shipments from - Canadian Shipper

SMALL PARCEL
SHIPPING
Strategies to make you
the master of faster
NOVEMBER 2012
AUTOMOTIVE
LOGISTICS
Lean and agile in
a complex chain
Published Since 1898
HELL
shipments from
From lithium batteries to body parts for medical
training, an emphasis on lowest price is flaunting
safety and haunting air cargo shipments
Features
Published Since 1898
10. . . MASTER OF FASTER
Best-in-class strategies to help you gain more control
over your small parcel shipping costs.
VOLUME 115
ISSUE NO. 10
NOVEMBER 2012
18. . . A SHAKY BALANCE
Automotive supply chains require just the right mix of lean
and agile in an increasingly complex and global arena.
COVER
22. . . GO GREEN AT GROUND LEVEL
How the Canadian Pallet Council is dealing with the
huge waste of energy that is shipping empty pallets.
24. . . ON THE SAME PAGE?
Editorial director Lou Smyrlis engages shipper, carrier
and 3PL executives in an insightful discussion about
challenges, priorities and opportunities for 2013.
Departments
4 THE VIEW WITH LOU
Will we ever resolve the gridlock at the Detroit-Windsor trade corridor?
Only if we can outlast the greed of one man, says editorial director
Lou Smyrlis.
6 IN THE NEWS
Will motor carriers be prepared for new requirements at the Canadian
border? Plus: the latest on acquisitions, awards, alliances, and
even Antwerp.
shipments from
HELL
26 DASHBOARD
TransCore’s Canadian Freight Index sees uptick in August; cost
of ground transportation drops in July; rail freight continues rise
over summer months; US truck tonnage falls in August; and more.
28 INSIDE THE NUMBERS
A look at the key challenges and ways to understand Canada’s
quiet giant: private fleets.
30 THE BIGGER PICTURE
Managing freight transportation successfully requires true
partnership between finance and logistics, says Dan Goodwill
of Dan Goodwill and Associates.
From lithium batteries to body parts for medical training,
an emphasis on lowest price is flaunting safety and haunting
air cargo shipments. And the result is hellish. . . . . . . . . . . 14
Thank you!
Our annual Transportation Buying Trends Survey, conducted
in partnership with CITT and CITA, has now been completed.
Your response has made it a success.
Look for the results in the December issue of CT&L.
www.ctl.ca
ct&l november 2012
3
­
the view with Lou
Volume 115 Issue No. 10 November 2012
EDITORIAL DIRECTOR
Lou Smyrlis (416) 510-6881
[email protected]
Will we ever resolve the gridlock at the
Detroit-Windsor trade corridor?
MANAGING EDITOR
Adam Ledlow (416) 510-6890
[email protected]
Only if we can outlast the greed of one man: Manuel Maroun
T
rade is like a river; it moves around all
obstructions. For too many years now,
the Windsor-Detroit corridor, which accounts for about 30% of Canada-US trade, has
been viewed as exactly that: an obstruction to
the efficient flow of trade in the most critical
part of our nation’s trade network with the US.
The 83-year-old, privatelyowned, Ambassador Bridge linking Windsor and Detroit is by far
the busiest commercial crossing
in North America and congestion
when the economy was booming
left both shippers and carriers
complaining. It’s estimated that
1.3 million trucks trips are made
annually over the bridge. The
Lou Smyrlis,
route to the Ambassador Bridge
MCILT
on our side of the border, which
winds through Windsor, has been an object of
scorn for decades for motor carriers fed up
with being tied up in congested city streets
with far too many traffic lights.
As you will read in our feature on automotive logistics, the crossing is particularly important to our automotive industry. The complex automotive supply chains see some car
components crossing the border up to seven
times. Windsor’s two largest employers are
Chrysler and Ford. The latter estimates it has
as many as 600 trucks a day crossing the border on the current bridge.
So it’s no surprise that the automotive industry is concerned about being so reliant on
aging infrastructure in private hands when accessing our primary trade market. And it’s also
no surprise the automotive industry, the
trucking industry and Ottawa itself are solidly
behind the proposed six-lane New International Trade Crossing (NITC) connecting
Windsor and Detroit through a more viable
route than the current one.
Yet the NITC could be in danger, yet again,
of never being built. All thanks to the greed of
one man: Manuel Maroun, the owner of the
Ambassador Bridge.
Maroun is dead set against any plans that
would allow the construction of the new sixlane public bridge and cut into the toll revenues currently generated by his aging fourlane span. He has spent millions on a campaign
FEATURES EDITOR
Julia Kuzeljevich (416) 510-6880
[email protected]
against the new bridge, proposing that he privately build a new bridge alongside his existing one instead. His lobbying efforts against
the NITC have proved so effective at creating
political gridlock across the border that Michigan Governor Rick Snyder and the Canadian
government had to resort to signing an “interlocal agreement” this summer to save plans
for the NITC. Canada agreed to finance
Michigan’s $550M portion of the project.
But that didn’t stop Maroun. A group
called The People Should Decide, which is
actually funded by Maroun and his family,
managed to get a measure on the Nov. 6 US
election ballot that could block construction
of the bridge. The ballot will ask Michigan
residents to vote on an amendment that
would prevent the state from spending any
money or resources on “new international
bridges or tunnels for motor vehicles” unless
approved by the voters – even though Canada is picking up the tab for the NITC and
constructing the new bridge is expected to
create 6,800 permanent jobs and contribute
$630M each year to Michigan’s gross state
product, according to a recent study by the
Centre for Automotive Research.
The Conservative government in Ottawa is
also having to resort to passing legislation to
exempt the NITC from a slew of environmental laws in order to protect it from any other
legal actions from Maroun. In mid-October,
the Conservative government introduced legislation that would exempt the construction
of “the bridge, parkway or any other related
work” from the Fisheries Act, the Navigable
Waters Protection Act, the Species at Risk Act
and large parts of the Canadian Environmental
Protection Act. That’s likely to draw fire from
supporters of the new bridge, such as Windsor
MP Brian Masse, a New Democrat. But the
Canadian government believes Maroun’s next
move, if his ballot measure doesn’t work,
would be to challenge environmental approvals so it’s moving to head him off.
Regular readers of this column know I
don’t place much trust in the Harper government’s interest in environmental protection,
but on this occasion I believe them.
So one critical question remains: Can we
outlast Maroun’s seemingly endless greed?CT&L
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Nick Krukowski (416) 510-5108
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ct&l november 2012
5
in thenews
Will motor carriers be prepared for new
requirements at Canadian border?
By James Menzies
Canada Border Services Agency’s (CBSA)
Advanced Commercial Information (ACI)
e-manifest program for Canada-bound
loads is set to go into effect Nov. 1. For real,
this time. They swear.
The program, Canada’s answer to
CBP’s ACE, was initially set to be rolled
out in June 2010, and then in September
of that year and then it was pushed back to
Oct. 31, 2010 before being suspended indefinitely. One key piece of the puzzle was
conspicuously absent all along; a CBSA
portal that carriers could use to file their
Customs documentation. That didn’t
come online until August 2011. Now,
CBSA insists it’s ready to roll out ACI
in earnest.
In short, e-manifest requirements will
work this way, as explained on the CBSA
Web site: “With the implementation of emanifest, highway carriers transporting
goods into Canada are required to transmit
cargo and conveyance data electronically to
the CBSA prior to arrival. The cargo and
conveyance data must be received and validated by the CBSA a minimum of one hour
before the shipment arrives at the border.”
But how prepared is the motor carrier
community? The large fleets and Customs
brokers are already filing much of their documentation electronically, as required under ACI. But what about the small to midsized fleets?
According to Amitha Carnadin, media
relations spokesperson with CBSA, 932 active business accounts have been created to
use the portal, which can be found online at
http://www.cbsa-asfc.gc.ca. That represents a startlingly small proportion of Canada’s cross-border trucking industry. Since
the portal went live last August, 255 carriers
have used it to file 32,882 submissions.
It’s worth noting, not all carriers will
choose to use the CBSA portal. Large fleets
can build their own electronic data interchange (EDI) clients and fleets of all sizes
can rely on third-party service providers.
Still, the CBSA portal was meant to be a
user-friendly, cost-effective way to transmit
data for small and mid-sized fleets and it appears few have signed up for the service just
6
ct&l november 2012
weeks before the program is launched.
The CBSA is now urging carriers to
get up to speed with the program before the
new e-manifest requirements go into effect.
“The Agency strongly encourages clients
to adopt e-manifest requirements before they
become mandatory,” Carnadin said in an email to Transportation Media. She pointed
out early adopters benefit from: more time to
adjust to the process and address problems; a
vast collection of online resources and tools;
and reduced likelihood of non-compliance
when enforcement begins. (CBSA told
Truck News there’ll be a period “to encourage informed compliance” before fines are
assessed, but the agency didn’t specify how
long that period would be).
Carriers interested in using the portal
can go to the site, file for a CBSA-issued carrier code and then choose a method of filing
information. High-volume carriers are encouraged to explore EDI options, while the
portal itself was developed primarily for
small and mid-sized carriers. Fleets looking
to choose the EDI method must first apply
to become an EDI client, and then compatibility testing with CBSA’s e-manifest Technical Support Unit could take two to three
months to complete.
“The transmission of advanced commercial information to the CBSA using either
the e-manifest portal or an EDI method and
with or without a third-party service provider is an individual business decision,”
Carnadin said.
Carriers that have been early adopters
of ACI report “expedited processing at the
border upon arrival into Canada,” Carnadin said.
Customs brokers, by and large, have
been among the first to explore the CBSA
portal in detail. Shirley Smith, president of
Buckland Customs Brokers, said her staff
finds the portal to be well designed, all in all.
