Logistics Management - October 2011

OCTOBER 2011WWW.LOGISTICSMGMT.COM®LM EXCLUSIVENASSTRAC SHIPPER OF THE YEARStein Mart’s $20 million savePage 24Stein Mart’s supply chain team: fromleft, Bill Stover, Gregg Sayers, andRick Schart.Squeezing your TMS 32Logistics in China: Thinking ahead 36Lift truck evolution 42SPECIAL REPORTS:LEADING AIR CARGO CARRIERS 48SHong Kong callingTOP 30 OCEAN CARRIERS 53SNew era of collaboration

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Copyright © 2011 United Parcel Service of America, Inc.4 WAYS LOGISTICS CAN MAKE YOURSUPPLY CHAIN MORE SUSTAINABLE.Every supply chain has a carbon footprint. UPS is the best choice to help companieslarge and small measure, manage and mitigate their impact on the climate.And our methodology has been certified and verified by trusted third parties.1) MEASURE YOUR FOOTPRINTWe can work with your companyto conduct the UPS Carbon ImpactAnalysis, which reveals carbon impactby mode and scope. We can thenpartner with you to find ways toreduce that impact.2) MANAGE MORE EFFICIENTLYFrom our Eco-Responsible PackagingProgram to a host of automated andpaperless solutions, we can helpyour company reduce waste andstreamline its supply chain.3) MITIGATE YOUR IMPACTUPS carbon neutral shipping helpsyou and your customers offset thecarbon impact of your shipments forjust pennies per package.4) IMPRESS YOUR CUSTOMERSIncreasingly, businesses are findingthat sustainability is a factor inpeople’s buying decisions. When youchoose UPS carbon neutral, yourdecision is backed by the credibilityof UPS’s reporting. And we offer a UPScarbon neutral logo you can use to letcustomers see your commitment.For complete details, go to thenewlogistics.com/sustainability or snap the QR code.thenewlogistics.com/sustainability

Get your daily fix of industry news on logisticsmgmt.comAn executive summary of industry newsm YRCW restructuring: A done deal. YRCWorldwide (YRCW) shareholders unanimouslyvoted to have common stock of thefinancially-troubled LTL carrier diluted inthe last step of its financial restructuring.This news follows a $500 million restructuringannounced in July that included a new$400 million lending agreement. Before therestructuring, YRCW had 48 million outstandingshares; after the restructuring, it has 1.9billion shares, meaning former shareholderswill own just 2.5 percent. New shareholderscomprised of lenders, bondholders, and laborunion members now own the other 97.5 percentof the company. YRCW officials said therestructuring would enhance the company’sliquidity and provide a “runway for the continuedgrowth in revenues and earnings.”m Port Tracker predicts Peak Season. Importcargo volumes at major U.S.-based containerports are slowly seeing annual monthly gainsas retailers prepare for the holiday shoppingseason, according to the monthly Port Trackerreport by the National Retail Federation (NRF)and Hackett Associates. The Port Trackerreport is calling for September to come inat 1.5 million TEU for an 11.8 percent annualdecrease. October is expected to reach 1.48million TEU for a 9.5 percent increase. HackettAssociates President Ben Hackett said the2011 Peak Season is already taking form inthe U.S. with slightly improved freight ratesand carriers implementing Peak Seasonsurcharges. And with the amount of inventorythat was being held, Hackett said a peakseason of some sort is in effect although itwill not be as strong as others due to a lack ofstrong demand.m Boeing late for its 747-8 Freighter date.Shippers anticipating the launch of Boeing’s747-8 Freighter last month were disappointedby a last minute cancellation. At issue, itseemed, was a contract negotiation with oneof the manufacturer’s key clients: Cargolux.Published reports contend that the disagreementbetween Boeing and the airline mighthave also involved compensation for QatarAirways that owns 35 percent of Cargolux.Quatar was promised 787 Dreamliner aircraftthat had not yet arrived. According to thejust published Boeing Current Market Outlook2011-2030, long-term economic projectionsare fraught with difficulty. This episodecertainly points to one them. “Many of theassumptions such as regional and nationalGDP growth underlying Boeing’s projectionsare highly variable, influenced by short-termfactors,” the report said.m Maersk wants to deliver the goods. Followingits promise to be more collaborativewith shippers, Maersk Line is introducing atime-definite service in the booming Asia-EUtrade lane that it’s calling Daily Maersk. “Upuntil now, customers have had to adjust theirproduction schedules and supply chains toaccommodate shipping lines’ unreliability, asthey have never been able to trust that theircargo would be on time,” said Maersk LineCEO Eivind Kolding. But Maersk promisesthat this will be a thing of the past, noting thatthe engine behind Daily Maersk is 70 vesselsoperating daily sailings between four ports inAsia (Ningbo, Shanghai, Yantian, and TanjungPelepas) and three ports in Europe (Felixstowe,Rotterdam, and Bremerhaven) in whatamounts to a giant “ocean conveyor belt” inthe carrier’s busiest global service.m Teamsters lawyer up. Following the Julyannouncement that the U.S. and Mexico hadreached a cross-border trucking agreement,a Wall Street Journal report indicated that theTeamsters union has filed a lawsuit againstthe White House that intends to block the deal.According to the report, the complaint allegesthat the “pilot program sets standards thataren’t stringent enough for Mexican trucks anddrivers,” adding that the cross-border truckingprogram, which is expected to kick off with apilot program in the next 30-to-60 days, waivesa law requiring trucks to display proof of meetingfederal safety standards. It added thatthe Teamsters believe the program is “faulty”because it includes standards that are impossiblefor Mexico to meet.continued, page 3 >>October 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 1

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Get your daily fix of industry news on logisticsmgmt.comcontinuedm Wanted: National airline policy. The AirTransport Association of America, Inc. (ATA),the industry trade organization for the leadingU.S. airlines, was calling on the FederalAviation Administration (FAA) last month toaccelerate its timetable for implementing newand more efficient air traffic procedures, akey pillar of a needed National Airline Policy.“Near-term FAA action will help governmentfocus on priorities that can provide immediateeconomic and customer service benefits,” saidATA President and CEO Nicholas E. Calio in aspeech at the Boyd Group International AviationForecast Summit. As a first step towardexecuting a National Airline Policy, the ATAcalled on the Obama Administration andthe FAA to focus its resources on expeditingthe most cost-beneficial elements, includingperformance-based procedures.m UPS beefs up European hub. UPS is makingmajor expansions to its European air hubfacilities at Cologne/Bonn Airport in Germany.Company officials said that the roughly$200 million expansion, which is expected tobe completed by the end of 2013, will consistof equipping the existing facility with additionalstate-of-the-art technology as well asan extension to the existing building. Thegoal is to allow the building to process largerfreight shipments. UPS added that theseefforts will boost the carrier’s package sortingcapacity from the current level of 110,000packages per hour to 190,000 packages perhour. UPS has roughly 2,300 employees at theCologne/Bonn Airport, and the company saidthis expansion should add up to 200 jobs bythe end of 2013.m Massport cleans up. In keeping with anational trend, The Massachusetts Port Authority(Massport) began developing its own “CleanTrucks Program.” Last month’s announcementincluded news that the Environmental ProtectionAgency (EPA) had “teamed up” with theport to establish a program giving ownersof older trucks servicing Conley ContainerTerminal an incentive to replace the vehicleswith ones that are 2007 emission compliant ornewer. With a $500,000 EPA Diesel EmissionsReduction Act, a total of $1.5 million will beavailable to provide truck owners with 50 percentof the replacement cost. Massport ExecutiveDirector Mike Leone said unionization ofdrivers was not a mandate for this program.“This program regulates trucks not truckers,”said Leone.m Better, but not great says IATA.The InternationalAir Transport Association (IATA)announced an upgrading of its industry profitexpectations to $6.9 billion—up from $4.0billion projected in June. IATA emphasizedthat, despite the improvements, profitabilityat these levels is still exceptionally weak (1.2percent net margin) considering the industry’stotal revenues of $594 billion. In its firstlook at 2012, IATA is projecting profits to fallto $4.9 billion on revenues of $632 billion fora net margin of just 0.8 percent. “Airlines aregoing to make a little more money in 2011than we thought. Given the strong headwindsof high oil prices and economic uncertainty,remaining in the black is a great achievement,”said Tony Tyler, IATA’s director generaland CEO. “But we should keep the improvementin perspective. The $2.9 billion bottomline improvement is equal to about a half apercent of revenue, and the margin is a paltry1.2 percent,” he added.m Manufacturers look to the clouds. Theemergence of cloud computing is having adirect and positive impact on manufacturers’IT performance and subsequently supplychain operations, according to a report fromIDC Manufacturing Insights. In its reportBusiness Strategy: Cloud Computing in Manufacturing,IDC stresses how “cloud computingwill have a very positive impact on ITperformance for those firms that take a wellconsidered approach to investment.” Two ofthe report’s notable findings include how 44.3percent of the nearly 100 manufacturers surveyedare either implementing or currentlyevaluating cloud deployments, and more than22 percent have already implemented cloudcomputing systems.October 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 3

