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2017

First and certainly foremost, our thoughts and prayers are with the people of Puerto Rico and those working to respond to the devastation caused by Hurricane Maria Sept. 20. Since then, the country has struggled without electricity, drinking water and medical supplies. The situation now is a humanitarian crisis, where it is reported nearly half the population lacks drinking water, hospitals struggle to stay open, food and medicine are in critically short supply, and 97 percent of the people have no power. It is our hope the U.S. federal government ramps up relief efforts quickly.

 

Our thoughts also eventually turn to the global nature of supply chains, especially since Puerto Rico is home to many pharmaceutical factories which supply the U.S. and other markets. Indeed, there are nearly 50 pharmaceutical plants on the island, and pharmaceuticals represent 72 percent of Puerto Rico’s 2016 exports, valued at $14.5 billion, according to the U.S. Bureau of Labor Statistics, a USA Today article reports.

 

Many large pharmaceutical companies report their factories didn’t sustain much hurricane-related damage. Nonetheless, power isn’t likely to be restored to the island for three to six months, and while factories run by global pharmaceutical companies generally have backup power generation, most employees are unavailable to help resume manufacturing because they face calamity in their personal lives.

 

“Companies are looking at what their production plans will be and what redundancies are in place,” Nicolette Louissaint, president of Healthcare Ready, a non-profit group that addresses emergency supply chain crises during the hurricane season, says in the USA Today article. “They’re beginning to look at how to best ensure there’s continuity of operations.”

 

A U.S. Food and Drug Administration Commissioner Scott Gottlieb said in an interview with The Wall Street Journal that the agency is taking steps to mitigate the possibility of hurricane-related drug shortages, including working with companies to ensure products are shipped. He said the agency is focused on avoiding shortages of a number of critical drugs which are made primarily in Puerto Rico.

 

“There’s a significant amount of manufacturing on the island,” Gottlieb said. “If those facilities can’t be restarted soon, we have concerns about the potential for drug shortages.”

 

In the meantime, for example, Baxter International says it has lost “multiple production days” at facilities in Puerto Rico due to Maria, and that will delay its ability to restore shipments of two products that were already in short supply on the U.S. mainland. The products—dextrose and sodium chloride, also known as saline—are intravenous fluids given to hospital patients. The company disclosed the delays in a Sept. 22 letter to U.S. hospitals and other customers, saying Baxter was still assessing hurricane-related damage to its facilities. U.S. hospitals already had faced shortages of the drugs due to manufacturing problems and other issues unrelated to the hurricanes.

 

Baxter also said in a statement that the company took steps to mitigate a potential disruption to supply by transporting finished products off Puerto Rico in advance of the hurricanes, the Wall Street Journal reports. The company said the product-allocation plan is designed to ensure equitable product distribution to customers.

 

Bristol-Myers Squibb has announced its plant in Humacao appeared to suffer some damage during the hurricane, but a second plant, in Manati, wasn’t harmed. The Humacao plant makes the bloodthinner Eliquis as well as some older drugs.

 

“Based on the contingency plans we executed, we believe we have mitigated the risk to product supply regardless of that damage,” a company spokesman told Reuters.

 

Finally, Pfizer said a preliminary assessment indicates that two of the company’s three manufacturing plants sustained minimal damage, while a third had “minimal to moderate damage to parts of the facility.” A spokesman told multiple sources the company is trying to repair the damage as quickly as possible, and is confident it can avoid interruptions to product supplies.

 

What are your thoughts on the situation in Puerto Rico—either the apparently slow relief efforts or when pharma manufacturing may resume?

Electric and autonomous trucks may have garnered increasing attention in recent months, but technology that offers perhaps the most potential for improved performance and impact on supply chains is being tested as well.

 

With help from the Virginia State Police, the Federal Highway Administration (FHWA) conducted a two-day demonstration of three-truck platoons on I-66 in Centreville, Virginia, demonstrating the results of a four-year research project to test the effectiveness of new driving and communications technologies. Driving an eight-mile course on the state highway, the trucks were able to maintain a following distance between trucks of 45 feet to 50 feet at 55 mph—a following gap of just 0.6 second, the administration reports.

