POINT OF VIEW
Amar Ramudhin is director of the Center for Supply Chain Management & Technology at Georgia Tech’s Supply Chain & Logistics Institute, Atlanta.
It is the most recognized in the United States. Amar Ramudhin is a Montrealer and former prof at Laval University and École de Technologie Supérieure. He is also the president of BlueSail Solutions, a professional services firm located in Quebec City. We met with him during his visit to the Port of Montreal, where he took part in an information and brainstorming event with port managers.
Technology and logistics
You state that the supply chain has become more complex in recent years. For what reason?
For 20 years, globalization has been putting a distance between production sites and markets. Large manufacturers seek locations that offer lower manufacturing costs, for example in Asia. As a result, there are more intermediaries on the path a product takes before reaching the end customer, and supply chains become more complex. Often, parts are manufactured at site X, shipped to site Y for assembly, warehoused in site Z and then moved again to the end consumer market. All this complexity inevitably ups supply costs.
What makes a complex supply chain harder to manage?
For one thing, despite the more burdened supply chain, giants like Wal-Mart stick to their JIT policy and try to keep their inventory at 30 days tops. Under these conditions, a ship running late is a big problem! Also, every time a container changes hands, there’s a higher risk of loss and error. This means compromises must be made between the rolling stock, transit time, buffer stock and the quality of service, all while factoring in the various related costs.
What solutions do you see for improving supply chain management?
We could consider, for example, adopting international standards in order to harmonize import-export processes, transportation and the visibility of planning data. Adopting the standard is a key component in managing, for example, the cold chain, which covers the quality of perishable food in transit. Many farmers in developing countries do not have a good understanding of food conservation conditions. For lack of a cold chamber, they use refrigerated containers to store products, and some even unplug the refrigerated containers at night to save energy. There are huge losses in the cold chain! Adopting international standards would lead to better understanding of food handling and would cut these losses.
Along the same lines, we can also take advantage of new technologies.
In what way could new technologies help improve supply chain management?
Good information tools can help in making the right choices to minimize costs related to the logistics chain: where to produce? Which carrier to use? What port to transit through? Where to store the cargo? You know, certain ports with lower labour costs are getting equipped with warehousing services so that large retailers can fit them into their supply chain.
In the supply chain itself, we must use technology to implement product-tracking tools. Currently, importers, for example, cannot monitor their container when it moves, let’s say, from the hands of the marine carrier to the land carrier. The different stakeholders in the chain work mostly in isolation. Imagine if you could collect data according to a globally accepted standard and distribute the data to every stakeholder in the chain. That would be wonderful!
The various players in the supply chain must be persuaded to show greater transparency.
Here again, a good information sharing system makes it possible to coordinate the actions of various players, who realize that it’s to their advantage to work together instead of in a climate of competitiveness.
Take the case of Panama. There are four ports around the Canal: Balboa on the Pacific coast and Colon, Cristobal and MXT on the Atlantic. The two coasts are connected by rail. For all sorts of reasons, some carriers would rather tranship containers to trains once they arrive at the Port of Balbao and reload them on another ship in Colon, instead of sending their own ship through the canal.
At the Port of Balboa, about 80% of containers are transhipped and about 30% go by train. Port authorities, marine and rail carriers; all these players depend on each other. When a ship is late, it holds up the train, which in turn delays a ship on the other side. Everyone gets frustrated, and the customers? Not happy!
If Panama wants to maintain its status as a global transhipment port, all these partners must sit down at the same table, talk to each other and listen to each other. And this communication goes through sophisticated information sharing systems.
More and more we talk about connectivity between ports. No doubt about it, new technologies are expected to play a leading role.