In order to improve one-stop access to information on global supply chain management, with a special focus on Asia, I have created the following customized Google search engines for your convenience:
Blogs on SCM in Asia
News on SCM in Asia
Research on SCM in Asia
This will remain at the top of the page for easy access into the future.
Back in February, I discussed the supply chain environment and requirements in and around Afghanistan for support of U.S. and NATO operations in the country. At the time, Russia had reduced or cancelled cooperation in supporting or providing transit for logistical supplies into Afghanistan and, combined with Kyrgyzstan possibly pulling its transit base off the table, things looked increasingly difficult going forward for supply chain planners in the U.S. and NATO forces.
Now, as Dr. Barnett recently noted, Kyrgyzstan has reversed its position after securing a better deal with the U.S. regarding its Manas Air Base and now Russia has just announced on Friday (h/t Russia Blog) that it will support expanded transit into Afghanistan mostly through Russian airspace and via air bases like the one at Manas. As the Russia Blog notes, this could be more business for Russian businesses via 3rd party logistics providers and utilizing air transport vehicles such as the Antonov 124 cargo plan pictured below:
The announcement coincides with the upcoming trip to Russia by President Obama, who is seeking to bring back to an even keel the relations between Russia and the U.S. Obviously, a more stable relationship is desired in the face of the increasing investment in Afghanistan operations and the on-going precarious situation in North Korea.
Operations in Afghanistan will require long-term stability in these alternative supply links and the peaceful, steady development of the Central Asia region is a critical part in achieving that stability. The considerable leverage Russia possesses in either making this happen or hampering the desired results will continue to hang over the entire region and our leaders across all facets of the U.S. government must be adept at dealing with Russian decisions and actions into the near- and long-term.
This "case study" series will be covered in five parts, listed below: You can read my introduction here. The importance of the comprehensive approach to business development and building of supply chain foundations for Korean FDI flows into Georgia is never more clear than during an economic downturn such as that we are experiencing around the world, particularly in the United States. As noted in this article by Trevor Williams from Global Atlanta titled "Kia, Suppliers Plow Ahead Amid Manufacturing Slowdown:" "Kia has a varied portfolio of suppliers for most parts to combat potential disruptions in its supply chain. Many parts will be imported from South Korea and other countries. "The Georgia facility, Kia’s first plant in the U.S., will employ a logistics-intensive “Just in Time” method by which parts arrive at the plant when they need to be installed into the vehicles, said company spokeswoman Joanne Mabrey. “It’s a lot easier if you can get the parts when you need them, not to have to stockpile them,” she said. ""The auto industry is moving toward this method rather than dealing with the overhead costs associated with storing parts," she said. Suppliers of some vital components are located on the Kia site. Mobis Georgia LLC, which makes front-end chassis and other parts, will feed those into the Kia facility through a conveyor system." Denso, my former employer and former subsidiary of Toyota, the JIT king, takes a similar approach to weathering downturns; it is likely Kia developed these methods, as they have done with quality control, after the research and benchmarking of Toyota's successes. Battle Creek, the home of the largest Denso manufacturing facility in Michigan, found the company and its network of suppliers to be its largest employer base after the last downturn in which The Kellogg Company closed plants and cut jobs. Georgia cities are now facing this dynamic and yet reaping the same rewards of a dedicated and determined effort over many months to attract Korean FDI, and in a very strategic and forward thinking manner. I hope this case study provides an inspiration to communities around the U.S. looking for ways to not only survive this economic downturn but to also better prepare for maintaining prosperity through the next one.
If you are a company working with a vendor on a project or on-going basis, the best way to get them to "go the extra mile" for you is to follow this simple formula:
Constructive Criticism (when things go wrong) + Prompt Praise (when things go right)
The surest way to ensure a drop in effort from a vendor is to a) issue petty complaints at every challenge and b) fail to recognize achievements, no matter how small or expected. I have seen these mistakes time and again during my +10 years of working on various types of projects and its a shame.
