Category Archives: Logistics

Is Next-Day Delivery About To Become A Reality in India?

A recent article over on Knowledge @ Wharton, which asked whether or not “India’s Logistics Industry Could Deliver a Better Model for Transporting Goods”, noted that G.R. Gopinath, who revolutionized air travel in India with Air Deccan, is starting Deccan 360 with the goal of connecting 75 cities in India to each other on a 24-hour delivery schedule within the next year. That’s an ambitious goal in a country where only 1% of the population travelled by air up until 2003, and where air travel is still restricted to about 5% of the population.

It’s also an ambitious goal considering that while you can often get a part from any major city in the world to Mumbai in 24 hours, it will usually take at least 72 additional hours to get it to its final destination. The article notes how it once took seven days to move a spare engine from New Delhi to Kolkata (which is approximately 800 miles or 1300 kilometres away) and that it was cheaper to transport it via Singapore (which increased the transport distance to at least 4367 miles or 7028 km) than to transport it within India at logistics costs that are among, if not, the world’s highest. (Logistics costs in India account for about 13% of India’s GDP.) Talk about taking a ride on the crazy train.

Right now, only Blue Dart, owned by DHL, is the only logistics player in India with dedicated cargo aircraft — all 7 of them, dedicated to a whole three routes! So what Deccan 360 is proposing is revolutionary in scope. Starting with three Airbus aircraft and a network of 30 franchisees, Deccan will start offering next-day connectivity to 30 cities next month. Over the next year, it will add two more Airbuses and four ATR aircraft and expand to 75 cities. It will do this by way of a hub-and-spoke model run out of a 100-acre state-of-the-art cargo handling facility in Nagpur in central India. And if it works, express will no longer be a fantasy in India.

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When the Market Recovers, Will You Have Logistics Capacity?

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A recent article in Industry Week, which noted that “logistics [is] on a bumpy road to recovery”, had a scary statistic: 7% of the available capacity on US highways was eliminated last year as more than 3,000 trucking companies went out of business. And many more have went belly up since the year began. While the stats are not yet known, I’d estimate that over 10% of 2007 capacity has disappeared. When you consider that the capacity was almost fully utilized, this is not a good thing, as rail only gets you to a rail yard, not to your DC or the store.

And while you should definitely be using more rail, as this could significantly lower your (domestic) fuel usage and shipping costs, you still need the trucks for the “last mile”. Thus, you should be analyzing the state of your carriers now, their capacities, and locking in guarantees before they become scarce when the economy turns around again. Otherwise, you might see a large spike in your logistics costs again which would hurt your chances of a quick recovery.

Oil Prices Will Soar Again

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And it will happen sooner than you think. Are you ready?

A recent piece in Supply Chain Digest states that oil prices (are) set to soar according to Dr. Fatih Birol, the chief economist at the International Energy Agency, and Dr. Birol is right. About every decade we get a new peak, and the last two decades have seen faster boom and bust cycles. Plus, now that international shipping is now consuming 20% of all oil production, we’re not only draining reserves faster than expected, but getting close to the point where we will be consuming oil at full production capacity. There are only so many fields and so many rigs and we can only pump it so fast.

Now, I don’t think the “oil crunch” will start as early as 2010, primarily due to the fact that this recession is going to linger a little longer, but I do think we could see it as early as 2012, which, of course, will make the new age conspiracy theorists (or is that the true believers) squeal with delight, especially if it peaks at the end of the Mesoamerican (Maya) Long Count Calendar on December 20, 2012.

It’s not that unlikely, given that IEA’s recent assessment of over 800 major oil fields, that cover three quarters of the global reserves, found that most have already seen production peaks and that the rate of oil production decline is now running at nearly twice the pace that was calculated a mere two years aga. These are unsustainable levels, and with the lack of new exploration and development by the major oil companies, it is extremely likely we could see oil prices skyrocket within two years.

So, are you ready?

Do You Know Where Your Cargo Is?