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ContentsVOL. 50, NO.10OCTOBER 2011NASSTRAC SHIPPER OF THE YEARStein Mart’s$20 million saveBy re-engineering its supply chain, the fashion retailerreduced transportation expense, lowered storeoperating costs, enhanced labor planning,improved communication with its vendors,and was the hands-down winner of the2011 NASSTRAC Shipper of the Year Award.24Cover photo by Cy Cyr/Getty magesTRANSPORTATION BEST PRACTICES & TRENDS28MillerCoors taps dunnage innovationWhen the beer giant revamped its dunnageprocesses, it realized significant cost savings,ushered in a safer work environment, and founda more fluid freight model—all while helping thecompany get a little greener.SUPPLY CHAIN & LOGISTICS TECHNOLOGY32Squeeze more out of your TMSYour transportation management system (TMS)is installed and running, but are you getting themost out of it? Our technology correspondenthelps shippers determine where the utilizationgaps exist and formulates a plan to effectivelyoptimize a TMS investment.GLOBAL LOGISTICS36Logistics in China: Thinking aheadWhat is the country doing to ensure theefficiency and effectiveness of those globalsupply chain networks that have tapped itsresources and fueled its rise to power?WAREHOUSING & DC: EQUIPMENT UPDATE4215 ways the lift truck is evolvingToday’s lift trucks offer more in the way oftechnology, power, and performance than everbefore. Here’s a look at the latest innovationsavailable in today’s trucks.MillerCoors 28TMS 32China Update 36Logistics Management ® (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Ste 200, Framingham, MA 01701. Annual subscriptionrates for non-qualified subscribers: USA $119, Canada $159, Other International $249. Single copies are available for $20.00. Send all subscription inquiries to Logistics Management,111 Speen Street, Suite 200, Framingham, MA 01701 USA. Periodicals postage paid at Framingham, MA and additional mailing offices. POSTMASTER: Send address changes to:Logistics Management, PO Box 1496 Framingham MA 01701-1496. Reproduction of this magazine in whole or part without written permission of the publisher is prohibited. All rightsreserved. ©2011 Peerless Media, LLC.October 2011 | WWW.LOGISTICSMGMT.COM LOGISTICS MANAGEMENT 5

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departments1 Management updateGet your daily news fix atlogisticsmgmt.com9 Viewpoint10 Price trends13 News & analysis18 Moore on pricing18 Pearson on excellence18 Andreoli on oil & fuel64 Sage adviceVirtual ConferenceSupply Chain Best Practices:Boost Productivity and Cut CostsWednesday, October 26Go to http://supplychainvirtualevents.comfor more detailsThis Virtual Conference, presentedby Logistics Management and SupplyChain Management Review, will offerpractical, tested best practices toimprove productivity—while controllingcosts. In each of the four critical areascovered we’ll present logistics and supplychain managers with proven tactics andstrategies that can be put to work in theirorganizations right away.pSpecial report:Leading aIr Cargo CarriersHong Kong callingWorld air cargo traffic will tripleover the next 20 years, with mostof the growth being driven in theAsia Pacific marketplace. Is it anywonder that the biggest players inthe industry are investing heavilyin the region? 48SKeynote and workshop sessions:Keynote:“How Energy Trends Will Impact Our Supply Chain Future”Transportation Management: Practical Steps to CutCosts and Control Operations• How to improve existing carrier relationships.• How to harness technology to improve transportation operations andrein in costs.Warehouse and DC Management:Tips for Optimizing the Distribution Network• How to asses the effectiveness of the current distribution network.• How to understand the process of network modeling and optimization.Inventory Management: How to Lower Costs, GenerateCash, and Improve Productivity• How changes in cycle, safety, and surplus stock translate to lowerworking capital requirements.• How to segment inventory for maximum cost reduction and profitability.Labor Management: Seven Steps to a More Productive Workforce• The key steps that can be taken to improve workforce productivity.• The technology enablers available to manage today’s workforce.pSpecial report:TOp 30 Ocean carriersNew era of collaboration?Big shippers and the world’s topcarriers vow to work collectivelytowards leveraging technologyto improve business processesand relationships. Will they makegood on the promise or slip backto business as usual? 53SOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 7