“I don’t know if it’s as good as CBP’s portal,” she said. “They have a very good portal.
But certainly we’ve done some testing on it
(CBSA’s portal) and from a carrier perspective, it seems to be adequate.”
The biggest flaw noticed in the CBSA’s
portal is its inability to store user data, which
would make it easier to file information related to repetitive loads. An in-house solution, or
one developed by a third-party service provider typically would allow the user to save
certain information so they don’t have to reenter it every time they use the site.
Still, Smith said she thinks the CBSA
portal will be a good option for small carriers that aren’t constantly crossing the border. A key difference between the CBSA
portal and that of the US CBP is that the
American portal requires driver information
whereas the Canadian portal does not.
“I think not requiring the driver immigration data makes it much simpler than the
US model, where you also had to have the
driver’s information as well,” she said.
Smith says her firm already files 98% of
its documentation electronically and she
hopes the CBSA sticks to its guns and rolls
out the program already.
“I think CBSA has done a fairly good job
in getting the information out to the various
industry sectors in all the logistics disciplines,” she said. “From our standpoint,
there’s been some frustration in that the
timeline keeps getting pushed out, so it becomes very difficult to prepare.”
The big question may be whether or not
there will be pandemonium at the Canada
border on Nov. 1, as thousands of trucks arrive at the border oblivious to the new requirements? CBSA doesn’t think that’ll be
the case.
“The CBSA is making every effort to
prepare for the implementation of the new
requirements for advanced electronic trade
data, with a view to delivering a reliable
and predictable commercial processing system with tangible benefits to the trade
community,” Carnadin said via e-mail.
“We are well poised to address any increases in traffic volumes and will make adjustments as needed. Our officers are fully
trained and equipped to handle the new
requirements. The agency strongly encourages clients to adopt e-manifest requirements before they become mandatory.”
SCL shipper-carrier panel examines
costs and outlook for 2013
How are Canadian shippers and carriers
working through the challenges presented
by a volatile and fragile economic recovery?
That was the focus of a Supply Chain and
Logistics Association Canada breakfast seminar held in Mississauga in October and
moderated by Transportation Media editowww.ctl.ca
rial director Lou Smyrlis.
Jim McKay, Walmart Canada Corp’s director, transportation, said the company
would focus on reliability with respect to
servicing its stores and DCs in 2013. Fuel
efficiency, and keeping costs low would also
be key areas of focus.
Ian Murray, general manager, marketing,
with Canadian Pacific Rail, said the number
one driver of change for 2013 will be the
change in leadership at the railway under
new CEO Hunter Harrison.
“There will be a huge focus to move the
needle on reliability and speed, foundational to what we’re doing, and to moving assets
more efficiently while controlling costs,”
said Murray.
Doug Munro, president, Maritime-Ontario Freight Lines, said there are challenges ahead in trying to get compensatory
rates in a market of overcapacity and stagnant growth.
“It’s trying to get top line revenue
when costs on the bottom are pushing up
all the time. It’s about maintaining margins,” said Munro.
Excess capacity is also a major issue for
the marine sector, said Michael Broad, president, Shipping Federation, as is slow trade
growth worldwide.
“Record numbers of containerships,
along with swelling international trade, and
the high cost of inputs, are the three issues
of concern,” he said.
In terms of priorities heading into 2013,
Murray said service quality would be at the
top of the list.
“It’s making sure we’re making commitments and delivering to those commitments, and controlling our resources much
more closely than we have in the past,”
he said.
Keeping service levels up is also a priority for Munro.
“It’s educating customers on the one
hand, but with the markets so competitive we have to maintain a high level of
service. Without that, nothing else matters. My outlook is that 2013 is going to
be a bit of a tough year but I think we’re
getting a bit of market share from our
competitors,” he said.
Walmart Canada’s McKay said 2013
will be about finding increased reliability
through relationships, and also about fuel,
www.ctl.ca
cost mitigation and balancing the inbound
and outbound flow of goods.
“Global trade is expected to increase
3-5%. We’re hoping for the best but will
have to take a look at controlling costs and
keeping efficient,” said Broad of the marine
industry outlook.
Murray noted there is ample room for
collaboration between the modes in the
year ahead.
“2013 is going to be an exciting year centered around raising the game on the service
side, and doing so at a time when we think
we can increase efficiencies. There is a tremendous amount we could still do working
with shippers and other supply chain partners,” said Murray.
Antwerp eyes big increase of
maritime trade with Canada
By Leo Ryan
Already the leading European gateway for
maritime container trade across the Atlantic with Canada, the Port of Antwerp sees
strong potential for further growth in the
coming years – especially in cargo flows to
and from Montreal because of its close
proximity to the industrial heartland of
North America. An important catalyst
would be the projected free trade agreement currently at an advanced stage of negotiations between Canada and the European Union.
“We definitely see new opportunities
that will arise,” Eddy Bruyninckx, president
and CEO of the Antwerp Port Authority,
said in an interview with CT&L while passing through Montreal in early October during a port trade mission that also included
Chicago and Houston.
Negotiators from Brussels and Ottawa
are striving to conclude a final agreement
by the end of this year. Among other
things, the free trade pact would give Canadian exporters tariff-free access to a continental market of 500 million consumers
in 27 countries.
Container cargo in both directions between Montreal and Antwerp totaled nearly 285,000 TEUs in 2011. This means that
approximately 20% of all containers handled at Montreal are coming from or going
to Antwerp.
Situated on the Scheldt River 80 kms inland from the North Sea, Antwerp enjoys
an exceptionally central location – with its
docks connected to a rich hinterland by rail,
road and waterway.
The second biggest European port after
Rotterdam, Antwerp is the leading European port in the container trade with all of
North America, holding a 36% market
share versus 26% for Bremen and 21% for
Rotterdam.
In 2011, the port handled 187 million
tonnes of cargo, representing a 5% increase
over the previous year. Container freight
dominates overall volume at 105 million
tonnes, or 56% of total throughput. This
translated into a record 8.6 million TEUs.
The other categories of importance are ,
in descending order, liquid bulk, dry bulk ,
conventional breakbulk and ro/ro.
More than 15,000 seagoing ships visited
the port in 2011. Montreal-based Fednav’s
FALLine service with the Great Lakes/St.
Lawrence system uses Antwerp as its European hub due notably to its significant
breakbulk operations (largest in Europe).
An impressive volume of barge traffic
with Europe’s extensive inland waterway –
nearly 90 million tonnes annually - also
passes through Antwerp. This involves
some 60,000 barge movements.
Despite the recent entry of a number of
Eurozone economies into revived recession
territory, Antwerp managed to record a
small growth in container business in the
first half of 2012.
Bruyninckx attributes the port’s continued strong performance, in part, to last
year’s completion of a substantial dredging
program. The channel deepening has allowed ultra-large containerships with a
draught of up to 16 metres (53 feet) to call
at Antwerp since early 2011. For instance,
the biggest box vessel to call has been the
Edith Maersk , with an estimated capacity
of 15,500 TEUs.
“I am convinced that this greater accessibility will help us improve our position in
Far East trade services from the present
12 compared to 28 for Rotterdam,”
Bruyninckx affirmed.
Other key elements contributing to the
port’s competitiveness, he said, are a productivity performance of 38 crane movements
per hour on average and terminal-handling
ct&l november 2012
7
in thenews
charges that are among the lowest in Europe.
Meanwhile, to meet future demand, the
Antwerp Port Authority has earmarked an
area of more than 1,000 hectares on the left
bank for maritime and logistics activities,
including the construction of a new tidal
container dock.
Livingston International
acquires Norman G. Jensen
Livingston International has acquired Norman G. Jensen, Inc. (NGJ), including its
Canadian brokerage company, Jensen Customs Brokers Canada (JCBC).
“In acquiring this long-standing US
northern border broker, “ said Peter Luit,
Livingston president and CEO, “we are
not only strengthening our presence along
the Canada-US border, but also adding attractive air/sea ports and bolstering our
services on the border with Mexico. NGJ
brings us further expertise in lumber and
forestry products, oil and gas, and the
agribusiness sector.”
A second-generation family business
founded in 1937, NGJ is an independent customs broker with a strong presence in the
western US. Headquartered in Minneapolis,
Minn., NGJ employs about 350 staff at more
than 30 locations in the US and Canada and
specializes in providing import and export services to high-volume commodity shippers.
XTL makes changes to senior
management, updates brand
XTL Transport has announced changes to
its senior management team, in conjunction
with an updated logo and brand.
Serge Gagnon will now act as XTL’s
CEO, with Marcel Francoeur becoming
CFO. Genevieve Gagnon will now take on
the role of president with Luc Francoeur
serving as executive vice-president.
“Genevieve and Luc have been part of
the XTL family for 13 and 18 years, respectively, and have been instrumental at
supporting its growth through hands-on
learning and identifying strengths and opportunities,” the company said in an internal letter to employees. “The change in
their role to become even more involved in
overseeing and managing the organization
is a natural evolution to ensure the business continues to thrive.”
The company has also modernized its
logo, including the words “Transport,”
“Logistics,” and “Distribution” to the right
of “XTL.”
“We realized that XTL Group of Companies didn’t clearly identify the business
we are in and ran the risk of limiting our
Promoting B2B markets since 1988
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ct&l november 2012
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growth potential. Not wanting to lose the
brand recognition of XTL – you will see we
did not rebrand but modernized our logo
to demonstrate our focus on innovation
and forward-thinking solutions,” the company said in its letter to employees. “A
brand standards manual has been developed to ensure that all people who touch
our brand – employees, suppliers, or partners – can ensure our brand is used consistently to build awareness.”
