Category Archives: Logistics

Where is Canada’s Road to Riches? The Rails, My Friend, the Rails.

As SI posted three months ago, The Road to Riches [is] The Rails, My Friend, The Rails. Not only is rail transport more fuel efficient and predictable than road transport, but it’s increasing adoption in the east has shown just how beneficial it can be.

The reality is that It’s Time for California to Update It’s Passenger Rail Solution and it’s time for Canada to update its passenger rail solution. Not only are parts of the country utterly without passenger rail service (as the only Via Rail stops in NS are in Amherst, Halifax, and Springhill Junction, for example), but the parts of the country that desperately need high-speed rail the most, like the GTA (Greater Toronto Area) are totally bereft.

As per this very well written article over on The Huffington Post, Canada’s Tech Future May Ride on the Rails. For example, right now it takes almost an hour to get from Pearson Airpot to Union Station downtown, a problem that is expected to be completed in 2015 with the Union-Pearson Express rail-link that will cut the travel time down to 25 minutes.

But this is not the biggest problem. Right now, one of Canada’s biggest tech-hubs is Kitchener-Waterloo, home of RIM, the University of Waterloo, Wilfrid Laurier, and a slew of technology companies, including many start-ups prime for US VC investment. Investment that is likely to flow only if it’s easy for VCs (who will fly out the afternoon before) to get there, meet with prospects, and get on the flight back home the day of the meeting (on the last flight out of Toronto between 6 and 7 pm, depending on their airline of choice). But with their only option being either the train, which only leaves Kitchener at 5:49 am (arriving at Union at 7:53 am) or 7:07 pm (arriving at Union at 9:08 pm), or the 401, which is typically a two to a two and a half hour drive at standard congestion levels, getting in and out of KW in one day is impossible (even though the straight line distance is under 100 km) if you also want to conduct business in Toronto during your trip.

As a result, as the article points out, a number of valley VCs make less trips than they might otherwise and don’t stop by to visit potential opportunities that haven’t commandeered their full attention (which, due to circumstances, typically requires multiple expensive trips to the valley). Opportunities, that, with funding, could bring more investment north of the border. Opportunities that could be used to fill the five million square feet of building space that could be built on all of the vacant land within a five minute walk of the multi-modal station in downtown Kitchener if there was demand.

If Kitchener-Waterloo achieved its technology potential, and another five million square feet of building space were filled with technology companies, according to Rod Regier, the executive director of economic development for the City of Kitchener, you would have another 15,000 technology workers in the area. At 2011 figures, these workers would generate 1.1 Billion in personal income and generate almost 400 million in income tax.

And guess how much a high-speed train with regular all day service between Union Station and downtown Kitchener would cost? An estimate in 2009 pegged the cost at 400 Million. It would be more expensive now, but probably not more than 20% more expensive. At this cost, the project would very quickly pay for itself since more tech companies would move in and once the region reached its potential, it would be generating tax revenues every 15 to 18 months that equaled the initial project cost. But for now, this logical project, just like high-speed rail along the North East Corridor of the US (and high-speed rail across Northern and Southern California in our lifetime) remains a pipe-dream. Too bad. It seems that the rails really do bring riches to those who choose to ride them.

FREIGHTOS: Helping to Bring Freight Into the Modern Era

Freight is often the bane of the Procurement professional, especially when such professional needs a quote in a hurry. It’s not uncommon even in this day and age for a Procurement professional to call up a freight carrier for a spot quote and have to wait two or three days. It’s absurd. Quotes, or at least quotes on standard table rates, should take two or three seconds. The only time you should wait a couple of days for a quote is during a master contract negotiation for hundreds of lanes, as you will want to give the carrier some time to determine their absolute best rate in this situation.

This is the primary reason BuyTruckload.com was founded. The founders, veterans of the logistics management software industry, got fed up with both having to wait for bids on the spot market and being unable to shop the business to enough carriers to get the best rate.  But this isn’t an article about BuyTruckload.com, even though BuyTruckload.com does a wonderful job in North America. Why?  Because BuyTruckload.com it doesn’t solve the global shipping problem, doesn’t address other modes of transit, and it doesn’t account for the fact that you might have contracts in place (that the buyer might not even be aware of).

