SMC³ 2008 Summer Conference--The New Supply Chain: Global Trends, Technology & Infrastructure

SMC³ 2008 Summer Conference Unites Shippers, Carriers, 3PLs

Attendees Examine Opportunities for Collaboration, Cost Savings at Annual Conference

The SMC³ 2008 Summer Conference, held June 25-27 in Boston, combined industry education with business networking opportunities to place a timely focus on the latest trends and developments emerging in the domestic and global supply chain. Sessions there honed in on cost-saving technologies, green supply chain strategies, and the country’s growing economic and infrastructure concerns.

“Our members, customers and associates are continually modifying their transportation networks in an effort to reduce their overall cost of doing business,” commented Jack E. Middleton, SMC³ president and CEO. “While this dynamic supply chain can give them leverage, it also dictates that they stay on top of major business influencers. The educational and networking components of the SMC³ conferences enable them to do just that.”

Specialized conference sessions and subject matter experts were chosen to inspire forward thinking by exploring methods for shippers, carriers and supply chain partners to adapt and grow their businesses in an unstable business environment. Conference highlights included an in-depth discussion of the 2009 Highway Authorization Bill and what it means specifically to those involved in shipping freight; a highly informational session on emerging supply chain technologies and usage trends; an eye-opening presentation on the latest economic and legislative concerns; and a play-by-play description of what we can look forward to in the upcoming presidential election.

“I now have new topics for discussion when I return to my employer, about how well we are executing change in this challenging environment,” said attendee Matt Speier, supply chain analyst, Kerry Ingredients & Flavours.

“This conference exceeded my expectations and provided valuable information and insight,” commented attendee Jon Morgan, national account sales, Averitt Express. “We will use the information to affect internal policy and focus.”

“For me, a great opportunity to learn about the industry, global economy and meet new people,” attendee Marina Dunaway, network manager, Exel Transportation Services, said.

Keynote Presentation
Sharing a Dream for Success—Jim Craig

Jim Craig has been called the backbone of a team that accomplished one of the most extraordinary and memorable sports victories of all time – the 1980 U.S. Olympic Hockey Team’s upset of the Soviet Union team at Lake Placid. In the game against the Soviets, the Americans were outshot 39-16, but Craig made 36 saves, many of the spectacular variety, and his teammates scored four times. Two days later, against the Finnish team, Craig was again superb, and the Yanks won, 4-2, to take the Olympic gold medal.

Speaking to SMC³ Summer Conference attendees, Craig said that he never considered his individual contributions to be more valuable than those of the team as a whole. To him, “the name on the front of the jersey [was] much more important than the name on the back.” He stressed the importance of recruiting the right people as well as establishing mentoring relationships.

Craig challenged the group to not be afraid to dream. He discussed how each of us leaves a legacy based upon what those around us have observed in our speech and actions. The key to realizing our dreams, he said, is “staying young” in our attitude about the opportunities we’re presented with, because “you don’t know that you can’t do something.”

Greening the Supply Chain

As corporate America’s interest in global warming begins to focus on combining their civic and cost reduction initiatives, senior managers are looking for ways to “green” the supply chain and reduce their vendor’s carbon footprint. The surprising benefit: Greening the supply chain actually reduces costs.

Panelist Brooks A. Bentz, partner, Accenture LLP, began the discussion, highlighting the findings of recent Accenture surveys on companies’ responses to climate change. Introducing new technology, he said, was identified as the biggest challenge to businesses in addressing climate change.

According to Bentz, “Supply chain is intrinsically linked to global warming, energy costs and pollution.” He explained that supply chain sustainability must involve the adoption of new technologies. While there is an initial financial outlay, there are impressive cost savings down the road. For example, our nation will have fewer vehicles on the road and businesses will realize greater cost savings by integrating route optimization and load planning software, as well as rationalizing their facility networks.

Panelist Remzi Ural, principal, ILOG, added to the discussion with additional research findings. Market trends ILOG is seeing include end-to-end supply chain optimization, risk management and green logistics in the form of efficient packaging and reduction of carbon emissions. In a detailed discussion of network design, Ural showed how a supply chain can be optimized for either cost or service. Which of the two is better, he said, is up to the organization.

