of 44
8/4/2019 Outsourced Logistics 200901_02
1/44
J a n u a r y / F e b r u a r y 2 0 0 9
A Penton Media Publication outsourced-logistics.com
Also in this issue:
High-yield Capital Strategies
Calming the Waters on 10+2Outsourcing Adds to Internal
Resources
J a n u a r y / F e b r u a r y 2 0 0 9
A Penton Media Publication outsourced-logistics.com
ExpandingWhileContractingPorts are moving ahead
with critical infrastructure
improvements.
http://outsourced-logistics.com/http://outsourced-logistics.com/http://outsourced-logistics.com/8/4/2019 Outsourced Logistics 200901_02
2/44
Bellhop
Distribution Technologys global logistics concierge sales process was built
upon the belief that, in order to deliver results, we must understand our
clients business objectives and supply chain challenges from the outset.
By asking the right questions, we are able to leverage our two-distribution-center model, foreign
trade zone warehousing and transportation services to provide a comprehensive strategy. This
solution is designed to cost-effectively satisfy your customers service requirements while
ultimately increasing sales. Thats the difference a concierge makes.
Experience our Signature Concierge Service first hand.
704.587.5601 | DistributionTechnology.comOpening Opportunity
http://distributiontechnology.com/http://distributiontechnology.com/8/4/2019 Outsourced Logistics 200901_02
3/44
Pre-election fuel prices had candidates chanting
Drill, baby, drill. The tune has changed to Build,
baby, build.
The proposed US economic stimulus focuses attention
on infrastructure and is lauded as necessary but criticized
as lacking clarity on how it will spend nearly $1 trillion.
Weary of large investments that dont spell out details
on how funds are spent or how spending is monitored, the
public wants to see resultsespecially in job creation.
There is no doubt the US desperately needs infrastruc-
ture spending. Lets make sure it is directed to areas with
the most long-term promise to support commercial andeconomic growth. That will help ensure the job creation
is not short lived. This is a place where the logistics com-
munity can (and must) weigh in together in support of the
best alternatives for economic survival and growth.
I have a queasy feeling each time the term shovel ready
comes up in some local politicians speech. Whats in
this inventory of unfunded
projects? Do they fit
the changing social
and commercial
l a n d s c a p e a s
it is evolving?
And what's left
behind on the
drawing board?
In a 2 0 0 3
presentat ion,
Americas Ports:
Falling Fur-
ther Be-
hind? John Vickerman noted an increasingly dire need for
investment in port infrastructure to meet not only current
(2003) demand but future growth. He pointed to an inter-
modal system in the US that is an aggregation of multiple
private and public modes with little or no true cross com-
munication or collaboration. Too little has changed and
today, this sounds like fresh commentary.
Vickermans co-presenter, Theodore Prince, added
there has been inadequate research into the national sig-
nificance of port infrastructure development, including
a gap on local vs. national benefits. Many of the benefits
occur elsewhere, making it difficult to lobby a regionalpolitical base to invest when a disproportionate benefit oc-
curs outside their constituency. The stimulus provides the
ultimate opportunity because its focus is on linking local
and regional investments to national prosperity and jobs.
But we need a concerted effort to avoid moving from
crisis to crisis. When the economy recovers, well find less
capacity, and that can constrain growth. This is an op-
portunity to define infrastructure development in terms of
long-term commercial and economic needs and overcome
some of the historical barriers that have created a discon-
nected (or only semi-connected) logistics network.
That shovel ready project your local politician men-
tioned might create construction jobs in the short term,
but when completed, will it sustain job growth?
The shovel-ready comment sounds like a build it and
they will come mentality we cant afford. We need more
convincing. The logistics community must come to the
table with its support. Then build. Bring them back and
get and keep them using what was built. And bring more.
Its a relentless and unforgiving process, and there is no
time for lengthy lobbying efforts. The logistics communi-
tyshippers, carriers and logistics service providersare
the beneficiaries and need to identify the most sustainableprojects in the pipeline or described as shovel ready and
push them as priorities. This is a one-time funding oppor-
tunity and a one-time marketing opportunity for logistics
to be recognized as the economic engine it is. The US
logistics community already signed a $1 trillion check for
the services it purchased in 2007 and it will do so again
in 2008. Spend wisely.
Editorial
The Economic Engine That Could
Perry A. Trunick, chief editor,[email protected]
Outsourced Logistics |January/February 2009 | 1
mailto:[email protected]:[email protected]8/4/2019 Outsourced Logistics 200901_02
4/44
6Global Markets
UK to Fund Transport
Community VoiceMexico's New Customs Regime
12Operations
Top 10 Trends in Services Globalization 2009
Community VoiceConsider Internal Resources Before Outsourcing
Logistics Functions
30Logistics Services
Iraq Builds Its Logistics Network
Community VoiceConnecting Domestic Pricing to the Global
Supply Chain
Features18
Special Feature
Calming the Waters on 10+2
The new rules are a sea change in the wayimports are handled. There is time to get readyfor the government's forceful implementation.
22Cover FeatureExpanding While ContractingThough business is in decline, ports aremoving ahead with critically neededinfrastructure improvements.
26Field ReportStrategies for High-Yield WorkingCapital in Today's EconomicEnvironment
Attention shifts between supply chain,chain of custody and capital chain asexternal forces reshape priorities forbusiness.
373PL ReportFocus on ValueUsers still want value from their logisticsservice providers.
403PL FileSunteck Transport Group
Departments
1 EditorialThe Economic Engine That Could
34 Classifeds
Advertiser Index
January/Februa ry 2009
Volume 2 , Number 1
2 | January/February 2009 | Outsourced Logistics
18
8/4/2019 Outsourced Logistics 200901_02
5/44
Call 1.800.VZW.4BIZ Clickverizonwireless.com/pushtotalk Visit a Verizon Wireless storePush to Talk is available only with other VZW Push to Talk subscribers; coverage not available everywhere. Network details & coverage maps at vzw.com. 2008 Verizon Wireless.
Make your business instantly more productive by choosing the only Push to Talk service that
comes with the reliable voice service of the Verizon Wireless Network. Plus, get coast-to-coast
coverage and 24/7 customer service. Verizon Wireless. The smart choice for Push to Talk.
Choose The Only Push To Talk
That Comes With The Network.
Let Verizon Wireless be your go-to guy for Push to Talk you can count on.
http://verizonwireless.com/pushtotalkhttp://verizonwireless.com/pushtotalkhttp://vzw.com/http://vzw.com/http://verizonwireless.com/pushtotalk8/4/2019 Outsourced Logistics 200901_02
6/44
Have you
heard?
Outsourced-Logistics.com
is more than just a
companion site to the
magazine. It is the online
logistics daily, providing
news, decision-making tools
and information resources
for logistics professionals.
Daily News Featureson the industry
White Papers
Webcasts
Current and PastIssues
Forums/Rateem & Rankem
Outsourced Logistics (ISSN 1547-1438) is published monthly by Penton Media, Inc.,9800 Metcalf Ave., Overland Park, KS 66212-2216.
The magazine is sent to qualified management in the field of logistics.Periodicals postage paid at Shawnee Mission, KS and at additional mailing offices.
Can. GST #R126431964. Publications Mail Agreement # 40026880.
POSTMASTER: Send address changes toOutsourced Logistics, P.O. Box 2113, Skokie, IL 60076-7813.
Printed in U.S.A. Copyright 2009 by Penton Media Inc.
Send editorial correspondence to: Editor, Outsourced Logistics, 1300 E. 9th Street, Cleveland, OH 44114-1503,or [email protected]
For information on obtaining reprints: Contact Penton Reprints at [email protected]
List Rentals:Walter Karl Inc., Rosalie Garcia, (845) 732-7027,
[email protected]: Permission is granted to users registered with the Copyright Clearance Center Inc. (CCC) to photocopy any article, with the ex cep-
tion of those for which separate ownership is indicated on the first page of the article, provided that a base fee of $1.25 per copy of the articleplus 60 per page is paid directly to the CCC, 222 Rosewood Dr., Danvers, MA 01923. (Code No. 0895-8548/09 $1.25 + $.60)
Out-of-print copies are available as positive microfilm and can be ordered from National Archive Publishing Co. (NAPC)300 N. Zeeb Road, P.O. Box 998, Ann Arbor MI 48106-0998.
