A champion for supply chains: interview with Kevin Smith
When it comes to the supply chain's value to an enterprise, there's more to it than most companies realize, says Kevin Smith, CSCMP's new chairman. He aims to get the word out.
For Kevin Smith, it all started with a job unloading freight cars at a General Mills warehouse in Massachusetts. That was the entry point for a distinguished 30-plus-year career in logistics and supply chain management that has included executive-level positions at some of the world's best-known companies. For instance, prior to his retirement in 2008, Smith served as senior vice president supply chain & logistics and corporate sustainability officer for CVS Caremark. Before that, he worked for H.J. Heinz, where he was vice president of logistics and customer support, and for Kraft Foods, where he was the director of network design and implementation. Today, he is president and CEO of his own firm, Sustainable Supply Chain Consulting, which he started after retiring.
In September, Smith began a one-year term as chairman of the Council of Supply Chain Management Professionals (CSCMP). In addition to his CSCMP post, he is a special adviser to World 50, a private community for senior-most executives from globally respected organizations, and its Supply Chain 50 subgroup. Smith also serves on the advisory board of the Massachusetts Institute of Technology's Center for Transportation & Logistics.
Smith spoke recently with Editorial Director Peter Bradley about his goals for CSCMP, the relevance of trade groups in the age of the Internet, and why the supply chain should get more respect.
Q: Congratulations on becoming the CSCMP chairman. My first question is what are your principal goals for the next year?
A: When I think about furthering the progress and development of what we do in supply chain management, I think there are three challenges: We have to provide foundational information for people to use in their own personal development. We need to build an appreciation of the importance of what we do as an industry. And we have to help supply chain managers develop the confidence to change, innovate, and involve—to make supply chains more effective, efficient, and important to their individual enterprises.
Name: Kevin Smith Title: Chairman Organization: Council of Supply Chain Management Professionals
Title: President and CEO Organization: Sustainable Supply Chain Consulting
Special advisor to World 50, a community of senior executives from organizations across the globe, and its Supply Chain 50 subgroup
Advisory board member, Center for Transportation & Logistics, Massachusetts Institute of Technoogy
CSCMP Member: since 1986
Q: How do you accomplish those goals?
A: Well, of course, you've got CSCMP as a network that can connect all kinds of people. Whether it's based on a particular business issue or it's mentoring or just networking within the industry, we have the wherewithal to do that because we have a lot of members who want to share either information or experiences.
We also have a lot of educational information, a lot of educational programs, a lot of pre-existing research that can be helpful to people trying to solve problems for their businesses. We've got all this content. The question is, how do you make it readily available to people in such a way that they recognize the importance or the value it brings to their enterprise? That is the tricky part.
Once they have that, it could help them develop confidence to take chances, introduce innovations, and actually try to look at the supply chain as something very positive for the enterprise.
I have seen this repeatedly, especially in 2008. In 2008, we hit the skids. Supply chains became very important to businesses. Why? Because the supply chain had the ability to influence both the top line through the way we dealt with customers and the bottom line in terms of saving money and decreasing costs within the enterprise. When that happened, it was almost like a switch went on, and CEOs and CFOs suddenly realized that supply chains could play an important role in making sure that the companies, in some cases, literally survived that first couple of years.
Now, as the environment improves, as the economy improves, I think there's a tendency to try to put supply chain operations and supply chain management back into the backroom and let the sexy marketing take over again. That has been the premier activity within the enterprise. I'm not sure that is wrong, but I think what is wrong is for companies or enterprises to totally disregard the importance of supply chain even in good times. The ability to control costs, to reduce costs for the enterprise, is very important. More important, though, is the ability of the supply chain to develop a relationship with the customers and clients, so that those customers and clients want to do more business with the enterprise. So to discount that and push it off to the side and focus your company on just marketing or just finance, I think you are losing something. We have a challenge within CSCMP to bring all that out into the open so CEOs and companies recognize the value of supply chain not just in cutting costs, but also in growing business.
Q: One of the challenges, not just for CSCMP but for every trade organization, is holding onto and building membership. Why do you think that is so, and what approach will CSCMP take to build membership?
A: When did membership in professional organizations start to wane? Some would say it was 9/11. A lot of people were afraid of traveling, and companies used it as an excuse to say, "Let's curtail travel." It actually started before that. The advent of the Internet and the "wiki" world that we live in, I think, has given people this false impression of where they can get knowledge and useful information.
I think it's a very small percentage of people that actually take that information and transform it into something that's really useful. I think as human beings, (it is) much more important to have interaction and to network with people, especially the people who have actually done what you're trying to do.
So, we've got what we call "the lifecycle" at CSCMP. We try to get people involved in CSCMP and supply chain from the time they are college students up to the time when they are senior fellows like me. So we categorize people as students, young professionals, mid-career, senior leaders, and senior fellows. You can participate in CSCMP whether you're 18 years old or 88. You just participate at a different level. What we're trying to do is develop an information network where people are able to participate no matter where they are in their career.
Q: You've been a supply chain professional for a long time, and now, in your current role, you see a lot of businesses. What do you see as the biggest challenges folks in our profession are facing?
A: As I said before, I think a lot of it is economically driven through the C-suite. The challenge for CSCMP and the challenge for enterprises over the next couple of years will be to try to capitalize on supply chains and leverage what the supply chains have to offer. In many businesses, the people who have the face-to-face interaction with companies, besides the individual salesperson, are the supply chain people. It is the supply chain that has to deliver in the end and look the customer in the eye and either say, "We've done what we promised to do" or "We failed in what we promised to do." So that relationship, I think, in many ways is as important as the sales-to-customer relationship—and in some cases, it is more important because the last and final impression that a customer gets is whether or not the product was delivered on time, complete, and free of damage. If the supply chain is doing all of those things, you're probably going to build a really good relationship with your clients. If it's not doing those things, then you're going to be in big trouble.
Q: Right, which goes back to the old silo argument we've been having for decades. If the merchants and sales and marketing people aren't talking to supply chain, you may have some issues.
A: Right, and, you know, I think a lot of companies have done a better job with that over the last few years, especially since 2008. Back in 2004 or so, 30 percent of companies had a position called supply chain or logistics that was either in the C-suite or reporting directly to the C-suite. By 2011, 80 percent of Fortune 500 companies had that position, supply chain or logistics reporting to or in the C-suite. There has been a recognition that supply chain management is important to the enterprise. The trick is keeping it top of mind because when things get good, when the economy is booming, when you can't help but sell things, enterprises lose track of the fact that the supply chain is important, and they only come back to that realization when things get tough.
Q: Wall Street pays attention to supply chain these days, too.
A: It does. But again, I think that has been more since 2008. I can recall being the first supply chain person at CVS to ask to present at an analysts' meeting in New York because of all the things we just talked about—the fact that we had a story to tell and it was not just about how we were cutting and controlling costs, but how we were adding to the value proposition on the top line.
We have certainly come a long way. The trick now is to make sure that we keep our value proposition front of mind so people understand that we're not just the backroom people who ship stuff and store stuff, but that we are also a part of the enterprise that helps add value to whatever product or service is being provided.
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.