Asia Logistics Wrap

WSJ Profiles Thunderbird Alumn in Supply Chain

As a Thunderbird alumnus, I like to highlight the successes of other "TBirds" whenever possible. So I was delighted to find that the Wall Street Journal's Career Journal interviewed TBird graduate '98 Mark Zafra as part of their "How I Got There" series (which I recommend following). Even more relevant to this blog, Mark works in the supply chain field.

I recommend reading the interview, but I thought I would just provide my own comments on his answers to "How you can get there, too":

Best Advice:"If you want to be in supply chain, you should learn to be good at negotiations and be able to say 'no' to people that are aggressively trying to sell you things," says Mr. Zafra. "It is also critical that you can work with a variety of levels -- in supply chain you'll often deal with entry level people up to very senior people." My comments: Negotiations are definitely important, not just in purchasing from vendors, but also in working with your customers, both external and internal. To his last point, I agree wholeheartedly--the more comfortable you are in switching from warehouse floor to boardroom and vise versa, the more successful you will be in supply chain management.
Skills you need: Along with technical knowledge of the job, you need "a passion for negotiation and financial analysis and people skills," offers Mr. Zafra. He also recommends working with shipping and receiving employees. My comments: Having worked with shipping and receiving employees in Japan distribution centers, I can't agree more with the recommendation and its value. The appreciation and understanding of the job you gain is invaluable.
Degrees you should go for: If you know you want to work in logistics, consider studying supply chain issues says Mr. Zafra. And, he says, go for a B.A. in business or an M.B.A. with classes in logistics. My comments: Having had an Art major in undergrad, I transitioned at the MBA level--so I have the same recommendation.
Where you should start: Consider a career as a buyer, planner, logistics analyst or a financial analyst, recommends Mr. Zafra. "Supply chain is critical with companies that have a tangible product," says Mr. Zafra. That includes things like computers, clothing, or food. "Manufacturing companies especially need good supply chain people," he says. My comments: Also, it doesn't hurt to consider a supply chain IT vendor like Manhattan Associates as well.

If anyone is interested in Thunderbird, please feel free to write me anytime. I would be happy to share my thoughts on the school.

Three Weeks into South Africa

I had to visit my own site to see when the last time I posted. I was 25 days from my first Manhattan WMOS go-live, and perhaps those visiting here afterwards thought I may not have survived it! Well, I did, but spent many long hours in the days before and after the event.

As the new operations began to settle in, and as my role transitioned from post-go-live support to general optimization support, I found out that I might have the chance to join a project for two months in South Africa implementing the 2006 version of the Manhattan WMOS, combined with Vocollect's voice-picking technology.

With a chance to come to Africa for the first time, and also work on a Manhattan project outside of APAC, I decided it would be a great challenge and nice change of environment where I could continue to build on my knowledge of WMOS and it's application with a different customer. Three days before I was meant to leave, I received confirmation I would indeed be on the project...

So here I am in South Africa. Currently, I am staying in Port Elizabeth, working here for two weeks after one week in Johannesburg (Joburg). We are two weeks from go-live, and in many cases, I am reliving the experiences of my last project. At the same time, it is a new country, there are new team members, and a new customer with a completely different set of business requirements. This all tests one's ability to adapt and learn rapidly in a high-pressure environment.

However, with no local Manhattan office, the challenge of being far from a support center can be frustrating. For most of my three weeks, I have been the only MA resource on-site, taking the place of another resource who left shortly after I arrived in-country. But we have a quality partner here that I have enjoyed working with, and despite the numerous challenges, I have learned a great deal in a very short period of time.

I am hoping with time that I can begin to absorb the reality of actually being in South Africa. Work has taken up a disproportionate amount of my time, but the country here can be quite beautiful and I have been fortunate in that I am staying at a beautiful guest house near the ocean, with fantastic hosts.

If I do remain here for the full two months, I hope to learn enough to share South Africa with others and provide some insight into the supply chain challenges here, and where the industry is heading.

