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2015

 

A great deal can be learned from the results of the “30 Under 30 Rising Supply Chain Stars Recognition Program” of ThomasNet and the Institute for Supply Management. Perhaps most important are lessons about how to engage the Millennial generation (ages 18-34) so they grow to become supply chain management leaders.

 

The recognition program puts the “spotlight on individuals whose initiative, collaboration, innovation and/or leadership are already bolstering the profession,” according to ThomasNet. This is important because many of the Baby Boomers who are supply chain management executives are—or soon will be—retiring, which leaves even more jobs open. Millennials can be a good fit for supply chain management because not only are they the largest generation in the U.S. workforce, but their values and expertise match the industry’s needs, says M.L. Peck, senior vice president, Programs & Product Development, Institute for Supply Management.

 

One example is Katy Conrad, site lead at Shell’s Geismar Chemical Plant and “Megawatt star” of last year’s 30 Under 30. Conrad says she loves everything about her job—working with smart engineering and business professionals, solving tough problems and making a bottom-line impact. At Shell, she has delivered significant savings, built a regional B2B sourcing strategy and held an exciting overseas assignment, ThomasNet reports.

 

The key as an industry is to identify the means to attract and retain Millennials. Peck and Linda Rigano—executive director, Media Relations at ThomasNet—recently wrote about a panel discussion with several of last year’s 30 Under 30 in an article that ran on SupplyChainBrain. Many of the winners also answered a survey about their work and outside interests.

 

Roundtable panelist Jami Bliss, director of global procurement program management at Teva Pharmaceuticals, nominated several of the 30 Under 30 winners and sat in on the panel discussion. The number one thing they’re looking for is meaningful work, Bliss says in the article. They want a role where they can contribute and add value to their organization, she continues.

 

Peck and Rigano explain that, according to the panelists taking part in the discussion, there are several key strategies for attracting Millennials. The first is to promote the supply chain industry to college students. For example, Conrad never thought she’d enter supply management until she was a business major at Ohio State University. There, she heard a presentation by a logistics professional at Limited Brands. That presentation led to a three-month internship in the procurement group at Shell, which changed her plans, Peck and Rigano write.

 

Another key strategy is to move Millennials around the company. Whether it’s a lateral move into a new department, rotations from the headquarters office to a warehouse or a call center, or a transfer to a different geographic location, Millennials look forward to the opportunity to move around. They say it helps them better understand how their company operates, and where they can make a unique contribution.

 

Companies should also look for opportunities to mentor new supply chain professionals. Many of the 30 Under 30 say they have at least one mentor who offers advice in a non-judgmental way. These Millennials appreciate the insights of experienced professionals, along with advice on where they need to improve, Peck and Rigano write.

 

Another key approach is to emphasize supply chain management as a career that eallows Millennials to leverage their interests and strengths. Amy Alpren, another 30 Under 30 winner, says she likes to “apply everything I’ve learned—communications skills, ability to organize and multitask, and my financial and analytics background, all in supply chain management,” Peck and Rigano report.

 

I’m interested in what you think of both what Millennials have to offer, and how they can be attracted to careers in the supply chain. Do you agree with the observations of the 30 Under 30 discussion group?

 

By the way, ThomasNet and the Institute for Supply Management have extended the deadline for their second 30 Under 30 Rising Supply Chain Stars Recognition Program to October 30, 2015. More information can be found at: www.thomasnet.com/30under30

 

 

 

 

Robots are expected to take over 16 percent of U.S. jobs—22.7 million jobs—by 2025, according to new research. Perhaps the larger concern is whether or not it’s safe for humans to work alongside robots.

 

Considering recent, rapid progress in robotics and artificial intelligence, it’s important to define robotics. “By ‘robots,’ we mean all forms of automation technologies, including those that conduct physical tasks, intellectual tasks or customer service tasks that mix elements of both physical and intellectual activities, but which constitute a distinct category in the age of the customer,” J.P. Gownder, a vice president and principal analyst serving Infrastructure & Operations Professionals at Forrester Research, writes on a Forrester blog.

