Thought Leader

Mitch MacDonald, Group Editorial Director, DC Velocity Something's Gotta Give The recession may be receding into the rear view mirror, but that doesn't mean the freight community's worries are behind it. In fact, for at least one segment of the business, the worst may be yet to come. Just as the freight recovery gets under way, the nation's truckers find themselves facing a host of new challenges that could put a serious crimp in their operations. And that's a concern not just for the folks who run trucking companies, but for the folks who use their services as well. The source of their worries? A legislative climate that carriers say is downright hostile to truckers. "There is a certain amount of antitruck rhetoric in Washington today," YRC Worldwide COO Michael Smid said at the NASSTRAC conference in April. The result has been a flurry of regulations and proposals aimed at making trucking operations safer, greener, and more union friendly. They include the Federal Motor Carrier Safety Administration's upcoming Comprehensive Safety Analysis program, proposals to further restrict truck drivers' hours of service, proposed "cap and trade" legislation, efforts to fund highway improvements via increased fuel taxes, and various initiatives viewed as concessions to organized labor. Trouble is, the regulations would do more than just make truckers greener, safer, etc.; they would also drive up their costs - and by extension, the rates shippers pay. "There are at least five issues at play," Mike Regan, president and CEO of the consultancy TranzAct Technologies, warned at the NASSTRAC conference. "If they swing the wrong way, your rates will go up." And these rate increases could be substantial. According to some of the conference speakers, any one of these initiatives alone could result in a rate hike of 2 to 4 percent. If they were all to hit at once in a so-called "perfect storm" scenario, freight rates could shoot up as much as 15 to 20 percent. If this scenario plays out, don't expect shippers to go down without a fight. Speaking on a shipper panel at the conference, Candace Holowicki, manager of logistics for building products maker Masco Corp., noted that while she understood the need for carriers to cover their costs, her budget may not support double-digit rate hikes. "I envision a lot of trouble explaining to my management why we need all these rate increases," she said. "I'm trying to be an advocate for both sides of this, but I can't give everyone a 20-percent increase, so don't ask—the money's not there." Regan warned shippers, however, that "just say no" won't be one of the options. Refusing to accept the hikes won't make the problem go away, he said. "Whether it's in your budget or not, you're going to have to pay it. If you don't, your freight simply isn't going to move." No one wants to see that kind of standoff. But resolving the problem won't be easy as long as the anti-truck sentiment persists on Capitol Hill. As the truckers see it, the key to turning the negative perceptions around is to raise awareness of their industry's vital contributions to the nation's economy. At the conference, both YRC's Smid and FedEx Freight President Bill Logue emphasized the importance of getting that message out to Congress. "A lot of education is needed," Smid said. "There are people working on … congressional committees that if they had their way, there would be no trucks at all. They have very little idea of what trucks carry or the role they play in the economy." That's where shippers come in. The industry has a monumental public relations task ahead of it, and truckers can't do it alone. Make sure your elected representatives know what they need to know. Explain that the old saw "Freight don't vote, people do" no longer holds true. Let them know that freight interests do vote, and when they do, they back candidates who "get" why trucking is so important to us all. Back to top   Bill Graves, President and Chief Executive, American Trucking Associations The Argument Against Cap And Trade One of the most challenging issues the trucking industry will confront in 2010 is pending climate change legislation that advocates a carbon cap-and-trade (or cap-and-tax) system.   Over the past several years, the trucking industry has taken significant steps toward becoming a more sustainable industry. Our broad environmental initiative resulted in sizeable reductions in greenhouse gas emissions from idling. The vast majority of carriers also have enacted policies and procedures to slow their trucks to no more than 65 mph, improving fuel economy and highway safety. To further secure improvements in this area, we have asked the federal government to mandate speed governors set at 65 mph or below for all trucks and enact a 65 mph national speed limit. Although we support those and other environmentally friendly proposals, the industry cannot back a cap-and-trade system that will ultimately tax all consumers. Trucking companies are not discretionary fuel users, meaning we do not choose when or where to travel. The increase in diesel prices that would result from the implementation of cap-and-trade would overwhelm small, family run trucking companies, many of which struggle to pass on rapid increases in diesel fuel prices. The companies that survive would be challenged to cope with more expensive fuel that constantly fluctuates in price. Ultimately, these increased fuel costs will be borne by consumers. Trucks haul nearly 100 percent of consumer goods at some point in the supply chain and the resulting diesel price increases would affect everyone from families buying a gallon of milk to hospitals purchasing medicines and surgical equipment. The economy-wide cap-and-trade legislation being considered by Congress could result in $1.3 trillion in new diesel fuel costs being passed on to consumers. The trucking industry’s plans for reducing carbon emissions, including a reduction in highway congestion and increased fuel efficiency standards, would have a more significant impact on greenhouse gas reductions without harming American families already struggling to recover in this economy. Back to top   Nariman Behravesh, HIS Chief Economist, IHS Global Insight Top 10 Economic Predictions for 2010 The U.S and world economies have emerged from recession, and the recovery process has begun. Unfortunately, for most developed economies, this recovery will not feel like one in its early stages. Strong tailwinds (policy stimulus, improved financial conditions, and pent-up demand) are being partially neutralized by equally strong headwinds (rising unemployment rates, lingering hangovers from housing bubbles and the financial crisis, and the likely winding down of fiscal stimulus). Consequently, global GDP will grow only 2.8% in 2010—much better than the 2.0% drop in 2009, but well below the 3.5 – 4.0% trend rate of growth for the world economy. Most emerging markets, particularly Asia, will outpace the developed economies next year. The U.S. economic recovery will begin the year slowly, but Europe and Japan will rebound even more slowly. 