Editorial
Publishing DirectorDavid H. ColbyeMedia Market Development ManagerJason Washburn
Circulation ManagerTyler MotsingerProduction Coordinator Rachel KlikaCustom Media GroupTerrence Grogan
Bob MacArthur Senior VP Industrial Group
Chief Executive Officer Sharon [email protected]
Chief Financial Officer Jean B. [email protected]
1300 E. 9th StreetCleveland, OH 44114-1503
216.696.7000 216.696.2737 faxwww.outsourced-logistics.com
249 W. 17th St., New York, N.Y., 10011212-204-4200
Chief Editor
Perry A. Trunick
Senior Editor
Roger Morton
Design
Art DirectorBill Szilagyi
Business
EASTERN REGIONJim Oot, Phone: 973-335-8902, Fax: 973-335-8903, [email protected]
WESTERN REGIONKeith Taunton, Phone: 334-514-8107, Fax: 334-514-9377, [email protected]
FLORIDABob Eck, Phone: 352-391-5577, [email protected]
ENGLAND Paul Barrett, Mark Whiteacre, David Moore, Phone: 44-1268-711-560, Fax: 44-1268-711-567FRANCE Fabio Lancellotti, Phone: 331-4294-0244, Fax: 331-4387-2729
ITALY Cesare Casiraghi, Phone: 39-31-261407, Fax: 39-31-261380BELGIUM, HOLLAND Peter Sanders, Phone: 31-299-671303, Fax: 31-299-671500
TOKYO Yoshinori Ikeda, Phone: 813-3661-6138, Fax: 813-3661-6139SEOUL, KOREA Young Sang Jo, Phone: 822-739-7840-2, Fax: 822-732-3662
TAIWAN Charles Liu, Phone: 886-2-707-5829, Fax: 886-2-707-5825CHINABallycastle Trading, Inc. Ltd., Phone: 852-524-7256, Fax: 852-524-7027INDIA Shivaji Bhattacharjee, Phone: 91-11-268-7005, Fax: 91-11-2652-6055
SINGAPOREMike Seah, Phone: 65-299-0413, Fax: 65-758-7850 or 65-296-6629
Sales
4 | January/February 2009 | Outsourced Logistics
http://outsourced-logistics.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.outsourced-logistics.com/mailto:[email protected]:[email protected]:[email protected]://outsourced-logistics.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.outsourced-logistics.com/8/4/2019 Outsourced Logistics 200901_02
7/44
s a fact the tough economy has forced many trucking companies off the road. Including some you may have counted on for
ome of your shipping needs. So heres another fact for you CRST is rolling strong, with the financial stability and depth of
ervices you can rely on for all your important loads.
If your companys shipping fortunes have been placed on your head, from van expedited to
atbed, short haul to dedicated fleet, or total logistics management, CRST has the resources and
ready to roll for you, today and for years down the road. Thats some serious peace of mind.
WHATS TOP OF MIND FOR YOUR SHIPPING NEEDS?
CRST INTERNATIONAL CRST VAN EXPEDITED CRST DEDICATED SERVICES CRST MALONE CRST CAPACITY SOLUTIONS CRST LOGISTICS
C R S T T H E T R A N S P O R T A T I O N S O L U T I O N
8/4/2019 Outsourced Logistics 200901_02
8/44
6 | January/February 2009 | Outsourced Logistics
T
he UK Transport Secretary, Geoff Hoon,
recently confirmed the government plans
to inject an extra 1 billion into major
transport projects next year. According to
the Department for Transport (DfT) state-ment, the investment is being made, In
order to stimulate the economy by accel-
erating Government plans to cut congestion and significantly
increase rail capacity.
This extra 1 billion, to be spent on road and rail plans, is in
addition to the overall 10 billion for 2009-2014 already pledged
by the transport minister in July 2007 to increase rail capacity.
Other major long-term rail projects include the massive London
Crossrail plan, the 5.5 billion Thameslink program and an ad-
ditional 600 million to tackle congestion.
Major transport plans highlighted in this most recent DfTstatement, include the enhancement of rail freight routes through
Global Markets
London. This includes 54 million just for the North
London route improvement. Other monies already
allocated in Oct. 2007 to rail freight projects in-
cluded TIF (Transport Innovation Fund) money
(132.5m) for Peterborough to Nuneaton (80m)
and Southampton to West Midlands (43m) rail
gauge enhancement to cope with modern taller con-tainers on standard-height rail wagons.
While this is more welcome news for southern trans-
port projects, which will continue to receive the lions
share of new rail funds, there is a rapidly growing con-
sensus in the rest of the country that further expenditure
in southern UK infrastructure is a failed model. It makes
no provisions for tackling the identified problems of the
UKs north-south economic performance divide.
The UK Government needs to invest in the fu-
ture and not the past, stated Martyn Pellew, Group
Development Director for PD Ports. This latest injec-
tion of cash for road and rail projects into the already
congested south will do very little to improve any-
thing, its just a perpetuation of pre-existing problems.
Over three-years ago the Governments Northern
Way initiative identified a 32 billion shortfall in the
economic performance of the North of England. If the
UK Government really wants to help our economy in
this financial crisis and also meet the long term environmental tar-
gets that have been laid out in the recent Climate Change, Energy
and Planning Bills, then the UK Government clearly needs a new
direction for a sustainable future added Pellew. Despite the obvi-
ous benefits of moving freight by rail, so far there is still consider-able misdirection in the way the UK Government treats and funds
its rail network.
As the recent DfT news indicates, a significant amount of fund-
ing has gone into rail access to the countrys southern ports for
increased freight shipment particularly to cope with the newer
one-foot-higher containers bringing more and more product to
UK consumers from the Far East, but as Pellew argues, This latest
investment will only continue the trend for shipping lines to add
increasing cargo volumes on to the overcrowded southern UK in-
frastructure. Its an investment that will work against itself.
Pellew adds, The fact that Britain is an island with a history ofmaritime trade and excellent ports around our entire coast, plus the
UK to Fund TransportA good but
misdirected effort,
says one port official.
8/4/2019 Outsourced Logistics 200901_02
9/44
As an island, we need to use our already available best infrastructure
asset firstthe sea, explains Pellew. Like Pellew, proponents of the supply
chain concept known as Portcentric Logistics, strongly argue that by bring-
ing cargo farther north via the sea, closer to its end destination and then
transferring to shorter distance rail movements, retailers can see a signifi-
cant reduction in their shipment delays because their products will not be
caught up in UK southern port and road congestion. This means that there
will be an increase in the accessibility of inventory. They will also benefit
from lower overall transport costs and cheaper land costs and lower labor
rates in the North. All of which will help retailers significantly cut their
supply chain costs. When a product is moved from its overseas originalsource, in say China, to the UK retail shelf with greater efficiency, then ev-
eryone benefits, including the environment.
Once again, theres data to back up the claims made by
these northern UK infrastructure supporters. Tesco has been
reported as having this year doubled some of its national
haulage by rail, while ASDA said it had already reduced
road miles by 25% since January 2005 and aims to cut an-
other 15% by the end of 2009. The results seen with Tesco
and ASDA/Wal-Mart, added Pellew, indicate that the UK
Government needs to open its eyes as to the benefits that
result from a greater use of northern ports and the need for
better rail infrastructure to accelerate this trend.
Yet, while the recent DfT announcement included 30
million for certain road improvements to Immingham Port
on the Humber, the East Coast ports of the Humber, Tees,
Tyne and Grangemouth still have not seen money committed for urgently
needed rail gauge enhancements to link these ports to the East Coast Main
Line (ECML). The ECML is the crucial rail link that runs along the East
Coast of the UK from London to Scotland, and has yet to receive any seri-
ous investment for freight.
According to estimates, a relatively small 100 million investment in rail
freight capability on the ECML would allow the UK to effectively handle
an ever increasing demand for imported containerized goods through eastcoast ports on the Tyne, Tees and Humber. Those in the North East, argue
that as a matter of strategic transport investment, their request for a 100
million investment in the ECML is a relative drop in the UKs transport
budget bucket.
The country needs to develop more sustainable transport methods and
there is a need to change traditional thinking. The UK Government cannot
continue to neglect the North East and the ECML any longer, as this area
clearly represents the most logical place for change to begin. A meager 100
million investment into this vital rail line will have a major and direct impact
for all UK business in terms of reducing cost, carbon emissions and conges-
tion. Investment in the ECML now represents an opportunity for the UKGovernment to act with responsible and decisive vision, stressed Pellew.
fact that the North has less road and rail congestion, is an
incredible asset with some of the best potential for increas-
ing inward investment to the UK and for reviving our eco-
nomic development. The right mixture of good access to
the sea, available brown-field land and an eager work force
exists in the North East. Its clear to see that there is signifi-
cant economic potential for the UK here. Whats missing isa supportive rail infrastructureespecially in the form of rail
access for trains and wagons capable of
carrying the modern high-cube imported
containers.
