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Published Since 1898
NOVEMBER 2012
SMALL PARCEL SHIPPINGStrategies to make youthe master of faster
AUTOMOTIVE LOGISTICSLean and agile ina complex chain
HHHHHHEEEEEELLLLLLLLLLLLshipments from
From lithium batteries to body parts for medical training, an emphasis on lowest price is flaunting safety and haunting air cargo shipments
ct&l november 2012 3
VOLUME 115 ISSUE NO. 10 NOVEMBER 2012
Published Since 1898
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
COVER
Features 10. . . MASTER OF FASTERBest-in-class strategies to help you gain more control over your small parcel shipping costs.
18. . . A SHAKY BALANCEAutomotive supply chains require just the right mix of lean and agile in an increasingly complex and global arena.
22. . . GO GREEN AT GROUND LEVELHow 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.
4 THE VIEW WITH LOUWill 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 NEWSWill motor carriers be prepared for new requirements at the Canadian border? Plus: the latest on acquisitions, awards, alliances, and even Antwerp.
26 DASHBOARDTransCore’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 NUMBERSA look at the key challenges and ways to understand Canada’s quiet giant: private fleets.
30 THE BIGGER PICTUREManaging freight transportation successfully requires true partnership between finance and logistics, says Dan Goodwill of Dan Goodwill and Associates.
Departments
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.
HHHHHHEEEEEELLLLLLLLLLLLshipments from
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44 ct&l november 2012
Trade is like a river; it moves around all obstructions. For too many years now, the Windsor-Detroit corridor, which ac-
counts 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, privately-owned, Ambassador Bridge link-ing 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 route to the Ambassador Bridge 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 automo-tive logistics, the crossing is particularly im-portant to our automotive industry. The com-plex 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 bor-der on the current bridge.
So it’s no surprise that the automotive in-dustry is concerned about being so reliant on aging infrastructure in private hands when ac-cessing 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 Interna-tional 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 six-lane public bridge and cut into the toll reve-nues currently generated by his aging four-lane span. He has spent millions on a campaign
against the new bridge, proposing that he pri-vately build a new bridge alongside his exist-ing one instead. His lobbying efforts against the NITC have proved so effective at creating political gridlock across the border that Mich-igan Governor Rick Snyder and the Canadian government had to resort to signing an “in-terlocal 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 Cana-da 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 environmen-tal laws in order to protect it from any other legal actions from Maroun. In mid-October, the Conservative government introduced leg-islation 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 approv-als so it’s moving to head him off.
Regular readers of this column know I don’t place much trust in the Harper govern-ment’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
Lou Smyrlis, MCILT
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We acknowledge the financial support of the Government of Canada through the Canada Periodical
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Volume 115 Issue No. 10 November 2012
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Will we ever resolve the gridlock at the Detroit-Windsor trade corridor?
Only if we can outlast the greed of one man: Manuel Maroun
the view with Lou
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• CONSTRUCTION MARATHON AT CN SITE: Construction crews toiled for 96 hours straight to place a five-million-pound concrete tunnel under the CN Rail line in Burlington, Ont. over the Thanksgiving Day weekend.
• THE PRICE OF HAPPINESS: How much does a competitive salary affect job satisfaction?
• SHOULD YOU EXPECT A RAISE?: See what the results from our Salary Survey show.
5ct&l november 2012
ONLINE
What’s on CTL.ca?
• CAPACITY CRUNCHED?
Hear what shippers and carriers had to say about capacity in the different modes as we head towards 2013.
Blog bits Search our blog archives at ctl.ca • Is your trucking company engaging its customers?
• Is consolidation good for the transportation industry?
• Will BPA regulations impact transportation?
Salary calculator: Discover your occupation’s average salary range with the PMAC/Purchasingb2b salary calculator.
Feature: Organizations should consider total lifecycle costs when sourcing overseas.
Road Test: Dodge Dart remake shows some Latin flair.
3PL Finder: A comprehensive directory of Canadian third-party logistics providers.
Feature: How to select the best software solutions to provide visibility into your supply chain.
News: Container terminal in the cards for Sydney, N.S. port.
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Blog bitsBlog bitsSearch our blog archives at ctl.caSearch our blog archives at ctl.ca
• Is your trucking company engaging its customers?Is your trucking company engaging its customers?
• Is consolidation good for the transportation industry?
