Mike Regan Sounds Off (page 4)

-- Logistics Management, 11/1/2005

Page 4 of 6

How do you convince shippers to put yet another item on the to-do list?

This summer I got the chance to ask Director Mueller of the FBI a question that basically closed off the meeting as he stormed off the stage. But it’s the same question I got to ask to Admiral James Loy when he was over at the Department of Homeland Security (DHS): Do you feel confident that we’re reasonably secure from terrorist incidents occurring on our soil?

Mueller and Loy both said something that was just stunning. They both said that we need to understand that within those agencies, the FBI and DHS, they don’t talk about “if” there will be a terrorist incident, they talk about “when” it happens. If you have two of the top people in the government talking about “when,” then it would be prudent for you to think about what you would do if it happens at one of the ports you use on a daily basis.

Are you suggesting that security is then the top concern for shippers moving forward?

Fuel, right now, is at the top of everyone’s list. Second would have to be capacity. Shippers are wondering if they’re going to have the capacity for handling all of their imports from China. Will I have rail and truck capacity at rates I can afford? But to me, the real sleeping giant is security. That is going to be the issue to vex shippers well into the future.

In what way? Is it a cost or time?

It’s both. Who knows how many containers are actually inspected? I do know if you have an incident involving a container it will take longer and cost more to provide the level of assurance that we as a country will demand to remain

We transport hazardous materials, you can’t get around it. If you want to drink water we need chlorine. Right now there’s a driver shortage. If I have a security incident, and if we put licensing restrictions that morph out of a security concern, what does that do to my capacity? If I throw security issues onto the fire when we already have a driver shortage, we impose further shortages due to more intense licensing requirements. Then what? This will usher in yet another issue, more substantial issue revolving around supply chain execution.

Does that then elevate the importance of scenario planning?

It will have to. When I talk to a room of CEOs today I run through a line a questioning: How would your business be affected if I shut down your supply chain for four to six weeks? They tell me it will make a huge impact. Then I ask if they’re engaged in any type of scenario planning or disaster recovery planning and very few hands go up.

They have disaster recovery plans that deal with disruptions with IT. But if a supply chain disaster occurs—an event that could theoretically shut them down or put you out of business—they have no disaster recovery plan in place. I’m not talking about hypothetical to the extreme, I’m talking about stuff for which there’s a reasonable probability of happening.

All of the issues we’re discussing have been mounting over time—and are just getting worse. Yet, we find that some shippers still find themselves managing as if many of these issues don’t exist. What do you prescribe to shippers who are “managing in the dark?”

That’s a question that’s had relevance for the last several years. The thing I wonder about is how many people believe that their education just stopped when they got their diploma? This astounds me. One of the few prescriptions I can offer is to stay informed, stay networked, and be out there.

I know a lot of people in this industry. Let’s say I know 5,000 people and I see these people at NITL, NASSTRAC, and CSCMP events. So there are 5,000 people who attend these educational events, and you can say that’s a pretty good number. But when you look at it in terms of the percentage of people who have responsibility for logistics and freight issues, you’re dealing with single digits. Continued...

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