SMC³ Winter Conference Highlights Education and Networking

Annual transportation industry conference continues to attract an array of industry professionals, subject matter experts

Representatives from shipping companies, freight carriers, third party logistics groups and business consulting firms gathered in Atlanta this week to increase their industry knowledge and network with their peers at the SMC³ 53rd Annual Winter Conference. This year’s conference, entitled, “Shifting the Pipeline – Supply Chain Roles, Risks & Technology,” focused on what it takes to adapt and grow market share throughout the expanding and shifting global marketplace.

“Global trade is necessitating a fresh look at how the supply chain operates,” said Jack E. Middleton, SMC³ president and CEO. “Staying on top of changing business processes and technologies enables transportation professionals to avoid service failures and other costly disruptions. Recognizing this, SMC³ assembled educational discussions led by industry and subject matter experts to address varying aspects of global trade and supply chain management.”

At the conference, industry experts provided the insight needed to plan for both short and long term sustainability in the next era of transportation and technology. In addition, an elite group of update speakers detailed the most current economic trends, energy costs, political factors and legislative enactments affecting the transportation industry. Business networking opportunities were plentiful, including a Monday evening networking reception, a Tuesday evening formal dinner, daily lunches and ample session breaks.

“This conference is a must for transportation and logistics professionals. The timely updates and legislative/regulatory translations were invaluable moving into the New Year,” said Craig Fiander, senior director of marketing, ALK Technologies, about his SMC³ conference experience.

Gary Fox, director national sales, TSG, Inc., echoed Fiander’s enthusiasm about the informative value of the conference when he said, “If I could attend only one educational [event] each year, it would be SMC³.”

Did you attend the conference but you need a “refresher” on a speaker’s points? Or did you miss the conference and want to see a little of what you’ve missed? Read on for snippets from the individual speakers’ sessions. Also, many of the speakers’ PowerPoint presentations are now available by clicking here.

Keynote Presentation
Mike Durant, Best-Selling Author and Inspiration for the Movie Black Hawk Down

Keynote speaker Mike Durant, a highly decorated soldier, kicked off the SMC³ Winter Conference with a story of valor as he described his involvement with U.S. military operations in Somalia in the early 90’s, and his harrowing experience as a prisoner of war. Looking at the U.S. military from a business person’s perspective, Durant explained how “conservatism can come back and bite you in a big way when you live in a dynamic environment.”

Durant outlined the ways in which commands were given and carried out, and, much like any business, how opportunities were both taken and missed. He stressed that there are windows of opportunity, but if the organization isn’t “all in,” the opportunity should be passed over. He also pointed out that if you use the same business strategies and tactics repeatedly your competition will adapt. “You have to maintain the element of surprise,” he said.

Summarizing his message, Durant said that the keys to a mission’s success, whether a military, business or personal mission, are 1) leadership, 2) resources, 3) tactics, 4) training and 5) planning. Following the keynote presentation, conference attendees were given a copy of Durant’s book, In the Company of Heroes, and were able to meet him and receive autographs.

Global Trade Management Presentations
Facilitator: Neil Shister, Editorial Director, World Trade Magazine

This panel session, facilitated by Neil Shister, was designed to explore the latest applications of supply chain technology, the unique characteristics of the world’s resource rich trading regions, and the value of establishing risk management as a core business function. The first panel presenter, John Brockwell, global supply chain management practice leader for JP Morgan Trade Management Consulting, discussed risks and the need for visibility in the extended supply chain.

Brockwell addressed the business and economic issues he sees with the global supply chain, including the ability of nations and enterprises to simultaneously manage risk and seize opportunity. He described how risk occurs in the product lifecycle and how better supply chain management increases value. For example, he said, a three percent improvement in the order fill rate, on time delivery, paperwork accuracy, etc. can return one percent to a company’s profit margin.

According to Brockwell, every CFO should ask themselves, “What are we doing to maximize the value of our inventory so it gets to the right place, at the right time and at the right cost?” Then, taking it one step further, “How can I react to a world event to get even more profit?” (For example, anticipating a hurricane and shifting supply to be in the new “right place” at the right time.)