“More and more companies are using network design,” said Ural. Efficient network design can help with mergers and acquisitions, plant rationalization, transportation costs, production sourcing, risk management, carbon emission footprint and more. As fuel costs grow in their influence over the design equation, companies will need to make more “network tradeoffs.” Ural explained that manufacturers will respond by moving production closer to demand – meaning that more production facilities, warehouses and distribution centers could pop up as transportation costs become more important than production and facility fixed costs.

Infrastructure Panel

On January 15, 2008 the National Surface Transportation Policy and Revenue Study Commission submitted its report to Congress after 18 months of intense analysis of America’s transportation network, challenges and future funding. New developments will be funded by both the government and private sector, and prioritized by the new president’s infrastructure agenda. Both providers and consumers of transportation will fund the private sector portion. Moderated by Roger Morton, senior editor of Outsourced Logistics magazine, this panel session presented a unique opportunity to hear varying viewpoints from those hoping to influence the 2009 Highway Authorization Bill.

Panelist T. Peter Ruane is president and CEO of the American Road and Transportation Builders Association (ARTBA), a 105-year old national federation of public and private transportation construction interests with over 5,000 members. According to Ruane, “the country, frankly, has been drifting” in its focus on transportation infrastructure as it relates to the economy as well as public safety. He said the U.S. faces two central investment issues: current infrastructure maintenance and future infrastructure growth. Outlining ARTBA’s 25-year plan for “Critical Commerce Corridors,” Ruane said the construction program would be funded through “freight-related user fees” and would set the country up for future global competition. More information on the “3C” program and how to become involved can be found at www.tmaw.com.

Greg Cohen, president of the American Highway Users Alliance, joined the conversation, also expressing his organization’s concern and dismay over the country’s current infrastructure crisis. He said “major reform is key to public support for a new highway bill,” including the need to establish a new fund that cannot be reallocated or misappropriated, as is happening with the government’s current transportation funding. For more information on the American Highway Users Alliance stance and how your business can become involved, visit www.highways.org.

Panelist Robert Poole is director of transportation studies at the Reason Foundation (www.reason.org), a board member of the Public-Private Ventures division of ARTBA and a member of the Transportation Research Board’s Congestion Pricing Committee. The funding solution, he said, is in “21st-century tolling” – investors fronting road projects with “solid ROI” and end users paying for the benefit. Detailing the perceived benefits of this solution, Poole said that the federal government should do everything it can to back public-private partnerships, including fostering nationwide interoperability for electronic tolling.

Speaker Kathy Ruffalo, a government affairs consultant who Congress recently appointed as a member of the National Surface Transportation Infrastructure Financial Committee, stressed that members of Congress are not acting quickly to resolve our infrastructure crisis because they are not feeling public urgency.

“We need to find a new way to illustrate and describe the problem so the public can get their heads around [the significance of] it,” said Ruffalo. “Business as usual is not going to work and doing nothing is not an option.”

Ruffalo said that the commission she is a part of, which began work in April 2007, is not focused on policy, but on financing options. She described their preliminary observations of an infrastructure system that is far outpacing the government’s current financing structure and discussed funding alternatives such as hot lanes, toll lanes and even the concept of a “national infrastructure bank,” which would make use of both public and private capital. She said the group should keep an eye on two Senate bills: S.1926 and S.2021.

Legislative and Regulatory Update

Transportation attorney John R. Bagileo, principal, The Law Office of John R. Bagileo, addressed the latest regulatory initiatives and legislative actions, and their expected impacts on those involved in transporting freight. Referencing the quick pace at which the legislative landscape can change, Bagileo said that in the three weeks since his conference notes were compiled, several updates had occurred.

Bagileo began by discussing H.R. 5934, H.R. 5977 and H.R. 5997, which address fuel surcharge pass-throughs. He also detailed his thoughts on H.R. 5473, which is supported by the American Trucking Associations, and its companion bill, S. 2598. Pointing out that some bills don’t move as quickly as intended, Bagileo referenced S. 2890, which was introduced by Senator John McCain on April 17, 2008 to provide for a highway fuel tax holiday between the Memorial Day and Labor Day holidays. “We’ve obviously passed Memorial Day, so if the bill does come on line, it may go until Labor Day, but it does not have much of a chance of passing at this time.”