Polaris wins SmartWay award
for environmental excellence
Polaris Transport Carriers has been honoured with a SmartWay Excellence Award
from the US Environmental Protection
Agency. The award recognizes industry
leaders in freight supply chain environmental performance and energy efficiency.
According to Polaris officials, over the
last three years, the company has expanded its use of fuel-saving technologies such
as FreightWing trailer under belly aerodynamic fairings and trailer gap fairings –
which officials say have helped the company to achieve to achieve a 9% fuel saving
– as well as an integrated Kinedyne, K2
Kaptive Beam decking system, which the
company says has extended productivity
and fuel savings even further.
Polaris officials say the company has
also added 2012 and 2013 Kenworth
T700’s with Carrier auxiliary power units
(APUs) for reduced idling and additional
fuel savings. All of Polaris’ newer and replacement equipment is outfitted with
low-rolling resistance tires, the company
said. The combination of these technologies has helped “to create a complete package of environmentally friendly technologies that has not only improved fuel
efficiency, but also, customer service,” the
company said in a release.
Polaris was one of 40 companies, selected from the Partnerships’ nearly 3,000 Partners, to receive this distinction.
have signed a strategic alliance agreement
aimed at removing industry segmentation
in cross-border traffic flows and reducing
total transportation costs between Canada
and Mexico.
The partners hope that Agri-Food will
benefit from improved economies of scale
through the tuck-in of lighter weight,
higher value, shipments into its existing
agri-food based pipeline, and that Crossdock will benefit from increased utilization of its full range of warehousing and
distribution services by existing and new
shippers, said a release.
“The strategic alliance agreement with
Crossdock was the missing component we
required in order to make spaceavailable
in our pipeline to other industries,” said
David Nyznyk, director of Agri-Food
Central, a large volume Canadian inter-
modal shipper of FDA regulated food
products to Mexico.
“Now, with the agreement in place,
and with Crossdock Manitoba as part of
our established logistics network, we are
offering a bi-weekly service for full container loads (FCL) and less-than-container loads (LCL) of dry goods between
Canada-Mexico” he said.
“For us, this is about leveraging Crossdock’s advantages such as cross-border
transport support and logistical services.”
said Scott Lins, president of Crossdock
Manitoba.
“Our two companies have more than a
ten year history together and now with the
agreement in place, both parties will actively promote each other’s service offerings and rates in the spirit of cooperation,”
said Lins.
Agri-Food Central, Crossdock Manitoba
form alliance to reduce costs
By Julia Kuzeljevich
Agri-Food Central and Crossdock Manitoba
www.ctl.ca
ct&l november 2012
9
1
small parcel shipping
master of
faster
These best-in-class
strategies can help
you gain more control
over your small parcel
shipping costs
By Julia Kuzeljevich
10
ct&l november 2012
1
Understand your shipping environment
Consider what will benefit your company the most in terms of cost
structure and service levels. What are your shipping needs and what is
the shipping environment? Are there discounts available to you and
how do you access these?
“Shippers need to weigh the cost benefit of optimizing modally.
The key is understanding all the solutions and what is best for your
company with a price/service mix. Why pay for air when you can get
that package there next day by ground? We’ve also looked at [moving
from] ground to postal operations,” said Tim Sailor, principal with
Navigo Consulting Group, which helps clients in transportation spend
management.
“Other strategies would be looking at where geographically you
locate your DC. Mode shifting is something we recommend all the
time,” he said.
4
www.ctl.ca
small parcel shipping
You may also be “overservicing your commitment” to your
customer, Sailor suggested.
Can you meet customers’ delivery expectations by adjusting
the time required, but at a lower cost?
Shippers should understand that there are customs implications that can come from strategies such as distribution network
optimization. There are many ways of shipping internationally
with duty and taxes paid or unpaid, for example.
“Duty and taxes paid potentially becomes a good marketing
tool. But there’s a lot of work to doing that up front. There are
software solutions out there that can make this possible, but the
shipper has to make the calculation – is it worth the effort to do
the duties and taxes paid?” said Sailor.
2
portant to review your contracts and understand how that
would impact your business. I could have a great contract, but
if I were, for example, an oversize shipper, and all the carriers
changed their dimensional factor, oversize shippers would have
experienced a contract erosion. Not enough shippers are reviewing their shipping policy after general rate increases,” said
Sailor.
6
Negotiate better carrier contracts
7
Keep up to date on new regulations, legislation
8
Audit, audit, audit!
Rethink inbound parcel shipping strategy
A Ryder whitepaper on small parcel shipments suggests shippers rethink their inbound supply chains to see how they could
help boost visibility, increase control and cut costs.
“Depending on the number of packages being expedited and
the volume of shipments, inbound parcel shipping represents a
rich opportunity to reduce costs.”
But few shippers have total control over the service level
suppliers use to get small parcel
shipments to them, the study suggested. In fact, many companies have no defined process for controlling these shipments.
The problem arises when small parcels are shipped via air or
premium service when they could just as easily be shipped via
ground – or when suppliers ship several small parcels to the
same destination separately instead of consolidating them.
“Combining packages that originate from the same geographic cluster of suppliers and are destined for the same manufacturing centre can reduce costs and minimize waste and environmental impact. The cornerstone of a successful solution is
technology that flags small parcel shipments for consolidation
and links multiple suppliers,” said the Ryder paper.
3
Package accurately
4
Consider alternate/regional carriers
5
Beware ‘contract erosion’
When packaging, consider whether you can consolidate cartons.
Keeping within the defined dimensional weight means you can
often take advantage of volume discounts.
Consider diversifying your carrier strategy by giving a percentage of your parcels to an alternate or regional carrier while still
maintaining volume discounts at the larger carriers.
Making your parcel contract competitive is more than just looking at rates. Over time, contracts may lose value if not reassessed. Focus on wording, commitments and surcharges, especially as your network changes. Make sure your contract is
flexible enough to change as well.
“When carriers announce their general rate increases, it’s imwww.ctl.ca
“The key here is for shippers to understand not only where the
top line expenditure is, but also where their individual shipping
dollars go. Once they understand this, it’s easier to spend where
it helps them the most,” said Sailor.
Shippers also don’t focus enough on the terms and conditions of their carrier agreements, he said.
“In today’s environment, carrier contracts are very complicated and contingent on meeting certain revenue thresholds.
Make sure terms and conditions work for you.
It does take time, but it’s one of the most important things
that shippers can do. Data warehouse some of your historical
usage so you can make more intelligent decisions,” said Sailor.
What affect will any new or pending legislation or regulations
have on your budget, and what impact could they have on your
shipping strategy? Keeping abreast of these developments is a
key factor in controlling and preparing for costs.
When looking at the components that go into a best-in-class
freight and parcel audit, consider that what gets audited often
varies depending on who is doing the auditing.
Accessorial charges could include fees for home delivery,
oversized dimensional weight (so that the tariff-rated weight or
DIM weight that determines shipping charges is different than
the actual weight), delivery to remote locations, pick-up at nonaccount locations, and fuel surcharges.
In a whitepaper by Logica president and CEO Rob Nelson,
he says “a good audit should streamline the accounting and payment processes for all of your shipping invoices and ultimately
be driven by a robust set of tools and software that can manage
the complexity and deliver the most relevant and important
data about your invoices to you quickly and easily.”
Validate all contract pricing and accessorial fees to ensure
that shippers are getting the most accurate invoice possible,
said Nelson.
Verify the gross transportation charge, to ensure that all
available discounts are being applied to the correct rate on each
individual shipment. Look at base discounts, tier incentives, automation discounts, volume discounts and more. Based on that
information, ensure that each package is priced accurately and
that the carrier hasn’t missed anything.
“We like to refer to these as the ‘Oh, by the way’ fees and
ct&l november 2012
11
small parcel shipping
it’s clear that carriers are always incentivized to add to these to the invoice,”
said Nelson.
9
Managing data can be a tactic in itself. Data visibility could lead to
changes that will save you money,
such as moving from single-piece parcel rates to hundredweight or multiweight parcel costing models.
Make auditing an ‘opportunity’
By tracking all of your audit data you
may find opportunities for proactive optimization, such as mode optimization
or shifting, rather than auditing after the
fact, said Nelson.
10
Match invoice to order
There really is no industry standard for
determining fully landed shipping costs,
said Sailor.
“There is no clear predominant methodology to use to arrive at what to charge.
It’s a problem in and of itself. We came to
the conclusion it’s really important when
you’re trying to determine fully landed
costs that you match it up with your carrier invoicing.
Almost 70% of shippers told us that
shipping is a cost centre not a profit centre.
We would encourage shippers to look at
fully landed costs just beyond the shipping
charges – are packaging costs, returns included? These may contribute to shipping
being a cost centre for people,” he said.
For freight invoices, take each bill
and run it through a bill of lading match,
said Nelson.
11
Track shipment details, service
guarantees
Nelson said that some couriers will, in
practice, waive the service guarantee for
high volume shippers in exchange for an
additional discount point in the pricing.
“Regardless of whether you can get
money back on service failures, tracking
your packages is vital to the audit proCT&L
cess,” he said.
Features editor Julia Kuzeljevich
has been writing about transportation issues for more than a decade.
Her meticulously researched articles
have garnered several transportation
and Canadian Business Press writing awards.
12
ct&l november 2012
www.ctl.ca
petroleum equipment
G
cover story
HELL
shipments from
From lithium batteries to body parts for medical
training, an emphasis on lowest price is flaunting
safety and haunting air cargo shipments
By Ian Putzger
T
wo years ago, a cargo employee of Southwest Airlines made a gruesome discovery when he opened a container. In it, he found parts of human heads. The
subsequent examination of the suspect shipment revealed four complete heads
and 40 partial ones.
