global transportation trends - logistics quarterly announcements 6 contributors 9 editorial 10...

William CiemnyVice PresidentBusiness Transformation OutsourcingIBM

David J. Closs, Ph.D.The John H. McConnell Chaired Professor of the Eli Broad College of Business, Department of Marketing and Supply Chain Management Michigan State University

Oliver CostaTrent University

Jim DavidsonPresidentiWheels Dedicated Logistics

Jennifer HarringtonTrent University

Stirling LafranceTrent University

Alan Law, Ph.D.Associate Professor of SociologyTrent University

Warren Neel, Ph.D.Executive DirectorCorporate Governance CenterUniversity of Tennessee

Christopher D. Norek, Ph.D.Founding & Senior PartnerChain Connectors, Inc.

Peruvemba Ravi, Ph.D.Supply Chain Management FacultySchool of Business and EconomicsWilfrid Laurier University

Nicholas Seiersen, P.Log. M.B.A.Senior ManagerKPMG

The Official Magazine of The Logistics Institute

Volume 11, Issue 5, December 2005

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Global Transportation Trends

800-663-6331

To effectively manage your supplychain we strive to understand allaspects of your business needs.Our objective is to enhance yourservice levels and better controlcosts through improved strategiesand proven processes. Given theopportunity, we can recommendcomprehensive supply chain solutions that will encourage youto put Wheels in motion.

5 Announcements 6 Contributors 9 Editorial10 Outsourcing: The Definitive Trend in

Supply Chain ManagementWhen asked to identify business and technology trends specific to logistics, outsourcing is top of mind with most of us in the industry. As more manufacturing

companies embrace best practices as powerful weapons intheir fight for competitive advantage, outsourcing supplychain management becomes a compelling option for maximizing performance and bottom line results.

13 2005 Canadian Logistics Labor MarketSurvey: Employability This is the third in a series of articles basedon a 2005 labor market survey conducted by Trent University and the Toronto-basedLogistics Institute. This feature focuses on

employability the initiatives, processes and accreditationsan individual uses to secure employment and advance in the field of logistics.

19 A Conversation with Rob Carter,Executive Vice President and CIO,FedEx CorporationIn this interview, questions raised by LQsExecutive Editor, Nicholas Seiersen, andAdvisory Board Member, Chris Norek, Ph.D.,

cover a wide variety of technology topics. Rob Cartersanswers cast an insightful perspective on trends and bestpractices in technology.

22 Understanding the Mathematics of Supply Chain ManagementBesides helping you to understand and question some of the mathematics underlyingsupply chain software, knowledge of supplychain mathematics may also make it possible

to develop superior solutions in-house. If you are interestedin understanding the far-reaching applications and value ofmathematical tools to solve problems associated with the performance of your supply chain, you can start here.

26 Sarbanes Oxley: Some UnintendedConsequences The sweeping U.S. legislation should lead to best practices for managing spending, contracts, supplier and procurement information and overall corporate compliance.

However, heres another perspective on how companies maybe interpreting these laws and some of the unforeseen consequences.

28 Supply Chain Outsourcing in the Era of On DemandAn increasing number of companies are seeing the supply chain as the front line togrow revenue and reduce their costs throughimproved operations in a global economy.

Heres a look at some of the hurdles global businesses mustmitigate to grow from the perspective of a practitioner whohas helped transform IBMs supply chain.

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Announcement:We are pleased to announce Jeanette Polenychko has taken on the position of Sales Manager (U.S.), for LogisticsQuarterly (LQ) Magazine. In her new role, Jeanette will be responsible for USA based sales and marketing.Jeanette's experience in logistics includes marketing and advertising campaigns at LeanCor LLC, a third party logistics firm based in Florence Kentucky. Jeanette will be working with LQ's U.S. Director of Sales, RobertMartichenko, president of LeanCor LLC. Jeanette holds a BA in Elementary Education, from Michigan StateUniversity. Jeanette can be reached at [email protected] 859-283-9933 extension 126

3LQ December 2005LogisticsQuarterly.com

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LQ ADVISORY BOARDDavid J. Closs, Ph.D.Department of Marketing and Supply Chain Management,Michigan State UniversityExecutive Editor, LQKaren CooperSenior Media Relations Specialist,FedEx Canada Ltd.Jim DavidsonPresident,iWheels Dedicated LogisticsBruce DanielsonExecutive Communications Manager,UPSRuss DixonSenior Manager,TNT Logistics North AmericaRuss J. DoakDirector, Global Logistics, Kodak Graphics & Communications.David FaoroDirector, Supply Chain The International Group, Inc.John FirminoVice President, Director Solutions andExecution Standards, Ryder CanadaBenjamin GordonManaging Director, BG Strategic AdvisorsThomas J. Goldsby, Ph.D.Associate Professor,Supply Chain Management,University of KentuckyDavid GriffithVP Global Supply Chain Management,BAX GlobalJoe GrubicSenior Manager, Alliance/Network Management, Nortel Networks Global LogisticsRob HamiltonPlanning, Timing & Control Manager,DaimlerChryslerGeorge KuhnExecutive Director,CIFFARobert MartichenkoPresident,LeanCorJames Mahoneyategic Business DevelopmentExecutive,GeoLogistics CorporationJeff MooreManaging Director,Lakeside Logistics Inc.Mark Morrison, Senior Vice President of Business Development, TNT North AmericaTom NightingaleVice President, Corporate Marketing, Schneider National, Inc.Christopher Norek, Ph.D.Senior Partner, Chain Connectors, Inc.Peruvemba S. RaviAssistant Professor,Wilfrid Laurier UniversityKurt M. RitceyPartner, Deloitte Consulting Nicholas SeiersenSenior Manager, KPMGExecutive Editor, LQMichael SneddenManager of Distribution Operations, IBM-Canada Ltd.Thodore Stank, Ph.D.John H. Dove Distinguished Professor of Logistics, University of Tennessee

Volume 11 Issue 5

PUBLISHER & EDITORFred [email protected] PRESIDENT & EDITORIAL DIRECTORVictor [email protected]

CREATIVE DIRECTORCraig [email protected]

COPY EDITORBill [email protected]

ADVERTISING SALESJeanette PolenychoMarketing and Sales [email protected] MartichenkoU.S. Marketing [email protected]

CIRCULATION & WEBSITE DEVELOPMENTBill [email protected] Raffan, CGA Independant [email protected]

LQ2 Bloor Street W., Suite 100, Box 473, Toronto, Ontario, M4W 3E2,Telephone: (416) 461-8355Toll Free: 1-800-843-1687Fax: (416) 465-7832 Email: [email protected]

THE LOGISTICS INSTITUTE

160 John Street, Suite 200 Toronto, Ontario M5E 2E5

Logistics Quarterly (LQ) (ISSN 1488-3309) is published six times annually by LQ Inc. LQ is written for professionals in logistics. Subscription Services at: www.LogisticsQuarterly.comCanada Post Publications Mail Sales Agreement Number: 40032602. CANADIAN POSTMASTER: send subscription orders, address change notices and undeliverable copies to LQ, 2 Bloor Street West, Suite 100, Box 473, Toronto, Ontario, Canada M4W 3E2

EDITORIAL POLICY

The opinions expressed in this publication do not necessarily reflect the policy of The Logistics Institute or LQ Inc. The editors reserve the right to select and edit material submitted for publication. Not responsible for unsolicited material. LQ Inc. is a Toronto-based corporation and publisher. All rights reserved by LQ Inc. 2005. Reproduction without written permission of the publisher is forbidden. LQ welcomes your comments, letters to the editor, or written submissions for consideration.(LQ is available on-line at:www.LogisticsQuarterly.com)

WE ARE HONORED to announce the followingnew participants have accepted LQs invitationto join its Advisory Board:

THOMAS J. GOLDSBY, Ph.D., Universityof Kentucky.

