Daily Archives: October 28, 2012

Federalist No. 25

In Federalist No. 25, Hamilton continues his consideration of the powers necessary to the common defense, which he began in the last instalment where he determined that restraints upon the discretion of the legislature in respect to military establishments in time of peace, would be improper to be imposed as here has been a constant necessity for keeping small garrisons on our Western frontier and that alone justifies the need for standing armies, even in peace-time.

In this piece he noted that the territories of Britain, Spain, and of the Indian nations … encircle the Union from Maine to Georgia and that the danger, though in different degrees, is therefore common. And the means of guarding
against it ought, in like manner, to be the objects of common councils and of a common treasury

If power was instead to be imbued in State governments, rivalships could form, due to the inherent love of power possessed by any assembly, and in any contest between the federal head and one of its members, the people will be most apt to unite with their local government. Plus, if the ambition of the members should be stimulated by the separate and independent possession of military forces,
it would afford too strong a temptation and too great a facility to them to make enterprises upon, and finally to subvert, the
constitutional authority of the Union
. As a result, the liberty of the people would be less safe in this state of things
than in that which left the national forces in the hands of the national government

And if the need for a national army under the control of the federal government is not yet clear, we can obviate this consequence by noting that the United States would then exhibit the most extraordinary spectacle which the world has yet seen, that of a nation
incapacitated by its Constitution to prepare for defense, before it was actually invaded

Good Advice and Bad Advice for Controlling Transportation Insurance Costs

Inbound Logistics recently ran an interesting article on controlling transportation insurance costs, which can be quite high if you are transporting high-value items (such as electronics and pharmaceuticals) or high-risk items (such as alcohol and tobacco). The tips can be grouped into three categories, average, good, and bad. In this post we will review the good and the bad, which, in the latter case, might also be just plain ugly.

The good tips were:

  • Become a Partner in Loss Prevention
    It’s amazing how much control you have over keeping your shipments safe, and the safer your shipments appear to be when the underwrite does her analysis, the better off you are. You can make sure that your trucks and facilities are always secure and monitored, you can make sure that at least two people are involved every time something is loaded or unloaded, and you can insure that any potential security breaches are dealt with quickly and efficiently.
  • Operate in Full-Disclosure Mode
    The more your insurance company knows about your operations, shipment preparations, supply chain, and logistics, the more informed underwriting and pricing decisions it can make and the more comfortable it is with giving you the benefit of the doubt when there is one, and a lower rate.
  • Limit the value of individual shipments on single conveyances
    Limit the value of individual shipments on single conveyances. This isn’t life insurance. It doesn’t help you to have more coverage then you will ever need.

The bad tips were:

  • Seek out transportation providers willing to offer higher liability limits.
    Just because they are willing to offer higher limits does not mean that they are safer. It might just mean that they are more desperate for business. You want the safest providers you can find, as that is what is the most likely to help you lower your premiums.
  • Shift Cost, Obligations, and Risk of Cargo Loss to Your Trading Partners Earlier in the Transaction
    This is equivalent to telling your CFO to improve working capital by extending days payable outstanding. You don’t reduce costs by transferring the problem to someone else. You increase them. Just like extending DPO forces your suppliers to borrow more money at higher interest rates for longer periods of time, which results in them charging you higher prices, shifting risk to your buyers prematurely just results in them demanding lower prices as they have to pay higher insurance costs and factor that into their TCO. Dumb, de-dumb, dumb, DUMB!