• Will BPA regulations impact transportation?
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6 ct&l november 2012 www.ctl.ca6
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 in-definitely. 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 e-manifest, 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 vali-dated 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 doc-umentation electronically, as required un-der ACI. But what about the small to mid-sized fleets?
According to Amitha Carnadin, media relations spokesperson with CBSA, 932 ac-tive business accounts have been created to use the portal, which can be found online at http://www.cbsa-asfc.gc.ca. That repre-sents a startlingly small proportion of Cana-da’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 inter-change (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 ap-pears few have signed up for the service just
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 e-mail 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 encour-age 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 car-rier code and then choose a method of filing information. High-volume carriers are en-couraged 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 compat-ibility testing with CBSA’s e-manifest Tech-nical Support Unit could take two to three months to complete.
“The transmission of advanced commer-cial information to the CBSA using either the e-manifest portal or an EDI method and with or without a third-party service pro-vider 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,” Carna-din 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 por-tal,” she said. “They have a very good portal. But certainly we’ve done some testing on it (CBSA’s portal) and from a carrier perspec-tive, 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 relat-ed to repetitive loads. An in-house solution, or one developed by a third-party service pro-vider typically would allow the user to save
certain information so they don’t have to re-enter it every time they use the site.
Still, Smith said she thinks the CBSA portal will be a good option for small carri-ers that aren’t constantly crossing the bor-der. 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 immi-gration 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 disci-plines,” she said. “From our standpoint, there’s been some frustration in that the timeline keeps getting pushed out, so it be-comes 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 ar-rive at the border oblivious to the new re-quirements? 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 sys-tem with tangible benefits to the trade community,” Carnadin said via e-mail. “We are well poised to address any increas-es in traffic volumes and will make adjust-ments as needed. Our officers are fully trained and equipped to handle the new requirements. The agency strongly encour-ages clients to adopt e-manifest require-ments before they become mandatory.”
SCL shipper-carrier panel examinescosts and outlook for 2013How 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 sem-inar held in Mississauga in October and moderated by Transportation Media edito-
in thenews
7ct&l november 2012www.ctl.ca
rial director Lou Smyrlis.Jim McKay, Walmart Canada Corp’s di-
rector, 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, foundation-al to what we’re doing, and to moving assets more efficiently while controlling costs,” said Murray.
Doug Munro, president, Maritime-On-tario Freight Lines, said there are challeng-es ahead in trying to get compensatory rates in a market of overcapacity and stag-nant growth.
“It’s trying to get top line revenue when costs on the bottom are pushing up all the time. It’s about maintaining mar-gins,” said Munro.
Excess capacity is also a major issue for the marine sector, said Michael Broad, pres-ident, 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 commit-ments and delivering to those commit-ments, and controlling our resources much more closely than we have in the past,” he said.
Keeping service levels up is also a priori-ty for Munro.
“It’s educating customers on the one hand, but with the markets so competi-tive we have to maintain a high level of service. Without that, nothing else mat-ters. 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,
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 cen-tered around raising the game on the service side, and doing so at a time when we think we can increase efficiencies. There is a tre-mendous amount we could still do working with shippers and other supply chain part-ners,” said Murray.
Antwerp eyes big increase of maritime trade with CanadaBy Leo Ryan
Already the leading European gateway for maritime container trade across the Atlan-tic 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 agree-ment currently at an advanced stage of ne-gotiations between Canada and the Euro-pean 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 pass-ing through Montreal in early October dur-ing 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 Ca-nadian exporters tariff-free access to a con-tinental market of 500 million consumers in 27 countries.
Container cargo in both directions be-tween Montreal and Antwerp totaled near-ly 285,000 TEUs in 2011. This means that approximately 20% of all containers han-dled at Montreal are coming from or going to Antwerp.
Situated on the Scheldt River 80 kms in-land 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 Euro-pean 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 Euro-pean 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 contin-ued strong performance, in part, to last year’s completion of a substantial dredging program. The channel deepening has al-lowed 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 acces-sibility 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 produc-tivity performance of 38 crane movements per hour on average and terminal-handling
8 ct&l november 2012 www.ctl.ca
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. JensenLivingston International has acquired Nor-man G. Jensen, Inc. (NGJ), including its Canadian brokerage company, Jensen Cus-toms 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 at-tractive 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 cus-toms 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 ser-vices to high-volume commodity shippers.
