In anticipation of his presentation at JDA’s Innovation Forum in Chicago on September 10, Supply Chain Nation sat down with Rick Blasgen, president and CEO of CSCMP, as part of our Expert Insight series to get a preview of his presentation on the State of Supply Chain Management. Here are some highlights from that discussion.
SCN: Supply Chain Management has undergone tremendous evolution in the 50 years CSCMP has been in existence. What have been the biggest changes in the past 5 years, and what is next?
Blasgen: When CSCMP was founded back in 1963, it was known as the National Council for Physical Distribution Management. Then in the 1980s it evolved to the Council of Logistics Management, which was reflective of the integrated functions that made up logistics back then and how they had to communicate effectively with one another, then once again to the CSCMP. As the council has evolved over the last five decades, our discipline has also evolved to become much more core competent. In just the past five years it is becoming a core competent business entity within progressive companies. While we have traditionally been known for controlling costs — which we have shown that we can do effectively — we are now becoming fast movers in generating revenue and doing things for our customers that we may not have been able to do in the past. That is going to drive talent needs and the discipline is fast becoming a destination for really high caliber, qualified talent. We understand what works in the supply chain, we are more educated in the discipline today, and that is an area where I see us driving global business. In the global expansion of supply chain, we have become financially astute and knowledgeable of what it takes to reap the benefits, while also dealing with the challenges of risk and sustainability. There will be no shortage of opportunity over the next five years, but just think of what value we will bring to the companies we serve.
SCN: How do supply chain practices vary between the U.S. and other parts of the world?
Blasgen: In June we released our State of Logistics Report indicating that logistics expense in the U.S. is 8.5 percent of GDP. When you compare that to countries like India or China, you’ll find that we’re at a much lower percentage. We’re doing a better job at that and we’re much more productive. When you travel to those countries the first thing you notice is infrastructure. The U.S. still needs to make repairs and further invest, but in other countries, for example, there are no cold supply chains or distribution capabilities with extensive consolidation functions, or warehousing and transportation functions that are seamlessly connected like we enjoy for the most part here. Infrastructure and regulations provide barriers in other countries, yet supply chains are global and best practices are being brought forward into these countries. But vast differences do exist and supply chain practitioners are on the forefront of helping to bring best practices to those countries that have the wherewithal to adopt them.
SCN: Production costs have been the driving force over the past decade for outsourcing to low cost countries, but that seems to be changing as transportation costs, the need for agility and speed to market have taken on more importance. Where do you think we are at in this evolution and what do you think the future will look like in this regard?
Blasgen: I remember when a barrel of oil was $30 and when it went to $31, everyone freaked out. But as supply chain leaders are conditioned to do, we went out and found the lowest cost labor in places like China and other Asian countries. Now we see the labor rates in China skyrocketing to where the gap between U.S. and Chinese labor rates has diminished. That has played a very important part in what is going on now in terms of bringing manufacturing back to parts of the U.S. and other North American countries.
There is also the cost of fuel which unexpectedly shot up to $140/barrel. You had a length of haul issue which generated more transportation expense. There were also quality and IP issues from sourcing in those parts of the world. And as you mentioned, agility and speed to market are also critically important to serve our customers. A lot has been learned from all of that.
Today we are elevating the professionalism in many of the source points. I think things will get a lot better from the learning that has occurred. It’s hard work and you run into things you don’t anticipate — not only geopolitical issues and things of that nature, but also the risk that goes on in the extended supply chain. But I think things will advance pretty quickly and we will be able to globalize and standardize best practices in those countries so everyone will be able to take advantage of total global sourcing and total global lowest delivered cost.
SCN: Rick, thanks so much for your insights. In part II of this blog, we’ll learn Mr. Blasgen’s thoughts on supply chain segmentation, the changing roles of forecasting and planning, and what is being done about the talent gap. Look for part two of our conversation in the JDA Expert Insights blog series on Thursday, August 22.
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JDA Software Senior Vice Presidents of Manufacturing, Distribution & Retail, David Johnston and Wayne Usie, invite you to the upcoming JDA Innovation Forum’s in Chicago, New York and Santa Clara.