Addressing speculation about the 2009 Highway Authorization Bill, Bagileo said that he is especially concerned about earmarks defraying the amount of money actually being allocated for crucial infrastructure needs. He also said that the 2009 legislation may “include the imposition of fees for the use of congested highways, more public-private partnerships for the acquisition of highways and the transferring of federal fuel taxes to back projects being developed by the states.” Also, as evidenced by the earlier infrastructure panel discussion, he said there is a real possibility that the truck size and weight issue will be revisited, and that truck-only lanes will be considered.

In his presentation, Bagileo covered issues being discussed by both federal and state lawmakers. Specific states of interest included Alabama, Georgia, Illinois, Minnesota, Missouri and North Carolina. He also discussed the status of hot-button topics such as Hours of Service (HOS), the Mexican truck program and the U.S. Department of Transportation’s delay in approving pending safety regulations.

Emerging Supply Chain Technology Panel

Technology continues to shape the supply chain, as new developments radically improve processes and facilitate better planning, execution, and collaboration. Companies of all sizes and across all industries are leveraging technology to transform their business processes, differentiate from the competition and enhance their financial results. This panel discussion, made up of both technology experts and long-time industry practitioners, examined the latest trends and developments in supply chain technology and how companies can use technology to optimize their business operations.

Adrian Gonzalez, Logistics Executive Council director for the ARC Advisory Group, served as moderator for the panel session, kicking off the panel discussion by highlighting the five major things he’s learned in his nine years as a supply chain analyst. Among them: bad-quality data is the “Achilles heel” of supply chain management, metrics drive behavior and technology is “far ahead of what most companies are ready to adopt.”

Panelist Lynn Kaster, field services director for the SAP Travel and Logistics business unit, has more than 15 years’ experience in the transportation and logistics industry and global supply chain. Her presentation focused on key performance indicators and the strategic value of business intelligence. Kaster stressed that when evaluating technology for gathering business intelligence it’s important to understand what information you need and what, specifically, you will do with that information. Business intelligence succeeds, she said, when it “empowers organizations to better understand, analyze and predict what’s occurring in their company.’

Taking a technology developer’s perspective, panelist Hal Feuchtwanger, managing director of global logistics for i2 Technologies, educated conference attendees about the benefits of service oriented architecture (SOA) technology. When asked if they were familiar with SOA, less than 50 percent of attendees raised their hand. SOA enables the sharing of business intelligence and applications in a manner that is process driven, rather than platform based, so companies can easily access information and technology across their business enterprise. “Companies growing by acquisition have a real challenge in their technology set-up,” said Feuchtwanger. “SOA can resolve this.”

Peter Wharton, senior product marketing manager, Sterling Commerce, is also a software industry veteran, specifically as it relates to transportation management. Wharton built upon Feuchtwanger’s presentation, discussing the “Software as a Service,” or SaaS, concept. He said that SaaS has changed the way one thinks about buying software, because it allows companies to focus their IT manpower on overall business strategy vs. individualized implementation and data updates. There are no longer “four walls of enterprise computing,” he said; with SaaS we are experiencing the “power of community.”

The panel presentation was rounded out with a dialogue between Gonzalez and Gregory Bostick, vice president, Pinnacle Foods Group. Bostick, who has more than 20 years’ experience focusing on start-up and re-organizational processes within the supply chain, reduced Pinnacle Foods Group’s transportation costs by 18 percent over a period of 22 months, while increasing service levels. Bostick discussed the factors he uses to evaluate technology options as well as how he has modified his business strategies based upon economic influencers such as the cost of fuel.

The panel discussion topics sparked a lively Q&A session between the audience and the four presenters. Among the outcomes was a consensus that shippers should set aside their perceived competitive differences to pool their shipments for combined cost savings. Gonzalez observed: “Innovative ideas occur when you keep challenging the status quo.”

Geopolitical Panel

“Energy is the common denominator in all the presentations at this conference,” said William Cassidy, executive editor of Traffic World magazine and geopolitical panel moderator. “The cost and availability of energy is fast becoming the dominant factor driving change in the U.S. economy and even in Washington. It’s fitting that we bring this conference to a close with three distinguished panelists who will discuss change in the U.S. economy, change in energy markets and change in the White House and on Capitol Hill.”

