Since 9/11 people have been paying more attention to dangerous goods. And in case it slips their mind, they are re-minded every time they travel by air. A person walking down a street might even consider an abandoned backpack a dangerous good. That said, people are not always aware that something THEY introduce into the flow of everyday life might be a dangerous good. Even companies that should know better—don’t.

USA Today reported recently that a shipment of lithium-ion batteries caught fire as it was being loaded onto a FedEx jet at the company’s Memphis hub in August 2004. According to the National Transportation Safety Board, the probable cause was unapproved packaging used by the shipper, AC Propulsion. The packaging “was inadequate” to protect the lithium, the NTSB said.

I talked to one of DHL Express’s Hazmat experts about why hazardous material handling is such a difficult skill to master. Jerry Freeman, dangerous goods manager for DHL, told me there wouldn’t be such confusion if dangerous goods regulations were consistent year after year. But the hazmat regs change quite often.

“What customers knew yesterday might change today and will change tomorrow,” he said. “When calls come into our hotline it’s through that channel I learn that customers need to be educated.”

Sometimes the hazmat supply chain is like a game of telephone. That’s where a message changes with each transfer along the line of communicators. By the time that message gets to the last person in the chain, it’s a completely different message. In the same way, a shipper may receive a dangerous good from a supplier for shipment to another company which will ship it to a consumer. By the time that product gets down to the shipper that’s shipping it for the final time, it’s either not in its original packaging or it has otherwise lost its visibility as a dangerous good. That’s the kind of thing that keeps Freeman busy.

“It’s our hope that the training we provide gets to those kinds of shippers,” he said.

DHL will be rolling out training in 2011 to update shippers on international dangerous goods. The biggest new regulation takes hold in January 2011. The U.S. Department of Transportation issued a notice of proposed rulemaking earlier this year announcing changes related to the offering and handling of lithium batteries, both rechargeable ion and metal batteries. If the notice becomes final, he says, there will be significant changes impacting not just your typical dangerous goods shipper who ships chemicals and substances, but shippers of electronic equipment, as well.

This rule would change how and where lithium batteries are loaded into aircraft. The shipper will be responsible for executing the appropriate paperwork, getting the training, and implementing a security plan.

When in doubt about the nature of something you’re handling, always refer to the Material Safety Data Sheet (MSDS). Freeman says most MSDSs include transportation regulatory information to help the shipper and the carrier determine if something is a dangerous good.

The customer should be looking at those documents to determine what they have in inventory that’s regulated as dangerous goods.

And remember, what’s reflected under U.S. law is not necessarily what you have to do under international law. It’s your responsibility to understand what those variations are. Where lithium batteries are concerned, the International Civil Aviation Organization (ICAO) is a little ahead of the game in that the U.S. DOT’s 49CFR doesn’t fully regulate lithium batteries yet. Unfortunately what DOT is proposing with regard to those batteries will supersede ICAO’s requirements, according to Freeman.

“A lot of what the U.S. laws state regarding dangerous goods over time have been based on incidents and by lobbyists,” he told me.

Guess that’s good news for anyone offering hazmat training. That said, I’ll play devil’s advocate for them. Are you sure you don’t have any hazardous goods in your warehouse or distribution center?

It looks like the struggling economy has ended the struggle of supply chain managers who’ve been trying to get their CEO’s attention. According to James Tompkins, president and CEO of Tompkins Associates, and a member of MH&L’s editorial advisory board, the recession has given CEOs a taste of what happens to the bottom line when supply chains go awry. Tompkins and his firm will soon be releasing a position paper illustrating a “Supply Chain Value Framework,” demonstrating how supply chain professionals drive value tied directly to their companies’ goals and objectives.

For example, optimal product flows and material handling excellence are tied to reducing the cost of goods sold and improving supply chain speed and productivity—both of which improve corporate margins. That’s tied directly to every corporation’s ultimate goal of increasing value for shareholders and investors.

As proof that they’re investing fully in their own supply chains, retailers are starting to make major commitments to item-level RFID. Drew Nathanson, an analyst for VDC Technologies, a market research firm, noted recently that most RFID solution suppliers reported strong first-half sales numbers and that, for the first time in his memory, end users—particularly in retail—seem to be more optimistic than these suppliers.