XTL makes changes to seniormanagement, 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, re-spectively, and have been instrumental at supporting its growth through hands-on learning and identifying strengths and op-portunities,” the company said in an inter-nal 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 busi-ness 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 Com-panies didn’t clearly identify the business we are in and ran the risk of limiting our
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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 com-pany said in its letter to employees. “A brand standards manual has been devel-oped to ensure that all people who touch our brand – employees, suppliers, or part-ners – can ensure our brand is used consis-tently to build awareness.”
Polaris wins SmartWay awardfor environmental excellencePolaris Transport Carriers has been hon-oured with a SmartWay Excellence Award from the US Environmental Protection Agency. The award recognizes industry leaders in freight supply chain environmen-tal performance and energy efficiency.
According to Polaris officials, over the last three years, the company has expand-ed its use of fuel-saving technologies such as FreightWing trailer under belly aerody-namic fairings and trailer gap fairings – which officials say have helped the com-pany 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 re-placement equipment is outfitted with low-rolling resistance tires, the company said. The combination of these technolo-gies has helped “to create a complete pack-age of environmentally friendly technolo-gies that has not only improved fuel efficiency, but also, customer service,” the company said in a release.
Polaris was one of 40 companies, select-ed from the Partnerships’ nearly 3,000 Part-ners, to receive this distinction.
Agri-Food Central, Crossdock Manitobaform alliance to reduce costsBy Julia Kuzeljevich
Agri-Food Central and Crossdock Manitoba
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 Cross-dock will benefit from increased utiliza-tion 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 con-tainer loads (FCL) and less-than-contain-er loads (LCL) of dry goods between Canada-Mexico” he said.
“For us, this is about leveraging Cross-dock’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 ac-tively promote each other’s service offer-ings and rates in the spirit of cooperation,” said Lins.
9ct&l november 2012www.ctl.ca
10 www.ctl.ca10 ct&l november 2012
Understand your shipping environmentConsider 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.
These best-in-class strategies can help
you gain more control over your small parcel
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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 implica-tions 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.
Rethink inbound parcel shipping strategyA Ryder whitepaper on small parcel shipments suggests ship-pers 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 com-panies 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 geo-graphic cluster of suppliers and are destined for the same manu-facturing centre can reduce costs and minimize waste and envi-ronmental impact. The cornerstone of a successful solution is technology that flags small parcel shipments for consolidation and links multiple suppliers,” said the Ryder paper.
Package accuratelyWhen packaging, consider whether you can consolidate cartons. Keeping within the defined dimensional weight means you can often take advantage of volume discounts.
Consider alternate/regional carriersConsider diversifying your carrier strategy by giving a percent-age of your parcels to an alternate or regional carrier while still maintaining volume discounts at the larger carriers.
Beware ‘contract erosion’Making your parcel contract competitive is more than just look-ing at rates. Over time, contracts may lose value if not reas-sessed. Focus on wording, commitments and surcharges, espe-cially as your network changes. Make sure your contract is flexible enough to change as well.
“When carriers announce their general rate increases, it’s im-
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 re-viewing their shipping policy after general rate increases,” said Sailor.
Negotiate better carrier contracts“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 condi-tions of their carrier agreements, he said.
“In today’s environment, carrier contracts are very compli-cated 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.
Keep up to date on new regulations, legislationWhat 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.
Audit, audit, audit!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 non-account locations, and fuel surcharges.
In a whitepaper by Logica president and CEO Rob Nelson, he says “a good audit should streamline the accounting and pay-ment 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, au-tomation 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
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it’s clear that carriers are always incen-tivized to add to these to the invoice,” said Nelson.
Make auditing an ‘opportunity’By tracking all of your audit data you may find opportunities for proactive op-timization, such as mode optimization or shifting, rather than auditing after the fact, said Nelson.
Managing data can be a tactic in it-self. Data visibility could lead to changes that will save you money, such as moving from single-piece par-cel rates to hundredweight or multi-weight parcel costing models.
Match invoice to orderThere really is no industry standard for determining fully landed shipping costs,
said Sailor.“There is no clear predominant meth-
odology 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 car-rier 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 in-cluded? 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.
Track shipment details, service guaranteesNelson 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 pro-cess,” he said. CT&L
Features editor Julia Kuzeljevich has been writing about transporta-tion issues for more than a decade. Her meticulously researched articles have garnered several transportation
and Canadian Business Press writing awards.
