Management Update

An executive summary of industry news

By Staff -- Logistics Management, 11/1/2005

• Hey, this stuff is actually working! Researchers at the Information Technology Research Institute of the University of Arkansas have found a 16-percent reduction in "out-of-stocks" and a reduction in excess inventory at Wal-Mart stores that use RFID with electronic product codes (EPCs) to track products in the supply chain. According to published reports, the study found that out-of-stock items that were RFID tagged were replenished three times faster than items using standard bar-code technology. RFID-enabled stores were also 63-percent more effective in replenishing out-of-stock products than control stores that were not equipped with RFID. The study, commissioned by Wal-Mart at the beginning of this year, lasted 29 weeks and analyzed merchandise at 12 pilot stores that are using RFID and 12 stores that operate without that technology. The retailer says that it plans to double the number of RFID-enabled stores and distribution centers in 2006.
• Diversions pump up Mexican ports. According to a news feed into LM's website, logisticsmgmt.com from Business News Americas, Mexican ports handled 1.55 million 20-foot equivalent unit (TEU) containers in the first nine months of 2005, a 12.3-percent increase over the same period in 2004. The Port of Manzanillo, on Mexico's Pacific coast, was the most active in the country, handling a total of 632,397 TEUs for a 3.6-percent jump in container volumes over the first nine months of last year. Veracruz, located on the Gulf Coast, was the second-busiest port, handling 453,439 TEUs for a year-on-year increase of 4.3 percent. This news should come as no surprise, since our recent poll of 200 ocean shippers found that more than half of them are doing a new "dance"—the Port Shift—in order to avoid congestion at the ports of Los Angeles and Long Beach. For more about our survey results, see "Circumnavigating the choke points" in the October 2005 issue of LM, online at www.logisticsmgmt.com.
• Global sales are rising, yet global operations strategies are failing. That's what the global consulting firm Accenture found when it surveyed 160 sales, marketing, and supply chain executives at U.S. companies with revenues exceeding $1 billion. Accenture's researchers learned that U.S. businesses expect sales revenues generated outside of the country to grow to an average of 42 percent of their total revenues over the next three years—up from 35 percent today and 26 percent just three years ago. Despite those expectations, the study found, U.S. companies' share of foreign markets may be at risk of declining. Nearly half (47 percent) of the executives surveyed said a poorly designed or executed global operations strategy has contributed to their companies' failure to grow their share of important new markets. Additionally, 40 percent of the executives surveyed said their companies do not have global procurement, manufacturing, and distribution networks that are designed to deliver products on time and at the budgeted cost.
• Crisis averted. Shippers breathed a sigh of relief as China and the European Union (EU) resolved a trade dispute over clothing imports. Earlier this year, the EU's 2005 quotas were abolished under a World Trade Organization (WTO) agreement, according to London-based analysts Transport Intelligence. European clothing makers successfully lobbied the European Commission to reinstate the quotas. That affected orders that had already been placed or were en route from China, and customs authorities to refuse to release that merchandise. Under pressure from several governments and retail lobby groups, the European Commission renegotiated the agreement; Chinese authorities agreed to a reduced quota for E.U. clothing imports in 2006, enabling the release of shipments held in warehouses across Europe.
• IBM goes back to school, teaming with Penn State University to build and operate a new Supply Chain Laboratory at Penn's Smeal College of Business. The new lab, opened on Oct. 28, is outfitted with IBM hardware and will double as a classroom for Smeal students. Penn State's lab is linked with similar IBM labs at Michigan State University, Arizona State University, University College Dublin, and National University of Singapore. The simulations conducted in the lab help IBM and other companies build supply chains that better respond to customer demands and market conditions.
• After 50 years, the NMFTA takes full control of the NMFC. Beginning this month, the National Motor Freight Traffic Association (NMFTA) will publish and sell the National Motor Freight Classification (NMFC) in-house. The NMFC, known as publication NMF 100-AF, is considered to be the industry standard for classifying goods for transport in North America. Until now, the American Trucking Associations (ATA) owned the publication's copyright and arranged for its marketing and sales. In August the NMFTA, which has compiled classification material for the book for 50 years, bought the copyright from the ATA. "We are pleased to have the opportunity to market and sell our own work product," said NMFTA Executive Director William Pugh. "Now we will be able to serve our members more effectively as we bring new, value-added products to market that are designed to save money for shippers and carriers and enhance the profitability of our industry."
• And this year's 2005 "Connie" Awards go to... James Capo, chairman and CEO of the United States Maritime Alliance; Peter J. Gatti, Jr., executive vice president of the National Industrial Transportation League (NITL); and Rudiger (Rudy) Mack, President of Hapag-Lloyd America. According to the Containerization & Intermodal Institute (CII), which presents the awards, all three recipients have deeply rooted careers in the worldwide transportation industry and have been on the cutting edge of the containerization and intermodal revolution. The three will be honored at an awards ceremony on December 8, 2005, at The Newark Club in Newark, N.J.
• What in the World is the Global Supply Chain?The Council of Supply Chain Management Professionals (CSCMP) answers that question in a new, 40-minute DVD by that title. Created for use in classrooms, career programs, and training programs, the DVD educates viewers about the supply chain concept as well as the career options that exist in the industry. What in the World is the Global Supply Chain? is priced at $49.95 for both members and non-members. It's available for purchase through CSCMP's online bookstore at www.cscmp.org.
• Make 'em stick. Ever think about the fact that RFID labels can be removed and reused without your knowledge? MIKOH Corp. has, which is why the company has developed "Smart&Secure," a proprietary technology that detects when an RFID label has been tampered with or moved. The system disables a compromised tag, preventing its use on counterfeit or substitute products. MIKOH says the technology can also be used to monitor seal integrity on trailers and containers.
• Global Supply Chain Conference (GSCC) 2006 is ready to roll November 7–8. Now in its third year, the GSCC is the most comprehensive event of its kind. On those two days, leading executives and practitioners from around the world will explore the full spectrum of supply chain issues—from executing global supply chain strategies, to excelling at logistics management, to creating a world-class materials handling environment. James P. Womack of the Lean Enterprise Institute will keynote this year's event, discussing how the principles of lean production can be applied to supply chain management. To register for the conference, produced by Supply Chain Management Review, Logistics Management, and Modern Materials Handling, go to www.scmr.com/gscc.