In order to address this problem and speed up the freight quote time, on or off contract, in the global market place, Zvi Schreiber and his team built FreightOS (pronounced Freight O.S., or even freigh-toss, as it is a freight operating system and not a brand of breakfast cereals), which is an technology platform that enables an on-line network of global freight carriers to provide instant spot-rate and on-contract quotes when a (potential) customer needs them.

When a carrier, or freight-forwarder / 3PL,  signs up for the FreightOS network and uploads their standard rate tables for ocean, air, and land-based shipping for all of the routes they service, customers can access the carrier’s portal on the FrieghtOS network and get almost instantaneous quotes (which, depending on the number of routing options and shipment goal — be it lowest cost, fastest delivery, etc. — could take a few seconds) for the route(s) of their choice. All the buyer has to specify is the origin, the destination, some basic load characteristics (what is being shipped [boxes, pallets, etc.], dimensions, unit weight, and quantity), the desired pick-up date, the allowable modes (land, ocean, air, or any combination), whether or not the load is hazardous, if insurance is required (and the load value if it is), the applicable HS code(s), and if a customs brokerage is being used and click a get quote button. Within 10 seconds, the buyer will get the quickest delivery quote, the cheapest quote, and, if applicable, some suggestions for nearby delivery locations that are quicker or cheaper (especially in the case of inter-continental shipments where there are multiple options that require a multi-modal delivery network that consists of air or ocean and truck or rail). Each quote returned will include the total cost, the time-in-transit, the modes of transportation required, and whether or not the carrier will work with a customs brokerage or transport hazardous material. Clicking on a quote will break it down into its constituent cost components, which may include, but are not limited to, basic freight cost, (airline) screening fees, (airline) security fees, fuel surcharges, documentation fees, (airline) handling fees, export declarations, advance manifest fees, etc. If the buying organization has a contract with the carrier, even if it only covers some lanes, they can upload the contract and all of their buyers can get on-contract quotes instantaneously and compare them to off-contract quotes. This can help the buyer discover whether a different routing can save them some money.

Also, after the buyer has requested quotes from their (preferred) carriers of choice on the FreightOS network, they can download their entire quote history to an excel spreadsheet to not only do a lowest-cost cross-carrier comparison by lane, but determine where the real (hidden) costs are. For example, it’s possible that (one of) the biggest cost(s) (in air freight in particular) is the fuel surcharge, and if the buyer can identify this and negotiate a better fuel surcharge rate with a carrier of choice, they could potentially lower their shipment costs going forward. Also, in the case of exports and imports, a buyer can see if any of the security or documentation fees imposed by one carrier are (unreasonably) higher than the market average.

Right now, the FreightOS platform has approximately 20 carriers on-board, but considering the huge cost savings this represents to a carrier that spends a considerable number of man-hours every day quoting on business for which it knows it will only see a 20% to 30% success rate at best, it shouldn’t be long before more carriers sign up. With this type of platform, no man-hours are needed to provide market-rate quotes and the carrier will know that when they do get a call based on a quote provided by the platform, the buyer has product she needs to ship, has decided that the carrier may be able to provide the service she needs in an acceptable price range, and has narrowed her pool of carrier choices down to select few. The founders of FreightOS believe that they can increase the success rate of their carriers by 10% with this tool, but SI believes that this tool could increase a carrier’s success rate by as much as 50% as most buyer’s will only call, at most, the 3 lowest quoting carriers and select the first carrier that can meet their delivery requirements at an acceptable price.

If you have global freight and need a better quoting solution than calling up a carrier who will take, on average, a day or three to get back to you, SI recommends checking out FreightOS. It’s definitely a platform to watch.