With North Korea all over the news this week after its nuclear test and missle launches, as well as with South Korea's entry as a "full participant" into the U.S. Proliferation Security Initiative (PSI), it now seems like the appropriate time to continue my discussion here on maritime security and trade in the Asia-Pacific.
In this post, I would like to summarize the types of disruptions that concern supply chain managers in terms of the maritime transit of goods and within the current Asia-Pacific environment. Without citing anything specifically, and in no particular order, from my own experience I believe disruptions could include:
All of the above could significantly affect ports, shipping and the people involved in a particular company's supply chain, thus causing major disruptions in the delivery of goods and services. As inferred in my previous post, the dramatically increased levels of trade between countries of the Asia-Pacific has served to reduce tensions and concerns overall on its seas and in its ports. However, as we have seen with North Korea, there are specific areas that will be identified as potential flashpoints that could quickly begin disrupting the links of Asia-Pacific trade.
Below is a diagram that points out where these flashpoints are located:
The East Sea and Yellow Sea are now going to be under close watch due to the recent actions of North Korea and because South Korea has now become a full participant in the PSI. Tensions still exist between Japan and South Korea over the Dok-do islands in the East Sea, between Japan and Russia north of Hokkaido, and between Japan and China over oil exploration and development in the Yellow Sea, but these mostly have taken a back seat to stronger economic ties and political reconciliation.
The South China Sea and Taiwan Straits are also areas of territorial tensions as witnessed by the occasional flare up between Chinese and U.S. vessels and military exercises in Taiwan and China in relation to a possible armed conflict. Fortunately, China-Taiwan relations have been warming significantly in recent months and territorial disputes in the South China Sea have mostly been made through international bodies.
The Strait of Malacca differs in that it doesn't involve territorial issues; rather it is a hotbed of piracy, fraud, theft and general crimes against the concentrated flows of trade and commerce in the area. As seen in the below graph from the "Regional Security Outlook" report made available by the Council for Security Cooperation in the Asia Pacific (CSCAP), attacks are down over the past few years as trade intensity has picked up along with new security measures:
With an increase in attacks in 2008, it will remain important for government-led security and private-sector security remain focused and innovative when dealing with these incidents. But there is no doubt that as the value of trade goes up the will to protect and secure those trade flows will also increase.
You don't have to be from Michigan to know how bad the Michigan economy has become. There is little positive news emanating from Detroit outside of sports as 2/3 of U.S. auto companies have essentially become nationalized. The state unemployment rate is at 12.9% and climbing. There is a net outflow of people to other states in hopes of finding better prospects for themselves and/or their families. Taxes and union favoritism have tainted the State as unfriendly to businesses, leading the Governor of Michigan to heavily subsidize the businesses that do locate to the State. A recent article in the Detroit News says that the State owes the Department of Labor $2.2 billion in borrowed money for unemployment benefits:
"...during the second half 2008, the state started running behind and the debt ballooned.
""We have about 470,000 people who are claiming unemployment benefits," Isotalo said. At the 2008 average, that's a total of about $141 million in unemployment checks every week. "There's a lot of money going out in benefits right now."
"Michigan paid 4.8 percent interest on its debt to the U.S. labor department last year, and was ready to collect a state "solvency tax" from employers this year, until the Obama administration waived interest on the loans for this year and next. That spared employers a $40 million tax hit, but only for the moment. Under federal law, the borrowed money will have to be repaid through the Federal Unemployment Tax, state officials said, starting in 2010.
"That will cost employers about $21 per worker per year, in addition to regular state unemployment taxes that increase when companies lay off workers who collect more in benefits than employers have paid in to the state system.
"The effect, however, could be to dampen the recovery or deepen the losses to businesses still struggling to rebound, and could mean more layoffs, delayed hiring or other cutbacks for business, said Wendy Block, director of health policy and human resources for the Michigan Chamber of Commerce."
"That extra $21 is going to have to come from somewhere," she said. "The only other alternative would be to increase taxes in some other way through the system. There's really no good alternative to the future tax increase."
