Category Archives: Logistics

5,500 Miles of Common Border …

… and heat treating a few million pallets is going to stop the spread of insects across the Canada – United States Border. Really? No wonder the CTA takes no position on the science behind the decision to eliminate the exemption that allows wood packaging materials (WPM) crossing the Canada-US border to bypass heat treating and marking requirements — because there is no science. Insects don’t respect borders. Heat treating a few million pallets is not going to stop the spread of insects across the border. Trust me.

As per this recent article in Canadian Manufacturing, all removal of the exemption will do is “disrupt border crossing” because it’s going to take quite a while to individually check Three Hundred and Twenty (320) Million pallets to find the millions that don’t meet the requirement. So while it’s not necessarily a bad idea, since an insect-laden pallet could accidentally find its way to a foreign country and introduce a foreign bug to the local ecosystem that could be harmful, like the CTA says, elimination of the exemption (and subsequent enforcement) shouldn’t begin until APHIS and CFIA, working with industry, are satisfied that there are enough WPM compliant pallets in circulation to meet the demands of Canada-US trade. Otherwise, we’ll have lineups at the border from Detroit to Toronto (which is about 244 miles), and that won’t help anyone.

How Much Can A Small Enterprise Really Save With Just In Time Inventory?

A recent article on “wringing cost out of the supply chain” in World Trade Magazine suggested that carrying too much inventory can lead to a significant hit on the balance sheet for a SME and that SMEs should use a JIT inventory strategy to lower costs. And while I agree that this is a good strategy for MEs and LEs, I’m not convinced this is always the case for SEs with less than 100 Million in revenues.

First of all, as the article notes, SMEs often struggle to come up with the resources for payroll, much less [the resources to] develop intricate supply chain models, optimize inventory levels, and calculate their carrying costs. Unless the savings are significant, they will quickly be eaten up by the additional manpower needed to design, execute, monitor, correct, and maintain the JIT strategy.

Secondly, they will likely need help at first. And while this could come from a logistics provider, this too will come at a cost. Either the logistics provider will assign a resource to manage the JIT strategy for the SE and up their rates to cover the cost of the resource assigned to manage the JIT strategy, or the provider will simply store inventory on behalf of the SE in shared warehousing, which still increase the logistics cost. So even though some savings may be found, they won’t be as significant as one might expect. Furthermore, the logistics provider is not likely to be in a position to sense demand changes and this could increase the possibility of a costly, and even business threatening, stock-out. Since most SEs operate on (relatively) slim profit margins, a stock-out on a key product line could not only cost revenue, but customers vital to business success.

Thirdly, and most importantly, the expected savings can be wiped out by a single, short-term, supply disruption. Consider the example presented in the article for a 40M company. After all is said and done, the reduction in net income before taxes is a mere 47,000! That’s an expected reduction of only 0.1%! A single volcano erupting, port going on strike, or political breakdown that causes a one-week delay in your next order and that projected savings is dwarfed by the magnitude of the loss the SE will be facing. The extra 50K is now an insurance payment.

I might be wrong, but I don’t think JIT is right for SEs. Good inventory management with reasonably low safety stocks in shared low-cost warehousing, certainly. But lean? I’m not sure the SE can afford it!

That Expedited Shipment Has to Be On Time. Who Do You Choose?

No matter how much effort is put into planning, at some point a shipment is going to have to be expedited. It’s going to cost extra, but there is going to be no choice in the matter. The only choice is Fedex vs. UPS. Which should you choose?

PackageFox recently put together an informative infographic that compares and contrasts the two companies, and the net result is that, from a big picture, they are surpassingly similar. But one difference stands out. With 2.4 times as many jets, Fedex rules the air while UPS, with 4.63 times as many delivery vehicles, rules the ground. While there probably won’t be much difference for in-country shipments, if it is international, and has to go air, it might have to go Fedex.