 

FHWA said the Virginia tests used partially automated trucks that handle acceleration, deceleration and braking, with professional drivers behind the wheel actively steering the trucks and able to take control if necessary. While various aspects of truck platooning have been studied for years, FHWA’s Exploratory Advance Research program has taken testing to new levels with the addition of Cooperative Adaptive Cruise Control technology, which adds vehicle-to-vehicle communications to the adaptive cruise control capability already available in new vehicles. This connectivity allows trucks to operate more smoothly as a unit, reducing and controlling the gaps between vehicles, the administration explains. According to a report from the North American Council for Freight Efficiency last year, trucks traveling in a platoon convoy can take advantage of increased aerodynamic efficiencies and see fuel economy increases of from four percent to seven percent, depending on operational conditions.

 

“These new technologies have the ability to increase capacity on our highways and make freight transportation more efficient,” Acting Federal Highway Administrator Brandye Hendrickson said at the event. “With innovations like these, we can get more out of the highway system we already have, relieve traffic congestion and reduce costs to the freight industry.”

 

The platooning test used trucks from Volvo Trucks North America and a control system from Peloton Technologies. Researchers from the University of California’s Partners for Advanced Transportation Technology program (PATH) are also part of the Volvo team.

 

However, there have been other demonstrations of platooning technology both in Europe and the U.S. In particular, last year, more than a dozen trucks produced by six of Europe’s largest truck manufacturers made a platooning trip across Europe, which included border crossings. The tests were conducted to monitor the viability of platooning as a means to ensure cleaner air through reducing fuel consumption and traffic congestion, as well as improving road safety by preventing accidents caused by human failure, Dutch infrastructure and environment minister, Melanie Schultz van Haegen said. What’s more, Daimler Trucks North America LLC recently announced it has received permission from the regional regulatory body, Oregon Department of Transportation, after successful trials in its proving ground in Madras, Oregon, and consequently will begin “pairing” tests of two connected Freightliner New Cascadia truck trailer combinations on public roads soon.

 

Trucks represent the most commonly used mode of transportation for freight shipping, with FHWA estimates saying trucks move 63 percent of the total tonnage of goods transported in the U.S., and FHWA further expects the volume of freight moved annually by trucks to more than double over the next 25 years. With those numbers in mind, federal officials expect truck platooning to dramatically enhance mobility on the country’s highways.

 

What impact would truck platooning have on your supply chain if it indeed delivers reduced fuel consumption, faster delivery times and minimized traffic congestion, as well as improving road safety by preventing accidents?

Corporate social responsibility (CSR) efforts appeal to a growing number of people. The impact of these efforts can be seen in everything from consumers buying products associated with a cause they care about to using their online networks to amplify social and environmental messages. Consequently, CSR’s increasing appeal should not be lost on employers, especially those working to build a pipeline of potential senior executives, as CSR can be an effective recruiting tool.

 

Consider, for instance, a recent Cone Communications study on corporate social responsibility, which found that 78 percent of the respondents want companies to address important social justice issues. Interestingly, 87 percent of the respondents indicated they will purchase a product because a company advocates for an issue they care about and 76 percent indicated they will refuse to purchase a company’s products or services after learning it supports an issue contrary to their beliefs.

 

As organizations work to find their next generation of executives, it’s clear they should target Millennials. Companies with a strong culture in CSR can increase their chances of attracting this group of potential employees because Millennials generally are considered to be more civic-minded and have a stronger sense of community, both local and global, than other generations.

 

A Cone Communications study last year found that 64 percent of Millennials indicated they strongly consider a company’s social and environmental commitments when deciding where to work. The same number indicated they won’t even take a job if a company doesn’t have a strong CSR program, while 83 percent said they would be more loyal to a company that helps them contribute to social and environmental issues. What’s more, 88 percent of the Millennials said their job is more fulfilling when they are provided opportunities to make a positive impact on social and environmental issue.

 

The challenge then becomes for companies to identify ways to set themselves apart from competitors in the eyes of Millennials by making sure their CSR programs are not only strong, but communication about CSR reaches Millennials. One of the best ways is to reach Millennials online, but without hiding news about CSR efforts under multiple drop-downs, Peggy Anderson, VP of global talent acquisition at Blackbaud (via HR Dive), says in an Environmental Leader article. News about CSR efforts should also be broadcast via other outlets online: social media, bylined articles and press releases, she says.