It turned out that the cargo of heads did not serve any sinister purpose. The body
parts were to be used in medical training, a routine affair for the consignee, but this time
the cargo had not been shipped with the appropriate procedures. The heads were
packed in plastic containers that had been sealed with duct tape and carried little information about their contents.
Mark Vinesky, manager of air export operations at forwarder International Transport, regards what he calls “eBay shippers” as one of the biggest headaches for air cargo
operators. The term denotes an attitude dominated by an emphasis on going for the
lowest possible price with a readiness to forsake service elements, even to the point of
flaunting safety requirements. While the term is associated often with private vendors
or small companies sending out small shipments, Vinesky stresses that the malaise extends to larger shippers as well. “It’s not just guys in a basement packing something in a
box; you also have big, smart companies offering undeclared hazardous cargo,” he says.
He adds that his company has lost business in some cases because it insisted on compliance with regulations for shipping hazardous materials.
In many cases, special requirements are ignored unwittingly. Albert Saphir, president of ABS Consulting, points to lithium batteries. These ubiquitous power sources
bear considerable risks and require special handling, but many shippers are not aware of
this, he remarks.
“In the past, most hazardous materials were handled by companies that understood
HazMat goods and regulations. When it comes to lithium batteries, there could be a toy
manufacturer who does not know that they are hazardous,” says Bob Imbriani, vicepresident of business development at forwarder Team Worldwide.
Lithium batteries have been linked to several fatal incidents on freighter aircraft. A
report by the US Federal Aviation Administration (FAA) counted 113 incidents of
smoke, fire, extreme heat or explosion between 1991 and 2010 on passenger and
cargo aircraft that involved batteries or battery-powered devices. Without new, tighter safety regulations, fires from lithium batteries will likely destroy one cargo jet registered in the US every two years, according to a study commissioned by US and
Canadian aviation regulators.
In the past two years, lithium batteries have been linked to two fatal crashes of Boeing 747-400 freighters: the crash of UPS flight 006 in the Middle East in 2010 and the
disappearance of Asiana flight 991 en route from Seoul to Shanghai the following year,
after the crew reported a fire on board. In both tragedies, none of the crew survived.
14
ct&l november 2012
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cover story
However, the investigations into the tragedies did not establish
any conclusive evidence that the fires had been caused by lithium
batteries. The US Department of Transportation proposed regulatory changes that would require lithium batteries to be stowed in
locations that can be accessed by the flight crew, unless they are
shipped in an FAA-approved container or a Class C cargo compartment. The scheme was quashed after a firestorm of criticism
from a broad phalanx of opponents, from airlines and forwarders,
electronics shippers and battery manufacturers to the government
of South Korea.
Even iconic products such as the iPhone are at loggerheads with
aviation safety principles. Jens-Thomas Rueckert, manager for
training and projects at compliance specialist Logar, points out that
it is virtually impossible to remove the lithium battery from an
iPhone before shipment.
“To start with, you need a special screwdriver, and you are dealing with miniscule screws. Next you have to carefully push out the
touch screen. When you have done that, you have to take a soldering iron and un-solder the pouch batteries,” he says. “Apple is noncompliant by design. The iPhone is, by design, illegal.”
Even if they wanted to, shippers would find it hard to keep track
of safety requirements around some hazardous cargoes. What
makes it hard to establish clear safety processes is the constant
change in rules governing hazardous goods like lithium batteries.
“The problem for airlines, forwarders and shippers is, it has become
a moving target. Almost every six months, there are changes in the
rules,” Imbriani says.
Nor does it help that the cost cutting drives in the downturn
have accelerated the exodus of experienced staff at carriers and lo-
16
ct&l november 2012
CITT11E-PA02-profitability-OUTLI1 1
gistics providers. “We are losing a lot of institutional knowledge because of cost cutting measures,” Vinesky says.
The cost and effort associated with educating vendors about the
changing regulatory framework are considerable. “Our effort to
keep everyone up to date on lithium batteries is probably close to
500 hours per year,” Imbriani reckons.
Team has been actively developing logistics services built around
the growing internationalization of online shopping. This traffic is
bundled into consolidations for the international leg of the journey
and customs clearance. Team has about 500-1,000 packages a week
that have to be scrutinized. To speed up the process, the forwarder
obtains advance lists of online purchases from its clients, which allows early flagging of questionable shipments for closer inspection.
“This is something that has changed our procedures,” Imbriani says.
Saphir is also concerned about the shipment of merchandise
purchased online. “It has gotten so easy to do, but it’s very difficult
to have proper controls in place,” he reflects.
For the most part, online purchases are moved by postal services.
Again, there are serious questions about safety regulations and their
appliance. “When you tender your parcel to the postal service, they
ask you, ‘Is there anything hazardous in the box?’ Of course, most
CT&L
people say, ‘No.’ Are they even checking?” Saphir wonders.
Ian Putzger is an award-winning journalist with more than 20
years experience covering transportation and logistics issues. He
is a former writer and editor with the Hong Kong-based Asian
Sources Media Group, and Airtrade, a British magazine covering the global air cargo industry.
www.ctl.ca
2/9/2011 3:07:22 PM
automotive logistics
a shaky
balance
Automotive supply chains require just the
right mix of lean and agile in an increasingly
complex and global arena
By Julia Kuzeljevich
18
ct&l november 2012
www.ctl.ca
automotive logistics
A
utomotive is an industry vertical that is beginning to
ramp up following a period of dampened demand and
supply issues.
Cost containment and lean distribution, the hallmarks of efficient automotive operations, continue to be the main
focus of supply chain players operating in this arena. But as supply
chains get more complex and lead times longer, that very efficiency
depends on greater visibility and transparency.
According to an Ernst and Young study on working capital in the
automotive industry, worldwide, the automotive industry “is in a
period of profound change.”
“Consolidation, competition, fast-evolving technologies, a shift
toward greater energy efficiency, the globalization of supply chains
and the promise of emerging markets are just a few of the challenges facing industry participants,” the study suggested.
Auto sales are now resurging following a significant decline after
the 2008 recession. But in terms of auto parts exports, a recent
Scotia Economics report suggests that Canada has now fallen out of
the list of top 10 exporters in the sector.
In a Global Auto Report published earlier this year by Scotiabank, senior economist Carlos Gomes noted the Canadian auto
parts sector has been losing global market share, “with the industry
still searching for a strategy geared to benefit from the rapid
growth occurring outside of the mature auto markets of North
America and Europe.”
Concerns about supply issues also remain on the forefront, such
as those resulting from natural disasters. The March 2011 Japanese
earthquake, tsunami and later incidents of flooding in Thailand
were the most prominent recent examples, but disruptions in one
form or another are a daily occurrence, said Bindiya Vakil, president
and founder of Resilinc, a provider of multi-tier supply chain resiliency solutions.
“What we’re seeing is that there are continuous events happening every day globally to cause companies to react because of a lack
of information,” she said.
“In order to be able to deal with that kind of commotion, you
need to have the capability to have visibility into every part of the
system,” said Dick Jennings, vice-president of automotive supply
chain solutions for Ryder, recently named a GM Supplier of the
Year for the seventh time.
“You’re going to see, on the part of the OEMs, more alternative
solutions, more attention being paid to alternate sourcing of parts
that come from far distances. There are a lot of challenges. Everyone does business a little bit differently. We just have to make sure
we have solid partnerships and construct an agreement that is suitable to everyone in the process,” he said.
“I think that all of the OEMs and all of our service providers are
going to be grappling with economic recovery. Most people are
seeing healthy signs of recovery, and good consistent growth.
Hopefully, we will see efforts to expand capacity after a period of
consolidation and shrinkage. I think now everyone is trying to determine to what degree they will invest, and how to manage that,”
said Mike Steck, vice-president of supply chain management at
www.ctl.ca
Nissan North America.
On the manufacturing side, he noted, there have been more
efforts in localization as opposed to offshoring, because of currency volatility.
“The Yen exchange rate has been quite harmful to us over the
past year or so,” he said, noting that Nissan North America is now
ramping up its plants closer to full capacity while avoiding investing
in facilities.
“There were some significant disruptions following the Japanese
earthquake and Thailand flooding in 2011. This impacted some of
our own facilities and our supply base had some challenges, which
were all consistent with the other OEMs who share some of the
same supply base. Eliminating ambiguity and getting good information right away in those situations is key prioritizing decision-making. For example, is there a part that may be shared across all our
vehicle platforms? We had a good handle on which of our products
were in tighter supply than others and this helped us to navigate
earlier on,” said Steck.
“If you look at trends in automotive over the last several years,
before, OEMs would buy components, now they buy complete
subassemblies. The complexity, with electronics components, has
increased compared to 15 years ago. Then you add the amount of
complexity at the tier one level where a lot of the control of the
design of the product has been passed on. Also with the use of subcontract manufacturing overseas, now you have a very stretched
supply chain, but the culture, and the amount of information-sharing between the tiers, is still where it was 15 years ago,” said Vakil.
This has led to the need for increased communication and collaboration as a risk mitigation strategy.
“With suppliers, we probably want more specifics in terms of
capacity, any volume changes we’re anticipating, and we share
these more frequently. We have thought about various contingency
plans a little more frequently. Some of the risk mitigation strategies
helped us. In a situation like a port strike, you have to ask if you’re
too dependent on one particular port; should you spread risk across
various points of entry, or carrier? (i.e. parts provider or car hauler).
If there were to be a financial crisis or strike, you are vulnerable to
that. Do we have experience with alternate operators? Could we set
up inland transport relatively quickly?” said Steck.
