The Role of Transportation in Supply Chains and Business

6

But it's not that way anymore. All of a sudden transportation is mission-critical. So I'll ask you just in general how do you deal with these factors? Just in general. About the only thing you know for certain is that it's not going to be certain. So you need people and models to be able to deal with the uncertainty. That's a very complicated set of circumstances and there are a lot of things that work to make supply chains complex. So we're going to do a little complexity exercise here for just a second. And this is related to a phenomenon in thermodynamics. I bet you never thought we get into thermodynamics in a transportation class. But there is a phenomenon in thermodynamics called entropy. Anybody know what entropy is? Somebody said disorder. It's related to disorder. The basic idea is any system left unto its own without intervention will run into chaos. So how in the world does that relate to a supply chain? If you graph the complexity of a system versus the performance of that system, what do you think the graph looks like? Now before we get into this let me apologize right out of the gate. My handwriting is atrocious. This goes all the way back to the sixth grade. Back then for your report card you didn't get A, B, C, D, F. I think they were afraid to give anybody an F. C was commendable, S was satisfactory, and N was needs improvement. And I would get all commendables except for two areas. One was handwriting and the second was talking too much. It's the same today. My handwriting is still bad and I have never finished teaching a seminar. The other thing I discovered with handwriting is if you write poorly enough and you don't spell very well, people will imagine that it's spelled correctly. I don't know what it is. So that says logistics complexity and performance on one axis and complexity on the other. What does that graph look like? If you put complexity on one axis and performance on the other, and by performance we might as well get that on the table. In this class is going to be a function of three things. Productivity, accuracy, and response time. There's a real simple way to remember that. It's called PAR. For me is a miracle and for Tiger Woods is a disappointment. Productivity, accuracy, and response time. So what does that graph look like? Performance versus complexity. The more complex the system, the worse the performance. That phenomenon as we have done studies in logistics over the years, it plays out in a warehouse, it plays out in an inventory system, it plays out in a transportation system, it doesn't matter what type of system it is. So what I want to ask you for just a second is, what factors contribute to complexity in logistics? What makes one logistics system more complex than another? Very good, time windows. What we have found recently with our consumer products clients is like with the Walmart time windows, they're very strict and difficult and so the cost to serve Walmart from a transportation standpoint is sometimes 15 or 20 percent higher than serving anybody else because of those time windows.

The Role of Transportation in Supply Chains and Business | © RightChain Incorporated | All Rights Reserved