Trans-border Trade - Logistics Quarterly

Transcription

IDEAS FOR LEADERSHIP IN LOGISTICS AND TRANSPORTATION
©
Volume 14, Issue 1, February/March 2008
Michael H. Belmer,
President and Chief Executive Officer,
Montship Inc
Geoffrey (Geoff) A. Bennett,
President and Co-founder
Kelron Logistics
David J. Closs, Ph.D.,
LQ Executive Editor,
Michigan State University
John M. Cutler Jr., General Counsel
NASSTRAC and a Principal of McCarthy,
Sweeney & Harkaway, PC.
Jim Davidson, CEO, Wheels Group
Bill Graves, President and
Chief Executive Officer,
American Trucking Associations
Wim Lagaay, Senior Vice President and
Area Operations Manager, Maersk Line
Keith Matthews, Executive Vice President
and Co-Chairman, & Co-founder,
Kelron Logistics
Chris Norek, Ph.D.,
Founding & Senior Partner
with Chain Connectors, Inc
Michael Regan,
CEO and Chairman of the Board,
TranzAct Technologies, Inc.
Kurt Ritcey, Partner, Deloitte
Robert Shaunnessey,
Executive Director,
Warehousing Education and
Research Council (WERC)
Gregory L. Werner,
President and
Chief Executive Officer
Trans-border
Trade:
A New Era of
Security
INSIDE:
MQ REVIEW
A Special Marine
Quarterly Report
PM40032602
www.MQReview.com
PAGE 17
Is your supply chain looking more like a 3 ring circus?
It doesn’t matter whether your needs are
complicated or simple, let UTi take on the
juggling act. Our network of professionals will
be the one point of contact you look to for a
complete solution.
If you require a supply chain solution for
value added services, freight management
and distribution nationally and internationally,
UTi is the right choice.
Call UTi today at 1-800-336-5699 or
email us at [email protected]
www.go2UTi.com
CONTENT S
LQ
™
6 Announcements 7 Contributors
10 Trans-border Trade: A New Era of Security
Despite a stellar history of corporate
compliance with border protection programs,
a company and the livelihoods of hundreds of
hardworking people could have been easily
derailed by the wrong turn of one driver.
Here’s a firsthand account of the value of building resiliency
into your supply chain in the most extraordinary of
circumstances.
12 LQ’s Executive Interview Series: Defining
Leadership in Logistics and
Transportation in North America
This is the second of a two-part interview
with Keith Matthews, Executive Vice
President and Co-Chairman, Kelron
Logistics, and Geoff Bennett, President, Kelron Logistics.
13 ATA’s Commentary: The National Infrastructure
Commission: America Must Invest
Heavily in Its Transportation
Infrastructure
Even though an estimated 82 percent of
American cities and towns receive their
goods exclusively by truck, current revenue streams are
failing to keep pace with infrastructure requirements.
What’s next for the world’s pre-eminent transportation and
infrastructure network?
14 A Heads-Up for Supply Chain Managers
It is important that supply chain managers
become more aware of how political initiatives can affect supply chain organizations.
Industry players need to become more visible
and active in policy creation forums to
ensure industry expertise is applied to public policy,
regulations and legislation.
LogisticsQuarterly.com
16 NASSTRAC Commentary: U.S. Hours of Service
(HOS) Follow-Up
The recent January 23, 2008 court order
means we can all focus on the issues before
the U.S. Federal Motor Carrier Safety
Administration without the disruption of
interim changes in the HOS rules. The agency’s deliberate
approach to assessing its next steps has paid off, enabling
shippers and carriers to dodge a bullet.
17 MQ Review: Celebrating the Toronto Steamship
Association’s 50th Anniversary
Scott Pichette, President, Toronto
Steamship Association and Line Manager
Canada, Montship Inc. – Wim A. Lagaay,
Senior Vice President, Maersk Inc. –
Michael Belmer, President and Chief Executive Officer,
Montship Inc. – Jeff Parker, Vice President, Customer
Services, Hamburg Süd
26 LQ’s Executive Interview Series: Defining
Leadership in Logistics and
Transportation in North America
An Interview with Gregory L. Werner,
Werner Enterprises, one of the top North
American carriers in LQ’s Top 3PL Report.
28 Opportunities in Inventory Tracking
Out of stock items create a bad impression
with customers, reduce service levels — and
cost retailers money in lost sales. Having
more accurate inventory knowledge is key to
improving customer perceptions and service
levels. Critical process and systems improvements can
reduce out of stocks and raise revenue.
30 WERC Commentary: We Don’t Need No
Stinking Inventory!
Here’s a compelling overview of how the
conventional view of inventory often belies
its true value when it comes to the success
of your business.
LQ ™
February/March 2008
3
Other Companies Deliver Freight.
We D e l i v e r I n t e l l i g e n t
Tr a n s p o r t a t i o n .
With 15 years experience as a premier third party logistics provider,
Kelron delivers intelligent transportation. That’s important because your
company survives by making intelligent decisions.
Kelron can help you break through your Key Performance Indicator and
supply chain efficiency barriers. We also provide immediate cost savings with
no upfront capital investment, and have the intellectual capital, physical assets
and financial resources to deliver what we promise.
Wo r k i n g w i t h K e l r o n w i l l :
• optimize your transportation network
• improve your supply chain integration
• increase profitability
Give us a call, and take the first step towards adding Kelron to your intelligence equation.
Telephone: 1-866-695-6414 • Email: [email protected] • www.kelron.com
Volume 14 Issue 1
PUBLISHER & EDITOR
Fred Moody
[email protected]
LQs EXECUTIVE EDITORS
David Closs, Ph.D
Nicholas Seiersen
ADVERTISING SALES
LQ™ ADVISORY BOARD
Michael Skinner
Director, North American Sales, 905-489-1174
[email protected]
David J. Closs, Ph.D.
Department of Marketing and
Supply Chain Management,
Michigan State University
Executive Editor, LQ
Karen Cooper
Senior Media Relations Specialist,
FedEx Canada Ltd.
Jim Davidson
CEO,
Wheels Group
Bruce Danielson
Executive Communications Manager,
UPS
Richard Dawe, Ph.D.
Associate Professor,
Golden Gate University
Russ Dixon
Senior Manager,
CEVA Logistics
Russ J. Doak
Director, Global Logistics,
Kodak Graphics & Communications
David Faoro
Director, Supply Chain,
The International Group, Inc.
Sue Gadsby, C.P.P., C.P.M.
Director, Procurement,
Apotex Inc.
Thomas J. Goldsby, Ph.D.
University of Kentucky
Melissa Gracey
President,
DTA Services Ltd.
Joe Grubic
Senior Manager,
Alliance/Network Management,
Nortel Networks Global Logistics
Ed Kearns
President,
Kearns Transportation Services
Contributing Maritime Editor, LQ
Arun Kumar
Director of Americas Logistics,
Dell Inc.
John C. Langley Jr., Ph.D.
Director of Supply Chain
Executive Programs,
The Logistics Institute (TLI),
Georgia Institute of Technology
Clifford F. Lynch
C. F. Lynch & Associates
MBA, University of Chicago
Robert Martichenko
President,
LeanCor
Kevin Sharp
Sales Manager, North American, 905-604-1510
[email protected]
CREATIVE DIRECTOR
Craig Allen
[email protected]
Fred Moody
Editor & Publisher, 416-461-8355
[email protected]
COPY EDITOR
Trish O’Reilly
[email protected]
WHAT'S AHEAD:
CIRCULATION MANAGER
Bill McCarvell
[email protected]
April
Women in Supply Chain
Management &Trucking Quarterly
(TQreview.com):
An Executive Interview Series
Advertising Closing: March 25
LQ’s Symposium
Creating Value in the
Supply Chain
for more information
wwwlogisticsquarterly.com
LQ™ Inc.
2 Bloor Street West, Suite 100, Box 473
Toronto, Ontario M4W 3E2
Telephone: (416) 461-8355
Toll Free: 1-800-843-1687
Fax: (416) 465-7832
Email: [email protected]
Logistics Quarterly (LQ™)
(ISSN 1488-3309) is published six
times annually by LQ™ Inc. LQ™ is
written for professionals in logistics.
Subscription Services at:
www.LogisticsQuarterly.com
Canada Post Publications Mail Sales
Agreement Number: 40032602.
CANADIAN POSTMASTER: send
subscription orders, address change
notices and undeliverable copies to
LQ™, 2 Bloor Street West,
Suite 100, Box 473, Toronto,
Ontario, Canada M4W 3E2
EDITORIAL POLICY
The opinions expressed in this
publication do not necessarily reflect
the policy of LQ™ Inc. The editors
reserve the right to select and edit
material submitted for publication.
Not responsible for unsolicited
material. LQ™ Inc. is a Toronto-based
corporation and publisher. All rights
reserved © by LQ™ Inc. 2007.
Reproduction without written
permission of the publisher is
forbidden. LQ™ welcomes your
comments, letters to the editor, or
written submissions for consideration.
(LQ™ is available on-line at:
www.LogisticsQuarterly.com)
LQ MAGAZINE’S
STATEMENT OF OWNERSHIP
The trademark LQ™, LQ Magazine
(ISSN 1488-3309), LQ Newsletters and
the LQ Conference, including the
“Executive Exchange,” its trade marks
and published material are wholly owned
by LQ Inc., private-owned and operated
corporation. LQ’s valued sponsors are
independent of LQ Inc., and LQ’s editors
do their utmost to uphold independent
and impartial views in all of their
publishing initiatives.
LQ is honored to have the status of the
“official magazine” of The Logistics
Institute. The Logistics Institute and
LQ are independently owned and
operated organizations.
James Mahoney
Vice President of the
Supply Chain Excellent Practice,
Auxis, Inc.
Diane Mollenkopf, Ph.D.
Assistant Professor,
University of Tennessee
Jeff Moore
Managing Director,
Lakeside Logistics Inc.
Tom Nightingale
VP Communications
and Chief Marketing Officer,
Con-way Inc.
Christopher Norek, Ph.D.
Senior Partner,
Chain Connectors, Inc.
NASSTRAC Contributing Editor
Robert Novack, Ph.D.
Business Logistics,
Penn State
Susan Promane
Director, Supply Chain,
Whirlpool Canada
Peruvemba S. Ravi, Ph.D.
Wilfrid Laurier University
Kurt M. Ritcey
Partner, Deloitte Consulting
Michael Rubinfeld
Director, Solutions,
Execution & Standards,
Ryder Logistics & Transportation
Solutions Worldwide
Nicholas Seiersen
Senior Manager, KPMG
Executive Editor, LQ
Robert L. Shaunnessey
Executive Director, WERC
Allan Smith
President & CEO,
BCG Logistics Group
Michael Snedden
Manager of Distribution Operations,
IBM-Canada Ltd.
Donald Tham, Ph.D., P.Eng.
Ryerson University
Walter Zinn, Ph.D.
Professor,
Ohio State University
LQ™ ADVISORY BOARD EMERITI
Benjamin Gordon
Managing Director,
BG Strategic Advisors
George Kuhn
LQ ™
February/March 2008
5
6th Annual 3PL Summit 1 col ad
11/2/08
ANNOUNCEMENTS
Annual
3PL
Summit
25+ Global and American CEOs &
Presidents share with you their
insights on the future trends and
opportunities in the 3PL industry
23-5 JUNE, 2008, INTERCONTINENTAL
BUCKHEAD, ATLANTA GA
Hard Hitting C-Level Speakers
John Pattullo ScottMcWilliams
Cliff Otto
CEO
CEO
President
CEVA Logistics CEVA Logistics Saddle Creek
Tom Sanderson
CEO
Transplace
Bill Conley
CEO
Transplace
Sean Snow
CEO
C.R. England
Joe Bento
CEO
EGL Logistics
Harry Drajpuch John Wagner Jr.
CEO
President
Kane is Able Wagner Industries
Now in its 6th year the 3PL Summit is
AND
the established meeting place where
MANY
CEOs and senior management from
MORE!
leading 3PLs - and logistics executives
from multi-national shippers come together to
discuss best practices and greater collaboration.
Over 400 senior executives are expected to attend in
Atlanta for three days of intense networking, learning
and benchmarking. The 3PL Summit consists of 20
CEO 3PL presentations, 10 high powered panel
sessions debates and 4 exclusive workshops combined with presentations and insights from
more than 10 multinational shippers, World
Class networking, a focussed
OF
20 HOURSKING exhibition and the ‘US 3PL Awards
Ceremony and Gala Dinner’.
NETWOR
Register Now and save
$300 and enter a draw for tickets for
the Atlanta Braves Game! Go to
www.eyefortransport.com/3PL or
call 1 800 814 3459 EXT.209
6
LQ ™
February/March 2008
LQ Announces New Members of
Advisory Board
LQ is pleased to announce that
Clifford Lynch of C. F. Lynch & Associates, Susan Promane, Director of Supply
Chain for Whirlpool Canada,and Robert
Shaunnessey, Executive Director of
Warehousing Education and Research
Council (WERC), have accepted LQ’s
invitation to join its Advisory Board
Clifford F. Lynch of C. F. Lynch &
Associates has provided
management advisory
services in logistics
since 1993. During the
previous thirty-five years,
he was Vice President,
Logistics for the Quaker Oats Company
and President of Trammell Crow Distribution corporation. He attended public
schools in Memphis and received his
undergraduate degree from the University of Tennessee and an M.B.A. from
the University of Chicago. He is a
Certified Member of the American
Society of Transportation and Logistics
and is also a member of:
• Editorial Review Board, Journal of
Business Logistics
• Editorial Review Board, International
Journal of Physical Distribution and
Logistics Management
• Editorial Review Board, Supply Chain
Management Review
• Warehousing Education and Research
Council
• Advisory Council to Dean, College of
Business Administration, University of
Tennessee
Mr. Lynch is a member and past president of the Council of Supply Chain
Management Professionals (CSCMP)
and has received numerous awards in
the field of logistics. He is an adjunct at
the University of Memphis and a frequent lecturer at other colleges and universities, as well a being the author of
numerous articles on the subject of
logistics and two books on logistics out-
sourcing.He is a director and past chairman of The Memphis Food Bank, and is
licensed as an affiliate real estate broker
in the State of Tennessee.
Susan Promane has over 15 years of
progressive supply chain experience
with a variety of companies including
ICI Canada, CN Rail, Tibbett & Britten
North America and Skulogix Ltd.
Currently she is the Director of Supply
Chain for Whirlpool Canada and a
