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Commissioner Dye Addressed the TRB’s Maritime Research & Development Conference

June 19, 2018

Remarks of Commissioner Rebecca Dye
Transportation Research Board
Maritime Research and Development Conference

FMC Supply Chain Innovation Teams

Thank you so much for that kind introduction, and for the opportunity to address TRB's Maritime Research & Development Conference.

I'm pleased to be here to discuss with you the Federal Maritime Commission's focus on supply chain innovation and the systemic value of critical information availability.

Project Background

For those of you who may be unfamiliar with the Federal Maritime Commission's charter, the Commission exercises broad programmatic authority over ocean carriers, seaports, marine terminals, freight forwarders and non-vessel operating common carriers.

Our flagship authority is contained in the Shipping Act of 1984, under which we analyze agreements among ocean carriers, ports and marine terminal operators to ensure that U.S. ocean transportation markets are competitive. The ultimate benefit of this program accrues to American importers and exporters-- to provide the highest quality of ocean freight transportation, at the lowest cost.

In order to carry out this mandate and develop an in-depth understanding of the businesses we regulate, we analyze and evaluate a huge amount of current operational and financial data from our stakeholders. Of course, we are also familiar with the commercial realities of all categories of U.S. importers and exporters.

It was our understanding of the commercial interaction among key supply chain actors that gave us the incentive to move forward with the Commission's Supply Chain Innovation Teams initiative. The Commission created the Supply Chain Innovation Teams Initiative following port congestion situations beginning in 2012-2013 on the East Coast and becoming acute on the West Coast in the second half of 2014 and the first half of 2015.

The East Coast difficulties were mainly weather-related; the West Coast, arose mainly from labor issues. Around that time, truckers appeared before the Commission and implored us to become more involved in resolving port operational challenges.

So when our former Chairman Mario Cordero asked me about Commission "next steps," I volunteered the Supply Chain Innovation Teams concept that I'd thinking about for some time.

I asked him for two things: first, a Commission order, that would provide me with authority to develop the "Innovation Teams," project, and second, a promise that nothing I developed would be turned into an inflexible government regulation. He agreed.

This project is at the intersection of supply chain systems management, team and innovation leadership theory, and port and maritime shipping operations. To support the Innovation Teams project, I consulted some of the best supply chain companies in the country and also other transportation organizations with supply chain expertise.

We were obsessive about our team leadership and innovation approaches. I know my staff hears me in their sleep saying, "Not collaboration, but engagement. Not brainstorming and facilitation, but focused leadership." Of course, today your main interest is in the supply chain "visibility" aspect of the Teams project.

So I'll discuss how the Commission acted as a catalyst to lead the innovation teams to take a broad "systemic" view of the global supply chain, identify one important supply chain process innovation, and move beyond discussion to action on supply chain visibility.

At the desk, I have left copies of our summary Supply Chain Innovation Teams report, our annotated bibliography, and a list of participating companies and organizations.

Complexity

In his 2015 book, Team of Teams, General Stanley McChrystal discusses how systems move from complicated, in which we can predict and plan each event that routinely occurs (like an assembly line), to complex, in which "butterfly effects" and "black swans" and other far-flung events make anticipating outcomes difficult, if not impossible.

Nassim Taleb, one of my favorites, the author of the Black Swan and Antifragile, is another author who explains the challenges of systemic risk. The most important concept that we encouraged the members of our Teams to adopt was that our global supply chain is a complex system, in which every action, every commercial decision, may affect outcomes in the supply chain in unanticipated ways. Internal business efficiency alone may not be enough to prosper in a complex system.

For these reasons, we guided our Teams to "step out of their enterprise silos" and consider the supply chain from the overall, "upstream and downstream" perspective. As an aside, I suggest to you that the transportation "intermodal" approach that the Federal government employs to regulate the various businesses in our global ocean transportation system may need to be updated, to reflect the interdependent, complex systems reality of our global freight delivery system.