Northern UK ports employers, the
rail community and major retailers
have been collectively calling on the UK
Government to invest strategically on
the rail infrastructure of the North and
Northeast. The UK needs to invest in
its Victorian-era rail network and shed
its prejudices toward everything good
being in and around the south east. We
need new ways of thinking if we are to
realize that there is a vital latent eco-
nomic power that exists in the Northeast, suggested
Pellew, and major retailers seem to agree.
ASDA Wal-Mart is already operating a 360,000 sq
ft import center at the northern UK port of Teesport to
handle its imported containers prior to onward trans-
port to the companys distribution centers in the North.
Furthermore, Tesco has commenced construction of a
1.2 million sq ft import center at the port in a move thatwill create over 800 jobs. Again this import center, when
opened in 2009, will serve the UKs largest retailers north-
ern stores and regional distribution centers.
Yet, despite the interest of UK and overseas business
enterprises to invest in the North East, the Government,
as recently evidenced, still doesnt seem to be catching
on to the more economically viable and environmentally
responsible transport solutions available up North. Those
in the North suggest that this could be because the UK
Government and Whitehall still have not shed archaic no-
tions about how best to re-energize the economy and howbest to move goods within the UK.
Outsourced Logistics | January/February 2009 | 7
Projects
Martyn Pellew
8/4/2019 Outsourced Logistics 200901_02
10/44
8 | January/February 2009 | Outsourced Logistics
Global Markets
Schneider LogisticsExpands Coverage
The global provider of comprehensive
logistics services has added five new freight-
forwarding offices at major US and European
gateways. These locations join those already
along the US West and East Coasts. The
company has also grown its China marlet
coverage, as well.
Already existing in the US are operations in
Los Angeles, San Diego, San Francisco, Seattle
and Miami. Joining them now are the new
facilities in Chicago, Atlanta and New York. The
two new European locations are at Rotterdam
and Amsterdam. Schneider Logistics strategy
guiding the new US operations is to offershipping customers the option of diversifying
their points of delivery away from dependence
on West Coast ports. In Europe some 70%
of freight at the two new locations is either
inbound or outbound from other European
countries, including those in the emerging
Eastern European region.
John Ferguson, vice president, International,
for Schneider Logistics, observes, These
locations and services are key components in
our strategy to build a comprehensive, door-to-door, global logistics operation that spans air,
ocean and truck transportation.
Hapag-Lloyd Container Business SoldA consortium of Hamburg businessmen and the city government
of Hamburg have outbid Singapores Neptune Orient Line (NOL) for
the container business of Hapag-Lloyd.
Klaus-Michael Khne, head of Kuehne + Nagel, which recently
broke ground on a logistics site near Hamburg, and Christian
Olearius of MM Warburg are top figures in the group acquiring
Hapag-Lloyd. Current Hapag-Lloyd parent TUI will buy back one-
third of the company. Though TUI is selling the container line to
focus on its tourism businesses, its partial stake in Hapag-Lloyd has
been described as a means to bring the deal down to a price that both
valued the operation fairly and brought it within reach of the buyers.
The enterprise value of 4.45 billion ($6 billion) was a fair value
under normal market conditions, according to TUI.
One of the goals of the consortium acquiring the shipping line is
to keep it in Hamburg. Hamburg is Europes second largest container
port and Hapag-Lloyd is the worlds fifth largest container line(handling 2.8 million twenty-foot-equivalent units through June
2008).
Uncertain markets have had another impact on logistics companies
in Germany. The expected floatation of Deutsche Bahns DBP Mobility
Logistics did not take place at the end of October as planned. The
forwarding and logistics business will remain with the national
railway, Deutsche Bahn (DB) for the time being.
Hartmut Mehldorn, chairman and CEO of DB, has said hed like
to see more consolidation of the European transport markets. DB
already holds Schenker and was rumored to be in negotiations for a
large motor carrier. Its recent expansions in rail include Transfesa in
Spain and EWS in the UK.
The government had expected to raise 8 billion ($11 billion)
through the floatation but some industry sources indicated that even
a figure of 5 billion ($6.8 billion) would be optimistic in the current
economic climate.
CH Robinson AcquiresTransera
With the acquisition of Canadian project
freight forwarder Transera International, CH
Robinson Worldwide expands its global freight
forwarding capability. Transera, based in Calgary,
Alberta, is a non-asset global project freight for-
warder handling over-dimensional and heavy lift
shipments. It has eight offices in Canada, Dubai,
Singapore and the US. Annual gross revenues
were approximately $125 million.
Terms of the acquisition were not released.
We are very excited to bring our capabili-
ties to Robinson and turn international over-
dimensional freight shipping into a successful
core offering for Robinsons current and future
customers, said Rosemary Marr, founder andCEO of Transera.
CH Robinson Worldwide provides multi-
modal transportation services and logistics solu-
tions through a network of 221 offices in North
America, Europe, Asia and South America.
New
sBriefsJanuary/February
2009
Whos Who of 3PLs
The 16th edition of Whos Who in Logistics has been released. The
new edition, in two volumes The Americas and International, has been
expanded with in-depth profiles of 242 3PLs, says publisher Armstrong
& Associates.Of the 3PLs profiled, over 70% are private versus publicly traded com-
panies. Whos Who in Logistics profiles individual 3PL financial informa-
tion, key personnel, information technology, and service capabilities.
Since our first publication in 1994, our guides have become a pri-
mary information source for third-party logistics market information,
said Richard Armstrong, chairman of Armstrong & Associates. We are
pleased with the quality of our global information expansion. 119 of
the 3PL profiles highlight international providers. Each profile includes
assessments of 3PLs overall capabilities, strengths and weaknesses and
identifies 3PLs with the requisite capabilities necessary to be classified as
Tier 1 Global Supply Chain Managers. These providers have extensive ITcapabilities, over 5,000 employees and provide service to 90% or more of
the worlds Gross Domestic Product (GDP).
8/4/2019 Outsourced Logistics 200901_02
11/44
mailto:[email protected]8/4/2019 Outsourced Logistics 200901_02
12/44
10 | January/February 2009 | Outsourced Logistics
Global Markets
DB Schenker Grows Its Siemens Alliance
DB Schenker has extended its role with Siemens medical products in
Australia and New Zealand. Schenker Australia Pty Ltd has been providing
import and export services for Siemens medical products for more than
eight years. This will now extend to all Siemens Australia and New Zealand
international and domestic import and export activities and domestic
freight, providing a consolidated, streamlined service that ultimately ben-
efits the customer, says Schenker.
Ron Koehler, CEO of Schenker Australia Pty Ltd, notes the contract exten-
sion is the result of significant improvements in the companys supply chain
across its businesses during the last two years, and a responsive approach
to reducing the environmental impact of its freight services. We are proud
to have been awarded the Siemens contract for import and export services
across Australia and New Zealand, and will transfer solutions originally de-
veloped to meet the demands in the Healthcare business, to strengthen and
develop Siemens supply chain in other sectors, said Koehler.
We have also considered ways of reducing the environmental impact ofour international and domestic freight services. By providing an optimized
combination of transport modes and reducing paper in freight documen-
tation and invoicing, Schenker Australia Pty Ltd reduce environmental
impacts in the supply chain, which is in line with Siemens principles of
environmentally responsible practice.
Jeff Connolly, Siemens Ltd CFO, said that of the tenders received,
Schenker Australia Pty Ltd was best placed to deliver a consolidated, time-
and cost-effective international and domestic import and export service for
Siemens customers.
Having provided freight forwarding, warehousing and distribution
services for Siemens medical products and for large projects since the late
90s, Siemens is pleased to extend our relationship with Schenker Australia
Pty Ltd to include freight forwarding services for import and export activi-
ties across Australia and New Zealand, including transport and distribution
services throughout both countries, said Connolly.
DB Schenker provides the optimal solution for Siemens freight services,
with the ability to deliver some very challenging cargo, from an extremely
large power generation turbine, to delicate medical devices within very
tight timeframes and cost effectively. Priority medical products have al-
ways been deliverable from Europe within just two days, but now this
exceptional turnaround rate can be provided to customers for all priority
products across Siemens three sectors Industry, Energy and Healthcare.
The delivery time for goods other than priority medical products was pre-viously nine days.
