ILLUSTRATION BY GREG RAGLAND

By George A. Gecowets and Kenneth B. Ackerman George A. Gecowets led the Council of Supply Chain Management Professionals (CLM) for more than three decades, having retired us executive vice president of that organization in 2001. Kenneth S. Ackerman, president of the Ackerman Company, has been active in logistics and warehousing management his entire career. Among his numerous industry recognitions, Ackerman is a past recipient of the CLM Distinguished Service Award.

The supply chain landscape will look a lot different as we approach midcentury. Intelligent computer systems will be calling most of the shots, streamlined flow will be the ultimate performance criterion, liability hassles will be eliminated, and whole new categories of integrated service providers will emerge. And those fortunate enough to be around when these predictions come true will look back and wonder how we ever got by with those rusty old supply chains of 2003.

As the end of the last century neared, writers and soothsayers deluged us with predictions for the coming 100 years. Many of these predictions--like the crash of all information systems on Jan. 1, 2000--already have proven dead wrong . As for the others, we'll just have to wait and see.

Now that we're well into the 21st century, the predicting business has leveled off. Yet for logistics and supply chain professionals, it's an opportune time to speculate on their future world in terms of infrastructure, regulations, information systems, and operations. We know enough about trends in each of these areas to make some reasonable projections about the emerging supply chain environment. Specifically, we predict that eight key developments will gain increasing momentum as we approach the middle of the century:

• Performance will be judged by systems and flows.
• Artificial intelligence will play a central role in all supply chain activities.
• Supply chains will be branded and marketed.
• Liability hassles will be alleviated by simplified and released-rate pricing.
• Logistics operations will be paperless and "near laborless."
• Worker education and training will largely be a corporate responsibility.
• Two types of carriers will emerge: line haul and "last mile."
• The federal government will be forced to rebuild the transportation infrastructure.

It's important to consider these predictions as evolutionary phenomena. In other words, they will not be revolutionary events that you can prepare for or react to in a matter of weeks or months. Some of the issues associated with these predictions, like those involving education and carrier rights-of-way, are so weighty that they will require intervention by the federal government for resolution. Certain of these predictions, may make supply chain practitioners a bit uneasy. But if you reflect objectively on where we are now, and where we seem to be heading, the inevitability of these eight predictions becomes clear.

1. Performance will be judged
by systems and flows.

A key part of this mandate is to remove any flow-impeding bottlenecks, such as those often found today in the warehouse. And as warehousing moves from a regional to a national to a global function, the potential for such bottlenecks only increases. Though warehousing may be only one small link in the greater supply chain, managers need to make sure that link remains strong.

Carrier operations, in large part, are already measured by the rate of flow. They, too, can be bottlenecks in any given supply chain if they fail to implement the continuous improvement efforts needed to accelerate flow.

As integral parts of a larger supply chain service system, the warehouse and carrier operators must go to great lengths to assure the success of that entire system-even if it means taking up the slack for failed performance in another part of the system. For example, if a warehouse operator faces a stockout because of a delayed inbound shipment, it must be prepared to expedite throughput with overtime, if necessary, to meet the ultimate customer's delivery expectations. Similarly, carriers need to offset warehouse shortcomings in the supply chain. Both parties arc equally responsible for the overall supply chain performance and both must conduct their operations to meet ultimate customer flow expectations no matter what.

In the 21st century of ever-shorter cycle times, bottlenecks to supply chain flow cannot be tolerated. Going forward, supply chain managers will need to concentrate on systems that maximize flow. They also must develop processes for measuring flow-specifically, the cash-to-cash cycle that begins when somebody buys the raw material, and ends when the final consumer's payment is deposited in the bank.

2. Artificial intelligence will play a central role in all supply chain activities.

Artificial intelligence is the use of computers to replicate many cognitive skills, including the ability to solve problems. Artificial intelligence, which is enabled by intelligent computer systems, incorporates such applications as computer-aided instruction, voice recognition, robotics, and expert systems.