Three Themes

There are three major themes that describe the work of our six import and export supply chain innovation teams during 2016 and 2017. Small Teams and Process Innovation, or more specifically, the importance of creating small teams of no more than a dozen industry leaders, from across the relevant range of supply chain actors, to identify and promote conditions that support process innovation.

Second, Visibility of Critical Information. Not just more data collection and distribution, but identification and provision of the specific critical information that each supply chain actor needs to achieve its goals efficiently and effectively.

Third, a National Seaport Information Portal. This is the supply chain process innovation that our teams recommended as potentially the most useful for changing the operational behavior of actors in the ocean freight delivery system.

It is the way critical information can be made available in a timely and secure manner to all relevant supply chain actors.

The Foundation

When the Supply Chain Innovation Teams project was launched in May, 2016, our three Import Teams were directed to first, identify one supply chain process innovation that would increase supply chain reliability and resilience and second, develop a proposed private sector implementation of that process innovation.

I took two issues off the table: port infrastructure and funding and port metrics.

We organized our Teams to consider process innovation, with the Commission designing the discussion platform, focusing discussions and overall, acting as a catalyst to "speed up" the process by allowing the teams to "think out of the box."

We insisted on small teams of key supply chain leaders - 12 or fewer -- because small, multi-stakeholder teams were essential to ensuring active engagement by the participants. Larger groups or roundtables, I have observed, tend to simply present each participant's talking points in turn, but rarely engaged in open dialogue or productive debate.

And of course, formal Advisory Boards are organized to advise agencies on their own regulatory programs, not develop commercial solutions. We also insisted on industry leaders as Team members, to ensure that there was enough collective experience and authority at the table to make the discussions productive.

The other key element of the team's composition is the inclusion of different ports types (landlord and operational ports) and port regions - as well as separate teams for importers and exporters. Our port officials were "port anchors" for our Teams, because it's difficult to discuss port operations in some fantasy port.

We knew that participants would be more likely to fully engage, and step outside their industry-specific "silos," if team discussions were not held in public. We balanced those private meetings with regular public presentations on the team's progress at Commission open meetings, in Congressional testimony, and from time to time via public statements on the agency website.

Finally, at the project launch, I discussed with our Team members how innovation may occur. In his book on the digital revolution, The Innovators, Walter Issacson concluded that the contributions to innovation by isolated individuals is overrated. He observed that real innovation springs from creative interaction among committed individuals. (Sounded like Innovation Teams to us.) Most often, that takes the form of incremental advances over time.

Also, a 2014 study from the MIT Center for Transportation and Logistics concluded that most innovation in supply chain management builds on existing achievements and reconfigures known methods and technologies.

By the end of the Innovation Teams project in December, 2017, all six of our Import and Export teams agreed that enhanced international supply chain visibility would improve global supply chain reliability and resilience. Many supply chain inefficiencies, our team participants agreed, result from poor information availability, inaccurate information or untimely information.

This lack of timely, accurate information can leave some supply chain actors "flying blind." And even worse, not only are we flying blind, but we are flying right into each other! Providing critical information (the"right information", at the "right time") encourages "self-correction" of existing sub-optimal supply chain behavior.

Our Teams identified each supply chain actor's critical information needs, and discussed how to ensure that key information reached each actor in a timely fashion. It involves determining who requires what information -- and when? Who has the information, and how can they distribute it effectively?

That may seem simple, but I suspect this audience will already be aware that it's not simple or easy to determine in the seaport context.

For example, the shippers on our import teams reported that the key piece of actionable information they needed was "when" their inbound containers were ready for pick-up at the terminals.

But to confidently say that, marine terminal officials need to know where the container is in the yard, whether or not it has been cleared by customs, whether or not the required paper work has been submitted and processed, if, when and where a chassis is available to transport the container, whether a truck appointment can be scheduled by the terminal, etc.

