Ports, supply chains and the future of software

I read two interesting news items recently. One announced that this year, for the first time, the US Port of New York unloaded more cargo off ships from Asia than from Europe.

It seems that China and Korea have launched a new generation of super warehouse ships that are moving the growing tide of goods from Asia to the US.

Apparently the Port of New York had been in decline for several years, while West Coast ports had been growing rapidly. The new generation of ships, however, makes it just as efficient to ship from China to New York as to ship from China to Los Angeles and then tranship by rail from Los Angeles to New York.

This shipping boom has led to thousands of new longshoremen jobs in the New York and New Jersey area, to an effort to install improved freight handling systems on the docks, and to a multi-year effort to dredge the Port of New York harbor to provide more docks for the bigger ships. In addition, major new warehouse complexes are being constructed in New Jersey, and new highway and rail access will be required in the years ahead.

A second magazine article discussed how increased Asian imports have led to labor shortages and overloaded West Coast ports. The report described how, from a high point on the road from Los Angeles to Long Beach, one could see vessels that were stretched for miles down the California coast, waiting for a chance to unload at the Port of Los Angeles, where container volume was up over 12% this year. Apparently, things are similar at other West Coast ports.

Obviously some of this represents the growing US economy and the fact that a lot of manufacturing for the US market is now done in China. And, in passing, it suggests that outsourcing and free trade isn’t the problem that some would make it out to be, since they’re creating new jobs in the US at the same time that new jobs are being created in China.

Both articles mentioned, in passing, that the ports were planning on spending millions to introduce now technology, including new scheduling systems, optical scanning devices, and radio frequency identification (RFID) chips to track cargo flows. Clearly, many software architects and developers are going to be engaged in the development of software systems for these new facilities in the course of the next several years.

What both articles reminded me of, however, was a recent workshop with some Supply Chain Council (SCC) members. The SCC is a consortium of some 700 supply chain managers who have spent the past few years developing the SCOR (the Supply Chain Operations Reference) framework.

SCOR provides a common language, notation, measurement system, and benchmarks that companies can use to analyze and redesign their supply chain processes. One of the major reasons for developing SCOR was to facilitate the development of multi-company supply chains.

It’s not unusual, in a SCOR workshop, to hear of a supply chain that draws raw materials from throughout the world, moves them to manufacturing facilities in Asia and South America, and then distributes the parts to assembly plants in Mexico, the US, or Europe — finally sending the finished products to warehouses throughout the world.

Processes of this type require dozens of companies to coordinate their schedules and their business processes. To do that, however, they must first have a common vocabulary with which to talk about things, to ensure that one company’s output and another company’s input are properly and precisely characterized.

Similarly, using SCOR, companies can establish measures that allow companies to determine which processes are performing best, which are within general bounds, and which are deficient.

SCOR is growing in popularity as world trade grows apace. A wide variety of software companies are working to coordinate their products with the SCOR model to make it easy for companies to acquire software components to implement SCOR processes and subprocesses.

Interestingly, one of the things that impressed me at the SCC workshop was the data that the various supply chain managers had on port times and efficiencies. Ports not only physically move products from ships to warehouses, but clear products through customs and manage financial transactions, which all take time and are all tracked. SCOR analysts treat a port of entry just like a company in their chain. The port receives product, processes products, and ships products on to the next link in the chain, just as an assembly plant does, and it is included in a schedule in a similar way.

All this is just to say that we live in a more and more automated world in which companies are going to use real-time data to modify their processes to maintain efficiencies.

Major companies are not only going to devise worldwide supply chains, they are going to calculate the efficiencies of ports and route materials, parts, and products, accordingly. Does the Port of Los Angeles take too long? Has the Port of New York invested money in scanner technologies and reduced its throughput time by a day?

Have Seattle warehouses installed rail lines and new automated routing systems that move products from port facilities to rail in less time? Companies are not only going to ask questions like these, they are going to monitor their results and know the answers in something close to real time.

It’s said that oil in a ship being moved from the Middle East to an Atlantic or Pacific port is sold and rerouted several times between the time it sails and the time it arrives at whatever port it arrives at, depending on daily changes in market conditions.

Increasingly, similar things are going to happen to all raw materials, and to parts and products as well.

Increasingly, companies are going to compete by dynamically altering their business processes to reflect the latest changes in the market and in processing conditions along the way.

This won’t be possible unless companies understand exactly how their processes work and are in a position to automatically make modifications in their processes. It is concerns like these that are driving IT architects and business process managers to investigate the latest software tools for modeling and managing business processes.

If you work for a large company that isn’t already exploring the possibilities of business process management, you probably ought to encourage your company to start.

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