member of their Senior Leadership
Team.
Susan has an M.B.A. and a B.A.
(Honours), specializing in Business and
Economics, from York University and is
a member of the CSCMP and the Supply
Chain & Logistics Association Canada
(SCL).
Robert L. Shaunnessey has been
Executive Director of the Warehousing
Education and Research
Council (WERC) since
2003 and in the distribution industry for more
than 30 years. He was a
founder and partner of
third party logistics provider Sterling
Logistics Corporation. Earlier in his
career, he served as President and CEO
of Records Management Services, President of Midwest Distribution for ITELGATX and Executive Vice President,
Finance and Administration, for DSC
Logistics.
As a resource for 37,000 logisticians,
academics and executives in various
disciplines in the United States and
Canada, LQ offers ideas for leadership
in logistics, supply chain management
and transportation, and provides a
unique bridge between business,academia and practitioners. LQ’s Editorial
Advisory Board ensures that LQ affords
authoritative thinking on the complex
and fast-changing world of the logistics
business — with a unique focus on best
practices in the United States.
FEBRUARY/MARCH CONTRIBUTORS
LQ’s mandate to provide “Ideas for Leadership in Logistics” is clearly evidenced this
issue, with articles written by professionals and logisticians
from America and Canada who are leading and transforming
business by creating new roadmaps and definitions for leadership in this exciting field.
OUR CONTRIBUTORS
MICHAEL H. BELMER, President and
Chief Executive Officer, Montship Inc.
was born in Brighton, UK, moved to
Canada with his family at the age of two
and grew up in Montreal. He graduated
with a Bachelor of Commerce degree
from Loyola College in 1972. He began his
career with Montreal Shipping Company, as Montship was then known, in
1964, holding progressively senior positions in Treasury, Information Systems
and Sales and Marketing, before being
elected to the Board of Directors in 1991.
He served as Executive Vice-President
before being appointed President and
Chief Executive Officer in 1996.
He is past Chairman of the Shipping
Federation of Canada, past President of
Mariner’s House of Montreal, current
Chairman of the Board of Trafalgar
School, and President of the Hermitage
Club.
GEOFFREY (GEOFF) A. BENNETT is the
president and co-founder of the Kelron
Logistics family of companies, headquartered in Mississauga, Ontario. Kelron is
one of Canada’s largest third party
transportation logistics companies, with
more than 110 employees working out of
three operating locations in Canada,
generating annual revenues approaching
$100 million. Prior to founding Kelron,
Mr. Bennett was a Director of Operations for Ontario’s largest dry cleaning
chain, Sketchley Cleaners. His tenure in
supply chain management also includes
holding senior level positions in various
transportation companies, including
Director of Operations at Gelco Same
Day (now Dynamex Express), one of
North America’s largest same day and
rush messenger, expedited and dedicated
delivery networks.
DAVID J. CLOSS, Ph.D., LQ Executive
Editor, is the John H. McConnell Chaired
Professor of the Eli Broad College of
Business, Department of Marketing and
Supply Chain Management, Michigan
State University. He has consulted with
more than 100 of the world’s Fortune
500 corporations regarding logistics
strategies and systems. He is an active
member of Council of Supply Chain
Management Professionals (CSCMP).
JOHN M. CUTLER JR. is General Counsel
of both NASSTRAC and the Health and
Personal Care Logistics Conference and
a frequent speaker on legal issues affecting transportation and logistics. He is
the author of Rules of the Game: Legal and
Regulatory Issues Facing the Supply Chain
Manager, published in 2006 by CSCMP,
as well as other publications. Mr. Cutler,
who has 30 years experience in transportation law, is a principal with the
Washington, DC, law firm McCarthy,
Sweeney & Harkaway, PC.
JIM DAVIDSON, CEO, Wheels Group,
began his career in logistics at the Ford
Motor Company in 1963, working in all
aspects of logistics for 17 years. Mr.
Davidson joined TNT in 1983 and held
various management roles, including
roles in operations, staff, administration
and general management for a number
of different divisions. He also served as
the TNT board member representing
North America at their European-based
board meetings. He has served on the
executive of the Canadian General Motors
Supplier Council and as Executive Vice
President of the ATA Council of Logistics
located in Alexandria, Virginia.
BILL GRAVES, who served as governor of
Kansas for eight years, is President and
Chief Executive Officer of the American
Trucking Associations, the largest
national trade association for the trucking industry. Through a federation of
other trucking groups, industry-related
conferences and its 50 affiliated state
trucking associations, ATA represents
more than 37,000 members covering
every type of motor carrier in the United
States.
WIM LAGAAY, Senior Vice President and
Area Operations Manager, Maersk Line,
is responsible for the procurement of
operations services, equipment control,
marine operations, Maersk Domestic
and inland intermodal services. He is
also a board member for Bridge Terminal
Transport, Inc. and Maersk Equipment
Service Company. Having joined Maersk
following the P&O Nedlloyd integration,
Mr. Lagaay has an extensive background
in the industry, having worked in Europe,
Africa and North America. Mr. Lagaay is
a Certified Management Accountant,
received his B.A. from the University of
Cape Town with studies in commerce
LQ ™
February/March 2008
7
and economics. He is a competitive
sailor, a military veteran, a husband and
father of two.
KEITH MATTHEWS is Executive Vice
President and Co-Chairman, as well as
co-founder, of Kelron Logistics, one of
Canada’s largest 3PLs, with three transportation operating facilities for on
demand transportation and a 108,000
square foot warehouse and distribution
facility. Along with being one of the top
25 freight brokers in the United States,
Kelron Logistics is one of the top 36 3PLs
in North America. Keith heads up
Kelron’s sales and marketing activities,
which are more than $80 million annually, as well as leading the company’s
Transportation Management Group,
responsible for network design, implementation and execution of single source
transportation solutions. During his
tenure in the industry, Keith founded the
Expedite Division of Dynamex Express in
the late 80s. He also co-founded DDK
Marketing Inc., a successful industrial/
commercial air cleaning and air quality
business. Keith has a background in
computer programming and systems
design and has earned his Logistics
Executive Certification from the University of Tennessee.
TOM McHUGH is the Director of Supply
Chain Process & Technology for
CVS/pharmacy, the retail arm of CVS
Caremark, the pharmacy healthcare
giant. Tom has been with CVS for over 10
years and has accumulated over 30 years
experience in the retail industry managing various aspects of merchandising,
replenishment and distribution for grocery, Rx, HBC and general merchandise
product categories.
Tom has senior level experience in
supply chain business disciplines as well
as technical expertise in the development
and integration of their underlying I/T
infrastructure including inventory forecasting and replenishment, POS, ERP,
EDI, supplier collaboration methodologies, logistics, distribution, transportation management, supply chain visibility
and supply chain financial integration.
CHRISTOPHER D. NOREK, Ph.D., is a
founding Senior Partner with Chain
8
LQ ™
February/March 2008
Connectors, Inc., an Atlanta-based supply chain consulting firm specializing in
strategy, operations, technology, training and SMB supply chain transformation. He has been in the logistics field for
over 20 years both in industry, with
Accenture, Kimberly-Clark, Apple Computer and CSC, and in academia, as a
professor at both Auburn University and
the University of Tennessee. Dr. Norek
has consulted for large firms including
Lowe’s, SAP, Amazon.com, Accenture,
Office Depot, Schneider National,
Cingular Wireless, The Sports Authority
and Party City. He also does focused
work with SMB companies including
Malt-O-Meal, Chatsworth Products and
ADCO Products. He has been active in
publishing for journals in the field and in
professional associations, including
CSCMP and NASSTRAC, where he is
Education Chair. Dr. Norek holds supply
chain/logistics degrees from Penn State,
Tennessee and Ohio State.
JEFF PARKER has well over three decades
of experience in marine transport and
intermodal logistics, most of it with
Hamburg Süd. He joined the company’s
North American division, Columbus
Line, in 1976 as a terminal manager in
Philadelphia, and since then has held
positions of increasing responsibility
with the company, today serving as Vice
President, Customer Service for
Hamburg Süd Region North America.
SCOTT PICHETTE is Line Manager
Canada, Montship Inc., as an agent for
Hamburg Süd. Scott has been with
Montship Inc. for the past 14 years, originally starting with Montship in Montreal,
and he now resides in Toronto. He is
President of the Toronto Steamship
Association and has been active with the
association since 1998. Scott is fully
responsible for all aspects, both sales
and operations, for Hamburg Süd
Canada since 2000.
MICHAEL REGAN is CEO and Chairman
of the Board, TranzAct Technologies, Inc.,
a company he co-founded in 1984.
TranzAct Technologies provides logistics
decision support technology and expertise that enables companies to lower their
transportation costs and generate signif-
icant savings through sound logistics
solutions. Mike serves as Chairman of
the American Society of Transportation
and Logistics and on the boards of
numerous industry groups. He is the
Chairman of the Advocacy Committee
for NASSTRAC.
KURT RITCEY, Partner, Deloitte, is a
management consultant who specializes
in improving supply chain operations for
clients in many industries, including
manufacturing, consumer business and
energy. He has directed improvement
projects throughout the supply chain,
including strategic sourcing, e-procurement, demand management, inventory
management, distribution and warehouse operations. In addition to work in
Canada and the U.S., Kurt has worked in
Hong Kong, Germany and Mexico. He
holds a B.Sc. (Hons.) in Civil Engineering
from Queen’s University and an M.B.A.
from the Ivey Business School at the
University of Western Ontario.
ROBERT SHAUNNESSEY has been
Executive Director of the Warehousing
Education and Research Council
(WERC) since 2003 and has worked in
the distribution industry for more than
30 years. He was a founder and partner
of third party logistics provider Sterling
Logistics Corporation. Earlier in his
career, he served as President and CEO
of Records Management Services and
President of Midwest Distribution for
ITEL-GATX Administration for DSC
Logistics.
GREGORY L. WERNER, President and
Chief Executive Officer, was elected a
Director of Werner in 1994. He was a Vice
President of the company from 1984 to
March 1996 and was Treasurer from 1982
until 1986. He was promoted to Executive
Vice President in March 1996 and
became President in April 1997. Mr.
Werner has directed revenue equipment
maintenance for the Company and its
predecessor since 1981. He assumed
responsibility for the company’s management information systems in 1993,
and also assumed the duties of Chief
Operating Officer in 1999. He was
named Chief Executive Officer of the
company on February 8, 2007.
Trans-border Trade:
A New Era
of Security
Despite a stellar history
of corporate compliance
with border protection
programs, a company and
the livelihoods of hundreds
of hardworking people
could have been easily
derailed by the wrong turn
of one, purportedly trustworthy, driver. Here’s a
firsthand account on the
value of building resiliency
into your supply chain in
the most extraordinary of
circumstances.
by Jim Davidson
10
LQ ™
February/March 2008
E
ver since that fateful day of 9/11 everyone is acutely
aware of the paramount need for increased security to
monitor trans-border trade. Granted not every logistics
company wants to deal with the escalating risks and responsibilities of trans-border trade. Consequently trans-border shipping has become a logistics specialty executed by only the
most patient, skilful, knowledgeable and compliant of transportation companies.
The business of trans-border transportation is not for sissies.
It’s a risky and expensive business with serious ramifications.
The story I’m about to tell reveals just how serious.
In writing about trans-border trade I am referring, of course,
to the border between Canada and the United States.The incident I describe took place at the Ambassador Bridge in
Windsor,North America’s most travelled gateway of commerce.
But first some background information that sets the scene.
The Canadian and U.S. governments are justifiably preoccupied with border security. Programs have been developed to
expedite the process by which legitimate carriers can cross the
border with relative ease. In Canada Partners in Protection
(PIP) is a goodwill agreement between private enterprise and
the government via the Canada Border Services Agency
(CBSA) designed to enhance border security, combat organized crime and terrorism,increase awareness of customs compliance issues and help detect and prevent contraband smuggling.By signing a Memorandum of Understanding a company
commits to working with the CBSA to achieve these security
objectives. The resulting benefits for the company include
improved security procedures, better familiarity with customs
requirements and faster processing for border crossings by
