DC Velocity - September 2010

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supply chain contemplates post-recession future

THE BOMBARDMENT IS OVER, OR AT LEAST IT HAS abated. Shell-shocked logistics executives have emerged from their foxholes to face a future that they can only hope is better than the recent past.

The recession has left indelible scars on the supply chain. No one with two digits to their age is likely to recall a decline so swift and severe. Few would doubt that the industry is now in recovery mode, but fear still trumps optimism.

“Many of our customers went through a near-death experience,” said Vincent W. Hartnett, president of Penske Logistics.

Given the recession’s ferocity, it might appear that the industry would treat the recovery—for as long as it lasts—with sober reflection. But some veterans say history indicates otherwise.

“When you come out of a recession, only 10 percent of the costs you save [during it] are sustainable,” said Thomas W. Speh. Speh, the James Evans Rees distinguished professor of distribution at Miami (Ohio) University’s Richard T. Farmer School of Business, made the observation at a press conference following the early June release of the 2010 State of Logistics Report. “My concern is we are going to forget some of those lessons,” he said.

Detlef Trefzger, a member of the board of management for contract logistics and supply chain management for the German giant Schenker AG, takes a more optimistic view. He thinks the change in customer attitudes has staying power.

“People are more focused and more committed to solutions,” Trefzger
said in an interview later in June. “Before the recession, we discussed
strategies with our customers that were nice to talk about but never
implemented. That has changed.”
Trefzger doesn’t think the crisis has passed. However, he sees growth con-
tinuing across all of Schenker’s regions and is optimistic about next year.

One sign of customer skittishness can be found in the absence of even an intermediate-term outlook. Trefzger said it has become virtually impossible to forecast volume patterns beyond three-month cycles, especially in industries like auto manufacturing that have volatile sales activity. “We have tried to reduce our lead times for future investments and have tried to not end up in long-term commitments,” he said.

Jim McAdam, president of APL Logistics, the logistics arm of shipping giant APL, has a different view. He said that importers, many of them in the retail trade, have seen their order books “strong and strengthening” throughout the year and heading into the end of the peak holiday season inventory replenishment period. McAdam said he sees nothing on the horizon to support concerns about a marked economic slowdown. Trade in and out of North America accounts for 60 percent of APL Logistics’ revenue.

McAdam said an enduring lesson from the downturn is for customers to develop tight strategic bonds with service providers instead of jumping back and forth looking for the best rate. “I think many cus- p. 15

The Material Handling Industry of America (MHIA) has announced the launch of Modex, a new trade show and conference. The inaugural event will be held Feb. 6–9, 2012, at the Georgia World Congress Center in Atlanta.

The exposition will have a material handling and logistics profile that is similar to the organization’s biennial ProMat show and seminars, said John Nofsinger, MHIA’s chief executive officer, in a statement. “However, the Modex event will additionally incorporate a broader array of technology, services, and educational offerings that serve the overall supply chain—hence the event’s tagline, ‘Solutions That Move Supply Chains.’” The show’s areas of focus will include equipment and systems solutions as well as learning opportunities that cover the entire supply chain, from material handling to logistics and manufacturing, assembly, and distribution, MHIA said.

MHIA, which represents material handling and logistics equipment and systems manufacturers, integrators, consultants, and logistics service providers, expects to draw some 500 exhibitors to the first Modex show. MHIA will also invite other industry groups with which it partners to co-locate at the event.

The association chose Atlanta for the first Modex show because of its role as a gateway for American supply chains. More than 40 percent of North American manufacturing and distribution locations are situated within a 500-mile radius of the city, and the region is home to extensive intermodal and logistics hubs, global third-party logistics service companies, and large retail distribution centers, Nofsinger said.

Nofsinger made it clear that Modex will complement ProMat, which he said “will continue strongly positioned in Chicago.” Modex will replace MHIA’s North American Material Handling and Logistics Show, which had been held in the years when no ProMat show was scheduled.