This Week in Logistics News (January 27-31, 2014)

By Adrian Gonzalez

Atlanta. 2 inches of snow.

I was trying to come up with something witty to say, but then I came across this article by Rebecca Burns, deputy editor of Atlanta Magazine, with a title that says it all: The Day We Lost Atlanta: How 2 lousy inches of snow paralyzed a metro area of 6 million. A good read for us northerners who are struggling to understand how a “dusting” of snow could possibly create such havoc.

In other news…

Ratings for President Obama’s “State of the Union” address were the lowest since 2000, but if you tuned in, he raised a couple of points related to supply chain and logistics. First, as in previous years, he called for increased investment in transportation infrastructure.

We can take the money we save from this transition to tax reform to create jobs rebuilding our roads, upgrading our ports, unclogging our commutes — because in today’s global economy, first-class jobs gravitate to first-class infrastructure. We’ll need Congress to protect more than 3 million jobs by finishing transportation and waterways bills this summer.

The bills he referenced are MAP-21, which funds surface transportation projects and is set to expire in September, and the Water Resources and Development Act (WRDA), which passed the Senate but is still waiting House approval.

The ongoing debate, however, is how to pay for transportation infrastructure projects. Raise the gas tax? Implement a Vehicle Miles Traveled (VMT) fee? Both of those options were recommended five years ago by the National Surface Transportation Infrastructure Financing Commission (NSTIFC), which Congress organized back in 2007 to “analyze future highway and transit needs and the finances of the Highway Trust Fund and make recommendations regarding alternative approaches to financing transportation infrastructure” (download the Commission’s final report). Now it’s 2014. I predict more talk and more commissions, but little substantive action in the months ahead. ATA President and CEO Bill Graves expressed similar disappointment in a press release:

“While we appreciate President Obama making reference to the need for infrastructure investment, we remain disappointed in the continued lack of specificity when he discusses funding. While it is critically important to the nation that Congress and the administration come together on a multi-year highway bill this year, we believe that until the administration puts forward a serious, user-based funding proposal we will risk going over the Highway Trust Fund ‘fiscal cliff’ in the near term and be woefully underfunded to meet the longer term needs of the nation.”

President Obama also referenced global trade in his speech:

Let’s do more to help the entrepreneurs and small business owners who create most new jobs in America…And when 98 percent of our exporters are small businesses, new trade partnerships with Europe and the Asia Pacific will help them create more jobs. We need to work together on tools like bipartisan Trade Promotion Authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.”

As I’ve discussed in previous postings, you’re either a firm believer in the value of free trade agreements or you’re a staunch opponent of them. Well, with elections coming up in November, it didn’t take long for Senate Majority Leader Harry Reid to go against the president and make his opposition known: “I’m against fast track [referring to Trade Promotion Authority, which prevents Congress from amending trade agreements during the approval process]…I think everyone would be well-advised just not to push this right now.” Gary Hufbauer, senior trade expert at the Peterson Institute for International Economics in Washington, put it best in a quote from the Wall Street Journal: “[Reid’s opposition] is a one-two punch against trade policy.”

And you’re still wondering why more people didn’t watch the State of the Union address?

Moving on to other news, UPS released Q4 results this week. The financial numbers were less interesting than the operational details the company shared about the holiday period. Here are some excerpts:

“As the retail market shifts to a direct-to-consumer model, more and more companies are leveraging UPS solutions,” said Scott Davis, UPS chairman and CEO. “As a result, we experienced an unprecedented increase in volume, exceeding even our most optimistic plans.

During the holiday period, global daily deliveries exceeded expectations by surpassing 29 million packages on five days, with peak volume exceeding 31 million on December 23. Also during this period, UPS experienced 10 days with delivery volume that exceeded the company’s previous high.

To prepare for this year’s holiday season, UPS is “accelerating deployments in operational technologies” and investing over $500 million in capacity expansion and hub modernization. Those actions should help, but let’s hope retailers do their part too by setting realistic expectations with online shoppers about how late they can order and how quickly they can receive a package.

In technology news, Resilinc announced the release of SupplyIntel 5.0 that includes three major feature areas: “Resilinc Omniview™ for next-generation multi-tier visibility, Resilinc FlexRisk™ for next-generation supply chain risk scoring, and enhanced Resilinc Supplier Onboarding to facilitate and expedite the supplier engagement process.” You can read the press release for more details. The key takeaway is that supply chain risk management solutions are growing in scope and maturity — and the timing is right because if my prediction comes true, companies will become more proactive and smarter about supply chain risk management this year, and they’ll need technology to help them.

Finally, no matter how much electronic commerce advances, companies will always have to deal with paperwork. According to a Reuters article, Wal-mart is upgrading its vendor compliance process in China by investing “in a computer-based system enabling vendors to upload all required legal documents,” such as government test reports, China Compulsory Certificates, sample products or photographs, copies of manufacturing permits, official barcodes, and papers on intellectual property. “This process requires the collection, organization, filing and retention of well over one million documents annually [emphasis mine],” Wal-mart said.

In my opinion, this is another example of where a Supply Chain Operating Network would offer a better solution. Instead of every retailer investing time, money, and resources to do this on their own, vendors would upload those documents to a third-party network provider — who would take responsibility for collecting, organizing, and maintaining the documents — and retailers would connect to the network to access those documents as required.

Unless, of course, Wal-mart actually enjoys handling paperwork and views it as a core competency, in which case, paper on.

And with that, have a happy (warmer and sunnier) weekend!

Song of the Week: “Temple” by Kings of Leon