Top supply chain executives remain wary on economy

There is a light somewhere on the horizon, but the tunnel remains a very long one.

That was the prevailing view of top supply chain executives of two of the nation's biggest retailers and a multinational consumer goods manufacturer speaking on Tuesday at the National Industrial Transportation League's annual meeting in Fort Lauderdale, Fla.

"We keep bouncing along the bottom," said Joseph "Mike" Mabry, executive vice president, logistics and distribution for home improvement giant Lowe's Companies Inc., when asked about the outlook for the economy and retailing. The time frame for an economic recovery "keeps getting pushed out," Mabry said.

His comments were echoed by Richard Wallace, vice president, supply chain operations at retailer J.C. Penney Co. Inc. "It's still a tough market out there," he said.

Brian Hancock, vice president of supply chain for Whirlpool Corp.'s North American division, said elevated unemployment levels and a still-weak residential housing market have kept consumers wary about buying big-ticket items like household appliances unless the price tag represents a significant markdown. Retailers have been very willing to oblige the end customer, Hancock said, leaving manufacturers to do whatever's necessary to maintain market share.

"You are only as good as your crazy competitor," Hancock said.

In such a brutal environment, it has never been more important for the supply chain to effectively manage transportation spending, the executives said. "Transportation costs are the trump card," said Mabry.

The executives said they expect to ramp up their use of intermodal, especially as transit times and delivery reliability continue to improve the mode's value proposition. "Intermodal service has becomes so good that we are using it more," said Hancock.

"We want to use intermodal more frequently," added Wallace. In an unscientific poll of attendees at the panel discussion, respondents—many of whom were shippers—said they expected the shipping community to boost spending on intermodal services in 2011.

Wallace of Penney sang the praises of Vancouver's Port of Prince Rupert, through which the company's ocean-freight consignments from Asia reach the Midwest four days faster than via the traditional transloading off the U.S. West Coast. "Prince Rupert is a real winner for us," he said.

Despite the transit time improvements, Wallace said moving freight in a timely manner through Chicago to Penney's East Coast distribution centers or direct to its stores remains the company's biggest supply chain challenge. "I wish I could solve Chicago," he said.

Hancock was bullish on Whirlpool's use of an expanded Panama Canal when it opens for business in 2014. The expanded canal "will be a big win for us," Hancock said, noting Whirlpool's huge and growing presence in Latin America and its need for big box container capacity, which the enlarged canal will be able to handle.

However, Wallace was more measured in his outlook, saying that although an all-water route from Asia to the East and Gulf Coasts may be less expensive than transloading off the West Coast and moving freight inland via truck or rail, it may not provide the relatively fast transit times needed to satisfy customer requirements. "We're guarded about the Panama Canal," he said.

The executives agreed that while supply chains may be leaner than ever, inefficiencies will always exist in a dynamic network. "There's waste everywhere," said Hancock, noting that a Whirlpool team meets several times a month to discuss efficiency enhancements. "Any time you have product in motion and variability, there's waste."