Professor Goldsbys areas of researchinclude logistics strategyand supply chain integra-tion. He has served as alogistics analyst andresearcher in the corporateand public sectors and hasreceived awards for his

teaching and research. He has publishedarticles in several academic and profession-al journals including the Journal ofBusiness Logistics, International Journal ofLogistics Management, InternationalJournal of Physical Distribution andLogistics Management, ManagementScience, Supply Chain Management Reviewand Journal of Operations Management.He currently serves as a member of theCouncil of Logistics Management, Ameri-can Society of Transportation and Logis-tics, and Warehousing Education andResearch Council.

JAMES (JAMIE) MAHONEY, StrategicBusiness Development Executive, Logisticsand Supply Chain Management,GeoLogistics Corporation

Jamie Mahoney has more than 20 yearsof transportation, logisticsand supply chain leader-ship experience guidingtop-tier companies inbuilding global brandsand services. An accom-plished corporate strate-

gist and marketer, his vision and expertisein global business development have driv-en notable business growth in diversemarkets.

Offering a blend of global marketinginsight, operational strength and supplychain innovation, his achievements andderived consulting value have been recog-nized by Fortune Global 100 companies.His supply chain thought leadership duringeight years of overseas ex-patriot assign-ments has left long-standing impact andbest practices that continue to deliver ROI.

During his three years with Tibbett &Britten Americas as Director of BusinessDevelopment for Latin America, he led

teams in supply chain consulting, mergersand acquisitions (M&A) and post mergerintegration (PMI) processes. As ManagingDirector of Latin America StrategicAdvisors (LASA), he consulted to seniorexecutives on M&A activity and supplychain best practices.

Mr. Mahoney has started and grownfour companies, all of which he has soldor merged into others. In his currentassignment as Vice President atGeoLogistics Corporation, he managesthe business development and supplychain operations for large globalaccounts. He is a sought after speaker inglobal supply chain innovation.

Mr. Mahoney received his B.S (CumLaude) in Transportation from Massachu-setts Maritime Academy, studied for hisMBA at Salem State College (Massachu-setts) and has completed executive levelprograms at M.I.Ts Center for Transporta-tion and Logistics and The LogisticsInstitute (TLI) at Georgia Tech. He is cur-rently the Professional Development andMarketing Chair on the Executive Commit-tee of the Council of Supply ChainManagement Professionals (CSCMP).

JEFF MOORE, Managing Director,Lakeside Logistics Inc.

The fourth Moore generation in ourindustry, Mr. Moore carries on his familystradition of leadership and innovation in

transportation. In partner-ship with Chris Magill, Mr.Moore founded LakesideLogistics in 1986. In 1999,Mr. Moore and Mr. Magillrepositioned Lakeside fromthe transaction-based

freight business to long term relationshipsupply chain management accounts. Mr.Moore has a Bachelor of BusinessAdministration and holds the P.Log desig-nation. He is an active member of theCouncil of Supply Chain ManagementProfessionals (CSCMP).

LQs Advisory Board performs a pivotal rolein directing LQs business and editorial practicesto ensure it continues to be a source of ideas forleadership in logistics and transportation. LQsAdvisory Board members enable LQ to build onits tradition of being a publication written byprofessionals for professionals in the field oflogistics and supply chain management.

ANNOUNCEMENTS

LogisticsQuarterly.com6 LQ December 2005

DECEMBER CONTRIBUTORS

LQs mandate to provide Ideas for Leadership in Logistics, is clearly evidenced thisissue with articles written by professionals and logisticians from America and Canada who are leading and transforming

business by creating new roadmaps and definitions for leadership in this exciting field.

OUR CONTRIBUTORS

WILLIAM G. CIEMNY is Vice President,business transformation outsourcing,IBM Business Consulting Services.Appointed to this position in March 2005,Mr. Ciemny is responsible for worldwidesales and development for IBMs supplychain business transformation outsourc-ing (BTO) solutions. This is a new busi-ness for IBM that encompasses trans-forming and in some cases operatingaspects of the supply chain for enterpriseclients with focused offerings in directprocurement, global logistics, productdesign and supply chain optimization.Prior to this appointment, Mr. Ciemnywas group Vice President for SiemensMedical Solutions for the healthcare mar-ket. In this position he was responsiblefor building a world class services organi-zation with more than 2000 employeesworldwide. Mr. Ciemny was also theprocess owner for Siemens internal supplychain where he established performancemetrics to ensure the effective integrationof the companys internal customer rela-tionship management and product lifecy-cle management processes.

Mr. Ciemny originally joined IBM in 1994to establish a strategy and a business planfor the development of the IBM GlobalServices enterprise resource planning(ERP) practice. Shortly after the launch ofthe practice, which has since received indus-try accolades as the leading ERP servicespractice, Mr. Ciemny was promoted to VicePresident.

Mr. Ciemny also held a variety of posi-tions at SAP America Inc, ComputerHorizons Corporation and General Electric.

He is a graduate of Philadelphia Collegeof Textiles and Sciences in Philadelphia,Pennsylvania, with a B.S. degree in Com-puter Management and a minor in mathe-matics.

DAVID J. CLOSS, LQ Executive Editor: Dr.Closs is the John H. McConnell ChairedProfessor of the Eli Broad College ofBusiness, Department of Marketing andSupply Chain management, Michigan StateUniversity. He has consulted with morethan 100 of the worlds Fortune 500 corpo-rations regarding logistics strategies andsystems. He is an active member of theCouncil of the Supply Chain Managementprofessionals.

JIM DAVIDSON, President, iWheels dedi-cated Logistics, began his career in logisticsat The Ford Motor Company in 1963 work-ing in all aspects of logistics for 17 years. Mr.Davidson joined TNT in 1983 and held vari-ous management roles, including roles inoperations, staff, administration and gener-al management for a number of differentdivisions. He also served as the TNT boardmember representing North America attheir European-based board meetings. Hehas served on the executive of the CanadianGeneral Motors Supplier Council as well asExecutive Vice President of the ATA Councilof Logistics located in Alexandria, Va.

WARREN NEEL, Ph.D., recently returned tothe University of Tennessee to establish aCorporate Governance Center and is servingas its Executive Director. Until February 2003,he was Commissioner of the TennesseeDepartment of Finance and Administration,managing a $20 billion budget.

Prior to joining the State Cabinet, Dr.Neel served as Dean of the College of Busi-ness Administration at the University ofTennessee in Knoxville and in the Cabinet ofGovernor Lamar Alexander.

His academic career began in theUniversity of Tennessees Department ofManagement where his research focus wason corporate policy. Dr. Neel has served on

nine corporate boards and currently is aboard member of a NYSE and NASDAQ-listed company. His board experience hasincluded chair roles on a variety of commit-tees including audit, compensation, nomi-nating, and governance, in addition to hav-ing chaired special committees conductingfraud audits, acquisitions, mergers, and thesale of the business. Dr. Neels primary cor-porate governance interest is the distribu-tion of power between the board and theCEO/Chairman.

PERUVEMBA RAVI, Ph.D., is a member ofthe Supply Chain Management facultygroup in the School of Business andEconomics at Wilfrid Laurier University.Professor Ravi holds a B.Tech. in ChemicalEngineering from the Indian Institute ofTechnology in Delhi, India, an MBA fromthe Indian Institute of Management inCalcutta, India, an MS in OperationsResearch from the University of Rochesterin Rochester, New York, and an MSBA andPh.D. in Operations Management fromWashington University in St. Louis,Missouri. Prior to joining Wilfrid LaurierUniversity, Dr. Ravi was a visiting facultymember at the University of Missouri-Columbia. Dr. Ravis research interestsinclude logistics and supply chain manage-ment, the marketing-manufacturing inter-face, and scheduling. He was awarded thePetro-Canada Young Innovator Award in2001 and holds a research grant from theNatural Sciences and Engineering ResearchCouncil of Canada. Dr. Ravi is a member ofnumerous professional societies, includingthe Institute of Industrial Engineers, TheProduction and Operations ManagementSociety, Decision Sciences Institute,Canadian Operations Research Society,and Institute of Operations Research andthe Management Sciences.