The next Global Trade Management session speaker, Hughlett (Hugh) M. Henderson, president of HCI Corporation, Inc., outlined global perspectives and imperatives in supply chain management. One message of Henderson’s presentation was that American companies should diversify their inbound logistics to include multiple countries, not just China. While China may be popular now, he stressed that it is not a “natural ally” of the United States, and this can significantly increase risk.

Henderson, a subject matter expert in Mexican trade, explained why Mexico is ripe for profitable trade with the U.S. He recommended that U.S. manufacturers source 50 percent of their import/export business to Canada and Mexico, 35 percent to countries like Brazil, India and Poland, and only 15 percent to China. Henderson’s presentation also included information on selecting the right export agent/partner.

Luke Ritter, founder and CEO of transportation security consulting firm Trident Global Partners, presented conference attendees with a well-rounded look at “total security management,” or TSM. According to Ritter, businesses have not yet “met security and resilience head on” in their supply chain planning. While many organizations see security as a net cost with no associated return, Ritter pointed out that there is measurable ROI when an organization is committed to securing its supply chain.

“But we haven’t had an incident,” Ritter said, are the six most dangerous words in business today. He stressed that an incident doesn’t just involve terrorism, but rather anything that can negatively impact business operations. He cited several examples of security incidents, including a cargo ship fire caused by mis-declared freight, labor unrest causing a port shutdown and stolen brand identity caused by a cloned Wal-Mart truck.

“We have three options when it comes to security,” said Ritter. “Do nothing and accept the risk, rely on the government for protection, or develop and implement proactive strategies.” Ritter recommended that attendees adopt the latter option and take charge of their company’s own destiny.

Featured Supply Chain Presentation: Leading Responsive Supply Chain Transformation
Donald J. Bowersox, Ph.D., University Distinguished Professor and Dean Emeritus of The Eli Broad Graduate School of Management at Michigan State University

Featured supply chain speaker Donald Bowersox, Ph.D., opened his presentation by pointing out that managing today’s supply chain is certainly not “business as usual.” In this environment, he said, many organizations are finding it necessary to reinvent their enterprise, which he admitted is not a quick fix. Drawing from his current book, Start Pulling your Chain! Leading Responsive Supply Chain Transformation, Bowersox described his four-step leadership change process, which includes awareness, ratcheting, catapulting and endurance.

Detailing his “push to pull” philosophy, Bowersox explained that when you “push” the supply chain, inventory is created. Moving from a push to a pull supply chain process will create a responsive supply chain business model and extinguish the “we’ve always done it that way” mentality. In describing the ratcheting process, Dr. Bowersox outlined the importance of customer connectivity, operational excellence, integrative management and an integrated organizational framework.

When you catapult your business, he explained, you are engaging your supply chain. This involves real-time responsiveness, network leverage (i.e., many-to-many communication) and collaboration to create legendary relationships. According to Bowersox, once you’ve done all these things, you are set to endure. Endurance, or supply chain sustainability, equates to relational leadership in a responsive organization; in other words, a happy and successful supply chain management career!

How the Roles of Supply Chain Partners are Changing
Academic Presenter: Chelsea C. White III, Ph.D., School Chair of the H. Milton Stewart School of Industrial & Systems Engineering at the Georgia Institute of Technology

Chelsea (Chip) White began the conference’s Supply Chain Roles discussion with a presentation on trends in the supply chain and freight transportation industry. Starting on a positive note, he showed examples of healthy trends, such as the evolution of U.S. “mega” shipping regions and global trade representing an increasing percentage of the GDP. He also discussed the forecast growth in U.S. container trade and freight transportation tonnage. And, unlike speaker Hugh Henderson, he placed growth in trade with China in the “healthy trend” category.

Moving to “not so healthy” trends, White discussed growing logistics costs, lower inventory-to-sales ratios, reduced truckload productivity, and infrastructure bottlenecks and delays. Citing port, rail and roadway congestion, White said that it has a dramatic effect on profitability because it slows down supply chains and increases variability.