both freight and people.In the United States the corresponding
program is entitled Customs Trade Partnership Against
Terrorism (C-TPAT) and functions much the same by strengthening overall supply chain and border security.
Over and above these home grown programs is Free and
Secure Trade (FAST) a bilateral initiative between Canada and
the United States designed to maximize security and safety.The
economic prosperity of both countries is safe guarded through
the use of common risk-management principles and security
measures and advanced technology to improve screening and
clearing of commercial traffic across the border. Choosing to
work with government in these ways enhances corporate reputation and credibility by actively demonstrating commitment
to a secure trans-border supply chain.
In order to achieve a FAST designation, a Canadian carrier
must first participate in the PIP program.However,participation
in PIP does not guarantee a FAST designation.
FAST is an ambitious and far-reaching program that will
make or break a carrier’s ability to participate in trans-border
trade. Earning a FAST designation gets you across the border
more quickly and efficiently. Make one mistake, one error in
judgement that threatens your designation and you’ll find yourself at the end of a very long line-up trying to make up for lost
time,lost revenues and damaged reputations — not to mention
the threat of homeland security preventing future entry into
the United States.
Now that I have given you the alphabet soup of security programs that make trans-border trade possible, let me tell you
what happened when a FAST designation was temporarily lost.
Like most aspects of the transportation industry,a secure run
across the border depends very much on the virtues of the
driver.Often more attention is paid to the driver (and the company he represents) than the contents of his trailer — a reality
that strikes at the heart of what recently took place.
Consider for a moment what happens when a supposedly
trustworthy driver takes a very wrong turn.Someone who is rigorously screened by both Canadian and U.S.governments and
by his employer, is well-trained and believed to be a law-abiding citizen,suddenly steals the company rig to transport illegal
drugs across the border. Naturally he gets caught.
This is definitely a bad news story but what makes it so gutwrenching is the fallout.This guy getting caught and jailed was
only the beginning.
As a direct result of this one man’s criminal action the carrier (a multi-national logistics company and a major participant
in trans-border trade) immediately lost its FAST designation.
The carrier in this case is presumed to be guilty or non-compliant until proven otherwise.There is also no separation between
the driver and the company, all are presumed to be non-compliant. Remember that long line-up I mentioned earlier? Well,
this company with all of its efficiency and excellent reputation
was now at the back of the line. Consequently all of their drivers,trailers and payloads were held at the Windsor/Detroit border. One of the shipments held just happened to be destined
for General Motors. When GM didn’t get the parts shipment
from Canada that they needed, their manufacturing facilities
were forced to temporarily shut down. Needless to say just-intime production scheduling leaves no room for the penalties
of criminal activity by one rogue driver.
The consequences for all concerned were immediate,
expensive and fraught with lawsuits.Unwilling to risk any costly delays in the future, GM took their shipping business elsewhere.The carrier,in addition to losing millions in revenue,has
to date spend over $60,000 in legal fees to regain their FAST
designation, with lawsuits against the owner/operator and his
driver still before the courts.
The moral of the story? Participation in trans-border trade is
a hard-earned privilege that is not to be taken for granted. Of
course you can never predict criminal intent or actions on the
part of a driver, but when it happens, act swiftly and decisively
to counteract the wrongful behavior. You’ve got a corporate
reputation to protect. Not to mention the partnerships with
government agencies and a commitment to trans-border
security to uphold.
Thankfully this particular incident didn’t put anyone out of
business but it certainly could have. Respecting the commitment to border security was,and is,paramount for all involved.
Again, one man’s actions could have derailed the careers and
livelihoods of hundreds of honest,committed,compliant,hardworking people who got caught up in the calamity of his poor
judgement.If not for the prompt and determined actions of the
carrier to clear their name, this could have been one painful,
far-reaching disaster.
By the way,in case you are wondering how I know so much
about this particular case then let me confess. We were the
carrier.
LQ ™
February/March 2008
11
AN INTERVIEW WITH
Keith Matthews
Executive Vice President and
Co-Chairman,Kelron Logistics
Geoff Bennett
President, Kelron Logistics
In this interview*, a compelling case is made for developing collaborative relationships with clients who share a culture that focuses on innovation and opportunities for growth in niche areas of the supply chain.
LQ: How do you structure your
operation’s supply chain in
order to deliver the flexibility
your customers need? E.g.
Equipment availability, driver
scheduling, intermodal coordination. (Kurt Ritcey)
Keith Matthews: Some companies may not be focusing their
sales efforts on their most profitable areas. Instead, they may be placing
a priority on investing and developing a market for future profits. In this
case, cost and immediate ROI are not as important criteria for the business. In any case, you should be able to readily identify what your transportation and supply chain costs to develop a better business and have a
clear understanding of the client’s criteria and benchmarks for success,
and customize our service based on these factors.
For example, our company works with a mid-size client in the beverage business. They work with outside bottlers that also supply bottles to
large and mid-sized companies. Typically, this client maintains a few days
of inventory of bottles to produce several lines of their soft-drink product. They don’t want a large inventory of bottles and labels. The objective
is to have their supplier deliver bottles as they’re required for production. On the other hand, they do not want to diminish their production if
these bottles are unavailable.
After all, if this they do not have bottles requisite for their production
it often means they must produce their product at another location in
Canada and ship it the country from another of their other bottling inventory locations in order to meet demand. On a truckload of beverage it is
a profitable business. However, in this circumstance, where the company moves a truckload of product from Vancouver to Toronto to distribute
this to the Northeast United States, it hurts the bottom-line. This may
have happened because the delivery of glass bottles from Indiana or
another location wasn’t properly coordinated. This example highlights
the value of flexibility and resiliency in the supply chain. Every level of
manufacturing, irrespective of whether it’s a highly sophisticated
Fortune 500 company or a small firm, should have a full mix of visibility
requirements met and a reaction protocol prescribed in order to cover
all the bases. Looking at all of the elements in the supply chain enables
you to incorporate flexibility and resiliency.
LQ: What are the characteristics of your most successful customer
relationships - successful as defined by both your customer and your
business? (Kurt Ritcey)
Keith Matthews: There are several primary elements at the heart of
our most successful customer relationships. The key ingredient for success is a willingness on the part of the customer to be open and share
information to enable us to provide a solution that is effective. Trust and
12
LQ ™
February/March 2008
respect – and their acceptance of a third party provider – these are very
important ingredients.
This is particularly important in regard to our strategic supply chain
solutions, which go well beyond a sales-customer relationship. In these
cases, our mutual success is predicated on more than a sales professional-customer relationship. Nor do we limit our business relationship
in these instances exclusively to an operational relationship.
Communication at multiple levels of an organization is essential in order
to work out solutions and tackle concerns in the context of more complex and deeper business relationships. It’s vital that we understand the
shipper’s business and we are engaged in an ongoing dialogue that
addresses the customer’s evolving requirements.
Geoff Bennett: We also have definitions for different types of client
relationships. For example, a Montreal-based client has recently indicated they are interested in working under the auspices of a traditional oneto-one relationship whereby one person at our company works with one
person at their company to cover all their requirements.
This stands in contrast to an extended relationship, which is a one-tomany environment, with one principal at our firm communicating with
many at the client firm. It’s a strategic and integrated relationship with
synergies and multiple touch points. Defining the different types of
available relationships helps our people know how we want our firm to
interact with other organizations.
Keith Matthews: Another essential element for success is our
firm’s primary contact, who interacts with the client’s primary contact.
They must have a comprehensive understanding of the business and be
very consultative in sales. They aren’t a finance professional, but they
must understand the fundamentals of best practices in payment and
invoicing processes, as well as be well informed on the complexities of
the IT interface, for example. In summary, they must possess a generalist’s skill set.
In strategic business relationships we may also have a person working at the client’s organization in order to better understand and serve a
client’s business. However, it’s very important that this knowledge isn’t
lost in the translation back to our organization. This information must be
effectively distributed amongst all of the people who are assigned to the
solutions providing team who need to be involved in decisions to contribute to the client’s business.
Geoff Bennett: I would like to emphasize, this is how you develop a
great team. We focus on having the right mix of people functioning in this
kind of a team environment.
LQ: How do you hire and retain the best people?
Keith Matthews: When you’re looking for seasoned people you must
be very diligent in assessing their competencies in all of the required
areas. Generally, we work with other companies to hire senior-level people from outside.
Internally, however, our firm tests for aptitude, and we evaluate
skill-set orientation in various roles to help assess candidates for position and develop a predictor that shows whether this person fits the
profile we’ve developed. We have established a high success rate using
this process. A candidate may have a proven track record that suggests
a higher likelihood of success, but we are reluctant, particularly in
regard to sales people, to hire sales people professionals who have
done the circuit.
LQ: Gentlemen, thank you for sharing your insights on creating
resiliency, flexibility and successful business relationships and sustainable business advantages for your customers.
*This is the second part of a two-part series of articles; the first part of this
Executive Interview was published in the previous edition of LQ. Members of
LQ’s Board have developed questions for this interview.
ATA CORNER
The National Infrastructure Commission:
America Must Invest Heavily in Its
Transportation Infrastructure
Even though an estimated 82 percent of American cities and towns receive their goods exclusively
by truck, current revenue streams are failing to keep pace with infrastructure requirements.
What’s next for the world’s pre-eminent transportation and infrastructure network?
By Bill Graves
To measure the American public’s
paradoxical interest in the importance
of infrastructure to daily life, one need
look no further than the reaction to two
recent events: the Minneapolis bridge
collapse and the recommendations of
the National Infrastructure Commission.
The first showed the vulnerability of our
infrastructure and the public’s demand
that our highways, bridges and tunnels
be safe.The second, with its recommendation for an increase in the fuel tax,
showed the public’s reluctance to actually pay to maintain those same highways,
bridges and tunnels.
The Commission’s recommendation
to increase the fuel tax clearly struck a
nerve with American taxpayers, who are
reeling from the unprecedented run-up
in fuel prices over the past year.As one of
the largest payers of federal and state
fuel taxes — $23 billion annually — the
trucking industry knows all too well the
impact of any additional fuel costs on
the bottom line.
But we cannot escape the stark reality
facing our nation:We have neglected our
infrastructure for far too long and the bill
is coming due.
Americans must not take for granted
the reality that our quality of life is
dependant upon the systematic movement of freight on a safe and reliable
network of roads and highways, as
demonstrated by the fact that a full 82
percent of American cities and towns
receive their goods exclusively by truck.
Accordingly, the trucking industry is
acutely aware of the critical need to
maintain the world’s pre-eminent transLogisticsQuarterly.com
portation and infrastructure network.
