When the poet Robert Burns wrote that the best-laid schemes of mice and men often go awry, he could just as easily have been writing about the 21st century supply chain. As Hurricanes Katrina and Rita so powerfully reminded us, disruption to the smooth flow of goods is inevitable—it's just a question of where and when. And it doesn't take a disaster on the scale of Hurricane Katrina or the 9/11 attacks to wreak havoc on a supply chain; a collapse can be triggered by something as ordinary as a broken-down truck.
How do you prepare for the unforeseen? How do you come up with contingencies without knowing where the next disruption will occur? Corporate America may be reluctant to confront these questions, but not the folks at the Massachusetts Institute of Technology's transportation think tank. Researchers at the Cambridge, Mass.-based institute's Center for Transportation & Logistics grapple each day with the problems of how to build a more resilient supply chain, one that can withstand disruption whether it's caused by forces of nature, forces of evil, or anything else that might come along.
One of those researchers is Dr. Chris Caplice, who is both a principal research associate at the center and executive director of the school's Master of Engineering in Logistics (MLOG) Program. Caplice and his students right now are engaged in research about how to build a more resilient company—one that can bounce back from catastrophes like the 9/11 attacks or Hurricane Katrina as well as the more ordinary setbacks (say, a highway closure) that occur in the daily course of business. And importantly, they're working to get the message out into the real world.
Caplice, who earned a bachelor's degree in civil engineering from the Virginia Military Institute and a master's in civil engineering from the University of Texas, received a Ph.D. in transportation and logistics systems from MIT in 1996. His dissertation, "An Optimization Based Bidding Process: A New Framework for Shipper-Carrier Relationships," was selected as the winner of the Council of Logistics Management Doctoral Dissertation Award. Prior to joining MIT, Caplice held senior management positions in supply chain consulting, product development and professional services at several companies, including Chainalytics LLC and Logistics.com. Caplice also served five years in the Army Corps of Engineers, attaining the rank of captain.
DC VELOCITY Editorial Director Mitch Mac Donald caught up with Caplice this fall to discuss the need to prepare for uncertainty, why he makes it a point to get his students involved in his research (no, it's not about cheap labor), and the virtues of what he calls "friendly freight."
Q: Can you tell us a little bit about how MIT sees its role in the push to advance the logistics profession and describe your own role in the quest?
A: There's really no MIT perspective per se because there are so many different players at the institute. Every professor is essentially a cottage industry unto himself. I myself am with MIT's Center for Transportation and Logistics, or CTL, which was founded in the '70s as the Center for Transportation Studies.
What we do at CTL can really be boiled down to three things. The first is research. We receive approximately $10 million in research funding each year from both private industry and the government. As part of that, we run a vibrant corporate exchange program in which member companies trade information and best practices.
Second, we have an education track. The primary education track is the program that I run called the Master of Engineering in Logistics, or MLOG, program.
Third, we're trying to develop new supply chain knowledge and disseminate that knowledge. We try to spread that knowledge not just via the academic literature, which is very important, but also by getting it into practice. That's why our corporate exchange and outreach program is so critical. We really try to get new ideas out, bring people together and disseminate new ideas. The knowledge transfer, the technology transfer, that's the big focus.
That said, it's important to us to tie those three branches—research, outreach and education—together. My main role is leading the education track, but I also do research, predominantly in transportation. I also make it a point to involve the students in that research. These are the people who will populate the profession and supply chain for the next 10, 20, 30 years. That is really just another way of disseminating—by feeding the profession, if you will.
Q: Based on what you've learned from your research and your corporate exchange program, what do you see as the top two or three issues facing the profession right now?
A: That's a good question. Certainly one of the key issues is the ongoing quest to raise awareness of the importance of operations, which is really what the supply chain is all about, at the senior level. That's not to say the supply chain profession hasn't been gaining visibility. Lucent, for example, has a supply chain officer who's one of the lead corporate officers now. Yet we still have a ways to go. When I held a transportation symposium here in April, one of the key questions we were unable to get answered dealt with what your boss knows. We spent considerable time discussing the problems we face right now with transportation capacity and all that, but the thing is, very few people could say for certain the extent to which the upper level executives in the company were aware of this particular challenge or understood how deeply it could impact operations.
The other thing we're hearing a lot more about lately is the need to prepare for uncertainty. The way we used to approach it was by ignoring it. In all of our optimization models, we would assume away a lot of things. There has been more and more evidence, though, that it can't just be ignored. Whether it's a factory shutdown, a labor strike at a port or something as unpredictable as the 9/11 attacks, we've got to find ways to be prepared.
These big things get our attention and make us think. It's important, though, to recognize that it's not just about preparedness for these large events; it's also about being prepared for snarls in everyday operations. It's about building a more resilient company in general. I'm seeing more and more focus on that and the development of better tools, approaches and methodologies to handle that within an organization.
Q: What do you see percolating to the top? Have you identified some best practices for dealing with uncertainty?
A: There are some technical things that are coming along. For instance, we're integrating some simulation models in real-world operations to create robust optimization scenarios. There are also some technical approaches that are getting a little more visibility, and being applied a little more, that aim to measure the true cost of activities across the supply chain. The results often point out why it's not always best to go with the low-cost solution. Then there are the various methods of disseminating information up the ladder and of convincing people of the need to plan for these potential risks.