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®®EditoriAL STAffMichael A. LevansGroup Editorial DirectorFrancis J. Quinn® ®Editorial AdvisorPatrick BurnsonExecutive EditorSarah E. PetrieManaging EditorJeff BermanGroup News EditorJohn KerrContributing Editor, Global LogisticsBridget McCreaContributing Editor, TechnologyMaida NapolitanoContributing Editor, Warehousing & DCJohn D. SchulzContributing Editor, TransportationMike RoachCreative DirectorWendy DelCampoArt DirectorColumniSTSDerik AndreoliOil + FuelElizabeth BaatzPrice TrendsMark PearsonExcellencePeter MoorePricingJohn A. GentleSage Advicepeerless media, llcA Division of EH Publishing, Inc.Kenneth MoyesPresident and CEOEH Publishing, Inc.Brian CeraoloPublisher and ExecutiveVice PresidentEditoriAL OffiCE111 Speen Street, Suite 200Framingham, MA 01701-2000Phone: 1-800-375-8015MAGAzine SuBSCriptioNSStart, renew or update your magazinesubscription at www.logisticsmgmt.com/subscribe.Contact customer service at:Web: www.logisticsmgmt.com/subscribeEmail: logisticsmgmtsubs@ehpub.comPhone: 1-800-598-6067Mail:Peerless MediaP.O. Box 1496Framingham, MA 01701eNewsletter SuBSCriptioNSSign up or manage your FREEeNewsletter subscriptions atwww.logisticsmgmt.com/enewsletters.RepriNTSFor information about reprints, visit usat www.logisticsmgmt.com/info/reprints.one of the most satisfying resultsof any management decision is whenthe benefits not only exceed yourdepartmental expectations, but alsounexpectedly flow to other parts of theorganization—thus creating operationalimprovements across the board.While this may sound like the introductionto the latest best-selling managementbook, this is just what unfolded forthe supply chain team at Stein Mart—afashion retailer with 260 stores and $1.2billion in sales in 2010—when it reengineeredits transportation operationsover the course of the past two years.Prior to 2009, Stein Mart had beenhaving some success in shippingproduct directly, andquickly, from its vendors toits network of stores via smallparcel carriers. But whilethose carriers where doing acommendable job, the retailerwas bumping into issueswith packaging requirementscompliance and floor-ready guidelines,freight visibility was limited, and storedelivery times didn’t always mesh withstore hours.“It was getting expensive,” GreggSayers, director of supply chain transportationtells our John Schulz in thismonth’s cover story (page 24). “Therewere expenses at the stores to get merchandiseready to sell; and there werealso problems with managing the receiptof our product and the ability to reconcileanything that was not in compliance.”Newly appointed Vice President ofSupply Chain Rick Schart reviewed thesituation with Sayers and Bill Stover,his two new recruits at the time, andthe team went to work to re-organizethe retailer’s transportation operations.First, the parcel carriers were replacedwith a network of LTL and TL carriers,creating dedicated and pool transportationlanes. Then the team spent sixmonths educating vendors on the newprocess just to get the ball rolling.Beyond the expected benefits of thenew transportation process, the teamStein Mart provespower of innovationstarted to see considerable labor savingsat the storefront because managerscould staff accordingly now that theyknew when freight would arrive. Meanwhile,improved communication withvendors had merchandise ticketed andfloor ready, thus cutting more time andexpense once on the store floor.According to the team, the overallcost savings is now rolling in at about$20 million annually. “It came down tohaving the right team in place, the rightcarrier and 3PL partners, and havingthe Stein Mart organization, especiallyIT, aligned to support the new concept,”says Schart.The team started to see considerable laborsavings at the storefront because managerscould staff accordingly now that they knewwhen freight would arrive.This dramatic example of how a supplychain re-design can improve overalloperations has earned Stein Mart the2011 NASSTRAC Shipper of the YearAward, the highest honor bestowedupon the council’s membership andawarded in partnership with LogisticsManagement.According to NASSTRAC ExecutiveDirector Brian Everett: “SteinMart’s innovative approach epitomizesthe transportation and supply chainbest practices that we encourage inour industry.” And once you read thismonth’s inspiring cover story, you’llfind it tough to disagree with Everett’ssentiments.Michael A. Levans, Group Editorial DirectorComments? E-mail me atmlevans@ehpub.comOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics MANAGEMENT 9