1. The U.S. recovery will start slowly. IHS expects U.S. growth to be stuck in a 2.0 – 2.5% range for much of 2010. While housing and capital spending on equipment are expected to show respectable gains, with consumer spending rising just 1.8%, stronger gross domestic product (GDP) growth will be impossible. One of the biggest drags on spending by households will be the unemployment rate, which should move up to around 10.5% during the first quarter. 2. Europe and Japan will rebound even more slowly than the U.S. Europe and Japan suffered through deeper recessions than the United States and are likely to see more modest recoveries. The Eurozone and the U.K. economies are expected to grow 0.9% and 0.8%, respectively, in 2010. Some West European economies—Iceland, Ireland, and Spain—will continue to contract next year as the aftershocks of the housing bubbles and financial crises take their toll. Japan, on the other hand, will do better with GDP growth of 1.4%. 3. Most emerging markets—especially in Asia—will outpace the most developed economies. Growth in all the emerging regions will recover in 2010 and, with the possible exception of Emerging Europe, will outpace the United States, Europe, and Japan. Non-Japan Asia will be at the forefront, with GDP growth of 7.1%. Latin America, the Middle East, and Africa will see gains in the 3 – 4% range. The laggard will be Emerging Europe, which will expand only 1.7%. 4. Interest rates in the G-8 economies will remain very low. While some central banks (notably in Australia, Israel, and Norway) have already started to raise interest rates, the Federal Reserve, European Central Bank, Bank of England, and the Bank of Japan are unlikely to raise rates before the third quarter of 2010. Nevertheless, some Asian central banks, notably the Reserve Bank of India and the People’s Bank of China, may pull the trigger sooner—in the first or second quarters. 5. Fiscal stimulus will begin to ease. Aggressive fiscal stimulus by some countries (especially the United States and China) helped to cushion the blow of the financial meltdown a year ago. With that crisis now over, though, most countries have no plans for further stimulus, and some are set to tighten (e.g., the January boost in the value-added tax in the United Kingdom). Even in the United States, where there is talk of a second stimulus package, there is no money for anything more than a symbolic attempt to relieve some of the pain from job losses. 6. Commodity prices will move sideways. The extent of the recent rise in commodity prices cannot be justified given the slow pace of the recovery. Some of the increase can only be attributed to investor activity. As such, IHS believes that oil and other commodity prices will likely soften in the coming months. Specifically, oil prices are expected to fall from current levels (in the $75 – 80/barrel range) to around $65/barrel by next spring, before gradually moving above $70/barrel by the end of 2010 as the global recovery picks up steam. 7. Inflation will (mostly) not be a problem. In most regions of the world, inflation will remain tame. Rising unemployment rates will put a big damper on wage increases, and large amounts of excess capacity worldwide will limit the ability of businesses to raise prices. The only inflationary pressures will be in countries that are growing rapidly (mostly in Asia) and countries that peg (or closely tie) their currencies to the dollar (principally in the Middle East and Asia). 8. After improving for awhile, global imbalances will worsen again. The deep U.S. recession was a key factor in the current-account deficit plunging from more than $700 billion in 2008 to near $450 billion in 2009. Nevertheless, IHS expects this deficit to widen by about $90 billion in 2010. Some of this is because the U.S. economy will be growing faster than most other developed economies, but continuing dependence on export-led growth in several large economies (e.g., Germany, China, and the rest of Asia) is also a factor. 9. The dollar may strengthen a little, it is on a downward glide path. Given the slightly better prospects for the U.S. economy, relative to those of Europe and Japan, the dollar is likely oversold. This means there could be a slight appreciation in the coming months. Nevertheless, given that the progress on reducing global imbalances has been temporary, the downward pressure on the dollar will continue. This downward movement is likely to be the greatest against emerging-market currencies because of stronger growth prospects in those economies. 10. The risk of a “hard W” is still uncomfortably high. There is about a one-in-five chance of a double-dip or “hard W” downturn. This could be triggered by any number of factors, including a premature tightening of fiscal and/or monetary policies, a major retrenchment of consumer spending in the face of rising unemployment, a sharp and sustained rise in oil prices (either because of a supply disruption or increased speculative activity), and the failure of a few large financial institutions. It would probably take some combination of these factors to drag global growth back into negative territory. Back to top
		Bill Hutchinson, Director of Americas Fulfillment and Logistics, Dell Inc. The Long View Many of the factors that revealed the critical importance of solid logistics management, such as $140 per barrel oil last summer, have subsided over the past 12 months.