 

That definition puts the group’s forecast for job loss in context. However, it should be pointed out that Forrester’s research also forecasts advances in automation technologies will create the equivalent of nine percent of today’s jobs in the same timeframe. That’s because physical robots require repair and maintenance, which will necessitate the creation of several job categories. The forecast then is for a net loss of seven percent [9.1 million jobs], which, as Gownder notes, is far fewer than most forecasts, although still a significant job loss number.

 

Despite advances in robotics, it’s still troubling to learn of accidents in which a robot is responsible for a human’s death. For instance, earlier this summer at a Volkswagen plant in Germany, a man was helping to assemble the stationary robot that grabs and configures auto parts when the machine grabbed and pushed him against a metal plate. The man later died from the injuries.

 

That type of accident cats a spotlight on a significant technological challenge. Industrial robots are suited for moving heavy objects, moving at high speeds and performing repetitive and monotonous tasks. On the other hand, they also move blindly. Consequently, if they make contact with a human, it may result in serious injury or death.

 

The solution, some say, is the controlled use of robot-human interaction, known as “collaborative robotics” or “cobotics.” What's different is these robots have sensors and safety features that enable them to detect and even react to nearby humans. Proponents say this allows companies to safely pair machines’ strength and precision with employees’ ability to see, feel and think.

 

One company using cobotics is BMW. In 2013 the company installed robots, made by Denmark’s Universal Robots, in its South Carolina factory to help human workers insulate and water-seal car doors, a BloombergBusiness article reports. The robot spreads and glues material down while a human worker holds the material in place. Without the robot, it’s a physically uncomfortable task that leads to worker wrist injuries.

 

“We’re interested in ergonomics and safety,” Rich Morris, who heads up BMW’s assembly and logistics, says in the article. “A robot can do repetitive tasks like pushing or pulling without getting injured and having to come off the assembly line.”

 

What’s interesting is that if a human gets too close to the machine, first it tells them they’re getting too close, then it stops running, Morris says.

 

Some robots “learn” tasks from human workers. For example, Baxter, from Rethink Robotics, has two arms and an animated face on a head-like screen. “He,” as Baxter is known, can be taught to carry out tasks through demonstration: The human manipulates Baxter’s arms into a sequence of positions once, and the machine will then repeat the action, the Bloomberg article notes. Baxter’s on-screen facial expressions help communicate to nearby humans what the machine is focused on and when it’s confused by something unexpected.

 

There’s no doubt that robots can do many tasks faster and more efficiently than humans. The use of cobotics would seem to be the next step in industrial automation, and can offer many advantages—along with human worker safety.

 

What are your thoughts on the use of cobotics? How do you envision them being used throughout the supply chain?

 

 

Rising wages and logistics costs in China and other countries leads a growing number of U.S. manufacturers to reshore or nearshore operations, or at least consider one of the two strategies. Mexico plays an important role in some of these operations, and, considering the country’s recent economic investment in seaports, it may take on a more prominent role.

 

Rising wages in China are a key factor behind nearshoring initiatives. There are, however, other factors to consider. For instance, transportation is one of the most costly elements of production, so using facilities closer to the U.S. offers cost savings. Faster shipping is also a key concern because companies and consumers now place an emphasis on quick delivery. Nearshoring to Mexico holds appeal because it enables companies to minimize the distance between the point of production and consumption, consequently shortening delivery time while also reducing the risk of supply chain disruption.

 

Mexico’s growing importance in the continental supply chain is now being recognized by North American transportation groups, says John Morris, Cushman & Wakefield’s Industrial Services Lead, Americas. In the latest edition of its Industrial Research Market Note, industrial real estate analysts report that Mexican ports led the growth in import volume, with a 9.2 percent year-over-year increase—outperforming overall North American inbound growth of 6.4 percent.

 

Modernization of Mexico’s port system is crucial if the country is to take advantage of its strategic assets. Mexico has become a major supplier of vehicles, electronics and other goods for the U.S. consumer market (82 percent of automobiles produced in Mexico are exported to American consumers), so the ports are important in the dynamic to attract investment into the Mexican manufacturing sector, Cushman & Wakefield’s report notes. With this growing opportunity in mind, the Mexican government is spending $5 billion on its network of ports to keep pace with growth.