12840-4-8(2001 = 100)140135130125120Forecast1152007 2008 2009 2010 2011 2012% change (left scale) Index 2001=100 (right scale)% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. agoGeneral freight - local -0.3 0.6 3.6Truckload 0.0 3.5 7.0Less-than-truckload 1.0 3.3 9.7Tanker & other specialized freight -0.6 2.3 5.2TruckingLTL truckers shifted gears, increasing average transactionprices 1.05% in August, on the heels of the previous month’s1.5% price cut. Meanwhile, truckload prices held steady andall other trucking categories registered price declines. For thetrucking industry overall, average prices fell 0.1%. The truckingindustry’s year-over-year inflation rate nonetheless hit 4.8%in August 2011, which was the highest rate since March 2009.Looking down the road, our revised forecasts show all truckingindustry prices up an average 5.9% in 2011 and up 1.9% in 2012.LTL prices are forecast to end 2011 up 8.2%, but will increase ata much slower 0.2% average annual rate in 2012.241680(2001 = 100)165155145135-8125Forecast-161152007 2008 2009 2010 2011 2012% change (left scale) Index 2001=100 (right scale)% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. agoScheduled air freight 0.0 6.6 11.3Chartered air freight & passenger -7.0 -5.4 -6.2Domestic air courier -0.1 4.3 14.7International air courier 0.0 4.3 16.7AirAlthough Drewry Consulting surveys show international airfreight prices still descending at a 9% year-over-year pace, U.S.-owned airliners have reported more air freight price hikes. InAugust, average prices for flying cargo via nonscheduled, charteredplanes landing on overseas airstrips increased 4% frommonth-ago and 5.5% from same-month-year-ago levels. Likewise,prices for moving freight and mail via scheduled flights, althoughunchanged from a month ago, still registered a 10.3% year-overyearprice increase for the period ending August 2011. Looking atU.S.-owned airliners’ scheduled flights alone, our airfreight priceoutlook remains: up 9.3% in 2011 and down 3.8% in 2012.241680(2001 = 100)190180170160-8150Forecast-161402007 2008 2009 2010 2011 2012% change (left scale) Index 2001=100 (right scale)% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. agoDeep-sea freight -7.9 -2.9 -2.1Coastal & intercoastal freight 0.7 1.2 2.6Grt. Lks.-St. Lawrence Seaway 0.9 1.7 12.8Inland water freight -2.4 3.9 9.1WaterThe U.S. waterborne freight industry reported a surprisinglysharp 3.4% average price cut in August. The driving force for thiscut came from the deep sea water transportation market whereaverage transaction prices declined 7.9%. Prices for the inlandwaterways market also fell 2.4%. The last time we saw such largemonthly price drops was in March 2009 during the transportationsector’s deflation heyday. Another bout of sustained price cuts isnot likely now, though we do expect this industry’s inflation rateto slow significantly. In fact, we have revised the forecastfor average water transportation prices upward to 7.4% in 2011followed by a 1.5% average annual price hike in 2012.151050(2001 = 100)170160150140-5130Forecast-101202007 2008 2009 2010 2011 2012% change (left scale) Index 2001=100 (right scale)% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. agoRail freight -0.5 5.8 10.0Intermodal 0.1 5.0 11.3Carload -0.6 6.1 10.1RailThe U.S. rail transportation industry reported a 0.5%decline in its average transaction prices in August. That declinewas due solely to 0.6% drop in prices for carload service asintermodal rail transport prices increased 0.1% at the sametime. In August, the Association of American Railroads alsoreported the strongest monthly drawdown of parked railcarssince April. This suggests demand for carload rail service isstrengthening. Our railroad industry inflation forecast calls fora relatively strong 8.1% price hike in 2011. If a double dip recessiondoes indeed hit the U.S. economy in 2012, then rail industryprices are forecast to drop 1.4% next year.Source: Elizabeth Baatz,Thinking Cap Solutions. E-mail: ebaatz@alertdata.com10 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

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inside• Trucking freight rate pressurebuilding as Peak Season nears• Court puts the brakes on Fed’spush for “black boxes”• USPS proposes changes toimprove bottom lineCongress agrees to extend federaltransit funding though MarchShort-term fix provides funding atcurrent levels, but the need for along-term bill remains.By Jeff Berman, Group News EditorWASHINGTON, D.C.—Fundingfor federal highway, transit, and highwaysafety will remain intact at currentlevels through March 31, 2012,with Congress passing H.R. 2887,The Surface and Air TransportationProgram Extension Act of 2011. Thismarks the eighth extension of federaltransit funding since the previoussix-year, $285 billion authorization(SAFETEA-LU) expired on September30, 2009.While this legislation clears theway for transportation projects tobe funded through March 2012,larger problems remain when itcomes to funding these efforts ona meaningful, long-term basis. Thefederal gasoline tax, which has beenat 18.4 cents for gasoline and 23.4cents for diesel and has not beenincreased since 1993, has served asthe primary funding mechanism fortransportation.“Most people in transportationwould agree that gasoline taxesneed to be increased…in orderto avoid the Highway Trust Fundbeing bankrupt,” said Leslie Blakey,executive director of the Coalition ofAmerica’s Gateways and Trade Corridors.