Category Archives: Logistics

Infrastructure Damnation 12: Airlines

You knew it was coming. That’s why we saved the best infrastructure damnation for last. (And today’s post is the first of the last baker’s dozen of damnations that we have left to cover.) Postal Services failure is annoying, but there are private carriers. Road closures are more annoying, because even though there’s always another route, the other route is usually longer. Port closures are extremely frustrating, because if you don’t get notice in time to reroute the ship, or its already in port, you’re waiting until it reopens, which can be months if the closure is the result of a strike. But if the airline(s) aren’t flying, what do you do?

Ocean isn’t always an option

If the shipment is from an inland locale that is thousands of miles from the ocean, has no roads part (or all of the year), or is time critical (because the goods are perishable or needed now to prevent a production line shutdown that will cost millions a day), you can’t wait for slow ocean freight. You need air, and if air suddenly becomes unavailable …

Airlines are subject to a host of threats

  • Natural/Environmental
    Planes can’t fly in hurricanes or tornados, can’t fly if the air is filled with volcanic ash, and unless properly equipped, can’t land on water or ice (which means a sudden tsunami or ice storm can make a locale off limits). And, as we saw with the Eyjafjallajokull eruption, Air travel was shutdown for much of Europe for 10 days with minor disruptions occurring in different locales for another month.
  • Geopolitical
    Embargoes, dispute, and wars will close down a zone or prevent planes from one zone from entering another and terrorist threats can result in the grounding of entire fleets.
  • Labour
    Pilot, crew, or terminal worker strikes can down airlines for days, weeks, and even months.

While it may be statistically the safest mode of travel, as the number of people dying from airplane accidents is considerably less than those that die from car accidents, of all of the major modes of transport, it is the most easily interrupted.

AirFreight can skyrocket over night.

It’s not only ocean freight that can increase 20% or 30% (or more) year over year when demand is high, capacity is low, and fuel costs are going through the proverbial roof. If fuel prices spike, capacity drops (especially as a result of a strike at a major carrier), or certain routes become unavailable, prices can increase very quickly, and it won’t matter whether or not you have a contract. (As a Force Majeure or other out clause will quickly be enacted.)

You can’t soar without a plane, when it crashes, so does your Procurement operation.

Geopolitical Damnation 27: UNCLOS

No, that’s not a typo. We’re not talking about UNCLES, we’re talking about UNCLOS, short for the United Nations Convention on the Law of the Sea — an international agreement that resulted from the third United Nations Conference that took place between 1973 and 1982 and finally came into effect in 1994 (a year after the 60th nation signed the treaty). (So if you think your Legal department is slow approving your latest contract, they’re running at breakneck speeds compared to the glacial United Nations.)

This international agreement, that has been agreed to by 166 countries and the European Union as of 2015, replaced the conventional freedom of the seas concept that was the de-facto, unwritten, agreement between nations from at least the early 17th to the late 20th century that stressed the freedom of all nations to navigate open waters.

However, as of the early 20th century, this de-facto unwritten agreement was not enough for those wishing to engage in global trade as nations that wanted to protect mineral resources, fish stocks, or pollution-free waters started to stretch the conventional definition of territorial waters from the accepted 3-mile limit all the way up to a new 12-mile zone in 66 cases and, in 8 cases, a 200-mile limit. If every country has a different territorial claim, how do you know if your ship suddenly leaves international waters and enters a nation’s waters, and, conversely, how do you know how long you have the protection of your nation while entering or exiting your waters?

Under this new agreement, countries have, from the low-water line or a straight baseline (when the coastline is deeply indented, has fringing islands, or is highly jagged) a:

  • 12 nautical mile territorial zone
    where the nation has complete control as it is free to set laws, regulate use, and use any resource; in this zone, vessels generally have the right if innocent passage
  • 12 nautical mile contiguous zone
    where the nation can continue to enforce laws in four specific areas: customs, taxation, immigration and pollution, but only if the infringement started within the state’s territory or territorial waters, or if this infringement is about to occur within the state’s territory or territorial water
  • 200 nautical mile exclusive economic zone
    where the coastal nation has sole exploitation rights over all natural resources.

This all sounds crisp and clean, but there are a number of caveats that you need to be aware of if you are the Procurement person responsible for managing ocean freight.

You have no protection against theft or piracy beyond the 12 nautical mile territorial zone.

