Category Archives: Logistics

Forget Mexico. Canada Will Take Your US Shipping Business!

A recent article in American Shipper quoted the head of the largest container port in the U.S. who said that the “U.S. [is] at fault for Canada diversion”. According to Geraldine Knatz, Executive Director of the Port of Los Angeles, Canada’s investment (of over 4 Billion) in its western ports to capture more Asian trade is smart policy and there should be a U.S. government inquiry into cargo diversion to the North that focusses on domestic impediments to U.S. port competitiveness.

This is one case where the doctor has to disagree. See, up North, we’re quite happy to take your shipping business. And what you need to understand is that Vancouver is only 200 km (that’s 125 miles for you metric-phobes) from Seattle, only 500 km from Portland, and less than 700 km from Spokane. And it’s a mere 2000 km from Los Angeles. Smart Logistics can get your shipment there by truck in two days even with driving limits if you team-up drivers or have them switch off at mid-points. And while Chicago might be 3500 km away, with an infrastructure that supports intermodal transport (including rail), it doesn’t take long to get your cargo to Chicago either. (As per the article, Canada’s value proposition is that can trim at least two days off the transit time from North Asia to U.S. destinations, with competitive intermodal rail service. The new port at Prince Rupert was designed to transfer all containers at the dock to Canadian National Trains which can reach Chicago in 100 hours!)

And if you’re shipping to the east, Halifax to Boston is only 1100 km — and the Port of Halifax, in the world’s second largest natural harbour, is undergoing continual expansion (and now has direct routes from Vietnam) — with two new super post-panamax cranes coming in 2012 (along with the Disney Cruise Line). In addition, to meet your air cargo requirements, the main runway at international award winning Halifax Stanfield International Airport is being extended.

We’re ready for your business! And we can handle way more than 7%. So send your business up North. We’ll take it — and save you money too.

Logistics Managers Need Scraps Too!

A recent white-paper by Management Dynamics Inc. on “Current Trends and the Potential for Automation in Transportation Management” noted that better informed decision-making on freight route planning, carrier selection, shipping scheduling and costing, load planning, guidelines compliance and auditing, invoicing, and reporting results in greater logistics operational efficiencies yields significant cost savings. No surprises here. We’ve known that for a while.

The research further shows that many shippers have yet to automate these critical freight management and transportation procedures. No surprises here either. That’s why we have leaders and laggards. Leaders have automated many of these procedures, or are at least working on automating these procedures, and laggards are, sometimes, still using phone and fax, like they did BC*.

The research also found that one fourth of survey participants claims their company spends more than 15% of their overall revenues on freight transportation shipping efforts and the percent paid out on international freight services is also considerable. This is to be expected considering how many companies decided to outsource half a world a way and the recent spike in oil prices (as well as piracy off the Somali coast). Similarly, only one fourth of respondents automates mission critical applications for calculating rates and selecting routes and carriers. The leaders do it, the laggards still do three-bids-and-a-buy. Finally those [shippers] that do [use a contract management solution] are lowering their transportation spend through improved carrier selection, fewer errors and risks, and greater compliance with approved shippers.

So what’s the problem? Especially when solutions have existed for most of the functions for almost a decade? Simply put, the logistics managers are overwhelmed. In order to manage a shipment, as alluded to in the first paragraph, a logistics manager needs to be aware of the contract (in the Contract Management System, CMS), the spirit of the bid (included in the bid package contained in the Request for Proposal, RFX), the rationale behind the selection of new lanes (which stems from the optimal model, stored in the Strategic Sourcing Decision Optimization solution, SSDO); get the current rates (from the Transportation Management System, TMS), calculate the number of LTL or FTL loads needed (based on product weight and volume, contained in the Product Life-cycle Management solution, PLM), gather the necessary data for the manifests, import, and export documentation (contained in the Global Trade Management solution, GTM); generate the shipping order and goods (in a customized e-Procurement solution, eProc), receive status updates (through a Logistics Management solution, LM), accept the invoice and make a payment (through a Procure-to-Pay solution, P2P), and insure the goods are recorded as current inventory (through the Inventory Management System or Warehouse Management System). Let’s recap, they need to be fluent with CMS, RFX, SSDO, TMS, PLM, GTM, eProc, LM, and P2P solutions, at a minimum, plus any systems that their 3PL and freight providers use to provide data, any enterprise resource planning (ERP) or manufacturing resource planning (MRP) solutions that contain data they need or capture data their internal customers want, and any visibility and risk management solutions used by the Supply Management group as a whole. For an average logistics manager with an Associate’s Degree, at best, who started his career where it was just a matter of getting a truck to the loading bay on time, this is overwhelming. Instead of making his life easier, modern supply management technology has overwhelmed him.

He needs a solution that not only tells him what he needs to focus on today, but that identifies where the data, and only the data, he needs is in these various systems — with wizards or workflows that take him through what he needs to do. And until he gets it, he’s going to defend that fax machine with his dying breath.

So if you really want your TMS, WMS, LMS, or 3PL system to gain widespread adoption, remember to throw the old-school logistics manager a few SCRAPS. If you do, you might find that the state of the industry changes seemingly overnight.

Have Some Lessons Been Learned by Supply Professionals?

World Trade recently ran an article on “lessons learned by supply professionals” which started out by doing a great job of proclaiming the obvious — it’s been a rough year. As noted, unemployment continues to thwart efforts to tame it, customers are becoming more conservative, and in some quarters, forward thinking and strategizing seem to have been put on hold and profits are hard to make these days.