LogisticsQuarterly.com 7LQ December 2005

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Logistics Process Diagnostics February 27 - March 24 Online

Professional Ethics March 8 - 10 Vancouver

Supply Chain Strategies March 22 - 24 Toronto

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NICHOLAS SEIERSEN, B.Sc.(Hons.),M.B.A., P.Log. LQ Executive Editor: Mr.Seiersen is a Senior Manager with KPMG,based in Toronto, Ontario. He specializesin Supply Chain consulting, with particu-lar attention to Strategic Sourcing andSupply Chain Planning & Operations. Mr.Seiersen is the Canadian lead for SupplyChain at BearingPoint. Mr. Seiersen holdsa B.Sc. (Hons.) in Biochemistry and anM.B.A. in Industrial Management. Heteaches executive development courses attop Universities in Europe and NorthAmerica. He has written for numerouspublications in North America and Europeon ePurchasing, Logistics, Supply ChainManagement and Cost-to-Serve. He is thepast President of the Toronto Roundtableof the Council of Logistics Management,(now CSCMP), Vice President of theFrench Logistics Association (ASLOG),and a member of the European LogisticsAssociation Business Management Com-mittee.

These authors contributed to the 2005 CanadianLogistics Labor Market Survey featured on page 13.

JENNIFER HARRINGTON is a recent Sociol-ogy graduate (B.A. Hons.) from Trent Univer-sity specializing in religion. She played manyroles on the research team with a particularfocus on questionnaire design and dataanalysis.

STIRLING LAFRANCE is a recent Sociologygraduate (B.A. Hons.) from Trent University.Mr. Lafrance led the team that produced theresearch results. He recently accepted aninternship with a national social policyagency.

OLIVER COSTA is a recent Sociology gradu-ate (B.A. Hons.) from Trent University spe-cializing in philosophy. Mr. Costas primaryroles on the research team extended to ques-tionnaire design and data analysis.

DR. ALAN LAW is an Associate Professor ofSociology at Trent University in Peterbor-ough, Ontario. He specializes in appliedsocial research across a broad array of policyarenas and has been conducting research onthe Canadian logistics labor market since1996. Professor Law teaches the AppliedSocial Research course by facilitating stu-dents through funded research contractsfrom negotiation of an RFP through finalreporting and presentation.


EDITORIAL

LAST MONTH I HAD THE PRIVILEGE to welcome speakers,delegates and sponsors to LQs inaugural ExecutiveExchange at the Toronto Board of Trade on November 10th.It was an honor to be part of this prestigious program, onethat included many important speakers and delegates whocontributed to this valuable exchange of ideas on best prac-tices and global trade.

This program was predicated largely on a discussion paperand the themes developed by David J. Closs, Ph. D., ofMichigan State University and LQs Executive Editor,and JohnT.Mentzer,University of Tennessee.Key executive perspectiveson these themes were also featured in LQs TransportationForum (Volume 11,Issue 1,2005).LQs Advisory Board and thedirection of Dr.Closs played an important part in shaping theoverall program for LQs symposium. I also appreciate thecontributions of Victor Deyglio, president of the Toronto-based Logistics Institute, who helped to hone the program,and collaborated on the development of this exciting day.

LQs Executive Exchange provided an international forumto exchange ideas between leaders from Canada and theUnited States. It brought together a distinguished group ofprominent academics and practitioners of supply chainmanagement from some of the most forward-thinking andlargest corporations in North America.This group discussedthe critical issues of business and supply chain managementin todays global environment. The primary subjectsaddressed at LQs symposium followed four main themesthat were carefully considered by the best minds of our day.They were: How can C-Level Executives (CXOs) Find Value inLogistics and Supply Chain Management?; Global Trade:More and More Risk Is it Worth it? And What to do Aboutit?; Driving Logistics Performance: Can Metrics Get You WhereYou Have to be? The Risks and Pitfalls, What Role Do BestPractices Play?; Successful Relationships in a Transborder/Global Economy.

One of the most inspiring presentations of the day was pro-vided by our luncheon speaker,Alan Gershenhorn, President,Asia, Europe, Middle East and Africa, UPS Supply ChainSolutions. As lifelong students of leadership we are alwaysinterested in knowing more about what makes a leader whoinspires confidence, hard work and vision, while others withequal capabilities do not attain the same results in business.

The dialogue from leaders who joined us at the roundtablesfor discussion on November 10th and our speakers oftenshared a common view leadership is often defined by theway people face adversity.

This was clearly articulated by Mr. Gershenhorns openingremarks. I have a quote here from a sport columnist, JimTaylor,who once wrote Goal tenders are three sandwiches shyof a picnic. He added: Primitive man learnedthat whensomething hard and potentially lethal comes toward you at agreat velocity you get out of its path. I think that is what globalcommerce feels like today. It is an unstoppable force that cantake your breath away and it can be lethal if you are not pre-pared for the challenge and opportunity.And,like a goalie,youneed to put yourself between the puck and the goal.

Mr.Gershenhorn,who is a former president of UPS Canada,discussed the challenges of global supply chains, particularlythe growing importance of China as an exporter and its role asan investor and importer. He noted that China had displacedCanada in October 2005 as the U.Ss main trading partner.

Chinas drive to grow its exports is part of a long-term planto raise living standards as it works toward closing the gapbetween its well-to-do urbanites in eastern China and theagrarian class located in the interior. It is the worlds mostaggressive investor due to its drive to feed its manufacturingsector.The Asian dragon is snapping up minerals and oil andother commodities in every corner of the world,he noted.

Global supply chains have heightened the risk of disruptionand drive the need for multiparty collaboration and coordina-tion.Technology,the use of all modes of transportation,manag-ing high fuel costs and cost containment, training and devel-opment,are some of the key elements of global supply chainsthat he identified.

In this context, the growing use of outsourcing across thesupply chain will also help companies preserve their capitalfor new product development and growth.

Identifying such crucibles and defining the opportunitiesfor leadership to transform businesses and supply chainsacross North America was an important part of this ExecutiveExchange.We are looking forward to executives again sharingtheir practical applications and business acumen in the faceof converging global challenges at LQs next symposium,nowscheduled for April 20 2006.

An Executive Exchangeof Ideas for LeadershipBy Fred MoodyPublisher & Editor


Focus. Outsourcing permits a manufacturing compa-ny to focus on their core business. Logistics is a high vol-

ume, dynamic customized business that grew out of the

maturing of back-office procurement cost reductions. Its

not what most manufacturing companies are generally

best at. When manufacturers delegate the nitty-gritty of

supply chain management to a qualified specialist, they

have the luxury of focusing on what makes them unique

their product and how it satisfies their customers needs.

Expertise. Acquiring logistics expertise internallycan be very time-consuming and expensive.Best practices

can have a very short shelf life.What works today may not

work tomorrow.For this reason alone,SCM is best handled

by logistics experts who have acquired the skill and

resources to move quickly and manage change to their

clients advantage.

The Definitive Trend in Supply Chain Management

OUTSOURCING

By Jim Davidson

When asked to identify business and technology trends specific to logistics, outsourcing istop of mind with most of us in the industry. As more manufacturing companies embrace bestpractices as powerful weapons in their f ight for competitive advantage, outsourcing supplychain management (SCM) becomes a compelling option for maximizing performance andbottom line results. With time, outsourcing will become an industry standard, growing inpresence by as much as 50 percent during the next f ive to ten years

In recent years,outsourcing has provided one of the greatest shifts in manufacturing operations.Heres why:


Fewer capital expenditures. Working with aleading logistics provider can significantly reduce capital

expenditures.The need to purchase and maintain a trans-

portation fleet, equipment and distribution centre disap-

pears when an innovative logistics supplier has global net-

works and facilities ready to respond to a manufacturers

every need and the needs of their customers. Increasingly,

logistics professionals are capable of getting the job done

without appearing obvious to the customer.The very best

in the business do everything they can to look just like the

client on a good day.From wearing their uniform to driving

trucks with their corporate colours and logo, an experi-

enced LLP blends in with the operations of their client.The

customers customer cant tell the difference.