Unless the product originated from, or is being shipped to, the nation the contiguous zone belongs to, then the nation has no claim to customs or taxation, and can’t do anything. So, from a shipping perspective, the continuous and extended zones offer you nothing.

You have no protection from the nation within the 12 nautical mile territorial zone (or even the 12 nautical mile contiguous zone under certain circumstances).

The right of innocent passage is only valid so long as you are passing through waters in an expeditious and continuous manner, which is not “prejudicial to the peace, good order or the security” of the coastal state. If the nation decides that your vessel is a threat, it can be stopped, seized, and the crew brought up under criminal (or terrorist) charges and held indefinitely without release.

You don’t even have protection against the nation in the extended zone.

If your vessel or crew gets associated with a crew or vessel that is trying to illegally exploit natural resources in any way, shape, or firm, your vessel can be stopped, seized, and the crew brought up under criminal charges.

Now, the chances of these last two happening are low, unless your vessel is registered to a nation that is currently at diplomatic odds with the nation whose waters it is passing through. For example, if there are embargoes or military conflict, the vessel can be captured simply to use as a negotiation point. Not always likely, but always a possibility hiding in the darkest corners of the shadows just beyond the corner of your eye.

The crux of this post is that when it comes to open waters, it doesn’t matter whether your ship is in a zone or not, because either way it’s not safe. Protection from pirates leaves it open to seizure by law enforcement and freedom from law leaves it open to pirates. Damnation covers the open sea.

Freightos: Flippin’ Freight Quotes Faster than a Fleet-Footed Feline on Guarana

A couple of years ago we introduced you to Freightos in our post on how they were helping to bring freight into the modern era. Even today, when we are over half-way through the teens, many Procurement professionals, when they call up a forwarder for a spot quote, still have to wait two or three (or even eight) days for a response. It’s absurd. (See this hilarious video on The Great Freight Experiment.) And when the buyer has to get a shipment from Shanghai to San Francisco, which requires a truck, ocean freight, and another truck or a truck, air freight, and another truck, it’s a nightmare waiting for all the quotes to come in.

Freightos was founded to deal with this problem. In order to address this problem and speed up the freight quote time, on or off contract, in the global market place, Freightos was built as a technology platform that enables an on-line network of global freight forwarders to provide instant spot-rate and on-contract quotes for point-to-point global shipments when a (potential) customer needs them.

When a forwarder, or freight-forwarder / 3PL, signed up for the Freightos network, and uploaded their standard buy and sell rate tables for ocean, air, and land-based shipping for all of the routes they serviced, customers could access the forwarder’s portal on the Freight OS network and get almost instantaneous quotes for the route(s) of their choice. All the buyer had to do was specify the origin, the destination, some basic load characteristics, the desired pick-up date, the allowable modes, whether or not the load is hazardous, if insurance is required, if a customers brokerage is used, whether or not nearby ports / airports can be used, and click quote. Within seconds, the buyer could get the quickest delivery quote, the cheapest quote, and some alternate options from any forwarder that had a rate table in the system and chose to make it public. They could also request custom quotes from a forwarder as well, which they might want to do if they were willing to commit to a certain volume over a certain period of time.

Since it’s launch, Freightos, which primarily targeted freight forwarders and 3PLs, has been extending its platform and its target audience, now also serving (and targeting) enterprise shippers (in traditional logistics divisions) and e-commerce shippers as well. Since it’s initial launch, Freightos has added two major features:

  • the marketplace
    where all forwarders can list their public rates and any buyer can easily search public quotes (without a forwarder having to share quotes with them), compare, and book quotes
  • contract management
    which permits a buying organization to upload all of their contracts, which are included in search results, if the route is covered, and allow a buyer to see their contracted rate vs. the market rates

As well as a few other valuable features for enterprise shippers that include:

  • tariff management
    that allows freight providers (including 3PLs and forwarders) to define all of the associated tariffs and buyers to include all the tariffs defined by their contracted routes
  • spend visibility
    that allows enterprise shippers to see how much is being spent by lane, forwarder, region
  • business intelligence
    that allows enterprise shippers to slice and dice the spend visibility and contract data
  • real-time multi-currency support
  • powerful filtering
    that allows an enterprise shipper to include or exclude forwarders, forwarders, transport modes (and specify ocean only or air only), select and deselect nearby ports, etc.