In business, we call this a "death spiral." Governor Granholm's administration, in the face of challenges at the U.S. auto companies and in Detroit in general, has only hastened this death spiral by not demanding transformative innovation and new practices in governorship and economic leadership. She constantly overplays her successes and underplays her failures to the point of blaming them on everyone but her own administration. By any measure, Governor Granholm has been at best mediocre and mostly an obvious failure.
So what needs to be done? The Granholm Administration will be gone after 2010, so everything is currently be prepped for hand-off to her assistants in this failure. It is obvious Michigan needs a change in governorship, but will the majority of the electorate realize this or continue this masochistic dive to the bottom of the U.S. barrel? A recent article, titled Piecing Michigan back together, offers some ideas around three areas: leadership, entrepreneurism, and leveraging key assets.
On leadership, I agree with the authors that Detroit's new mayor offers a ray of hope:
"Until there is a decision to put Michigan on a sound fiscal footing, there will be no structural integrity to the state budget. Businesses will be reluctant to invest in Michigan because they fear more taxation will be required to support the state government's spending levels.
"There also are new leaders arriving on the scene and with such change there is always an opportunity to do great things.
"Detroit's new leadership presents such an opportunity. The region and state must rally around Mayor Dave Bing, and Detroiters need to seize the moment to tackle the tough reforms necessary for the city's revival."
On entrepreneurism, the authors write of common sense absent in Lansing:
"Michigan must be attractive to individuals willing to open new businesses and to create new jobs, not driving them away by making it more expensive to live and work here. The way to grow the state is to restructure Michigan's tax system to be more competitive with the states we most often compete with for jobs. Being an "average tax" state is not good when the states we compete with have "below average" costs. When you add in wage, benefit, energy and regulatory costs, Michigan becomes an "above average" cost state.'
They also smartly mention logistics:
"Logistics is another industry that will allow Michigan to diversify its business base, attract new investment and grow additional jobs. The Detroit region is ideally suited to capitalize on the way global commerce is conducted in today's fast-paced world. We have the transportation infrastructure -- the roads, railways, water routes, international border crossings and airports -- to become a major center of international trade. These are all great assets that we can build on to continue economic diversification of the region."
In leveraging key assets, the authors mention an exceptionally high concentration of highly skilled engineers, the excellent, world class universities and colleges, and an international border ripe for expanded trade. These are of course excellent assets to leverage and build a stronger foundation for the future upon.
The Granholm Administration has presented its vision and we have seen it play out, falling flat year after year. I believe the longer you let a bad thing go on, the more dramatic an action is required to turnaround. In my opinion, we are fast reaching such a dramatic turn of events.
Our governor may be likeable as person in the eyes of many, but her performance speaks for itself. If Governor Granholm were taking her governorship of Michigan on the show The Apprentice, Donald Trump would have booted her out with an emphatic "you're fired!" I hope the Michigan electorate realizes over the next year the need for a dramatic change in state leadership.
My wife and I just received a new order of books from the States via my parents, who have kindly become our intermediary between Amazon and Australia. The books and a few comments on why I was seeking them out below:
Three books I plan on making comments about in future posts include: 1) War and Decision, 2) The Rise and Fall of the Third Reich, and 3) True Professionalism.
I am currently reading China Diary, that of George H.W. Bush during his year in Beijing 1974-1975.
I look forward to sharing both thoughts and notes on the above books over the next few weeks.
In my 2.5 years with Manhattan Associates, I have had varying involvement with the hardware upon which our software is installed and implemented. So far, I believe that the major issues around hardware fall into the categories of procurement, performance and maintenance. Since procurement essentially precedes performance and maintenance, it is only common sense that the poor procurement of hardware can result in downstream performance and maintenance issues.
Hardware does not necessarily always equate with servers and data centers when implementing supply chain execution software. With warehouse management systems, for example, it is common to also have some form of picking technology, such as RF guns, voice-picking devices, pick-to-light devices, etc. as well as a variety of material handling equipment.
