Supply Chain 2010: Building on the lessons learned

The recession may be coming to a close-at least officially. But the effects of that painful period linger on. Supply chain managers need to learn from the lessons of the past as they rebuild the foundation for a brighter future.

Sean Murphy, Associate Editor -- Logistics Management, 12/22/2009

With the recession in full swing, 2009 was a wild ride for some companies-and their supply chain managers. In a survey of more than 500 CFOs conducted by Basware in cooperation with Indiana University's Kelley School of Business and the University of Navarra's IESE Business School in Spain, 64 percent cited "reducing direct costs" as their top priority. It was, for many companies and their supply chain managers, the year to stay alive.
Fortunately, while many who are out of work would dispute word that the economy is improving, statistics from monthly reports from the Institute for Supply Management (ISM) have pointed to growth in the non-manufacturing sector, and even stronger growth in manufacturing. Findings like these have prompted many analysts to declare that the economy has not only finally ended its downward slide, but is on the way to recovering.

Recovery or not, one thing remains clear: The corporate world, and by definition the supply chain, has been changed forever. In this article, we discuss key trends that will impact the professional lives of the supply chain manager in 2010. These trends are grouped into four categories: education and professional development; technology; risk management, and global strategies. In each of these areas, the recession's lingering presence is plain-and supply chain managers would do well to heed its lessons.

"Renaissance" Education Needed: The recession saw, among other things, a massive cutback in staffing at most companies. Experts say there's a good chance those employees won't be hired back anytime soon. As a result, the employees that remain, including supply chain managers, must seek out new skills and expertise in new areas. In short, according to Kathleen Hedland, Director of Education and Research at the Council of Supply Chain Management Professionals (CSCMP), they must become renaissance people-if not reinvent themselves altogether.

And Hedland said companies are asking their people to expand on their knowledge and skills even more, and that will continue into 2010. In particular, Hedland said employers are finding short-term education most attractive, as it doesn't keep employees out of the office as much. Hedland said they are seeking out workshops and online self-study courses offered by organizations such as CSCMP. "Companies are slimming down. They've got a lot less people. They can't justify them being out of the office even for a full day," she said.

Some private options for online education have emerged in recent years. For example, Terry Nulty, executive director of Accenture's Supply Chain Academy, said his firm has offered staff training and schooling to corporate clients for the past six years. Originally, Nulty said, clients wanted overall, general supply chain knowledge. "That still hasn't changed," he said. But starting in early 2009, clients began seeking more focused training on specific supply chain processes and topics, such as inventory management and procurement. Nulty expects Accenture to be adapting its curriculum to the client's needs more and more often, with the one-size-fits-all approach no longer being the norm.

Once again, the recession seems to be the impetus. Nulty said the academy's clients are demanding more focused training due to their creating new key performance indicators. Those KPIs, Nulty said, are usually based directly on problems emerging during the recession.

But education is not just for professionals already in the working world. More colleges and universities are expected to expand on their degree offerings in 2010. Simon Croom, professor of supply chain management at the University of San Diego, said his school has just introduced a new undergraduate minor in supply chain management, an MBA program in supply chain management, and a Master of Science degree in supply chain management.

The reason, Croom said, was simple: more students want these programs. Just three years ago, supply chain management-related classes at his school were at 60 percent capacity. Today, they are full. "We're seeing more students taking the courses now then they ever have," he said.

The long-term benefits of supply chain management degrees are obvious, too. Croom said each year, an average of 60-70 graduates who studied supply chain management are finding jobs.

Online or in the Classroom?: The "which is better" debate between online and in-classroom course offerings may never be resolved. In 2010, look for more and more courses to be available online, and more people preferring online education. Yet the good old-fashioned classroom setting, it seems, will never go out of style. Whether you seek education online or in a classroom will depend on who you are, sometimes where you are, and definitely on what you need. ...

To keep reading, check out the full article here.

Railroad shipping: AAR reports volumes are down 8.9 percent for the week ending November 14

WASHINGTON-The Association of American Railroads reported this week that total volume for the week ending November 14 was down percent 8.9 compared to the corresponding week last year and 17 percent from the same week in 2007.