Freightos is a very powerful solution that will soon be Procurement’s best friend. How so? Stay tuned, as Freightos will be launching their Procurement portal early next year which will build on the powerful enterprise shipping portal they have now, but with features and functions targeted to make your life as a Procurement professional much easier when you are trying to build those total cost of ownership models during your multi quarter and multi-year sourcing events.

Infrastructure Damnation 14: Roads


Roll on highway, roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler, roll on (roll on)
  David Loggins, 1984

When we think about transportation in Procurement, we typically think about Carriers and 3PL Firms, two of our provider damnations, but Carriers and 3PLs typically transport your goods using eighteen wheeler trucks, and eighteen wheeler trucks have to use roads. And they have to roll on — which they usually do, until they don’t.

Wait, what?

They roll on until they don’t. Roads deliver their own special type of universal damnation, which impacts Procurement more than most.

Road Hazards: Pot Holes, Sharp Debris, Liquid Tar

Your eighteen wheelers can’t roll on without those eighteen wheels. A pot hole, sharp debris (nails, industrial strength broken glass, etc.), and the asphalt itself (which can reach temperatures 50C or 100F higher than the ambient air temperature in the blazing hot sun) can cause tire blowouts on a regular basis due to the hard impacts, big holes, and the rubber melting temperatures they create. And your truck is grounded until the tires are replaced.

Road Conditions: Often Abysmal at the Best of Times

While the roads in most big cities and the roads that are designated as major highways are typically in pretty good condition in the USA, in some countries, your average highway is full of craters, and sometimes isn’t even paved. So while your goods may roll on at 110 km or 70 miles an hour in the USA, in some places in India, if you can get 30 km or 20 miles per hour, consider yourself lucky. The reality is that in some places, your goods aren’t moving any faster than if they were being transported by an old-fashioned horse-drawn carriage.

And sometimes more prosperous countries will attempt to improve the roads, and the you have construction. Instead of covering 30 km / hr, your driver will spend over half of his driving day sitting in a traffic jam and will watch the horses trot by.

And if the roads are good, and near a big city, everybody tries to use them and you get bumper to bumper traffic jams where traffic moves at about the same pace as a person who is speed walking.

In other words, truck transport is often slow, slow, slow.

Highwaymen

A lot of theft occurs on the open road. Sometimes your driver, on his own, is unlucky enough to be held up at gun point when he stops to investigate a hazard, heed the call of nature, gas up, or grab some hot food at a truck stop. Sometimes, he’s lucky enough to have his rig broken into, hot wired, and driven off when he’s heeding the call of nature in a restroom or eating in a roadside truck stop. Either way, his mode of transportation and your cargo is gone, gone, gone.

Confiscation

Sometimes the highwaymen won’t steal the truck, but will instead try to use it to transport illegal goods or aliens. The driver will pull over at a stop, the truck will be a few hundred kilos heavier than the paperwork says the truck should be, the truck will get searched by authorities, contraband will be found, and the whole truck and all of its contents will get seized. And if he’s unlucky, your driver will get arrested, and then, upon his release, immediately tell you where to stick the next driving assignment you try to push his way.

We may not want to think much about them, but roads are an eternal damnation of the Procurement professional as they are literally what the trucking industry rolls on. Sometimes it really is best to return to the rails.

One Hundred and Ninety Years Ago Today

We entered the age of the steam locomotive when the Stockton and Darlington Railway is ceremonially opened in North East England as the world’s first public railway to use steam locomotives. One of the first uses of this railway system, and the steam locomotives that powered it, was the movement of coal to ships, and the age of steam-powered logistics began.

Soon after their introduction, steam locomotives dominated the world of railway transport until the middle of the 20th century (when they were gradually superseded by electric and diesel locomotives). However, they dominated the railways for well over 100 years (as evidence by Walter Lucas’ 1981 collector’s edition release of 100 Years of Steam Locomotives as they retained their dominance in the US until the 1950s and in the UK until the 1960s). This is not surprising considering that, near the end of their reign, they were capable of producing over 6,000 horsepower (as the Union Pacific Challenger could in 1936) and even the smaller locomotives at the time were capable of producing over 3,600 HorsePower (including the 4-8-4 Northern Class Locomotive #3101 built in 1928 by the Canadian Pacific Railway in Montreal, see this silent film).

And these steam engines changed the world. Steam power, first widely used in steam locomotives, not only transported the goods created during the industrial revolution, it drove the industrial revolution. It powered the factories, the ships, and the locomotives. And on land, nothing was more powerful, or faster, than the locomotives for transport.