Lessons learned

Lessons learned

If there was any doubt that supply-chain management is a CEO-level concern, it was dispelled last year. One of 2004's top business issues was the logistical mess that resulted when a flood of Asian imports overwhelmed the capacity of port and rail systems.

This is old news to JoC readers, but last year's problems were so bad that they also attracted mainstream media attention. USA Today, Fortune magazine, television networks and others picked up on it.

It was a big story, magnified by the recognition that companies of all kinds are increasingly reliant on international supply chains. U.S. manufacturers, hammered by buyers demanding lower prices, have shifted production to cheaper locations overseas. That's apparent to anyone who reads the ubiquitous "Made In China" labels or who watches Lou Dobbs.

While outsourcing has gotten lots of ink, less attention has been paid to a related but separate development - the change in how companies view and manage their supply chains.

Barely a decade ago, no one used the term supply-chain management. Most corporations had traffic or transportation managers. A few had logistics directors. In most cases, though, these positions were low on the organizational chart. The traffic manager's job was to arrange the shipment of whatever corporate higher-ups had decided the company should make or purchase.

When there were transportation glitches, such as the frequent longshoremen's strikes of the 1950s and 1960s, companies could draw on inventory to keep assembly lines running or store shelves filled. For the most part, that inventory buffer has disappeared. Companies have cut costs by shifting to just-in-time delivery while reducing manufacturing or product costs by adopting global sourcing.

These developments have emphasized the fact that transportation is only one part of the overall supply chain. It's still a very important part, but companies now realize it can't be viewed in isolation from manufacturing, purchasing, marketing and other activities. That's why we are seeing vice presidents of supply-chain management who report directly to the chief executive or chief financial officer.

This shift in corporate thinking is reflected by the new name that the Council of Logistics Management assumed on Jan. 1. CLM, the largest organization of supply-chain professionals, now is called the Council of Supply Chain Management Professionals, or CSCMP. The council was established in 1963 as the National Council of Physical Distribution Management. It became the Council of Logistics Management in 1985 when companies began linking transportation with materials purchasing, manufacturing and warehousing under the banner of logistics.

As Peter Leach and Bill Mongelluzzo point out in this week's cover story, companies hope in 2005 to apply lessons learned during last year's import peak season. One of those lessons is the central role that supply-chain management plays in a company's operations.

Joseph Bonney is editor of The Journal of Commerce. He can be contacted at (973) 848-7139, or via e-mail at jbonney@joc.com.