Professor (em) Massachusetts Institute of Technology. Chairman, American President Lines, Inc.

Abstract

Developments in transport, communications, and information technology now permit dramatic improvements in intercontinental transport time, cost, and quality of service. At the same time, shippers and consignees require reduction or elimination of inventories at all steps of the supply chain to improve their ability to effectively respond to changing economic and market conditions. A major challenge is the reduction of uncertainty and risks in total trans-ocean supply chains to permit more effective control of time, cost, and quality of service. Emphasis must, therefore, be placed on reducing deviations in time and cost of the different links in the chain. The use of conditional stochastic simulation to model, design, and control complex trans-ocean supply chains is described and advocated. It is shown that reducing link uncertainties can achieve large improvements in trans-ocean supply chain costs and profitability, and increase the market in an increasingly globalized world.