 

“Featuring CSR programs prominently on your website and career site allow interested job seekers and curious consumers to see what you’re about right away, perhaps even before you’ve had a chance to talk to them or discuss publicly,” Anderson says.

 

She suggests that companies not only document their impact—including examples, highlights and results—but that they include this information in recruiting materials and media outreach. These efforts should also emphasize the “local angle,” rather than just having a global view of CSR, as Millennials like opportunities to support local communities, Anderson continues.

 

Finally, it’s important for companies to emphasize the connection between “profit and purpose.” CSR programs can’t exist in a vacuum and companies are increasingly making commitments to show the links between CSR programs and positive business outcomes, either those that add directly to the bottom line or via building a reputation as a “good corporate citizen,” Anderson says. These efforts can then be used to attract Millennial talent as well as talent from other generations.

 

What are your thoughts on promoting CSR efforts, not just because it’s the right thing to do, but also as a means of attracting talent? Secondly, is your company actively broadcasting news about its CSR efforts?

Recent news illustrates that cyber security, or insufficient cyber security, is always a concern. More importantly, cyber security strategies and incident response processes should be continuously reviewed.

 

First, as if Equifax wasn’t already reeling under pressure from a massive data breach which exposed the information of 143 million Americans, the credit-reporting agency now reports it also had a security breach earlier this year that involved a different part of the company. The earlier breach involved TALX, Equifax’s human resources and payroll service. Equifax reports that there is no evidence that the TALX breach, which happened between March and April this year, and the wider breach are related.

 

Secondly, the Securities and Exchange Commission (SEC), the federal agency responsible for both ensuring that markets function as they should and protecting investors, has announced it was hacked and the intruders may have used the nonpublic information they obtained to profit illegally. According to the SEC, the breach was discovered last year but the possibility of illicit trading wasn’t uncovered until last month. The agency didn’t explain why the hack itself wasn’t revealed sooner, or which individuals or companies may have been impacted.

 

The disclosure comes two months after the Government Accountability Office issued a critical report about the cyber security measures employed by the SEC, citing a number of deficiencies in “the effectiveness of SEC’s controls for protecting the confidentiality, integrity, and availability of its information systems.” GAO also issued 26 recommendations which it said would make SEC systems more secure.

 

With both of those cyber security breaches in mind—well, actually three breaches if you count the Equifax breaches separately—I was interested to read a reminder that CIOs and IT leaders, of course, must frequently evaluate the technologies and resources the company uses to ensure they have the right defenses in place to anticipate, respond and resolve possible cyber threats. However, they also need to continually explain to all employees that everyone is responsible for maintaining the company’s cyber security, and secondly explain the roles all employees can take in strengthening the company’s cyber security.

 

Craig Williams, chief information officer of network strategy and technology provider Ciena, recently explained how companies can improve cyber security in an article on Forbes. He listed several strategies, but a few in particular caught my attention. The first is to institute awareness programs to ensure that—as a result of continuous training—employees can alert the cyber security team about things that look suspicious. That training must include teaching employees about cyber attacks, social engineering and phishing, including across multiple mechanisms, such as email updates, blog posts, posters and online training, Williams wrote.

 

Secondly, it’s vital to ensure the company’s incident management process can be followed for cyber security events. The only real difference to consider is the escalation path and whom to involve during an event. Williams reminds that security events can be highly sensitive, so executives may need to be selective of whom to involve—or not involve—depending on the issue. As always, it’s critical that the company frequently tests the process periodically.

 

Finally, it’s imperative that the CEO and other C-suite executives are advocates and participants in cyber security issues and discussions. Williams suggests asking executives to talk about security in their “All Hands” employee meetings, to send out an email about a particular security topic or to blog about cyber security in the company newsletter because when senior executives discuss concerns, it helps convey the matter’s weight. He also includes an anecdote about a senior executive who dressed up as a fisherman at an employee meeting and spent time talking about the importance of cyber security, explaining that phishing was no joke. As Williams relays, the message drove the point home.

 

I’d like to ask your thoughts on involving senior executives, and C-level executives in particular, as cyber security advocates. Does that happen where you work? What about your company’s key suppliers and partners?