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Two years ago, a cargo employee of Southwest Airlines made a gruesome discov-ery 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 infor-mation about their contents.
Mark Vinesky, manager of air export operations at forwarder International Trans-port, 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 ex-tends 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 com-pliance with regulations for shipping hazardous materials.
In many cases, special requirements are ignored unwittingly. Albert Saphir, presi-dent 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, vice-president 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, tight-er safety regulations, fires from lithium batteries will likely destroy one cargo jet reg-istered 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 Boe-ing 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.
HHHHHHEEEEEELLLLLLLLLLLLshipments 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
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www.HireLogistics.ca
Guess Who Found A New Job?
Getting a new job is life-affirming! Are you stuck in a job, and looking for something new? Well, you too can find
a job on www.HireLogistics.ca, a jobs website for transportation and supply chain professionals.
HireLogistics is brought to you by Canadian Transportation & Logistics magazine. Check it out today!
Attn: Employers ~ Job Postings Are Free!Post your jobs for FREE on HireLogistics.ca. Your ad will also
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storycover
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 regula-tory 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 com-partment. 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 deal-ing with miniscule screws. Next you have to carefully push out the touch screen. When you have done that, you have to take a solder-ing iron and un-solder the pouch batteries,” he says. “Apple is non-compliant 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-
gistics providers. “We are losing a lot of institutional knowledge be-cause 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 al-lows early flagging of questionable shipments for closer inspection.
“This is something that has changed our procedures,” Imbri-ani 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 people say, ‘No.’ Are they even checking?” Saphir wonders. CT&L
CITT11E-PA02-profitability-OUTLI1 1 2/9/2011 3:07:22 PM
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 cover-ing the global air cargo industry.
Automotive supply chains require just the right mix of lean and agile in an increasingly complex and global arena
B y J u l i a K u z e l j e v i c h
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Automotive 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 hall-marks 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 chal-lenges 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 Scotia-bank, 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 resil-iency solutions.
“What we’re seeing is that there are continuous events happen-ing 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. Every-one does business a little bit differently. We just have to make sure we have solid partnerships and construct an agreement that is suit-able 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 de-termine to what degree they will invest, and how to manage that,” said Mike Steck, vice-president of supply chain management at
Nissan North America.On the manufacturing side, he noted, there have been more
efforts in localization as opposed to offshoring, because of cur-rency 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 informa-tion right away in those situations is key prioritizing decision-mak-ing. 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 sub-contract manufacturing overseas, now you have a very stretched supply chain, but the culture, and the amount of information-shar-ing between the tiers, is still where it was 15 years ago,” said Vakil.
This has led to the need for increased communication and col-laboration 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 stock-pile. I think managing with lean principles is the right way to man-age the business. The better you can engage with your sales organi-zation 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 in-dustry 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 sup-ply chain needs, what alternate sites are available to them. They can query the information, look at a map and see suppliers’ ag-
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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 visi-bility so you can plan more proactively around risks,” said Jon Bovit, chief marketing officer for Resilinc.
Automotive manufacturers are attempting to get product to cus-tomers a lot more quickly, according to Jennings. There is more at-tention 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 em-ploy lean strategies where the focus is on “rigorous execution.”
“It’s amazing how buying patterns change very quickly depend-ing on gas prices, and that involves dialling down production of certain vehicles. We’ve learned to employ lean techniques and liter-ally produce a plan for every part that goes into an automobile, collect the data, purify it, and make sure that the packaging is cor-rect. 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. Ev-eryone 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 cen-tre, 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 ven-dors 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 consis-tent 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 wait-ing 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 differ-ent 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.
The 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 pre-approved freight and carriers from being laid waste by politi-cal wrangling and lobbying. They did so by signing an “interlo-cal 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 private-ly build a new bridge alongside his existing one instead. And he has now managed to force the question on to the state bal-lot. 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-
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 com-ponents 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 com-posed 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 con-cerned 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.
Will Michigan ballot amendment kill new Detroit-Windsor crossing?
logisticsautomotive
21ct&l november 2012www.ctl.ca
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 identifi ed herein are the intellectual property of their respective owners. © 2012 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
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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 choreograph trucks, planes and schedules at warp speed in over 200 service centers across the U.S. and beyond, you can track along online and on your phone. Because it’s not just a delivery we’re making. It’s a promise. odpromises.com/expedited
We may be in shipping, but your business is our business. When your product needs to get
If you’re in the rockets and radar business, so are we.