White built off the healthy and not-so-healthy trends to discuss how today’s supply chain can be designed for productivity and resilience, even in times of uncertainty. “Real-time supply chain control is based on real-time data,” he said. Data comes from many sources, including inventory levels, production rates, weather, freight status and visibility, and just-in-time production rates. The challenge, he said, is to determine, express and utilize the value of real-time data throughout your organization.

How the Roles of Supply Chain Partners are Changing
Integrated Service Provider Presenter: Tammy A. Beil, Vice President of Marketing, FedEx Freight

Tammy Beil continued the Supply Chain Roles conversation from the perspective of FedEx Freight, an integrated transportation service provider. According to Beil, integrated service providers see freight as “inventory in motion” in a worldwide marketplace. When your inventory is in motion, information access is a key component in supply chain management. That’s why shippers of all sizes are now using real-time tracking for their shipments. Beil pointed out that access through technology is the “enabler” of today’s supply chain.

Not only is information access a key component in the supply chain, but information reliability as well. “Forecasting needs to be reliable and technology needs to be actionable,” said Beil. Using Borders as an example, which has 1300 stores across the U.S., she described how FedEx uses technology and real-time information sharing to provide reliability. The company, she said, has dedicated itself to a reputation of reliability as well as innovation and a positive customer experience.

In regard to FedEx’s business partnerships, Beil said that the company strives to communicate relationally, not simply by transaction. She said the company also places a lot of importance upon its social and environmental responsibilities, and views challenges such as security, sustainability, “going green,” and our nation’s infrastructure as opportunities to improve our access to goods, people and information.

How the Roles of Supply Chain Partners are Changing
Motor Carrier Presenter: Dan Singer, Vice President Supply Chain Solutions, Averitt Express, Inc.

Presenting from a motor carrier standpoint, Dan Singer highlighted the supply chain provider’s response to industry trends and pressures. “Sourcing decisions for today’s supply chains call for a higher level of planning, integration and execution,” Singer said. He attributes this trend to domestic economic pressures and industry challenges, as well as the complexity of global shipping.

Singer said that the top three expenses carriers are challenged with are human resources, equipment costs and fuel prices. He also pointed to trade barriers with Mexico and regulatory requirements as key pressure points. Carriers are responding to these challenges both internally and externally through a number of business process modifications. Internally, he said, carriers are making infrastructure changes and externally they are working to expand market share and service offerings.

“The new philosophy,” said Singer, “is to invest in equipment, technology and policy changes to ensure longevity.” He said the “new business footprint” for transportation service providers includes services such as multi-modal transportation, inventory management, transportation management and port-side operations.

Industry Review
Jon A. Langenfeld, Director and Senior Research Analyst, Robert W. Baird & Company

Drawing a connection between the financial health of the transportation industry and the overall economy, Jon Langenfeld said that trucking companies lead the market up or down, and right now the U.S. is in a “freight recession.” He said he does not feel the market has stabilized yet, but statistics are showing that we are nearing the end of this slowdown, which began in January 2006.

“We’re already bottoming on the demand side – the key is when pricing will bottom,” Langenfeld said. He said he believes this will occur sometime in the first half of this year, and once this occurs, the industry will move back toward a higher capacity environment. “Trucking stocks will then lead the market higher,” he speculated.

In regard to longer term (five to ten year) marketplace trends, Langenfeld discussed increased supply chain complexity, sub-GDP U.S. freight growth and regionalization of freight. He also commented on how transportation providers are trying for a broader reach with extended service offerings. “But, I don’t know of one company that has a broad service offering that’s ‘best in class,’” he said. Pointing to a bullish long-term LTL pricing outlook, Langenfeld commented, “Prices must go higher to produce fair returns.”

Legislative and Regulatory Update
John R. Bagileo, Principal, The Law Office of John R. Bagileo

Covering recent legislative and regulatory matters impacting freight transportation, John Bagileo provided his 42 years of trade sense and personal observations to present an all-encompassing viewpoint. He detailed issues with the 2009 Highway Reauthorization Bill, including the possible requirement for carriers to install safety technology on their trucks. While this would incur additional costs on the carriers’ part, a bill has been introduced that would make certain types of safety technology purchases eligible for a tax credit.