The recession has driven freight volumes and carrier pricing power to new lows, causing many shippers to limit their cost improvement focus to bidding their business and using current market conditions to reduce cost. While that strategy can drive some short-term gains, the better play is to maintain a balanced approach to managing your business to better prepare you for the market stability and economic growth ahead. Here are four things you should be doing to prepare your organization to compete:

1. Optimize often - many savvy shippers are taking a more holistic view of their supply chains and have incorporated network optimization tools and operations research capabilities into their operations teams. A network analysis is no longer something you run every 3 years with an outside consultant; it is the key to understanding the inflection point when the total landed cost of your product is uncompetitive. The best supply chain companies understand these trigger points and have developed contingency plans to preserve their company’s competitive position in the market.
2. Focus on the customer – logistics cost that doesn’t benefit your bottom line or that isn’t valued by your customer is waste. Take the opportunity to introduce mode-shift alternatives to dramatically improve cost for segments of your business that may be less sensitive to cycle time.
3. Chose partners wisely – the best carrier to partner with over the long term is the one that has the lowest cost model to support your business, not the one that happens to offer the lowest rate on your latest bid. Take the time to understand how your business complements your carriers’ other customers to drive better utilization in their network. More companies are turning to the same logistics providers that serve their competitors to share in the benefits of a better utilized network.
4. Solicit feedback from the outside- many of the best supply chains and fulfillment networks may not reside in your particular industry vertical. Take the time to learn about supply chains that carry different products, but have similar attributes in product handling characteristics, cycle time requirements, and delivery service offerings. The carriers and logistics providers that you deal with know what you do that drives cost and unneeded complexity, so take the time to listen to them.

