For openers, what's a triple witching hour? In the financial community, the triple witching hour is the last stock market trading session on the third Friday of March, June, September, and December. Three types of securities expire then, and huge trading volumes, often accompanied by wild price swings, are generated. So, this is the culmination of known trends and progressions.
In comparison, a "perfect storm" is the confluence of somewhat random, and otherwise unconnected, negative events. In the supply chain universe, we experience both types of combinations.
What's worse than the triple version of either is a quadruple variant. What's worse than that is a quintuple—and so on.
TODAY'S LOOMING EVENTS AND DEVELOPMENTS
So, whether the next wave to wash over the rocky shores of supply chain management is more a witching hour or a storm, imperfect or not, we need to be alert and aware to possibilities and probabilities. Something is coming; there is always a dark cloud on the horizon, no matter how sunny the day. What follows is a look at some of the looming challenges:
• Dim weight parcel pricing: Let's begin with the highly visible, and somewhat controversial, implementation of dimensional weight pricing for parcel shipments. In the short haul, pun intended, costs for parcel shippers of any consequential volume will go through the roof. Ultimately, thoughtful and proactive companies will mitigate the cost consequences by more intelligent packaging and carrier/mode decisions.
But reaching that equilibrium will take time, and everyone will experience some level of chaos in the interim. Shortsighted shippers may never get it quite right, and we could see shakeouts in the marketplace, with re-allocation of volumes and market repositioning, not to mention business failures, as outcomes.
• Energy and fuel: We may be getting lulled into a false sense of confidence, with drastically lower fuel prices at the pump. We are generating all kinds of energy internally, and Saudi Arabia has just announced a substantive reduction in per-barrel pricing for crude oil. Sleep with one eye open, friends. There is no reason to think that fuel prices will stay low forever.
Global demand—and diversion of domestic production into Europe as a counterweight to the disproportionate power of Russia in supplying the Continent with gas and oil—will ultimately act to drive our prices higher. And the current boon of less pressure on transport costs could disappear overnight.
• Labor and talent capacity: You can't pick up any journal, magazine, whatever, without getting the shakes over either the probability or immediate actuality of talent shortages throughout the supply chain. We see, btw, parallel shortfalls throughout manufacturing, one of the supply chain's major components.
We need, now, and simply don't have, skilled tradespeople. We are looking, not only at the bottom of the barrel, but under the barrel as well, for analysts, engineers, planners, supervisors and managers, IT professionals, network designers, strategists, and on and on. There are just not nearly enough to go around. Whatever talent surpluses there may be are likely not qualified, or contemporary, or multiskilled, or enterprise-aware enough to fill gaps of any significance.
We don't have enough truck drivers, particularly for long distance over-the-road transport, and the gap is growing daily. We don't have enough pick/pack distribution center operatives, certainly to support future needs, and in specific areas of the country, enough to fill immediate needs and/or support future growth.
Remedial programs to retrain, upgrade, bring into the supply chain management (SCM) arena, build from a foundation of military skills for civilian application, and target trade-level vocational training and education are woefully insufficient, uncoordinated, and hit-or-miss bits and pieces of a mere slice of a long-term solution.
Get ready. You are not going to be able to find people to do the job. And your chances of stumbling into a mob of a couple of thousand seasonal workers are dwindling rapidly. How will you deal with the backlash from being unable to meet customer demand for a base with high performance expectations?
• Wages: Hang on to the safety railing, and don't look over the edge. As certain geographies are finding already, when the pool of capable workers is fully employed, what used to be $8- and $9-per-hour jobs are now going for $10.50 to $13.
How does that affect operating margins, and how happy does that make shareholders, CFOs, and the private equity investors in the company? And how tightly do you think the cost management wheel will get turned when one cost element suddenly eclipses budgeted expectations?
It might get worse. We've yet to see more than street demonstrations, but, when fast-food workers can demand a $15 per hour minimum in their industry and we are surrounded by local initiatives to elevate overall minimum wage levels, what will that do to execution-level wages in SCM?
• Resurgence: Meanwhile, we face the challenge of success. As the overall economy continues to, if not rebound, at least get slowly and painfully better, all manner of industries will be reaching out for talent. They won't, most likely, be rehiring those who were on the business end of the ax when times were bad; they'll be after the bright, motivated, contemporary, new generation hotshots—the same ones we are after to join us in the wild and wonderful world of SCM.
Can you say "signing bonus"? Will notoriously tight-fisted logistics companies be willing to compete with the big dogs for a choice cut of whatever prey the pack has brought down? Opinion: They had better be, if they want to be around for the main event when the prelims are over.
• Materials and sourcing: Things that we have taken for granted for decades, or longer, are joining a list of endangered species. Think rare earths, which might have dwindling global supplies, after which there is no more. Or are completely controlled by nations or groups that have no interest in our welfare.
Now, here's a dual potential. One is that prices are likely to rise, even explode, for reasons of either demand or the capriciousness of those controlling supply (or both). Another is that our R&D resources, or our next tier suppliers, or someone's engineers must find alternative materials with acceptable functionality, reliability, and quality.
This is not getting any easier, is it?
• The death of the post office, as we know it: Back to parcel shipment for a moment. One part of solving, or easing, the price/cost challenge is to include the U.S. Postal Service (USPS) in mix-and-match solutions. While this is a topic for discussion in greater detail in another venue, it seems fair to say there is no guarantee whatsoever that the USPS will be up to the challenge.
• Global economic stagnation: There's not much light to brighten the day when we look at flatlining economies around the globe: Slowed growth in China. Little to no growth in the EU nations. Year after year of persistent underemployment, even in the stronger European economies. How long will it be before these factors drag down our ability to export and prosper? How do they affect our physical trade volumes? Are our nuts and bolts of logistics underdeployed because of these issues?
There we have some eight possibilities to contemplate during suddenly sleepless nights. Which are parts of perfect storms and which make up some sort of witching hour is a pretty much fruitless discussion. What is important is that you have thought through these and who knows how many other possibilities, in preparing for a somewhat murky future.
We should note that this is not an exhaustive rundown of problems, pitfalls, and possibilities. Los Angeles/Long Beach port congestion could be added to the list, as could our national failure to build and maintain adequate, let alone superlative, supply chain infrastructure. And no doubt, further challenges will have emerged by the time this sees print.
The "Gin for Dinner" incentive seems to steadily grow, but working through these sorts of issues is part of what makes our profession a special challenge, and a special reward.