Recent news has me thinking about the prevalence of modern slavery in some supply chains. First, new research led by The University of Bath’s School of Management found that failure to monitor outsourced recruitment results in companies inadvertently employing victims of modern slavery. Interviews with experts in business, NGOs, trade unions, law firms and the police showed that while companies can increasingly trace where their products come from, many simply don’t know about the backgrounds of suppliers’ staff.

 

The research, conducted with the University of Sheffield, suggests that layers of outsourcing, subcontracting and informal hiring of temporary staff are to blame. This, say the researchers, enables victims of slave labor to be hidden within the workforce of companies and organizations, even those with good intentions. The researchers concluded that the key issue in tackling modern slavery is understanding the labor supply chain, which, as they note, are often unregulated networks through which contingent and sometimes forced or trafficked workers are recruited, transported and supplied to business by third-party agents.

 

“Companies have little hope of detecting modern slavery practices unless they adopt a new approach that focuses specifically on their labor supply chains—they need to be able to trace the origin of their employees in the same way as most now can trace their products,” says lead author, Professor Andrew Crane, Director of The University of Bath’s Centre for Business, Organizations and Society. “There has been a revolution in responsible business practices and companies have invested millions of pounds to trace the source of their products and tackle the myriad sustainability issues they found. To prevent the misery of modern slavery from blighting our workforces, companies must apply that same focus to their staff.”

 

Secondly, a recent Reuters story running on New York Times reports that global business leaders and politicians from 48 countries committed to ending human trafficking, forced labor and modern slavery met at a forum in Australia to expand public-private partnership to eradicate these crimes.

 

“It’s about accepting standard for good labor practices throughout the supply chain,” said Indonesian Foreign Minister Retno Marsudi. Work is also being done to raise awareness on ethical business practices and establishing a “spatial mechanism” to ensure immediate identification, processing and assistance for victims of human trafficking, Marsudi added.

 

And finally, a survey of supply chain professionals by CIPS (Chartered Institute of Procurement & Supply) found that 34 percent of businesses required to publish a statement in compliance with the UK Modern Slavery Act 2015 have failed to do. Those companies are UK businesses or companies conducting business in the UK. However, since there are no legal consequences for businesses which do not complete the statement, it’s perhaps not surprising that the survey also found that 37 percent of supply chain professionals required to deliver a statement had not read the government guidance.

 

“The results of our survey are shocking,” says Cath Hill, CIPS director. “Legislation that was designed to be world leading has fallen at the first hurdle: compliance.”

 

Another key finding is that awareness of how to deal with modern slavery issues appears to have been raised by the act, says CIPS. The proportion of UK supply managers who don’t know how to handle slavery in their supply chain has fallen to 17 percent this year from 52 percent in 2015. What’s more, the number of companies who have mapped their suppliers to understand the risk and exposure to modern slavery has risen to 45 percent from 33 percent.

 

“While awareness of modern slavery is becoming more widespread, we need to ensure that outrage turns into action,” says Hill. “Those working in the procurement and supply chain profession have told us that without stricter policies and harsher punishments for those who are not compliant with the act, little will change.”

 

What are your thoughts on human trafficking, forced labor and modern slavery? Does your company know where all of its suppliers’ labor comes from?

As pressure from investors continues to grow, more companies’ executive boards are adding women to their ranks and they also are voluntarily disclosing more information about directors’ skills and diversity. For instance, in 2017, 20.9 percent of board seats were occupied by women at the 500 largest U.S. companies by revenue, compared to 16.5 percent five years ago, according to a new report from Equilar. For the Russell 3000 as a whole, that figure is 16.0 percent, up from 12 percent in 2013, according to the report, “Board Composition and Director Recruiting Trends,” which features commentary from KPMG’s Board Leadership Center and Semler Brossy Consulting Group.

 

“There was a time when having women make up 20 percent of boards might have seemed an audacious goal, but now that goal has been reached for Equilar 500 [the 500 largest, by reported revenue, U.S.-headquartered companies trading on one of the major U.S. stock exchanges] executive boards overall—and seems in sight for the Russell 3000—so that achievement should be celebrated,” says Blair Jones, Managing Director for Semler Brossy Consulting Group. “At the same time, boards can’t rest on their laurels, as gender parity is the ultimate goal, and the current pace of change has that milestone still quite a ways away.”

