Category Archives: Logistics

There are Perks and Pitfalls of Friend-Shoring — But The Answer is Near-shoring!

On Tuesday, when we told you the tariff tax is coming and there’s nothing you can do about it, we told you the long-term solution is near-shoring, and while others will tell you that the short-term answer is friend-shoring, we want to make it clear that it is NOT.

As a result of recent logistics disruptions, geopolitics, and global disasters, and all of the supply disruptions that have resulted, a lot of global companies are starting to pull back on global outsourcing and extended supply chains, at least where they seem to have options.

Apparently a number of these organizations are considering Friendshoring, as per yet another article on the subject, with a recent example being the perks and pitfalls of friendshoring in EP&T.

According to this article this strategic shift is buzzing among industry leaders and policymakers. Why, I’m not sure.

The article has the following benefits right:

  • enhanced security and trust as partners tend to trust each other and keep each other safe
  • improved compliance and standards as friends generally work to serve the same markets and are more aware of the standards and regulatory requirements that need to be met for all to benefit

And has the following challenge mostly right:

  • increased costs as most “friends” are in first world countries with higher labour costs, higher utility and operating costs, stricter environmental regulations, etc. etc. etc. so costs are generally a bit higher up front (at first)

But here’s what the article overlooks:

  • better quality since these friends usually operate at higher standards with better tech which typically translates into
  • more reliability and longevity which generally translates into
  • reduced returns and warranty costs as customers will generally discard or move on from the product before it breaks
  • higher sales prices as customers will pay more for quality

And here’s what the article really overlooks.

It’s NOT friendshoring, it’s nearshoring!

Preferably somewhere you can get to on land, or from a nearby port. For North America, that means we should primarily be outsourcing from Central America (since we can get our stuff on trucks if ocean freighter availability is low) and, if we can’t get it there, from South America — since we can get it from a ship that sails up and down the coast (and doesn’t have to pass through a canal that has limited capacity due to drought or is unsafe due to terrorist presence). NOT from China, unless it is a raw material we can’t get elsewhere.

The nearer the source, and the less countries and distance the materials or products have to pass through, the less chance for disruption.

Moreover, it’s NOT the friends you have, it’s the friends you need, which may not be one in the same.

For example, a company in the UK might be your “friend”, but the UK is expensive, crossing the Atlantic is expensive and risky at certain times of the year, and you might be able to invest in a supplier in Mexico to get the same product! Moreover, if you invest in a company to help them grow, they are much more likely to stay your friend than a company who is only your friend because they think you are locked in to them.

Plus, if you choose, and invest in, up and coming / new suppliers, you can help them with their processes, new technology selections and plant upgrades, and even sub-tier supplier and material selection. This can be more helpful to you than an established supplier locked into their ways and last-generation technology and production lines they paid too much for.

Some of your “friends” will be the right “friends”, some won’t. Analyze them all and make sure they fit all of your requirements: near, quality, reliability, and potential for future value creation. (Not just future cost reduction after you help them get efficient, but potential sales price increase, value added services, and other factors that might increase the overall profit equation. After all, Procurement is about increasing business value, not just about securing supply and controlling costs.)

Stay close to home, and even home-shore when you can, and you will see fewer disruptions, which should be your goal as supply disruption has been the biggest risk for at least the last 15 years.

Supply Chain Resilience is Becoming Key, but You Can Only Reach it By Design!

But while it used to be a relatively straightforward Supply Chain Network Design problem (especially if you had a good SCND tool with optimization and simulation capability), it’s become a lot more complicated.

A recent article over on Logistics Viewpoint on Resilience by Design: The Power of Simulation in Supply Chain Strategy did a great job of explaining the power and importance of optimization in supply chain network design (and demand fulfillment modelling), especially around optimizing cost between two potential fulfillment options (determined to be equally viable).

These days, you have to consider:

  • the reliability of the supplier (financial viability, raw material availability to it, geopolitical instability, etc.
  • the reliability and availability of the carriers (financial viability, available containers, route viability, etc.)
  • the carbon contribution of the fulfillment model (is it going to make targets today AND tomorrow)
  • … and how your supply chain will adapt if a supplier or carrier fails or a primary product becomes unavailable and you have to switch to a secondary product

That’s true resilience … not just managing costs under demand shifts, but managing availability under supply shifts — in the supplier, carrier, or product.