Sustainable Transportation, It’s Harder Than You Think

Material Management & Distribution recently published an article that asked if “your international shipments [could] be more sustainable”. It’s a good question since not all modes of transportation are equally damaging to the environment, but the issue, as the article attempts to point out, is not as simple as carrier selection. Consider the following factors put forth:

  • ocean vs air freight
    while air shipments can emit up to 35 times more carbon than ocean container shipments, let’s not forget that a single giant container ship can emit the same amount of cancer and asthma-causing chemicals as 50 million cars and that the ocean shipping industry is responsible for 6,000 times the emissions of every single automobile on the planet — many of the older container ships in operation are the dirtiest modes of transportation on the planet
  • container size
    bigger is better if the port and the trucks can handle it, but you have to service the lowest common denominator in the supply chain
  • fuels and fuel treatments
    biodiesel blends are better, provided the equipment is built for the blends and the blends deliver sufficient octane; otherwise, the savings are minimal if the switch doubles the amount of fuel that is required
  • speed
    slower-moving vessels will consume less fuel if they are moving in the range of optimum performance; too slow will just increase fuel requirements
  • “electric” ships
    a ship that plugs into a grid only reduces its carbon and GHG footprint if the grid’s primary energy source is cleaner than the ship; if it happens to be a brand-new ship that uses low-sulfer fuel, catalytic converters, and particle traps and the grid’s primary power source is a dirty coal plant, plugging in isn’t that much greener
  • trains vs trucks
    trains are better than trucks, but the carbon savings only kick in if you use less trains than you would need trucks; if the dock is a primary distribution point and load sizes are small, it might be better to send a truck or two to five geographically dispersed DCs then to load one train with five cars that have to split off to five different trains at the closest yard
  • gate and container yard operations
    trucker friendly is good, but the whole operation needs to be efficient
  • efficiency of inbound routes
    optimization is key
  • location of production
    choosing the right location (even overseas, if it’s close to a port) has a significant impact on overall carbon production

Sustainable transportation is important, especially with impending energy and carbon costs, but getting there won’t be as easy as selecting the right carrier. A detailed analysis of the end-to-end distribution chain will be required.

Why You Should Optimize Your Logistics

Because half of the time (on average), that truck you use is running empty. But you’re still paying for fuel, maintenance, driver time, etc. Consider this statistics from a recent article on “How to Combat Logistics Inefficiencies in Your Organization” over on Environmental Leader.

  • 25% of all freight vehicles in Europe run empty
  • 50% + of all freight vehicles in Europe run only part-full

As the article states, this is a monumental waste and has a staggering negative impact on the environment. In Europe, freight transport is believed to account for 1/4 of all carbon emissions. That’s 25% — and one sixth of the emissions are 100% unnecessary (as the equivalent of half the trucks are running empty and road transport accounts for 1/3 of the emissions). Given that road freight alone accounts for about 420 Million tonnes of CO2 per year in Europe (more than the entire carbon footprint of some countries, including South Africa, and 1/3 of global road freight emissions), that’s a lot of environmental damage!

And don’t tell me it’s not your problem, or that it’s your logistics carrier’s problem, because it’s not. It’s your freight, and you can do something about it. When you send out that RFI that asks if a carrier can service a given route, also ask if they currently service that route, how many trucks travel down the route on a weekly basis, and what % of trucks go FTL, LTL, and empty each way. Then you can define empty transport costs, carbon costs, and efficiency discounts in your sourcing model based upon how many empty trucks you will create or get rid of. If there are no full trucks going to the vicinity of your warehouse now, then the carrier will have to add trucks which will go to your warehouse empty, adding cost and carbon to your supply chain. But if there are full trucks going to the vicinity of your warehouse that always leave empty, you will be increasing the efficiency of the carrier while reducing the overall carbon footprint of the logistics carrier’s operation — and be in a position to potentially negotiate even better rates. And while the exact breakdown of FTL/LTL/empty on any lane varies by week, carriers on top of their game have these stats for the last month, quarter, and year at all times. The data is there. You just have to get it and make use of it. (And with a good optimization platform, you can!)