Last month, AAR officials said that they will be reporting 2009 weekly rail traffic with year-over-year comparisons for 2008 and 2007 from this point on, because at this time a year ago is when the economic downturn began to take hold.

Weekly carload freight, which does not include intermodal data, was 281,218 carloads, which topped the week ending November 7 which hit 274,486 carloads and the week ending October 31 at 275,349. Carloads were down 8.2 percent in the West year-over-year and 14.1 percent compared to 2007. And in the East, carloads were down 10 percent year-over-year and 21 percent compared to 2007.

Intermodal container and trailer volumes-at 208,056 trailers and containers-were down 7.7 percent year-over-year and are also up on a sequential basis compared to 206,890 for the week ending November 7. Intermodal volumes are up the last three weeks, and the week ending November 14 matches up favorably with the week ending October-the highest week of the year, which hit 208,941. Intermodal container volume was off 1.5 percent year-over-year and 8.3 percent compared to 2007, while trailer volume was off 30.2 percent year-over-year and 38.3 percent compared to 2007.

As LM has previously reported, while intermodal volumes remain down, there continues to be steady improvement in recent weeks compared to pre-Labor Day volumes, which were in the 189,000-200,000 range. In recent weeks, these volumes have settled into the 200,000-to-210,000 range.

In recent weeks, the AAR, railroad executives and industry analysts have stated that rail volumes continue to reflect the overall economy and also pointed out that volumes appear to be stabilizing and not getting incrementally worse.

Read the rest of the logisticsmgmt.com article here.

Green logistics: Industry expert cites ways of going green and cutting costs at the same time

WALTHAM, Mass.-It's possible to save money and the environment at the same time, and if you need proof, just look at the Green Machine.

That was the message Jack Ampuja, president of the consulting firm Supply Chain Optimizers, and executive director of the Center for Supply Chain Excellence at Niagara University in Lewiston, N.Y., was trying to get across at a Council of Supply Chain Management Professionals (CSCMP) New England Round Table event in Waltham, Mass. Tuesday night.

The event featured, among other things, a description of a new type of tractor for hauling freight, which Ampuja dubbed the "Green Machine" because of its environmentally-friendly design.

The tractor, he said, was conceived and built by a number of former trucking industry workers and veterans in Michigan. The tractor, Ampuja said, contains a long list of "green" enhancements, including nitrogen-filled tires (ordinary air escapes through the rubber over time), carbon-fiber springs, and a special hydrogen injector system for the engine.

Right now, companies like office furniture maker Hayworth, along with Pepsi, Anheuser-Busch and other companies, are expecting to save thousands of gallons of fuel per truck per year, and cut greenhouse gas emissions by amounts measured in metric tons.

But Ampuja was selling a point, not a truck: for all the cutting-edge improvements and patented design, Ampuja said the tractor is built out of off-the-shelf parts, and therefore costs the same as any other tractor on the market, so using them will not cost extra. If anything, Ampuja said, using them will save money long-term.

And that, Ampuja told the packed room, is the reality of the green movement in the corporate world.

"They (cutting costs and helping the environment) are not at odds," he said. "They complement each other."

Ampuja cited a recent study by the Aberdeen Group which found that leading companies are "greening up" by, among other things, redesigning logistics systems and redesigning packaging.

In addition to technological advances, Ampuja challenged the audience of supply chain managers, consultants and vendors to look to their own operations for other ways to go green and save money. Network optimization applications, he said, will be another major component of a green plan in the future, especially with oil prices expected to rise.

This week, prices passed the $80/barrel mark, and the room was silent when Ampuja asked if anyone thought prices would fall anytime soon. That will become a big problem, he said, for unprepared companies with poorly-organized supply chains.

Read the rest of the logisticsmgmt.com article here.