So, before that single piece of critical, actionable information can be provided - before the shipper and drayage trucker can act - a great deal of underlying information is needed by the marine terminal operator.

In the export direction, our shipper team members identified different critical information needs, such as: When would an empty container be available at the shipper's location? What was the earliest time they could deliver the loaded export container to the marine terminal? And, what are the gate hours at the terminal?

Shippers had their critical information needs. Marine Terminal Operators had different but related information needs. Trucking companies and chassis providers had other information requirements. And all of these interlocking information needs must be met in a timely and transparent manner for optimal supply chain performance.

Which brings us to the proposed National Seaport Information Portal to deliver the key information from and to each of the supply chain actors in our dynamic, multi-modal freight delivery system.

That portal, our teams told us, should have a number of important attributes.

Critical Information Delivery Technology

The National Seaport Information Portal would allow supply chain actors to better align their business processes - and change their behaviors in ways that more closely integrate their transportation operations. The consensus was - across all six teams - that supply chain visibility could be significantly enhanced by such a national portal - possibly one that included business dashboards tailored to the needs of each supply chain actor.

The teams felt that focusing on supply chain visibility at a national level could also incentivize standardization of terminology and types of information provided.

A national seaport information portal, and any associated dashboards, would need to be customizable to take account of different informational needs in different regions and among the various supply chain actors. Accessibility to the portal, they said, should be "layered," so that each supply chain actor could obtain and provide the specific information required.

For the information portal to have significant value, it would need to consolidate each actor's critical, actionable information in a single interface - ending the actors' need to check multiple websites.

A number of participants expressed the view that it would be beneficial if the system could "push" the critical information, rather than functioning solely as a query service. Some team members advocated for a national portal that could be linked with existing information systems at individual ports. And as you may imagine, all the teams identified cybersecurity as an essential element of any national seaport information portal.

On the practical side, the teams recognized that a national seaport information portal would be difficult to develop, test and implement. So, some participants suggested initially developing and testing a seaport information portal at one port - as a pilot effort - and then expanding and adapting it to container ports nationwide.

As you may be aware, since November 2016, there is an on-going seaport information project at the Port of Los Angeles, with GE Transportation, that is expanding to include other ports, including the Port of Long Beach.

Although the Commission does not endorse or advocate for any private sector enterprise or any particular port, we are closely following the Los Angeles project and its potential to become a national seaport information portal.

Representatives of the Ports of LA and Long Beach, the Port of New York/ New Jersey, marine terminal operators from those ports, and shippers with cargo moving through those ports were active participants in the import teams we created in early 2016.

So our supply chain team discussions were important to the development of the LA/GE information portal program that began in late 2016. And there was, I believe, significant and useful cross-fertilization.

Some of you may have noticed the results of a survey of shipping industry executives and professionals that the Journal of Commerce recently published under the banner: "Working as One: How real-time, cloud-based data-sharing will benefit the maritime shipping sector."

The first two takeaways from that survey were:

"More than half of all respondents said their operational performance would improve by at least 50 percent if they could share real-time operational information."

"97 percent support the importance of supply chain stakeholders being able to operate with a common set of data."

If those figures are reasonably accurate, the shipping industry understands the benefits of greater data sharing and visibility. And that's definitely a good thing.

But the hard part remains: Bringing the key supply chain actors together to improve the reliability and resilience of our complex, dynamic international, multimodal freight delivery system.

The Commission's supply chain teams made substantial progress in that direction in a relatively short period. Their work can (and I expect will) be continued and refined through future private sector efforts -- such as that being undertaken now by the Port of Los Angeles, GE and others.

Boost American Economic Growth

So why are we doing all of this?

Because our international freight delivery system - ocean, rail, and trucking - is vital to the growth of the American economy.

If we can enhance the performance of our American freight delivery system through information visibility, it will provide a boost to the international competitiveness of the United States.

Thank you for your kind attention. I will be happy to answer any questions in the remaining time available.