Cost reductions. By delegating SCM to the experts,fixed costs can become variable costs. Better operating

practices drive higher productivity, thus lower costs. Use

what is needed as its needed and pay for it accordingly.

Nothing more. Nothing less.

Visibility. Supply chain LLPs give a manufacturerthe power to see their inventory as it flows through the

supply chain. Materials and products make the necessary

connections and everyone in the supply chain is ready

when needed to receive shipments and pass on the goods.

The manufacturer need not be hands-on for the process to

work. A competent LLP does all the tracking, recording

and reporting. Consequently, the manufacturer always

knows where things are and is in a position to proactively

manage their business without the significant investments

in systems and partner connections.

Key Performance Indicators (KPI). We allknow how costly bad practices can be.Whether it is premi-

um transportation incurred, service issues or excess mate-

rials carried as in-transit inventory, we all have a respon-

sibility to identify and eliminate gaps in performance.

Experienced LLPs play a vital role by providing manufac-

turers with all the information they need to better manage

their businesses.

Having briefly described the benefits of outsourcing,

let me address directly those readers who are about to

select a third party LLP, either now or in the near future.

There are a few obvious considerations that need to

guide your decision, along with some industry specific

features, that an accomplished LLP will possess that may

not come readily to mind. For those who need to know,

heres my insiders checklist:

Trust. Trust is the backbone of every business rela-tionship, for good reason.We need to trust our suppliers to

do effectively what we cant do ourselves.When choosing

a logistics provider, you are essentially putting them

between you and your customer. Consequently you must

choose a company you can truly depend on to do what

they say they will do, to establish and maintain an open

and honest relationship, and treat your customers as well

or better than you would treat them yourself.

Capability. Capabilities and trust go hand in hand.Trust is built when a supplier delivers what they promise.

The salesmans axiom of under-promise and over-deliver

comes immediately to mind. However, the supplier you

really want to recruit is an LLP with the ability to employ

best practices consistently at the highest levels.

Resources. In todays market driven economy, logis-tics has become less about low-cost warehousing and

cheap freight and more about managing information. Is

your LLP in a position to know your operational demands

and limitations? Can they quickly gain insight into your

business needs and meet them consistently? Do they pro-

vide business analysis? Can they manage information and

resources for continuous improvement? Also, dont hesi-

tate to judge a potential LLP by the company they keep.Do

they have a global network of carriers in all modes of

transportation? Do they implement the latest analytical

software to track, report and evaluate all supply chains

activities? Do they put in that extra effort that tells you they

really care about your organization and your customers?

Theres a lot to consider when outsourcing.Theres noth-

ing more constant than change. As a result of this pro-

found reality, logistics is no longer exclusively about busi-

ness tactics designed to reduce transportation and distri-

bution costs. It has become a part of a companys overall

strategic plan, discussed and evaluated at the highest

executive levels. It commands increasing investment of

time, money and resources, and rightly so. What is more

important than getting your product to the right place, at

the right time at the right cost?

So choose your LLP carefully and with confidence. Set

the agenda and let your logistics supplier manage the

process. As your company soars to new heights, let your

logistics provider be the air traffic controller.Youll reach

your goals faster and with greater economy. After all, you

dont want to be the one explaining to your customer why

your widget costs more when it could have cost less with

innovative, outsourced supply chain management.

G

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LogisticsQuarterly.com 13LQ December 2005

Employability2005 CANADIAN LOGISTICS LABOR MARKET SURVEY:

This is the third of a series of three articles showing the results of the 2005 labor market survey conduct-

ed by Trent Applied Social Research on behalf of the Canadian Professional Logistics Institute.The first

focused on compensation (salaries and bonuses).The second focused on recruitment and retention, that

is, the variety of ways in which an individual locates his or her vocation, as well as the methods and

procedures the employer engages in to preserve that employees employment status including provision

of non monetary benefits. This article focuses on employability - defined as the initiatives,processes and

accreditations the individual has pursued to secure employment and advance in the field of logistics.

The web based survey was sent out to approximately 3000 practitioners from CPLI mail lists during

February 2005.Five hundred and sixty one valid responses were received, representing a response rate of

approximately 19%.

EmployabilitySoft Skills

Throughout the project employa-bility is defined as the processes theindividual has engaged in tobecome more mobile in the logis-tics industry.

To what extent does educationspecialization make a difference tojob performance?

In an attempt to understand howlogisticians are becoming mobile thesurvey examined the effect of educa-tion specialization on certain aspectsof employment performance.

The survey asked personnel howrelevant they found their educationspecialization to the performance of:overall job performance, interper-sonal aspects, business strategyaspects, reading and writing aspects,quantitative aspects and technicalaspects. Relevance was rated on ascale of one to five: one not at all rel-evant,and five as crucial.

Figure 1: Relevance of educationspecialization to overall job performance

Figure 1 demonstrates that those

with a specialization in logistics find

their education specialization most rel-

evant to overall job performance.

Business and commerce graduates also

find their degree to be very helpful in

performing in the logistics industry.

Figure 2: Relevance of educationspecialization to interpersonalaspects

Figure 2 again illustrates that those

with an education in logistics find their

training to be highly relevant to per-

forming interpersonally in their career.

However, personnel in both business

and commerce and social sciences and

humanities find their degrees to be

highly relevant to interpersonal aspects

in the workplace.

Figure 3: Relevance of educationspecialization to business strategyaspects

Figure 3 reveals that those with a

business and commerce degree rate

their educational background to be

highly relevant to performing business

strategy aspects. Those with a logistics

background also find their specializa-

tion to be relevant to performing busi-

ness strategy aspects.

Figure 4: Relevance of educationspecialization to reading and writing aspects

Figure 4 illustrates that those with an

education in the social sciences and

humanities find it to be highly relevant to

the performance of reading and writing

aspects of their vocation. A specializa-

tion in logistics and business commerce

were also deemed relevant to reading

and writing aspects of job performance.

By Jennifer Harrington, Stirling Lafrance, Oliver Costa and Alan Law (Trent University)


Figure 5: Relevance of educationspecialization to quantitativeaspects

Figure 5 demonstrates that personnel

with a logistics and business commerce

background find it to be highly relevant

to the performance of quantitative

aspects. Those with an applied and

pure science degree also find their spe-

cialization to be relevant.

Figure 6: Relevance of educationspecialization to technical aspects

Figure 6 shows that those in logistics

find their logistics specialization to be

very relevant to performing technical

aspects in their career. Those educated

in the applied and pure sciences and

business and commerce also find their

specialization to be relevant to techni-

cal performance in their career.

The focus group suggested that an

undergraduate educational specializa-

tion, whether it is logistics or applied

sciences does not guarantee employ-

ment in the logistics industry. However,

a specialization in business commerce

or logistics will be helpful in gaining ini-

tial entry into the logistics industry. A

specialization in logistics is also benefi-

cial in that it will help decrease the

amount of time the individual spends at

the lower management and operational

levels of the corporate hierarchy. Those

without the logistics centered special-

ization will, as a result, have a longer

career path. This being said, at the

upper levels of management the spe-

cialization becomes less important,and

the ability to add value to the supply

chain more so. An educational back-

ground in logistics or business may help

personnel get their foot in the door, but

hard work, experience, expertise, and

devotion are what create upward mobil-

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 4.0

4.33

3.89

LogisticsSpecialization

Business/Commerce

1

57 18

1

Anova = .00

5

3.15 3.1

Science(applied and pure)

Social Sciencesand Humanities

2

61 49

1

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Education specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 2: Relevance of education specialization to interpersonal aspects

3.82 3.77


Business/Commerce

1

57 18

1

Anova = .00

2.66

3.61



1

61 49

1

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 3: Relevance of education specialization to business strategy aspects

3.86 3.91


Business/Commerce

1

57 18

1

Anova = .00

2.752.88



2

61 49

1

FIGURE 1

FIGURE 2

FIGURE 3


ity. Employability was also examined

through the lens of firm hopping. Firm

hopping was calculated by dividing the

number of years of experience person-

nel have in logistics by total number of

firms worked for. Resulting in, average

number of years worked for a particular

firm. In order to better understand firm

hopping we attempted to answer:

Are young people firm hopping

(shifting employers) more than older

people?


