducing the New Lead Time/Inventory Level Calculator!

Mark Krupnik of Retalon, Kevin Harris of Compliance Networks and SCDigest editor Dan Gilmore.

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On Demand Videocast:

The Internet of Things: Where it's Headed, and Practical Strategies for Leveraging RFID Right Now

We are Entering a New Era of "Turbo Visibility" - Learn How Connected Assets and Data-Driven Analysis are and will Make Companies More Efficient

Tom O'Boyle, Director of RFID, Barcoding, Inc., McLeod Williamson of Zebra Technologies and SCDigest editor Dan Gilmore.

Now Available On Demand


Catching up with some feedback from a few weeks ago on our First Thought column on "Consumer Goods Companies are from Mars, Retailers are from Venus."

Received a few good emails, including our Feedback of the Week from Andre Martin of JDA Software. You will find them all below.


Feedback on Best Cartoons Column:


I agree with everything you listed but what has been missing until now are two things.

1. The retail supply chain is interdependent whether we like to admit it or not and Jay Forrester from MIT proved it all the way back in 1958 when, working with a bunch of PhD students, he modeled a complete retail supply chain on a Univac computer. The results: a 10% increase in sales at the store level in January cascaded down to the supply chain and amplified to a 40% increase on the factory six months later. This demonstrated the retail supply chain was naturally linked regardless of what we think and regardless if we collaborate or not. Changes in consumer demand at store level will impact the entire retail supply chain and there is nothing we can do about it.

Retailers and manufacturers have but two choices to deal with this:

a. They can ignore the natural linkages, end up carrying more inventory than they need, wait until the changes hit and bear the added costs.

b. They can collaborate, anticipate, plan the expected changes and share in the inventory savings and associated operating costs.


2. Retailers and manufacturers then need to spend a certain amount of time understanding and educating themselves on what are the root causes of changes up and down the retail supply chain. This is not rocket science and can be quickly understood if only people take the time to do this.

Then they need a way to create a model of how they wish to do business together. The model should consider the following:

a. The retail store is truly the beginning and the end of the retail supply chain: it is the beginning of information flow and the end of product delivery.

b. The model must be built on a simple truth: NEVER FORECAST WHAT YOU CAN CALCULATE. People need to spend time understanding what that really means then acknowledge it as a basic fact to be considered in creating the model they are building.

c. Applying this basic fact now enables trading partners to conclude they must collaborate and agree on ONE UNIQUE STORE/SKU SALES FORECAST TO DRIVE THE ENTIRE MODEL

d. Agreeing to this will greatly simplify the way retailers and manufacturers will flow products from the factory to the store shelf. Then the balance of the retail supply chain become a mere calculation that ultimately will consider all their existing business rules, inventories, in-transits, modes of transport etc.

e. Finally, retailers & manufacturers should jointly look at the resulting model and see if they like what they see. Is product flowing from the factory to the store shelf the way they want? If they do not like what they see (initially they will not) then tweak it until they are happy with the expected flow projections.

f. Update the model. Keep it up to date with ongoing business decisions and conduct business through the model going forward.

Let me end with this statement: There is no guessing anymore in how to best manage a retail supply chain and flow product from the factory to the store shelf. What is now needed from retail and manufacturing executives is a genuine desire to take some time to learn how this has become a science today.

It has taken a long time to get to this point but we have arrived. The enabling technologies are finally available but what is now needed is the will to do it. The financial benefits to retailers and manufacturers are absolutely huge and it is now in their hands to make it happen. Those who do it first will definitely create a competitive advantage for themselves.

Andre Martin

JDA Software


30 years ago I worked for a major computer manufacturer. I had started in the stockroom and progressed to a planner position for nuts, bolts, screws, cardboard and skids. This position lead to a more senior planning position where a team would go out to the field each quarter to do a sales force sensing. We had four regional sales units and this process was repeated in each unit.

We would go to each of the sales force centers and meet for 30 minutes with each sales rep and discuss their impressions of the market for the next 8 quarters. W had a specific list of products to discuss including some [as yet unannounced or unreleased] products. The products selected covered a majority of the component parts that needed to be manufactured or procured. We manually collected this information from each sales rep and at the end of the day had a manual spreadsheet and a discussion with the Sales Unit Manager.

The SUM would review the numbers and make suggestions for revisions at the aggregate level. On the last day we would roll all the regional data and have it reviewed by the Regional Sales Unit Manager. Again minor adjustments would be produced.

Armed with the smoothed information, the four sales unit forecasting teams would gather and combine their information. There were always some anomalies and these would be worked out in the meeting. The forecast was then used as a tool to determine not only production [including signals to vendors] but manpower needs, facilities planning [construction or decommissioning], manpower forecasting, training, and financial forecasting, both internal and outward facing to the stakeholders.

Move forward 20 years. The company has implemented a Customer Resource Management package. The module they are most proud of the one that contains the ability for the customer to directly input their forecast and essentially a purchase order directly into the system. The new module delivered reports to all the potentially impacted groups listed above for them to take immediate action. Each of the respective groups would constantly reforecast their data.

Another feature of the module was the ability for the customer to go in and revise a forecast without a financial penalty. Because there were many changes made in any reporting period the nuances of discrete demand for an individual product would be missed. A rumor would start in the press or financial markets and customers would go in and place orders as a hedge to be able to meet their own forecasted needs. The company needed 5 years and $5 billion in construction to meet expanded needs and triggers would be sent through the system. Multiple meetings would be held and announcements would be made in the community about potential new construction and personnel requirements.

The reduction in requirements were slow to be acknowledged. The forecasters did not want to withdraw their upward forecast for fear their original work would be questioned. Many hours were spent on the forecasting and potential implementation due to the addition of the CRM Customer Input Module.

Was there a cost in the earlier model? Certainly. With application automation the forecasting and purchase order group was able to claim significant savings. Was there really a total savings in dollars and company image with the change? Probably not.

I worked for a large truck dealer. One day I knew I needed to order 25 small size low dollar parts and I put in the order with the supply house. My boss got a call to verify that we really wanted 25 high value large size items due to the fact we had never ordered that part before. I had transposed 2 numbers on the parts order and we were able to make the change before shipment. Better to have one phone call and make the change than to suffer the issues involved in arranging for returning the incorrect parts and not being able to serve the customers that needed the original part.

Automation is not always free.

Howard Pierpont
Greeley, CO


I think you have really hit the nail on the head with this one.

The fundamental problem is that retailers and manufacturers see the problems and opportunities differently. And that is a very large chasm to overcome.

Add to that since the retailer is the customer, and that means in the end they are going to call the shots.

Retailers have certainly gotten a lot better in supply chain, and that has made a difference, but even saying that they do not think about it the way a manufacturer does.

Great insight - thank you.

Adrian Gibson
Huntsville, AL



Q: What does the relatively new technology acronym BYOD stand for?

A: "Bring your own device" - which basically means customers and/or employees can download an app and use what type of mobile hardware they have. Could apply to retail customers for in-store shopping apps (e.g., scan a bar code, get more product info) but we have even heard some DC managers with this vision for how order pickers might operate.

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