Critics attacked the
increase in the fuel tax,
instead coming out in
favor of tolling increases
and privatization. But neither is a more effective
solution than the one that
has been in place since
the inception of the interstate highway system.
Upon closer examination, it is apparent that fuel taxes are the most efficient
and equitable method to raise dedicated
highway funds. In essence, fuel taxes are
the ultimate user fee or pay-as-you-go
approach, which is why they have been
used for so many decades to build our
existing infrastructure.
Moreover, the substitution of fuel
taxes with schemes such as the privatization and tolling of existing highway
infrastructure, congestion pricing fees,
or toll increases that divert highway revenues away from infrastructure projects, will result in Americans paying a
significantly higher price to access our
highway system while receiving less in
the form of safe, efficient and reliable
roadways.
Considering that the nation’s infrastructure is already paid for with fuel
taxes, adding tolls is simply a way of
adding a new tax.Tolls represent a double taxation on motorists – one that
incentivizes drivers to use roads often
ill-equipped to handle such large traffic
flows.And ultimately the public will pay
the price to repair these roads and
bridges damaged as a
result of that diversion.
Furthermore,a full 30
percent of the revenues
from tolls typically are
spent simply to administer the toll.Administering a fuel tax by comparison, costs between
just 1 and 2 percent of
the revenues collected.
That translates into
more money dedicated to addressing
critical needs,and less going to fund government bureaucracy.
As recognized by the Commission,
America needs to invest heavily in its
transportation infrastructure to ease congestion, alleviate bottlenecks and repair
the existing infrastructure. Fixing the
problem is, without question, a significant financial undertaking.
But current revenue streams are failing to keep pace with infrastructure
needs. If the tragic bridge collapse in
Minnesota last year taught us anything,
it’s that ignoring the overwhelming need
can have catastrophic results. The bottom line is that we need an equitable
solution and we need it now.This means
increased investment coupled with systematic reforms of the way funds are
allocated.
Citizens and businesses alike will
need to pay their share to restore our
aging infrastructure. For its part, the
freight transportation industry is willing
to do just that, provided funds are allocated to meet the needs of the freight
transportation industry.
LQ ™
February/March 2008
13
EDITORIAL
A Heads-Up for Supply Chain Managers
It is important that supply chain managers become more aware of the implications of political initiatives
on supply chain organizations. Industry players need to become more visible and active in policy creation
forums and reviews so that industry expertise can be used to make sure that public policy, regulations and
legislation don’t result in unintended supply chain consequences.
By David J. Closs
S
upply chain and logistics managers have
been able to operate in
a relatively insulated environment over the past three
decades.Sure,transportation
providers had to be concerned about regulation, but
economic regulation has
largely gone away. On the
safety and environmental
side, however, there continues to be increased regulation in hours of service,
emissions,hazardous material, security and delivery limitations. While these issues
can have a significant operational impact, most transusers
and
portation
providers are experienced
enough to keep an eye on
legislation and regulations
that may impact them.
Over the past three
months, I have had the
opportunity to observe, however, the evolution of public policy that
could have a much broader and pervasive impact on supply chain management.The two items of particular interest
are a federal proposal to implement a
card-check system for unionization and
the imposition by states of use taxes on
supply chain services. Use taxes are
essentially sales taxes on services.
The card-check system is a bill currently passed by the United States House
of Representatives (H.R. 800, 110th
Congress) and passed to the Senate, that
14
LQ ™
February/March 2008
would authorize the creation of a union
at a worksite after valid signatures of
more than 50 percent of the eligible
workers have been obtained. Under the
current labor relations laws,even if more
than 50 percent sign initially,the employer has the right to require a secret ballot
election.If during that secret ballot more
than 50 percent of the workers vote in
support of the union,the union becomes
the authorized negotiator for the firm’s
workforce. If less than 50 percent of the
employees indicate support on the
secret ballot, the unionization effort fails. The cardcheck bill simplifies the
process by removing the
requirement for a secret ballot. Opponents of this bill
believe that the lack of
secrecy may make it easier
for a limited group of union
proponents to strong-arm
their colleagues into signing
for the union. On the other
hand, as supporters of the
bill have pointed out,
research indicates that
employers have used the
time prior to the unionization election to strong-arm
employees prior to the
secret ballot election.
The second public policy
issue of interest is the legislation recently approved by
the Michigan legislature
and signed by the governor
that implements a use tax
on warehousing and logistics services (Michigan House Bill 0093
of 2007).The bill was passed in the middle of the night on October 1, 2007, as a
means to recover some of the tax revenue that was lost due to the expiration
of the Michigan Single Business Tax.The
bill mandated the assessment of a 6 percent use tax—essentially a sales tax on
contract warehousing, transportation
courier services and logistics consulting services. For example, if a contract
warehousing operator provided $1 million in services to Michigan clients or in
shipments from Michigan, the operator
would have to charge clients an additional use tax of $60,000 and remit it to
the state.Effectively,the law results in a 6
percent cost increase for many third
party logistics services and activities
completed in the State of Michigan.The
use tax has significant implications for
firms performing manufacturing and
supply chain activities in the state
because it effectively increases many
variable costs by 6 percent. These
increases could also be pyramided,
because it is a business-to-business
(B2B) tax that multiple levels in the supply chain have to charge.The tax would
likely result in significant job losses for
the state as firms moved these activities
outside the state. Part of the rationale
cited for the use tax by the legislators
was that “other states are beginning to
tax warehousing and transportation
services so it appeared to be a trend.”
Specifically, a survey provided to the legislators indicated that nine states
charged service taxes on transportation
services and six on warehousing services. A more comprehensive review indicated that while some of the states did
tax services, the tax was generally not in
the form of a use tax.This illustrates the
need for expertise in evaluation regarding how specific tax initiatives will
impact services industries.
When the Michigan legislators realized the potential job loss implications
of the use tax, they began to look for
alternatives. As of press time, strong
industry lobbying and some quantitative research completed by Michigan
State University under the sponsorship
of the International Warehouse
Logistics Association has resulted in a
recommendation to replace the use tax
with a surcharge on the revised
Michigan Business Tax. The recommendation has resulted in a bill rescinding
the tax which has been approved by the
Michigan House and Senate but is
awaiting negotiation regarding how the
surcharge is to be operationalized. The
details are currently being finalized.
My observation of and involvement
in this process have highlighted a few
considerations that I would like to relay
to today’s supply chain management
professionals.
First, since job creation and maintenance is a key focus area for politicians,
legislators are taking an active role in
determining what infrastructure, training and tax incentives can be used to
increase district employment. Many
nations,provinces,states and cities have
used tax policy to attract supply chain
activities to their region. Countries such
as Ireland and Singapore and states
such as Kentucky and Tennessee have
successfully demonstrated how these
strategies work.State and provincial legislators in North America are asking
how they can use the same strategies to
enhance their region’s employment.It is
likely that such initiatives will expand. It
is important that supply chain managers become aware of and appropriately involved in such initiatives as they
have significant implications for supply
chain activities.
Second, while legislators are interested in attracting supply chain activities
to improve local employment, it is also
apparent that legislators need help in
understanding the role that supply
chain activities play in the economy.
Specifically, many supply chain activities (i.e., warehousing, transportation
and other value-added services) represent derived demand, meaning that the
demand must be there before the businesses that provide those services will
be successful. For example, establishing
a warehouse or a roadway doesn’t create the demand for supply chain services; the demand is derived from the
demand for goods to be sold or manufactured. Supply chain industry professionals need to be involved in the discussion and interpretation of policy initiatives regarding what will drive the
demand for supply chain services.
While supply chain managers are very
familiar with this concept of derived
demand, legislators and policy analysts
typically are not.Simply enhancing supply chain infrastructure or changing tax
policy on supply chain activities does
not guarantee job expansion.
Third, the shift from a manufacturing
to a services economy is driving the
need to identify new revenue sources
for the provinces and states. In the past,
the majority of provincial and state
taxes have resulted from the relatively
high wages related to manufacturing.
With increased offshoring of manufacturing jobs, legislators are seeing an
increased need to either decrease government services or develop other
sources of revenue. Because decreasing
government services is not a popular
political strategy, legislators are beginning to consider taxing services. Since
over 70 percent of North American jobs
now are in the service economy, such
taxes have an obvious attraction. It is
important that policy makers understand the impact of service taxes,particularly for B2B environments.
Given these considerations, my suggestions are two-fold. First, it is important
that supply chain managers become
more aware of the implications of political initiatives on supply chain organizations. In the past, relationships with government have been the responsibility of
government affairs or lobbying representatives. While these individuals are still
very important, the changes in legislation and/or tax laws are often so
nuanced that it requires substantial
expertise to determine the implications
for the firm. In Michigan, the supply
chain industry was very surprised when
the proposed use tax showed up in legislation to recover revenue lost from the
Single Business Tax. Second, and probably more important,I suggest that supply
chain professionals become more
proactive regarding the initiation,design,
and refinement of public policy regarding supply chain infrastructure,
resources and constraints. This includes
becoming more visible and active in policy creation forums and reviews. While
the legislators and their policy analysts
ultimately draft the legislation, supply
chain professionals can assist by offering
insight regarding the operational
nuances and implications. Legislators
are looking for more expertise and
insight to provide perspective and thus
a more balanced political process.
Since supply chains don’t have a vote
and are not very visible to the typical
voter, it is increasingly important that
industry expertise be used by policy
developers and legislators to make sure
that public policy, regulations and legislation don’t result in unintended supply
chain consequences.
LQ ™
February/March 2008
15
NASSTRAC CORNER
U.S. Hours of Service (HOS) Follow-Up
The January 23, 2008 court order means we can all focus on the issues before
FMCSA without the disruption of interim changes in the HOS rules.
By John Cutler and Mike Regan
THE NASSTRAC CORNER article appearing in the last issue of LQ included critical statements about the U.S. Federal
Motor Carrier Safety Administration’s
(FMCSA) delays in addressing the implications of the appellate court decision
striking down FMCSA’s 2005 Hours of
Service (HOS) rules. In retrospect, the
agency’s deliberate approach to assessing its next steps to this long-running
issue paid off, and carriers and shippers
appear to have dodged a bullet.
Before discussing the latest news,
we’ll note some key prior events (reflecting our policy perspectives):
• 2000: FMCSA proposes terrible HOS
rules, which safety advocates like.
• 2003: FMCSA adopts decent HOS
rules, which safety advocates challenge
in court.
• 2004: Court vacates 2003 rules, finding FMCSA’s discussion of driver health
inadequate.
• 2005: FMCSA adopts essentially the
same HOS rules it adopted in 2003, supported by additional evidence and
analysis addressing court concerns.
Safety advocates file new court challenge.
• 2007: In July, the court again rejects
rules, vacating the provision allowing
