Category Archives: Logistics

The Economic Advantages of Fleet Management

A recent article in Integrated Solutions pointed out the economic advantages of fleet management which can save hundreds of thousands (and sometimes millions) a year in fuel costs for your average mid-size distribution company. In addition to fluctuating fuel costs, excessive idle-time, out-of-the-way routes, and unsafe driving are all expensive issues that plague your average distributor. And although the price of fuel can’t be controlled (although it can often be locked in for a limited time), fleet efficiency can be increased with technology that decreases idle time, optimizes routes, and eliminates unnecessary trips.

The article presents a case study of Namasco Corp. which is saving more than $500,000 per year in fuel costs thanks to a GPS-based fleet-management solution that optimizes loads and routes, minimizes idle-time, and gives Namasco real-time visibility into where its trucks are at any given time. In addition, when this software is paired with DOT logging software, the savings that result from efficiency improvements start to add up rapidly. Considering that a recent study by Motorola found that vehicles equipped with a GPS solution have 53% less travel downtime and a 26% improvement in employee accountability, can you afford not to do it?

10+2 Is In Effect. Are Your Trade Programs Ready?

The requirements of the Importer Security Filing, 10+2, took effect on January 26. The clock is now ticking, and there are only eleven months left in the CBP informed compliance period to achieve full compliance before full enforcement and (significant) monetary penalties take effect.

Under the Importer Security Filing initiative, the electronic transmission of 10 data elements from an importer (or its freight forwarder), and 2 from the vessel, must be executed no later than 24 hours prior to the loading of cargo onto a vessel destined for the US, shifting data transmission to an earlier stage of the supply chain distribution process.

If a company does not comply, it can be fined a minimum of $5,000 for each violation. If you do a lot of importing, that will add up fast.

Are you in compliance? Are you sure? If you don’t have good trade visibility, and don’t verify the 10+2 submissions filed (on your behalf by your freight forwarder and broker), you might not be … and you won’t know it without good trade visibility. Moreover, you might be risking other non-compliance losses. For more insight, check out the latest Sourcing Innovation Illumination on Why You Need Trade Visibility.

On the Third Day of X-Mas … (Three Sides to the Supply Chain)

On the third day of X-Mas
my blogger gave to me
tri-focal lens,
two boxing gloves
and a lesson in strategy.

When coming up with a good strategy for your supply chain, one of the very first things you need to understand is that there will always be three views of the best decision: the procurement view, the logistics view, and the executive view. Your number one challenge could easily be the transformation of these viewpoints to a common viewpoint that permits a common solution.

This will probably require a lot of good negotiating skills, good listening skills, and innovative problem solving skills to propose designs and solutions that can appease everyone’s desires. This is where Jason’s Emotional Intelligence (or EQ) really comes into play. You have to see their viewpoints, understand their perceived problems, get to the real issue, and come up with solutions that will simultaneously meet your needs and theirs.

Management will typically want the solution with the perceived lowest cost or highest profit, or both; logistics will typically want the solution that makes their life easiest; and you should want the solution that meets the needs of your stakeholders – engineering, marketing, etc. – while keeping your costs down. A narrow focus on lowest cost can lead to quality issues, a narrow focus on the easiest solution (local sourcing enabled by a national carrier that can meet all of your shipping needs) can overlook lower cost or higher quality sources of supply, and a narrow focus on minimally meeting your shareholder’s needs in a cost-controlled manner can overlook opportunities for innovation.

So not only do you need to be able to understand each of these viewpoints, you need to be able to see their strengths and weaknesses so that your team can collaboratively design an over-arching supply chain strategy that exploits all of the supply chain strengths available to you while blocking out the potential weaknesses.

Logistics Providers Are Not Created Equal

World Trade Magazine recently ran an article on “customized solutions” offered by logistics providers and 3PLs where it asked thirteen different experts how they would meet the logistics needs described in a ‘hypothetical case study’ for a leading developer or electronics. I think that this is one of the most interesting articles that World Trade Magazine has ever published because it clearly shows that even though a group of logistics providers might offer the same services, they might approach the solution in completely different ways and you likely won’t know who the best logistics provider is for you until you find out how they will handle your transportation needs.

A brief description of the hypothetical situation is as follows. The electronics developer jumped on the LCCS bandwagon and moved the majority of its manufacturing operations offshore. It established relationships with two major contract manufacturers and a major international logistics provider to ship product from factories in China and Hungary to distribution centers in Singapore, the Netherlands, and Memphis. The logistics provider was selected based upon freight rates and the promise of product visibility during shipment, which has been slow to materialize, forcing the electronics developer to make decisions based on the expected transit time, rather than a firm delivery date (as the provider is routinely off by as much as two weeks). In addition, invoicing is poor. Although they get the total bill weekly, details about each shipment are missing and they can’t allocate costs to a specific product. Finally, although the logistics provider is living up to negotiate freight rates, the electronics developer is constantly getting hit with handling fees that weren’t in the initial contract, as well as higher taxes and duties that may not be justified. How should the company proceed?

Expert number one, who noted that visibility is important, that a minimal level of connectivity is required between each node in the chain, and that predictive monitoring needs to be put in place, had the following advice:

  • conduct a full review of existing contract provisions and identify gaps between promises and realizations,
  • convene a summit meeting with the 3PL senior executives to discuss the gaps and develop a plan to address them, and
  • if the 3PL cannot realize its commitments, find a replacement logistics carrier.

Expert number two, who noted that the electronics developer probably didn’t understand the concept of total delivered cost, needs to go back to the table and focus on measurable goals that will be committed to by all parties and then develop contingency plans if the current relationships fall through.

Expert number three, who noted that the electronics developer is probably not agile enough, pointed out that they need a services oriented supply chain based on a SOA (services oriented architecture).

Expert number four, who believed that the electronics developer underestimated the importance of due diligence when selecting a logistics partner, said that the developer has to work with the carrier to first and foremost satisfy customer needs, which will require better visibility and firm delivery dates. In addition, they should get tax help to reclaim likely overpayments if their taxes increased without any clear reason why.

Expert number five, who noted that the electronics developer is no longer master of its own destiny, advises the developer to “staple itself to an order” and map its entire order-to-cash process to obtain a detailed understanding of the physical, financial, and information flows. Then it needs to work strategically with its key vendors to resolve the issues.

And so on.

The key thing to note is that, just like each expert views the problem definitely, so will each 3PL and selecting the right one will require some research to find the one that has the same understanding of your supply chain as you do.