 

There are three ports in particular to watch. The first is the gulf port of Veracruz. Port authorities expect the port to increase its capacity by more than 400 percent as a result of a $1.8 billion expansion program that will involve the construction of two container terminals over four years, ending in 2018. The port’s expansion will increase its capacity to 88 million metric tons, and add 35 new berths, two new turning basins, a logistics center for ground transportation and a 13 mile-long double-track railway bypass, the report explains.

 

The Port of Lazaro Cardenas along the Pacific coast is now handling one million TEUs a year. During the first five months of 2015, LCT moved 310,000 TEUs of cargo, up 30 percent year-over-year. This port’s key asset is its on-dock rail facilities, which are provided by Kansas City Southern de Mexico S.A. de C.V., a subsidiary of Kansas City Southern. That gives Lazaro Cardenas on-dock intermodal links directly into the southern U.S., as well as the shortest route to Mexico City.

 

Finally, Puerto Manzanillo handled 2.4 million TEUs in 2014. What’s more, since year-end 2010, container volume at the port has increased by 55.8 percent. Manzanillo is Mexico’s largest port and the only one capable of double-stacking containers onto railcars, which provides efficient movement of cargo throughout Mexico and as far as the Texas border 1,000 miles away. With nearly 90 percent of Mexico’s trade being with the U.S., Manzanillo’s access to the western coast, as well as to Houston via rail and other eastern seaboard destinations via the Panama Canal, is seen as key to attracting investment, the Cushman & Wakefield report explains.

 

Does your company have operations in Mexico or plans for operations there? If so, what do you think of the expansion plans for those three Mexican seaports?

 

 

This is an interesting time for U.S. seaports. Some distribution center and warehouse occupancy levels have reached historic highs. On the other hand, expensive construction and labor costs keep new development sparse in other seaport industrial real estate markets.

 

The Seaports Outlook Report and Index from JLL is the result of an examination of the major container seaports in North America and their surrounding real estate. According to the report, occupancy levels by total square feet have surpassed that of 2007, which was the high-point of the last real estate boom.

 

“We see unprecedented industrial real estate growth around our nation’s seaports,” says Mark Levy, managing director and lead of JLL’s Ports, Airports and Global Infrastructure (PAGI) practice group.  “Industrial real estate occupancy has grown by 17 million square feet in the West Coast seaport markets between 2007 and 2014, and rose 15 million square feet between 2013 and 2014 alone. The East Coast and Gulf of Mexico seaports had equally impressive gains and increased by 36.9 million square feet between 2007 and 2014.”

 

The 15 seaports ranked in JLL’s report received a total of 43.4 million twenty-foot equivalent units (TEU) containers in 2014, which is an 8.5 percent increase from 2007. Of particular note, West Coast cargo volume decreased by 2.2 percent over this time period, while East Coast and Gulf of Mexico cargo volume was up by 25.3 percent. It certainly seems that supply chain disruptions on the West Coast last winter and a sluggish return led to the decreased overall cargo volumes. JLL analysts believe many companies consequently re-evaluated their import strategies, which partly helps explain why TEU volumes are rising faster for Gulf and Eastern Seaboard ports.

 

“Cost, service and risk are the three perennial drivers for supply chain executives as they develop their logistics strategy,” said Levy. “As a result, the East Coast/Gulf seaports are gaining favor among industry veterans because they mitigate some risk, provide access to major population centers and connect with the optimal inland transportation mode: rail.”

 

JLL’s Seaports Index ranks U.S. seaports based on terminal operating scores (their proximity to population density, transportation networks and recent infrastructure improvements) and the port area market score (industrial space availability and suitability).

 

For the fourth consecutive year, the Port of New York/New Jersey topped the index. Its 2014 TEU volume was up 5.6 percent from 2013—and 40.9 percent from 2007—to outpace West Coast rivals Long Beach (ranked second) and Los Angeles (ranked third).

 

Nonetheless, the ports of Long Beach and Los Angeles are the primary gateway into the U.S., and are expected to remain so based on their infrastructure, automation enhancements and strong rail connectivity to the rest of the nation. Occupancy on the West Coast is also expected to remain strong based on its established markets that are home to notable consumer bases.

 

Perhaps most notable is that the Port of Savannah received the number four rank. Savannah had TEU growth of 28.5 percent from 2007 to 2014 and industrial development has been pronounced in recent years. What’s critical is that Savannah’s distribution center real estate market serves as a conduit to inland ports in Atlanta, where goods connect with major East Coast and Midwest rail lines. Additionally, the port’s location and proximity to Atlanta mean it will only continue to thrive once more ships begin to arrive after the new, wider Panama Canal opens next year, according to the index.