New Study Highlights Role of Third-Party Logistics Providers in Helping Shippers Adapt to Economic Challenges

The fourteenth Annual Third Party Logistics (3PL) Study examining the current global market for logistics outsourcing was recently released. The study surveyed shippers and logistics service providers in North America, Europe, Asia Pacific and Latin America. Key findings included:

* The economic downturn has created significant challenges for both shippers and third-party logistics providers (3PLs) – 82% of shippers are employing cost-cutting tactics and 60% are rethinking their supply chains and relationships with 3PLs
* 88% of shippers feel that IT-based logistics services are important, but only 42% are satisfied with the capabilities of their provider – as a result of this IT capability gap, shipper respondents reported a lack of the key performance indicators, alerts and visibility required for an adaptive supply chain and 3PLs reported similar difficulties in getting the data and commitment they need from shippers
* There are significant differences between how 3PLs evaluate their role in the supply chain and how they are viewed by shippers – 59% of shippers feel their use of 3PLs has a positive effect on customer service compared to 88% of 3PL respondents
* Shipper respondents devote an average of between 47% (in North America) and 66% (in Europe) of their total logistics expenditures to outsourcing and this is expected to increase in the next five years.

“Shipper-3PL relationships are being impacted significantly by the prevailing uncertainty and economic volatility in global markets,” said Dr. C. John Langley Jr., Professor of Supply Chain Management, Georgia Institute of Technology. “It is very important for 3PLs to mitigate or reduce any financial risk or service level impact that this may cause.”

Economic uncertainty and the use of 3PLs
Economic volatility has challenged shippers and 3PLs alike to contend with factors such as unpredictable demand, instability in fuel costs and currency valuation, and excess inventory. In response, not only are shippers attempting to cut costs, 77% are also seeking to improve forecasting and inventory management.

Cost reduction and improved reliability in services are the main factors likely to increase shipper respondents’ use of 3PLs. This includes converting fixed to variable costs (59%), expanding to new markets or offering new products (56%), and restructuring the supply chain network to improve financial performance (48%).

Supply chain orchestration
The study shows that while shippers continue to outsource logistics services that are more operational and repetitive, they outsource less frequently those that are more strategic, customer facing and IT intensive. However, economic volatility presents an opportunity for shippers to assess their supply chains and make changes designed to increase agility and responsiveness, reduce costs and reconsider their relationships with 3PLs to drive them deeper. Overall, 75% of shipper respondents agree that more strategic 3PL relationships would help them reduce costs.

In order to achieve a more strategic shipper-3PL relationship, shippers want to see 3PLs investing in enhancing their regional and vertical expertise to better understand their particular business. Shipper respondents will also need to be more forthcoming with their data and be willing to team with 3PLs to re-engineer business processes.

Read the rest of the mhia.org article here.

Why 3PLs need to build their brand

Over the past several years, the global third party logistics (3PL) industry has changed dramatically. While the demand for 3PL services has grown steadily, the major logistics service providers have expanded their geographical reach and broadened their service offerings. At the same time, the structure of the industry has changed not only through mergers and acquisitions, but also through new market entry by many companies, including some funded by private equity investors. 3PL company reorganizations and name changes have become commonplace.

These changes have fostered a degree of buyer confusion in the marketplace, and many large 3PLs fear a possible “commoditization” of their services in the eyes of those who currently buy their services or are considering doing so. If this is indeed occurring, existing and potential customers will become increasingly indifferent when choosing between logistics service providers. And this, in turn, will intensify the price compression pressures that already plague the 3PL industry.

A key question that needs to be asked here is: What are executives of those 3PL companies doing in response to these market developments? Specifically, what steps have large 3PLs taken in recent years to differentiate their service offerings in the marketplace while strengthening their brands? Further, is there more that those executives should be doing in those areas?

This article addresses the typical steps that companies should take in building, refining, and strengthening their brands—and in particular examines recent attempts by major 3PLs to do so. Branding literature forms the basis for discussion of the general case, and the branding steps taken by large 3PLs were documented through data generated during 2006 and 2007 in surveys of the CEOs of major 3PLs operating in three geographic regions: North America, Europe, and the Asia-Pacific region. (For more on the surveys, see accompanying sidebar). We conclude with suggestions for 3PL industry executives concerning their future branding efforts—and the potential positive implications of these efforts on the buyers of these services.

Read the rest of the scmr.com article here.