The turmoil of last summer’s market dynamics gave logistics organizations a moment in the spotlight, as the CFOs of the world tried to understand what $140 to $200 per barrel oil would do to their bottom line. With relaxed rate levels caused by freight volume declines, many organizations have elected to bid their business to take advantage of today’s shipper pricing power. Failing to focus on more sustainable ideas to improve the efficiency of your entire supply chain, including your logistics providers, will leave you scrambling when the market stabilizes and heads the other direction.

Dell listens to customers and delivers innovative technology and services they need and value. For more information, visit www.dell.com.

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Security is a necessity today; with the nation on heightened security alert, the transportation industry must be prepared. By its very nature, the transportation industry places goods in a more vulnerable environment than when they are at a shipper’s or receiver’s facility. It’s not like having your goods in a warehouse; you cannot post a security guard, install lights or a closed circuit TV or build a fence around your freight. Expensive freight is moved along highways and by sea everyday and physical security devices and new tracking devices are becoming more of a necessity for trucking and container companies. New security procedures and rising insurance costs are also driving companies to secure their fleet. Before 9/11 companies would lock and seal only some loads that were deemed high value, and accepted theft as a cost of doing business. Today many security conscious companies have taken steps to combat theft of their equipment and products. These security procedures range from “low tech” physical security devices to “high tech” tracking devices. These devices are becoming more affordable, allowing companies to develop security programs incorporating one or both of these security devices, and drastically reducing the number of thefts among their company.

Physical Security Solutions

High security locks and seals are not a luxury item for transportation companies anymore. Physical security has become an effective tool in preventing cargo theft within the transportation industries security programs. Companies using high quality padlocks, king pin locks, air cuff locks and seal guard locks have effectively prevented cargo thefts.

When choosing a physical security device, a company must take into consideration their: fleet, equipment and employees. High security locks must be of high quality and be flexible to the companies needs. The physical security company’s products and reputation must also be reliable to ensure compatibility and service of those locks in the future. These steps along with a solid company policy will ensure a seamless security program.

Trailer Security

High security padlocks must be resistant to physical attack and being picked. These locks also must be able to withstand the harsh environments that containers and trailers are exposed to. These padlocks also need to be user friendly, allowing the company to set up a system that is flexible, yet provides the utmost security for their equipment. Characteristics of a good high security lock allow for master keying systems and restricted keyways, limiting the possibility for unauthorized duplication of keys.

In addition to securing rear trailer doors, companies must evaluate their need to secure unattended drop trailers and terminal trailers. There are many options including providing a secure drop yard for loaded trailers, which minimizes theft occurrence. High security king pin locks can be used to prevent unauthorized fifth wheel hook ups to trailers. Effective king pin locks should be able to be keyed into a company’s master keying system, allowing for added security. High security king pin locks should be constructed of heavy duty steel and be resistant to physical attack and be pick resistant.

Transport Security, Inc. supplies both trailer and tractor high security locks that meet the security demands of the transportation industries.

The ENFORCER® Adjustable Lock for example, is a portable heavy duty lock that consists of 10 gauge chrome plated spring steel body and the locking component is surrounded with cast iron, preventing tampering. This device allows for a tight fit on virtually all containers and trailers and is secured with an ABLOY® lock that provides superior performance in weather and is highly resistant to physical attack.

Tractor Security

Thieves are not only stealing loaded trailers, but also taking the tractors. These tractors in some cases are then used to steal trailers. Properly securing these expensive tractors starts with driver education and responsibility. Drivers must always lock doors, turn off the truck and secure the tractor brakes with a high security air cuff lock, preventing the release of truck and trailer brakes. Theft of a truck can happen within a few seconds of a driver leaving his truck unattended at a truck stop. Air brake locks must be user friendly, allowing the driver to easily attach the device to his brake nozzles within seconds. Properly securing a tractor can help prevent thieves from easily driving away with not only a loaded trailer, but an expensive tractor.