“I think, in principle, we’re not going to do something to stockpile. I think managing with lean principles is the right way to manage the business. The better you can engage with your sales organization and forecast ahead, with upward and downward scenarios,
and building contingency plans around potential bottlenecks and
how to get out of them, then at least you can do a little bit of the
homework behind some of the potential investments and capacity
issues,” he said.
Resilinc’s Web-based cloud solution, focused on the auto industry vertical, “enables companies to be proactive and address
single points of failure. Where are the critical exposures? Where
are they most vulnerable? We collect information about their supply chain needs, what alternate sites are available to them. They
can query the information, look at a map and see suppliers’ ag-
ct&l november 2012
19
automotive logistics
gregated hot spots,” Vakil said.
“We help customers build out the mapping, to show them what
the supply chain actually is. We store and manage that for them and
deliver it as a service. Then, once you have that, you can do some
interesting things around events. We generate tracked global events,
and notifications, and also the impact of the event. This offers visibility so you can plan more proactively around risks,” said Jon Bovit,
chief marketing officer for Resilinc.
Automotive manufacturers are attempting to get product to customers a lot more quickly, according to Jennings. There is more attention given to new launches earlier in the process than in the past.
“It allows for communication to occur a lot more quickly than it
had. There’s also more investigation around what has to happen six
months to 18 months out to have steady supply,” he says, adding
that 3PLs that are well integrated in the automotive industry employ lean strategies where the focus is on “rigorous execution.”
“It’s amazing how buying patterns change very quickly depending on gas prices, and that involves dialling down production of
certain vehicles. We’ve learned to employ lean techniques and literally produce a plan for every part that goes into an automobile,
collect the data, purify it, and make sure that the packaging is correct. We put together a complicated and detailed transportation
system managing the material from point of supply to point of use.
It allows us to deal with all of the complexities within a supply line,”
said Jennings.
Damage and quality control are other areas where there is now
a lot of emphasis when it comes to cost containment in automotive
supply chains.
“3PLs like us are responsible for building more economies of
scale into the process, trying to build more efficiency into shipping
and packing, and providing more value added like pre-packing. Everyone is conscious of the cost of disposing of waste material. There
is a trend – wherever you can – to reuse tote boxes, skids, etc.,” said
Steve Terry, site manager at BMW’s Whitby, Ont. distribution centre, which has been handled by Schenker of Canada since 2006.
There’s also the issue of what is the better way to package a
product so it’s better protected, for example with windshields, and
body packaging. Most of the manufacturers are going to as few vendors as possible for their packaging materials so they can develop
protocols. There’s more detail analysis of what types of damage are
occurring, to rectify quality control with the vendors overseas.
A new warehouse management system, consistent with the
manufacturer’s systems around the world, now offers more consistent flow and visibility.
“While this trend is not new, more manufacturers are going this
way. There’s more top-down distribution as a result without waiting for orders,” said Terry, who also noted that, in many cases,
OEMs are moving to get more product closer to the retailers.
“They are looking at getting smaller DCs in some of the different areas in Canada called ‘DM DCs,’ a smaller distribution centre
for some of the places where there is no distribution centre like
this,” he said.
Will Michigan ballot amendment kill new Detroit-Windsor crossing?
T
he proposed New International Trade Crossing (NITC)
connecting Windsor and Detroit is critical to automotive
logistics. Yet, it could be in danger – again.
The Nov. 6 US election ballot will ask Michigan residents
to vote on an amendment that would prevent the state from
spending any money or resources on “new international
bridges or tunnels for motor vehicles” unless approved by the
voters.
The move comes after Michigan Governor Rick Snyder
along with the Canadian government this summer saved years
of plans for the new six-lane bridge with special lanes for preapproved freight and carriers from being laid waste by political wrangling and lobbying. They did so by signing an “interlocal agreement” that would allow the crossing to go ahead.
Since the state had no authority to pay for the bridge, Canada
agreed to finance Michigan’s $550M portion of the project.
Canada plans to make back its investment through tolls.
Manuel Maroun, the owner of the four-lane, 83-year-old
Ambassador Bridge, however, continues to doggedly fight any
plans that would allow the construction of the new public
bridge and cut into his toll revenues. He has spent millions on
a campaign against the new bridge, proposing that he privately build a new bridge alongside his existing one instead. And
he has now managed to force the question on to the state ballot. The measure was put on the ballot through the efforts of
a group called The People Should Decide, which was created
and funded by Maroun and his family.
For his part, Gov. Snyder says it was within his constitu-
20
ct&l november 2012
tional authority to sign the deal with Canada and that the new
bridge will go ahead regardless of the election outcome since
the agreement has already been signed.
The complex automotive supply chains see some car components crossing the border up to seven times. Windsor’s two
largest employers are Chrysler and Ford. The latter estimates
it has as many as 600 trucks a day crossing the border on the
current bridge. It’s estimated that 1.3 million trucks trips are
made annually over the Ambassador Bridge and one study
found that about one-third of our exports to the US are composed of goods previously imported from the US. The bridge
is by far the busiest commercial crossing in North America
and congestion when the economy was booming left both
shippers and carriers complaining.
So it’s no surprise that the automotive industry is concerned about being so reliant on aging infrastructure in private
hands and that the industry is solidly behind proposals for the
new bridge.
Constructing the new bridge, will not only better secure
access for Canada to its primary market, but is also expected
to create considerable growth for Michigan. The new bridge
will create 6,800 permanent jobs and contribute $630M each
year to Michigan’s gross state product, according to a recent
study by the Centre for Automotive Research. The state’s
three largest employers’ organizations have also lined up in
support of the project.
It remains to be seen if this wave of support will be enough
to get bridge construction started.
www.ctl.ca
automotive logistics
“The pressure to have the supply ready and available faster continues to grow. We do several deliveries a day to major centres. The
dealerships in the major centres are starting to have major problems
with space. They are landlocked as properties around them get built
up, so it’s more of a trend to multiple daily deliveries and overnight
deliveries, of stock as well as emergency product,” he said.
OEM service parts pricing is an area that often falls short on visibility and that can negatively impact revenue and gross profit.
“We do a lot of metrics around getting competitive parts pricing.
When we go in and analyze specifics, we see a lot of spreadsheets
and prices that just don’t make any sense,” said Jon Utterback, vicepresident of service parts pricing for Servigistics, an SLM (Service
Lifecycle Management) software company which provides postsales service automation solutions for 12 of the top 15 automotive
original equipment manufacturers.
“OEMs want to run and maintain inventories in a lean fashion
and try to manage inventory stocking levels as closely as possible,
and also to put pressure on service parts groups to manage visibility.
There are companies out there today trying to manage millions of
parts using some very basic cost-plus types of pricing. There are so
many parts and challenges of what belongs where. It ends up being
a default of what’s our cost and let’s put a margin on top of that, and
that will be our pricing,” he said.
Servigistics offers a blended software solution allowing
OEMs to manage price elasticity curves, and to offer competitive price research.
“We’re able to take a list of parts from an OEM, understanding
the form, fit and function of these parts, and to look at comparable
and competitive prices in the marketplace. Based on this form-fitfunction, we go out and try to find aftermarket suppliers that will fit
the parts and gather those prices as well. By taking market averages,
it gives the pricing analyst tremendous power in terms of determining and pricing adjustment strategy for the OEM,” he said.
While the Ernst and Young study suggests the automotive industry “is struggling to strike a better balance between operational efficiency with flexibility and responsiveness,” Jennings said there’s a
growing interest in collaboration amongst automotive players.
“We’re calling it a strategic initiative. Intuitively, we believe
there are opportunities for people to collaborate on transportation
routes, to comingle and allow for different customers to share the
same vehicle conveyance. Diesel prices are impacting this. What
you want to do is attempt to move material without driving as many
miles as you have in the past,” he said.
“The secret to this stuff is to be able to have the data aligned with
the OEM and tier one and to execute at 100% proficiency. There
has to be a great deal of faith placed in the supply line – that’s the
CT&L
basic tenet, no matter what else is going on,” he said.
Features editor Julia Kuzeljevich has been writing about transportation issues for more than a decade. Her meticulously
researched articles have garnered several transportation and
Canadian Business Press writing awards.
If you’re in the rockets and radar business, so are we.
We may be in shipping, but your business is our business. When your product needs to get
there right on time or just plain fast, OD makes it happen, guaranteed. And while OD employees
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www.ctl.ca
M2OD0008_CanadianTransport_Nov.indd 1
ct&l november 2012
21
10/10/12 12:30 PM
sustainable transportation
go green at the
ground level
While sustainability strategies have focused on modal shifts,
packaging redesigns and aerodynamic vehicles, shipping empty
pallets is also a huge waste of energy. Find out how the Canadian
Pallet Council is looking to deal with that.
By Ken Mark
Veteran technology expert Ken Mark has covered supply
chain management since it was called distribution and
has documented its legitimization as a critical business
function. He holds an MBA from York University.
22
ct&l november 2012
T
he Canadian Pallet Council’s (CPC) recent launch of its Electronic Container Transfer (ECT) software is yet another reminder that in logistics, lean and green are not contradictory.
By simplifying the tracking and return of empty pallets, ECT will
boost sustainability by reducing empty miles and cutting costs.
“This system is going to save members money and generate
carbon credits,” says Cobourg, Ont.-based CPC president and CEO
Belinda Junkin.
By using algorithms – powerful mathematical models – to crunch
the raw numbers flowing into the CTSWeb database, ECT can
present CPC members each morning with an update on their individual pallet inventories. Junkin compares such alerts to a debit/
credit statement from the bank.
More important, the new system offers members options and
choices to rebalance their pallet account using a paperless Web-based
platform. All the heavy lifting occurs within ECT’s black box so that
members can make better business decisions with only minor changes to their current processes.