Going state-by-state, Bagileo discussed important regulatory matters in the states of North Carolina, California, Michigan and Pennsylvania. He then moved to national matters, including the FMCSA Hours-Off-Service Regulations. He cited the FMCSA’s Interim Final Rule, which became effective on December 27, 2007. The Rule allows commercial motor vehicle drivers up to 11 hours of driving within a 14-hour, non-extendable window from the start of the workday following 10 consecutive hours off duty. The Rule also includes a provision that motor carriers and drivers can restart calculations of the weekly on-duty limits after the driver has at least 34 consecutive hours off duty.

Bagileo also discussed two high-profile court cases, one involving antitrust and fuel surcharges and the other involving a suit by Con-Way Transportation Services to collect on unpaid invoices for transportation services provided to Auto Sports Unlimited. These examples helped carriers and shippers alike better understand how the law applies to carrier pricing agreements. Bagileo rounded out his presentation with an update on SMC³ and the National Motor Freight Traffic Association (NMFTA) in relation to the May 2007 STB Collective Ratemaking Ruling.

Economic Conditions
Alan M. Gayle, Senior Investment Strategist & Director of Asset Allocation, Trusco Capital Management

Investment strategist Alan Gayle outlined why our current economic situation is not promising a strong 2008. Citing market indicators, he discussed national issues such as the housing crisis, a soft labor market, record level energy prices and tight credit. Gayle did, however, discuss positive trends as well, including still-positive job growth, falling mortgage rates, monetary stimuli from the Fed and exports growing at a double-digit rate.

According to Gayle, the weaker dollar has helped boost exports by creating more opportunities for manufacturers and distributors to be competitive. In addition, inflation is historically low, inflation rates are low and falling, and overall global growth is projected to continue. “The question is, how will all that contribute to U.S. consumer confidence?” he posed.

Concurring with Jon Langenfeld, Gayle said indicators are pointing to a bottoming of trucking volumes. “The trucking industry is likely seeing the worst now, but improvement will be slow,” he said. Other predictions by Gayle were:

  • Slow growth and a recession-like environment in the U.S. will continue through the first half of 2008, curtailing global expansion. The consumer will be under the greatest downward pressure.
  • Core inflation is likely to moderate, though the weaker dollar could put a floor under prices.
  • The economic “ease” from the Fed has been more deliberate and decisive, and will likely be completed in the next 3-6 months.
  • A fiscal stimulus package is a real possibility.
  • The second half 2008 recovery is likely to be more “L” shaped than “V” shaped.

Energy Developments
Michael J. Economides, Ph.D., Professor Cullen College of Engineering, University of Houston

Michael Economides, a regularly featured SMC³ industry update speaker, gave conference attendees his insider’s perspective on how production efficiencies and world politics are affecting U.S. energy costs. He said that the actions of political leaders and factions have a tremendous potential for impacting the cost of oil. “If Israel attacks Iran, Al Qaida manages to disrupt Saudi Arabia or Chavez does good on his promise to shut the U.S. off with ‘heavy oil’ we will have $150 per barrel oil,” Economides warned.

Noting that the world’s energy demand is expected to increase 50 percent by the year 2030, Economides said he does not see any immediate solution to our nation’s energy crisis. He explained that solar energy is costly to contain and utilize, equating it to $2000 per barrel oil.

Economides pointed out that nothing else but oil goes to transportation, so we can’t talk about oil independence until we address the transportation fuel problem. He said that if we were to convert all of the corn in this country to ethanol we would only make up for 20 percent of our consumption needs. Still believing that electrifying transportation is the only solution, Economides admitted it is at least “a 40-year proposition.”

Energy Panel Debate
Facilitator: Bob Rosenbaum, Publishing Director, Penton Media

Facilitated by Bob Rosenbaum, this lively panel discussion included individual presentations followed by a Q&A session. In his presentation, Rosenbaum highlighted the “new enterprise strategy,” which is to “optimize total cost, based on manufacturing, logistics, risk and long-term sustainability.” Describing manufacturing’s current goal to go green, he observed that the larger the company the more importance it places on “green” issues. He also pointed out that 78 percent of respondents to a recent industry study said their company will increase attention to green issues over the next three years.