Transportation infrastructure: Funding options for next surface transportation authorization presented at House hearing

At a Ways and Means subcommittee hearing last week the top two members of the House Transportation and Infrastructure Committee—Chairman James L. Oberstar (D-Minn.) and Subcommittee Chairman Peter A. DeFazio (R-Ore.) presented their options for the lack of capital in the Highway Trust Fund (HTF), as well as recommendations for their recently-introduced six-year, $500 billion surface transportation authorization bill, the Surface Transportation Authorization Act of 2009.

This hearing came at a time when there are many questions about how to keep the HTF solvent and how to finance the new legislation.

Among the measures presented by Oberstar and DeFazio for funding the next surface transportation authorization were:

* restoring the HTF for emergency relief, vehicle safety research, and foregone interest;

* issuing $60 billion of 10-year Treasury bonds to finance increases in funding provided during the first several years of the bill, which would be repaid in fiscal year 2012 with revenue from the HTF and be retired in 10 years;

* requiring fuel tax exemptions to be reimbursed from the United States General Treasury Fund;

* increase the per barrel fee on crude oil and imported gasoline and diesel;

* instituting a transaction tax on speculative trading of crude oil futures;

* the implementation of other user fees like an increase in the Heavy Vehicle Use Tax, vehicle registration fees, and container fees, which would finance freight related infrastructure improvements (this would be comprised of a $10 fee on every TEU (twenty-foot equivalent unit) container moving through a U.S. port and raise $3 billion over six years;

* a freight waybill tax that would act as a sales tax on freight shipping costs, with a 0.1 percent tax on truck freight waybills that would raise $620 million per year and a similar tax on waybills for all transportation modes that would raise $740 million annually; and

* a transition from a gas and diesel tax to a vehicle miles traveled (VMT) fee system that charges users for each mile driven.

“There are many options for financing the Surface Transportation Authorization Act of 2009,” said Oberstar. “None will be popular. However, without new revenues, our highway, highway safety, and public transit programs face enormous cuts at a time when the nation’s surface transportation network requires a substantial increase in investment just to maintain current standards. By making this investment, we will transform the future of surface transportation in the United States.”

Read the rest of logisticsmgmt.com article here.

Logistics and Business Manufacturing: Economic Data Presents Mixed Views for Recovery

At a time when freight volumes remain depressed amidst the recession, coupled with reports indicating that the economy has “bottomed out,” it is very clear that those optimistic for a near-term recovery need to take a long-term view.

Some recent economic indicators for this sentiment include:

* A recent report from the Federal Reserve indicating industrial capacity usage in May, at 68.3 percent, hit a record low in May.
* Retail sales in May fell 4.7 percent year-over-year, according to the National Retail Federation.
* The U.S. trade deficit rose to $29.2 billion in April from $28.5 billion in March, with (adjusted for inflation) exports and imports down 4.3 percent and 2.7 percent, respectively.

The news is not all bad, though. Recently-released data from Panjiva, an online search engine with detailed information on global suppliers and manufacturers, notes that May represents the third consecutive month that there was an uptick in the number of global manufacturers shipping to the U.S. May saw a two percent bump, following gains of two percent in February and eight percent in March. Panjiva said this is the first time it has seen three consecutive monthly increases since it began tracking this metric in July 2007.

Even though these numbers are heading in the right direction, the company cautioned that last spring it also saw some uptick in the number of global manufacturers shipping to the U.S., leading to the possibility that there may be a seasonal component to these findings. Also, the company noted the two percent May gain is “modest,” with the recovery to pre-trade levels likely to be a while.

“We are seeing some encouraging signs, but there is still a low level of overall activity in an absolute sense,” said Panjiva CEO Josh Green in an interview. “It feels like the ‘deer in the headlights’ moment is over.”

Another positive, he noted, is that the sense of economic panic from earlier in the year seems to be gone, but there is still a long way to go. Companies continue to be cautious in their approach to placing orders, according to Green, and they are much more cognizant of the risks that are in their supply chains.

Read the rest of the scmr.com article here.

Trucking news: ATA reports that its For-Hire Truck Tonnage index is down 2.2 percent

ARLINGTON, Va.—In another sign that the economy still has a ways to go before it fully recovers, the American Trucking Associations reported this week that its tonnage index was down again in April for the second consecutive month.