Shaping Supply Chains to Shape the World

As I progress through my career in supply chain management, I have been stepping back lately to put the work I am doing in more perspective. It is easy for all of us to get caught up in daily activities, the issue of the moment, and hitting the numbers. But for myself, I can't leave work and say that I find satisfaction in simply succeeding in my everyday responsibilities. Hitting my professional goals are important, but in the bigger picture, I am focused on where I am having impact in the world.

The reality is that, no matter where a person is in a supply chain, that person has a part in shaping the world of those on both the supply-side and demand-side. Although the size of an individual person's role and impact may vary, this does not diminish the fact that certain roles are essential for high-performance supply chains.

Why are high-performance supply chains important? Ultimately, a high-performance supply chain should be aimed at creating a better and more positive life experience for those it impacts. When thinking of a larger community, it's success is a guage of how it develops, manages and participates in high-performance supply chains. This is key not just in an economical sense, but also in how a larger community handles supply chains that support political institutions, security, and the flow of people in their life activities.

As supply chain managers, we must educate up, down and across our organizations on the bigger picture and the impact each of us has in shaping the world for the better. 

Leveraging Partnerships for Strategic Advantage

In my April 9th post on the investments required in building business and customer relationships in Japan, I framed the strategic dilemma for small firms and business units trying to gain a foothold in the Japanese market, especially with larger Japanese businesses. After discussing the market realities in Japan, I summarized:

Thus, a firm in this situation cannot be completely dissatisfied with short-term losses associated with such an investment of resources. It is a cost of doing business in such a market and requires a combination of patience, steady determination, and a commitment to relationship development. At the same time, for a business unit evaluated on profitability, such a situation eventually requires tough choices--drop the project all together or work your tail off to find new sources of cash flow elsewhere in order to subsidize already dedicated resources.

I didn't touch on ways to find new sources of cash flow, but recently a few online magazines have recently made notice of the announcement by Manhattan Associates and IBM to strengthen their commercial partnership--a move I would categorize as one strategic way of opening new sales channels and building a solid project pipeline.

On way towards discussing how such a partnership can work in our dilemma above, I want to briefly detail the Manhattan-IBM partnership via a couple articles. The first is from Logistics Management and titled, "New Manhattan Associates, IBM partnership aims to offer shippers more integrated platform."

First, in a description of the partnership:

Supply chain software vendor Manhattan Associates announced earlier today it has bolstered its partnership with IBM in an effort to implement and sell supply chain technology offerings that are built on IBM's open technologies for global shippers in the retail, consumer goods, manufacturing, and transportation sectors.

The companies said that this initiative will focus in on certain geographic markets, including Asia-Pacific, Europe, Latin America, Middle East, as well as its current interests in North America, where they share roughly 1,000 customers.

"This partnership is a great opportunity for us and makes a lot of sense with what are are doing with our supply chain solutions-and the innovation we are bringing to our customers-along with what IBM offers in terms of technology and R&D," said Jeff Cashman, Manhattan Associates senior vice president of business development.

Prior to today's announcement, the partnership between the two companies was described as a "go to market" relationship by Cashman over the last 15 years. It focused on re-selling hardware and the concept of working together in the future on global services, as well as possibly using IBM software.

Later in the article, I think it hits on where such a strategy will help deal with the above dilemma:

In terms of how today's news positions Manhattan in a highly competitive marketplace, Cashman said that IBM's global reach is a boon, along with its technology expertise in the industry.

The second article from Computer Business Review Online, titled "Manhattan Toasts New IBM Partnership," is more to the point:

Manhattan is hoping to tap into IBM's global sales and marketing channels and strong service capabilities to push its supply chain offerings to market.

Basically, this set-up allows Manhattan to reduce the risk in developing new sales channels and customers in a market like Japan where it requires more unrecoverable costs. At the same time, IBM is able to tap into Manhattan's expertise in supply chain execution technologies to deliver better solutions to its customers, both current and potential.

