‘Nuff Said!
Category Archives: Logistics
Patent Pirates Are Still Plundering
According to this recent article over on CNN Money, patent trolls have cost investors Half A Trillion Dollars over the last 20 years. Half A Trillion Dollars! That’s an awful lot of innovation down the drain!
At this point, I’m wondering which pirates are worse? The pirates off the coast of Somalia, who have escalated their attacks and brought ocean piracy to an all time high this year, with 142 attacks in the first quarter alone (and 346 attacks as of September 27). Now, it’s true that the attacks are sometimes violent and that 15 people have been killed this year, but for the most part, the Somali pirates are more focussed on taking hostages in return for ransoms, and release the hostages when they get the ransom. And while the ransoms are getting higher, with the average ransom reaching 5.4 Million in 2010, total payments in 2010 were only 238 Million. Yes, this is a big number, and 20 times 238 Million is a bigger number at 4.76 Billion, but that’s only 1% of losses that can be attributed to patent pirates. One percent!
And the “contributions” that the patent trolls supposedly make to innovation are essentially nonexistent. They’ve funnelled less than 10 Billion to R&D, or less than 1/50th of what they’ve cost investors and innovators. All they do is create a disincentive to innovate. And in SI’s view, they should be made to walk the plank.
Your Transportation Costs Are About To Go Way Up!
Mary C. Holcomb of The University of Tennessee and Karl B. Manrodt of Georgia Southern University, in partnership with Con-way Inc., Ernst & Young, and Logistics Mangaement, just released their Annual Study of Logistics and Transporation (The Masters of Logistics Report), and the findings, summarized in this recent article on Study of Logistics and Transportation Trends: Navigating transportation’s Bermuda Triangle that had some scary findings. Namely that, in the average supply chain, there is:
- a lack of planning for the impact of rising fuel prices,
- a rigid network that is incapable of flexing when uncertainty occurs, and
- a myopic internal focus that limits the enterprises’ ability to achive the desired performance results.
Furthermore, the most mature actions being undertaken by study respondents are
- use of core carriers
which doesn’t deal with the fact that they will tack on fuel surcharges when prices get high enough - use of dedicated transportation
which generally only helps with core routes - carrier tracking
which keeps on top of rates but does nothing to mitigate or control rates - load planning
which increases fill rate and minimizes shipments, but doesn’t necessarily optimize the network - shipment consolidation
which helps, but only if done in conjuction with S&OP planning because, otherwise, there’s a chance that this could increase the probability of costly stock-outs
And none of these are optimal. As the authors indicate, logistics managers need to be looking at route planning in conjuction with network optimization and redesign with respect to overall supply chain needs. This is the only way to adequately mitigate the risk of (rapidly) rising freight prices in the years to come. And any company that keeps doing the same-old, same-old, which is the majority of companies by the looks of things, is in for a rapid rate increase as soon as the (global) economy bounces back.
Six Secrets of Successful Freight Tenders
A recent article over on Canadian Transportation and Logistics on “the five secrets of successful freight tenders” had some really great tips for getting the best bang for your buck that makes the article a must read. However, it missed one very important tip, which is probably why it claims that Freight RFPs are analytically challenging. (This used to be true, but it’s not anymore. If it’s still true in your organization, then your organization is stuck in the middle ages and it’s time to at least step up to the industrial age.)
Before we get to the tip it missed, let’s start with the tips it provided because at least one of these is overlooked on many a project.
- Sell your freight.
Provide as much information as possible about your freight requirements. For each product, include transport, storage, volume, and frequency requirements. The more accurate and complete the RFx, the better quote the carrier can give you. Without detailed information, carriers will build in a “risk premium” so they don’t end up with “bad freight” and both parties lose. - Provide enough time.
Without enough time to analyze your requirements and consider the fit, you’ll get a rough bid that won’t be the carrier’s best proposal. Remember that, depending on the time of year, it will likely sit on someone’s desk for a week, then in pricing for another week, before someone gets to it in the third week. If detailed analysis is required by the “number cruncher”, it could take a month to get the best bid. - Standardize the accessorial program.
Variety and complexity of programs can make the analysis of bid responses unnecessarily complex, as you will be trying to compare apples to oranges to potatoes. And while maybe you can force fit compare the first two, the third poses quite a challenge. Create one program with one uniform set of charges that applies to all carriers. - Fully analyze rate proposals across the board.
Typically carriers will give you aggressive discounts on major lanes to lure your business, but keep discounts to minor lanes minimal, or non-existent. As a result, you may pay more for freight overall if you end up shipping more on secondary lanes. - Benchmark results
Freight patterns can change, and the net result is that a new freight schedule expected to save you money costs you more in the end. “Shadow rate” your current shipments using at least your last rates (if not your last two rates) to get a feel for what freight profiles give you the best deal overall.
But most importantly:
- Use a sourcing package that can handle freight optimization and multi-level freight bids.
A good strategic sourcing decision optimization platform (as provided by Algorhythm, BravoSolution, CombineNet, Emptoris, Iasta, or Trade Extensions) will not only allow for full analysis of the entire freight bid, but allow for the easy import of multi-level freight bids from excel spreadsheets. More specifically, these modern packages allow a carrier to define (inter)national rates by weight, volume, or distance, and then override these by region, and then by lane. This will allow a carrier to quickly define standard bids for low-volume lanes or lanes that they are not interested in and focus in on the lanes that fit their network and that they want to aggressively bid on. A carrier can bid on a 10,000 lane global sourcing project in a couple of hours. This decreases response time and increases bid quality.
Does Your 3PL Have the CCSF Designation?
If you want quick transport by air, maybe it should.
As per this article on “tsa finalizes airfreight screening ruling” in Air Cargo World, the US Transportation Security Administration has executed its interim final rule (IFR) on airfreight security and enabled entities other than airlines to screen cargo transported on passenger planes.
Before the TSAs certified cargo screening program (CSSP) that was introduced in September 2009, only the TSA or airlines were authorized to screen belly-hold cargo. But now that the IFR has been implemented, airfreight entities can now apply to become certified cargo screening facilities, provided they adhere to a stringent chain-of-custody requirement and implement a multi-layered security program that includes appointing security coordinators, strict access controls and vetting of key personnel.
Given that the TSA is aiming to achieve 100-percent cargo screening on all U.S.-bound flights by the end of the year, there’s a good chance that any shipper relying on the TSA or the airline to screen their cargo could experience a backlog delay during the holiday rush season. However, those who use a 3PL with CCSF status will see their cargo clear immediately.