11th hour of driving time and the provision allowing duty clocks to restart after
34 consecutive hours off duty.
After the court’s July 2007 decision, it
was obvious that the FMCSA would have
to conduct further proceedings. However, what rules would apply while those
proceedings were going on?
As discussed in the November
NASSTRAC Corner,the FMCSA,the trucking industry and shipper groups sought
and obtained (over the safety advocates’
objections) a stay of the 2007 court decision keeping the 11 and 34 hour rules for
16
LQ ™
February/March 2008
now, but the stay was set to expire on
December 27, 2007, setting up the possibility of reduced hours of service on
December 28. To head this off, FMCSA
issued an Interim Final Rule in midDecember,under which the current HOS
rules will continue in effect until the
agency completes the next phase of its
rulemaking proceeding, which it has
pledged to do by the end of 2008.
A court challenge was issued by
Public Citizen and other groups including the Teamsters Union,but the FMCSA,
ATA and a group of shipper intervenors
led by NASSTRAC urged the appellate
court to deny the safety advocates’
motion. Fortunately, the court did deny
the motion in an order issued January
23, 2008. The FMCSA deserves credit for
this win as a result of the agency’s thorough and careful explanation for its
Interim Rule.
In a nutshell, FMCSA explained that
inaction was not an option, because all
prior HOS rules had been rescinded.
Therefore, absent an interim rule there
would be no federal HOS rules, an outcome even safety advocates would presumably oppose. In addition, highway
safety has improved while the current
rules have been in effect.
FMCSA also explained that evidence
favors the current rules, and that implementing changes involves extensive revisions to existing practices by state governments (possibly requiring state legislative action),law enforcement personnel, trucking companies and drivers,
among others. Shipper logistics and supply chain procedures would also require
modification to account for shorter drivers’ hours. Implementing all of these
changes would be likely to take at least
as long as the next phase of the FMCSA
rulemaking.
The safety advocates did not help
their cause when they said they wanted
FMCSA to adopt a maximum driving
time of 10 hours per duty shift and a
longer restart (possibly 60 or 70 hours).
Public Citizen and its allies could still
seek legislation modifying the current
HOS rules, and at least one powerful
senator may be sympathetic. Senator
Frank Lautenberg (D-NJ), Chairman of
the Surface Transportation Subcommittee of the Senate Commerce Committee, has already held a hearing at which
he criticized FMCSA’s interim HOS
rules. However, Congress has many
other priorities and 2008 is an election
year, reducing the likelihood of action
on HOS issues.
The January 23, 2008 court order
means we can all focus on the issues
before FMCSA without the disruption of
interim changes in the HOS rules.
Comments are due February 15, 2008
and NASSTRAC will be filing comments
supporting continued application of the
current HOS rules, which should remain
in effect for at least two years, and possibly longer.
Safety advocates may also continue to
push for reduced driver hours of service
through legislation, if Democrats
increase their Congressional majority in
this year’s elections, and through administrative action, if the next President is a
Democrat who appoints a new head of
FMCSA with a different position on these
issues. Of course, Hours of Service rules
are only one of many components of the
current legal and regulatory landscape
for transportation, logistics and supply
chain management that could change
dramatically depending on the outcome
of this year’s U.S. elections. We will keep
you posted in future columns and please
contact us with any questions.
MARINE QUARTERLY IS A SPECIAL FEATURE OF LQ, OFFERING
IDEAS FOR LEADERSHIP IN LOGISTICS AND TRANSPORTATION
Toronto
Steamship
Association
50th Anniversary
Special
Executive interviews featured with:
T O R O N T O S T E A M S H I P A S S O C I AT I O N E X E C U T I V E I N T E R V I E W S E R I E S
The Toronto Steamship Association
Celebrates Its 50th Anniversary Gala
Dinner “Steamship Night”
A conversation with Scott Pichette,
President, Toronto Steamship Association,
and Line Manager Canada, Montship Inc.,
as agents for Hamburg Süd.
LQ: Who was the original president of the Toronto
Steamship Association at the time of its inception?
Scott Pichette: Brian McDonald, Executive Vice
President, Montship Inc., started the Toronto
Steamship Association (TSA) in 1994 as its founding president. He had initiated an invitation to those executives whose businesses were from the steamship side of the
business, at a time when our group existed informally as an
industry sector within the Toronto Transportation Club (TTC).
Brian and several steamship executives within the TTC who
had participated on that club’s steamship committees, decided that it would be a good idea if the steamship lines ran their
own events to afford a greater opportunity for these events to
be more focused on the steamship side of the business.
In fact,the TSA’s 50th anniversary dinner this year commemorates the first dinner 50 years ago — which then was the
TTC’s Steamship Night Gala dinner.It is important for us to recognize at this juncture the Toronto Transportation Club, which
was founded in 1913.After all,this 50th anniversary dinner has
had everything to do with the TTC and their original
Steamship Night event. Of the 50 years we’ve been meeting,
we’ve enjoyed some 35 of those years associated with the TTC
and their Steamship Night.
However, at the time of the TSA’s founding, the
Transportation Club was more closely affiliated with the rail,
truck and other interests in the business.The founding of the
TSA allowed the steamship oriented companies and the liner
services to represent themselves and have a greater voice in
an association. Under Brian’s stewardship, the TSA was established, with the leadership of others in the field, such as Hugh
McMaster (1996 TSA President),Jim Surphlis (1997 President),
Ron Wilford (1998 President) and Ron Bannon (1998
President), as well as several other gentleman who participated in the TSA’s first meeting in 1993.
We’ve since established other events, which have become
something of a tradition, such as the annual Golf Tournament
held at Cedar Brae Golf and Country Club,which is exclusive to
the TSA. The establishment of an executive committee and a
president,which is the customary model of governance we have
maintained, has also helped to chart the TSA’s path as an effective organization that provides good value for its membership.
18
LQ ™
February/March 2008
LQ: Where was the first TSA Steamship Night
held?
Scott Pichette: The first Steamship Night was
held at the Royal York in downtown Toronto,
which is where this year’s annual dinner was held.
This has been the primary venue for the TSA most
of the years since its founding in 1993.
LQ: How many members attended the first TSA
dinner in 1993?
Scott Pichette: Today, the TSA has approximately
43 members and associate members and we are fortunate to
have as many as 850 to 1,000 people attending our Annual
Steamship Night. We must highlight an important distinction
between the TTC and the TSA; the transportation club has individual members, which means the executives and employees
of each and every company. The TSA, however, considers the
company that’s represented as one member,even if that membership includes many employees from that company.We also
started an associate membership several years ago, which
allows non-steamship companies to join the association as
associates. Canadian Tire, which was one of our first companies to join as an associate member, is a good example of this
type of membership. We also have companies like Dimerco
Express (Canada) Corp., Hunt Refrigeration Canada Inc. and
Gusco Transport LP.
An associate membership gives these organizations access
to the TSA newsletter and it enables them to participate in
annual events, as well as keeping them in touch with the association and current events in our industry. We are looking at
expanding our associate memberships further in the years to
come.
The only comparable organization in Canada would be the
Montreal Traffic Club and the Grunt Club, which is equivalent
in many ways to the TSA; these are the two major associations
or clubs in Montreal. I was involved with the Traffic Club in
Montreal and it is similar in the way it’s run, the way the executive works, and the way the different committees function.
Clearly, there is a close parallel to what they do in Montreal
and our work in Toronto.
Fundamentally,these associations and the TSA have a tradition of being a fraternity that allows the membership — the
key members of the TSA — to get together to plan events that
unite them.These events really help to unite the liner services
and the steamship community.In today’s world,few of us have
free time or time to get together other than taking care of our
families and working on our respective businesses, and the
TSA enables us to get together several times a year.The constitution of the TSA, and its bylaws are similar but distinct from
the TTC’s:“The purpose of this association shall be to increase
the knowledge and education of its members in the transportation field and the advancement of personal acquaintance and good fellowship among members and the trade.”
The TSA’s Steamship Night, which is its most successful
event with the most participation, has up to a thousand people who come to enjoy this evening. We’ve also created, for
example, the Gerald J. Laurendeau Memorial Bursary, which
was set up in the early 1990s for the children or relatives of
people who are members of TSA as a bursary to assist students who have shown the interest and ability to pursue a university education.The bursary is awarded through a competitive process based on a specific set of criteria.(In 2007,Nicole
Marie Surphlis, Stacey Janet Feggans and Alana Zamrij were
bursary winners.) In 2008, we are very proud to have established a full four year scholarship valued at $4,000.This scholarship will be awarded over a period of four years to four
lucky winners within our industry.This is all thanks to the generosity of our membership and their full support of the
Toronto Steamship Association.
The TSA also has a tradition of being a strong supporter of
Father David Mulholland,who oversees the Toronto Mission to
Seafarers Centre, located at the Toronto Port, offering an estimated 4,000 seamen a place to unwind after work. We have
also been discussing support for additional causes — such as
breast cancer research and prevention, and the Canadian
Cancer Society. We have already dedicated a considerable
amount of time to examining new ways to garner financial
contributions for these causes and we will continue to work
on this.
LQ: What is the biggest change that you would identify over
the past 50 years?
Scott Pichette: I’ve only been in this industry for 14 years.
However, there’s no question in my mind that the most dominant forces in the industry today would be the incredible
trade to and from Asia and the north Atlantic, which includes
Europe and the United Kingdom.These two markets definite-
ly dominate our side of the industry. In Canada, for example,
the intermodal congestion at the Port of Vancouver has been
a key factor for our industry in the last couple of years.
Generally,however,the overall convergence of congestion and
the need for developments in infrastructure, particularly intermodal, continues to impact all of our trades. Not surprisingly,
since 9/11,our world has also been transformed with regard to
security, customs, inspections, and delays due to these new
processes.
LQ: What’s your vision regarding future initiatives for the
TSA?
Scott Pichette: Education.There are many associations, such
as the Canadian International Freight Forwarders Association
(CIFFA), who have excellent education programs developed
within their associations. Another excellent example in our
field is the Shipping Federation of Montreal, which works in
liaison with Montreal-based Concordia University, and provides a course that ties into the steamship association and
shipping,liner shipping,ocean shipping.We would need more
resources to develop additional initiatives in regard to education for our field. As a result we will continue to focus our
efforts on providing our membership with a scholarship fund
that will assist young people with additional resources they
require to help them succeed in their postsecondary education. However, we continue to hold day courses, focused on
geographical programs within our industry. We had approximately 30 to 40 participants attend a one-day session recently.
Another recent initiative was a one-day trip to CN Rail, really
to allow the general population, the people that are behind
the desks,to get out and appreciate first hand how a rail terminal works. We’re looking at a similar one-day program for a
Canadian port.In the years to come,our scholarship fund and
our work with charities will be the key focus for the TSA.
LQ: Thank you for taking time at this important milestone
for the TSA to share your thoughts on the founding of TSA and
your vision for its future.
Questions for this interview have been prepared by LQ’s
Maritime Executive Editor, Ed Kearns.
It’s not just a statement,
it’s a question. Doesn’t it make sense
to locate where you can avoid congested highways
and crowded population centres?
Get your goods to market faster using our hassle-free road, rail and water
connections to and from Ontario’s fastest growing commercial and industrial heartland.