He cites data taken from a recent VDC study indicating that RFID budgets are up more than 200% (over 2009) and are expected to increase by nearly 100% (over 2010) in 2011. There have been more RFID pilots done, and the rate of conversion from a pilot/evaluation to a commercial scale deployment has shortened by nearly 20%.

Supporting these figures, a recent article in Apparel magazine reported that retailers are expected to purchase 300 million RFID labels this year. Patrick Javick, director of industry development for GS1 US, the RFID standards organization, told MH&L that while users can scan 200 bar codes in an hour, RFID’s ability to read labels without a line of sight enables the identification of 20,000 items in an hour. That represents a 96% reduction in inventory labor, he noted.

Javick cited a University of Arkansas report showing that standard inventory accuracy across all retailers in its study was 62% without RFID. With RFID at the item level, inventory accuracy went up to 95%. Is 95% good enough? According to a study with American Apparel Stores, the chain not only achieved 95% accuracy, but a 2-8% increase in same-store sales, and a 50-75% decrease in out-of-stocks.

“Item-level RFID is no longer a laboratory experiment in apparel,” he concluded. “Wal-Mart, Macy’s, JC Penney and Dillards are coming together with the brand owners on this technology because they’re seeing the value now.”

The Item-Level Committee at GS1 will be making an announcement on November 1st about the latest progress in technology adoption. Joe Andraski, president and CEO of the Voluntary Interindustry Commerce Solutions (VICS) Association and MH&L advisory board member, will comment on these developments in MH&L’s November issue.

The timing of the most recent Tylenol recall couldn’t have been better for providers of plastic pallets. As MH&L reported this week, Johnson & Johnson’s McNeil Consumer Healthcare unit is recalling a product lot of Tylenol 8 Hour caplets from store shelves after receiving complaints of a musty or moldy odor. You would think after one of these recalls the company would have gotten to the bottom of this, however, 12 recalls later, we’re still reporting on the problem.

In our reports, McNeil linked this moldy odor to the presence of trace amounts of a chemical called 2,4,6-tribromoanisole (TBA). This is produced by the conversion of its precursor, 2,4,6 tribromophenol (TBP), a wood preservative that has been linked to the pallets used to carry J&J’s products. Bruce Scholnick, president of the National Wooden Pallet and Container Association (NWPCA), points out that U.S. and European wood pallet manufacturers and recyclers do not use TBP. In fact, it’s banned in the U.S. So why all these recalls?

“My guess is [the problem] may be coming from the shipping container and not from pallets,” Scholnick told me. “TBA is extremely aggressive and gets absorbed into plastic pretty easily. So if it’s present, I’ve heard it will go right through the walls of a plastic container.”

Is that what happened with the Tylenol? He’s not sure, because McNeil hasn’t sat down with NWPCA to discuss corrective measures. Scholnick likens the company to an ostrich with its head in the sand. The pharmaceutical industry itself has stated it is looking into the feasibility of heat treated pallets—something Scholnick says is ineffective against TBP.

To help the pharmaceutical and food chains be more effective, NWPCA is working on a set of best handling practices for pallets and containers traveling these chains. This is not only a service on NWPCA’s part, but a defensive measure against the plastic pallet industry’s constant attacks on the safety—or perceived lack thereof—with wood pallets.

This brings me to the good timing of the plastic pallet people that I mentioned at the top of this blog. At about the same time McNeil was announcing its Tylenol recall, Intelligent Global Pooling Systems (iGPS) Company, a pallet rental service providing all-plastic pallets with embedded radio frequency identification (RFID) tags, announced a new, premium-level pallet rental service “specifically designed to meet the unique needs of the pharmaceutical and life sciences industries.”

According to the company’s press release, the new service—“iGPS bios”—follows a year of research into the unique needs of these industries, and “provides a level of pallet hygiene and security that cannot be achieved with pallets made of wood or other organic materials.”