Connolly said DB Schenker also offered Siemens customers complete
visibility throughout the entire journey, with ready access to the online
track and trace system, and improved order and invoicing processes. As
Schenker Australia Pty Ltd is now the single preferred provider of interna-
tional and domestic import and export services for Siemens customers in
Australia and New Zealand, customers will be able to check online where a
product is at any time throughout its journey.
The development of the electronic interface between DB Schenker and
Siemens also means a vast reduction in paperwork, and timely receipt
and issuing of invoicing, with all related documents to now be processedelectronically.
The Panama Canal Had a
So-So Fiscal Year
As it closed its 2008 fiscal year, the Canal
reported a slight decline in overall transits and
tonnage, though there was growth in tanker and
passenger business.The lessening in transits was just 0.1%, with
14,702 in 2008 compared to 14,721 last year.
Using its Panama Canal/Universal Measurement
System (PC/UMS) calculations, tonnage through
the Canal was down 1.1%, from 312.9 million
PC/UMS tons in 2007 to 309.6 PC/UMS tons in
2008.
The Panama Canal Authority (ACP) attributes
the increase in tanker traffic to the fact that
natural gas supplies used for generation
of electricity in Chile from Argentina were
suspended. As a result, petroleum from the USGulf Coast to Chile increased. For the Canal,
tanker traffic was up 4.8% during the year, to
2,067 transits compared to last years 1,972.
Tanker tonnage was up 8.6%.
Transits of passenger vessels were up
17.6%, from 205 to 241. A reason for the gain,
according to ACP, was that more smaller cruise
ships made transits. Transit by container ships
dropped from 3,622 in 2007 to 3,544 in 2008. At
the same time, movement by dry bulk vessels
was up to 2,420 from 2,406.
Commenting on fiscal year figures, ACP
executive vice president of operations, Manuel
Bentez, said, The Panama Canal remains on
sound operational footing, providing the safe,
reliable and efficient service our customers have
come to know and expect. Though a slowing US
economy has slightly reduced cargo shipments
traveling to and from US ports via the waterway,
the Canal actually experienced some growth this
fiscal year among key segments.
ACP notes that during the second quarter
the Canal experienced a surge in arrivals at the
time maintenance was being performed on the
Miraflores and Pedro Miguel locks. This resulted
in an increase of 13.3% in Canal Waters
Timethe average time, including waiting time,
it takes a ship to navigate the waterway. Year-
end totals were 31.55 hours in 2008 compared
to 2007s 27.84 hours.
The canal has a vessel booking system, used
by 60% of its oceangoing transits. Customers
had requested increases in the number of daily
slots available. The ACP increased the number
from 25 to 27. However, use of the system
declined to 92.73% from 94.98% year over year.
New
sBriefsJanuary/February2009
8/4/2019 Outsourced Logistics 200901_02
13/44
Aprime objective of the government of Mexico is to
promote its interests abroad. Efforts to revitalize
its economy and open up to international
competition have resulted in scores of free trade
agreements more so than any other country. In addition,
Mexico seeks to improve its cross border processes by
revamping outdated customs processes and procedures.Currently, Mexican customs officials are working to pilot
a new customs regime that seeks to attract more foreign
investment by improving importers supply chain speed
and mitigating the delays frequently associated with time-
intensive processes and procedures at the port of entry.
RFEA New Customs Regime
A customs regime is a countrys specific set of trade
regulations, processes and practices that regulate the
actions of importers and exporters. This new customs
regime is known as Regimen de Recinto Fiscalizado
Estratgico (RFE), or loosely translated as a Strategic
Bonded Warehouse. It is similar to a Foreign Trade Zone
within a geographical area, where tariffs and quotas are
eliminated and bureaucratic requirements are minimized
in an effort to attract foreign investment.
The benefit of the new customs regime is to allow
goods to be imported into Mexico and remain for up
to two years on a tax-free and duty-free basis. It is
expected to mimic the current automotive fiscal deposit
regime (Deposito Fiscal para la Industria Automotriz)
and expand to include more industries and to be more
competitive than the current IMMEX (previously Maquila& Pitex) regime. The government believes that RFE will
decrease logistics cost in terms of dollars per container
and numbers of days in transit which in turn will help
attract additional production to Mexico.
As a growing export center in central Mexico, the
state of San Luis Potosi will pilot the new RFE customs
regime. The Mexican government has partnered with
local businesses to develop and test the new regime,
including two large automotive parts makers, a robotics
and electronics manufacturing company, a warehousing
facility administrator and J.P. Morgans Global TradeServices unit. Preparations began in November 2007 with
Outsourced Logistics | January/February 2009 | 11
the pilot program going live in July. The program is expected to open for
additional manufacturers in early 2009.
Key elements of the new customs regime include:
Allows goods to remain in a Mexican warehouse for up to 2 years on a
tax-free and duty-free basis
Elimination of customs inspection at the port of entry, resulting in cost
reductions and reduced time-to-market. No secondary customs inspections required
Simplified customs clearance process results in reduced customs
brokers fees
Importers have a three-day grace period within which to correct
import declarations
Mexico Customs estimates that the RFI clearance process will save an
importer between US$200 and US$600 per shipment.
Differences between RFE and IMMEX
RFE is similar to the well-known IMMEX program and is expected to
be slightly more favorable due to greater flexibility and simplified customs
inspections that will speed goods through customs.
Global Markets
Community Voice
Ay Caramba!Mexicos New Customs RegimeBy Alvaro Quintana, Executive Director, Global Trade Services, J.P. Morgan
RFE IMMEX
Goods may undergo manufacture,transformation, repair, handling, stor-
age, distribution, exhibition and sale.
Goods may undergo manufacture andtransformation; certain services arealso permitted.
Importer permitted to correct customsdeclarations within three days.
Customs broker will require his physi-cal inspection (previo) prior to submit-ting a declaration (pedimento).
Goods exempt from customs inspec-tion at countrys point of entry.
Goods are subject to a first and a sec-ond customs inspection at countrys
point of entry.
Simplified import declaration required
(aviso).Simplified import declaration required(aviso).
Reduced services required of customs
broker will result in lowered costs.Customs broker fully engaged and lia-ble in the import process, hence higher
costs.
Goods destined to local market enjoy aduty and tax deferral of up to two years
from arrival date in Mexico.
Authorized items imported duty andtax deferred destined to a manufacture
or transformation process.
Lessened manipulation of goods intransit reduces costs, time and risk of
damage and or pilferage.
Goods subject to three inspections,transfers, loading and unloading re-sulting in higher fees and delays intransit. Odds of misrouting increasethereby subjecting goods to greater
risk of damage and pilferage.
8/4/2019 Outsourced Logistics 200901_02
14/44
12 | January/February 2009 | Outsourced Logistics
or outright dissolution.
Undeniably, 2008 was a tumultuous year for out-
sourcing, and though we continue to advise clients to
remain cautious in the year ahead, we do not discount
the opportunities and potential still very much evident
in the market. We consider the current struggles of the
industry as a driver for positive change and expect the
outsourcing industry to develop in the coming years, be-
coming more mature, efficient, dynamic, and ultimately
more resilient. With prudence, heightened focus and a
more adaptive approach towards outsourcing in 2009
can in fact be a watershed moment for the global out-sourcing industry.
These Tholons Top Ten Trends in Services
Globalization2009 will have a significant impact on
Global Outsourcing for buyers, investors, providers
and on emerging centers of excellence:
1. The market downturn will impact rev-enues during the first 2-3 quarters.
There are strong headwinds for vendors in the out-
sourcing space. We expect the worldwide market
downturn to impact growth and margins for the first
2-3 quarters of 2009 before picking up and ending the
year on a stronger note as clients seek to cut costs and
generate more revenues. During this period, we see
a reduced number of start-ups in the services sector
as the focus shifts on sponsoring hard asset-intensive
businesses. Moreover, it has become increasingly clear
that the downturn is impacting revenues and we ex-
pect most large firms will see a decline in Quarter over
Quarter earnings.
2. Focus on domestic market to in-
crease.As Western economies continue to hurt, service pro-
viders will shift focus to domestic markets for growth.
We are already seeing increased focus by vendors to-
wards large (and growing) domestic markets such as
found in India, China, Argentina and Brazil. Fulfillment
of customer support and back office services targeted
for retail, Telco, and Financial Services verticals will be
among the hot spots for providers looking to tap the
surging local demand of outsourced services.