Hardware Procurement
On the projects I have managed or worked on so far, below are the common problems I have seen around hardware procurement:
All of the above can have a detrimental affect on:
Hardware Performance
Usually performance problems occur when the size, volume and volatility of operations is not properly researched and analyzed prior to hardware procurement. Due to the lead times involved in adding hardware capacity, the failure to size properly for operations can lead to devastating consequences after a operation has transitioned onto new applications, goes "live" and quickly ramps up to normal business transaction levels.
Hardware Maintenance
Without sufficient expertise internally to properly maintain hardware, such as needed for monitoring capacity utilization, applying patches and updates, configuring scheduled jobs and processes, fixing and troubleshooting devices, etc., some companies are forced to deal with costly mistakes and unforeseen downtime or rely on subcontractors without proper knowledge of, or commitment to, the business.
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My opinion is that hardware doesn't have to be hard, but as my boss remarked once: "If it was easy, it would be called easyware." From working with a variety of companies and hardware scenarios on multiple projects, I can understand how companies end up underestimating either the complexity of the hardware architecture required or the complexity of the operations that must be supported, or both. As a result, I believe companies should educate their employees about the role of hardware, especially how those executing business operations can lend their expertise in determining hardware requirements. Never assume that a particular IT organization, group or individual has everything under control.
In June of 2007, upon entering the IT park that Manhattan Associates calls home in Bangalore, I was struck not only by the hustle and bustle of activity and construction but also by the contrast between the clean office and hotel properties and the rough-looking construction workers that built them. Surrounding most of these properties are spaces of dusty, undeveloped and trash-laden lots. But at that time, you could feel that it was simply the momentum of a globalizing IT network and infrastructure outpacing the usual bureaucratic pace of city planning. Having just returned to Bangalore this month, the impression is the same but with significantly more offices and hotels.
However, the influx of hotels has made more obvious the fact that the global economy has slowed down dramatically, leading to significantly less business travel than before, and less occupancy rates. After visiting multiple hotels near the office for lunch, my colleagues and I had the sense that the number of lunch guests easily outnumbered the number of guests staying overnight. In one new, 5-star hotel, we heard it was 12 guests against a total of 180 rooms.
Bangalore will likely succeed in the race to cut costs around the world because most of the costly overhead will be tied to operations in foreign companies' home countries. But services firms like hotels that cater to the coming and going of foreign guests will be hit hard as I have already witnessed. The list actions by technology companies resorting to layoffs and cuts since last October is longer and longer. And if you have been following public earnings announcements, you already know that the recession has not been good for supply chain vendors, including Manhattan Associates. Oracle has already taken advantage by moving to acquire Sun.
The key will be in how well companies can maintain their foundations while weathering the storm, and by foundations, I include the core individuals and talents essential to the successful execution of existing strategies. When a company has to start chipping away at their core to survive, it is the strongest signal that our current environment will bring dramatic change to the underlying assumptions of that company's strategy.
On February 11, I highlighted Afghanistan and its unenviable logistical challenges, noting where the U.S. and coalition forces would be most vulnerable in building a supply chain architecture for success in the country and in competition with their enemies.
Via The Corner and Michael Yon's blog, I found my way to an article from March 22 in the Washington Post on the same topic of logistics in Afghanistan, titled "General Urges Confidence in Ability to Supply Troops in Afghanistan." Before going into the article, I would like to highlight something I wrote on February 11:
"While true that the AOG (armed opposition groups) supply chain sophistication has yet to reach the level of the U.S. military, the U.S. supply chain is far more extended and thus more exposed to instability. This is exacerbated by the fact that the supply chain nodes surrounding Afghanistan exist in countries that are also underdeveloped states (former Soviet states), highly unstable states (Pakistan), or highly insular/hostile states (Iran).