Enjoy a lifestyle centred on one of Canada’s greatest natural harbours. It all adds up to a great opportunity.
In Hamilton. It’s all right here.
605 James Street North Hamilton, Ontario, Canada L8L 1K1
www.hamiltonport.ca
LQ ™
February/March 2008
19
A Conversation with Wim A. Lagaay,
Senior Vice President, Maersk Inc.
LQ: When you look at the rise of the Canadian
and U.S. dollar in 2007, how has this impacted
charter rates?
Wim Lagaay: We do not see any direct impact
on charter rates. However, since most, if not all,
of the charter fee is paid in the U.S. dollar, vessel operators with Canadian dollars in hand
may benefit from the better exchange rate
thanks to the appreciation of the Canadian dollar.
LQ: How have circumstances in the Middle East impacted
vessel costs?
Wim Lagaay: The circumstances in the Middle East have
impacted oil prices, eventually transferring to higher bunker
costs for vessel operators.
LQ: With respect to drayage — is the shortage of truck drivers affecting your business and that of others in the industry?
Wim Lagaay: In general, a shortage of truck drivers has not
been the case this year due to lower than expected industry
volumes, but long term supply shortages remain a concern.
LQ: In terms of the railways, is there a capacity problem,
and what is its impact?
Wim Lagaay: Similar to the above, there has been no rail
capacity problem this year due to lower than expected industry volumes, but long term capacity shortages remain a concern. This can impact price, route choice and the mode of
transport selected.
LQ: Can you tell me a little more about the impact of rising
fuel costs.
Wim Lagaay: For the container shipping industry, variability
or volatility in the bunker fuel price is at record high levels.
The current container shipping contracting model prevents
carriers from being fully compensated for the fuel cost
increases. Since bunker fuel prices cannot be accurately predicted over the duration of most contracts, carriers are essentially accepting all of the risk for potential fuel pricing
increases. While all cost items have increased, bunker has
increased the most. As a result, bunker costs — as a share of
network costs — have doubled in the last few years. Rising
fuel costs have greatly impacted carriers’ ability to make profit; however, with higher fuel costs, pressure to use the most
efficient mode of transport in order to reduce exposure to
costs place shipping ahead of rail, trucking and air transport.
LQ: What are your forecasts for trends for 2008 and as far
as 2010?
Wim Lagaay: For 2008,it is projected that import volume will
remain flat, while export volume will demonstrate continued
20
LQ ™
February/March 2008
growth. Import volume is expected to gain
momentum from 2009 and return to a normal
rate of growth by 2010. Barring any drastic appreciation of the U.S. dollar, export volume is project
to be strong through 2010.
LQ: Do you see a weakening or strengthening
of the charter market?
Wim Lagaay: The short-term outlook for the
charter market remains positive. In the medium term, upward
pressure on charter rates may continue if the market fundamentals remain positive.Sentiment in the market remains at a
very high level and this should support the upward tendency
in the short term at the very least.
LQ: With the pullback of Maersk service from Halifax,
would there be an interest by Maersk in a feeder service from
the Atlantic Canada area, without the benefit of rates and
service of the feeder? In that case,what load port would be of
interest to Maersk — New York, Richmond, Savannah, or
Jacksonville?
Wim Lagaay: At this time, there is no plan for Maersk to offer
feeder service to/from the Atlantic Canada area.
LQ: Which load port has an over-supply of empties returning to overseas destinations?
Wim Lagaay: West coast ports usually have an over-supply of
empties. With the east coast ports, the situation is more
dynamic and seasonal.
LQ: In reference to the CSX intermodal terminal being built
at Buffalo. Would Maersk use this terminal to serve the
Ontario market or does it target the upstate New York and
Ohio area?
Wim Lagaay: This is an issue upon which no decision has
been made.
LQ: Would Maersk look at options other than New York (rail
and truck) inland to service Ontario, Quebec and Atlantic
Canada? The options might be a combination of SSS and
inland truck and/or rail.
Wim Lagaay: It varies from trade lane to trade lane. Maersk
serves eastern Canada by railing cargo via Vancouver for
cargo from Asia. For cargo from Europe, the Middle East,
Africa and the Mediterranean, on the other hand, Maersk
serves the area by moving cargo via Montreal. To/from the
rest of the world, Maersk serves this area by moving cargo
via New York.
Questions for this Executive Interview Series have been prepared
by Ed Kearns, LQ’s Maritime Editor and Advisory Board member.
OUR CONTAINER.
YOUR PRODUCTS.
What you see as simply a container, we see as our commitment to you.
Each container filled with your products represents our commitment to
“deliver the goods” – dependably and reliably. We’re the vital link that
you trust to keep your supply chain moving on time and on schedule –
anywhere in the world.
CREATING OPPORTUNITIES IN GLOBAL COMMERCE.
CONGRATULATIONS TO THE TORONTO STEAMSHIP ASSOCIATION
ON YOUR 50TH ANNIVERSARY!
Conversation with Michael Belmer,
President and Chief Executive Officer, Montship Inc.
Montship, one of the oldest and most
respected shipping agents in Canada, has
made careful succession decisions and
continues to thrive in today’s ever-changing
shipping environment.
LQ: Please provide some introductory notes about
your company.
Michael Belmer: Montship, originally known as
Montreal Shipping, was established in 1925 and is one of the
oldest and most respected shipping agents in Canada.
Originally a family business, the management team at our firm
has changed three times since its founding. Developing a tradition aimed at ensuring good governance,our succession model
has been based on handing the leadership over to the next tier
of middle management,rather than to third or fourth generation
family members,who may not be engaged in the business with
the same level of enthusiasm as their predecessors.
I began working at this company in 1964 in the Treasury
Department, moving steadily up to the position of Vice
President of Sales and Marketing in 1984. In January 1991, five
of us from middle management finalized the purchase of the
company. When Mr. Guy Bouchat passed away in 1996, I succeeded him as President and CEO. My partners complete the
senior management group of this firm: Brent Coulthard in
Vancouver, Brian McDonald in Toronto and Domenic Bravi
here in Montreal. Jim Allan, who is part of the original five that
bought the company, developed and runs Trealmont
Chartering Inc.and Trealmont Logistics (USA) Inc.,with offices
in Montreal,Vancouver, New Orleans and South Carolina.
LQ: Please provide a brief overview on your firm’s operations.
Michael Belmer: Fundamentally, we have been a ship agent
and chartering company for more than 80 years, handling several areas of operation.We are a liner agent for several prestigious carriers, such as Bermuda Container Line, Great White
Fleet, Hamburg Süd, Hoegh Autoliners, MOL and Swire
Shipping.
We also own Trealship Services Inc., a repair company specializing in refrigerated containers and mobile climate control
systems, with offices in Halifax, Montreal, Toronto and
Winnipeg,and Prairie International,a Winnipeg-based trucking
company. Our company has a dozen locations from coast to
coast, from Newfoundland to B.C., with almost 200 employees.
Our head office is in Montreal,with an estimated 15 percent of
its business in this city, and the balance spread across Canada.
A significant area of growth has been our chartering group.
22
LQ ™
February/March 2008
Our liner business has also grown — in a business
environment where many shipping lines have
opened their own offices instead of using agents.
We have been fortunate that the lines we represent have retained our expertise.I believe the best
measure of performance has been our customer
relationships and market share.
LQ: How have circumstances in the Middle
East impacted vessel costs?
Michael Belmer: The biggest impact relates to
fuel prices, which have been affected by the instability in the
fuel supply. That in itself has moved many carriers into loss
position.
LQ: With respect to drayage, is the shortage of truck drivers
affecting your business and that of others in the industry?
Michael Belmer: In our business, most of the costs associated
with trucking are covered by the importer/exporter.We have a
small trucking company in Winnipeg that focuses mostly on
refrigerated containers and uses 35 owner/operators who own
their trucks.The real problem has been with the trucking companies that own their trucks, since they often appear to need
drivers.
LQ: In terms of the railways,is there a capacity problem,and
what is its impact?
Michael Belmer: With regard to the infrastructure, CN and CP
have addressed the capacity issue through using each other’s
rail lines.They have put in more sidings and have made some
other significant investments. It is also noteworthy that Prince
Rupert has been added as a major facility.This does not necessarily help our Canadian shipments, however, since the development of the Port is primarily targeting shipments destined for
Chicago and the U.S. Midwest.
The equipment balance is a major factor impacting railway
capacity.On average,for every three containers that arrive from
the Far East and Europe, two return full, with the third container remaining empty.As a result, we normally have a surplus of
empty containers and we must look into ways of returning
them, but not necessarily on the railways, creating an imbalance of rail equipment.
The biggest infrastructure problem pertains to the terminals, especially in Vancouver. From time to time they become
saturated and, consequently, containers are sitting at that terminal that cannot be loaded onto railcars in a timely manner.
If we continue to increase business at an annual rate of 6–8
percent a year, these terminals will not be able to accommodate this growth. The Delta, B.C., port is developing, but at a
very slow pace.
Continued on page 29
TREALMONT
TRANSPORT INC.
THE TREALMONT
TRANSPORT GROUP
Montship
Trealship Services
Montship Maritime
Prairie International
Trealmont Chartering
Experts In
Logistics &
Transportation
Since 1925
Trealmont Logistics
www.trealmonttransport.ca
Botwood
Halifax
Montreal
Saint John
Stephenville
Toronto
Winnipeg
Vancouver
New Orleans
Greenville
A Conversation with Jeff Parker,
Vice President Customer Service, Hamburg Süd
LQ: How has the rise of the Canadian dollar in
2007 impacted charter rates?
Jeff Parker: Assuming your question refers to
our rates for transport, both maritime and intermodal,the biggest impact has been on the inland
cost segment of our rates. In that area, we are in a
constant effort to achieve full cost recovery — a
real challenge given the volatility of energy costs
and their ripple effect throughout the transportation pipeline.
LQ: With respect to drayage, is the shortage of truck drivers
affecting your business and that of others?
Jeff Parker: I can’t speak for other companies,but we have not
had any significant problems related to shortages of drivers.We
work with carefully selected service providers and our contracts include performance clauses.The changes in contractual
permitting with drivers and truck operators serving the ports of
Vancouver seem to have addressed issues that had resulted in
labor stoppages and service disruptions there in the past.
LQ: In terms of railways, is there a capacity problem and, if
so, what is its impact?
Jeff Parker: We have not seen serious problems with rail
capacity in the U.S. or Canada. The most serious rail bottlenecks have instead been related to seasonal (usually winter)
delays and intermodal service disruptions to the east caused
by heavy snows in the Canadian Rockies. Such delays have, in
some years, led to a backup of cargoes and equipment in
Vancouver and delays in moving cargoes and equipment to
and from customers in western and mid-western Canada and
the U.S. LQ: How have circumstances in the Middle East
impacted vessel costs?
Jeff Parker: That would be in the cost of fuel. LQ: What has
been the impact of rising fuel costs?
Jeff Parker:The skyrocketing cost of fuel is one of the biggest
challenges facing the transportation and distribution industry
as a whole.Clearly,marine transportation represents one of the
world’s most efficient means of goods movement in costs per
ton/mile.Nevertheless,cargo ships do consume large amounts
of fuel on trade routes, many of them thousands of miles in
length, and we must do everything we can to control costs
where possible and at the same time recover this major
expense from our customers (and ultimately the end consumer) through our rates and bunker fuel adjustment charges.
While nobody wants to pay more for services, the surge in
fuel prices is worldwide and highly visible and certainly transparent to our customers who have been understanding of,
while not always happy with,its impact.We try to explain to our
24
LQ ™
February/March 2008
customers as well, that industry mechanisms for
computing these rapidly rising costs mean that we
trail the actual price rises in an up-cycle in terms
of recovering those increases through rates and
adjustments.
As an example,we commonly average our costper-ton for bunker fuel over a two month period to
determine the adjustment factor we need to recover those rising costs, then announce the rate and wait 30-days
before implementing it.As a result,we are regularly 2–3 months
behind in recovering the increased costs from the time they
