Since this is a logistics publication we’ll skip past the personal side and look at things that threaten corporate supply chains. For the past couple of months I’ve been delivering a message, “Torpedoes That Can Sink Your Supply Chain Battleship.” This message notes that unless logistics and supply chain professionals know and understand the implications of critical issues, their supply chains will be at risk. This article looks at some of the more critical challenges and why shippers need to be paying attention to what is happening in the marketplace.

While there is a laundry list of concerns to choose from, three issues that should concern all supply chain professionals include: 

• Continuing emphasis on U.S. security initiatives
• Runaway legislation that will adversely affect carriers and shippers
• The next Highway Bill and its reliance on user fees

Security Initiatives.
Effective January 26, 2009, the Importer Security Filings, or 10+2 initiative went into effect. The US Customs & Border Protection (CBP) now requires importers to file ten  elements of data for each transaction with CBP before a container may be loaded at the point of origin with two additional data requirements for vessel cargo. Additionally, C-TPAT which is now a voluntary program, may become mandatory for companies who import products into the United States. And of course there are the scan all requirements which call for 100% screening of air cargo by 2012.

Space precludes us from getting in to the details of these programs. Since these programs affect any company that imports products, you would think that these companies would understand their impact on their supply chains; unfortunately, that is not the case. Some major companies are addressing this issue and making the necessary changes, but it has been surprising to see how few small and medium-sized businesses (SMBs) know that these programs exist, or how they can potentially impact their operations.

For example, I talked to the CEO of a billion dollar company that is heavily reliant on imports, and asked him how his company was doing in complying with 10+2, or whether it was C-TPAT compliant. He had no idea what I was talking about. He raised the issue with his supply chain people. Suffice it to say, they have a lot of work in front of them as no one is currently studying this issue. Going forward, our advice to supply chain professionals is that security issues will only grow in importance so it makes sense to recognize this in your supply chain planning process.  

Runaway Legislation and Federal Rules Affecting  Transportation
Updating that old adage that no one’s wallet – especially this year, is safe when Congress is in session, you can now add supply chains to that list of things that can and will be affected by this Congress and regulatory agencies that issue Federal Rules. If you want a small sampling of things to consider, there is the Employee Free Choice Act (or Card Check), Lacey Act, SHIPA, TRUCC, Hours of Service, Clean Air Act and carbon taxes, plus all the security issues mentioned above that are on the menu. Add it all up, and carriers and shippers are looking at legislation that will either slow down supply chains resulting in increased inventory carrying costs, or significantly increase the costs associated with moving goods through our supply chain.

Why are we passionate about the need for professionals to support  industry associations? Two reasons--first, associations like NASSTRAC, the NIT League, CSCMP, TIA, AST&L, and other industry groups do a great job of educating shippers about what is important and strategies to address these issues. Second, these associations rely on member support to accomplish their missions; now, more than ever, that support is critical.  

The Next Highway Bill
The current Highway Bill, SAFETE-LU expires on September 30, 2009. The House Transportation Committee, chaired by James Oberstar (D-MN) has signaled its intent to have a new Highway Bill ready for debate this summer. Whether they meet that deadline is not important. What everyone needs to pay attention to is how much it will cost and how it will be funded. The current bill has a price tag of $286 Billion. The estimates for the next Bill will run anywhere from $500 Billion to over $1 Trillion – that is a big increase!

How will this Bill be funded? We’re recommending that people get used to the term “consumption based pricing.” In short, whether it’s an increase in the fuel tax, or the increased use of tolls (for example, on existing interstate highways that are presently not tolled), higher tolls, or things like a vehicle mileage tax, it’s going to cost a lot more to run trucks and cars on our highways. Depending on who you talk to, funding for this highway bill could increase shippers costs by 3% to 5%.    

Summary
Years ago, a mentor talked about the importance of continuously scanning the environment to look at threats to the business.  His point was that companies can eliminate surprises if they look at what is happening and ask: “How will this impact my business?” Each one of the factors noted above can, on a stand alone basis significantly impact your supply chain. Taken together, they can determine the success or failure of your business. As a result of all of these issues, we encourage people to get informed about the issues and then get involved in developing comprehensive action plans to address the challenges ahead.