Putting Expert Systems to Work in Logistics, a book written over a decade ago by Mary Kay Allen and Omar Keith Helferich, provides a good overview of the potential of artificial intelligence in the warehouse setting. The authors note that intelligent systems can be used to:

• Design the warehouse layout.
• Assess alternate warehouse site locations.
• Design specifications for material handling.
• Plan, control, and schedule the shipping and receiving operations.
• Prescribe warehouse performance and then monitor that performance.

Some software available today contains algorithms to guide layout decisions as well as site location selection. In addition, voice recognition now is used in warehouses to facilitate the process of picking orders. The solutions available today, however, will be primitive in comparison to the technology used in midcentury. Advances in expert systems will result in software that fully enables all of the activities listed above-and more. Many of these activities, of course, are already being done today. . .but by people, not by computers.

Fifty years from now, people will be so acclimated to working with intelligent computer systems that they will give little thought to interacting with those daily flows administered by those systems. Adoption of intelligent business systems will be gradual because of the human tendency to resist relinquishing control over anything. But adoption will come nonetheless. The benefits of intelligent systems are far too compelling: They arc less prone to error and faster than human decision-makers.

Here's how we see one likely scenario unfolding:

• Intelligent systems will alert human system managers when the intelligent systems sense that they arc about to fail or require human intervention.
• Human system managers will know when and how to intervene and make interim decisions as required.
• The intelligent system will be in a continuous optimizing or learning mode so that human intervention will be minimized and minimal.

Industry leaders are already using intelligent systems in their supply chain operations. Those companies that have dragged their feet in applying this technology risk an inevitable loss of customer confidence and market share. As managers learn to trust the powerful and positive impact of intelligent systems on supply chain flows, artificial intelligence will become a core component of every, efficient supply chain.

3. Supply chains will be branded and marketed.

Supply chain capabilities will be branded, and the leading-edge providers will promote their brands as aggressively as consumer product companies do today. Many of these leaders will offer to sell their capabilities to other firms, even to competitors. Perhaps the only major logistics provider doing this today is UPS with its campaign to brand a common color--brown. A smaller-scale branding example is a regional provider of warehousing and trucking based in Scranton, Penn., which was known as Kane. Some years ago, Kane created the slogan "Kane is Able" and then changed its company name to Kane is Able, Inc.

As part of supply chain-wide branding initiatives, individual prices for warehousing and transportation services will be de-emphasized. Instead, third-party providers will promote a bundled price for all logistics services. The midcentury buyer will be far more interested in the total supply chain cost than in the price for any individual piece.

Users of third-party logistics services have their preferred suppliers. And while they don't advertise the fact, the providers of those services have their preferred customers as well. These are the clients who get the special attention, especially in times of capacity shortages or crisis. Soon we'll see the emergence of another preference category -- "preferred logistics service partners." These will be the truckers, warehouse operators, express carriers, salvage/repack operators, and so on that the third-party provider relies on to deliver its branded supply chain offering.

4. Liability hassles will be alleviated by simplified and released-rate pricing.

The English common-law distinctions regarding the respective liabilities of transportation and warehouse service providers will be adjusted to deal with the realities of 21st century global supply chain operations. No longer will the owner of damaged or lost goods be required to prove that those goods were in the custody of the carrier (who today has absolute liability for the goods in its care whether it was negligent or not) or in the custody of the warehouse operator (who has liability for the goods in its care only in case of proved negligence). Insurance policies designed to cover goods moving through any given supply chain will provide total coverage of every aspect of logistics-related services. Importantly, this will include such dynamic activities as cross docking, which is sometimes performed by a carrier and sometimes performed by a warehouse operator.

Fulfillment services will be used more widely than today, and the fees for those services will be simplified and bundled. Just as a catalog buyer now can quickly determine the cost of handling and shipping for a new sweater, the midcentury logistics buyer will have ready access to understandable and accurate published fulfillment schedules.