The Air Cuff™Lock is an example of a brake lock that is a two part lock made of high impact resistant material and secured with an ABLOY® lock cylinder. The lock is user friendly and is installed on the brakes within seconds, completely locking out the tractor and trailer brakes.

Preventing seal integrity has become more of an issue since 9 /11, especially with shipments of food and chemicals. Shippers have refused loads that show evidence of seal tampering, costing companies thousand of dollars. We have come to the point that we need to protect the seals themselves. Seal guard locks provide a barrier box that prevents unauthorized removal of cargo seals. These devices are made of a high strength steal and withstand physical attack. These units can be used in tandem with trailer locks to protect the cargo seals’ integrity.

With heightened security for the transportation industry, physical security has merged with high tech tracking devices. These tracking devices enable a transportation company to accurately locate their assets in transit. There are an abundant amount of tracking devices on the market today, each having their own advantages and disadvantages depending on your companies needs. Three of the most popular types of tracking devices include GPS, A-GPS (Assisted GPS and CDMA (Cellular). With any tracking technology your company chooses, researching the product and the supplier is very important, given this can be an expensive investment. Companies should compare technologies and run specific tests with their equipment and staff, making sure the technology is compatible with their company.

Tracking Technology

Basic GPS units have been around for years with great success. These devices collect and store data such as time, latitude and longitude from GPS satellite while the unit is in use. Once the unit returns, the information on where the unit has been can be downloaded onto a computer into easy to read maps. These devices are accurately able to show stops and starts, location, speed and other important data. GPS devices tend to be bulky in nature and require external antennas mounted on trailers and containers and must be able to “see the sky” in order for the unit to work effectively. This limits the use of units in underground parking garages and warehouses, where thieves are more likely to transport stolen cargo and equipment. These units also tend to be “power hungry”, limiting their battery and power life. These units are very effective for those companies who require a fleet management device for locating their fleets and for time management of deliveries.

A-GPS is a fairly new type of GPS device that has all of the features of basic GPS, but is more effective in areas where GPS is not. A-GPS is able to be very covert and does not have to “see the sky”, with an internal antenna in some cases. Many of these devices can be the size of a cell phone or smaller. Many devices have self contained batteries, making it completely portable allowing them to be concealed in freight. This allows less chance of a thief discovering and disengaging the unit. A-GPS allows for real time tracking of an asset that can easily be seen on a laptop or computer, in real time sometimes reporting locations within seconds of “calling” the unit. With the compatibility of these units and complete user control, allows security personnel to have an exact location of their asset at their fingertips. Another feature A-GPS offers is “geofencing”, which allows security personnel to define a location they want their asset to stay inside of, (ex. Terminal or certain route) and are notified via email or cell phone when their asset leaves the defined “geofence”.

Accurate locations of assets with this technology are made easier, with mapping technology that shows exact street names and major landmarks. These devices are also less “power hungry”, therefore allowing a longer battery life, in some case as long as a month. This makes these units more effective for longer shipments along the supply chain. Some of these newer devices use CDMA technology, which allows the unit to incorporate the cellular towers and technology for more accurate locations. Combining all of these features allows A-GPS/CDMA devices to provide a complete range of anti-theft and supply chain management tracking applications.

Conclusion

Technology is evolving everyday, with more sophisticated tracking devices and physical security options for the end user. Companies looking to secure their entire fleet are now combining the “tried and true” physical security products with the new technologies of the tracking devices, allowing for a complete security program. Ultimately saving the company money and lowering the risk of their cargo being stolen. Security programs must be thought out and well planned in order for the chain to be effective. Contact: Nick Erdmann Transport Security, Inc. / ENFORCER® Tel: +1 630 961-3202 Email: nick@transportsecurity.com Website: www.transportsecurity.com Transport Security, Inc. / ENFORCER® has been providing high security cargo solutions for trucks, trailers and containers for over 25 years.