Q: What do you see percolating to the top? Have you identified some best practices for dealing with uncertainty?
A: There are some technical things that are coming along. For instance, we're integrating some simulation models in real-world operations to create robust optimization scenarios. There are also some technical approaches that are getting a little more visibility, and being applied a little more, that aim to measure the true cost of activities across the supply chain. The results often point out why it's not always best to go with the low-cost solution. Then there are the various methods of disseminating information up the ladder and of convincing people of the need to plan for these potential risks.Q: Let's drop altitude a little bit and talk about some things of a more tactical nature. I've heard you speak a couple of times and you very often comment on the need for shippers to work cooperatively with their carriers to boost efficiency. You link it to a concept you call "friendly freight."
A: The whole idea—and I've been playing around with this since I wrote my dissertation on shipper/carrier relationships in the early '90s—is that anything you can do to make your freight more carrier-friendly, anything you can do to make their job easier, will help you in the long run. That doesn't mean you have to hand over the farm, but you at least have to be cognizant of opportunities.
I'm seeing more shippers starting to pick up on some of the things that the guys at the warehouse have known for years and years. They're starting to think about what drives carriers' costs. They've figured out that with trucking, the more you keep the truck on the road (that is, not sitting idle at the dock or in the yard), the lower your rates will be. As a result, they're looking at ways to cut dwell time—the time it takes for a trucker to come in and actually get loaded or unloaded—whether it's by setting up a drop-and-hook program or focusing on fast release or fast entry.Q: The idea is that you have everything to gain by making it as easy as possible for carriers and suppliers to do business with you?
A: No question about it.
Q: Let's talk about today's logistics professional for a moment. Are there any particular skills that today's professionals need that might not have been so important in the past?
A: I'm very biased. I am a structural engineer by undergrad training. I took a circuitous route to where I am today, from structural engineering to transportation engineering to transportation to logistics and supply chain management. With that background, I tend to focus on finding interesting problems and trying to solve them. In civil engineering there are challenges, but there's also a lot of "cookbook" type work going on. It's different with logistics and the supply chain.As you look deeper and deeper into logistics and supply chain issues, you realize there is no "cookbook" yet. I think today's logistics or supply chain professional needs to be a problem-solver—someone who can go in and identify the problem, analyze it, look at what's important, and come up with a solution.
Now, having said that, the biggest weakness of any engineer, myself included, is that we can't write, talk, and, you know, work with others. That's why we approach the M-LOG program the way we do here at MIT. We're really focusing on some of those leadership skills: Can you make an effective presentation? Do you know how to lead? Do you know how to work within a team and with outside parties? I guess I see two skills as being most important. The first is being able to attack a problem, analyze it, come up with a good solution and implement it. The second deals with change; being able to introduce change, manage it and make it actually happen.
Q: Let's look out at the horizon. What's going to rock a logistics professional's world in the next five or 10 years?
A: That's another good question, but really, it's not the specific development that matters so much as the way we react to it. The thing that I love to see now is the way that people have become used to things happening. Change is nothing. It has been constant. Think of all the things we've seen that have brought about change. Right now, it's RFID that's supposed to change our world. Before that it was the Internet. Was it EDI before that or did I miss a revolution?
Q: There might have been a minor skirmish or two along the way as well.
A: A I think the big lesson we've learned is to roll with change. For example, it could be that fuel is going to double in price. If that happens, perhaps we'll all simply open up more DCs and put them closer to the customer.
Q: Yes, the pendulum swings: One year it's "We've got to centralize." Five years later it's "We'd better regionalize."
A: Oh, it always goes back and forth. But based on my discussions with people out in the field, it does appear that manufacturing and sourcing will constantly be in flux in the coming years and we're just going to have to be more flexible.We'll need to be prepared to coordinate across the globe, across multiple players, and, of course, among a changing roster of players.
Q: In other words, as a logistics professional, you must embrace and truly live the notion that the task will never be finished, there will always be changes, there will always be new variables?
A: I would absolutely agree with that.
Q: If you could pick just one thing that you absolutely, positively would want to instill in your students to prepare them for a career in this field, what would it be?
A: Intellectual curiosity—the quality of being inquisitive, of being alert to potential problems and to want to solve those problems. Say you're going through a warehouse and you see a bunch of boxes piled up on the side. I'd want my students to start asking: What's that all about? I urge my students to ask questions instead of just accepting what they've been told.
Q: Before we wrap, I'd like to touch briefly on the implications of the expanding globalization of operations. Where will this trend lead us? Do you think operations will continue to change? Do you think globalization will continue to expand?
A: I think so. I don't know where exactly it's going to expand, but I think it's definitely going to change how things are done. We're also going to see more and more traditional products turn more service oriented. Think of the music business, where many products are now delivered digitally. I live right in downtown Boston. When we moved in three years ago, there were four music stores. Today, there's just one left. Books are probably going to be next. It may take five, 10, or 15 years, but more and more of these data-centered things are going to go digital. It's going to change the way we ship and the way we do business.