Figure 7 compares age and average

years worked for a particular firm. As

the line of best fit demonstrates, as age

increases so does the number of years

worked for a firm. The interpretation

focus group suggested that a possible

explanation for this is that as personnel

become older they are less inclined to

change firms. At an older age logisti-

cians have established themselves at

the upper levels of management,and as

a result have established a position

within the firm and have a sense of loy-

alty towards the firm which they are

working in. Younger logisticians may,

unlike their senior counterparts, be

required to firm hop in order to sample

and learn as many aspects of the supply

chain as possible, increasing their

chances for upward mobility in the cor-

porate hierarchy.

Figure 8: Number of years with firmby firm size

Figure 8 is broken down by firm size

and number of years with a particular

firm. Those that are employed at small-

er firms firm hop more often than those

working at larger firms. The interpreta-

tion focus group suggest that a possible

interpretation of these results is that

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 4.0

4.33

3.89


Business/Commerce

1

57 18

1

Anova = .00

5

3.15 3.1



2

61 49

1

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 5: Relevance of education specialization to quantitative aspects

4.023.96


Business/Commerce

1

57 18

1

Anova = .00

3.69

3.29



2

61 49

1

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

Specialization

Rele

vanc

e (1

=no

ne/5

=cr

ucia

l)

Figure 6: Relevance of education specialization to technical aspects

4.04

3.5


Business/Commerce

1

57 18

1

Anova = .00

3.54

2.47



2

61 49

1

FIGURE 4

FIGURE 5

FIGURE 6


logisticians working at larger firms have

more opportunities for internal promo-

tions, whereas those in smaller firms

have to change firms in order to find

new opportunities, retain a higher

salary, or be challenged in new and

exciting ways. Furthermore, logisticians

may stay at larger firms because the

firm itself, its brand essence, is seen as

an industry badge of honour. Working

at a larger more recognized firm is an

integral part of a highly mobile and

employable career path. The next ques-

tion we endeavored to answer was:

To what extent is firm hopping affect-

ed by firm size, industry, gender, job

level, and P.log?

Figure 9: Industry and number ofyears with a firm in logistics

Figure 9 demonstrates what person-

nel in which industries in logistics firm

hop more often. Those in the public

sector and manufacturing firm hop the

least often, whereas those in business

services firm hop the most often.

Probable interpretations for those in

manufacturing firm hoping less often

may be that the manufacturing industry

is characterized by large firms which

are complex and multi-layered, allow-

ing for greater internal upward mobility.

In the public sector, firm hoping occurs

least frequently. Those in the public sec-

tor have a greater degree of job security

and are able to attain tenure.

Business services as an industry

thrives on meeting new clients,network-

ing, and being faced with a variety of

employers. Business services are also

highly profit oriented, and as a result

work is often contract based and there-

fore those logisticians in business serv-

ices are continually finding new

employment opportunities with firms

that may have previously been clients.

2

4

6

37

42

8

10

12

14

0

Age

Mea

n Ye

ars

wor

ked

in fi

rm


ANOVA = .00

1.0

22

1.7

65

38

130

1.8

27

3.1

3.0

32

4.7

3.2

37

5.8

5.1

42

8.7

6.3

47

9.9

37

42

6.1

52

9.6

5.4

57

9.4

6.6

62

10.9

0.0

65+

12.3

1

2

3

4

5

6

7

8

9

0

Firm Size

Mea

n Nu

mbe

r of Y

ears

with

Firm

Figure 8: Number of years with firm by firm size

6.82 7.52

Small(under 250)

Medium(250-500)

4.9

86 132

5.0

Anova = 0.01

8.78

Large(over 500)

5.8

199

10

2

6

4

8

0

Mea

n Nu

mbe

r of Y

ears

with

Firm

Figure 9: Industry and number of years with a firm in logistics

Avona = 0.00

10

7.04

33

2.7

5.37

Transportation,Storage andWarehousing

Wholesaleand Retail

BusinessServices

4.6

101

8.07

Manufacturing

112

5.7

SD=6

57

7.03

10.45

Public Sector

91

6.184.6

12

Main

FIGURE 7

FIGURE 8

FIGURE 9


Figure 10: Gender and number ofyears with a firm in logistics

Figure 10 compares firm hopping by

gender. The graph demonstrates that

females stay with their firms for shorter

periods of time, firm hoping more often.

Both the literature review and the focus

group suggest that women encounter

the glass ceiling. A result of this unrecog-

nized barrier is women firm hopping

more often. Women are forced to do this

in order to retain a higher salary or climb

the corporate hierarchy. Further interpre-

tations may be that women may also

firm hop more often in order to ensure

the stability of their home life. Women

may leave a firm in order to find one

with a more comprehensive benefits

program, or may choose to leave a firm

in order to support a partners career in a

new location.

Figure 11: Job level by number ofyears with firm

Figure 11 shows the frequency of firm

hopping by job level. This data suggests

that those who occupy positions in mid-

dle management firm hop less often,

whereas those in the operational sector

firm hop the most often. The focus group

suggested that those in middle manage-

ment firm hop less often for a variety of

reasons. At the middle management

level there is a great deal of opportunity

and variety of tasks to be completed. As

a result, those that wish to move vertical-

ly must commit a significant portion of

their career path to undertaking these

roles. Further, middle managers in this

survey had a mean age of 45 years and

as a result may be in a position where

they are less inclined to change firms.

There is also a very finite number of posi-

tions in upper management, those that

are unable to penetrate into upper man-

1

2

3

4

5

6

7

8

9

0

Gender

Mea

n Nu

mbe

r of Y

ears

with

Firm

Figure 10: Gender and number of years with firm in logistics

8.45

Male

329

5.55

T-Test = 0.00

6.2

Female

85

4.90

1

2

3

4

5

6

7

8

9

0

Position in Firm

Mea

n Nu

mbe

r of Y

ears

with

Firm

Figure 4.11: Job level by number of years with firm

8

9.4

Top/UpperManagement

MiddleManagement

4.71

93 182

6.0

Anova = 0.00

7.3

5.1

LowerManagement

Operational

5.02

69 64

3.98

10

1

2

3

4

5

6

7

8

9

0

P.Log. Status

Mea

n Nu

mbe

r of Y

ears

with

Firm

Figure 12: P.Log status number of years with a firm in logistics

8.25

Have P.Log.

315

5.4

Avona = 0.017

6.84

Non-P.Log.

116

5.4

FIGURE 10

FIGURE 11

FIGURE 12


agement may end up fixed in middle

management roles. Those in the opera-

tion sector tend to be younger and may

firm hop more often in order to attain a

more holistic knowledge of the supply

chain, which in the end will help the

logistician to gain a higher degree of

employability in the logistics industry.

Top and upper level manager may firm

hop in order to seek out a firm which

will remunerate them more competitive-

ly. It is also probable that they are head

hunted more often, and as a result find

firm hopping less strenuous.

Figure 12: P.Log status, number ofyears with a firm in logistics

Figure 12 juxtaposes P.Log. status and

number of years with a firm. The data

from the survey suggests that those that

have a P.Log. designation firm hop less

often than their Non-P.Log. counterparts.

The interpretation focus group suggests

that this may be because P.Logs. are

retained more aggressively by their

employers. P.Logs.are also older,and as a

result more established in their current

position, and therefore less likely to firm

hop. Finally, P.Logs. at the upper levels of

management are challenged more and

as a result find their work more fulfilling,

making them less inclined to firm hop.

The final research question we

attempted to address was:

What is the relationship between firm

hopping and salary?

Figure 13: Income in 2005 and number of years with firm

Figure 13 shows years with a particu-

lar firm and income. The line of best fit

shows that as years with firm increase so

does salary. Our data therefore suggests

that firm hopping does not automatical-

ly correlate to an increase in salary. A

possible explanation for this is that stay-

ing in one firm allows for the accumula-

tion of experience and expertise which

is rewarded by a higher salary.