 

JLL analysts also expect Charleston (ranked 9th) and Virginia (10th) to see increased cargo traffic, given their rail connectivity to major markets. Both ports – like Savannah – also feature on-dock, double-stacked rail capabilities. These are strong selling points since intermodal rail provides logistics executives with a cheaper alternative to long haul trucking.

 

It remains to be seen what impact the expanded Panama Canal will have on Eastern U.S. seaport business. It will, however, be interesting to see how supply chains change.

 

 

Careers in manufacturing can pay well, offer opportunities for advancement, and be both interesting and rewarding. However, while parents may not actively discourage their children from pursuing such a career, it seems they don’t encourage it either.

 

Consider, for instance, findings from a new survey conducted for Alcoa Foundation in partnership with SkillsUSA. The “2015 Parents’ Perceptions of Manufacturing Survey”—conducted in May by Toluna—surveyed more than 1,000 parents of children ages six-17. The intent is to debunk stereotypes about careers and education within Science, Technology, Engineering and Math (STEM) fields, and educate people about the rewarding job opportunities in the manufacturing field, Alcoa explains.

 

Not surprising, the results show that most (90 percent) of surveyed parents worry about their child’s future career options given the state of the U.S. economy, and 87 percent of the parents say they believe STEM education is critical for economic success. Furthermore, nearly three-quarters (72 percent) of the parents believe a good job requires a four-year bachelor’s degree. Interestingly, 34 percent of the parents don’t think jobs in the manufacturing or trade industries require college or higher education, and only 12 percent of them believe jobs in manufacturing are “recession proof.”

 

“Parents have some awareness about manufacturing careers, but there are still looming misperceptions about the robust, exciting prospects for their sons and daughters, especially as more than half of manufacturers see a shortage of manufacturing talent,” says Tim Lawrence, executive director of SkillsUSA, a not-for-profit association that serves more than 300,000 high school, college and postsecondary students in trade, technical and skilled service instructional programs. “Students have plenty of options to explore within the field of STEM education and manufacturing careers, and may earn strong wages and benefits.”

 

The surveyed parents have a number of other notable misperceptions as well. For example, most of the surveyed parents (89 percent) estimate the average hourly wage of manufacturing jobs to be between $7 and $22 per hour. The average actually is much higher--$34 per hour—according to The Manufacturing Institute.

 

Finally, the surveyed parents also have little confidence in the industry’s compensation, benefits and intellectually stimulating work opportunities. According to the survey results, about one-in-five parents think that manufacturing jobs provide only minimum wage salaries, don’t offer benefits, and don’t offer innovative and intellectually stimulating work. It’s important to note that those perceptions don’t reflect reality. As the report explains, according to the U.S. Department of Commerce, the average annual salary for entry-level manufacturing engineers is $60,000, 90 percent of manufacturing workers have medical benefits, and manufacturing workers have the highest job tenure in the private sector.

 

Unfortunately, I can’t say the survey results are unexpected. The good news from a study from Deloitte and The Manufacturing Institute last year showed that 90 percent of respondents rank manufacturing as “important” or “very important” to the U.S. economy. Further, eighty-two percent of Americans believe the U.S. should invest more heavily in manufacturing.

 

As a Deloitte report summarizing the results of that survey notes, more than half of respondents believe manufacturing jobs are interesting and rewarding, but there still exist negative perceptions toward manufacturing—particularly in terms of likelihood of jobs being moved offshore. Indeed, job stability and security was the most common reason given as to why respondents would not encourage someone from a younger generation to pursue a career in manufacturing. Most troubling is that only 37 percent of respondents indicate they would encourage their children to pursue a manufacturing career.

 

I’d like to know your thoughts about how the manufacturing industry as a whole can educate parents, and students, about what a career in manufacturing is really like. What role do you think creating and promoting STEM programs in schools may play in those efforts?

 

 

A little more than half of the respondents to a survey are more optimistic about the U.S. economy than they were in 2014. A majority (54 percent) of the survey’s respondents say they expect their revenue to increase by more than five percent this year, and 96 percent anticipate their company’s hiring to increase or stay constant this year.