It’s a tall order, and not all platforms in our space can handle it (well beyond standard SSDO), but a few can. From a network management viewpoint, you can check out Logility Network Optimization (formerly Logility Starboard) and Coupa with their SSDO and SCNO solutions.

The reality is that it doesn’t matter how great of a deal you inked if you can’t actually acquire the products at the agreed upon prices, and, more importantly, if you can’t even get the products at all! So if you want a resilient supply chain, you need to design for it. And sometimes that goes beyond just doing the standard 80/20 or 50/30/20 splits (because if all the suppliers are in the same fault zone on the ring of fire … it will only take one disaster for them all to burn).

Source-to-Pay+ Part 6: (In) Transport Risk

In Part 1 we noted that Risk Management went much beyond Supplier Risk, and the primitive Supplier “Risk” Management application that is bundled in many S2P suites. Then, in Part 2, we noted that there are risks in every supply chain entity; with the people and materials used; and with the locales they operate in. In Part 3 we moved onto an overview of Corporate Risk, in Part 4 we took on Third Party Risk (in Part 4A and Part 4B), and then in Part 5 we laid the foundation for Supply Chain Risk (Generic).

As part of supply chain risk, we highlighted transport mapping and tracking as a key risk that the system should track, but noted that a generic supply chain risk management system would generally not be a full featured transport risk management system because such a system would also monitor and mitigate risks of goods in-transport. (Not just risks at nodes.) Such a system has a number of specific requirements beyond the basics outlined in our last article. In this article, we are going to discuss a number of those specific requirements.

Capability Description
Modal-Specific Support Cargo can travel by land, rail, sea, or air. As a result, an in-transport platform has to recognize each of these modes, the differences between them, the data that needs to be tracked, and the data that can be obtained from carriers providing each mode.

Such a platform should integrate with industry standard data feeds from TMS (Transport Management Systems), data feeds from major carriers, GPS systems, and other systems that provide data on your shipments, where they are, and when they are expected to get to the next location if the current leg of transport does not have a real-time GPS feed.
Cold Chain/Hazardous Not all cargo can travel dry at room temperature. Some has to travel wet, some has to travel refrigerated or frozen, and some has to travel with special precautions for hazardous materials. It’s critical that such a platform be able to tag items with these tags, these transport requirements, and assess the risks associated with the transport based on carrier, route, geolocation, etc.

Such a platform must be able to detect when a risk materializes or escalates, such as the delivery time estimate being pushed forward by a week when the cargo was only expected to have a shelf-life of six (6) days when delivered, extreme weather phenomena suddenly materializing in the region of the transport vehicle, or dangerous (man-made) accidents occurring as a result of a leak, accident, or failure in transport.
Manifests/Bills of Lading The system should be capable of accepting bills of lading and cargo / shipping manifests and ensuring that the bill of lading exactly matches the shipment that is expected from the supplier, the cargo/shipping manifest exactly matches the bill of lading, and the inventory at the dock/yard matches the cargo manifest. This is the only way to minimize the chance of theft and fraud during transport. And by fraud, we don’t just mean your goods disappearing, we mean your containers and your company being used to smuggle goods into one or more countries where the goods are prohibited in those countries.

The system should also be capable of identifying carriers who have had incidents in the past, the carriers who are most at risk due to the regions they operate in, and the carriers who are most at risk due to the products they are carrying, both for you and for others (based on public manifests).
Ports The system will track detailed information on the ports that are used in the supply network. It will maintain information on port capacities / throughput, the carriers that go in and out, the equipment, the security at the dockyards, and so on. It will maintain information on the labour situation (last strike, the date the contract ends, likelihood of a strike/slowdown, etc.) as well as the available workforce.