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Recent articles on cargo theft from eSide Supply Management (in the ISM) and S&DC Executive (“LoJack Supply Chain Integrity Releases Cargo Theft Study”) highlighted a 2008 study from LoJack Supply Chain Integrity that uncovered 299 cargo thefts in 2008 (in the US) at truck stops, parking lots (including drop yards), facilities, warehouses, store locations, vehicles parked on the street, airports, casinos, ports and hotels across less than 600 organizations who belong to SC-ISAC. In other words, over 50% of organizations surveyed experienced cargo theft in 2008.

What does this mean? Simply put, if you move goods — you’re a target.

What can you do? First, identify your areas of highest risk. According to the study:

  • 65% (194/299) of incidents occurred at truck stops, in parking lots, (parked) on the street, and in store lots
  • 56% (168/299) of incidents occurred on the weekend
  • 52% (155/299) of incidents occurred in Texas, Georgia, Tennessee, and Florida

This says that:

  • your trucks are more likely to be targeted when they are in public areas which are less secure
  • your trucks are more likely to be targeted on the weekend when traffic and workforces are low / non-existent
  • your trucks are much more likely to be targeted in certain states, indicating the likely presence of organized crime rings

This says that you should:

  • avoid parking in un-secured public ares and, if you must, insure the trucks are monitored constantly
    (either through the use of a second driver who stays with the vehicle or real-time locator technology and software that immediately triggers an alert if the truck is moved without a clearance)
  • insure sufficient, if not extra, security is present on weekends
    on weekdays, you’ll have staff around who would notice a missing truck
  • minimize routes / stops through trouble zone
    and only use trucks that are well-secured and monitored in real-time

And follow the advice of LoJack Supply Chain Integrity which noted you should:

  1. Arm yourself with information
    What methods are criminals using to access the trucks, where are they most active, and what products are they targeting? The higher your risk, the more security you’ll need.
  2. Have a plan in place
    Be sure you’ve covered your supply chain end-to-end and that you:

    • review high-value shipper security requirements
    • developer corporate supply chain security guidelines
    • contact your insurance carrier about resources at your disposal
    • regularly evaluate and audit your transportation partners
    • establish contractual security requirements for partners
  3. Use deterrents
    Make sure your trucks have immobilization devices such as wheel locks, fuel shut-offs, air cuff locks, ignition locks, battery-disconnect switches, covert cargo-tracking, monitoring, and vehicle recovery systems.

What is The New Supply Chain Normal?

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In “A New Supply Chain Normal?”, Dan Gilmore of the Supply Chain Digest asked if there will be a new supply chain normal coming out out of the recession as many of the financial experts are expecting a new financial normal. His answer was that there will be a new normal for quite a while because important changes in the consumer consumption, business, and government will inevitably drive new requirements and responses from the supply chain.

In an effort to identify what this new normal would be, he asked a number of leading experts to weigh in with their take. Some of the more important points were as follows:

  • A greater focus on network efficiency as fuel prices rise permanently.
    Dr. Tom Mentzer, University of Tennessee
  • There is no new norm because the pace of supply chain change is too rapid. Supply chain success will only be achieved if the supply chain has enough flexibility and modularity.
    Dr. Jim Tompkins, Tompkins Associates
  • Permanently increased volatility. Constant currency fluctuations, cautious customers, and rapid swings in the price and availability of key commodities are just a few areas where we may never see stability again.
    Bill Read, Accenture Supply Chain Practice
  • The acceleration of risk mitigation. Optimization, simulation, and plan auditability will be critical.
    Richard J. Sherman, Gold & Domas Research

And they all had a common thread. Constant, sometimes rapid, change. This means that the new normal is really the old normal, just sped up. Instead of worrying about fuel price increases, currency fluctuations, or raw material availability over years, you’re often going to be worrying about them over months. Shorter, more unpredictable, product life-cycles. An even greater need for spend analysis and optimization. And a greater need for risk visibility, management, and vigilance.

For more insights into what the experts had to say, check out “The New Supply Chain Normal: Supply Chain Gurus Weigh In” which dives into the views of Dr. Tom Mentzer and Dr. Jim Tompkins, and “The New Supply Chain Normal: Supply Chain Gurus Weigh In, Part 2” which explores the insights of Bill Read and Richard J. Sherman.