The options are issued to small groups of three within a tight local
or regional zone. If all members agree (suggestions are voluntary),
they simply ship the empty pallets as directed to clear their books.
But if members have other plans, such as holding back pallets for a
large project, the software will bring in another local partner, tumble
the numbers again and offer them choices.
ECT’s efficiency and productivity breakthrough is based on taking
a holistic view of the system-wide imbalances and proposing efficient
solutions to recycle empty pallets in a more compact, local area. Before
ECT, pallet imbalances were settled bilaterally, directly between supplier and receiver irrespective of distance. For example, if a Torontobased shipper sent goods to a Halifax customer, the two firms had to
resolve the pallet imbalance between themselves. Now, ECT reduces
the solution space to a tighter-knit circle of near-by CPC members.
But according to Huw Leonard, Toronto-based chief technology officer of iLogics, which developed ECT software on CPC’s behalf, the
new system has greater computing firepower to massage a wider range
of logistical concerns to create strategic solutions. “The algorithms deploy advanced linear calculations that consider a list of factors relevant to
shipping pallets, including distance, fuel cost, products involved, possible
damage, greenhouse gas (GHG) emissions, etc. to propose an optimum
solution,” he says.
“ECT can also calculate the estimated savings from using the more
efficient balancing system.”
Along the way, CPC received $1.25 million from Sustainable
www.ctl.ca
sustainable transportation
Development Technology Canada (SDTC) to assist in the development and demonstration of the ECT technology. SDTC is an
arms-length, not-for-profit corporation funded by the Government of Canada.
“It’s amazing how everything comes down to that little pallet,”
says Ottawa-based SDTC vice-president of investments and chief
technology officer Rick Whittaker. “Freight is one of the largest
carbon emission sources in Canada, and is hugely affected by oil
prices. By shipping only loaded pallets, companies make their operations more efficient and transporters save fuel. The benefits can
be passed along to consumers for example, by helping bring down
the cost of food.”
The solid financial business case supporting ECT’s future
benefits and savings helped clinch the funding. The project team
showed that, by trading balances, a trio of companies in Toronto,
Vancouver and Halifax could shave 12,000 kilometres of unnecessary transport from their routes, save more than 4,389 litres of
diesel fuel, and collectively cut GHG emissions by 155 tonnes.
That adds up to an estimated savings of $118,000 – just for that
one route.
Such benefits come from lower transportation and management costs, reduced handling, less damage and greater productivity through higher pallet utilization – carrying more cargo with the
same number or fewer pallets. Tracking and reconciling pallet
ownership electronically will cut shipping and handling costs
while reducing road traffic, diesel engine pollution and GHG
emissions. ECT’s coverage also extends to tracking other standard
returnable assets such as cases, totes, plastic pallets, thermal cov-
ers, milk crates and bread trays, but without the ability to balance
the inventories.
ECT also opens the door for carbon credits that create further
value while improving sustainability. Ultimately, CPC plans to
mine the enriched transportation data storehouse to calculate certifiable carbon credits that can be sold on public exchanges. The credits are based on lower GHG emissions resulting from reduced transport and handling of empty pallets and containers compared against
industry averages and statistics. Although such exchanges are still in
their infancy and ECT only went live in late June, Junkin says the
CPC has already received inquiries from a power plant in Alberta
that’s interested in buying any carbon credits it could generate.
By 2020, CPC expects to cut annual carbon dioxide emissions
by 41 kilotonnes, methane by 1,952 tonnes and nitrous oxide by
1,502 tonnes. Some of the biggest food retailers, including Sobeys
and Metro Ontario, are on board to adopt the system.
As a membership-owned and managed cooperative, CPC
members will decide the next steps regarding the carbon credits.
Such a consensus-driven business model has enabled CPC to leverage member input to update its CTSWeb database and other
systems annually and share the benefits all around. Its original
breakthrough 35 year ago was to establish a national standard
wood pallet in terms of dimensions, materials and number of
nails that can support 3,500-lb. load as an alternative to commercial solutions.
“We are working hard to get members to adopt the new system. I believe the payback from ECT will be many times the
CT&L
$1.25 million support from the SDTC.”
If you’re in the gloves and scrubs business, so are we.
We may be in shipping, but your business is our business. Choosing OD for your Domestic, Expedited
and Global freight means choosing proven technology that reduces costs, increases efficiency and
ensures better service. And you won’t be alone. InformationWeek chose us too, as the top logistics
and transportation company in their 2010 InformationWeek 500 ranking. That means a lot of promises
kept to our customers, and to theirs.
odpromises.com/technology
®
OD • DOMESTIC
OD • EXPEDITED
OD • PEOPLE
OD • GLOBAL
OD •TECHNOLOGY
HELPING THE WORLD KEEP PROMISES.®
Old Dominion Freight Line, the Old Dominion logo and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc.
All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2012 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
www.ctl.ca
M2OD0010_CanadianTransport_Nov.indd 1
ct&l november 2012
23
10/10/12 12:14 PM
transportation management
Port D
on the same page?
Editorial director Lou Smyrlis engaged shipper, carrier and 3PL executives in an insightful discussion about challenges,
priorities and opportunities for 2013 at the annual Halifax Port Days forum. Read what Nick Nanos, director of traffic,
customs and Toronto logistics operations at LCBO; Jim Ramsay, vice president of air and ocean freight, Canada,
at UPS Supply Chain Solutions; and Keith Reardon, vice-president of intermodal services at CN, had to say.
CT&L: We are in what appears to be a fragile and volatile economic
recovery and both shippers and carriers are struggling with what to
expect in the year to come. Looking at your own organizations, what
do you see as the main competitive pressure shaping your business
approach to 2013?
Nanos: From a pressure perspective, there is a lot that is going
on. We are a retailer and importer that brings in product from 80
different countries, so what happens elsewhere has a huge impact
on our business. When we look at Europe, which, quite honestly,
includes many strategic countries for us, what’s going on over
there from a labour unrest standpoint and how that impacts our
ability to move freight and get the product here is going to affect
us going forward. It’s something we are not taking lightly. The US
is in an election year and that will have a big impact. We get a lot
of inventory from the US, so that’s a pressure we are focusing on.
Recently, Middle East (unrest) is an issue yet again. What is that
going to do to fuel pricing and how is that going to drive up our
costs? And then when we start looking within our own domestic
market and what’s happening within Ontario, we have a lot of
labour unrest in the province, whether it’s in the public sector or
with unions in the automotive industry, or the NHL players strike,
which is a huge impact on our organization on the wholesale part
– that’s 17-18% of our sales. The year ahead is definitely going to
have a lot of challenges.
Reardon: We can only do as good as what the economy gives us.
Our customers who give us freight, we find out from them what the
economy is going to bring us and we make adjustments to our transportation services to accommodate that, to try and provide open
gateways for them and improve the speed with which we move their
freight. Our challenges are more to take what the economy gives us
and to figure out how we can outperform those circumstances.
24
ct&l november 2012
CT&L: UPS has relationships with many shippers. In your discussions with them, are you seeing a clear pattern emerge with what will
drive their supply chain-related decision making for 2013?
Ramsay: A clear pattern is always hard to find, but building on
some of the comments from earlier, what we see companies focusing on really comes down to four things. One is the Canadian
dollar and what trend that has been on for the last while and what
that does for the Canadian exporter, particularly for exporting to
the US. The second is what is happening in the US economy.
About 70% of our exports still go to the US. There are also a lot of
things going on with Europe that have an impact on supply chains
and capacity and whether or not capital is going to be available
and how people are going to finance growth in the future. The
final one is the potential slowdown in growth of the emerging
markets: Brazil, Russia, India, China, and you can throw South
Africa in there as well. We’ve seen a few stumbles this year for
those economies and what that is creating for companies I speak
to is a high level of uncertainty. And with that uncertainty comes
a whole lot of caution. That caution manifests itself in a couple of
ways: One is they are not willing to invest as much and secondly
what they are really driving towards is being razor thin on inventory levels. The way that is impacting the transportation world is
that we are seeing smaller orders. Often, it’s the same total volumes we’ve seen in recent years, but broken up into smaller quantities. And that comes down to people not being willing to take
the risk for the big order, not knowing how quickly they are going
to be able to sell that through.
The other thing that I see as a pattern is looking outside Canada’s
borders. Not only for new markets for our manufacturing, but also for
imports. Looking for new sources and new ways of sourcing as we tie
in with infrastructure in countries we are not used to dealing with.
www.ctl.ca
t Days
CT&L: In relation to transportation and logistics, what is the top
priority for your company heading into 2013?
Nanos: Our top priority is efficiency. It’s part of our 3 Es: Efficiency, Ergonomics, Environmental. From a logistics perspective,
we are looking at a lot of automation in our retail service centres.
There is efficiency and cost savings attached to that. Ergonomically there are a lot of gains. Our workforce is getting older and
there is a high incidence of lost time due to musculoskeletal-type
injuries so that will help with that. From a transportation perspective, our buying patterns have changed. As Jim suggested, we are
buying a lot more LCL and LTL to find that sweet spot. That’s a
huge priority for us. And from a strategic perspective, we are constantly looking at different modes – whether that’s increasing water transportation on certain lanes of traffic, or rail on other lanes.
Those are definitely good opportunities for us.
Reardon: Specifically on my part of the business – this is key,
because intermodal is such a large growth segment for CN – is
meeting and exceeding the customer’s expectations. All of our
customers, and especially in the overseas market, have quite a few
headwinds to deal with. It’s our job to talk with them and try to
figure out where we can help them, whether it’s opening up new
gateways, entering into new markets with them, improving the
speed and reliability of the service or creating new products for
them. The knock against railways in the past was that we were set
in our own ways. So we are innovating and we are collaborating
and listening to our customers and trying to help them perform
better in the markets they are going after.
