Category Archives: Logistics

UPS Knows that Halifax Gets it There!

UPS, with a delivery fleet of 2,500 vehicles in Canada, just opened a multi-million, fifty-thousand (50,000) square foot logistics facility in Halifax, Nova Scotia, Canada because the area is considered to be a key access point to other major supply chain networks both locally and globally. And as SI pointed out in its recent post on how The Looming Strike Might Cost Billions – But You Don’t Have To Lose a Dime, sitting on the second largest natural harbour in the world, the Port of Halifax can expand to a capacity equal to that of the Port of New York and New Jersey combined.

Two days closer to Europe, a day and a half closer to southeast Asia through the Suez Canal, and only three days to get cargo to Chicago by rail, Halifax is posed to be a key access point in the global supply chain, just as it was once a key player in the global telecommunications marketplace. It was only 110 years ago that the first radio message crossed the Atlantic, originating from Glace Bay, Nova Scotia and terminating in Poldhu, England (South Cornwall) in December 1902.

UPS knows that Halifax is important to your global supply chain. Do you?

How Do You Identify Tomorrow’s Supply Chain Paupers?

They still use paper today.

Although I don’t understand how any supply chain focussed business, and a logistics carrier in particular, could still be paper-based. It blows my mind that the WT 100, in their recent article on “Rounding the Optimization Curve”, reports that there are still a significant number of carriers that keep their records on paper. How can you survive in today’s cost-competitive, just-in-time, value-conscious supply management landscape and work on paper?

And while we’re at it, let’s talk about how you can identify the dead men walking of the day after. They use Excel. We’ve known for years that errors in spreadsheets are pandemic. Needless to say that it boggles my mind that Microsoft Excel continues to be the application of choice for supply chain and logistics management around the world. Fidelity lost 2.6 Billion as a result of a spreadsheet error, Fannie Mae made a 1.13 Billion honest mistake, and RedEnvelope lost more than a quarter of their value in a single day after they warned of a fourth-quarter loss due to a budgeting error that resulted in an overestimate of gross margins. How long is it going to be before someone accidentally uses a plus sign instead of a minus sign in a profit formula and forgets to uncap an inventory calculation and instead of ordering 100,000 units of a profitable product, instead orders 1,000,000 units of a product that actually results in significant losses at the target sale price, for which the market demand is weak, ties up all of the organization’s working capital, and essentially bankrupts the company? My guess, with the steadily increasing complexity of S&OP, JIT inventory management models, and supply chains, not much longer. But, maybe after a few companies are brought to their knees from spreadsheet errors, we’ll see the day when Excel is sh!tcanned along with the dinosaurs who still think it has any more use than a HP or TI calculator.

It’s time for anyone still on paper or Excel to wake up and realize we don’t live in Walt Disneyland and that the story of the prince and the pauper is a fairytale. A pauper is not going to become the benefactor of princely riches just by looking like a bigger, richer, company. In today’s uber-connected world, appearances don’t account for much. It’s not long before someone digs deep and uncovers the truth.

There’s a reason why customers are demanding end-to-end visibility of their supply chains, including those of their supply chains logistics’ partners. And a reason customers ow expect all of their suppliers and business partners on the supply chain (including logistics providers) to participate in a supply chain social network. It’s because they know that the only way they can accurately manage their supply chain is to keep on top of it, that the only way they can build accurate models is with accurate data gathered from partners, and that the best reports they are going to get are going to come from supply chain visibility and planning software plugged into these “social networks” (where, in reality, these are “enterprise communities” that allow the necessary collaboration, not “consumer networks” where you can poke, prod, and shake your buddy for no apparent reason).

In other words, paper is dead, and Excel will be the new paper, and then, someday, it too will be dead. So if you don’t want to be the pauper, move off of these technologies and onto solutions designed for your supply management needs. With a plethora of Best-of-Breed solutions on the market, designed for large and small providers, it’s extremely likely that there’s at least one solution that meets your needs almost exactly with minimal tweaking. If you look hard enough, the doctor would bet that there’s at least three, or will be before you can look twice.

Another Reason Why China Will be #1 in GDP by 2021

As part of the 158B in infrastructure spend China recently unleashed, “China’s NRDC approved 25 urban rail transit project plans and feasibility studies in 1 day”. That’s a whole lotta transit. And they’re doing this at a time when the economy slows and growth stabilization becomes the top priority.

They may have spent much of the 20th century hiding behind a red curtain, but they have learned that if they want to again become the dominant economy (which they were uncontested from the beginning of the second millennia to about 1800, although the economy of Europe as a whole was about the same size as China from 1500 to 1800, which was still known as the Age of Chinese Dominance), they have to not only play in the global market, but invest at home to give themselves an edge. While we will spend decades bickering about the need for high-speed rail, they will identify the need and approve a feasibility study within the next five year plan at the latest. And if the feasibility study comes back positive, they’ll get it done. In comparison, California started talking about high-speed rail at least as early as 1996, when the California High Speed Rail Authority was established, did not decide to go for it until 2008, and did not approve the first phase until July of this year.

China realizes that if it is going to go head-to-head with the United States, it has to at least match the United States, if not exceed the United States, it in all of the metrics that matter, including education, R&D investment (to the tune of 2.2% of GDP), and infrastructure. And it’s doing that. It plans to meet its goals of 45,000 km of high-speed railway and 83,000 km of highway networks. The infrastructure will be able to move people and goods as efficiently in the interior as on the coasts, making most of China suitable for new factories and office parks. This will allow China to continue to dominate in global manufacturing and take on more back-office functions.