The system should be capable of tying in weather information, local geopolitical information, economic information, and other disruptions that could affect the port, as well as any other risk-based factors that are relevant.
Canals/Straits A lot of the world’s goods flow through canals (primarily the Panama and Suez) and straits to ports that are off of lakes and seas and not on the Atlantic or Pacific Ocean. While there are the risks of natural disasters just as there are on the high seas, there are also the geopolitical risks associated with all of the countries that border the canal or strait. (Especially if they are unfriendly to the country of origin, destination, or registration of the ship.)

The system must track all of the risks specific to the canals and ports that the organization, and its carriers, use in the ocean-based transport of goods.
Warehouses/Cross-Docks Most goods procured by an organization will live in multiple warehouses in their journey through the supply chain. The suppliers, the shipper’s local cross-dock, the port warehouse, the railroad cross-dock, your primary warehouse, and the regional warehouses that supply your local retail centers or manufacturing plants, as appropriate. These docks all pose a security risk.

The system should support all of the third party risk capabilities that are relevant for the owner/operator of the warehouse, the locale the work force is in, the third parties that provide the workers, and any other risks that can be identified and monitored for.
In-Yard (Rail/Dock) Sometimes the goods are in a warehouse, and sometimes they are just in a yard at the dock or the (rail)yard waiting to be loaded on a truck or a train to be taken to a cross-dock or warehouse. The risk will be a blend of warehouse/cross-dock and port/rail risks, tailored to the relevant locale.

The system should support all of the associated third party risk capabilities that are relevant, and, as with the warehouse/cross-dock, support risks that can be identified and monitored for.
Airports/ Some goods will go by sea, some by rail, some by land, and some by air. Airports have their own class of risks — which can include hijackings, crashes, and way too many carriers and personnel in and out of shared warehouses.

Similar monitoring to in-yard, but expanded to meet the specific need of airports servicing your cargo.
Driver/Conductor/Captain The biggest risks in transport are often not the third party carriers you deal with, but the people — are they appropriately vetted, trained, certified, and monitored? Who are they associated with? Can those associates pose risks? Do they need to be monitored? If so, when and how?

This system should integrate with an employee/contractor certification and monitoring systems to at least make sure all employees/contractors assigned to the organization’s cargo have appropriate licenses, certifications, training, and insurance.

And, of course, an In-Transport Risk Management system will also need a host of generic analytics/planning/monitoring capabilities, but since many of these are common, and since stand alone risk-focussed analytics applications are also part of the plethora of offerings out there, instead of discussing these generic features in this and every other article, as we noted in our coverage of Corporate Risk, we will instead discuss these capabilities in an article dedicated to Risk Analytics and Monitoring.

TenderEasy: Easy Breezy Beautiful Freight Quotes

First things first: if you are shipping globally, you need a(n) RFQ / Spot Bid solution built for freight. You may believe that just because you have a generic RFQ / e-Auction solution that can be used to collect freight quotes that you don’t need a custom freight tendering solution, but nothing could be further from the truth. When it comes to freight, at a minimum you have to consider:

  • five modes: road, rail, ocean, air, and small parcel,
  • multiple cargo types: dry, cold, frozen, and liquid,
  • palletized vs. non-palletized,
  • LTL vs FTL,
  • regular vs flammable vs hazardous, and
  • multiple cost tiers

and that’s quite a few data elements that most RFX tools are not setup to collect out of the box. Furthermore, even if the solution is highly configurable and can allow the creation of bid collection matrices that will collect all of the associated bid and lane data, chances are the platform isn’t setup with the rules to enforce the right bidding, the analytics for the right comparison, or enough sophistication in auto award scenario creation even for a baseline low-cost cherrypick scenario.

Furthermore, when you are shipping globally, you need to

  • understand approximate current lane costs / benchmarks,
  • know who is shipping in a region AND their typical capacity, and
  • be able to quickly access current rate agreements or spot-market bid rates

and your typical out-of-the-box RFX tool for indirect or direct sourcing is not going to do that.