The Future of Packaging is All About Labelling … At Least For Now

DC Velocity recently ran a short article on the 10 global trends that are shaping the future of packaging that was quite interesting, but for the near future, not that relevant — especially to Procurement and Logistics.

For example,

Big Science will continue to discover lighter and stronger substrates, which will eventually allow packaging to be reduced, but the time it takes between the time a new substrate is discovered until it is mass produced at a competitive cost is typically a decade. No big changes are coming in the next few years.

The eco agenda has been pushing environmental concerns for a couple of decades now. The eco agenda is not going away, but, unless your corporation is damaging the environment more than the competition, it’s not going to change its behaviour until it is more cost effective to do so with near-term results. In other words, until someone invents a significantly more environmentally packaging alternative that is stronger and cheaper than what is currently in use, no changes are expected as a result of the eco agenda.

Developments in Neuroscience will allow for the design of more enticing packaging, but that design will predominantly revolve around the graphics, colours, and messaging on the packaging, as you can’t securely ship a square item in an oversized round sphere without padding and adding undue cost to the process. As a result, regardless of what the still inexact science of neuroscience tells us, there will be no change to the packaging in the near future, just what is printed on it.

Demanding Consumers will always want more, but now that every smartphone has a free barcode scanning app, all you have to do is slap on a q-code or a barcode and, voila, they user can be taken to a dedicated web-page. Again, no changes to the packaging, just what is printed on it.

Unless your packaging contains dangerous chemicals, which should have been taken out years ago with the introduction of RoHS and similar acts around the world, More Legislative Oversight is only going to add more labelling requirements in the short term, especially in F&B and CPG. The oversight is not going to fundamentally change the nature of packaging for most products in most industries (unless a new chemical is deemed harmful and restricted for use in packaging).

SI could go on, but packaging is not likely to change much in the next few years, just like it hasn’t changed much in the last decade. Emerging markets, the rise of the BRIC, and new retail models will eventually spur a packaging renaissance, but not until there is a crisis or radical new breakthrough to drive it. In the interim, the focus will be on labelling — exceeding the legislative concerns to appease the more demanding consumer and doing so in a way that is attractive and calming.

Anyone have any good counter-arguments?

The Manufacturing Labour Shortage Isn’t That Big of an Issue

when compared to the logistics labour shortage in the trucking industry.

The SCIDigest Editorial staff might have painted a grim picture in their recent article on how the labor shortage in manufacturing really is getting worse, but SI believes this grim picture is only temporary, whereas the logistics labour shortage is poised to continue getting worse for some time. Before SI explains why, let’s examine the current situation.

The SCDigest Editorial quoted a recent Fortune magazine article that said that companies that make tangible products are struggling to find candidates for about 237,000 job openings — a number that is 89,000 more than the total number of jobs created by the U.S. Economy in September. To make matters worse, nearly 80% of the manufacturing workforce is over the age of 45, and over 33% are over 55 and not far away from retirement — and the number of young workers (under 30) entering the sector is shrinking significantly, with one study reporting that only 5% are 25 or younger.

Basically, the majority of young people just don’t see manufacturing work as an attractive option — which it isn’t if you are talking about old-school 1980’s shop floor manufacturing which was hard work for low blue-collar pay.

Turning our attention to logistics and trucking, new estimates put the driver shortage at 240,000 drivers, as SI reported back in March. With 100+% turnover a year, one third of drivers reaching retirement age this decade, and an average graduate age from driver training schools of 54, the trucking industry is in dire straits!

In comparison, manufacturing has it easy. Young professionals enter an industry in which they see opportunity, typically defined as a mix of growth potential in their career and their salary, and given two equal options, many will choose the industry with the higher starting salary. Taking this into account, we see that manufacturing is in much better shape.

First of all, factory jobs are not what they were in the old days. Most of the tedious, menial labour has been replaced by automation and the only manual labour done by shop floor workers are high-end speciality tasks as most of the work on the shop floor is focussed on maintaining the robots on the automated assembly lines. In comparison, in trucking, you’re still driving a truck. The only difference is instead of driving an old pollution producing rig, you might get to drive a new hybrid that uses electricity and biofuel or clean diesel and is equipped with enhanced catalytic converters.

