Lexington, KY - UPS, which liberally sprinkles the word “logistics” throughout its print, broadcast and online advertising, is bullish on expanding the supply chain further across Kentucky, the nation, and world.
“Globally, markets are really expanding and U.S. companies are taking advantage of great opportunities. We’ve just scraped the surface because emerging markets continue to open up. We can grow big time," said Zachary Scott, president of the Ohio Valley District for UPS. His territory includes Kentucky and several nearby states.
“Big companies like IBM already know what’s going on because they’re multi-national and get it,” Scott continued. “But small and medium-sized companies need to grab these opportunities. UPS supplies much of what I call ‘back room’ opportunities through logistics.”
Scott’s comments came during an interview at the third annual Supply Chain Forum, recently held at Fasig Tipton in Lexington and sponsored by the University of Kentucky’s Gatton College of Business and Economics.
Supply chain management (SCM) covers the movement and storage of raw materials, work-in-process inventory and finished goods from the point of origin to the point of consumption. Deft supply chain management has gained attention across the business world.
Of course, an international shipping company like UPS, with a major hub in Louisville, would benefit from more global trade.
“The world has seven billion people with 300 million-plus in the U.S. so the market opportunity is huge,” Scott again emphasized. “UPS has about 35 percent of companies shipping internationally. However, many are only shipping to one or two companies.”
Scott said the Internet has “brought the whole world to a smaller place.” Countries like China and South Korea are developing a middle class as people are able to buy consumer products from the U.S. and other countries.
“Kentucky exports have grown 28 percent in the last five years, even during the down time. I just saw our exports were up nine percent just in January. Two strong areas are automotive and aerospace parts.”
Kentucky wants to remain competitive in supply chain management, said Jake Barr, retired after 33 years at Procter & Gamble and now a principal at BlueWorld Supply Chain Consulting.
“Like most states, Kentucky firms are grappling with how to re-engineer themselves to deal with a couple of issues. One is an immense lack of talent with the skill set to drive this change,” said Barr.
Barr believes that when the price of petrochemicals peaked about a year ago, it forced companies to focus more on their business models and how to remain profitable. It drove a lot of investment and re-engineering including facility layouts, where and how operations were being carried out and what processes could be dismantled, improved and put back together.
“Some companies in the state I am consulting with are going to a different operating model like from a single manufacturing facility to multiple locations and distribution outlets,” said Barr.
The state has done great work in recruiting new firms while emphasizing that Kentucky is the nucleus for 35 percent of the U.S. population, Barr noted.
Scott Ellis, assistant professor of Supply Chain Management at UK, says the new constant in the industry today is change. “Whether it’s external change driven by severe weather and unanticipated strikes or if it’s anticipated change like new product development, introduction or innovation. Those changes are what supply chains must cope with more and more. It drives the need for flexibility and agility. It’s a fundamental topic,” said Ellis.
Returning overseas jobs to America is an emerging trend. Ellis thinks there is great motivation for certain firms to do this, in part, because of increased costs of fuel to ship products overseas. It’s about giving the customer what he or she wants when they need it. “Onshore production is likely more capable of providing that,” he said.
Is there political pressure to return lost jobs here? “When you make products in the markets you serve, you send a signal that you’re part of the market. Not only can you react to the market, but your labor force is drawn from the same market,” said Ellis. “There are innate advantages to producing where you serve. It gets things to market faster. I wouldn’t say those ideas are political; the idea makes good business sense.”
The Gatton School is, in the meantime, growing. It just launched a building campaign. “We’re excited. We’re going to renovate and expand. In three years, you won’t recognize the building we’re in,” said Harvie Wilkinson, MBA program director and director of the Executive Education Center and who was attending the forum. “Gatton is one of the fastest growing colleges on campus,” he added.
Steve Skinner, chair of the Department of Marketing and Supply Chain said the revived building could be finished in late 2015 or early 2016. It will house many areas of the school including professional, executive and evening MBA. Skinner said some Kentucky executives go off to Ohio State University or Vanderbilt University for training. “We want to keep those people home.”