3. Global economic downturn andfinancial sector consolidation will
The tsunami of the global economic downturn continues
to impact the foundation of the outsourcing industry
both near and long-term. Service providers are already
feeling the effects of decreased margins and employee down-
sizing, while service buyers are reducing IT budget allocations
for outsourcing engagements. This in turn has caused a cas-
cading effect across the industryevidenced by drying pipe-
lines, cancelled bookings and increased pressure to deliver
value beyond cost.
Decreasing margins and headcount will push providers
to better utilize existing resources. Service providers need to
implement new technologies in a more efficient manner to
differentiate themselves and improve service delivery pro-
cesses. Clients, with reduced IT budgets, will be forced to bemore selectivedemanding far more stringent Service Level
Agreements, greater contractual flexibility and output/result
based payment schemes.
These shifts will significantly induce a high degree of con-
solidation that will be felt across the outsourcing ecosystem.
Paul Santos, Managing Director at Tholons Capital says:
Its an opportune time for the larger players to continue their
string of strategic, niche acquisitions. In an increasingly com-
petitive market, and improbable economic state, the mantra of
only the strong will survive has never been more relevant.
Smaller and less efficient providers may face difficulties intapping new revenue streams and will be prone to acquisition
Operations
Despite a lingering cloud of
uncertainty, the global advisory,
investment and research firm,
Tholons, predicts a strong demand
for outsourcing over the long term.
Top
Trends in Services
Globalization 2009
8/4/2019 Outsourced Logistics 200901_02
15/44
Outsourced Logistics |January/February 2009 | 13
In the coming year, we will see more clients asking for al-
ternatives to India to de-risk their service delivery models
that are otherwise geographically limited.
Nearshoring as a low cost alternative to domestic
sourcing will assume greater importance for processes
requiring the same time zone presence. Latin America
with superior cost dynamics will emerge as a near time
zone alternative to Europe/US business adding Spanish
language capability. In the near-term, the top Indian firms
are predicted to expand global footprints and open deliv-
ery centers in China, Latin America, Eastern Europe and
North America.
6. Pricing pressures will result in reducedrates and new measures to achieve costsavings and higher productivity.
Pricing pressures will kick in as suppliers scramble to
meet their quarterly targets through the year. We will see
clients negotiating hard with suppliers to reduce costs,
while suppliers will try to protect rates but offer more
value added services.
Large providers are expected to see EBITDA margins
plunge below 20% over the next three years, as they
move more IT projects offshoremostly to Indiaand
struggle to balance operations with rising wages. The situ-
ation could aggravate if the Rupee continues to appreciate
during this period.
On the delivery front, supplier movement from high
onsite to low onsite deployment will be visible and new
tactical measures for cost savings and higher productiv-
ity towards clients and internal operations will mark new
industry standards.
7. Consolidation imminent for small
playersfocus away from large deals.On the M&A front, large deals will slow due to a more
tepid market. Challenges related to integration and main-
taining liquidity (as opposed to acquisition), will also be
primary concerns for 2009.
Cross-border, inorganic investments are expected to
increase in Japan and China with increased market con-
solidation seeing small to medium players being likely
targets. We also see difficult times for small, non-differ-
entiated players over the next 12 months. As clients look
to reduce spends and rationalize costs, new business
generation will be very difficult. Also, some of the existingengagements may come up for re-negotiation as clients
lead to increased outsourcing in Healthcare,Education, Retail, Telecom and Legal ProcessOutsourcing (LPO).
Global economic downturn is motivating service providers to
focus on recession-proof industries like Healthcare and educa-
tion. Other sectors like manufacturing, retail and telecom will
have to make a significant shift and reduce cost drastically to
survive. These sectors will be attractive industries as they look for
opportunities to cut cost. It is more a question of survival than
being just competitive in such turbulent times.
Consolidation in the financial sector is inevitable due to the
global financial crisis. This will create M&A opportunities whichwill generate further business for LPO firms. We expect strong
growth for LPO firms. Increased M&A activity in the financial
sector would also mean that merging companies would want to
integrate their existing outsourced servicesleading to increased
spending for integration projects. The processes will revolve
around integration of software applications, data center consoli-
dation and tighter integration of other operational platforms.
With financial institutions such as Lloyds TSB/HBOS and Bank
of America/Merrill Lynch merging, service providers will also find
themselves bidding against incumbent transnational rivals like
IBM, Accenture and HPEDS for several large-scale integration
contracts (valued anywhere between US$500 million and US$1
Billion over 5 years).
4. Governments to take special initiatives inpromoting destinations.
Emerging outsourcing destinations still trying to establish
their brands will find the going tough, as clients look for safer
choices.
Cebu City, Shanghai, Beijing, Ho Chi Minh City and Krakow
make up the top five spots in the recent Tholons study of Top
50 emerging global outsourcing cities. We see significant gov-
ernment and industry support for these cities along with someother more popular emerging destinations like Cairo, Sao Paulo,
Buenos Aires and Dalian.
5. Clients will increase geographic diversity intheir service delivery locations.
Newer service delivery geographies are emerging with niche
capabilities. The Philippines has exhibited spectacular growth,
with BPO export value aggregating close to 50% of Indias
Business Process Outsourcing (BPO) export.
Similarly, Vietnam has emerged as a solid alternative to India
on the IT side, and we are seeing aggressive strategies fromVietnam-based players to increase traction in the global market.
8/4/2019 Outsourced Logistics 200901_02
16/44
Adam Aguilar, Dana Burleigh, Mick Noce and Brian Alexanderof Unyson Logistics, A Hub Group Company
offerings. Companies that focus on solution-based selling will
weather the storm. Companies that do not innovate will lose
market share.
Otherwise, they run the risk of being an also ran compared to
larger, feature-rich Multi-National Company (MNC) vendors.
10. Sourcing deal sizes will increase forlarge clients.
Large clients will move towards single vendor sourcing to
get volume based price discounts, as opposed to the best of
breed solutions for specific sourcing requirements, which
tend to cost more, and carry a higher program management
overhead.
They will also look for opportunities to group an asset sale
with a sourcing contract, as vendors show readiness to use
their balance sheet strength for top line gains. As a result, weanticipate the average deal sizes to go up, even as the overall
deal volumes remain depressed.
Tholons is a Services Globalization and Investment Advisory
firm combining Best of Breed consulting experience with deep
execution expertise and investment insights to deliver effective ser-
vices to its clients. Learn more about them at www.tholons.com.
look to vendor consolidation for better pricing and reduced
program management costs.
With Tier One firms witnessing flat to negative Quarter
over Quarter revenue numbers, smaller players will find the
going tougher, and will be more open to mergers or takeovers
to survive. We believe a large proportion of sub-1,000 (em-
ployee) companies will either close shop or be acquired.
8. Outsourcing revival by 2009 enddrivenby small to mid sized (SME) clients.
The fundamental motivation for offshoring has not dimin-
ishedin fact it has actually become stronger. We expect to
see a revival in outsourcing, and we are already seeing an up-
tick in outsourcing related activity for engagements that will
come to fruition in 9-12 months.
The mid-market swing will also be aided by providersdeveloping market specific, full service solutions catering to
this space.
9. Strong focus on innovation, R&D andtechnology adoption will be key differen-tiators for providers.
We expect increased pressure to differentiate ones service
Operations
http://www.tholons.com/http://www.tholons.com/8/4/2019 Outsourced Logistics 200901_02
17/44
To their shipper-clients, the carrier procurement professionals at UnysonLogistics are LTL heroes. Theyve harnessed the power of SMC3 Bid$ense,the only strategic LTL bid tool that leverages their expertise to far exceedtheir clients cost-saving and service-level goals.
You too can be an LTL hero:
Save time and guesswork during bid preparation
Distribute your bid package quickly and confidently
Conduct sophisticated, lane-by-lane carrier response analyses
Spot opportunities to increase efficiency and reduce
transportation costs
Be an LTL Hero. Go towww.smc3.com/go/heroic
to view real business case studies and download the
free LTL Purchasing Best Practices white paper today.
Or give us a call at 800.845.8090, ext. 5588.
From Logistics Professionalsto LTL Heroes...
and well-engineered supply chain
practices. Its fundamental to supply chain
velocity and a competitive cost structure.Menlo is an ideal partner for Navistar as we
build a world-class logistics capability that
will make us more profitable and enable us
to better serve our customers.
We are very proud and excited to
be selected for this highly strategic and
mission-critical role supporting Navistars
business objectives, said Robert L.
Bianco, Jr., president of Menlo Worldwide
Logistics. Its clear that Navistar is
determined to elevate their logistics and
supply chain operations into a source
of competitive advantage. The role of
lead logistics provider is a tremendous
opportunity for Menlo and we look
forward to demonstrating the value of this
engagement for Navistar and its customers.
