Category Archives: Logistics

Opportunities for Transportation and Logistics Operators Part I

In addition to the presentation of 18 theses around the continued scarcity of energy resources, Volume 1 of the Transportation & Logistics 2030 report on “how supply chains will evolve in an energy-constrained, low-carbon world” by PriceWaterhouseCoopers and the Supply Chain Management Institute also identified some (emerging) opportunities for transportation and logistics operations that are worth close scrutiny by any provider looking to differentiate themselves in the marketplace.

The report provided opportunities in four areas:

  • Products & Services
  • Finance & Accounting
  • Processes & Organization
  • Strategy & Policy

Today, we’re going to overview the products, services, finance, and accounting opportunities.

Products & Services

  • Virtual Delivery
    e-Document providers capable of quickly and cost effectively digitizing any type of document (received by any traditional means of communication) and reproducing an exact copy at the destination will gain a short term advantage as companies begin the slow journey to true paperless operations.
  • Eco-Consultants
    Companies who recognize the market for green logistics and SCM early and develop an expertise will have the opportunity to provide eco-consultancy services to their customers.
  • Slow Transport
    Companies that provide slower, but much more energy and cost efficient, transport options might see a booming business as the eco-conscious consumer starts to dominate the market.
  • Co-opetition (Competitive Collaboration)
    Cooperation between competing businesses as a way to cut costs and achieve competitive advantages will gain increasing acceptance. For example, logistics providers have an opportunity to collaborate on “last mile” deliveries and significantly reduce associated costs with network and route planning optimization.
  • Low Cost Logistics
    Going beyond co-opetition and allowing a customer to assemble logistics services according to their needs, which could be limited to the actual transport of goods (where the customer takes over administrative processes and work steps) could be a booming business. (Of course, these providers will need to implement a sophisticated real-time infrastructure with cost transparency to enable this service.)
  • Fabbing Supply Chain
    Fabrication of products using a computer and a 3-D printer could be common by 2030. Providers who offered this service to consumers who bought “blueprints” over the internet could see a booming business.

Finance & Accounting

  • Mobility Account
    Environmentally aware companies may start introducing mobility accounts and monitor the carbon footprint caused by their employees business trips. Providers that offer (SaaS) solutions for mobility account tracking could see a booming business.
  • CO2 Ticker
    Companies tracking carbon emissions will start reporting all carbon emissions associated with product and transport with a CO2 Ticker. Companies who can reduce this number will see a competitive advantage.
  • Green Credits
    Green Credits, a positive incentive system to act in an environmentally friendly way that grants credits to employees who engage in activities to improve environmental conditions, might catch on. Providers who offer such credits to customers who select greener alternatives might gain a competitive advantage.
  • Total Emission Monitoring
    CO2 emission tracking is just the tip of the iceberg. In the future, sulphuric dioxide, nitrogen oxides, noise, and other pollutants will also be monitored. The first to market with Total Emission Monitoring solutions will have a clear advantage.
  • Sustainability Rating Agency
    Third party sustainability ratings will be as important as third party credit ratings in the future. Logistics companies with high sustainability ratings that could improve the ratings of their customers will be looked very favourably upon in the future.

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Top 11 Projections from the Transportation & Logistics 2030 Report

PriceWaterhouseCoopers and the Supply Chain Management Institute recently released Volume 1 of their Transportation & Logistics 2030 report on how supply chains will evolve in an energy-constrained, low-carbon world. The first issue focussed on the scarcity of energy resources and how it will likely affect the industry over the next 20 years and contained a number of theses that were assigned an average probability of likelihood by 48 experts under a Delphi study. Of the 18 theses addressed in the report, the following 11 were assigned a greater than 50% chance of occurrence, with the first thesis given a 71% chance of likelihood.