To cover the security side, each of these plastic pallets has four RFID tags embedded in its frame, enabling tracking and tracing throughout the supply chain. In addition, Spider AT tags throughout this pallet fleet will transmit alerts, specific events and pallet location. That information should come in handy during a recall!

Even if McNeil chooses to keep its corporate head buried in the sand about the unwanted aroma therapy that has been accompanying some of its meds, it looks like the plastic and the wood pallet industries are busy looking for ways to clear the air—while trying to bury each other in the sand.

If you remember the movie “City Slickers” with Billy Crystal and Jack Palance, you’ll remember one key scene. It’s the one where the two of them are talking about the meaning of life and the Palance character asks the Crystal character “Do you know what the secret of life is?” Crystal’s guy says “No, what?” Palance holds up his gloved index finger and says “This. One thing. Just one thing. You stick to that and everything else don’t mean @#*$!”

Crystal asks, “But what’s the one thing?”

Palance answers, “That’s what you’ve gotta figure out.”

If those two guys had been supply chain managers, the Palance character might have had an answer for what that one thing is.

“Flexibility.”

But what’s that? THAT’S what you’ve gotta figure out.

Dr. John Langley made flexibility the theme of the recent Georgia Tech Supply Chain Executive Forum. Some 35 executives from leading companies engaged in a two-hour working session on this topic. It seemed everyone figured out a different definition of flexibility. Here are a few:

“The ability to respond to fluctuations in demand or capacity with minimal impact on costs or service.”

“The ability to deal with last minute changes to the ‘make and move’ portion of the supply chain such that the right product is delivered to the right selling floor at the right time.”

“Producing the right goods (down to color and size level) and moving at the appropriate speed (air v/s ocean) to deliver the right product to customer.”

“Having supply chain analysis tools in place to model flow and networks to support growth strategies.”

“The ability to utilize existing resources and assets to create and deliver multiple outcomes.”

“The capacity and capability to respond to demand requirements by expanding, contracting, or creating new supply chains/routes to market.”

Despite these variations, 67% agreed that supply chain flexibility is very important, and 25% ranked it as “highest priority.” Why?

“To become more demand driven.”

“To accommodate rapidly changing customer needs.”

“To deal with globalization.” and,

“Speed to market.”

Equally interesting were the barriers keeping these executives from their one thing: organizational structure and culture, cost pressures, the difficulties in putting value on flexibility, and, ironically, poor flexibility of supply chain software and poor system integration.

Quantifying flexibility’s value is a big challenge. It’s why trading partner collaboration is so difficult. “If it cannot be valued, it will not be included in the priority initiatives,” the Forum participants concluded.

Kevin Hume, principal of Tompkins Associates and one of the members of the Georgia Tech Supply Chain Executive Forum concluded: “Most executives will need to figure out where it is most beneficial – with which group of customers, what product categories, what flow of goods – and determine if differentiation there will result in customer preference and thus revenue or margin growth. The followers who work continually toward standardization and stability and ignore flexibility will likely be left behind.”

To put flexibility in another context, think of what it did for those 33 Chilean miners who were brought to safety after being trapped a half-mile underground for two months. If it hadn’t been for the flexible logistics thinking and problem-solving talents of those miners below and their rescuers above, there would have been no happy ending. Now that they’re safe, you can bet there will be a hundred versions of their story on the big and small screens.

Hollywood’s City Slickers are masters of flexible thinking.

If you’re a technologist and landscaper, and you read my last blog, I have good news for you. Even if you’re not a landscaper, you’ll be happy to know that there are ways to use wireless technology without making sensitive data vulnerable to pirates.

In my last blog I told you about my conversation with a former GM employee whose IT people would not consider wireless devices in their plant for fear that a competitor or anybody else who wanted to access their production data could simply lift it out of thin air. That’s not paranoia, apparently. But it’s also not the easiest way to get at data. Dan Dobkin, principal with Enigmatic Consulting and author of several books on RF technology, told me if he were trying to penetrate someone’s data stores, he’d go through their firewall via the Internet rather than try to plunder the airwaves from an adjacent parking lot.

“To intercept a radio signal, I have to be there (or at least my equipment does), which exposes me to discovery and capture,” he said. “And if I hack into the network I’m much more likely to find what I really want, well-organized information in files or databases.”