 

Sikich LLP, a professional services firm, surveyed 116 manufacturers and distributors—almost 75 percent of which have annual revenues of $1 million to more than $100 million—for its 2015 Manufacturing Survey.

 

Nearly 40 percent of the survey respondents view increased share in existing markets as their top opportunity for gains in the next 12-18 months. Even so, in the wake of the financial crisis, many companies remain hesitant to move into new markets or expand product offerings. Interestingly, almost a third of the survey respondents say their company spends less than one percent of sales on research and development for new products.

 

“Many manufacturers continue a cautious approach to growth,” says Jim Wagner, partner-in-charge of Sikich’s manufacturing and distribution practice. “While a focus on existing markets presents less risk, it won’t sustain manufacturers forever. Eventually, companies will need to become more aggressive and invest in new markets and products to drive differentiation and future success.”

 

Additional challenges manufacturers and distributors face include the need to both cut costs and make needed capital investments in equipment and technology, the survey results show. More than 90 percent of respondents expect taxation and labor costs to either increase or remain the same in the next 12 months, while 86 percent said the same about the cost of raw materials. Additionally, 32 percent of the respondents plan capital expenditures on equipment while 42 percent expect to spend on computer hardware and software.

 

As they strive to balance the need for more investment with ongoing cost pressures, manufacturers identify the supply chain as a key component. For example, 59 percent of the respondents identified supply chain management as either important or highly important to their companies’ success over the next five years.

 

“An effective supply chain can help companies increase production and delivery and better manage materials, labor and overhead,” Wagner said. “Advanced technology and machinery can further improve potential efficiency gains from the supply chain. Implementing a strong supply chain management strategy is one of the most important decisions a manufacturer can make.”

 

Optimism aside, I was surprised to see the survey responses show many manufacturers still heavily rely on manual processes. Indeed, 53 percent of respondents said their companies use spreadsheets and other manual processes to prepare key performance indicators (KPIs) such as productivity, utilization and availability. According to the survey results, only 26 percent of the respondents said they use a financial application module such as an enterprise resource planning (ERP) system for KPIs.

 

“In a time of rapid change, tracking accurate KPIs can mean the difference between stagnation and long-term growth,” says Wagner. “The persistence of manual processes in the industry is troubling. Technology can help companies grow more efficient, lower costs and better serve customers. It has the potential to transform the industry and drive success, but companies need to make full use of it to realize gains.”

 

I’m interested about your opinion. Do you also see a continued cautious approach to growth?

 

 

The rapid growth of the “Internet of Things” brings with it a great deal of potential to increase visibility and control of devices and equipment. It also, as has been seen in the news lately, presents opportunities for cyber attacks.

 

“The Internet of Things is definitely one of the big new frontiers,” Christopher Kruegel, co-founder of cyber security firm Lastline and a professor of computer science at a state university in Southern California, says in a recent Agence France-Presse (AFP) article. “The idea of bridging the gap between the cyber world and the physical world has been around for a while,” he says, referring to fears of possible cyber attacks on power grids, water plants and other crucial infrastructure targets. “Now, these proof-of-concepts show that it’s a real threat. All these devices are out there and reachable, and security is terrible.”

 

As was reported in Wired magazine and then mentioned almost everywhere, two computer-security researchers demonstrated that—using a laptop computer—they can take control of a moving Jeep Cherokee using the vehicle’s wireless communications system. It took the two men two years’ of research, but they were able to figure out how to enter the Jeep’s electronics via its online entertainment system. They then were able to change the moving vehicle’s speed and braking capability, and also manipulate the radio and windshield wipers. They have, however, kept some of the flaws they uncovered under wraps to prevent other hackers from causing trouble.

 

After the report, Fiat Chrysler—which makes the Jeeps—recalled 1.4 million vehicles. A free software patch for vulnerable vehicles is now available to patch the software holes. Fiat Chrysler spokespeople say the company had no first-hand knowledge of hacking incidents.

 

In another interesting development, Harman International Industries, which makes the car radios that the friendly hackers exploited to take control of the Jeep Cherokee, says its other infotainment systems don’t have the same security flaw.