 

Companies are also voluntarily providing more detailed information about their directors’ skills to help investors and other stakeholders understand how they approach board composition. In the Equilar 500, 18.4 percent of companies included a “board skills matrix” in their proxy statement to list qualifications of the directors on their board. Among directors at those companies, finance, business development and technology were the most commonly cited.

 

Increasingly, evidence shows that diversity leads to better financial return and investors are pushing the business case, Matthew Goforth, Equilar senior governance adviser and one of the study’s authors, says in a Bloomberg article. For example, in a 2015 study, McKinsey found that companies with above-average gender equity are 15 percent more likely to outperform markets than those which lag the average, and last year, a Credit Suisse report determined that companies with a more diverse workforce return more money to investors. Ultimately though, investors want to avoid the executive board becoming an echo chamber of eight to 12 people sitting in a room, Goforth says.

 

“Given the challenges businesses face from factors including disruptive technology, global competition and geopolitical uncertainty, companies have increasingly taken a more strategic approach to board composition, looking for skill sets and backgrounds that will add new and important perspectives to the boardroom conversation,” says Susan Angele, Senior Advisor, Board Governance, KPMG’s Board Leadership Center. “This need has caused many boards to look beyond their immediate networks when they recruit new board members.”

 

Interestingly, although executives at most large companies say gender and racial diversity are key factors in picking a new director, fewer than half of those companies are willing to divulge whether they are succeeding. For example, slightly more than 45 percent of Equilar 500 companies disclosed their board composition as it relates to gender diversity, and only slightly less than 40 percent included information about their directors with respect to racial or ethnic background, the report explains. As Bloomberg notes, although institutional investors such as State Street Global Advisors and BlackRock Inc. are pressuring boards to add women as directors and are now more likely than in the past to support shareholder proposals which call for better disclosure of diversity, lacking federal requirements, the way companies report the information varies widely.

 

“There is no standard” for how companies disclose such information, says Goforth, “but if that were to happen, it would put more pressure on boards to diversify if they were perceived as being less diverse.”

 

What are your thoughts on gender parity and diversity on boards of directors? Are the boards where you work, and at your company’s supply chain partners—diverse?

The good news, a new study from DHL notes, is that the U.S. Bureau of Labor Statistics reports jobs in logistics are estimated to grow by 26 percent between 2010 and 2020. The flip side of the coin, however, is that one global study estimates demand for supply chain professionals exceeds supply by a ratio of 6:1, with others estimating the ratio could be as high as 9:1, the report continues.

 

DHL surveyed more than 350 supply chain and operations professionals in five global regions to identify reasons contributing to the talent shortage. The report “The Supply Chain Talent Shortage: From Gap to Crisis” was commissioned by DHL and written by Lisa Harrington, president of lharrington group LLC. It highlights key supply chain talent challenges, and also identifies means for companies to attract and retain talent.

 

“Leading companies understand that their supply chains, and the people who run them, are essential to their ability to grow profitably,” Harrington writes. “However, the task of finding people with the right skillsets required to run these highly complex operations is increasingly difficult—especially at the middle and upper management levels. Unless companies solve this problem, it could threaten their very ability to compete on the global stage.”

 

The main factors driving the talent shortage are well known: an aging workforce at, or near, retirement age; changing skill requirements calling for employees with tactical/operational expertise and professional competencies such as analytical skills and strategic thinking; and a perception that supply chain jobs lack excitement. I was interested to read that changing job requirements was indeed cited as the biggest single driver behind the talent shortage, with 86 percent of the respondents ranking this factor as “high” or “very high” in terms of its effect on companies’ ability to find the right talent. Furthermore, 27 percent of the respondents indicated their company has difficulty finding talent with solid professional competencies, but a third of the respondents said their company had failed to take steps to create a future talent pipeline or develop their workforce.

 

Surprisingly, only 25 percent of the respondents said they thought their company viewed supply chain as equally important as other disciplines, and said a common perception of supply chain careers as “lacking in excitement” hurts the industry’s recruitment potential, the report notes.