Nevertheless, RF does have its vulnerabilities. In a perfect world, sensibly designed RFID systems send data that only makes sense if you know what’s in the database. But according to Dan, for people using the EPC standards, tags do broadcast some information that anyone can decode.

“EPC Gen 2 provides a “cover code,” but it’s useless if you can hear the tag talk,” he explained. “I’ve decoded cover-coded messages during some intercept work.”

Wi-Fi radios provide physical-layer security through encryption. Dan says the original model, called “WEP” (wired equivalent privacy) was not terribly secure and can be broken with a few megabytes of traffic. Then, around 2004, WPA2 came out, and was based on the Advanced Encryption Standard. He has yet to hear of someone breaking WPA2—as long as a reasonably secure passcode is used.

“Bluetooth communications can be encoded but I believe few of them are,” he concluded. “Fortunately they are low power, but someone typing next to a window might be sending the characters they type in the clear, for all I know.”

What does this have to do with landscaping? Trees might be one of your best defenses against parking lot pirates. Dan told me that trees are good absorbers in the range of frequencies usually used by portable wireless systems. One tree can contribute 10 dB attenuation when in leaf. If you have three layers of trees in leaf, the signal will be decreased by 25-30 dB and will be much harder to decode successfully.

If you live in the Midwest or the East, winter might pose a challenge, unless you use pines or other evergreens.

However, if your building is made of concrete and steel it might attenuate another 10-15 dB. And you can also transmit at low power. Any one of these might not be enough to foil a pirate, but put them all together and you’ll make it a lot harder for them.

And you’ll have a lovely, woodsy place to work at the same time.

With all the productivity solutions automotive manufacturers have adopted, you’d think wireless technology would qualify as one of those. Not in some plants. Apparently wireless has a way to go before convincing some IT managers of its security.

I learned this from a software vendor sitting in on a supply chain execution systems product section conference at MHIA’s annual meeting in Palm Springs last week. This former GM employee told me that until wireless is deemed to have the proper features to make it secure, the plant he worked at is saying “no wireless.”

“There have been people parking their vehicles outside plants tapping into wireless networks to get sensitive production information,” he said. Apparently such pirates can learn things like how many vehicles a plant makes, what styles and what materials they’re using. “You can’t even plug things in without IT authorizing it,” he added. Now they’re getting to the point of segmenting parts of their network, making unsecured portions available to guests.

This gentleman admitted his former employer is missing out on important benefits that come with wireless, and that installing Ethernet drops can cost a lot of money. But aside from security issues, wireless requires careful application. When you carry a wireless device into a data-dense environment to program a PLC, he said, you have to make sure you’re talking to the right device. This identifies a common problem in all industries: the need for better communication between IT and its clients.

“There needs to be more give and take between IT and manufacturing on how wireless should be used,” he said. “Wireless can make manufacturing processes more productive because you can switch some process equipment very quickly. This plant decided to give that up.”

I told my new acquaintance I would blog about this to my readers and see how some of them on both the technology vendor and the user sides are coping with wireless security issues. Do policies on wireless usage need to be beefed up at manufacturing plants before this technology is more widely accepted in some applications or is security just a lame excuse not to dent the IT budget? Let’s get some two-way communication going.

The Reed-Apple Award is not given blithely. Over the past 30 years it has been presented to 18 people (including this magazine’s former editor-in-chief, Bernie Knill, in 1992). Maybe that’s because the qualities it recognizes are so rare. It was established to recognize outstanding individuals for their contributions, dedication and service to the material handling logistics field and to the Material Handling Education Foundation. This year a group of prestigious educators in this field identified a candidate whose time to be recognized has come: Dr. Russell Meller, Hefley Professor of Logistics and Entrepreneurship in the University of Arkansas’ Department of Industrial Engineering. He’s also director of the National Science Foundation-sponsored Center for Engineering, Logistics and Distribution.