Transport Security, Inc. / ENFORCER® has been providing high security cargo solutions for trucks, trailers and containers for over 25 years. Contact Nick Erdmann at 630-961-3202 • Email • www.transportsecurity.com

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As we work with customers, we find that most of them do not have extensive or robust processes in place for these initiatives. However, because of this, these initiatives can be very fruitful by applying just a few principles. We have found the most effective approaches involve focusing on the following areas:

1. Eliminate duplication and redundancies: Ask the people doing the work; they know exactly what wastes time and effort.
2. Reduce gaps and overlaps: Are there customers that are being neglected? Are customers or employees confused about who they should go to with questions or issues?
3. Refine or streamline unexamined processes: Examine hand-offs and inter-dependencies, especially in those areas that have different reporting lines. Target-rich areas included customer service and sales, production and transportation, procurement and supply-chain management.
4. Eradicate faulty assumptions: Identify non-revenue generating processes and question why they are being performed. You may not like the answers.
5. Assign ownership to all key results: Often companies are able to drive results and cut costs by assigning direct ownership and accountability to a key individual, rather than the “all for one, one for all” approach.

It doesn’t take sophisticated techniques to be effective when looking for areas to cut costs. The most effective approaches to efficiency and cost-cutting measures have commonly had:

• Project accountability defined • Cross functional teams
• Senior management launch and involvement
• Consistency and clarity in communication of ongoing progress
• Emphasis on building momentum through small wins
• Clearly-defined widespread sharing of the rewards of success

By applying these principles and focusing on the areas mentioned above, you can effectively cut costs and increase your efficiency.

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After all, isn’t the master plan written about in supply chain textbooks as a highly desired theoretical and hopefully practical objective? Then, after taking some time to reflect, I am reminded of the challenge and complexity associated with providers of logistics services actually making good on promises such as global integrated services, and of customers preparing themselves to be effective buyers and users of such services. Unfortunately, and regardless of which side of the provider-customer relationship on which you happen to be … there are still huge challenges to achieving the objectives of the “master plan.”

Perhaps the greatest “shared” challenge is that of forming and growing successful collaborative relationships between users and providers of logistics services. Unless a relationship is so transactional that that a simple purchaser-vendor model may suffice, it is just not realistic to expect relationship success without thinking of the concept of collaboration in terms of “a matter of life and death.” Without making sure that individual organizational objectives are aligned with what it takes for a successful relationship, and also aligned what it takes for a successful supply chain, the likely result will not be very pretty.

In the words of Dr. Michael Hammer, author of Reengineering, logistics is the “sweet spot” for collaboration. Considering that success in any aspect of logistics typically requires multiple organizations to work together, doesn’t it make sense that collaboration is rightfully viewed as a necessary condition for success in logistics and supply chain management?

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In this case, what you might think sounds like rhetoric is reality: the operation of triple trailers is a powerful supply chain productivity tool that reduces emissions and improves highway safety.

Currently we operate triples in 10 states. Use of this environmentally-friendly combination prevents approximately 125,000 tons of carbon emissions annually. Reduced emissions and improved safety. Triples have a highway safety record approximately 30 percent superior to that of other combination vehicles. The supply chain benefits of triples are real; unfortunately, the politically-oriented limitations on expanding this productivity tool are also real. There is currently a federal freeze on the expansion of triple trailer routes.

Think green. If you see a presidential candidate or a member of Congress on the campaign trail, talk to them about the use of triple trailers as a pathway to increased productivity, reduced emissions and improved highway safety.

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Firms as diverse as IBM, 3M, Dell, and General Motors are vertically disaggregating at an often blinding pace, delegating many of the activities they once performed in-house to a network of specialist suppliers. However, although outsourcing significant portions of product development and manufacturing may provide a competitive advantage, coordinating the outsourced pieces may indeed create new challenges in product development and procurement along the supply chain interface.
 