“The schedule needs to beaccelerated,” she added. “The longtermstimulus effect of this wouldThe “American Jobs Act” would call for $50 billion to be allocated fortransportation spending and $10 billion for an infrastructure bank—whichPresident Obama has pushed for several times.more than offset the relatively minimaleconomic drag that an increasedfuel tax would have.”Along with the repeated call byfreight transportation stakeholdersto increase the gasoline tax hascome the vital need for a new surfacetransportation reauthorization, ratherthan the continued slate of shorttermextensions.Janet Kavinoky, vice president ofAmericans for Transportation MobilityCoalition and executive directorof Transportation and Infrastructurefor the United States Chamber ofCommerce, made this clear. “Now,Congress must turn to passage of amulti-year reauthorization measure,”said Kavinoky. “The longer it takesto pass a multi-year bill, the moreexpensive the problems are to solve.Highway and transit investmentsfacilitate national, regional, and localeconomic growth in the long term,and create direct jobs in the shortterm. The longer we wait, the longerthe United States forgoes theseopportunities.”Kavinoky added that a multi-yearreauthorization bill must reform andrefocus surface transportation policiesand programs so that Americansget the greatest return on highwayand transit investments.Investment in transportation infrastructurewas prominently mentionedOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 13

in a speech President Obama made toCongress last month, which focusedon job creation and the economy. Inhis wide-ranging speech centered ona piece of legislation—the $447 billion“American Jobs Act”—transportationinfrastructure was one of thePresident’s key themes for job growth.“Everyone here knows we have badlydecaying roads and bridges all over thecountry,” he said. “Our highways areclogged with traffic. Our skies are themost congested in the world. It’s anoutrage.”He went on to say that building aworld class transportation system is whatmade the U.S. an economic superpower,while other countries like China are nowbuilding newer airports and faster railroadsat a time when millions of unemployedconstruction workers could buildthem right here in America.In pushing the urgent need for moreinfrastructure spending, the bill wouldcall for $50 billion to be allocated fortransportation spending and $10 billionfor an infrastructure bank—which hehas pushed for multiple times duringhis term as president.Regarding the infrastructure bank,he explained it in simple but directterms. “We’ll set up an independentfund to attract private dollars and issueloans based on two criteria: how badly aconstruction project is needed and howmuch good it will do for the economy,”said the President. “This idea camefrom a bill written by a Texas Republicanand a Massachusetts Democrat.The idea for a big boost in constructionis supported by America’s largest businessorganization and America’s largestlabor organization. It’s the kind of proposalthat’s been supported in the pastby Democrats and Republicans alike.”The infrastructure bank legislationcited by Obama was drafted in March bySenators John Kerry (D-MA), Kay BaileyHutchison (R-TX), and Mark Warner(D-VA) and is entitled the BUILD (theBuilding and Upgrading Infrastructurefor Long-Term Development) Act. Themain objective of the legislation is tosupport the establishment of an AmericanInfrastructure Bank in the U.S. toleverage private investment.But unlike other calls for an infrastructurebank in the past, this oneis different in the sense that it wouldrequire a lower up-front investment,which would subsequently be supportedby private sector investment. MratesTrucking freight rate pressure buildingas Peak Season nearsHARRISBURG, Pa.—Trucking ratesare rising and will continue to outstripthe pace of inflation as carrier capacitytightens, say experts and industryofficials.One key indicator of tight capacity isthe spot market. TransCore, which analyzesspot rates versus contract rates,has discovered a shift in freight buyinghabits that could be a harbinger of thispredicted, future rate environment.Usually, the spot market rates areabout 15 percent lower than contractrates. But this year, according to Trans-Core’s analysis, on a national average,about 24 percent of lanes had spot marketrates that were higher than contractrates during the second quarter.Geography seemedto play a role as well.In April, nearly half ofthe lanes with higherspot market rates originatedin the Midwest.But in May and June,the action shifted to theSoutheast where half ofthe higher rates originatedin Southeasternstates.Where spot marketrates were higher thancontract rates, the averagedifference was 19cents a mile in April and24 cents in June. Whencontract rates exceeded spot rates, thedifference was between 30 cents and33 cents in April-May but only 22 centsin June.That’s because dry van rates rosein June across the board, according toMark Montague, TransCore’s industryrate analyst who has spent decadesdeveloping and analyzing marketdrivenrate structures for transportcompanies.