However, a tool built by freight sourcing / logistics professionals for freight sourcing is going to do that and more. That’s what TenderEasy is. Founded almost two decades ago in 2004 to help organizations optimize their freight sourcing, they launched the first version of their fully SaaS-enabled freight tendering solution eleven years ago. Their freight tendering solution was among the first solutions that were custom built to help global companies manage their global fright RFQs across air, land, and sea. Since then, they have added spot quote capability, rate (contract) management, an integration API for custom data push to any TMS, ERP, or S2P system you want to transfer the awards to, out-of-the-box integrations with multiple TMS systems (e.g., Alpega, SAP4Hana), out-of-the-box APIs with public freight rate benchmark and analytics platforms (including Xeneta, Freightos, Upply, and Alpega FX), out-of-the-box integrations with container management platforms (including BuyCo), and out-of-the-box integrations with freight/lane-based emission calculators (including EcoTransIT World).

There are three main parts to the TenderEasy platform:

  • Administration
  • Buyer Interface
  • Supplier Interface

Administration

There are six main parts to the administration interface:

  • User Management: where you can manage your internal users with easy profile settings controlling visibility, accessibility and inter-activity with bidders
  • Supplier Management: where you can import, add and manage suppliers, including the ability to #tag supplier groups, and this management includes the management of (supplier) modes, cargo types, pallet capability, whether or not they do LTL or FTL, any certifications for flammable and hazardous materials, countries they can operate in, etc.
  • Currency Rates: where you can define, on project level, the currencies you support and the rates you wish to use for base conversion
  • Keyword Lists: where you can define as many arbitrary value lists as you want for bid and data collection during a tender (to make sure responses are with the right naming convention for rule creation and future data integration with your TMS, ERP, and/or S2P system)
  • Integrations: where you manage your export connectivity to whatever systems you want to push data to
  • Partners: where you select the data partners you wish to connect with for data enrichment of your analysis data (freight benchmarks, emissions, service KPIs, etc.). With some Partners you can “pay-as-you-go” via TenderEasy. Other partners will require a subscription and your partner license key credentials to access the data.

Supplier Interface

The supplier interface has four main parts and is designed to be as simple as possible for the suppliers:

  • Tender List which lists the tenders they are currently invited to and the status of those tenders
  • Tender Details where they enter their bids by lane
  • Import/Export where they can export the tender to Excel, fill it out in their favourite tool, and then import it
  • On-line bidding where Suppliers can fine-tune bids on-the-fly

Buyer Interface

There are four main parts to the buyer interface:

  • RFQ/Tendering which is where the multi-round magic happens (which we will dive into shortly)
  • Spot Quote Request where a buyer can empower their organization to execute quick spot requests for a single load in a transparent and compliant way
  • Rate Management where the buyer can store and manage their contracted rates in an auditable and sustainable way
  • Rate Search where the buyer’s stakeholders can search for contracted services and rates (that are stored in the system) in real-time, including historical rate records

The core is the tendering component where the buyers spend most of their time.

A tender can be created from an existing tender (as a copy) or from scratch. Creating a tender from scratch is quite easy:

  1. name it
  2. select a currency group and a default currency
  3. define the transport mode
  4. define the end time of the current round (with start [auto-]populated when you publish it)
  5. define the range for which supplier bids must be valid
  6. optionally upload any attachments with requirements
  7. optionally provide a detailed event description
  8. optionally define any terms and conditions (separate from the file uploads)
  9. create the bid / rate matrix by either
    • copying a matrix from a previous event
    • instantiating one from a best-practice template defined on system implementation
  10. add the suppliers (and you can easily upload their details via Excel)
  11. select/customize notifications
  12. publish

That’s it. Complex freight events can be instantiated in a matter of minutes. Why?