Navistar International Corp. announced it
has selected Menlo Worldwide Logistics, LLC,
as its global lead logistics provider to support
Navistars global growth strategies as the
company moves into new marketplaces.
Menlo will support Navistars strategies
to achieve world-class performance and
a competitive cost structure in its global
logistics network. The contract includes
management of global transportation
providers, regional warehouse management,
lead-time planning and net landed cost
modeling.
Navistar said the outsourcing initiative
represents a significant step forward for itsplans to accelerate growth globally and
speed the introduction of its products into
new markets. Ed Melching, Navistars director,
Global Logistics said, Effective logistics
operations are based on superior processes
Operations
NewsBriefsJanuary/Februa
ry2009
Navistar Selects Menlo for Its Growth Strategy
http://www.smc3.com/go/heroichttp://www.smc3.com/go/heroichttp://www.smc3.com/go/heroichttp://www.smc3.com/go/heroic8/4/2019 Outsourced Logistics 200901_02
18/44
16 |January/February 2009 | Outsourced Logistics
Consider Internal Resources BeforeOutsourcing Logistics Functions
Operations
Community Voice
A
s chemical companies look for ways to reduce lo-
gistics costs, many are increasingly considering out-sourcing as a way to save money associated with
freight and personnel costs. Often considered a fast and ready
solution to mandatory reductions in the logistics budget,
companies should carefully consider the value of combining
internal expertise with outsourced technology-based tools and
professional services rather than simply replacing internal re-
sources to streamline logistics functions.
With capital funds tight, many companies may find it dif-
ficult to acquire the latest state-of-the-art transportation man-
agement technology or retain sufficient staff to manage new
technology or develop corporate-wide logistics solutions. It is
at times like this they often turn to third party logistics (3PLs)
to provide the logistics solutions and/or logistics service pro-
viders (LSPs) to supply the technological tools and professional
services for logistics and supply chain optimization. However,
it is the companys internal staff that holds the knowledge base
of their supply chain operations to understand the specific
risks and merits associated with different cost-saving tactics.
Understanding the value of their internal resources, companies
should consider supplementing in-house expertise with out-
sourced resources to optimize specific logistics operations.
A recent survey reports that while nearly 60% of companies
did outsource some portion of their logistics function, onlyabout 4% outsource the entire department. And companies
that are outsourcing use these resources to achieve savings on a
variety of logistics programs involving inbound and outbound
traffic, freight costs, current assets, raw material and finished
goods inventories.
Rising fuel costs and more limited carrier options have
resulted in increased logistics costs for chemical companies, av-
eraging somewhere between 10% and 20% of revenues. Rather
than focus on specific logistics tasks, companies are evaluating
the total supply-chain when considering logistics enhance-
ments to balance trade-offs between cost and customer service.Through this approach, companies are saving as much as 4%
in sales, while improving customer service.
But should companies outsource the entire logistics func-
tion? Because logistics is a core business function, chemical
companies may find that complete outsourcing can create new
barriers as 3PLs and LSPs are simply not as knowledgeable as
their own staff about internal operations, customer relation-
ships and business regulations. For example, as the changingbusiness climate warrants increased responsibilities in security
and asset visibility, chemical companies may find that many
3PLs do not have as much experience as their own staff to
handle these issues.
When considering outsourcing as a means to optimize logis-
tics functions, companies should evaluate how their business
operations would change with this new resource and review
successful implementations by other companies. Changing
market factors should also be considered.
For example, the practice of making staff cuts to reduce costs
has slowed in recent years as many logistics departments have
reached the point where downsizing may affect business op-
erations. Though cost savings are accrued through reductions,
dollar impact is usually near term and the in-house intellectual
capital that took years to build is gone forever.
Some 3PLs propose freight rate savings solely based on the
larger volumes they command. Studies indicate that lane and
carrier market intelligence also can have a significant impact on
freight negotiations. In addition, the use of an online bidding
tool and supplemental resources allows shippers to execute an
RFQ quickly and generate savings much faster than the con-
ventional bid process. After bidding is completed, optimization
tools can pinpoint the best carrier mix and savings based onclient service levels, capacity commitments and rates.
When considering logistics improvements, experts instruct
companies to look beyond cost savings associated with per-
sonnel and freight as savings and service improvements can
be found in product visibility, inventory and asset reductions,
demand planning, improved procurement and freight opti-
mization. And because a truly cost-effective logistics program
typically includes organizational changes across different de-
partments, many functions may lie outside a logistics managers
control (including sales, purchasing and manufacturing). This
is where logistics outsourcing can help project management ona program and supplement in-house resources.
Steve Hamilton describes
experiences with chemical
companies that can benefit other
industries as well.
8/4/2019 Outsourced Logistics 200901_02
19/44
New
sBriefsJanuary/February
2009
Outsourced Logistics |January/February 2009 | 17
Polep DistributionServices Adds WarehouseSystem
J. Polep Distribution Services, one
of the top 15 convenience storedistributors in the US, is upgrading
its enterprise system and installing
a new warehouse management
system (WMS) at its Chicopee, MA
headquarters. It is using the Retalix
Power Enterprise suite. The purchase
is part of the convenience distribu-
tors expansion and technology in-
vestment initiative over the last few
yearswhich has included strate-
gic acquisitions, expanded productlines, and new programs and value-
added servicesto better meet the
needs of convenience retailers.
Service, dedication, commitment
and customer satisfaction have been
the driving force of our business for
more than 100 years, said Lori Polep,
president of J. Polep Distribution
Services. To continue to deliver on that
promise, we needed the complete
supply chain solution that Retalix offersto enable our customers to grow and
thrive in a highly dynamic and com-
petitive environment.
The project includes Retalix Power
Enterprise to integrate and synchro-
nize business and operational ap-
plications; and a new install of the
Retalix Power Warehouse to man-
age all aspects of route-based,
multi-stop distribution operations.
Retalix is the market-leading soft-ware provider for convenience and
foodservice distributors, said Reuben
Halevi, chief operating officer of
Retalix USA. Retalix Power Warehouse
will enable J. Polep to synchronize
its supply chain and business pro-
cesses, reduce costs and support
new growth opportunities.
Polep serves more than 4,000 chain
and independent retailers in the six
New England states and New York.
Chemical companies have reduced specific logistics expenditures
by supplementing in-house resources. For example: Looking to
reduce less-than-truckload (LTL) freight costs while gaining online
visibility of customer orders without sacrificing services, a specialty
lubricants company engaged the rate benchmarking and negotiation
services of a qualified logistics outsource provider. Maintaining an
extensive database of freight rates for carriers in different modes, the
LSP analyzed freight costs associated with different carriers to deter-
mine optimum carrier selection.
Benchmarking LTL rates of incumbent carriers, the LSP can pro-
vide an accurate estimate of cost savings prior to bidding out LTL
freight. With this capability, the lubricants company can negotiate
the best transport rates and lanes with existing and new carriers for
lower freight charges and better delivery performance.
In addition, the LSPs carrier selection and routing tools enable the
company to track orders from system entry until completion, rate
shipments online and monitor carriers, resulting in more accurateaccruals and reconciliation of expenditures.
In another scenario, a global chemical company looking for a
solution that would streamline management of freight and increase
customer service decided to upgrade their logistics functions by
implementing a transportation management system (TMS). Because
the company didnt want to make any changes to its staffing or op-
erating procedures, it chose to outsource to an LSP that could also
provide strategies for increasing efficiency and outline opportunities
for short- and long-term savings.
The LSP provided a web-based TMS that optimized freight opera-
tions in key areas such as carrier management, route guide design
and compliance, tender management and vendor compliance in
addition to providing full visibility into freight spend through online
access to data and custom reports. Automatic tracking improved
carrier performance from 90% to around 98%.
Advanced contract management functionality offered by the on-
demand TMS provides for highly accurate, real-time freight accruals
for accurate reconciliation, eliminating the occurrence of wide vari-
ances between estimated and actual cost of freight.
Chemical companies as well as businesses in other industries
should evaluate the value of their internal logistics resources be-
fore eliminating them for a complete outsource solution. Before
outsourcing any transportation and logistics functions, tap into thevalue of your current resources. Money can be saved by using inter-
nal staff to manage specific tasks rather than outsourcing complete
operations. Companies also shouldnt lose the investment made in
building internal logistics expertise over the years. Consider using
outsourcing to provide the tools and support needed for your in-
ternal staff to better manage logistics functions for greater efficiency,
cost savings and customer service.