Many shippers take great care in focusing on their core competencies, and then select the areas in which they have a “competency gap.” These are areas that are critical in delivering on their value proposition yet are not a core competency. From a transportation and logistics perspective, these potentially outsourced activities can include export and import execution, transportation management, shipment visibility, merge-in-transit programs, modal optimization, landed cost optimization, “final mile” deliveries, and vendor managed inventory. In operations, these activities can include global workforce management, vendor-managed inventory, and service parts management. In fact, several shippers at the seminar discussed that they now even outsource manufacturing — a function that many traditionally consider a core competency.
 
In whatever you decide to outsource, be customer-driven in your decisions. Take Lenovo, for example. As a leading manufacturer of PC laptops, Lenovo is focused on what customers want (typical of most companies these days): Best price, best quality, best service. Like many other shippers, Lenovo focuses on five fundamental areas which help them to deliver on these expectations:
 
• Speed to market and speed of deployment.
• Value, which is defined by the benefit less the cost.
• Innovation by creating benefit through differentiation.
• Quality, which is all about execution. This is defined by the need to get it right, on time, every time!
• Service, through which people make the difference.

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In today’s era of modest, (if any), reductions in logistics spend by shippers, getting control of inbound freight can deliver the ROI mother lode.

Managing inbound and non-inventory freight takes a different management “muscle” than managing outbound freight.  While every customer’s needs are different, there are several predictable challenges and pitfalls when launching and managing these programs successfully. At the outset, it is critical that a shipper’s corporate management team understands and supports the effort. It’s important they take the initiative to promote cooperation between the historically divergent interests of logistics and purchasing departments. When these two departments cooperate, they can create powerful organization-wide strengths and returns.

During our three decades of managing inbound programs for customers, our company has identified five core values good inbound and/or non-inventory programs deliver. During the first year or two, good programs deliver direct logistics and HR cost savings (1 and 2 on the following list). As these programs mature, and the initial low-lying waste and inefficiencies have been identified and wrung from the system--deeper analysis,  process enhancements, reengineering and other cost reducing initiatives begin resulting in systemic, long-term supply chain savings.

The five core values of good Inbound programs:

1. Freight bill cost containment & proper allocation of expenditures
2. Human Resource deployment to more leveraged R.O.I. activities
3. 100% carrier contract, insurance compliance & reduced liability (within the program)
4. Vendor management, compliance & production planning and visibility
5. Education of the customer, its field personnel, vendors and carriers

3PLs often bypass investing in the ongoing education of the customer, vendors and carriers, choosing instead--to deploy their top resources to the next big sale and leaving the program in the hands of inexperienced staff. This investment in ongoing education for the duration of the contract is one of the most fundamental indicators that will result in a successful program.

Jeff Tucker, CEO of Tucker Company is an industry contributor to associations, schools and industry media outlets. He can be reached at 856-317-9600, ext. 122, or jefft@tuckerco.com.

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As someone who works in transportation, you know that it is the one discipline within the supply chain that is the most affected by outside factors. Those factors range from Mother Nature to the Government, and sometimes they both combine to cause us enormous headaches. Look at how truckload capacity was affected during FEMA’s mismanagement of Hurricane Katrina. Now contrary to your bosses’ expectations, there’s not much you can do about the weather, however, there are things you can do and things you should do to help your company weather the onslaught of issues affecting transportation.

Among those 87 new messages there is the one from NASSTRAC, the monthly NewsLink. The one you keep promising to read and not delete. Remember? Why should you bother to read it? Think about this:

• For several years, NASSTRAC has participated actively in proceedings before the Federal Motor Carrier Safety Administration in its rulemaking proceeding on revised Hours of Service rules. Now that the current rules are in court, being challenged by safety advocates seeking more restrictive rules, NASSTRAC has worked with ATA and others on a joint carrier-shipper brief defending the current rules. NASSTRAC General Counsel John Cutler says a court decision is unlikely before 2007. Companies, who are large truckload shippers, have reported that the new HOS rules have impacted their transportation costs by up to 15%.

