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Big Picture: Voices of the Supply Chain

More than ever, what happens outside the four walls determines what happens inside the four walls. Six supply chain experts look at the most important factors shaping the future of the supply chain.
By Bob Trebilcock, Executive Editor
December 01, 2011

Several years ago, an executive from Dematic came to Modern’s offices to introduce a new way of thinking about the warehouse and distribution center. He called it “four walls and two windows.”

The idea was simple. Materials handling solutions may happen inside the four walls of a facility, but they are affected by what happens outside of a facility. To be truly efficient, a system needs visibility— those two windows—into what is happening downstream and upstream.

The concept goes a long way to explaining the evolution of materials handling solutions. If all that mattered was efficiency inside the four walls, we would all crossdock full pallets and be done with it.

Instead, new customer service requirements, store operations, just-in-time manufacturing strategies and value-added services are driving distribution strategies. “How do I satisfy my customers and get an edge on my competition?” is the industry mantra. Questions like that have led to the development of sophisticated order fulfillment strategies such as the one featured in this month’s cover story on Skechers.

Add the upcoming expansion of the Panama Canal to the list of catalysts. Scheduled for completion in 2012, the canal will allow significantly larger ships and shipments to serve the East Coast of the United States. To get a view through the windows of how this might impact what happens inside the four walls of manufacturing and distribution facilities, Modern spoke to six supply chain experts.

imageAlberto Aleman Zubieta, CEO, Panama Canal Authority
“We believe Panama is becoming the most important distribution hub in the Americas.” ­

When looking at the expansion of the Panama Canal, most logistics experts have focused on the impact bigger ships will have on supply chains centered in the Gulf of Mexico and the Eastern Seaboard.

Aleman agrees with this assessment. “Some are calling this a game-changer for the maritime industry,” Aleman says. However, Aleman believes the more important change could be in where and how companies with global supply chains locate and distribute their products. “Panama is becoming the most important distribution hub in the Americas, especially if you want access to the growing markets in Central and South America and the Caribbean,” Aleman says.

As proof, he points to a growing number of warehouses in the Colon Free Trade Zone on the Atlantic coast and Panama Pacifico and to the fact that Panama is the only country with connectivity to two oceans. As such, he argues that the country is uniquely positioned to be a value-added distribution platform for global companies. Aleman also envisions Panama becoming a hub for redistributing at the level of the ship load.

“You can bring a full container into a distribution center, break it down and repack the product for a specific market before shipping it back out to a customer,” he says. “Or, you can offload the containers from a large vessel onto several smaller vessels headed to different markets. At the end of the day, this is a value-added route and not just a passage way between the Pacific and Atlantic oceans.”

imageGreg Buza, director of supply chain operations, BASF Corp.
“The most important driver of our warehousing and transportation operations is the balancing of service and cost.”

The expansion of the Panama Canal is one of the catalysts that has BASF kicking off the first comprehensive review of its North American distribution network supply chain since 2004. “The most important driver of our warehousing and transportation operations is the balancing of service and cost,” says Buza. “We ask: How close are we to our customers, how quickly can we get product to our customers and what is the cost of getting those materials to our customers?”

An expanded canal may create opportunities to reduce supply chain costs by relocating facilities now operating on the West Coast to the East Coast or the Gulf region. “We are especially looking at Houston and New Orleans to expand our shipments to Asia,” says Buza. “Freight for Asia is typically railed to the West Coast. If we can save money by bringing vessels into the Gulf through the canal, that could change how we crossdock and store materials.”

While the expansion is first and foremost a network design puzzle for Buza, he says BASF is rethinking its order fulfillment processes. “We are looking at automating more of our warehousing and standardizing our processes across our network to lower our costs,” says Buza. In North America, for instance, Buza is focusing on integrating supply chain management systems for greater visibility and efficiency. Globally, the company has built highly automated distribution centers in Asia and South America. “We’re taking what we’ve learned and looking to add automated handling and storage in North America in the future,” he says.

About the Author

Bob Trebilcock
Executive Editor

Bob Trebilcock, executive editor, has covered materials handling, technology and supply chain topics for Modern Materials Handling since 1984. More recently, Trebilcock became editorial director of Supply Chain Management Review. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484.

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