So when are we going to realize that if we want to maintain our lead a little longer, and push forward the date when India knocks down the USA to #3, that we are going to have to stop wasting money on ineffective broad-based buy-American stimulus programs and invest in infrastructure and R&D in an effort to at least keep pace with China?

Ten Tips To Top TMS

Inbound Logistics just published a good piece on “how to choose the right TMS for your company”. Almost makes me want to forget about that double play I recently scored against them.* Almost. 😉

Anyway, most of the tips in this article were dead on, even if some were a little obvious. By now, where Supply Management Systems are concerned, we all know that you definitely want to pick the right size provider, check references, try before you buy, check off all of your-must haves, and consider ongoing upgrades. The good tips were the following:

  • Time It
    Bring a stop-watch to the demos, and keep it by your side when you try it. Does it improve efficiency? If it doesn’t, what are you paying for?
  • Call Support Before You Buy
    If you can’t get through now, do you think you’ll get through later?
  • EDI is Essential
    Whether it’s EDI, XML, API, etc., you need to be transmitting and receiving all your documents electronically. If you have to pay by the bit, watch out! There shouldn’t be transmission fees when internet connectivity costs are fixed. You can be damn sure your provider isn’t paying by the bit, they’re paying a fixed cost for a dedicated 100 MB feed to their data centre. The cost for EDI should be a low, flat rate per month (up to a certain GB limit, because if the provider goes over their dedicated transfer rates, they will pay overage charges and have to pass them on).
  • Count the Cost in Money and Time
    It’s not just the cost of the TMS — it’s the cost of the TMS, the hardware, the connectivity, the integration, the training, the support, etc., etc., etc. as I have outlined repeatedly (and given you a spreadsheet for). But that’s just the hard cost. If the system takes a long time to set up, a lot of manpower to maintain, and decrease efficiency when compared to the current system, then the ownership costs will continue to pile up over time.
  • Can it Be Customized?
    This may not be that important for you, but if it is, and the system can’t be customized effectively and cost efficiently, find a new system – ASAP.

For the rest of the advice, see the article on “ten tips to choosing the right TMS for your company”.

*We’re not mysterious. We’re Canadians!
The Best Way to Insure Routing Guide Compliance

Three Does Not a Monopoly Make

But it does make competition hard and collusion easy. So what am I referring to now? As recently expounded upon in this recent article in the online version of The Economist, UPS has made a bid for TNT (Express), the fourth largest logistic carrier in the world, the second largest in Europe, and the largest in Britain and Italy. If UPS gobbles up TNT, it may not only shift the balance in power in the near-duopoly between FedEx and UPS in the US, but give UPS the edge it needs in Europe to take on DHL toe-to-toe in Europe (where it controls up to 50% of the market). If UPS succeeds, UPS would have at least a quarter of the market in three big European centres — Britain, France, and Italy. Unless Federal Express scooped up DHL (and it’s pretty easy to predict that bid would happen if UPS scooped up TNT), FedEx might soon go the way of the Pony Express in Europe.

While UPS is likely claiming that this will benefit shippers as it will allow them to offer better service at lower prices, the fact that we could soon be dealing with a duopoly, and would effectively be dealing with a duopoly in the US (UPS and FedEx) and Europe (UPS and DHL) is a bad thing. Consider the fact, as pointed out by Leigh Merz in A Shipper’s Right, that UPS and FedEx have already mandated that shippers can only work with FedEx or UPS directly (and not through brokers or other third parties). Hopefully this restriction will be removed as an anti-trust violation in the upcoming court-case between AFMS and the UPS-FedEx anti-trust lawsuit, but until then, United States shippers are already operating at a disadvantage.

And if we get a local duopoly and a global triopoly, there’s a good chance it could only get worse. All it will take to enforce a new, shipper preferred, style of business is for three senior executives to meet for lunch at the Executive’s club, spontaneously decide that, from now on, all products that weigh less than 5 lbs per unit go first class air freight, and, presto, no ocean cargo for you! And all it will take for prices to rise, on average, 5% across the board is for the CEOs to play a around of golf and decide that, next quarter, as a result of fuel increases, all prices will rise an average of 5%. Now, each shipper will still have lanes where it will be more competitive, but switching won’t save significant dollars as the competitors prices rose in sync. Not saying this will happen, but you see how easy it could happen if, by chance, it happens that each organization happens to have at least one senior executive who is less than honourable at all times. And this is an industry where price collusion happens more regularly than it should. As The Economist article noted, in March, the European Commission handed out fines totalling 169 Million Euros to 14 freight-forwarding companies, including UPS subsidiaries, for price collusion.

Right now, the EC is undertaking a phase II merger investigation, as per this recent press release, and has until November 28 to determine whether the proposed transaction would significantly impede effective competition in the European Economic Area (EEA). I hope they do. In the meantime, the case details are available at the EC site and, as per the initiation of proceedings, published in C226, the Commission invites interested third parties to submit their observations on the proposed concentration to the Commission. While it’s now too late to have the observations fully taken into account in the procedure, if you’re a major multi-national with a big voice, it might not be a bad idea to get your observations in anyway. Often, it only takes a few very noisy squeaky wheels to slow things down and force a good look.