Steve Hamilton is president and chief executive officer of ChemLogix
LLC. The company often works with best-in-class shippers, and those
aspiring to be, in implementing programs that generate significant logisticsand supply-chain savings. E-mail [email protected].
mailto:[email protected]:[email protected]8/4/2019 Outsourced Logistics 200901_02
20/44
18 | January/February 2009 | Outsourced Logistics
I ts not that the industry didntknow new regulations were to be imposed
on goods destined by ship for the US. Part
of the Security and Accountability for Every
Port (SAFE) Port Act passed in October 2006
mandated that ocean shipments to the US had
to have electronically filed manifests in the
hands of US Customs and Border Protection
(CBP) at least 24 hours in advance of lading a
vessel at its foreign port.
There are 10 data elements to be included in the
Importer Security Filing (ISF) by importers or their
agents. Ocean carriers and Non-Vessel Operating
Common Carriers (NVOCCs) are to file 2 data elements
that describe the status of a container and its physical
location on board the vessel. Hence the 10+2 regula-
tions. The specifics of required data are listed in the box
on page 20.
In January 2008, CBP published its proposed rule-
making in the Federal Register. It then collected and
By Roger Morton
Calmingthe
WatersSpecial Feature
8/4/2019 Outsourced Logistics 200901_02
21/44
While the new rules represent a sea change in
the way imports are handled, there is ample
time to get ready for the governments forcefulimplementation of whats commonly called 10+2.
on 10+2on what we call the line item level.
While realizing that some are going to turn to outside
logistics providers to handle the process, Nathan Pieri,
senior vice president of marketing and product manage-
ment, Management Dynamics, argues that the govern-
ments increased security regulations, holding importers
more accountable than ever, are moving companies to
have more control and develop core competency in the
area.
Management Dynamics is a provider of global trade
management software and information services, part of
which is to provide solutions to automate and complete
the import process, from order entry to delivery. As
part of our core trade import information, explains
Pieri, we added 10+2 capabilities. Our perspective
was that there would be pain in implementing this new
regulation, but with that there is the possibility of a tre-
mendous gain. The gain is that all of a sudden you have
much more automation in your supply chain. There will
be much more visibility and control over whats going
on. Now you can actually start getting operational ben-
efits. We see it as a net good.
There are barriers to overcome. For example,
Fountain feels because of the intermediary nature of theglobal economy, getting information on the true manu-
facturer will be one of the more difficult data elements
to get for the 10 portion of the regulation. Generally,
he notes, trading companies and wholesalers have been
reluctant to disclose the actual name of the manufacturer
for fear of losing future orders, and this piece of data is
one of the major components of the 10 + 2 filing.
Another challenge pointed out by Woods is that for
importers the filing is fairly involved. What really com-
plicates it, he says, is that you have to link it at the line
item level for the commodities. You have to identify themanufacturer, country of origin and harmonized tariff
evaluated some 200 public comments, made whatit calls significant enhancements, then issued the
Importer Security Filing and Additional Carrier
Requirements interim final rule.
When the proposed rules appeared they caused con-
cern since while seeming to be fairly straightforward, the
amount of data required to answer each element can be
burdensome. Some proactive companies saw this as a
strategic opportunity to evaluate and gain greater visibil-
ity into their supply chains. The alternatives for compa-
nies to meet the new regulations appear to be handling
the entire filing process themselves; purchasing or using
as required a vendors software solution; or turning the
entire process over to a third party supplier.
Walt Fountain, director of enterprise security at
Schneider National, feels the largest component to the
ruling that will affect shippers, importers and logistics
industries, is the level of visibility each party needs for
a transaction. The depth of information needed truly
makes the importer responsible for understanding every
point in their supply chain, he says. We strongly rec-
ommend that every importer go to their suppliers and
vendors and make sure that each party in the supply
chain can provide the needed information within theprescribed time frames.
Depending upon the service supplier, there are dif-
fering perspectives on who will handle the import
process. For example, Don Woods, director of customs
brokerage compliance for UPS Supply Chain Solutions,
claims results of two surveys conducted in each of the
past two years indicated that many importers expected
their broker to handle the paperwork on their behalf.
The advantage the broker has is that they are familiar
with the data elements required in the security filing, he
notes. They are dealing with this type of information ona daily basis, particularly linking information together
Outsourced Logistics | January/February 2009 | 19
8/4/2019 Outsourced Logistics 200901_02
22/44
20 | September 2008 | Outsourced Logistics
information you have at lading,
then perfect it before arrival. 4. The
fourth and final piece of data they
will allow you to give the best in-
formation you have up front then
amend it later is the ship to party.
In some casesparticularly where
the importer or ship to party may
not be knownthey will allow
you provide what they call a nomi-
nal consignee where they will ac-
cept in some cases theyll even ac-
cept a terminal, container freight stationor warehouse. So, thats a lot of flexibil-
ity on that piece because many import-
ers say they just dont know where the
goods are going to be finally delivered.
As for vessel reporting requirement,
The carriers have their operational sys-
tems that can report the 2 element,
claims Pieri. Some of our logistics
provider customers are interested in
using our systems to manage their
part of 10+2 which sometimes in-
volves providing the compliance de-
tails of stuffing locations and some
of the other 10 items. Most car-
riers can provide the 2 elements
pretty much from their normal op-
erations.
Although there is a substantial
grace period before 10+2 enforce-
ment goes into full force, this time
should be sufficient to allow import-
ers to assess their supply chains and
capabilities to determine whether tohandle compliance internally, out-
source it, or some combination.
Fountain explains Schneider
works with its customers to under-
stand how they view their compli-
ance programs and determine if com-
pliance is best handled internally or
should be outsourced. Every suc-
cessful compliance program will in-
corporate both internal and external
factors, he argues. Generally, ac-tivities such as Focused Assessment
ible data elements 1. The manufacturer
of the goods. But if you dont knowthat you can give them the supplier. 2.
Country of origin. If you dont know, you
can provide the country where the final
stage of production took place. 3. You
dont have to have the perfect harmo-
nized tariff schedule. Give them the best
schedule number. That puts it on
a par with a Customs entry.
Interacting with DHS on im-
plementation of the new regu-
lations, Woods notes that the
government has indicated there
will be some flexibility in en-
forcement for a period of time.
He claims that between January
26, 2009 and January 26, 2010,
DHS and CBP will accept mini-
mal data in the timing of when
the ISF is to be reported. When full en-forcement comes about in 2010, there is
to be a change in penalties. Where they
were leveled at shipment value, the new
charge will be at $5,000. per violation.
Another change involves what CBP
has considered as the responsible party
for the security filing. In the past it
has been assumed the responsible
party was going to be the importer
of record, usually the same party as
for Customs entry purposes. Now
the importer of record may be an
owner, buyer or a nominal con-
signee, whoever causes the goods
to enter a port within the US. This
change may relieve some anxiety
since the importer of record on the
entry doesnt have to be the same as
the ISF importer.
Further explaining results of his
governmental meetings, Woods
recalls that, Part of that flexibil-
ity comes in four data elements ofthe eight identified in the proposed
rule where there could be multiple
responses instead of a single one.
So, indicates the government if you
dont have all data 24 hours before
loading at origin, you can give us
the information you have to the best
of your knowledge at that time.
However, a modified or amended
ISF must be provided to Customs
24 hours before arrival.Woods enumerates the four flex-
20 | January/February 2009 | Outsourced Logistics
Don Wood of UPSSupply ChainSolutions
Nathan Pieri ofManagementDynamics
The 10+2 List
There are different requirements for im-
porters and carriers in the rules. The 10
refers to eight data elements that must bein the Importer Security Filing (ISF) with
an additional two elements that refer to
where containers are located on a vessel
and who performed the consolidation.
Here are the 10 for importers:
1. Seller
2. Buyer
3. Importer of record/FTZ applicant
identification number
4. Consignee number(s)
5. Manufacturer (or supplier)
6. Ship to party
7. Country of origin
8. Commodity Harmonization Tariff
Schedule of the United States
(HTSUS) number
9. Container stuffing location
10. Consolidator
The 2 for carriers
1.Vessel Stow Plan
2. Container Status Messages (CSM)
Special Feature
8/4/2019 Outsourced Logistics 200901_02
23/44
Poor RetailerScorecards
DistributionSupport forPromotions
ChargeBacks
SeasonalSpikes
Direct-to-Store
Delivery
Signs That You Need
the CPG Logistics Specialists.