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If you’re in the rockets and radar business, so are we.
M2OD0008_CanadianTransport_Nov.indd 1 10/10/12 12:30 PM
“The pressure to have the supply ready and available faster con-tinues 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 vis-ibility 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, vice-president of service parts pricing for Servigistics, an SLM (Service Lifecycle Management) software company which provides post-sales 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 competi-tive 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-fit-function, 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 determin-ing and pricing adjustment strategy for the OEM,” he said.
While the Ernst and Young study suggests the automotive indus-try “is struggling to strike a better balance between operational ef-ficiency 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 basic tenet, no matter what else is going on,” he said. CT&L
Features editor Julia Kuzeljevich has been writing about trans-portation issues for more than a decade. Her meticulously researched articles have garnered several transportation and Canadian Business Press writing awards.
22 www.ctl.ca22 ct&l november 2012
The Canadian Pallet Council’s (CPC) recent launch of its Elec-tronic Container Transfer (ECT) software is yet another re-minder 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 indi-vidual 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 chang-es 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 sup-plier and receiver irrespective of distance. For example, if a Toronto-based 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 of-ficer 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 de-ploy 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
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.
B y K e n M a r k
go green While sustainability strategies have focused on modal shifts, While sustainability strategies have focused on modal shifts,
go greengo greenground level
transportationsustainable
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ground levelat the
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.
23ct&l november 2012www.ctl.ca
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 identifi ed herein are the intellectual property of their respective owners. © 2012 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
OD•DOMESTIC OD•EXPEDITED OD•PEOPLE OD•TECHNOLOGYOD•GLOBAL
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 effi ciency 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
If you’re in the gloves and scrubs business, so are we.
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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 effi ciency and ensures better service. And you won’t be alone. InformationWeek chose us too, as the top logistics InformationWeek chose us too, as the top logistics InformationWeekand transportation company in their 2010 InformationWeek 500 ranking. That means a lot of promises InformationWeek 500 ranking. That means a lot of promises InformationWeekkept to our customers, and to theirs. odpromises.com/technology
We may be in shipping, but your business is our business. Choosing OD for your Domestic, Expedited
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®
If you’re in the gloves and scrubs business, so are we.
M2OD0010_CanadianTransport_Nov.indd 1 10/10/12 12:14 PM
Development Technology Canada (SDTC) to assist in the devel-opment and demonstration of the ECT technology. SDTC is an arms-length, not-for-profit corporation funded by the Govern-ment 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 op-erations 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 unnec-essary 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 manage-ment costs, reduced handling, less damage and greater productiv-ity 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 certi-fiable carbon credits that can be sold on public exchanges. The cred-its are based on lower GHG emissions resulting from reduced trans-port 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 le-verage 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 com-mercial solutions.
“We are working hard to get members to adopt the new sys-tem. I believe the payback from ECT will be many times the $1.25 million support from the SDTC.” CT&L
transportationsustainable
Port Days
24 www.ctl.ca24 ct&l november 2012
managementtransportation
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 trans-portation 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.
CT&L: UPS has relationships with many shippers. In your discus-sions 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 fo-cusing 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 inven-tory levels. The way that is impacting the transportation world is that we are seeing smaller orders. Often, it’s the same total vol-umes we’ve seen in recent years, but broken up into smaller quan-tities. 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.
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.
Port DaysPort Dayson the same page?
25ct&l november 2012www.ctl.ca
Port DaysCT&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: Effi-ciency, 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. Ergonomi-cally 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 perspec-tive, 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 con-stantly looking at different modes – whether that’s increasing wa-ter 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 cus-tomer 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 orga-nizations are very much focused on sustainability. We often paint sustainability as being green, which is important, but it’s also mak-ing 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 long-term business issues you have. It’s interesting, as well, the contradic-tion between wanting to increase customer satisfaction as a key
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 differ-ently today than you did yesterday and how you will run it tomor-row 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 quan-tifiable 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 sustain-able, 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 sup-ply 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 cran-ny on that can and that translates into more productivity. CT&L
managementtransportation
26 ct&l november 2012 www.ctl.ca
dash board
TransCore’s Canadian Freight Index sees uptick in AugustTransCore’s Canadian Freight Index, which reflects spot market freight shipments both within Canada and cross-border, re-mained steady with an increase of 1% from July. Year-over-year load volumes, however, were down 13% from August 2011.