Employability conclusionsWithin the section of employability

and soft skills we found that an educa-

tion specialization affects job perform-

ance in a variety of ways. A specializa-

tion in logistics is highly relevant to inter-

personal aspects and overall job per-

formance. An education in business and

commerce is very useful in performing

business strategy aspects. The attain-

ment of a social sciences and humani-

ties degree is crucial to reading and writ-

ing aspects. Also, a degree in applied

and pure sciences is beneficial when

performing technical and quantitative

aspects. With respect to firm hopping

our survey yielded the following results;

young people firm hop more often than

older people; personnel in smaller firms

firm hop more often than those in larger

firms; and individuals in business servic-

es firm hop the most, whereas those in

the public service firm hop the least. We

also found that the glass ceiling forces

women to firm hop more often than

men. Moreover, middle managers firm

hop the least often compared to those

in operations who firm hop most fre-

quently. Non-P.Logs change firms more

often than P.Logs. Finally, we found that

firm hopping does not translate to a

higher salary.

2

4

6

37

8

10

12

14

0

Income ($ 000)

Mea

n Nu

mbe

r of Y

ears

wor

ked

in fi

rm

Figure 13: Income in 2005 and number of years with firm

ANOVA = 0.00

25 27.5 33.5 37.5 43.5 47.5 53.5 57.5 63.5 67.5 73.5 77.5 83.5 87.5 93.5 97.5 105 115

FIGURE 13

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RTR-983 Laptop_Log.Quarterly Ad 9/14/05 4:32 PM Page 1


Nicholas Seiersen, Senior Manager, KPMG

Please comment on last-mile visibility. How do you ensurevisibility and traceability of deliveries, particularly when theyexist in your network or take low-tech delivery methods?

We believe strongly in the signature element and the rolethat it plays.We have just launched a new array of signatureservices that are designed to enhance proof of delivery.Thesesignature services range from the ability to hand off a ship-ment to a companys management office, or the office in yourapartment complex,or neighbor.Or the shipment may requiredelivery to a specific individual, or an individual over 18 yearsof age. Much of what we are doing in our signature serviceshas to do with custodial control and creating an electronicrecord of where and when those hand-offs took place.

There are parts of the world where others work on our com-panys behalf.They are called our Global Service Participants(GSPs). In these cases,we have created wonderful technologyinterfaces that drive the hand-off of information to GSP agentswho apply practices to meet our specific requirements. As aresult, they collect nearly the same class of information thatFedEx employees collect.

We provide them with a comprehensive set of tools toensure these processes are met.For example,we provide themwith hand tools and tracking devices that allow them to cre-ate proof of delivery and scan records to create a completeview of the transit of shipments.

How are the increasing demands for Proof of Delivery doc-umented in the Sarbanes-Oxley Act (SOX) regarding rev-enue recognition affecting the way you work with yourclients systems? What are the most challenging aspects ofbringing greater systems transparency?

Our signature service can be a very specific and powerfulmeans of proof of delivery. For example, we can create high-value oriented controls focusing on the hand-off of ship-ments to ensure that delivery is executed in a direct and spe-cific way.The controls could be set to disallow delivery on anindirect signature from anyone other than the intended recip-ient. So inside of our signature services, which we havelaunched and will continue to roll out, we will continue tospecify a great deal of differentiation on what kind of signa-ture we must collect.

Chris Norek, President, Chain Connectors

Do you have an opinion on Enterprise Resource Planning(ERP) systems versus Best-of-Breed in utilizing supplychain technology?

Many organizations have the culture, discipline and mind-set to incorporate an ERP solution that is probably an 80 per-cent fit for their requirements but thats not always sufficient.When an 80 percent fit is not enough, it is important to havethe discipline not to radically change components to cus-tomize the solution. If you cross that line and begin too much

In this interview, questions raised by LQs

Executive Editor, Nicholas Seiersen, and

Advisory Board Member, Chris Norek,

Ph.D., cover a wide variety of technology

topics. Rob Carters answers cast an

insightful perspective on trends and best

practices in technology.

A CONVERSATION WITH

Rob Carter Executive Vice president and CIO, FedEx Corporation


customization you are often in a situation where you mightwell have chosen a best-of-breed solution instead.

That (best-of-breed) may require more integration andinterfacing, but it will likely come closer to meeting 90 per-cent of your requirements.You may need to dedicate moreresources to work on integration,but as a result you will havethe tools that fit some fairly rigid requirements your organiza-tion views as essential and which you are not willing to beflexible about.

What percent of total technology implementation effortsare accounted for by back-end systems integration?

That would depend on whether you are integrating an ERP.The modules in an ERP are designed to talk to each other.Obviously, they must reach out and touch some supportingsystems, but at the end of the day it is a lower percentage atthat point because the interfaces come as part of the pack-age. If you are implementing a best-of-breed approach, youcan have a significant level of integration interfacing andback-end work to make it all work cohesively.This would bethe majority of the work you would need to perform - ensur-ing these things work together and with the other systems thatrequire you to feed information into them.

What mistakes do you make sure you avoid in selectingand implementing supply chain software?

This is a very important consideration. I have often seenexecutives make the assumption that you can gather datafrom disparate sources and count on the integrity of the infor-mation.This is an important concern when some of the data,in supply chain scenarios, is from outside of your companysfour walls.A lot of people assume that shipment notificationsand tracking information from various suppliers and trans-portation services will have the same level of accuracy as aFedEx shipment.

Often, this is not the case. There are strong providers ofinformation and many companies that offer different levels ofinformation. But some providers can not necessarily give usthe data that really lets us help our customers plan their man-ufacturing cycles and inventory cycles. So data integrity is ahuge area of concern, and we spend much time understand-ing the sources of information and how reliable they will be.

The other primary concern, in my opinion, and possiblythe most significant pitfall is the non-vanilla implementationof ERPs. Most of the large ERP disasters that have occurred -and I can say that at FedEx we have not had any of these -have been quite visible in our industry. In these cases,compa-nies have brought in big-packaged ERPs and then set aboutto make major modifications to them because they areunwilling to change their business processes to match thatsoftwares solution. These kinds of approaches tend to beextremely costly and often result in failure.

How are you advising your clients on RFID issues?We feel that RFID is going to be a very significant tech-

nology for the industry generally, and particularly for thesupply chain field.There are, however, a significant numberof root issues in the Electronic Product Code (EPC) stan-dards that need to be addressed beforehand. For example,EPC standards are oriented to the passive RFID tag com-monly known as slap-and-ship. Frankly, the readability andprogrammability of those RFID tags is not yet reliableenough to drive a solid supply chain implementation. It willget there. There is a strong belief on our part that many ofthe solutions that our customers require will help drive theindustry and facilitate its evolution away from passive RFIDtags,which are defined in the EPC standards today, to activetags that are battery-powered and put out a stronger radiosignal.

These tags are also called sensor-array or sensor-basedtags. They are dynamic in nature, much more readable andfrom greater distances. They are dynamic because they canproduce a products history, provide real-time informationabout the products current situation and, if required,respond. They could tell us, for example, whether a producthas been exposed to light and what temperature range aproduct has been exposed to on its journey.They could alsoalert us based on whether the temperature range exceeds acertain point, either high or low, and they can tell us if therehave been velocity changes in the delivery process for prod-ucts. For example, was the delivery process stopped abruptlyin mid stream? These are the kinds of things that sensor tagsare likely to bring to the party, including Global Positioning(GPS) that can tell us exactly where a product is,virtually any-where worldwide.

We are working with EPC, as a member of the EPCConsortium, and we are a member of MITs consortium forRFID Technologies, to look at those technologies and articu-late and define their current and future applications.According to a Gartner Consulting forecast, passive tags willnot reach the height of their usefulness until sometimebetween 2015 and 2020.