But is there a silver lining? New opportunities borne of anxiety and the desire among clients and potential clients to overturn every stone they can find to bolster their competitive edges and their bottom lines is a good start, but not a silver lining in and of itself. And executing on the lessons learned from 2008 is something companies should already be doing.

Understanding the market is good, understanding the technology requirements of the market is better, and understanding how to utilize both to provide more value to the customers is key, but should it take an extreme harsh environment to learn the lesson? And is the consensus reaction of lengthening decision times and more deliberation right when efforts need to be made to reduce costs and create value now?

And are 3PLs really getting more business opportunities? They’ve always done, and had the ability to consult on, inventory, regardless of whether or not companies care about inventory optimization outside of down markets. And there hasn’t really been any new offerings in VMI (Vendor Managed Inventory). And leading companies have always been doing supply network optimization on a somewhat regular basis. And smart companies never chase bad deals.

It sounds to me like average company hasn’t learned much, and that it definitely has not learned that the best way to weather a storm is to prepare for it before it hits. Innovation and improvement should be continuous and strategically planned, not a one-time tactical response to a down market. That’s the one lesson worth learning.

Can Electronic Postage Really Demystify International Shipping?

A recent white paper by DYMO Endica claims that “Electronic Postage Technology Demystifies International Shipping”. Needless to say this got my attention because, being aware of the dozens and dozens of issues that can arise in international shipping, postage usually doesn’t make the list.

The paper starts off with some facts that every supply manager needs to know, which include:

  • 96% of the world’s consumers live outside the US and collectively hold two thirds of the world’s purchasing power
  • currently, US-based online retailers that ship abroad acquire 5% of their revenue from foreign orders and this number is rising
  • 14.5% of retailers that ship abroad see more than 25% of total sales from foreign orders
  • rate classes that change annually, tariffs and taxes in multiple currencies, the disparate shipping rules of numerous countries, plus the rigours of complying with customs documentation and reporting are just a few of the challenges of international shipping

And then defines electronic postage systems as:

software platforms that enable the online purchase and printing of U.S. Postal Service postage, from the computer, to be used for domestic and international mailing and shipping

which is the proper definition of a country-based electronic postage solution. But how does that address the issues of tariffs, the disparate shipping rules of multiple countries, and the rigours of complying with customs documentation? All a typical electronic postage system does is insure that you apply the proper amount of postage (assuming you enter the proper dimensions of the packaged item and the proper weight and choose the proper shipping method, as the system looks up the rate from published rate tables). Now, some solutions from private industry will also produce the necessary documentation, given the necessary information, but then you are venturing into the territory of customs and trade documentation solutions. By definition, an electronic postage system does not produce customs documents. And you need to know how to answer the questions correctly (in what is typically a wizard-like interface) to get the right documentation.

In other words, if you integrate an electronic postage system with a trade and customs documentation system, you will simplify the trade process, as you will know how much you have to pay and what documents you need to include, but you will not demystify it. Many of these regulations are complex, with even more complex classifications for goods (for example, referencing HTS codes, a printer shipped with an installed cartridge is not the same as a printer shipped with an uninstalled cartridge). If you don’t understand the rules and regulations of where you are shipping, and the terminology used by the application, you will still be lost. There’s no magic demystification that occurs simply with the acquisition of such a solution.

However, if you understand the basics of international shipping, and the mandatory rules and regulations of the country you are shipping to, I do believe their claim that average shipping time can be reduced from 20 minutes to 2 if the software is in the hands of a professional in international shipping and logistics.

If you’re a small to mid-size business getting into the international direct-to-consumer shipping game, the white paper is definitely worth a read, but don’t get taken for a ride on the magic carpet. Simplification is not demystification, and you’ll have to learn a little to get a lot from this type of solution.

Is Polygamy Good for the Supply Chain?

A recent article over on CFO by Shawn Casemore, President of Casemore & Co, on why you should “mend your spend” in order to grow, offered up Casemore and Co’s four crucial steps to building a big-business attitude. Step two, which stated that the procurement department is not the place for monogamy, caught my attention because sometimes “monogamy” is needed for successful procurement.

According to Shawn:

Human nature has demonstrated that the longer we remain in a stable relationship, the less effort we place into maintaining or improving the relationship. In a supplier-to-customer relationship, this tendency is often substantiated through escalating prices and diminishing customer service over time.

As an example, he gives the anecdote of when he worked with an organization that used a sole transportation source for all of its inbound and outbound freight needs — remnants of its early days when it was a small business. The prices offered by the carrier had been steadily climbing, and freight damage was quite prevalent. Despite those problems, the company president was hesitant to change. But when they moved the business away from the incumbent and divided it between two alternative carriers, service levels improved and the firm reduced overall transportation costs by nearly 10% per year.

And this is a common story among consultant firms that specialize in transportation / logistics / 3PL cost reduction. Competition is good for the corporate coffers. And in this situation, a secondary source of supply can mitigate risks and increase competition.

But this isn’t always the case. If you need a specialized widget, or microprocessor, and you split the award, you drive up costs as setup costs, which often involve new equipment purchases, for production of a new, customized, product are high — and you’re paying them twice and information protection and losses due to IP theft — as there are two routes IP thieves can take to steal your IP and produce black-market copy-cat products — are higher.

In other words, competition is great when you have a tactical category where there are lots of low-risk, high quality suppliers to compete for your business, but if you have a strategic category where there are few high-quality suppliers and set-up costs are high, sole-source (with production distributed at geographically dispersed plants) might be the way to go.

Your thoughts?