 

I was most interested in reading about opportunities for companies to work to close the talent gap. For instance, to develop and retain current staff, DHL recommends offering clearer career paths and a visible commitment to the professional development of its supply chain staff, combined with competitive remuneration packages. To attract talent, the industry needs to emphasize that the future workforce will need skills in robotic management, AI and AV control—job aspects that will be attractive to the younger demographic and help combat the negative perception of the sector, the report continues.

 

“We recommend that companies start with prioritizing the development of their current talent pool to adapt to the changing job requirements through training programs, and then retaining staff through clear career paths,” says Louise Gennis, Vice President Talent Management/Acquisition, Learning & Development, DHL Supply Chain. “We strive to combat misconceptions surrounding working in the supply chain through highlighting the technological developments which are digitalizing the industry and which are attractive to younger demographics.”

 

What are your thoughts on the supply chain talent shortage? Does your company find it difficult to recruit talented employees? Secondly, how is your company working to develop a talent pipeline?

 

Following quickly after Hurricane Harvey comes Irma, one of the most powerful storms ever recorded over the Atlantic Ocean. According to the National Hurricane Center, the current forecast track calls for the storm to approach south Florida on Saturday, with Miami squarely in its possible track. The potential for substantial supply chain disruption up the Eastern seaboard is significant.

 

Authorities on Thursday ordered more than 650,000 people to evacuate the Miami area as Hurricane Irma moves toward a possible collision with the mainland U.S. Hurricane and storm-surge warnings were officially issued for south Florida including the Florida Keys. Gov. Rick Scott on Thursday expressed worry about the breadth of the storm and flooding potential as he warned residents to heed evacuation orders.

 

“Look at the size of this storm, it’s huge,” Scott said. “It’s wider than our entire state and could cause major and life-threatening impacts on both coasts.”

 

As Florida evacuees began to jam highways and back up traffic on Thursday amid worries about gasoline shortages in the state, Georgia Gov. Nathan Deal on Thursday also ordered a mandatory evacuation for all areas east of Interstate 95 starting Saturday, including Savannah, home to about 147,000 people. In South Carolina, Gov. Henry McMaster said he may issue a mandatory evacuation order effective Saturday morning—and that there would be lane reversals on I-26 which runs north from Charleston.

 

McMaster further warned there could be a burden on South Carolina highways due to residents fleeing Florida and Georgia, and I-95 was already congested on Thursday as people drove north. “If you can leave now, go ahead,” he said.

 

Hurricane Irma has already disrupted shipping operations as it churned across Caribbean islands. The storm is hitting oil tanker movements, with transshipment hubs in the Caribbean shut down. Maersk Line and Mediterranean Shipping Co. said at least 10 vessels would drop or delay calls to several ports.

 

Florida’s Port Canaveral has already closed commercial operations in preparation for the arrival of the Hurricane Irma. The Canaveral Port Authority released all non-essential employees from work at close of business yesterday, acting on the Brevard County Florida evacuation order.

 

“As of 12 Midnight tonight, all non-hurricane port operations will have ceased,” the port authority said in a release.

 

Further north, the Georgia Ports Authority says it will shut down operations at the Ports of Savannah and Brunswick, Saturday through Tuesday. Truck gates will close at 6 p.m. tonight in Savannah, while vessel operations will end at midnight. The Port of Savannah won’t accept empty container returns today. At Colonel’s Island and Mayor’s Point terminals in Brunswick, gates will close at 5 p.m. Friday.

 

“The safety of our employees and partners in the maritime community is our highest concern,” said GPA Executive Director Griff Lynch. “We encourage GPA staff and our neighbors to heed Governor Deal’s warning and evacuate ahead of the storm.”

 

Hurricane season is still at its peak, and Irma isn’t the only threat on the horizon. Hurricane Jose strengthened to a Category 4 storm in the Atlantic yesterday and triggered a hurricane watch in Antigua and Barbuda. A third storm, Hurricane Katia, is now threatening Mexico.

 

For companies with supply chains, especially distribution centers, in the busy South East, revising risk mitigation centered around hurricanes and their aftermath should be an ongoing strategy. If your company or supply chain partners are in those areas, how are operations changing this week to prepare for potential disruptions following the storm? Also, what plans are in place for next week?

 

Stay safe, everybody.