Interestingly, RFID is turning out to be a 3-15 technologyinstead of a 2-10 technology. (Footnote 1)

There is still a great deal that needs to be achieved.Thesetags must produce a stronger and clearer signal.The abilityto read them needs to become much more discrete.Today,most of the reading takes place at the pallet level and isextrapolated to the entire shipment based on advancedshipment notification or an ASN Record. An ASN recordtraditionally indicates what to expect in a bulk shipment,but the reality is that a lot of things can happen to a ship-ment and you could end up receiving something that doesnot reconcile with what you had expected to receive,basedon the ASN records.


How much RFID Technology are you currently using andexperimenting with? Do you have a different RFID focusthan you want your customers to have?

We do a lot with RFID. Often, this is not done with whatpeople classically call RFID tags.Almost all of our tractor-trail-ers, for example, have RFID tags on the side of them -- a bat-tery-powered re-useable tag that provides full automation ofyard management, signaling the arrival of tractor-trailerswhen they come into a yard and scheduling their use whenthey off-load. This technology tells us when the trailers areavailable for re-load, plus it dispatches them as on road.

In addition, an RFID key system is used in approximately40,000 of our companys courier vehicles. The RFID key sys-tems offer huge productivity enablers. For example, the vehi-cle unlocks when the driver approaches and locks and whenthe driver leaves. Drivers can get in, start the vehicle and gowithout looking for keys.This is also being used in the passen-ger car world. Mercedes, Porsche and other car manufactur-ers use this its a key system called enter-and-drive.

In todays world of security requirements it is imperative forus to know which employees should have access to certainparts of airport ramps and facilities,for example.So we use RFIDproximity cards to allow certain employees to access specificareas. It also offers a great record of who went where,when.

Those are all RFID technologies that we have becomeaccustomed to. I would characterize them as fairly activetechnologies that have an ability to be easily read and theyare more discrete in their ability to be read.

What have been your efforts to create seamless supplychain event management systems with partners so that athand-off points there is still visibility?

An interesting story about supply chain handoffs andseamlessness is the supply chain surrounding iPod.You cango to Apple.com and place an order for an iPod, have it cus-tomized with your name lasered onto it, and you can see thistake place. It is an exchange of information. IPods are madefor Apple at original equipment manufacturers (OEMs), gen-erally in China in the Pearl River Delta region and Shanghai.Through Apple.com,you can see your iPod order being built,entering the transportation system and into the custody ofFedEx for delivery. Orders are flown from the OEM into theUnited States and delivered through our FedEx ground homedelivery network. This is an exciting way to see how flat theworld has become and how a seamless supply chain func-tions. If you did not know the mechanics behind your orderof an iPod,you might speculate this involves only one compa-ny. But three companies, at the least, are involved.

What types of executive dashboards do you provide foryour customer base to quickly gauge the performance oftheir supply chain?

We provide a tool called FedEx InSight. It gives you visi-bility on all of your FedEx inbound shipments, from a lot ofdifferent perspectives, regardless of whether you knew some-one shipped you something or not. Based on how you regis-ter for Insight, you can see all of the FedEx shipments des-tined for your office, for example, on any day of delivery.

This is a great kind of dashboard technology. For instance,we have a customer that conducts medical tests on the westcoast of the United States.Typically,the customer sends samplecollection kits to physicians all over the country.Physicians col-lect these samples and send them in to be tested at this cus-tomers facility. It is important for these physicians and theirpatients to receive the test results in a timely manner.The test-ing facility must staff its office and build their responsiveness tothese incoming samples based on the volume they receive onany given day. FedEx InSight provides the testing facility andmany other customers with a valuable tool to allow them toplan their work and see the things coming their way.

What kind of alerts do you provide when there are glitchesin your deliveries so that customers can plan for thechanges rather than be surprised?

We have capabilities to help customers keep things onschedule and recover from unforeseen challenges.When weneed to provide notice, for example, on things that arebeyond our control, such as customs delays, we havelaunched an advanced notification system which operatesacross the complete supply chain to ensure that if the prom-ised date for a delivery will not be met,no matter the reason,theres a notification. From Email notification to a messagesystem on your pager, whatever you subscribe to, you will benotified of these delays.

We continue to grow the profile of this advance notifica-tion system to track packages and help customers garnermore information. FedEx InSight provides all of this informa-tion,from delivery to exceptions.We are also examining alertsto cell phones, Blackberries, and other options in order tobuild our portfolio of those classes of alerts and notifications.

How much additional budget did you set aside for technol-ogy improvements in 2005 over 2004?

Approximately a billion dollars is invested annually.So I donot feel constrained in my technology budget. I believe themore important issues pertain to the effective prioritization ofthose incredible resources for the maximum benefit ofFedEx. Instead of asking for additional budget, I may ask forbetter support on prioritization, on governance processesand business alignment.The support would help ensure thatwhat we are spending money on is the most effective use ofIT capital and people to improve the customer experience,drive top line revenue and increase productivity through theuse of technology.


In todays global economy, firms located in various parts

of the world collaborate to form supply chains that com-

pete with other supply chains to meet the needs of cus-

tomers.The process of coordinating activities and decisions

across a supply chain is very complex, with rewards accru-

ing to chains that then emerge as leaders in the global mar-

ketplace. Academic researchers and scholars have devel-

oped a powerful array of mathematical tools to address

issues and solve problems associated with the coordination

of members of a supply chain.This article focuses on these

mathematical tools. While a complete discussion of supply

chain mathematics cannot be compressed into this brief

article, a few key tools used by supply chain management

researchers will be examined with comments on their appli-

cability and limitations.

The Queuing Theory is an important tool used to model

many supply chain problems. It is used to study situations in

which customers (or orders placed by customers) form a

line and wait to be served by a service or manufacturing

facility. Clearly, long lines result in high response times and

dissatisfied customers.The Queuing Theory may be used to

determine the appropriate level of capacity required at

manufacturing facilities and the staffing levels required at

service facilities, over the nominal average capacity

required to service expected demand without these surges.

Statistical methodologies are used to make predictions

about the level of consumer demand and the extent of

unpredictability of consumer demand. They form the basis

of Statistical Process Control techniques used for the moni-

toring of quality levels. Data mining techniques based

partly on statistical tools are used to look for patterns and

relationships in a body of data. One important application

of data mining is in the analysis of marketing data to deter-

mine consumer behaviour patterns.

Simulation is used to study situations characterized by

uncertainty.Simulation involves the creation of a model of a

system based on specific assumptions about system behav-

iour and information about probability distributions associ-

ated with various variables. By running simulations, it may

be possible to determine the best values of various system

parameters, subject to the underlying assumptions. The

main advantage of simulation is that it can be used to study

extremely complex systems that cannot be easily modelled

by using other mathematical tools. It must, however, be

emphasized that the recommended solutions are a function

of the quality of the model and the underlying assumptions.

Flawed assumptions will lead to flawed recommendations.

Mathematical programming includes linear program-

ming, nonlinear programming, and integer programming. A

mathematical programming problem consists generally of

an objective (often the maximization of profits or the mini-

mization of costs) and a set of constraints (for instance, a

By Peruvemba S. Ravi, Ph.D.Besides helping you to understand and question

some of the mathematics underlying supply chain software, knowledge of supply chain

mathematics may also make it possible to develop superior solutions in-house. If you are

interested in understanding the far-reaching applications and value of mathematical tools

to solve problems associated with the performance of your supply chain, read on.

Understanding theMathematics ofSupply ChainManagement


limited budget or capacity) faced by the decision-maker.

Usually there are sets of variables order quantities, for

example that are under the control of the decision-maker.

There are also parameters that are fixed and exogenously

determined values that are not under the control of the

decision-maker. (For instance, cost figures must often be

treated as exogenous parameters.) Mathematical program-

ming techniques make it possible for a decision-maker to

determine the values of variables that result in the optimal

solution.

These mathematical tools are used to obtain solutions to

specific problems in supply chains.To obtain a more strate-

gic perspective than those provided by these tools,

researchers have often used the tools of game theory. Game

theory may be used to model negotiation processes in sup-

ply chains and to develop insights into the balance of

power in supply chains.