The Chinese IT firm I worked with in Beijing also utilized this strategy in a partnership with IBM. However, because IBM is so big, at the time it seemed certain parts of the business had poor visibility of what other business units were doing in China. The firm I was with, in just one week, outbid IBM for one project, joined a presentation and news conference with IBM on their partnership, and received a sales visit from two reps from a division of IBM. Thus, a company like Manhattan has to be sure they can manage this type of partnership dynamic and be able to interact consistently with the entire IBM organization.

For my former Chinese company, it was quite embarrassing for the IBM sales team to arrive in office and yet have no clue that IBM was a partner on the mainland. 

Note: SupplyChainer also mentions the news.

Western Retailers Rethink SCM Postponement Strategy

Just recently the Financial Times had an article, titled "Western retailers shift their supply chain tasks to China," regarding changes the author, Robin Wright, reports are occuring in retail and consumer goods industry supply chains. The focus is where postponement on the creation of market-ready finished goods is increasingly being dropped for including such work closer to the actual production in low cost countries.

Although the article could use more specifics or examples of retail products in question, it states the primary driver of making such a shift in strategy is lower costs. But is this really the case? The author says little about the costs associated with reworking products close to market that have been imported with bad packaging or mistakes in finalization.

Later, the author mentions another factor that I feel has more of an impact than low costs: the fact that low cost countries, such as China, are increasingly more sophisticated in finished goods for foreign markets and the fact that their own markets' growth will eventually require retailers to have this capability rooted in China. Below is that section:

Vera Tang, general manager for corporate development of Hong Kong-based Kerry Logistics, expects growth in the next few years to be "huge" as so many companies still run expensive distribution centres at home.

"You can imagine - in those high-living-standard countries like Scandinavia - if we can replace what they are doing at the destination with a similar operation at origin, the percentage [saving] can be huge."

Among Kerry clients using distribution centre bypass are a New Zealand-based lingerie maker and department store chains in the US, Spain and Chile. In Chile's case, she said the company shifted logistics operations abroad not primarily for cost reasons but because Chinese workers were more reliable.

Later, the article adds:

Many expect Chinese processing to become more sophisticated. Erxin Yao, managing director for China at OOCL, a Hong Kong shipping line, said his company's logistics arm hoped to attract imports of goods not made in China for sorting at its warehouse to distribute to Japan and Korea.

If Western retailers are thus focused less on thru-processing in their more expensive markets, and in other expensive countries like Japan, and are able to shift savings to investments in marketing or elsewhere, it is a valid shift assuming imports are of high quality and accuracy. However, if this shift decreases the quality level of market responsiveness, then this also must be carefully factored.

For Japan in particular, I have personally seen several instances where pre-packaged products have arrived in unsatisfactory condition--and often if there is even just one problem per case, the entire case is rejected. To ensure these problems are not identified at store locations, inspection and thru-processing in Japan has always been time- and people-intensive, leading to high material handling and processing fees that confound importers.

So this strategy, what is called "distribution center bypass," should not be applied liberally, but rather carefully considered for different product groups and their related market requirements.

Revisiting Space Logistics

Last November I did a post on the prospects of supply chains developing into space, titled "Outsourcing Space-bound Logistics." I was very happy to see the subject come up again over at Freight Dawg, a relatively new but excellent blog on logistics, where Eric points us to a program at MIT called "The Space Logistics Project." As I noted before, "space will obviously offer some extremely different environmental challenges than Earth-bound shipping, and quality and safety will need to be prioritized when targeting cost reductions." I believe Eric also points to this but simply noting how long it would currently take to transit space supply chains:

With transit times of up to 9 months on a mission to Mars, supply chain execution in space would be difficult.

I am not surprised that MIT has taken on this area of supply chain research, and it will be a fun site to stay up-to-date on as innovators develop all the architectures necessary to make the utilization of space supply chains a common phenomena. Once we overcome the most basic physical hurdles, space supply chains will become more sophisticated in terms of financing, IT, partnering and innovation. I am happy to see MIT using the same kind of architecture language employed here and originated by Dr. Cavinato of Thunderbird and the Institute of Supply Management.