Material Handling and Logistics magazine is especially proud to congratulate Dr. Meller, as he is also a member of our new Editorial Advisory Board. In presenting the award to him during Material Handling Industry of America’s annual meeting this week, John Hill, principal with TransSystems and member of MHIA’s Board of Governors, explained that Dr. Meller has distinguished himself as an educator, counselor, writer with an unmatched number of publications, patent holder, consultant and innovator in the 18 years since receiving his PhD from the university of Michigan in 1992. Hill also noted Meller’s 13-year association with the College Industry Council on Material Handling Education (CICMHE), both as an officer and as president.

That’s a lot of service for a comparatively young man, Hill commented to me after the ceremony. In fact, both of us agreed that Meller has had a lasting impact on MHIA by ensuring that today’s material handling logistics executives play a role in the professional development of their successors.

“Russ revitalized CICMHE,” Hill told me. “It is a stronger organization because of his stewardship. We never had CICMHE people sitting in our product section meetings before Russ started doing it. He has encouraged other CICMHE members to do the same.”

This not only helps educators bring real-world material handling perspectives back to their classrooms, but it reminds today’s industry veterans to give back to the industry that made them by helping a new generation find ways to further develop the art and science of material handling.

On behalf of the Material Handling and Logistics staff, congratulations Russ.

I’m in lovely Palm Springs, California this week attending the annual meeting of the Material Handling Industry of America. I know my surroundings are lovely because I take long glances out the conference hall’s window’s between the sessions I’ve been sitting in since Sunday morning. I’m in good company, though. The leaders of the material handling industry have been learning a lot at this year’s conference because they’ve been listening to thought leaders address strategic business issues during the first ever Executive Conference held at the annual meeting.

During these sessions a collection of futurists, industrialists and management consultants have been talking about how the material handling industry and its customers must re-invent themselves as they come out of the world economic recession.

One of the speakers was the internationally-known supply chain consultant Jim Tompkins, president of Tompkins Associates. He’s also famous for being blunt and honest, and he lived up to that reputation by telling his colleagues that the Material Handling Industry, although great, is not a leader when it comes to taking bold action. (he made an exception for Modex, the new logistics trade show that will take place in Atlanta in 2012). However, the core message he sent to his audience was not to fall prey to the protectionist movement. We are in a global economy and we need to embrace the concept of creative destruction—doing away with old business models that don’t apply to our global economy.

“It’s the cycle of life,” he said. “Low-skill, low paying jobs are being destroyed. We need to create smart jobs. Globalism results in huge advances if free markets are allowed to work. The fact that fewer people are working in agriculture and industry is good. It means we’re being more productive. And the smaller the government, the greater rate of growth. We need to stoke innovation and creativity as we improve productivity.”

Tompkins’ talk was actually the wrap-up of the Executive Conference. For the day and a half preceding it, other speakers offered insights into various modes of adaptation and survival.

Futurist Bob Treadway kicked things off, saying that we have such divisiveness in our government that it’s an opportunity for the private sector to take initiative. You don’t do this by trying to predict what will happen next, but to forecast based on what you know.

“Leave predictions to the economists,” he said. “Organize things into what you’re relatively certain of, like global influences, cost controls, Asian and Latin growth, development of the Panama Canal, new regulations and talent needs.”

You can take action around those things. Things you can’t affect, you hedge—have a plan B, C, and D. That’s what he calls “Flexible foresight,” being prepared for developments, not surprised by them.

He used Columbia Forest Products as an example. It is one of the largest employee owned companies in the US and makes hardwood veneers. Five years ago it looked into new ways to boost profitability. It did so by taking the thickness of their veneers down as the economy was entering recession. This was a smart move but it saw another opportunity to be green at the same time—by replacing the formaldehyde glue they were using with an adhesive made from an amino acid found in mussels and combining it with soy beans. The result was something called Pure Bond. The company won the Presidential Green Chemistry prize in 2007.

Another example of flexible foresight came from Kathryn Zepaltas, of Jackson Family Wines. The company’s Napa County, California distribution center is LEED certified at the gold level, which is a bold investment to make in any distribution facility. The site saves enough energy to power 1400 homes and is a great example of land, water, energy and waste management. The company worked with its utility company to develop water conservation measures. Today it recaptures all the water used to rinse out barrels and tanks. It also saves 9 million kW a year, equivalent to CO2 emissions of 750 million gallons of gas. The result is a $450,000 payback on its investment in 1.8 years.