Secondly, the opportunity for advancement is great. Factories need senior engineers for each task, floor managers, and plant managers — there is a career path for a bright engineer. In comparison, in trucking, unless you can be a dispatcher, you’re still driving that truck in 20 years.

Thirdly, due to the sophisticated high-end nature of the work in manufacturing, most of the jobs are for skilled engineers who will often start at 50K to 60K a year, and have the potential to climb to 100K a year or more as an engineer progresses, whereas the trucking jobs require one skill — the ability to drive a truck — and salaries, adjusting for inflation, have not increased and typically don’t increase much more than inflation on an annual basis (if the driver is lucky).

Manufacturing can easily solve their labour shortage by

  1. enhancing their image and
    which could be as easy as the NAM producing the right PR campaign (with prime-time airings on traditional and online media); a
    manufacturing equivalent of the “Got Milk” campaign could rejuvenate the industry
  2. implementing their own apprentice-type programs
    which take community college graduates (for the more traditional jobs in welding, machining, etc) and even university graduates (for the newer jobs in robot maintenance, etc.) and teach them the skills that colleges and universities don’t

In comparison, logistics is out of the frying pan and into the fire between a rock and a hard place. With little advancement opportunity and limited earning potential, how do you make trucking advantage to anyone who has other options? Unless you’re targeting fast food workers (tired of asking “would you like fries with that”), interest is going to continue to wane.

The Somali Pirate Song

Yesterday, we indicated that, with the current state of affairs, the limited Somali economy, and few options for many Somali men of working age, that Somali piracy is likely to remain strong for quite some time. Today we present one view of what you might hear if the Somali pirates were asked to put their story to song. SI thinks it might go something like this:

The Somali Pirate Song

I used to be a fisherman, and I made a living fine
I had a little cutter boat, and trawled the tuna fine
Government fell and though we tried, our borders were soon lost
The trawlers came and took our fish and we were at a loss

I looked for every kind of job, the answer always no
“Hire you now?”, they’d always laugh, “its the war, you know?”
The government, they can’t get the country under thumb
And I don’t want to get shot next time I take a run

And since no one gives a damn about this Mycenaean
I’m gonna be a PIRATE on the Ocean Indi-ian

And it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

Well, you’d think the local shippers would know that I’m at large
But just the other day I found an unprotected barge
I snuck up right behind it and I caught them unawares
I boarded their ship, ransomed it, and then I stole all their wares

A port outside of Cairo ends a mighty canal
Captains leave with so much fear that their crews have no morale
Cause they know that Pirate Big Mouth’s waitin’ at the pass
I’ll take the bridge and knock them cold and sail off with their gas

And it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

The merchant navy chased me, they were always at my throat
They monitored the shoreline with their little cutter boats
But cutbacks were a’comin’, and the sailors lost their jobs
So now they sail with me, they’re the modern Salty Dogs

An AKM, a skull-and-bones and pleasant company
I never pay salary tax and screw the TFG (Screw ’em)
Sailin’ down to Cape Town, the terror of the seas
If you wanna reach the FTZ, you gotta get by me

Cause it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

Well, Pirate life’s appealing but you just don’t find it here,
I hear in Bangladesh there’s a band of buccaneers
They roam the Bay of Bengal from Yangon to Colombo
And you’re gonna lose your cargo if you have to pass their gunboats!

Well, winter is a’comin’ with cruise ships on the way
My pirate days are over once they take over the bay
I’ll be back in spring-time, but now I have to go
I hear there’s lots of plunderin’ off the coast of Mexico!

Cause it’s a heave-ho, hi-ho, comin’ down the coast
Stealin’ oil and iPhones and all the modern gold
It’s a ho-hey, hi-hey merchants bar yer doors
When you see the power boat fleets
on Africa’s eastern shores!

With apologies to The Arrogant Warms from this Last Nova Scotian Pirate.