Logistics as a Barometer of Economic Health

Earlier this month in the Wall Street Journal, an article in the "Market Movers" section caught my eye. Written by E.S. Browning, it discusses the use of the Transportation Average as an accurate lead indicator in forecasting stock market health. Of course, when the finance industry directs their often short-attention span to transportation, it massages the supply chain manager's ego and we feel they are finally getting what we knew all along--that supply chain architectures support all that which drives economic health. Although transportation is one aspect of those architectures, it operates in parallel and collaboration with the many other physical, financial, informational, relational and innovational aspects of supply chains. So, for example, if manufacturing indexes are down but transportation indicators are up, we have to look at not just what these two are telling us, but also how entire supply chains are operating to make a true assessment of economic strength.

Into the WSJ article:

As they try to predict the future, some analysts are sneaking a peek at a 100-year-old investment theory. Based on the writings of Charles Dow, one of the founders of The Wall Street Journal, it is called Dow Theory.

It is catching people's attention because, until recently, the theory was flashing a yellow warning light about the stock market's future. Just lately, the light has turned green, or very close to it.

Dow Theory's most prominent tenet is that, for a stock-market rally to have legs, it needs not only the Dow Jones Industrial Average to hit highs but also the Dow Jones Transportation Average.

Dow Theory holds that the industrial average represents companies that produce goods, while the transports are the distributors -- railroads, airlines, truckers and package-delivery companies. If both are strong, it means a broad swath of the economy is supporting the market's gains. If not, it is time to check the market for lurking problems.

Despite volatility in gas prices over the past year: 

Among the transports' leaders at the moment are trucking and railroad companies, which are seeing strong demand.

Analysts are noticing.

"I am not a huge proponent of the Dow Theory, but I do very much care about the breadth of the market rally -- how many different sectors are participating," says Ken Tower, chief market strategist at CyberTrader, a Charles Schwab unit. Mr. Tower likes to use other, broader means of measuring how widespread the market's gains are. "And we are seeing the midcaps and the small caps and the transports join the Dow industrials at record highs. This is a good sign for the market's strength going forward."

In regards to that short attention span:

Back in the 1990s, many investors felt tech stocks were more important than transports. They noted services were a far bigger piece of the economy than manufacturing. And services are distributed not by truck but, often, by technologies. Today, however, the big economic driver is consumers, who use a lot of transportation for themselves and the goods they buy -- including tech goods.

Whatever the case, the broad number of stocks included in the market's recent gains is making even some skeptics say that they don't see the market running out of steam just yet.

I think one of things often missed today is just how much the services industry has become part of the supply chain industry--assisting firms in developing the more complicated architectures related to relationship-building and innovation initiatives that build upon and help reinvigorate what is already established in the physical, financial and informational (technology) practices of supply chain operations. As the above paragraph mentions, technologies and their complementary services (consulting, support, maintenance, etc) are not independent of--they are approached horizontally across--physical distribution and thus analysis shouldn't be independent--not approached functionally or vertically.

It seems that what is required in terms of assessing economic health is a paradigm shift in the mindset of analysts, so that thinking is more horizontal and able to accurately describe industry interdependencies and their impact.

Outsourcing Space-bound Logistics

While browsing Instupundit, the short post "OUTSOURCING cargo transport to the space station" piqued my interest immediately, with the link taking me to an article at Popular Mechanics on outsourcing necessary freight shipments to space, titled "To cut costs, NASA plans to outsource its shipping jobs." Hey NASA, welcome to the club!

Written by Thomas D. Jones, a planetary scientist and former shuttle astronaut, the article can be broke down as follows:

It's not a glamorous mission--hauling water, food, spare parts and clean clothes to the International Space Station (ISS)--but somebody has to do it. The shuttle was the truck of choice when my crew delivered the Destiny Laboratory to the ISS in 2001. But now, with the shuttle orbiters heading for retirement by 2010, NASA wants commercial suppliers to take on the orbital shipping job, to lower costs and spur industrywide innovation.