• In comments filed with the Surface Transportation Board, NASSTRAC called for termination of antitrust immunity for the National Classification Committee. The comments were filed in STB Docket Ex Parte No. 656 (Sub-No. 1), Investigation into the Practices of The National Classification Committee. NASSTRAC and other commenting parties (including the Department of Justice) regard antitrust immunity as unnecessary for pro-competitive activities of NCC. However, anticompetitive activities, including increased commodity class ratings that often lead to increased freight rates, are facilitated by antitrust immunity. Immunity from the antitrust laws for collective activity by carriers with such an impact on rate levels is inconsistent with deregulation and marketplace competition. Any shipper who has been caught in the web of the NCC re-classification actions can understand the impact of this issue.

• And “minor” issues can have a big impact on your transportation budget.  Consider IATA resolution 502 calling for a change in the weight/volume calculation for air freight. The Universal Cargo Screening Act continues to be considered in Congress calling for 100% inspection of all containers. If that doesn’t get your attention you’re suffering from sensory overload.

What should you do about all of this? Why should you bother to read the NASSTRAC newsletter, or get involved in this organization? The answer is as simple: Education, Advocacy, Connections, and Solutions. Why bother to get involved with NASSTRAC or any other worthy trade association? You or your company simply can’t afford not to.

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And he should know. Dole is the fourth largest U.S. importer of products using ocean containers, importing more than 17,000 FFE (40-foot equivalent units) or about 21,000 containers each year. This volume's foundation is based predominantly on products coming from Asia through the use of 3PLs. Engle noted that Dole also imports approximately 104,000 reefer containers of bananas and pineapples annually on vessels through marine terminal facilities managed and operated by Dole.

Dole utilizes other port operations on both coasts, while also managing marine terminal facilities in both Louisiana and Florida. Engle emphasizes that there are many challenges facing ports that ultimately impact shippers—ranging from congestion and resulting delays, long waits for trucks, limited hours of operation, and rail connectivity issues to security, expanded screening, and overall rising cost.

Carrier and Government Challenges

Consolidation is changing the face of the industry. Engle notes that larger carriers are buying up smaller carriers, citing examples such as Maersk and P&O, and Hapag-Loyd and CP Ships. He echoes a concern shared by many others: reduced carrier choices can only mean higher rates.

There are other shipper concerns driven by carrier issues as well. For example, "free time" for freight has been reduced by 20 percent; demurrage has more than doubled; and there is diminishing uniformity between carriers, ranging from data integrity and compounded service inconsistencies as a result of the usage of multiple brokers.

Couple this with government-driven challenges, and the international shipper faces additional issues, including the $7.4 billion Port Security Bill that is bringing increased scanning of cargo perceived as high risk; an enhanced "24 Hour Rule" that requires inspection 24 hours before loading; and C-TPAT compliance.

How has Dole handled such challenges? In response to C-TPAT, Dole now sends advanced ship notices to both Customs and its broker, and performs security surveys with all partners in its supply chain. Of course, Dole takes logical steps that every shipper should take, such as maximizing cube and weight; consolidating its number of brokers, ocean lines and carriers used; and educating political leaders on issues that can impact their operations.

What Can Shippers Do?

"First, be proactive," Engle advises. "Make sure your suppliers are compliant, protect your data chain, and send samples and information on new items to Customs before your first container arrives. This will go a long way in educating them about what you're doing."

"When it comes to your carriers," he continues, "demand more and work closely together." He recommends that shippers contract specific equipment requirements and clearly come to agreements on who pays for what; and clarify when your free time starts, how much you will be given, and who has what responsibilities on both the parts of the carrier and the port. Also make sure to clearly outline the process (which includes such areas as security and data flow), minimize the use of brokers for all shipments, and take steps to ensure that your shipment data integrity is maintained.

Dole is committed to supplying the consumer and its customers with the finest, high-quality products. Managing its supply chain—including a significant volume involving containerized imports—is a foundation to making this corporate mission statement a reality.

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