  • Continuous real-time control of the flow of goods eliminates disturbances in the supply chain and thereby significantly increases resource efficiency.
    Technology will never eliminate disturbances as some risks can’t be predicted, but given that the real time visibility solutions already available can greatly reduce supply chain fluctuations, I have to agree that most supply chains will flow smoother in 20 years (especially since those that don’t improve will perish in the current economic climate).
  • By using standardised measurement and evaluation systems (i.e. emissions trading, toll systems), the carbon footprint of logistics processes in supply chains will be allocated to the causer and factored into the price of the product.
    Governments are slow to move, but the pressure is on. This could happen in the next decade.
  • Consumer behaviour has changed such that locally produced products are strongly preferred.
    Consumer behaviour is already changing to environmentally preferred products … and as consumers better understand the unnecessary environmental damage caused by shipping products halfway around the world that can be produced down the street, this is inevitable.
  • Larger means of transport (gigaliner trucks, ultra-large container ships) have become prevalent in order to compensate for rising transportation costs.
    We already have 15.2K TEU container ships that are almost 400 meters long, and I don’t see this record standing for long.
  • The reduction of transportation costs has become the predominant criterion in determining where to set up production sites.
    As the cost of fuel continues to rise, this is inevitable.
  • Work environments, everyday activities, and leisure options are better integrated, which has led to considerable reductions in transport.
    We’re seeing the start of this revolution today with the rise of the networked person who can work anywhere.
  • Autonomous and self-controlled systems (agent systems, automatic guided vehicles) have revolutionized freight transport.
    While I think revolutionized is a strong word here, warehouse operations will become a lot more automated and a lot more streamlined.
  • Nanotechnology has significantly improved many means and procedures in logistics (e.g. transport, maintenance, repair and overhaul).
    This is one I have to disagree with. Until we see some real breakthroughs in the industrial application of nanotechnology, it’s going to be a while before we see a transition from the lab to logistics.
  • Personal influence on the logistics process has become more important for customers than the speed of delivery. Customers actively intervene in controlling the delivery process of goods.
    We’re already seeing the beginnings of this. If a customer can get the goods when they’re needed, how long they take to get there is not as much of an issue.
  • The minimization of energy consumption is the paramount criterion in supply chain design, rather than cost efficiency and speed.
    Since energy costs are going to rise as sustainability and corporate social responsibility continues to grab headlines, the focus will shift to minimizing energy. Furthermore, reduced energy consumption will reduce in decreased costs, so a focus on cost reduction won’t be as important.
  • The global energy turnaround has now advanced to the point so that in some countries alternative energy accounts for up to 80% of the overall energy mix.
    While this will be the case in a few emerging markets, I am going to make the sad prediction that most of the countries in today’s developed world will still be struggling to surpass the 30% to 40% marks.

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If That Bid Seems Too Low … II

Maybe this is how they transport your oversized merchandise …

Maybe this is how they secure your funds …

Maybe this is their idea of plant safety …

Maybe this is how they’ll service your fleet …

Maybe this is their definition of “repackaged” merchandise …

Maybe this is a good description of their products …

A North American Near-Shoring Obstacle

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

It appears that Mexican drug cartels are taking advantage of the US’ C-TPAT program to occasionally put marijuana into trucks that have been granted expedited clearance into the US. How serious is this?

Here are a couple of articles:
* Trucker Program Attracts Drug Smugglers
* Mexican Drug Smugglers Taking Advantage of New Program That Speeds Truckers Across the Border

If you dig into the articles you will see that there are about 5 million north-bound truckloads crossing the Mexican border annually. In two weeks CPB found four shipments containing marijuana. They say that ten percent of the trucks are inspected, but it’s not clear if that’s ten percent of all trucks or ten percent of the C-TPAT certified trucks. Worst case, that’s 20 trucks carrying marijuana per week, or 1,000 per year. That comes to 200 trucks per million. Your judgements will vary on how serious this is.

C-TPAT was not designed to catch drug smugglers. Of course, the obvious question is whether terrorists could substitute a weapon of mass destruction (WMD) for the marijuana. Theoretically it’s possible of course. However, I don’t think the Mexican drug cartels would do so voluntarily. A cynic would say that their customer base in the US is too valuable to them, and there are probably other reasons as well.

But the articles do raise some questions. Certified trucks are only required to notify the US Customs and Border Protection (CBP) staff 30 minutes ahead of reaching the border. This is in marked contrast to the Container Security Initiative that applies to ocean freight. For ocean freight, CBP must be notified of the contents of all containers 24 hours before a US bound container ship is loaded.

CBP is also finding trucks where secure seals have been broken or circumvented by removing doors at the hinges. That’s disturbing. These are the same seals that are used on ocean freight containers.

My thought is that there will probably be more delays at the border. One sensible approach would be to require trucks coming from further into Mexico than the immediate border area to provide more advance notice. CBP tries to judge security risks at least partly based on the names of the shipper and receiver and more time to react would help them select riskier for further inspection.

Dick Locke, Global Procurement Group and Global Supply Training.

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Don’t Forget to Optimize Your Packaging

Not only does packaging cost you money to produce, it can prevent you from being seen as a responsible corporate citizen concerned about sustainability if it is excessive and not reusable or recyclable. But more importantly, poor packaging can greatly increase your shipping costs. If it increases your product size by 50%, that’s at least a 33% reduction in the number of items you can ship in each truck or on each pallet. Moreover, if your packaging is poorly designed, or your box size poorly selected, your pallet efficiency might be considerably less than optimal! If a poor choice of box dimension cost you 15% or more in area efficiency, that’s going to increase your shipping costs by another 15%. Consider this example from a recent Supply Chain Digest piece on “the impact of packaging optimization on transportation management”. A simple package redesign increased the number of units that could fit on a pallet from 120 to 300 while increasing pallet utilization from 77% to 91%, which represents an 18% improvement in area efficiency. This represents a savings of 60% in transportation costs! Even if your savings potential was only half that, that’s considerable. So don’t forget to optimize your packaging.

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