The ATA said that its advanced seasonally adjusted For-Hire Truck Tonnage Index was down 2.2 percent in April, following a 4.5 percent decline in March. This index started the year fairly strong, with a 4.5 percent cumulative gain in January and March.

The ATA’s seasonally -adjusted index equaled 99.2 (2000=100), which represents its lowest level since November 2001. March’s index was also dismal at 101.4, which at that time was the lowest level it had seen since March 2002.

And its not seasonally adjusted (NSA) index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, was down 2.9 percent from March at 101.6. The ATA’s not seasonally adjusted index in March was up 10.2 percent over February at 104.7, indicating that fleets reported higher volumes in January. But ATA officials said that this gain falls short of the typical 15-20 percent increase that typically occurs from February to March.

Another sign that tonnage levels remain depressed is that tonnage contracted 13.2 percent year-over-year in April, representing the worst year-over-year decrease of the current cycle and the largest drop in 13 years, according to the ATA. This comes on the heels of a 12.2 percent annual contraction from March 2009 to March 2008.

Bob Costello, ATA Chief Economist, said truck tonnage is being impacted by the recession and the massive inventory correction that the supply chain is currently undergoing.

Read the rest of the logisticsmgmt.com article here.

Global logistics/supply chain management: Swine Flu may give shippers one more worry

- Interesting article from logisticsmngmnt.com

WASHINGTON—Transport and logistics analysts are questioning many of the measures now in place to respond to this latest health threat.

While not addressing supply chain concerns specifically, Department of Homeland Secretary, Janet Napolitano, said both the U.S. and Mexican governments are taking steps to reduce the potential for further Swine Flu transmission.

“Our goal is simple,” she said, “to communicate information quickly and clearly for our citizens, to rapidly address any new cases that emerge, and to have the capacity to effectively limit the spread.”

At a press conference held yesterday, Napolitano said that increased surveillance efforts have resulted in the identification of new cases.

“Early identification is vitally important to the overall effort. In the event that additional cases or sites of infection occur within the United States we want to recognize them quickly and then respond rapidly with appropriate guidance for the public health community and the general public in the infected area,” she said.  “We also want to ensure medical surveillance and testing and the provision of medications and medical supplies are distributed where necessary.”

The recent Swine Flu outbreak highlights a need for supply chain resilience and vulnerability assessments, said industry analysts. The latest flu scare is just one example of the vulnerability to risk of offices, logistics facilities or back-office locations, whether in Mexico City or elsewhere,” said Philip Damas, division director, Drewry Supply Chain Advisors.

Read the rest of the article here.

What is 3PL (Third Party Logistics) ?

A third-party logistics provider (abbreviated 3PL) is a firm that provides outsourced or "third party" logistics services to companies for part, or sometimes all of their supply chain management function. Third party logistics providers typically specialize in integrated operation, warehousing and transportation services that can be scaled and customized to customer’s needs based on market conditions and the demands and delivery service requirements for their products and materials. (source: wikipedia.com)

United Warehouse Facilities specialize in:

• Food & Grocery Products
  
• Tobacco
  
• Electronics
  
• Candy
  
• Paper Products
  
• Medical Supplies
  
• Misc. Consumer Goods
  

All of our distribution and logistics facilities are :

• Single story tilt-up structures
  
• Equipped with numerous truck doors
  
• Rail served by UP or BN
  
• Easily accessible to and from the freeways
  
• Protected by automatic sprinklers and electronic security systems 
  

About United Warehouses

Founded in 1948, United Warehouses has been owned and operated by the same management team since 1974. Subsequent growth in operations necessitated the addition of two trucking companies and an increase in floor space from 70,000 to 700,000 square feet in the Seattle, Washington area.

Our services include:

• Third party logistics
• Public warehousing
• Contract warehousing
• Transportation (TL, LTL, Drayage, Retail Delivery)
• Consolidation
• Cross-docking 

For more information on our third party logistics and public warehousing facilities you can contact us at 206-682-4535 or simply complete our Bid Request form and we will promptly reply to your needs.