 

Harman International CEO Dinesh Paliwal said last week on a conference call that the hackers used a cellular connection to get to the radio, which they used to control critical functions such as brakes and steering, an Associated Press article reports. But Paliwal said the radio system that was hacked, with an 8.4-inch touch screen, was developed about five years ago and doesn’t have as many security safeguards as current models.

 

“We believe—based on our assessment with all other customers we supply our system to—that the Chrysler system is the only one exposed to this particular experimental hack,” Paliwal says, AP reports. “So it’s a unique situation.”

 

Moving forward, across all industries, the issue is that protecting devices in the Internet of Things is possible, but it also increases costs of smart devices and development time. Given the degree of insecurity in today’s devices, it’s evident that for most makers, security isn’t a priority, IOActive chief technology officer Cesar Cerrudo told AFP.

 

“We haven’t seen planes drop out of the sky or cars run off the road—that we know of—but these are the issues we face,” Cerrudo says. “Real world hacks are coming.”

 

Kruegel from Lastline agrees, noting that lack of a profit motive for hackers with the right skills to commandeer control of airplanes or cars is considered a prime factor for the lack of incidents so far.

 

“The guys who can do it don’t have an interest now,” Kruegel says in the AFP article. “But, when you get the bored kid or the person who likes to create havoc, there will be a problem.”

 

What’s more worrisome, are concerns about cyber attacks targeting critical infrastructure of the U.S., such as electrical power grids, gas lines and waterworks. Then again, concerns regarding cyber attacks—or at least the possibility—targeting airplanes or cars are troublesome as well. The question then becomes, how will companies, and even industries, improve security to guard against cyber attacks?

 

What are your thoughts?

 

 

Egypt has finished its Suez Canal expansion project, which President Abdel Fattah al-Sisi says is both a symbol of national pride and a significant opportunity to stimulate the country’s economy.

 

The $8 billion project had been projected by many to take three years. However, President al-Sisi ordered the project to be completed in one year because the country urgently needed the economic boost the canal is expected to provide. It comes as no surprise then to learn the streets of Cairo are decorated in advance of tomorrow’s inauguration of the Suez Canal, and that Egypt’s Cabinet has declared Thursday a public holiday.

 

The new canal, which will allow two-way traffic of larger ships, is expected to expand trade and reduce navigation time through the fastest shipping route between Europe and Asia. The expansion adds an additional lane along part of the vital shipping channel, which officials say will shorten waiting times. It includes 21 miles of new channels cut through the desert and an additional 22 miles where existing bodies of water were dredged to make way for larger ships. Consequently, Egyptian officials say the expansion will cut the time of a north-south passage from 18 to 11 hours, and a total of 97 ships will be able to pass every day—up from a current capacity of 49 ships daily.

 

The canal drew in a record $5.3 billion last year, and Egypt’s government estimates it can raise that number to $13.2 billion by 2023. However, some economists and shippers maintain that’s an overly optimistic forecast.

 

“We have successfully completed tests since last Saturday,” says Vice-Admiral Mohab Mamish, chairman of the Suez Canal Authority, in a Euronews article. “Three large ships sailed through the canal. These vessels passed safely and securely, which proves to everyone that the new canal is already safe for navigation.”

 

It’s still amazing that the expansion project has been completed so quickly. To complete the project in a year, the Egyptian government hired six international firms—including companies based in the U.S., Belgium and the Netherlands—to dig new sections of canal and dredge the existing waterways, according to an article in The Guardian. Those companies worked day and night—under military direction—on six separate sections of the project.

 

“This is a huge undertaking on a world scale,” says Peter Hinchliffe, secretary general of the International Chamber of Shipping, in The Guardian article. “It has been completed in a time that is frankly astonishing.”

 

What’s even more impressive is the impact Egyptian officials expect from the expanded canal. Indeed, the Egyptian government had already planned to also expand port and shipping facilities around the Suez Canal as part of the country’s strategy to increase its international profile and establish Egypt as a major trade hub. Last year, Egyptian leaders announced plans to develop a logistics hub. Those plans call for the development of approximately 76,000 square kilometers around the Suez Canal to create an international industrial and logistics hub which, Egypt’s leaders believe, will further boost the country’s economic development.

 

What are your thoughts on the impact of the expanded Suez Canal? What will the faster shipping times mean to your supply chain?