Space will obviously offer some extremely different environmental challenges than Earth-bound shipping, and quality and safety will need to be prioritized when targeting cost reductions. But I think many cost reductions will come from simply accessing suppliers from outside the halls of NASA, which is probably paying outrageous prices on maintaining its current shuttle fleet. By contracting out, third-party logistics providers (3PL's) can reconfigure the supply chain appropriate to the task. And over time, the competition could likely result in that industrywide innovation.

The paragraph below suggests that eventually other supply chain management practices could become useful for space, such as perhaps vendor-managed inventory (VMI): 

Since ISS crews moved in six years ago, the space shuttle and Russia's unmanned Progress freighters have made deliveries. But the Columbia accident grounded the shuttle fleet for over two years, and the Progress's small capacity forced even two-man ISS crews into sometimes spartan operations. Last year, spacesuits aboard the ISS were out of commission for months waiting for spare parts.

The investment in space-bound cargo vehicles is of course not cheap:

The two companies getting NASA seed money (over $100 million each) for cargo craft are SpaceX and Rocketplane Kistler. SpaceX plans to loft its Dragon capsule atop a Falcon 9 rocket, but the smaller Falcon 1 caught fire and plunged into the Pacific last spring. With $100 million invested, the company hopes a second launch this winter will pave the way for the Falcon 9.

Rocketplane Kistler's craft, a reusable K-1 two-stage rocket, has yet to reach a launchpad. But John Herrington, director of flight operations and a former shuttle astronaut, says the K-1 will not only reach the ISS, but return cargo safely to Earth.

It seems that supply chains where the last leg will be a trip to space are upon us, and the same demands by customers on Earth will take hold in space:

Both firms plan to fly three test flights by 2010. The end of the shuttle era is upon us. But future crews won't care who delivers their cargo. They'll just want it to show up on time.

Priming China-ASEAN Trade

In the most recent online edition of Cargo News Asia, Gary Dale Cearley out of Kuala Lumpur discusses the potential impact of a FTA between ASEAN-member nations and China. This was actually reported on even earlier at Asia Times Online.

Of course, given geographic considerations, an FTA between China and ASEAN would quite positively impact trade flows between the two entities, affecting decisions on supply chain architectures across the entire Asia region. Mr. Cearley starts with this lead: 

"The recent meeting between the leaders of the Association of South East Asian Nations (ASEAN) and China in Kuala Lumpur on a free trade agreement (FTA) has made freight forwarders optimistic about future trade implications, and many are planning to increase their trade with China. A final agreement will eventually have far-reaching implications for all cargo transport between the two regions.

Quotes in the article from industry and related organizations:

"If this comes to pass we expect to see big demand," said Maritha Limen of Green Air Indonesia. "Right now, we don't have significant trade with China but hopefully as a result of this agreement we will see it increasing."

"The prospect of trade with China is very high," said Richard Chua of Yusen Sea & Air's Singapore operation, "Right now, our exports to China are not significant but we see the China market as a good prospect. We see it as moving ahead fast, even though we don't expect a significant improvement in exports to China in the very near future."

Xu Ningning, the deputy secretary-general of the China-ASEAN Business Council and well-known proponent of a China-ASEAN free trade zone, has described China-ASEAN trade as "a marriage of ideal partners" and reiterated that a surplus in the favour of ASEAN is more likely than one in favour of China.

"Right now there is much trade going on with China, both legally and illegally, which is mainly conducted across the borders overland in the northern ASEAN areas," said Nguyen Thi Hiep Hang of Aeroceanetwork, a Vietnam-based logistics consultancy. "Lowering the tariffs on this trade both ways will promise to grow the legal trade and shrink the illegal trade. Elimination of tariffs would only make prohibited items real Customs targets. Economies will grow and smuggling will shrink.''