“What we know is that the spot markethas had a robust year and continuesto be a great source of freight,” saidMontague. “Things are tracking nicely.”For shippers this means that tightercapacity across the board can becomeultra-tight in some geographic regions,depending on time of year. But it’sworth analyzing the spot rate trendssince they usually dictate what’s aheadfor contract rates. About 75 percent ofall truck freight moves under contracts,usually one year in length, but occasionallylonger.“The spot market is leading edge forthe contract world,” Montague says.“Some of the contract shippers areholding back to see what develops. Thatcreates more activity in spot market.”David Schrader, TransCore’s seniorvice president for operations, said theheadlines about a slowdown belie whathis data says is happening on the loadingdocks.“What we’ve seen is very robust,”Schrader said. “There is a 40 percentincrease in freight volume year over14 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

year in August. Now, August 2010wasn’t a banner month, but it wasn’tterrible either. There’s a lot of freightlooking for capacity and a lot of capacitylooking for freight.”According to Montague, one thing is forcertain: There’s pressure for rates to rise.There are several reasons. One isthat so much capacity—as much as 20percent—came out of the truckloadmarket during the 2008-09 recessionthat truckers have been slow to re-enterthe market. On top of that, truck equipmentcosts are growing by double-digitpercentages. Even though Class 8 trucksales are booming, analysts say that’snearly all replacement vehicles to makeup for the lack of fleet capitalizationthat occurred during the recession.“There are a lot of factors impedingcapacity in the short term,” MontagueregulationCourt puts the brakes on Feds’push for “black boxes”WASHINTON, D.C.—In a major victoryfor independent truck drivers fearing“big brother” harassment, the governmenthas been forced into the legalslow lane in its attempt to crack downon unsafe truckers.The Federal government’s attemptto mandate electronic onboard recorders(EOBRs)—the so-called “blackboxes” that record everything fromspeed to braking attempts during crashincidents—has run into a serious legalroadblock.In a major blow to its truck safetyreform program, the 7th Circuit U.S.Court of Appeals has told the FederalMotor Carrier Safety Administration(FMCSA) to go back to the legal drawingboard on this ruling. Experts say therule could be delayed as long as twoyears, perhaps longer.That’s because the court appeared tohint that the overall EOBR rulemakingprocess violated the 4th Amendment ofthe U.S. Constitution that forbids illegalsearches and seizures.“We conclude that the rule cannotstand because the Agency failedsaid. “It’s like what you see in the airlines.They used to flood the skies withcapacity, but not anymore. So far truckingfleets seem to be very disciplined inadding trucks.”Flatbed trucks are a good example.One thing unusual this year is flatbedcapacity has been in tight supply.“There’s not sufficient supply to meetdemand,” Montague added, so flatbedrates have continued to rise the entireyear. “That equipment is in strongdemand.”Refrigerated transport seems to befollowing suit. Reefer rates seemed tohave a “second peak” during the thirdquarter. Again, that was because oftight equipment supplies, lack of drivers,and increasing demand even in thisso-so economic environment. M—John D. Schulz, Contributing Editorto consider an issue that it was statutorilyrequired to address,” the courtsaid in its ruling in late August. Specifically,the court ruled that FMCSAdid not take adequate steps in theregulatory process to assure that theblack boxes “are not used to harassvehicle operators.”That was a major legal victory for theOwner-Operator Independent DriversAssociation (OOIDA). OOIDAhad sued the government on groundsthat EOBRs could be used to pressuredrivers to drive when tired. The courtagreed.For shippers, the ruling meansanother layer of uncertainty in theregulatory process regarding the truckingcompanies they utilize. Already,the government is mulling whether toreduce the legal hours of service truckerscan operate by one hour. That rulingis expected late this year or early 2012.EOBRs, which cost about $800 onthe low end and can run as much as$3,000 depending on the amount ofadd-on electronic capabilities, werea central tenet of the government’sattempt to crack down on unsafe operators.They’re attached internally tocommercial vehicles and automaticallyrecord the number of hours a driverspends operating a vehicle.At the outset, they were being mandatedin trucks operated by about 5,700carriers that have been deemed to havesignificant HOS violations. That rulingwas to have gone into effect in mid-2012, but now is delayed indefinitely.Ultimately, trucking officials expectedEOBRs to be mandated on all newtrucks later in the decade, but thatprospect is now anything but clear.The court’s ruling was worded sostrongly against the government, truckingexperts say, that any attempt tomandate EOBRs on all 700,000 truckersregistered at the Department ofTransportation will need to be carefullycrafted to ensure privacy rights for individualtruck drivers.