were actually incurred.The volatility of market prices is a constant challenge in this area.As an example,our average cost-perton for bunker fuel for 2004 was about $180 U.S.In 2007 that figure stood at $369 per ton and in November and December,our
monthly average figure was running very close to $500 per ton.
LQ: Your forecasts for 2008–2010?
Jeff Parker: Right now, we see a generally strong export
growth from the U.S. and Canada over the next roughly 18
months to both Latin America and the south Pacific The weak
U.S. dollar makes products less expensive for overseas buyers
and in the Canadian market the rise in value of their dollar has
had a relatively mild impact on exports and stimulated
imports.Export volume southbound to Latin America has been
strong because of those factors and rates are solid as a result.
There will be a new U.S. administration in a year and it is possible there may be a change in policy on valuation of the dollar.However,that could take another 6–12 months to take effect
after the next election, so it is difficult to predict what might
happen beyond then. LQ: Do you see a weakening or strengthening of the charter market?
Jeff Parker: All signs are that the charter market will remain
strong for the next 18 months or so,at least.However,Hamburg
Süd has, over the past several years, been engaged in an ongoing program to increase the percentage of its owned fleet vs.
charters to better control its costs. Our Latin American Tango
service for example, uses a fleet of six purpose-built companyowned vessels whose common design,speed and flexibility set
new standards of efficiency and schedule frequency and reliability for the service.A similar homogenous fleet now operates
between Europe and East Coast South America with vessels
offering the largest containerized reefer capacity of any ships
in the world.
Questions for this Executive Interview Series have been prepared
by Ed Kearns, LQ’s Maritime Editor and Advisory Board member.
It’s a fine tradition
we’re carrying on.
Linking North America with Latin America, Europe, Asia, Australia/New Zealand and the South Pacific Islands.
For more, visit us at www.hamburgsud.com
No matter what.
AN INTERVIEW WITH
Gregory L. Werner,
Werner Enterprises
Werner Enterprises is a company identified by Richard Armstrong,
Chairman, Armstrong & Associates, as one of North America’s “Top
3PLs” in LQ’s Special Report on 3PLs (vol. 13, no. 5).
LQ: What are the advantages and potential disadvantages of “one-stop logistics,” where the customer
counts on the 3PL to provide a range of integrated
logistics/supply chain solutions? (John Langley Jr.,
Georgia Tech)
Gregory Werner: The advantages of single
source freight management and logistics programs
are numerous. Among the most significant advantages are reduced systems integration, as 3PLs
oftentimes take on the role of integrating with vendors, carriers and
other supply chain partners. Reduced internal administration costs and
personnel related to load planning, mode selection, shipment tendering,
tracing, freight audit and payment and compliance are all advantages to
consolidating supply chain management to a single provider. Freight cost
reductions can be achieved in most cases where the single source
provider has the ability to leverage and integrate other managed freight
into their clients’ network. This creates efficiencies in capacity utilization and volume leverage in certain modes. Drawbacks to a one-stopshop can include selecting a single source provider that cannot grow and
evolve their solutions to match the business changes of their clients.
Simply put, some businesses outgrow their 3PL. Additionally, there is risk
of engaging a 3PL with suspect financial strength that prevents them
from investing and keeping pace on the technology front or reduces their
ability to weather tough financial times in slow freight environments.
LQ: What are the advantages of an “asset-based” 3PL versus a “nonasset” 3PL? (Russ Doak, Kodak)
Gregory Werner: Simply put, the ability to back the design up with
actual implementation and hard asset capacity is what separates assetbacked organizations from a more consultant-based model. In addition,
the design itself is often superior because asset-based organizations
have learned from years of actual freight movement experience and supply chain involvement instead of a more academic or insulated approach,
which results in many theoretical-only approaches.
LQ: What are the characteristics of your most successful customer
relationships — successful as defined by both your customer and your
business? (Kurt Ritcey, Deloitte)
Gregory Werner: The key to having successful customer relationships as a 3PL is ensuring expectations and definitions of success have
been clearly established throughout the sale and implementation of the
project. Equally important is having open, ongoing dialogue around what
issues and barriers exist with both parties and working in concert to
overcome those issues. Finally, a 3PL’s success is ultimately defined by
driving true value to its customers’ bottom line, which will always help
maintain or improve the long-term relationship.
LQ: What are the strengths that distinguish your company? What efforts
have you made to understand your customers’ business. What companies
have you solved problems for your clients. (Russ Doak)
Gregory Werner: Our overriding strength is that we take a unique
view of every customer’s business to provide the best overall solution.
For instance, we were presented with a bid from a large retail company
26
LQ ™
February/March 2008
that showed approximately 6,300 container movements from Asia to the
U.S., originating from multiple points in China going through specific
ports. We could have just priced the business as presented and hope our
price going head-to-head was competitive. Instead, we analyzed the data
and developed a solution, which involved consolidation of loads in China,
moving through different ports. In doing so, we dropped the overall containers needed from approximately 6,300 to approximately 5,033. Simply
working to drive improvements through rate negotiations or lower prices
will not be enough in today’s more competitive landscape. Through the
combinations of quality front-end analysis backed up by assets and the
ability to implement the tactical component, we feel our blended product
is able to better meet our customers’ needs.
LQ: What steps are 3PLs taking to ensure they provide customized
solutions that meet the needs of the customer? (Russ Doak)
Gregory Werner: Successful 3PLs ensure their ability to provide
customized solutions by transitioning more and more of their IT capabilities to proprietary solutions. An additional key element is the
provider network for distribution centers, consolidators and crossdock operations. Having a diverse network of providers in terms of size,
capabilities and geographic locations allows 3PLs to design an optimal
supply chain plan and implement it independent of fixed asset utilization considerations.
LQ: As 3PLs continue to consolidate, will their business focus shift to
targeting larger “Fortune 500” type organizations as opposed to small to
medium sized organizations? My concern is the consolidated 3PLs will
become less flexible in service offerings and less agile. Please address
this issue. (David Faoro, International Group)
Gregory Werner: Because small to midsized organizations often do
not have the buying power of “Fortune 500” companies and do not have
the corporate barriers to change inherent in many large organizations,
they tend to be more open to creative solutions for their network, which
we can provide.
Our philosophy and business model is unique to many logistics companies in that we take a ground-up approach with each customer and spend
more time in our fact finding and implementation phase to insure we build
the right system and solutions for each. We do not try to fit a customer’s
supply chain solution into a pre-designed box; rather we determine their
supply chain needs and build the solution to fit. In doing so, the amount of
on-site work and customer consultation is often greater than some of the
larger logistics integrators are prepared to commit to when working with
the small to midsized target customer.
LQ: Today there is a growing need for specialized knowledge and execution capabilities to adequately support cross-border logistics activities.
Please elaborate on these factors. (John Langley Jr.)
Gregory Werner: Cross-border activity is increasing every year when
compared to the true domestic logistics network. There is a growing
perimeter pressure in the U.S. right now from both the north and south
borders, as well as through the ports. Today’s 3PLs need to understand
the origin and destination complexities in the supply chain and be able to
capture the best-in-class capacity options in both countries while providing cross-border visibility throughout. In addition, today’s supply chain
customers expect their 3PL to have capacity options throughout, but also
to be a collaborative partner in everything from vendor and PO management to customs consultation and clearance — and ultimately final mile
delivery to the store shelf. Very few providers can excel across the supply
chain like Werner.
LQ Board members who have prepared questions included in this interview with
Mr. Werner include John C. Langley Jr., Ph.D., The Logistics Institute (TLI),
Georgia Institute of Technology; Russ J. Doak, Director, Global Logistics, Kodak;
Kurt M. Ritcey, Partner, Deloitte Consulting; David Faoro, Director, Supply Chain
Management, International Group.
TECHNOLOGY TOOLBOX
Opportunities in Inventory Tracking
Out of stock items create a bad impression with customers, reduce service levels —
and cost retailers money in lost sales. Having more accurate inventory knowledge is key
to improving customer perceptions and service levels. Critical process and systems
improvements can reduce out of stocks and raise revenue.
By Chris Norek and Tom McHugh
IF YOU’VE EVER GONE to a store and
the particular item/SKU (stock
keeping unit) you were looking for wasn’t available on
the shelf, did you go the
customer service department and report an out
of stock? If you did,you
are a unique shopper
and the store should
have given you a
reward. Significant
lost sales result from
out-of-stock situations
in the retail industry.
Knowing what is likely
to become out–ofstock should trigger a
response to ensure
the stockout doesn’t
occur. Having more
accurate inventory
knowledge is key to
improving customer
perceptions and service levels.
Another significant
negative result of
stockouts are lost
sales. A retailer can’t
sell what is not on the shelf. Inventory
tracking and accuracy in the retail
industry are important enablers to
increasing revenue by reducing out of
stocks. In fact, a key impetus for the use
of RFID (radio-frequency identification) at the retail level is to improve
inventory tracking and accuracy.
28
LQ ™
February/March 2008
However, it is going to be quite a while
before RFID is pervasive and is viable at
the individual item or SKU level.
New interfaces to existing technology platforms and recent collaboration
opportunities, however, can help in
ensuring
store
in-stock
levels.
Electronic communication systems
can also be used to link the store, the
DC (distribution center), central
marketing and merchandising,
and the supplier community
to ensure increased service
levels while minimizing
inventory investment.
Output from one system becomes the input
for the system immediately up or down line
and the data hand offs
are referred to as “integration” points. There
are varying degrees of
integration in the marketplace among retailers, ranging from loosely integrated with manual hand offs and
process inputs to very
tightly integrated systems. These integrated
systems use sophisticated logic and data evaluation techniques to automate the supply chain
and only require human
interaction for the most
important decisions.
The following are the systems that
are involved in inventory tracking in
the retail supply chain: sales systems,
order management systems (OMS),
warehouse management systems
(WMS), slotting and optimization tools,
forecasting and demand planning systems, ERP (enterprise resource plan-
Continued from page 22
ning) systems (including purchase
order management), financial/cost
accounting systems
Let’s take a look at the different levels of technical sophistication and
some critical process and systems
improvements within each:
Little Technological Sophistication
Required
Ensure proper training of cashiers
– Cashiers should scan every item so
that different “flavors” of a product
aren’t scanned as a multiple. Often
cashiers will see three similar items
and ring in a multiple and scan only
one of the items, thereby having the
inventory record in the system be too
high on some items and too low on
others.The result is potential overstock
of the items with too much inventory
decremented and, worse, a potential
out of stock on the item(s) not
scanned.
Physical inventory counts and good
housekeeping – In the absence of
good tracking systems, frequent inventory counts/scans of product on the
sales floor and good housekeeping can
help avoid stockouts and reduce lost
sales. Discrepancies between floor
counts and systems estimates can be
manually corrected after a physical
inventory. In addition, keeping shelves
clean, neat and blocked (“faced”) will
allow customers to more easily find the
items they seek
Regular and direct communication
between headquarters and the store –
Communicate, communicate, and communicate, to the stores, the DCs and the
suppliers about sales and marketing
plans, their impact, and the execution
requirements for making these programs successful.
Moderate Level of Technological