CT&L: When I speak with carrier executives, they tell me they need
to prioritize profitability after having taken some hard knocks during
the recession and slow economic rebound. At the same time, shippers
are also saying they want to keep their costs in line and improve customer satisfaction. Can the priorities between shippers and carriers be
brought into sync? What is the best way to do so?
Ramsay: I’m not so sure that when you dig deep enough into an
organization that there is that big of a contrast. Many leading organizations are very much focused on sustainability. We often paint
sustainability as being green, which is important, but it’s also making sure you have a business model that works not only today but
also in the future. UPS has been around 105 years; we want to have
a business model that gets us to the next 105 years. Our point of
view when working with customers is we want to give them that
kind of stability. Where you sometimes run into challenges is when,
during the grind of rate negotiations, you forget some of the longterm business issues you have. It’s interesting, as well, the contradiction between wanting to increase customer satisfaction as a key
www.ctl.ca
transportation management
priority at the same time as needing to drive out cost.
I look at it from a couple of perspectives. The first is that it’s
about efficiency. Think about how you run your business differently today than you did yesterday and how you will run it tomorrow to improve productivity. And, actually, productivity trends
have been pretty good in the transportation business. The other
side of that is also making sure your services as a provider help the
next person in the supply chain be successful. What is your quantifiable value proposition? What does that mean to your business
in quantifiable dollars? Good carriers want to understand their
customers’ business and how they can help that business. What
that helps the shipper do is have a business model that is sustainable, where you are not just taking the lowest-cost supplier, who
may or may not be there for the whole length of the RFP or who
doesn’t have the financial strength to deal with major impacts to
the supply chain.
There is a lot to it and, typically, I recommend to people,
make sure you know, as a supplier, who your customer is, and
as a customer, make sure you know your supplier inside and
out. Quite often I don’t see people go as deep as they should in
those areas.
CT&L: How will you be leveraging your supply chain practices to
help you address your priorities for 2013?
Nanos: We are looking at different parts and packaging is a huge
component of our supply chain and what we expect from our supply chain partners. We have two big packaging initiatives, from
which we are looking to gain efficiencies. With our cargo, generally
we weigh out, we never cube out. We have one initiative called the
light-weight bottle initiative and that involves taking what was, on
average, 515-520 grams-per-bottle down to 420 grams. That allows
us to gain some efficiencies on the transportation end and that’s
money in our pocket. Ergonomically that helps as well. There is also
the case conversion process that we have. We have put a maximum
case weight limit of 18.9 kg, which, again, allows us to gain some
efficiencies when we are loading the containers and that is saving
money. And going back to the ergonomic benefits, the average age
of our workforce is 51 and the workers in the stores are primarily
female, so lighter weight has a huge cost reduction.
We’ve also instituted floor loading containers. We have some
technology in our facilities – we call our it a destuffing platform –
that allows us to get on a platform and mechanically go up and
down and side to side. With that, from an ergonomics perspective,
the employee is able to lift and move from the power zone and from
a shipping perspective we are looking at using every nook and cranCT&L
ny on that can and that translates into more productivity.
ct&l november 2012
25
dash board
TransCore’s Canadian Freight Index
sees uptick in August
TransCoreCanadianSpotMarketFreightIndex2007-2012
TransCore’s Canadian Freight Index, which reflects spot market
2007 2008 2009 2010 2011 2012
%
%
freight shipments both within Canada and cross-border, reChange Change
Change
mained steady with an increase of 1% from July. Year-over-year Y-O-Y M-O-M
load volumes, however, were down 13% from August 2011.
Cross-border volume accounted for 71% of overall loads
Jan
173
214 140 171 222
220
-1%
1%
Jan
while intra-Canada freight made up 25% of the total load
Feb
174
217 117 182 248
222
-10% 1%
Feb
-10%
volumes.
Equipment availability increased 3% month-over-month
Mar
228
264 131 249 337
276 -18%
-18%
24%
Mar
24%
and 13% year-over-year. Available capacity has continued to
Apr
212
296 142 261 300
266 -11%
-11%
-3%
-3%
Apr
increase from the beginning of the year with August volumes
sitting at the highest levels year-to-date. August equipment
May
May
280
316 164 283 307
301 -2%
13%
May
13%
volumes were down only 3% from the peak posting levels of
Jun
288
307 185 294 315
295 -6%
-2%
-2%
Jun
August 2007.
Jul
219
264 156 238 245
233 -5%
-21%
Jul
-5%
While an increase was seen in both equipment and load
postings, the equipment-to-loads ratio for August widened
Aug
235
219 160 240 270
235 -13%
-13%
1%
Aug
-13%
to the largest variance in 2012, depicting a larger increase in
Sep
206
203 180 234 263
Sep
available capacity.
Top destinations for loads imported into Canada were:
Oct
Oct
238
186 168 211 251
Oct
Ontario (54%), Western (25%), Quebec (20%), and Atlantic
Nov
Nov
227
143 157 215 252
Nov
(1%).
Top regions for import equipment into Canada were:
Dec
214
139 168 225 217
Dec
Ontario (52%), Western (24%), Quebec (21%), and Atlantic
(3%).
TransCoreCanadianSpotMarketFreightIndex2007-2012
TransCore
Canadian Spot Market Freight Index 2007-2012
Regions of origins of loads within Canada were: Western
(43%), Ontario (27%), Quebec (22%), and Atlantic (8%).
The top states of origin for loads destined to Canada in order
of most loads were Ohio, Pennsylvania, Illinois, California and according to the latest results published by the Canadian General
Indiana. Texas dropped off from the top five to ninth place for Freight Index (CGFI).
The Base Rate Index, which excludes the impact of accessorial
the first time in months.
The top destinations for freight originating in Canada were charges assessed by carriers, increased by 0.9% when compared to June.
Average fuel surcharges assessed by carriers have seen a decrease
New York, Texas, Pennsylvania, California and Florida.
TransCore’s Canadian-based Loadlink freight matching da- from 20.18% of base rates in June to 18.8% in July.
“The total cost decrease was driven by lower fuel costs while base
tabase constitutes the largest Canadian network of carriers,
owner/operators, freight brokers and intermediaries. More than rates actually increased,” said Doug Payne, president and COO of
13 million full loads, less-than-truckload (LTL) shipments and Nulogx, which facilitates the CGFI. “However, base freight costs are
down 3% from a year ago.”
trucks are posted to the Loadlink network annually.
The CGFI is sponsored by Nulogx a leading Transportation
The first six columns include monthly index values for years
2007 through 2012. The seventh column indicates the percent- Management Solutions provider, and is used by shippers and carriage change from 2011 to 2012. The last column indicates the ers to benchmark performance, develop business plans, and secure
percentage change from the previous month to the current competitive agreements. It was developed with the assistance of Dr.
month. For the purpose of establishing a baseline for the index, Alan Saipe. The most recent results are available at the CGFI Web site:
www.cgfi.ca.
January 2002 (index value of 100) has been used.
Cost of ground transportation drops in July
The cost of ground transportation for Canadian shippers decreased by 0.5% in July when compared with June results,
26
ct&l november 2012
Rail freight continues rise over summer months
Canadian railways carried 27.5 million tonnes of freight in July, up
6.2% from July 2011. The gain was the result of increases in both
www.ctl.ca
domestic and international cargo loadings.
On the domestic front, freight loadings, composed of nonintermodal traffic (i.e., carried in bulk or loaded in box cars) and intermodal traffic (i.e., containers and trailers on flat cars), increased
4.7% to 23.9 million tonnes over the same 12-month period.
Non-intermodal cargo loadings rose 4.6% to 21.4 million
tonnes. The gain was the result of increased traffic in half of the
commodity classifications carried by the railways. The commodity
groups with the largest increases in tonnage were coal, fuel oils and
crude petroleum, and other refined petroleum and coal products.
However, there were notable decreases in loadings of wheat, followed by colza seeds (canola) and sulphur.
Intermodal freight loadings grew 5.6% to 2.5 million tonnes.
The increase occurred solely on the strength of containerized cargo
shipments, as trailers loaded onto flat cars declined.
Internationally, total rail traffic received from the US advanced
16.6% to 3.6 million tonnes. The increase was driven by both nonintermodal and intermodal traffic.
Geographically, 58.7% of the freight traffic originating in
Canada was loaded in the Western Division of Canada, with the
remainder loaded in the Eastern Division. For statistical purposes,
cargo loadings from Thunder Bay, Ont., to the Pacific Coast are
classified to the Western Division while loadings from Armstrong,
Ont., to the Atlantic Coast are classified to the Eastern Division.
US truck tonnage falls in August
US truck tonnage contracted 0.9% in August after increasing
0.4% in July, according to reports from the American Trucking
Associations.
“The sequential drop in August, while not erasing the cumulative 1.5% gain in June and July, was significant,” the ATA said
in a release. Compared with August 2011, the ATA’s seasonallyadjusted index was 3.2% higher. Year-to-date, compared with the
same period last year, tonnage was up 3.7%.
The not seasonally-adjusted index, which represents the change
in tonnage actually hauled by the fleets before any seasonal adjustment, was up 5.7% in August over July’s total.
“While there has been acceleration in housing during the last
few months, truck tonnage is being weighed down by a flattening in
manufacturing output and an unintentional increase in inventories
throughout the supply chain,” said the ATA’s chief economist Bob
Costello. “While choppy, tonnage has essentially been flat this year,
with August being the second lowest month of the year.” Costello
also noted that the seasonally-adjusted index in August was 0.3%
below January and 1.4% less than the high in March.