Economic forecaster Donald Ratajczak, Ph.D., told attendees that the U.S. is “not in a recession.” Defending his statement, Ratajczak said that he defines “recession” as a period of economic weakness that intensifies and spreads for an extended period of time. Even so, he said, the U.S. economy is experiencing several unique and simultaneous events that are causing trouble. For example, the housing sector has lost $2 trillion in wealth in the period of three quarters. (This is the greatest loss of wealth since the Great Depression.) “The interesting thing is, people haven’t changed their savings behavior,” observed Ratajczak. The outcome of this, he predicts, is a “struggle in consumer spending” that will last for several years.

Ratajczak said that another point of interest (and a signal that we are not in a recession) is that the consumer spending slump hasn’t spread to capital spending (in fact, the aerospace and agriculture industries are “up”). Referring to his definition of recession, Ratajczak said that the key figures he monitors for “intensity” are employment and industrial production. Adding his perspective on the world’s energy crisis, Ratajczak said that he sees a “bottleneck in the energy system” and that Russia, not Saudi Arabia, has been supporting the world for the last five years. “We’re making an assumption about what Saudi Arabia is capable of producing,” he said. “We’re pricing oil right now as if it were bottomless.”

So when will we have a recession? “If oil hits $200, we will have a recession,” said Ratajczak. Other economic forecasts included a housing recovery in the second half of 2009, food prices as a five-percent “inflation generator” over the next year and several years of sub-normal GDP growth. The bright side, according to Ratajczak, is that U.S. worker efficiency is increasing 3 percent annually, the recent government stimulus package is actually showing signs that it is working and each of us has “room to save” on energy while still preserving our current standard of living.

Michael J. Economides, Ph.D., professor, Cullen College of Engineering, University of Houston, discussed what he calls the “continuous energy crisis of the 21st century.” He said that much of the crisis is due to worldwide political maneuvering and the fact that our country is placing too much focus on alternative energy, when it “will never account for more than .5 percent of the world’s energy.”

Agreeing with Ratajczak’s sentiment that there is no incentive for the oil-producing countries to increase their production, Economides added that he thinks “$200 oil is not unlikely.” And, he said, if Israel attacks Iran “oil will hit $200 overnight.” Perhaps more eye-opening, though, were Economides’ observations that if oil prices were “properly adjusted” (by eliminating the influencers of controlled production, political unrest and unabated speculation), the price of a barrel of oil would be $25.

Shining a spotlight on the 2008 elections, the SMC³ Summer Conference played host to Larry Sabato, Ph.D., a remarkably accurate political forecaster who has authored more than 20 books and countless essays on the American political process. Sabato’s presentation examined the current state of the Bush presidency and its influence on the November election. Sabato outlined his thoughts on prospective running mates for Obama and McCain, and gave his input on what he believes is next for Hillary Clinton.

“If you can’t follow the players and don’t know the rules then you can’t make intelligent decisions at election time,” he remarked.

According to Sabato, we should expect to address our next president as “President Obama.” Citing a number of political conditions contributing to his prediction, he told the group that “no incumbent party has ever won under anything close to these conditions.” However, he did add that the McCain campaign could still influence the vote if they choose to commit to a “one-term pledge” based upon McCain’s age or if they play upon Americans’ distrust of a single-party Congress and White House.

Mark Your Calendar for 2009

“I’ve had the opportunity to attend many industry events and conferences over the years and I’m happy to say that the SMC³ conferences I’ve attended — and this is my second — stand out, not only because of the quality of the information they offer, but also in the strong thematic way in which it is presented,” said William Cassidy of Traffic World.

SMC³ offers two annual conferences – one in January and one in June – to enable better business decisions through timely and relevant information exchange. The conferences boast a diverse attendance representing every area of the transportation industry and offer an ideal setting for collaboration and networking.

The SMC³ 2009 Winter Conference will take place January 20-21 at the Hilton Atlanta Airport Hotel in Atlanta, Ga. and the 2009 Summer Conference will be June 24-26 at the Loews Lake Las Vegas Resort in Las Vegas, Nev.

The New Supply Chain: Global Trends, Technology & Infrastructure