Why should a manager be aware of the mathematics of

supply chains? While mathematics forms the underpinning

of supply chain management software produced by firms

such as SAP APO, i2 technologies, and many others, knowl-

edge of the underlying mathematics is usually not required

to use the software. It is possible to function within a supply

chain and to use supply chain solutions obtained from

external providers without being aware of the mathematics

built into the software. It does presume that the logic and

assumptions are valid, and that there are no practical limits

to their applicability. Otherwise, users will see inappropriate

outputs, and lose trust in the tools abilities to solve their

supply chain issues.

There are,however,several advantages associated with an

understanding of the mathematics of supply chains.Besides

being able to understand and question some of the mathe-

matics underlying supply chain software, knowledge of sup-

ply chain mathematics may also make it possible to devel-

op in-house solutions that may, in some instances,be superi-

or to solutions offered by external providers. An in-house

solution can be completely customized to firm-specific cir-

cumstances, and an in-house team will be subject to the

firms internal reward and incentive systems and can, there-

fore, be managed more effectively. Building up supply chain

mathematics skills in a firm has other significant advan-

tages,such as selling their logistics and supply chain skills to

other firms, thus converting the logistics function from a

cost centre to a profit centre within the firm. Frito-Lay was

successfully able to use its fleet of trucks to ship goods for

other companies, thus recovering a portion of the costs

associated with the ownership and maintenance of its pri-

vate fleet of trucks. American Airlines built up such an

extraordinarily skilled pool of mathematicians that it was

able to spin them off into a separate firm American

Airlines Decision Technologies, now called Sabre Airline

Solutions that produces and sells the Sabre system for the

booking of airline tickets. People Express Airlines, one of

American Airlines rivals in the early 1980s, was driven to

bankruptcy because of its failure to develop a comparable

pool of analysts and mathematicians.

It is important for managers to become sophisticated

consumers of supply chain mathematics and informed buy-

ers of solutions offered by software firms. It is particularly

important to be aware of the right tools to apply in a given

situation.The table on the following page maps mathemati-

cal techniques onto supply chain problems to which these

techniques can be applied.

Limitations of supply chain mathematicsAny mathematical model of a supply chain rests on assump-

tions about the supply chain.The outcome obtained is only

as good as the assumptions and the model.A sophisticated,

precise model that generates recommendations that are

altered significantly by a small change in the underlying

assumptions is less useful than a simpler, less precise model

that generates recommendations that remain essentially

unchanged even with a large change in the underlying

assumptions.Thus the recommendations obtained from any

mathematical model must be tested for sensitivity to the

underlying assumptions and the underlying assumptions

must be thoroughly tested for reasonableness.

It is also important to realize that mathematical models

can only provide answers to questions posed by a decision-

maker.The task of asking the right questions and identifying

the underlying problems facing a firm cannot be performed

by a mathematical model. For instance, a sophisticated pro-

cedure for the routing of vehicles will not significantly ben-

efit a firm that is selling the wrong set of products or is using

the wrong set of suppliers. Supply chain mathematics can-

not act as a substitute for intelligent decision-making by

managers.

ConclusionAs supply chains evolve and grow increasingly complex,

intuition and experience often prove inadequate and the

use of formal mathematical tools becomes necessary.Just as

sophisticated mathematics has, over the years, become an

essential component of the world of finance and the man-

agement of investments, advanced mathematics will come

to be regarded as an essential tool in the management of

supply chains.


(1)Determine capacity required by manufacturing and service facilities within a supply chain(2)Determine work-in-process inventory in a manufacturing facility(3)Determine the average number of customers waiting to be served in a service facility(4)Obtain information about service levels and shortages in manufacturing and service facilities(5)Determine lead times between stages i.e. the time taken by one stage in a supply chain to satisfy an order placed by the next stage

(1)Monitor quality levels and identify quality problems(2)Set up programs for improvement in quality(3)Analysis of marketing data to determine consumer behavior patterns(4)Forecast future sales:

Obtain information about average demand for a product/service over a period of timeObtain information about the relationships between demand levels for various products and servicesObtain information about short-term and long-term demand trendsObtain information about demand seasonalitiesObtain information about the relationship between demand for a product/service and the growth rate of the economy or of a

particular sector of the economyIdentify the underlying factors that drive consumer demand and the relative magnitude and importance of each factor

(5)Obtain information about the level of unpredictability in demand for a product/service to set safety stock levels

(1) Determine the location and capacity of manufacturing and service facilities within a supply chain(2) Compare expected system performance and total costs for various configurations of a supply chain(3) Determine lead times within a supply chain

Situations in which a manager must allocate limited resources to maximize the desirable/positive (e.g. profits, market share, or sales revenue) or minimize the undesirable/negative (e.g. costs, defects, pollution levels), and the objective (e.g. sales revenue) is proportional to the values of certain variables (e.g. the number of units sold). Such situations include the allocation of the following:(1)Limited amount of manufacturing capacity to a set of products(2)Limited amount of raw material/components/subassemblies to the production of various products (3)Limited amount of shelf space at a retail facility to various products (4)Limited marketing budget to various promotional and advertising initiatives(5)Capital budget to various kinds of capacity acquisition and investment alternatives

Situations as above where the objective does not vary linearly (i.e. proportionately) with the values of certain variables. This includessituations in which there exist economies or diseconomies of scale, such as:(1)Capacity acquisition in the presence of significant economies of scale(2)Determine the appropriate level of overtime in situations in which quality and employee morale exhibit diseconomies of scale i.e.

they are adversely affected at high levels of overtime, and wages exhibit nonlinearities because overtime pay exceeds regular-time pay(3)Determine the appropriate level of machine utilization in situations in which available machine time decreases and costs increase

at high levels of utilization due to increased wear-and-tear and machine breakdowns(4)Assign tasks to a set of workers in situations in which a significant learning curve effect exists for certain tasks

Situations in which a yes-or-no decision must be made, and situations in which fractions of an object (e.g. a machine) serve no purpose.This includes:(1)Choosing an appropriate location for a manufacturing facility/warehouse/service facility(2)Deciding whether to shut down a manufacturing facility/warehouse/service facility(3)Developing production schedules and determining the sequence of production of various products at a manufacturing facility(4)Developing workforce schedules at a manufacturing or service facility(5)Determining schedules and timetables for senior managers(6)Making a choice between infrequent full truckload shipments and frequent less-than-truckload shipments(7)Determining the optimal set of routes for a fleet of trucks and a given set of drop-off points(8)Determining appropriate purchase quantities and an appropriate purchase schedule in situations in which suppliers offer

price discounts for bulk purchases(9)Determining the optimal number of machines in a manufacturing facility(10)Determining the size and composition of a fleet of trucks consisting of trucks of various dimensions and capacities(11)Decisions relating to the introduction of a new product or the phasing out of an old product(12)Making a choice between performing an activity or business process in-house versus outsourcing the activity or business process

Strategic issues and issues involving negotiations and the balance of power in supply chains, including:(1)Determining the optimal strategy to be adopted during negotiation of supply chain contracts(2)Determining the appropriate relationship with a supplier or customer(3)Deciding whether to enter into a Vendor-Managed Inventory (VMI) arrangement(4)Deciding whether vertical integration (taking over a supplier or a customer) is appropriate(5)Making a choice between using a single source or multiple sources for a component or raw material(6)Determining the appropriate negotiation strategy during mergers, acquisitions, and takeovers of firms(7)Determining the appropriate set of incentive systems and compensation packages within a firm and its impact on employee

behavior and performance(8) Determining the impact of a centralized versus a decentralized organizational structure on employee behavior and performance(9) Determining the appropriate level of competition within a firm(10)Determining the appropriate strategy to be used during negotiations with employee unions(11)Determining the impact of incentive systems and performance measurement systems on the level of coordination between

different functional areas (e.g. between manufacturing and marketing) in a firm

Queuing theory

Statistical tools

Simulation

Linear programming

Nonlinear programming

Integer programming

Game theory

Mathematical technique

Situations in which the technique can be applied


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