  • pre-defined best practise rate cards can be utilized, or you can copy a previous RFQ
  • pre-defined currency groups make currency definition one-click
  • the platform can store attachments in the platform, creating libraries for your standard specialized requirements, Ts&Cs, etc.
  • the buying organization can define matrices for every mode – region – good type / transport requirement they have on system implementation, including all of the validations and rules that are 100% compatible with Excel, with all of the appropriate lanes
  • the system will automatically select the suppliers associated with the mode and region with the necessary characteristics (hazardous certification, etc.) and all the buyer has to do is check the suppliers it wants to invite
  • there are ready-made automatic notifications in the system for every event you want to action

A key point to note is that TenderEasy supports full Excel capability within the platform, and easy wizard base definition of column and cell settings and properties. For example, each column can have a type, an associated validation rule, display/coloring properties, a visibility definition (buyer or supplier, read or write), etc. and each cell can have a more specific validation based

Another key point is that it’s stupid simple to import benchmark data into (private) columns in the matrix that you can use to evaluate bids (and, automatically, flag any that are too high or too low, possibly with colour coding in the column, or a separate column if you are using colour coding to show the percentage change in a bid from round to round. You simply select “import benchmark” and select the benchmark provider you want to use (which is typically the one you have a subscription with) and the quotes get sucked in automagically.

Bid analysis is also very easy. It’s simple to define a scenario that auto-selects the appropriate carrier and bid for each lane. There’s an integrated scenario builder where you simply define the grouping columns, the supplier group to consider, the tariffs to use, the (optional) adjustments to apply (where you can favour incumbents or innovative carriers and disfavour new carriers or eco-unfriendly carriers or low reliability carriers using a financial cost percentage adjustment or fixed cost modifier), and whether or not you want to use breakpoint optimization (where it will select the FTL amount when that is cheaper than the LTL amount at the current weight / space utilization).

Supplier feedback can also be customized and color coded in a multi-round tender to tell a supplier approximately how far off they are from being selected (e.g. < 10%, 10% to 20%, > 20%). You can generate feedback on any numerical value in the rate card, including service data, emissions, quality etc.

You can create as many (partial) bid analysis as you want, including baselines, using whatever rules you want, and then visualize them graphically in the dashboard, where you can also define thresholds to alert you if any carrier would get too little or too much business. You can also compare them side by side to help you identify the awards you want for each lane. When you figure out what you want, you can incrementally build (by combining partial awards from existing scenarios) the award scenario you want, push it into your external system for contracting, and lock it down as a set of rates to be included in the rate management part of the platform.

If you do need help (which won’t happen often as the platform is very usable, it is usually quite obvious what to do next, and all of the up-front setup on implementation jump-starts pretty much everything you will ever do), there is extensive help built into the platform, training material and self-testing, and a webinar archive.

There is pretty much everything you need out of the box to get going, with the only obvious exceptions being

  • combinatorial carrier optimization (once you have selected the preferred carriers) to balance cost, emissions, and/or delivery time (which they are currently investigating)
  • market-based alerts if a supplier you select is not likely to have current capacity (based on the spot market), if prices are going up quickly (and you should make lock in an award sooner rather than later), or if KPIs are dropping for current carriers (which are currently under investigation, with KPIs and improved benchmarks, which are needed at the foundation level, being investigated with Partners on how to best share this information pro-actively)

In other words, if you do global freight, and you don’t have a custom solution for freight RFQs and spot buys, you should not only have one but include TenderEasy on your shortlist. Once you see the capability a platform like TenderEasy can provide and how much more efficient and effective it can make your freight buyers, you’ll wonder how you ever lived without it. (Like any good e-Sourcing tool, it will quickly pay for itself many times over.)

Digging into Logistics Sustainability

In our article on Solving the Sustainability of the Supply Chain is Systematically Strenuous and Surprisingly Serpentine, we noted that while there are easy two-word answers for reconfiguring the global supply chain for greater supply chain assurance and more sustainability at the 30,000 foot level, when you dig into the details, it’s not so easy as you have dozens of facets to get right to truly optimize sustainability across:

  • Support
  • Sales
  • Logistics
  • Procurement
  • Manufacturing
  • Materials

Logistics sustainability is much more involved than just “green transportation” and using “zero emission“*1 electric vehicles, because there’s a lot more to logistics than the plane, train, boat, or truck. There’s also the:

  • Packaging – is the packaging reusable, reclaimable, recyclable, or compostable; minimal?
  • Warehousing – are the warehouse operations sustainable?
  • Routing – is the routing designed to minimize unnecessary distance, handling, and environmental impact?

