Source: northcom.mil

More than eight years later, the events of 9/11 continue to have a game-changing effect on supply chain design and how global commerce functions. New concerns and opportunities, such as sustainability and the increasing availability of real time data, may also affect the way supply chains are designed.  It has become an increasingly complex activity, presenting significant challenges yet compelling opportunities.

There are two principal reasons why supply chains have become more complex, and a third reason for why this complexity will likely increase in the near future.  All of these have implications for the transportation and logistics industry, including accelerated outsourcing to companies with supply chain analysis, re-engineering and management expertise.

Reason 1. Supply chain design must account for variable operating models, assumptions and business characteristics that are far more diverse and complex than before.  Globalization, the multi-modal movement of freight, regulatory and cost structures, sourcing and financing practices, international border crossings, congestion at ports (sea and air) and on roads are only a few of the factors today’s supply chains must accommodate.  This model complexity invariably results in significant algorithmic and computational challenges associated with software systems that provide visibility and actionable information upon which supply chain operational decisions are made.

Reason 2. Supply chains are inextricably linked now more than ever to the overall performance of businesses. And while supply chains must first and foremost contribute to the overall competitiveness of the enterprise, increasingly their designs have to consider more than just efficiency. In this regard, lean practices and methodologies – pioneered in the automotive manufacturing sector – are finding wider adoption in logistics. Lean practices are driving significant improvements by removing waste and shop-floor inefficiencies that, once corrected, ripple back upstream to drive more consistency, productivity and cost savings. Lean supply chains thrive when there is little variability.  However, the very nature of globally distributed global supply chains breeds variability. Disruptions are anathema to a truly lean supply chain.  Witness the rapid collapse of the Toyota production system in the late 1990s when a major fire occurred at a key brake component supplier.

The events of September 11, 2001 brought significant attention to several questions and motivated the need to think beyond lean and be able to deal with major supply chain disruptions.  Before 9/11, supply chain security meant preventing things from being removed from the logistics cycle by unauthorized parties.  In the post 9/11 world, concern has also focused on preventing disruptive elements from being inserted into supply chain operations to create violent havoc.  Today we ask:  How do we reduce the impact of new security initiatives on supply chain and freight transportation network productivity and how can we design competitively productive supply chains that exhibit “resiliency” (i.e., degrade gracefully and recover quickly) when a major disruption occurs?  In addition, there are growing concerns about the environmental impact of supply chains and how these concerns will affect supply chain efficiency and hence the company’s competitive performance.

Reason 3. A third future contributor to the increase of complexity in supply chain design and analysis is the growing availability of real time data (e.g., inventory levels, production rates, vehicle status, weather, congestion) that can support real time supply chain control.  The availability of these data is enabled by the growing presence of sensor, communications and computer technology throughout the supply chain.  Explicit consideration of uncertainty inherent in the data represents an opportunity to reach the next level of (expected) supply chain competitive performance. This will be achieved by harnessing the value of information contained in the data, invariably at the expense of more complex supply chain models and computationally demanding algorithms.

All these challenges point to the need for new thought, approaches, skills and practices for supply chain design and management. These are areas where advanced 4PLs and lead logistics providers are demonstrating emerging competency.  The growing complexity of supply chain design can be expected to further accelerate outsourcing and the development of a high growth third and fourth party logistics industry.

Ultimately this emerging skill set will enable global businesses to overcome the increasingly complex challenges of our post 9/11 supply chain world and usher in a new level of advanced supply chain design and management.

Chelsea C. White holds the Schneider National Chair of Transportation and Logistics at the Georgia Institute of Technology, where he is the Director of the Trucking Industry Program and the former Executive Director of The Logistics Institute.

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