"With the U.S. raising the troop commitment in Afghanistan, it is absolutely necessary that they have the most sophisticated, underlying supply chain architecture in-theater, and that its innovation architecture is geared towards being highly disruptive and destructive when targeting the AOG's own supply chain architectures--physical (bases, training camps, hideouts), financial (cash lines, funding sources), informational (communication and IT), relational (collaborators and partners), innovational (new techniques and training camp programs), and human (recruiting, training and leadership)."
You don't have to be a genius to understand that Afghanistan is a logistician's nightmare. Not only is it tough to provide goods and services across its borders, supply chain architecture is equally difficult to manage within its borders. Taking a look at Google Maps:
As can be seen, Afghanistan is not just landlocked, it is landlocked by a handful of under-developed and/or unstable states. Over-land options are not just limited, they are all less than reliable. The path of least resistance, when air space is cleared by Pakistan, is from the sea by air. Thus, the following quote by Gen. Duncan J. McNabb in Post is the understatement of the year:
"You probably couldn't ask for or find a tougher place from a logistics challenge, of getting the stuff in," he told the Senate Armed Services Committee.
A description of how things are currently managed logistically follows:
"The most successful option has been air delivery. Battle gear -- including arms, ammunition, sensitive equipment, bomb-resistant vehicles and armored personnel carriers -- has been brought into Afghanistan by air, thanks to a Pentagon-funded expansion of air bases at Bagram, Kandahar and Bastian.
"In recent years, the capacity of the bases has been increased by up to 400 percent, and the growth continues. At Bagram air base, for example, the Army Corps of Engineers is managing about $650 million in construction, according to Col. Thomas O'Donovan, commander of the Afghanistan Engineer District.
"The materials for all this construction must be trucked into Afghanistan, since the country has few factories. Cement is brought in from Pakistan, steel from Uzbekistan and other northern neighbors, and manufactured goods such as doors and doorknobs from China or India.
"These trucks also carry food, water, clothing and other personal supplies, typically bringing them from Pakistani ports and into Afghanistan at one of five border crossings. About 130 to 140 shipments reach Afghanistan each day along that route, McNabb said, and because only 78 containers a day are currently needed to keep up with demand, "we're getting more in than we need.""
But tactics by the AOGs have forced U.S. forces to create new options:
"But insurgents have been successful enough at interrupting shipments that McNabb's command is using satellite trackers to look for any sign of attack and to reroute trucks accordingly.
"Meanwhile, "alternative routes to Afghanistan through the Caucasus and Central Asia have become a high priority," McNabb told the senators. The Pentagon has enlisted Russia, China, Turkmenistan and Azerbaijan in a northern distribution network, and a few dozen shipments have already reached the Afghan capital, Kabul, by that route.
"The hope, he added, is to be "able to bring in about 100 containers from the north a day to supplement" what is imported through Pakistan. "So we have lots of options to get the stuff in."
"However, if all ground routes fail, McNabb said, "if we had to do everything by air, you would see a Berlin airlift.""
As U.S. Forces continue to assist in the build up of Afghanistan's internal infrastructure, it is critical that border security is maintained to the degree that cross-border, ground transport is not only secure but also a feasible option for the supply of goods and services required for Afghanistan to thrive. Success will be a long time coming as long as AOGs are able to:
Pondering Afghanistan has led me to believe that its allure to many is exactly its various challenges, the possibility of succeeding in "taming" a country and land where many over history have failed. I personally find it both daunting and exciting, and can understand being susceptible to this allure. I believe we could see many errors ahead if our leaders become too emotionally attached to a particular strategy for definitive success in Afghanistan. In addition, the effort is sure to be doomed if our leaders are only half-committed.
I am in the process of finalizing an April trip to Bangalore. One or more of my Australia colleagues and I will engage in testing with our India colleagues in support of the TMS implementation I currently manage. Although I have spent a good amount of time with the India team on the WMS side, it will be my first time with the TMS India team and I am looking forward to the opportunity. Nothing beats being on-site with the technical team as they go through the development and issues related to an IT deployment half the world away.
My wife and I also have a friend in town and so blogging is much lighter than I anticipated with so much going on. The list of articles I have wanted to comment on is growing fast...