Sophistication Required
Use an in-store order management
system that can recommend re-order
quantities based on sales information
Ensure that the quantity in stock on
an item is aligned with the sales profile of the item -- More sophisticated
retailers will be integrating sales scan
takeaway information in order to better
support this alignment.
Use an in-store inventory system to
keep a perpetual inventory –
Combine this system with regular cycle
counts to keep the perpetual inventory
accurate, as well as to make timely
adjustments to the perpetual for
replenishment quantities and returns.
Ensure that service level and performance metrics are in place as a
result of linking systems – Linking systems allows you to check what was
delivered versus what was ordered.You
can also monitor and set acceptable
lead times as well as inventory and service targets for suppliers, DCs and stores.
High Level of Technological
Sophistication Required
Employ automated replenishment
systems at stores – This approach integrates sales takeaway with promotional
planning in order to generate orders
automatically. It should be used in conjunction with an in-store inventory system that keeps track of the in-stock
position on each item to insure that out
of stocks are minimized.These systems
keep track of the inventory on the shelf,
in the back room and on order or en
route from the DC or supplier.
Provide for a significant degree of
collaboration between the retailer
and the suppliers in the replenishment process – Score-carding key service metrics will be the common management mechanism. Internet portal
applications can also be employed as
gateways to information, and as workflow mechanisms, enabling a single
shared view of activities. Using these
systems, incomplete or late shipments
can be collectively identified as the
deliveries are loaded to be shipped by
the supplier and the trailers are en
route.
By employing some or all of the previous suggestions discussed, retailers
can significantly improve their in-stock
positions at the store to reduce out of
stocks, raise revenue, and increase customer loyalty.
LQ: What is the impact of rising fuel
costs?
Michael Belmer:Today the cost is about
$500 per ton for fuel.For vessels transmitting from the Far East there is a
$1,000,000 additional cost in fuel compared to last year, which means an average cost of over $900 per container —
one way. And using the rule of thumb,
whereby three containers arrive in
Canada and two are returned full, it
means one empty is going back; so one
third of the containers coming in must
support the cost of bringing the empty
container back.
LQ: What are your forecasts for trends
for 2008 and as far as 2010?
Michael Belmer: In the charter market,
we see the rates holding steady for about
three years. The supply of vessels will
increase, but so will the demand for
them. This forecast is contingent, to a
large extent, on trade with China, which
is importing more foodstuffs, such as
wheat and soybeans. In regard to
Europe, they have had a poor crop this
past year, and as a result, shipments of
agricultural products are rising to levels
where forest products have traditionally
been.In summary,the demand for breakbulk vessels and bulk vessels continues
to be consistent.
LQ: Do you see a weakening or
strengthening of the charter market?
Michael Belmer:Our chartering department forecasts that the next three years
will be strong.The manufacture of ships
has not kept pace with demand,which is
clearly evidenced in container business
— where more container ships are being
built, but they’re also full and used to
capacity. Today we are raising rates to
cover the costs of fuel, and the overstretched infrastructure has become a
major and costly issue.Delays of ships in
port are significant and also add to costs,
but overall,the charter market outlook is
very good.
LQ: How does the U.S. economy
impact your company?
Michael Belmer:In Canada, the economy in general is very dependent on what
happens in the United States.In our chartering and liner agency business, when
the U.S. experiences a recession, it can
result in our company’s best years,
because ships calling at Canada have
more available space to fill.
Questions for this interview have been
prepared by LQ’s Maritime Executive Editor,
Ed Kearns.
LQ ™
February/March 2008 29
EXECUTIVE’S CORNER
We don’t need no stinking inventory!
Here’s a compelling overview on how the conventional view of inventory
often belies its true value when it comes to the success of your business..
Robert Shaunnessey
TAKE THAT,you warehousing Humphrey
Bogart. The treasure of Sierra Madre is
right there in your warehouse and by
eliminating it you can cure all that is
wrong in your supply chain.
That is the position of many of supply
chain gurus today and I believe it is a
misguided perspective. Somewhere
there must be at least a nugget of benefit in having inventory. So what are the
benefits and costs?
One of the major trends in consumer
preference today is immediate, or ondemand, fulfillment of wants and customers are less patient than ever with
out of stocks. As orders grow smaller
and SKU’s proliferate,the ability to accurately predict demand declines and out
of stocks grow.This is because the ability to accurately predict demand relies
on the law of large numbers that evens
out the unpredictable acts of humans
into semi-predictable averages.
The Grocery Marketing Association’s
(GMA) recent study shows that out of
stocks average about 7.4 percent of the
items in the top 25 classes of products
in a supermarket. They also found that
40 percent of those out of stocks result
in a lost sale. This amounts to about 3
percent of total sales.
Promotional items fare even worse
— typically over 13 percent are out of
stock. That means over 5.2 percent of
sales are lost on those items. So, about
3.5 percent of sales are lost overall. Not
surprisingly, online shoppers are even
less likely to accept a substitute or wait
for a product to become available
again.
Let us value the primary costs that
30
LQ ™
February/March 2008
make up the inventory trade-off. If we
assume 3.5 percent of sales are lost, at
somewhere between 30 percent and 50
percent gross margin, the retailer would
lose 1 to 1.8 percent of profits just from
this initial sales loss.
The only way to overcome lost sales
is with inventory. But holding inventory
is not without a cost.
There are many ways to measure
inventory carrying costs. In general,
they include the warehouse and its
staff, interest expense, damage, obsolescence, taxes and insurance. A recent
survey of logistics executives reported
an average carrying cost for their inventories of 18 percent.
This 18 percent carrying cost number seems high when compared to the
3 to 5 percent loss of sales numbers we
see from various sources. However,
inventory is a static measure and sales
are dynamic — an apples versus
oranges situation.When you convert the
carrying cost of inventory to a percentage of sales you get a much different
picture.To make these numbers comparable we need to divide inventory carrying cost by inventory turns.
A common range of inventory
turnover is 10 to 15 times per year.When
you convert the inventory carrying cost
to a percent of sales you get a range of
1.2 to 1.8 percent of sales.
So now we can compare the cost of
carrying inventory to the cost of not carrying it.We have derived the range of 1.2
to 1.8 percent as the average cost of carrying inventory.The GMA study gives us
an average cost of not carrying it. The
loss of sales, according to this report,
will generate a 1.0 to 1.8 percent loss of
profit margin.
These ranges completely overlap.
This tells us that indiscriminate reductions in inventory will tend to reduce
profits. We’ve all heard the story of the
hunter who drowned in a stream that
has an average depth of 6 inches. It just
happened he was crossing during a
flash flood.The lesson here is that averages can give you a quick look, but if
you manage by them alone, the result
can be sub-optimal, to say the least.
Inventory must be strategically managed by SKU, not just eliminated. For
example, more inventory is called for in
products with a high gross margin and
high turnover.
The equation gets more complicated
when you consider not only the loss of
profit and overhead on the current sale
but also how much you lose when the
customer goes away to a competitor;
the lifetime value of that customer can
be enormous. This loss of clients over
time can be significant and has contributed to the failure of many retailers.
Yet you rarely see this factor used in the
analysis.
Your clients are your gold and minimizing all inventory causes you to lose
some of them. The long term loss you
face through losing those clients varies
but is substantial for many companies.
The marketing professionals in your
company can give you their estimate of
the profit generated by a new client; losing them will be at least the same. The
greater the long term cost of losing a
frustrated customer, the more inventory
you should carry.
We do the math.
3 PL =
(profitability + service)2
innovation + people + technology
=
Move Your Business.
We value our clients being more profitable because of us. We value our experienced people helping our clients
deliver better customer service to their customers. We value advanced technology, modern equipment,
our diverse services and forward thinking approach to effective supply chain management.
We call it our Value Equation™. It’s how we optimize our customers’ supply chains to create improved business results.
If you share our values, call us at 800.663.6331 or visit wheelsgroup.com to learn
how our Value Equation™ can move your business.
May 1, 2008
Board of Trade Golf & Country Club
20 Lloyd Street, Woodbridge, Ontario L4L 2B9
(An estimated 15-minute drive Toronto Pearson International Airport – YYZ)
LQ's Executive Exchange builds on LQ's tradition of introducing and demonstrating
new ideas for leadership in logistics and transportation by senior-level practitioners
in North America. We look forward to opening discussions on these key subjects:
Developing Value-Added Opportunities
for 3PLs and their clients
This session discusses value-added business
development opportunities for 3PLs and their
client firms. It will address questions such as: How
can 3PLs better align their value-added services
with their clients’ requirements, from warehousing
to technology solutions?; What kind of supply
chain resiliency should logisticians and 3PLs
consider in transborder trade practices?; What’s
around the corner in terms of logisticians’ future
expectations and requirements from their 3PLs?;
How can 3PLs and logisticians improve on defining
price and value added services to more effectively
to enhance the profits of all interests in the
supply chain.
Renewing Outsourcing Agreements
and a Perspective on the Role
Procurement Plays in this Context
For many, logistics outsourcing is now a mature
space for logisticians and 3PLs alike. With many
outsourcing agreements up for renewal, there’s a
lack of information available to help supply chain
executives. This session offers groundbreaking
research that includes in depth interviews with
executives of Logistics Service Providers (LSPs)
and Supply Chain Owners (SCOs). Some of the
themes we will cover include:
• The incumbent is often favored as the costs to
switch providers are high; • SCOs rarely wait for
the renewal of agreements to implement major
changes in the way in the LSP-SCO relationship to
better serve their business; • LSPs eager to renew
do not wait for the last months of the contract to
“wow” the SCO with everything they can do;
• Renewal is a great time to change the basis of
the relationship by modifying the compensation
approach; • Procurement involvemenis generally
not an impediment, but they do not add much to
the process.
How can logisticians and 3PLs Build
a Compelling Case for the CEO?
As a senior-level logistician who has inaugurated
a national supply chain strategy with a series of
new DCs you are on your way to the company’s
C-suite for a meeting. You’re armed with a
compelling case to show your firm’s CEO why your
S&OP is essential for the creation of a world-class
global supply chain. You are concerned, however,
as you’re mindful of the fact that other thoughtful
logisticians haven’t shown clear way on how
successfully sell this view to their senior-level
management team, while other logisticians
question why they are not being pushed to
develop a S&OP faster.
How do CEOs view these kinds of value added
opportunities? This session reviews the challenges
faced by logisticians and 3PLs who want to
distinguish their businesses, and some of the
challenges they face, such as pricing pressures,
recruitment, and the involvement of procurement
in the 3PL selection process. How are these
capabilities creating challenges as well as
opportunities for 3PLs and logisticians alike?
After a brief overview of the research findings,
a SCO procurement executive will describe how
procurement can bring value to the renewals
process, and an LSP executive will share insights
from a number of very different recent renewals.
We invite you to register – visit LQ online at:
http://www.logisticsquarterly.com/symposium/index
or Call Toll Free: 1-800-843-1687
GOLD
SPONSORS
.com
SILVER
SPONSOR
LQ ™
February/March 2008
9

Trans-border Trade - Logistics Quarterly

Transcription

Similar documents

General Overview WTC Industrial 2015

Salahuddin Kasem Khan, President, Bangladesh Employers

Dennis Buckmaster

WERC Warehouse Employee Survey

Heiner Heils, CEO, Maxim Group

Patient Logistics Center: A New Model for Improving Patient Flow

logmos working group meeting november 2013

CT LogiView Brochure.indd

fashion logistics - Logwin Logistics

Phoenix Logistics Center