Let’s dive into each of these:

Packaging involves ensuring that the following are sustainable:

  • Materials as the only trace of us millions of years in the future — after the “right to be stupid” crowd manages to vote in the greedy, power-hungry, self-nominated populist con-artist candidate in enough first world countries*2 — will likely be microplastics*3 and plastic molecules which, even after millions of years, will never fully dissolve (and which are already so omnipresent that microplastics are even in all of our bodies now)
  • Manufacturing as the packaging needs to be manufactured just like the product
  • Logistics as the packaging has to be shipped to the product manufacturer
  • Packaging as the packaging needs to be packaged to be shipped to the product manufacturer

Warehousing involves ensuring that the following are sustainable:

  • Heating & Cooling since most warehouses are built super cheap (thin metal structures) and, thus, require ridiculous amount of carbon-based energy production*4 to heat or cool
  • Operations since warehouses use forklifts and robotic automation — which are not necessarily green, energy efficient, and/or well designed
  • Workforce since there needs to be a sufficient workforce and there needs to be training in place to make sure they workforce is suitably skilled for the job

Routing involves ensuring that the following are sustainable:

  • Transportation Modes as most international shipments are multi-modal (and involve at least two different means of transportation, and usually three)
  • Cross-Docking as shipments will need to be unloaded from ships and trains at ports and yards and loaded onto trucks and unloaded from big trucks onto smaller trucks at local depots
  • Leg-Routings as ships can’t disrupt whale schools, dolphin pods, or fish colonies (which might also be needed for food); planes shouldn’t fly low through wildlife/bird reserves; trains shouldn’t pollute the forests they run through; etc.

In other words, there’s a lot more to logistics sustainability than green transportation, which isn’t exactly green to begin with!

*“Green” vehicles aren’t anywhere close to zero emission when you consider all of the emissions created in the production of those electric vehicles and those battery packs! For example, as quoted on the MIT Climate Portal, building the 82 kWh lithium-ion battery found in a Tesla Model 3 creates between 2.5 and 16 metric tons of CO2 (exactly how much depends greatly on what energy source is used to do the heating). This intensive battery manufacturing means that building a new EV can produce around 80% more emissions than building a comparable gas-powered car. And then you have to consider all of the emissions produced by your energy provider to produce the electricity that recharges your battery pack every few hundred kilometers (or 0.6214 miles for you Americans). If your local power plant is still burning dirty coal, then you could be responsible for the creation of 950 grams of CO2 per kWH. So if you’re driving a new AWD Performance Tesla, you’re producing 77.9 kg of CO2 for every 567 km you drive. In comparison, if you’re driving a Toyota Yaris that gives you an average of 36 mpg, or 58 kpg, you’re burning 9.78 gallons and producing roughly 86.9 kg of CO2 for the same 567 km. In other words, you’re only about 10% more green on a per-tank basis driving that Tesla 3 if your local power provider burns dirty coal!

In other words, “green” transportation isn’t necessarily green if you don’t consider the energy product or the up-front production. If the battery production emits 16,000 kgs of CO2, all other vehicle production related emissions are equal, and you are using electricity produced from dirty coal to charge the battery, you don’t see the first drop of CO2 savings until you drive almost 1,780 tanks or 1,000,000 kms! And then you only see a 10% if, and only if, as stated above, the production of the remainder of the vehicle has about the same CO2 production as an average vehicle for its size.  (Which means, at the end of those warrantied 192,000 kms, that green Tesla won’t even be Carbon Neutral!  It won’t even be one fifth of the way!)

*2 greedy, power-hungry con-artists who will repeal all environmental laws, take away all our basic human rights, and even start wars that could not only end all wars but end us (assuming the AI they are using to replace us doesn’t end us first)

*3 after the last last satellite has plummeted back to earth (and burned up), the last skyscraper has crumbled, and the last pyramid has turned to dust, traces of certain microplastic molecules that do not occur naturally in nature will still be found in the soils and at the bottom of the ocean where there are no lifeforms to break them down

*4 even renewable energy such as solar, wind, and hydro has a carbon footprint as the panels need to be manufactured, the turbines need to be manufactured, and the dams need to be built and all that involves carbon production with today’s technology