The murky area of liability and reimbursement for loss and damage will have been clarified by a relatively simple system of released-rate pricing for supply chain services. This pricing arrangement will allow the providers and users of these services to negotiate prices based upon the percent of risk each party is prepared to assume. Once both parties agree on a base rate for fulfillment services, that rate will be applied to a generally accepted release-rate structure.

To illustrate, here's how the released-rate structure could work in future supply chain service pricing:

• If the user will agree to pay 120 percent of the base rate, the supply chain service provider will agree to insure for and reimburse the user for 100 percent of the value of any goods damaged or lost in the fulfillment process (provided, of course, that there is no negligence on the part of the supply chain service user or owner of the goods).
• If the user will agree to pay 1 10 percent of the base rate, the supply chain service provider will agree to insure for and reimburse the user for 50 percent of the value of any goods damaged or lost in the fulfillment process (provided there is no negligence on the part of the supply chain service user or owner of the goods).
• If the user will agree to pay 100 percent of the base rate, the service provider's liability will be similar to that of the warehouse operator's common law liability of today. That is, the supply chain service provider will be liable only to the extent of its own negligence.

Essentially, the released-rate process allows all parties to share the risk of supply chain transactions according to how much each party is willing to invest in that risk. The complexity of any given released-rate structure will depend upon the relative value of the goods moved and the complexity of the fulfillment service provided.

5. Supply chain operations will be paperless and "near laborless."

The serious shortage of skilled labor that occurred at the end of the century was not a one-time phenomenon. It will return, particularly with regard to truck drivers and ware house operations people. The need for skilled workers will exceed the supply, particularly in the developed nations. The primary causes arc declining birthrates that result in shrinking populations, growing demand for real-time response supply chain services, and the increasing variety of value-added services offered by supply chain service providers.

We will handle the shortage in two ways: by reducing paper and by reducing touch labor.

Today most businesses are seeking to remove as much paper as possible from their shipper-carrier-warehouse-receiver operations. By midcentury, it will be rare for any company to use paper in supply chain transactions. Business transactions in 2050 may not be 100 percent paperless, but they will be so close that the typical person involved in any given transaction will rarely see or touch any paper at all.

Given the perpetual escalation of labor costs, companies are also seeking ways to replace labor wherever possible in their supply chain operations. Near labor-less operations in

2050, especially in warehouses, will be commonplace -- although no supply chain will completely function without some (albeit minimal) human intervention. Robotic materials handling equipment will allow many, if not most, material-handling vehicles to operate without a driver. Pallets will be built up and stripped by robots instead of humans. Packaging functions will be far more automated than they are today. Machines, rather than people, will perform nearly all order picking tasks. The number of line-haul drivers will be greatly diminished because nearly all inter-city containers and/or trailers will move in piggyback service on flatcars.

The workers who remain in warehousing, dispatching, and driving operations will have a different skill set from those working now. These will become precision jobs, requiring more education and greater intellect. The workers will be required to interrupt, diagnose, repair, and fully control mechanized systems. At the other extreme, some routine tasks will be simplified so that people with mental or physical handicaps can perform them.

6. Worker education and training will largely be a corporate responsibility.

Increasingly, corporations will recognize that proper education and training is the only way to assure a high-quality workforce in a time of scarce labor resources. At the same time, they will be forced to assume the primary responsibility for providing that education and training. Part of this will involve helping older workers utilize the new business tools and technology that did not exist when they went to school or entered the workforce.

Many new hires will be retained as "student workers" and paid about 80 percent of the normal salary. The student workers would spend one day of each week in formal training to acquire the reading, writing, math, or other basic skills needed to qualify as experienced workers. Each student worker will be required to demonstrate a required level of proficiency in reading, math, information technology, and appropriate operational areas. During the training process, each student worker must demonstrate that he or she is actually learning by successfully completing verbal or written examinations. Since the student workers would, in effect, be on probation, they could be terminated for not progressing satisfactorily in the training process.

Once the training is completed, the probationary student worker would be recognized as a qualified full-time worker with 100 percent compensation and full benefits.

