Lock, Dock, and Barrel

The lockout of Pacific ports that the Pacific Maritime Association initiated during the last weekend in September underlined the rather downbeat tone at the annual Council of Logistics Management conference in San Francisco. The action disrupted warehouse tours scheduled in conjunction with the conference, but more seriously, it posed the threat of severe economic consequences for retailers — with an estimated potential cost of a $1 billion a day — at the very beginning of their holiday season buildup.

A CLM panel on security took on a fairly bellicose tone when exhorted to vigilance by former lieutenant general John McDuffie (USAF, ret.), eliciting a decidedly non-neutral response from the (mostly male) audience. When asked what would be the most effective preventive security measure for global supply chains, McDuffie said without hesitation that it would be for the government to develop the sort of human intelligence networks abandoned decades ago in favor of technology. Unfortunately, that sort of network, he pointed out, takes years to put into place.

On the retail logistics front, tempers were calmer, but the news was no less grim. Presenting the findings of a study by consulting firm Booz Allen Hamilton, Toys ‘R’ Us supply chain director Anne Chung Frazer painted a somber picture of the state of retail logistics today. The report, based on 90 blind interviews with senior operations execs in retail, supply, and third-party service companies, found that operational networks are largely redundant and inefficient and that logistics managers lack full knowledge of their companies’ finances. Frazer noted that the retail business is so riddled with inventory management, forecasting, and replenishment problems that merchants have begun to recognize supply chain management as a core competency.

As logistics morphs into supply chain management (SCM), it is helpful to define the term — and fortunately, logistics professors Douglas Lambert of The Ohio State University and Terrance Pohlen of the University of North Florida took it upon themselves to do just that. SCM is not about measuring every little benchmark; rather, it is about identifying key business processes and integrating them from supplier to end user. “What every supplier ought to be doing is running a P&L on every customer,” said Lambert. “Retailers should be doing the same for every supplier. Then do a combined supplier-customer profitability analysis and ask how processes can be improved. Over time, the supply chain will migrate to the most efficient links.”

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