Cross-border volume accounted for 71% of overall loads while intra-Canada freight made up 25% of the total load volumes.
Equipment availability increased 3% month-over-month and 13% year-over-year. Available capacity has continued to increase from the beginning of the year with August volumes sitting at the highest levels year-to-date. August equipment volumes were down only 3% from the peak posting levels of August 2007.
While an increase was seen in both equipment and load postings, the equipment-to-loads ratio for August widened to the largest variance in 2012, depicting a larger increase in available capacity.
Top destinations for loads imported into Canada were: Ontario (54%), Western (25%), Quebec (20%), and Atlantic (1%).
Top regions for import equipment into Canada were: Ontario (52%), Western (24%), Quebec (21%), and Atlantic (3%).
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 Indiana. Texas dropped off from the top five to ninth place for the first time in months.
The top destinations for freight originating in Canada were New York, Texas, Pennsylvania, California and Florida.
TransCore’s Canadian-based Loadlink freight matching da-tabase constitutes the largest Canadian network of carriers, owner/operators, freight brokers and intermediaries. More than 13 million full loads, less-than-truckload (LTL) shipments and trucks are posted to the Loadlink network annually.
The first six columns include monthly index values for years 2007 through 2012. The seventh column indicates the percent-age change from 2011 to 2012. The last column indicates the percentage change from the previous month to the current month. For the purpose of establishing a baseline for the index, January 2002 (index value of 100) has been used.
Cost of ground transportation drops in July The cost of ground transportation for Canadian shippers de-creased by 0.5% in July when compared with June results,
according to the latest results published by the Canadian General Freight Index (CGFI).
The Base Rate Index, which excludes the impact of accessorial charges assessed by carriers, increased by 0.9% when compared to June.
Average fuel surcharges assessed by carriers have seen a decrease 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 rates actually increased,” said Doug Payne, president and COO of Nulogx, which facilitates the CGFI. “However, base freight costs are down 3% from a year ago.”
The CGFI is sponsored by Nulogx a leading Transportation Management Solutions provider, and is used by shippers and carri-ers to benchmark performance, develop business plans, and secure competitive agreements. It was developed with the assistance of Dr. Alan Saipe. The most recent results are available at the CGFI Web site: www.cgfi.ca.
Rail freight continues rise over summer monthsCanadian 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
2007 2008 2009 2010 2011 2012 % % Change Change
Y-O-Y M-O-M
Jan 173 214 140 171 222 220 -1% 1%
Feb 174 217 117 182 248 222 -10% 1%
Mar 228 264 131 249 337 276 -18% 24%
Apr 212 296 142 261 300 266 -11% -3%
May 280 316 164 283 307 301 -2% 13%
Jun 288 307 185 294 315 295 -6% -2%
Jul 219 264 156 238 245 233 -5% -21%
Aug 235 219 160 240 270 235 -13% 1%
Sep 206 203 180 234 263
Oct 238 186 168 211 251
Nov 227 143 157 215 252
Dec 214 139 168 225 217
TransCoreCanadianSpotMarketFreightIndex2007-2012
280 316 164 283 307 301 -2% 13% 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301 280 316 164 283 307 301May 280 316 164 283 307 301May 280 316 164 283 307 301May
288 307 185 294 315 295 -6% -2% 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295 288 307 185 294 315 295Jun 288 307 185 294 315 295
219 264 156 238 245 233 -5% -21% 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233 219 264 156 238 245 233Jul 219 264 156 238 245 233
235 219 160 240 270 235 -13% 1% 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235 235 219 160 240 270 235Aug 235 219 160 240 270 235
206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 206 203 180 234 263 Sep 206 203 180 234 263
238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 238 186 168 211 251 Oct 238 186 168 211 251 Oct 238 186 168 211 251 Oct
227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 227 143 157 215 252 Nov 227 143 157 215 252 Nov 227 143 157 215 252 Nov
214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 214 139 168 225 217 Dec 214 139 168 225 217
TransCore Canadian Spot Market Freight Index 2007-2012
Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
280 316 164 283 307 301
288 307 185 294 315 295
219 264 156 238 245 233
235 219 160 240 270 235
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
TransCoreCanadianSpotMarketFreightIndex2007-2012
Change Y-O-Y
-13%
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
Change Y-O-Y
206 203 180 234 263
238 186 168 211 251
227 143 157 215 252
214 139 168 225 217
2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % % 2007 2008 2009 2010 2011 2012 % %
1%-1%Jan 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220 173 214 140 171 222 220