This formal training for student workers will be a common business phenomenon by the year 2050-so common, in fact, that an entire industry of business educational institutions will offer a variety of services based on the needs of the particular industry or profession. Some corporations will contract to have the training conducted on site. Others will send student workers to nearby business education campuses one day each week. Still others will use a combination of both approaches.

7. Two types of carriers will emerge: line haul and "last mile."

For several years now, motor carriers in particular have realized that it is difficult, if not impossible, to provide efficient line haul and metropolitan (or "last mile") services at the same time. Consequently, they've begun to specialize in the type of service that they arc best equipped to provide. Going forward, two broad categories of carriers will emerge: line haul carriers and last-mile carriers. The line haul carriers will not provide door-to-door service. Instead, for local pickup and delivery they will rely on a vast network of last-mile carriers specializing in metropolitan or relatively finite geographical areas. Each last-mile carrier will have created an infrastructure capable of providing either full trailer or courier service that is uniquely capable of "touching" each building (and, sometimes, each office) in its service area several times each day. Further, many of these services will be available 24 hours a day, seven days a week. In most cases, these last-mile carriers will either be owned by or closely affiliated with public warehouses.

In the parcel service arena, by midcentury same-day service will be as common and as comparably priced as next-day service is today. Premium-service forwarders and parcel carriers will have backed away from handling truckload or volume shipments to concentrate on providing priority service as close to real time as possible. Every parry in any given supply chain will be aware of many ways to trade inventory for information and, accordingly, measure fulfillment service in terms of hours instead of days.

In a parallel development, we see the present distinctions between transportation modes becoming blurred or even nonexistent. Freight companies will move shipments over multiple transport modes with no transfer of liability or responsibility.

8. The federal government will be forced to rebuild the transportation infrastructure.

The condition of the railroad right-of-way will continue to deteriorate throughout the early part of this century. It will reach the point at which the capital generated by the right-of-way owners -- that is, the railroads -- will no longer be sufficient to ensure safe operating conditions. Thus, by 2050, the federal government will have taken title to railroad rights of way, bridges, tunnels, and similar structures. As part of a massive infrastructure-rebuilding program, the government will upgrade and maintain the rail rights-of-way in much the same way as it now does for the federal highway system. These projects will commence around 2020 and continue through midcentury.

A single federal agency similar to the Federal Highway Administration will oversee all rail and highway infrastructure activities. Railroads and users of the rail system will lease that right-of-way from the government on an as-needed basis. Portions of both the rail right-of-way and the highway system will be dedicated to freight transportation and, hence, not available for general public transit. Similarly, portions of both the rail and highway system will be restricted to public transit and not available to commercial traffic. The government will lease the right-of-way segments to the rail operators. It will also develop various lease or fee arrangements for motor carriers using the freight-only highways.

The cost of all of this may well double the rate of various transportation-related user taxes now paid on fuel and equipment. Yet this added expense will not be quite the burden that railroads, motor carriers, and shippers had initially feared. In any case, the benefits of having safe dependable roadbeds and roadways will more than offset the additional costs incurred.

Understanding the Linkages

The events surrounding these eight predictions may unfold at a pace that differs somewhat from what we have outlined here. And there may well be certain variations on the central themes articulated. So it's best to consider the eight predictions as most likely scenarios given our understanding of current business practices as well as social, economic, and political trends.

Professionals now working in supply chain management and those who will succeed them-should be aware of the interconnections of the predictions. As they apply the latest technology and process management techniques to their supply chain, they must strive to strengthen each link in that chain. This process will require improved management of flows, greater use of expert systems, better education and training, and a different type of carrier. The links will be further enhanced by branded marketing, a reduction of labor content, fixed fulfillment fees, and a totally rebuilt transportation infrastructure.

Things will be different going forward-radically so. In fact, those fortunate enough to be around by the middle of the century will look back and wonder how we ever got by with those rusty old supply chains of 2003.