Todd Buchholz, a former White House economic policy advisor and Wall Street executive, applied some lessons from the past to illustrate directions industry must take in the future. His example illustrates the need to see opportunity in every-day situations. A.P. Giannini was such a person. After the San Francisco earthquake in 1906, he saw opportunity on Fisherman’s Wharf. The leading banks closed up for six months after the quake. He started the Bank of Italy by bringing cash out to the Wharf and doling out loans. One year later San Francisco was rebuilt. By contrast, New Orleans is still suffering from the effects of Hurricane Katrina after five years.

The lesson here is, the private sector can be a much more powerful and effective change agent than government. And supply chain managers can be leaders in the private sector, said Richard Thompson, ex vp Supply Chain and Logistics Solutions, during his talk. Today supply chain executives report directly to the C-level and their responsibilities can entail aspects of risk management, technology enablement, customer management, mergers and acquisitions and new product design and development. He noted that 75% of freight moves are still by truck, but that, according to Georgia Southern University, rail represents a great opportunity to fill in for the capacity shortage that’s sure to arise when the economy comes back full force.

Rail not only has the capacity to fill transportation gaps, but it results in 40-60% lower greenhouse gas emissions than trucks, he said. And to battle the rising cost of transportation smart companies will go to more and smaller distribution facilities and look at packaging alternatives which will not only reduce costs but further contribute to a sustainability strategy by reducing corrugated, cutting product damage and making better use of trucks.

The message I’m taking away from MHIA’s first Executive Conference is, you CAN make lemonade out of lemons. Smart supply chain and logistics managers should take advantage of downtimes and slowdowns by developing and investing in bold business strategies such as those discussed here. Calculated risks often yield the highest returns.

Now it’s time for me to enjoy some lemonade under the hot California sun.

Too much supply chain talent is operating on half a brain. That’s not meant as an insult, it’s just the challenge of our human condition. It’s about hemispheric dominance. Most of us are left brained because that’s what our school systems reinforced in us. Let’s face it, technical analysts eat better than most poets and artists.

But if you believe educators like Stanley Fawcett, a professor at Georgia Southern University, a logistics professional has to be as good a choreographer as a business manager. A choreographer gets people to work closely together. He teaches them the right steps then gets off the stage and lets them perform. He talked about this from a stage at HK Systems’/Dematic’s Material Handling & Logistics Conference a couple weeks ago in Park City, UT. His topic: Preparing Supply Chain Leaders of Tomorrow.

To do that, he said, you also need to be a coach who corrects mistakes quickly and a champion who changes his or her company into a learning organization. They encourage failure but demand excellence. In fact they create a safe harbor to fail excellently. But when you fail, you must learn from it.

If that’s not touchy/feely enough for you right brainers, Fawcett also says good managers need to set up a succession plan. In other words, make sure the people you cultivate will be able to take your place. Teach yourself out of a job.

None of this is easy to do. There just aren’t that many people who make it through one organization to develop the cross functional skills required to act as the hub of that organization. And that’s what a good supply chain professional needs to be. That person needs some experience in quality control, R&D, finance, production planning, account management, process engineering, commodity management—all in addition to logistics management. Without such a hub to unite these spokes, an organization’s mobility is limited.

Fawcett says to get today’s skulls full of mush to maintain interest in one company for the long run, they need two-year development cycles. Start them off developing a critical skill set then after two years, transfer them to a new geography and a new function. Put them on cross functional teams. By the time 8-10 years go by, that person will be well connected and ready for senior leadership, according to Fawcett.

Only one problem with all that: how do you hang onto the superstar you create? They’ll be headhunter bait. Competitors would love to get their hands on such rare talent without taking any role or responsibility—or economic stake—it their development. So what’s the point? Why bother?

Because you CAN hang onto such talent. Just make your company a good place to work and offer good compensation. What a concept.

No, it’s not easy as that. Developing talent is a gamble. But life’s a gamble. Anyone with half a brain knows that.