Rosenbaum said the reason for this sudden shift to green is mainly PR-related and that decreased fuel costs, increased supply chain efficiency and reduced risk all fall surprisingly low on the list. Perhaps the most significant changes, he said, are in the logistics service provider sector, where government mandates are causing carriers to become green.

Panelist: Michael J. Economides, Ph.D., Professor Cullen College of Engineering, University of Houston

Dr. Michael Economides began his panel presentation by discussing the government’s Renewable Fuel Mandate, saying that it is a “mandate for something that today’s technology cannot support.” The viewpoint he takes on the subject of global climate change is that it is highly politicized to cause confusion, and that not much if anything can or should be done.

Panelist: Michael McAdams, J.D., Executive Director, Government & Public Affairs, Hart Energy Publishing

Panelist Michael McAdams holds a very different viewpoint to Dr. Economides, which he detailed in his presentation on his work with the Advanced Biofuels Coalition. McAdams stressed that there are many innovative ways to look at energy and the technology that supports it. However, he conceded that America can’t be energy independent without major technological development.

What we need, McAdams said, is a suite of technologies capable of making biofuels. He discussed the taxes and credits that would come along with this in order to make the technology easier to adopt. “Next generation technologies result in improved product attributes…and bring increased volume potential,” he said.

Panelist: Ross E. Eisenberg, J.D., Counsel, Environment & Energy, U.S. Chamber of Commerce

Ross Eisenberg spoke from the viewpoint of the U.S. Chamber of Commerce, the world’s largest trade federation. His work as counsel has made him heavily involved in the U.S. Energy Bill. According to Eisenberg, the concepts of energy and climate change are “completely intertwined.”

He described what he calls an “energy conundrum,” saying that Washington lawmakers are trying to reach four conflicting goals: energy supply/security, climate change, infrastructure and transmission, and air quality regulation. These issues, he said, are causing the U.S. to actually be more dependent on energy because current regulations and technology shortfalls are limiting our forward progress.

Eisenberg said he views complete energy independence as a myth. “Fossil fuels aren’t going anywhere, at least not in this country,” he said. “They’re going to be an important source for our energy supply for the foreseeable future. And the transportation sector especially relies on it.”

More Attendee Comments

First-time and regular attendees alike gave the SMC³ Winter Conference rave reviews:

I have attended many transportation/logistics conferences over my 20+ years in this business. This year, for the first time, I decided to give the SMC³ conference a try,” wrote Stephen Bolger, director of logistics for Highsmith, Inc., a provider of library and school products. “What I found was a group of sessions and speakers that were relevant and on point. All the topics covered were very timely in today's industry. Most impressive was that the speakers had the expertise needed to convey very clear and informed messages. In addition, I did not find myself sitting through ‘sale presentations’ disguised as informational sessions, which I have seen with other conferences. Bottom line - this conference had the most ‘bang for the buck’ of any I've attended.”

Tom Polidoro is vice president of corporate logistics for U.S. Fence. The company, along with its affiliates, is the largest manufacturer and distributor of wood and vinyl siding in North America. Tom has attended the last three SMC³ Winter Conferences, and calls the annual event a “premier educational conference addressing real issues with a consistently high level of the leading specialists as participants and presenters.”

Richard Matthews, logistics manager for automotive accessories manufacturer Lund International, has been attending the SMC³ Winter Conference annually for more than six years. When asked about his 2008 conference experience, Richard wrote, “Absolutely another 100 percent up to the minute coverage from top of the line presenters of many of today’s hottest issues.”

Mark Your Calendar Now!

SMC³ holds two annual conferences as a service to professionals working with freight transportation. Each of the two conferences is packed with industry information that you need to make better, more informed business decisions. What’s more, each conference event provides unrivaled business networking opportunities. Now is the time to mark your calendar for the SMC³ 2008 Summer Conference, which is scheduled to take place June 25-27 in Boston. Watch your inbox for more information, coming soon.