Discover Kane is Able: third-party logistics specially designed
for consumer packaged goods (CPG) companies. Nationwide, our
integrated warehousing, packaging and transportation services
help cut your operating costs and improve service to your
toughest retail customers.
Learn what some of America's leading consumer productcompanies already know: The people of Kane is Able are the
CPG logistics specialists.
Download our free white paper on Logistics for Mid-sized CPG
Companiesat www.kaneisable.com/CPGwhitepaper
888-356-KANE (5263) [email protected] www.kaneisable.com
Outsourced Logistics | January/February 2009 | 21
Audits should be done by an outside
organization, but the development of
the actual program must be done on an
internal level and can be guided by out-
side consultants or by US Customs. The
structure of the compliance program
will depend on the complexity of the
organization, its products and the reach
of its supply chain.
In Pieris view, At the end of the
day there are going to be a couple of
different camps. There are going to be
those that have relatively simple sup-
ply chain and are going to solve 10+2
transactionally. Typically theyll work
with one forwarder and move that way.
There will be another segment that will
say hey, I think this is a good time,
especially now that we have lead time,
lets go ahead and look at doing a better
job. Lets get it right in procurement.
Well make sure all of our orders are
compliant. Our view is that now is the
time, especially with this regulation,
to treat global trade management as a
strategic piece of information technol-
ogy that your business should have.
Reflecting on the motivation forimplementation of these rules: the rea-
son is security. US Customs has long
stood by the idea that cargo security is
best achieved by ensuring that freight
which poses a possible threat does not
make it onto a vessel or aircraft des-
tined for the United States, points out
Fountain. The security of our country
depends on the ability of international
communities, and industries within
these communities, to support and fol-low through on these initiatives.
US Customs has long stood by
the idea that cargo security is best
achieved by ensuring that freight
which poses a possible threat does
not make it onto a vessel or aircraft
destined for the United States
http://www.kaneisable.com/CPGwhitepapermailto:[email protected]://www.kaneisable.com/http://www.kaneisable.com/mailto:[email protected]://www.kaneisable.com/CPGwhitepaper8/4/2019 Outsourced Logistics 200901_02
24/44
Though business is in decline, ports are moving ahead with
critically needed infrastructure improvements.
Negative news
Among items of negative news is a report from Port
Tracker, produced for the National Retail Federation by
IHS Global Insight. Its analysis indicates retail container
traffic at the nations major retail container ports will be
the lowest since 2004. Volume for 2008 is projected at
15.3 million TEU (twenty-foot equivalent units) com-
pared to 2007s 16.5 million TEU, a decline of 7.5%
Because of the volume of container traffic handled by
West Coast ports and since so much import business of
late has come from Asia, they garner the most attention.
Drewry Supply Chain Advisors claims problems being
faced by US West Coast ports are structural and not of a
temporary nature.
The argument forwarded by a division of Drewry
whose expertise is in shipping, international supply
chains and related sectorsis covered in its white pa-
per, "US Transpacific Intermodal Today and Tomorrow."
By analyzing end-to-end transport costs of containers
shipped to and from the US interior via West Coastand East Coast ports, then forecasting a decline in
vessel-related costs once the Panama Canal
expands it capabilities
by 2015, and the in-
creased development
of the Suez Canal as a
viable route for cargo
from Southeast Asia,
D r e w r y S u p p l y
Theres no denying the global economy is
in a bad way and dragging down business
of every kind, including transportation.
Import and export freight movements
through the nations ports have been in
decline, just as with cargo for air, rail
and truck. While ports are suffering with
dwindling commerce, when looking be-
yond immediate problems there are a number of issues
on the horizon that require action now if they are to
remain viableand even ahead of the competition
when the gloom lifts.
A few of the matters needing to be addressed now in
order to be ready when the economy grows again include
the fact that larger vessels, carrying more cargo will have to
be accommodated with deeper channels and cranes that
can handle their size and volume. Facilities to move and
house freight must be expanded. On-dock rail is a requisite
for speedy movement of freight to intermediate or final
destinations. There are increased governmental demandsfor safety and security as well as improved environmental
conditions being imposed on the ports that require greater
investments as well. The list goes on. What is happen-
ing is that though business is shrinking, ports
are continuing to invest in upgrading
their infrastructure. The
story is one of current
negatives and future
positives.
By Roger Morton
Expanding
WhileContracting
22 | January/February 2009 | Outsourced Logistics
Cover Feature
8/4/2019 Outsourced Logistics 200901_02
25/44
Outsourced Logistics |January/February 2009 | 23
Among the projects is a $97.9 million wharf improve-
ment, part of TraPac Container Terminal expansion and
$42.7 million for marine wharf maintenance and im-
provements of various berths.
The Port of Tacoma. With three major projects esti-
mated to cost $1 billion, the port will increase its capac-
ity for growth and development within its industrial
core. The relocation of the Totem Ocean Trailer Express
(TOTE) Terminal is scheduled for 2009-2011. By ex-
tending the ports Blair-Hylebos Peninsula by 6.4 acres
and moving the TOTE facility there, space will be made
in the old location to support a new terminal for NYKLine. The Blair Waterway will also be widened to ac-
commodate larger ships.
Two berths will be built for the new NYK 168-acre
container terminal to be constructed from 2010 to 2012.
To be named the Yusen Terminals Tacoma Inc. (YTTI),
the new facility will incorporate an on-dock intermodal
rail yard with the capability of handing full-unit trains.
The port is also working to improve road and rail con-
nections from 2009 to 2013.
The Port of New Orleans. A $1 billion 2020 master
plan was announced by the port early in 2007. Reported
estimates are that short-term projects would cost $574.3
million and long-term work would be an additional
$465.1 million. The port has continued to suffer long-
term effects from Hurricane Katrina that struck the City
and Port in August 2005. Part of this is because the
US Army Corps of Engineers has halted dredging the
Mississippi River Gulf Outlet that would create deep
draft access to the ports Inner Harbor.
Despite the setbacks, the port is moving ahead with
its projects. Most recently it awarded a $26.5 million
contract for construction of two new multi-purpose gan-
try cranes for its Napoleon Avenue Container Terminal.These will join four cranes already in operation when
work is completed in July 2010.
The Port of Houston. The port reports that each year
7,700 vessels call there, which ranks it first in the US in
foreign waterborne tonnage and second in overall ton-
nage. The Port Commission is highly active in projects
to improve the ports infrastructure.
Among the most current projects under consider-
ation are $30 million for Bayport Container Terminal
improvements that include building a Terminal
Administration Building and a Maintenance and RepairBuilding. Additionally, consideration is being given for a
Chain Advisors sees the economic forces and infrastruc-
ture improvements favoring growth of Gulf and East
Coast ports.
Examining typical patterns of cargo arriving at West
Coast ports destined for customers in the East, the study
looks at costs for moving that freight via intermodal rail
traffic. Faced with a tightening market and rising de-
mand, claims Philip Damas, director of Drewry Supply
Chain Advisors, the railroads have chosen to up their
prices rather than invest in significantly more capacity,
in the mistaken belief that they had a captive market.
Ultimately, because of all these factors, concludesDamas, Intermodal costs are certain to keep rising, while
all-water costs will continue to fall, which means that the
land-bridge route will become less economic than the all-
water route except for very time-sensitive goods.
Positive actions
Even in the face of such serious traffic issues, ports are
taking steps to improve infrastructure. Here are some
exemplary projects underway aimed at meeting future
needs as the world economy improves and demands for
port services and facilities increases.
The Port of Anchorage. This far north port services
80% of the states populated areas, handling 90% of all
shipped goods and moving more than 4 million tons
of freight each year. Its current $700 million expansion
project is aimed at responding to a need for facilities for
additional containerized carriers; servicing more indus-
tries related to export, such as mining and forest prod-
ucts; and lending oil field assembly and load-out
support.
Among other facilities being built under the
project manager, ICRC, are two barge termi-
nals, four container/military berths, and threefuel berths.
The Port of Los Angeles. It is anticipated
that $383.7 million in construction projects
is to be awarded. The ports executive direc-
tor, Geraldine Knatz, Ph.D., notes, The rise in
construction activity underscores our mission
to continue upgrading Port infrastructure and
cargo terminals in the most environmentally
sustainable fashion. After a seven-year hiatus
in our capital development program, this con-
struction activity is a sign that we are back inbusiness in a big way.
8/4/2019 Outsourced Logistics 200901_02
26/44
24 | January/February 2009 | Outsourced Logistics
director of the Georgia Ports Authority
claims it will not only survive the cur-
rent recession, but will come out of it
stronger t