Nelson Cho of Singapore Technologies Log-istics, part of the government-owned Sembawang Group in Singapore, agrees that the benefits are there but doesn't think that this will cover all areas promised by China. "We are already handling export trade from ASEAN to China so I can say that this will improve the balance of trade," said Cho. "But I envisage the import will be mainly raw materials from China or high-end components. If China works out a free trade agreement with ASEAN we will see an increase of trade," said Cho. "Also with the proposal of India, Korea and Japan joining China and ASEAN to form an economic and trade zone, I forsee fast growth in trade annually."

Jewell Truong, a Ho Chi Minh City-based freight forwarder, said: "Europe and North America are far away and they have their own agendas. Other regions are too small or too weak to help us. So we need to keep China and India in future growth plans. There will be very big cargo growths from these two countries. Of course, we will still see some growth from Japan, Korea and Taiwan, but nothing to match China and India."

The move towards a China-ASEAN FTA will definitely pull in Korea and Japan eventually and has tremendous implications for the entire region if India also enters into any final agreements. Assuming that "greasing the wheels" of trade in this way assuages any significant, negative political history and issues between neighboring countries, the long-term prospects for the logistics services industry are very positive indeed. In particular, I believe those individuals and firms with tried and true cross-border expertise and capabilities will be in ever increasingly high demand.

Improving Tokyo-to-Seoul Intermodal Links

Ideally, freight and product in transit along supply chains will move seamlessly from origin to destination no matter which proportion of modes (transport vehicle) are used or through which nodes (storage or processing location) that freight or product passes through.  Obviously, the ability to maintain seamless movement breaks down due to several variables--distance, geography, freight and product complexity, amongst many others.

How firms managing supply chains adapt to the above variables depends on the quality of their supply chain architectures. As mentioned here many times before, these architectures can essentially be reduced to five: physical, financial, informational, relational and innovational. Usually, these architectures develop sequentially in the order above towards the point where a supply chain attains high performance, although this is not necessarily a given. The innovational architecture is important for the purpose of maintaining high performance through the resilience achieved in the face of continually evolving external and internal operational environments. The innovational architecture ensures that the other architectures are continuously reviewed for improvement and iterative or transformative adaptation.

With this framework, we can better approach available information on the development of a particular supply chain. Today, I want to focus on an article out of Logistics Japan on 9/18 that highlights changes in Tokyo-Seoul supply chain links, initiated by JR Freight. This article is titled "Cooperation with Korean Rail Public Corporation: Linking Tokyo to Seoul in 4 Days, Cheaper and Faster" and written by a Mr. Takagi. Rather than translate the entire article, this time I will highlight those areas that illustrate improvements in the architectures mentioned above.

Physical Architecture:

"In general, the Tokyo-Seoul link will be a continuous rail-sea-rail link...

"This will be the first case in which JR Freight 12-foot containers will be utilized by a rail company overseas, starting from January 2007...

"The idea is to utilize the modal combination of rail and sea to provide a cheaper small lot, door-to-door service between Japan and Korea...

"The primary nodes in transit will be at Fukuoka on the Japan side and Pusan on the Korea side, linked by sea freighters between those two cities...

"JR Freight containers will be joined in threes and placed on 40-foot flat truck platforms for sea shipment and connections on the Korea side...

Financial Architecture:

"The two companies will seek ways to jointly implement the management of charging fees and fee collection...

Informational Architecture:

"The handling and transmission of customs procedures and information will be outsourced by JR Freight to Nittsu on the Japan side, while also strengthening sales links...

Relational Architecture:

In addition to the relationship established above with Nittsu, the obvious joint-management established with Korea Rail is the overall, governing architecture: "While both companies hold joint-meetings with lead managers, the service details will be further developed. Negotiations will also be held with shipping companies."

The article also mentions that JR Freight will set-up a similar system with COSCO in China, linking Tokyo with Shanghai. In this case, the operations would begin in March 2007. The innovational architecture in this case, I think, would go back to how JR Freight is trying to think outside the box and review the reach of its services outside Japan. The below document illustrates the Tokyo-Seoul link visually:

Download tokyoseoul_link.ppt