On Monday, February 16th the Risk Management Fellowship played host to Patrick Hessini, Vice President of Transportation and Distribution for CHS, Inc. Hessini, a K-State graduate of Industrial Manufacturing and Systems Engineering, oversees 600 employees for the international commodity cooperative based out of the Minneapolis area. With over 11,000 employees across 24 countries and customers in 65 countries, CHS deals in the production and distribution of energy, grains, and foods on a global scale. Specifically, Hessini and the Risk Management Fellows discussed the business structure of CHS and how the company manages the risk and volatility associated with supply chains.
CHS takes pride in its cooperative status; with farmers, ranchers, and local co-ops making up the company’s owners and customers. A major goal of CHS is to help grow the businesses of their customers. CHS itself is comprised of 14 business units from agriculture and energy, to finance and transportation that collaborate to better accomplish the objectives of the company and its customers. This business structure also helps spread the company’s risk over multiple industries and economic environments. CHS also uses forward contracting and futures strategies, along with a fiscally conservative business model to handle its global risk.
Hessini explained that transportation and distribution contributes a great deal of volatility and risk for continued business success. Designing logistical plans to cope with infrastructure issues pose a major challenge for ensuring timely and efficient movement of goods. He went on to add that U.S. manufacturing growth; changes in international trade balance and routes; and political issues have had a major impact on transportation demand. A few examples of current events that have had, and will have, a major impact on the dynamics of the distribution industry include the Ukraine-Russia crisis; the updating of the Panama Canal; China’s slowing economic growth; and labor disputes in west coast ports. All of these events have altered the cost, demand, or efficiency of transportation routes enough for distribution companies like CHS to reevaluate how goods are moved from place to place.
To deal with this ever-changing environment Hessini described how important it is for CHS to forecast before high demand seasons; analyze all elements of the supply chain; and create options with business partnerships before they’re needed. Furthermore, CHS implements what-if analysis and scenario planning to develop strategies to deal with potential challenges. CHS also utilizes optimization models to determine the best solution to these challenges. The Transportation and Distribution department of CHS is comparable to a “supply chain control tower,” concludes Hessini.
I’m sure I speak for all of the Risk Management Fellows when I say that it was a pleasure to hear how a K-State graduate manages such a major component of a leading company like CHS, Inc. We all look forward to meeting with CHS again.