“Expect tough year-over-year comparisons to continue through
the rest of the year as tonnage grew nicely during the last five
months of 2011,” he said, adding the economy isn’t expected to
grow much in the second half of the year as manufacturing decelerates and excess inventories are worked off. As a result, tonnage is
expected to increase less than 3.5% in 2012, the ATA said.
RBC PMI signals expansion in September,
but at weakest pace in six months
Growth of Canada’s manufacturing sector lost further momentum
in September, with the weakest pace of expansion recorded since
March, according to the RBC Canadian Manufacturing Purchasing
Managers’ Index.
www.ctl.ca
The headline RBC PMI – a composite indicator designed to
provide a single-figure snapshot of the health of the manufacturing sector – registered 52.4 in September, which is evidence of a
modest expansion in Canada’s manufacturing industry. However,
having fallen from 53.0 in August, the rate of growth was the
slowest for six months. The weaker performance of the sector was
further highlighted by the quarterly average PMI reading falling
from 54.3 in the three months to June, to 52.8 in the three months
to September.
The RBC PMI is a monthly survey, conducted in association with
Markit, a global financial information services company, and the
Purchasing Management Association of Canada (PMAC). It offers
an early indicator of trends in the Canadian manufacturing sector.
The RBC PMI signalled that both output and new orders increased during September, partly reflecting greater client demand.
The rates of growth eased since August, however, with the latest
expansion in production the second weakest in the two-year survey
history. The rate of job creation also eased, slowing to a five-month
low. Inflationary pressures, meanwhile, picked up in September,
with input prices rising strongly since August.
“All things considered, particularly within the context of the
relatively weak global economic and manufacturing data, the
fact that Canada’s manufacturing sector continues to expand is
noteworthy,” said Craig Wright, senior vice-president and chief
economist at RBC. “While it hasn’t been entirely smooth sailing for
Canada’s broader economy in recent months, continued business
spending and improving labour market conditions, among other
generally positive factors, will help set the stage for GDP growth
of 2.1% in 2012.”
In addition to the headline RBC PMI, the survey also tracks
changes in output, new orders, employment, inventories, prices
and supplier delivery times.
Key findings from the September survey include:
• Growth of output and new orders slows to eight- and sixmonth lows respectively;
• Moderate rise in employment, but rate of job creation weakest
since April; and
• Input prices increase strongly over the month.
Incoming new work received by Canadian manufacturers rose
further in September, with a number of monitored companies
attributing this to greater client demand. The volume of new export orders also increased over the month, albeit only marginally.
Overall, total new orders rose moderately since August, but the
rate of growth was the slowest in six months and weaker than the
series average.
Manufacturing production rose in response to larger new order
requirements. However, the latest increase in output levels was
the second weakest in two years of data collection. Backlogs of
work and stocks of finished goods, meanwhile, were both broadly
unchanged from one month previously.
“The slowdown in Canada’s manufacturing sector was partly
reflective of production problems at some companies, with output increasing at the slowest pace since January,” said Cheryl
Paradowski, president and CEO of PMAC. “However, weaker
growth trends for new orders and employment, and in particular
new export work, also contributed and suggest that Canada continued to be hit by ongoing weakness in the global economy.”
ct&l november 2012
27
inside the numbers
Private fleet performs for-hire activities
76%
N/A
1%
NO
51%
76%
YES
48%
That’s the percentage
of private fleet managers
Scope of Canadian private fleet operations
who consider “attracting
Intra city
qualified employees”
24%
Intra provincial
to be the key challenge
31%
Interprovincial
facing their operation
International
27%
17%
Private fleet equipment owned vs. leased – tractors
Leased
14%
Owned
58%
Mix of leased & owned
22%
Not stated 6%
Private fleet equipment owned vs. leased – trailers
Leased 6%
Owned
57%
Mix of leased & owned 19%
Not stated
18%
UNDERSTANDING CANADA’S QUIET GIANT: PRIVATE FLEETS
Private fleets are a critical part of Canadian supply chains. Private fleet, or “own-account” transportation as Statistics Canada refers to
it, is estimated to account for 2.5% of Canadian GDP. Truck and delivery van services dominate private fleet transportation, accounting
for nearly 89% of the total. (The remaining 11% consists of small proportions of air, rail, water, bus and other ground transportation.)
The size of the Canadian private truck fleet (when costs are measured) is estimated to be worth about $35 billion, which is slightly
larger than the value of the Canadian for-hire fleet. Wholesale trade, retail trade and construction are large users of transportation
services in value terms and most reliant on own-account transportation. While own-account truck fleets can be found in large
companies such as The Hudson’s Bay and Molson’s, most private fleets are small operations.
With the last comprehensive study of private fleets published by the Canadian government more than 15 years ago, however,
finding accurate data on this sector has been difficult. Seeking to remedy this situation, Transportation Media collaborated with the
Private Motor Truck Council to publish the Canadian Private Fleet Practices Benchmark Study. The data shown above is from that study.
28
ct&l november 2012
www.ctl.ca
RSC-608 C
the bigger picture
There’s two partners in this marriage
Managing freight transportation successfully requires
true partnership between finance, logistics
F
reight costs often represent a significant percentage of a manufacturer or retailer’s expenses.
While many companies have highly qualified
CFOs and vice-presidents of logistics or transportation, the management of freight costs is often suboptimized. This appears to be the result of a lack of
collaboration between these executives with each
having a different set of metrics and perspectives.
Here is my take on why this is happening.
Dan Goodwill,
president of
Dan Goodwill
and Associates
has more than 20 years
of experience in
the logistics and
transportation industries in
both Canada and the US.
He has held executive
level positions in the
industry, including
president of Yellow
Transportation’s Canada
division, president of
Clarke Logistics, general
manager of the Railfast
division of TNT, and
vice-president of sales
and marketing at TNT
Overland Express.
Goodwill is currently
a consultant to
manufacturers and
distributors, helping
them improve their
transportation processes
and save millions of
dollars in freight spend.
He can be reached at
[email protected].
30
Business strategy versus transportation strategy
CFOs are focused on the strategic direction of the
business, on earnings, cash flow and return on invested
capital. They are under pressure to reduce the amount
of inventory tied up in supply chains. To a CFO, lean
inventory means “reduction in working capital tied up
in inventory.”
Vice-presidents of logistics and transportation are
preoccupied with efficient supply chains. Leaner inventories mean smaller production lots and faster transportation, which can command premium rates since they
preclude the use of cheaper, longer-transit modes, and
may even require paying a premium for expedited
freight. On the inbound side, this can cause plant or
production line shut-downs due to lack of raw material
or parts. On the outbound side, it can lead to empty
shelves or the loss of a customer and its associated revenue stream.
Inventory is a component of working capital.
Investors look at the levels of capital tied up in the
supply chain – the lower the better. However, if you
take your inventory, and therefore working capital,
too low, your profit margin may suffer.
Different perspectives on strategic
importance of transportation
CFOs are intimately involved in evaluating new business strategies. Business acquisitions can lead to production overlaps and duplicate supply chains.
Expansion to a new market may require the costly
creation of supply lines that don’t exist. Reducing
order-to-delivery cycle time to achieve a competitive
advantage means faster, more expensive modes
of transport.
Too often, however, transportation is an afterthought in these evaluations, despite the fact that
freight costs can significantly impact the viability of new
ct&l november 2012
business ventures. Evaluating the payback on new business strategies requires an accurate read on transportation costs, which can account for a good chunk of a
manufacturer or retailer’s operating costs. This demands that the CFO have a more granular understanding of these costs and how they are determined.
Unfortunately, a lack of clear communication between
logistics and finance can result in an incorrect financial
evaluation and adverse financial consequences.
Another area where CFOs and vice-presidents of
transportation may differ is whether or not to outsource the logistics function. Outsourcing transportation to a logistics company – one that provides the
required people, carrier capacity, warehousing and IT
systems – helps convert fixed costs to variable costs.
The asset-light approach to transportation may also
help reduce personnel costs, lower SG&A expenses,
reduce or eliminate insurance costs, improve return on
assets, gain fast access to extra capacity to support unplanned or future growth, or facilitate the reduction
in capacity in case of a business downturn.
However, the decision to outsource transportation
demands a certain level of expertise in the selection of
an outsource provider, and in putting controls in place
to ensure customer service levels are maintained. Also,
the true costs of a dedicated fleet may not be fully
allocated. For example, the outsourced fleet doesn’t
always have its own insurance and may just be piggybacking on the corporate insurance policy. Finally, if
the transportation function is outsourced, will the
company retain a minimum level of management expertise to provide proper oversight?
To sum up, reductions in working capital related
to inventory carrying costs should be balanced against
the potential for increased freight charges and lower
customer satisfaction levels caused by stock-outs.
CFOs need to work closely with their logistics colleagues to figure out what level of in-house and outside assets will best serve the company’s needs. To
make this decision, it’s critical to understand the total
cost of owning transportation-related assets, such as a
truck fleet or software system and the value added
from carrying a full-time professional and administrative staff. CFOs need to collaborate with their transportation counterparts to understand the true cost of
transportation and the impact of these costs on the
CT&L
viability of various business strategies.
www.ctl.ca
RSC-608 Canada Container Ad_Nov2011:Layout 1 10/14/11 1:28 PM Page 1
Chart the course
Simplify port operations
Deconsolidate efficiently
Go the final mile
View every turn
Execution Is Everything.
DRAYAGE • DECONSOLIDATION • TRANSLOAD • SORTATION • FINAL MILE DELIVERY
Ryder System, Inc. All rights reserved.
(888) 887-9337 www.ryder.com/rct