1%-10%Feb 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 174 217 117 182 248 222 -10%
24%-18%Mar 228 264 131 249 337 276Mar 228 264 131 249 337 276Mar 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 228 264 131 249 337 276 -18%
-3%-11%Apr 212 296 142 261 300 266Apr 212 296 142 261 300 266Apr 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 212 296 142 261 300 266 -11%
ChangeM-O-M
-21%
2007 2008 2009 2010 2011 2012 % %
24%
2007 2008 2009 2010 2011 2012 % %
27ct&l november 2012www.ctl.ca
domestic and international cargo loadings.On the domestic front, freight loadings, composed of non-
intermodal traffic (i.e., carried in bulk or loaded in box cars) and in-termodal 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, fol-lowed 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 non-intermodal 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 cumu-lative 1.5% gain in June and July, was significant,” the ATA said in a release. Compared with August 2011, the ATA’s seasonally-adjusted 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 adjust-ment, 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 deceler-ates 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.
The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufactur-ing 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 in-creased 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 six-
month 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 ex-port 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 out-put 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 contin-ued to be hit by ongoing weakness in the global economy.”
28 ct&l november 2012 www.ctl.ca28
inside the numbers7
6%76%
That’s the percentage
of private fleet managers
who consider “attracting
qualified employees”
to be the key challenge
facing their operation
UNDERSTANDING CANADA’S QUIET GIANT: PRIVATE FLEETSPrivate 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.
Private fleet performs for-hire activities
YES48%
NO51%
N/A1%
Scope of Canadian private fleet operations
Intra city 24%
Intra provincial 31%
Interprovincial 27%
International 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%
30 ct&l november 2012 www.ctl.ca
the bigger picture
Freight costs often represent a significant percent-age of a manufacturer or retailer’s expenses. While many companies have highly qualified
CFOs and vice-presidents of logistics or transporta-tion, the management of freight costs is often sub-optimized. 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.
Business strategy versus transportation strategyCFOs 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 inven-tories mean smaller production lots and faster transpor-tation, 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 rev-enue 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 busi-ness strategies. Business acquisitions can lead to pro-duction 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 after-thought in these evaluations, despite the fact that freight costs can significantly impact the viability of new
business ventures. Evaluating the payback on new busi-ness strategies requires an accurate read on transporta-tion costs, which can account for a good chunk of a manufacturer or retailer’s operating costs. This de-mands that the CFO have a more granular understand-ing 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 out-source the logistics function. Outsourcing transporta-tion 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 un-planned 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 piggy-backing on the corporate insurance policy. Finally, if the transportation function is outsourced, will the company retain a minimum level of management ex-pertise 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 col-leagues to figure out what level of in-house and out-side 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 administra-tive staff. CFOs need to collaborate with their trans-portation counterparts to understand the true cost of transportation and the impact of these costs on the viability of various business strategies. CT&L
There’s two partners in this marriageManaging freight transportation successfully requires
true partnership between finance, logistics
Dan Goodwill, president of Dan Goodwill and Associateshas 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
Execution Is Everything.
DRAYAGE • DECONSOLIDATION • TRANSLOAD • SORTATION • FINAL MILE DELIVERY
(888) 887-9337 www.ryder.com/rct
Chart the course
Simplify port operations
Deconsolidate efficiently
Go the final mile
View every turn
Ryder System, Inc. All rights reserved.
RSC-608 Canada Container Ad_Nov2011:Layout 1 10/14/11 1:28 PM Page 1
Execution Is Everything.
DRAYAGE • DECONSOLIDATION • TRANSLOAD • SORTATION • FINAL MILE DELIVERY
(888) 887-9337 www.ryder.com/rct
Chart the course
Simplify port operations
Deconsolidate efficiently
Go the final mile
View every turn
Ryder System, Inc. All rights reserved.
RSC-608 Canada Container Ad_Nov2011:Layout 1 10/14/11 1:28 PM Page 1