“The agency needs to consider whattypes of harassment already exist, howfrequently and to what extent harassmenthappens, and how an electronicdevice capable of contemporaneoustransmission of information to a motorcarrier will guard against (or fail toUltimately, trucking officials expected EOBRs to be mandatedon all new trucks later in the decade, but that prospect is nowanything but clear.guard against) harassment,” a threejudgepanel in the 7th Circuit said inits ruling.That is almost precisely what OOIDAhad argued. “Companies can and do usetechnology to harass drivers by interruptingrest periods,” said OOIDA ExecutiveVice President Todd Spencer after theruling. He added that the court’s decisionfocused on harassment issues butOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 15

also indicated there were other “problematic”issues as part of the EOBR rule.Many shippers and carriers have toldLogistics Management (LM) that if usedeffectively and correctly, EOBR usagewould be a main cog in future driversafety efforts and initiatives. Severallarge fleets, including U.S Xpress andWerner Enterprises, have already outfittedtheir fleets with EOBRs becauseof scheduling efficiencies and payrollaccuracy.WASHINGTON, D.C.—The UnitedStates Postal Service (USPS) announcedproposed changes to its network lastmonth that it said would deliver $3 billionin annual savings.Among the network changes proposedby the USPS were to:U.S. Xpress Co-Chairman andPresident Pat Quinn recently toldLM that the drivers at his $1.4 billioncompany, the nation’s sixth-largesttruckload carrier, have “adapted wellto the use of electronic logs whichhave made them more efficient.” Headded that EOBRs made for safertrucking operations because theyhelp eliminate HOS violations andfatigued driving. M—John D. Schulz, Contributing EditorgovernmentUSPS proposes network changes toimprove bottom line• consolidate or close 250 mail processingfacilities;• reduce mail processing equipmentby up to 50 percent;• dramatically decrease its nationwidetransportation network;• adjust its network size by as muchas 35,000 positions from its currenttotal of 151,000 mail processingemployees; and• change its First Class Mail servicestandard from a one-day to three-daywindow to a two-day to three-day window,with customers no longer receivingmail the day after it was sent.If enacted, USPS officials said thesechanges would result in fewer facilities;greater utilization, and efficiency;earlier mail availability driving moreefficient local delivery; and more retailpartners and kiosks, as well as fewerbrick and mortar Post Offices.“We are forced to face a new realitytoday,” said Postmaster GeneralPatrick Donahoe. “First-Class Mailsupports the organization and drivesnetwork requirements. With the dramaticdecline in mail volume and theresulting excess capacity, maintaining avast national infrastructure is no longerrealistic.”According to Donahoe, the USPSTRANSPORTATION SERVICES PROJECT MANAGEMENT DISTRIBUTION SERVICESSHANGHAI 7:52 P.M.16 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

has closed 186 facilities,removed more than 1,500pieces of mail processingequipment, decreasedemployee complementby more than 110,000through attrition, andreduced costs by $12 billionsince 2006.Through these proposedchanges, which the USPSwill file with the PostalRegulatory Commissionlater this year, the USPS iseyeing $20 billion in costreductions by 2015, comingfrom $6.5 billion innetwork changes for sortingand transport, $5 billionin compensation and benefits, and$8.5 billion in legislative changes.Among the chief legislative changesare going from a six-day to five-day deliveryschedule, receiving $6.9 billion inoverpayments to the Federal EmployeeRetirement System in the form of arefund, and resolving the mandate topre-fund retiree health benefits by $5.5billion annually and manage the legacycost going forward and allow the USPSto restructure its healthcare system tomake it independent of federal programs,among others.“By changing the servicestandard, which istoday far faster than mostpeople need, it’s easy tocut the number of processingfacilities in thenetwork dramatically,”said Jerry Hempstead,president of HempsteadConsulting, a parcelexpress consultancy.“There is significantinvestment already instate of the art automationwhich allows the USPSto process mail extremelyefficiently and accurately,”added Hempstead.“The fact is that with thedecline in mail there is far more capacityin the ability of the automation, inthe facilities themselves, and on thetransportation network to be able torationalize the system and close half theplants. This change is long overdue.” M—Jeff Berman, Group News EditorWe’ll show you the way.Managing a supply chain is complex. And your business is unique.Let UniGroup Worldwide Logistics design a solution tailored to your needs.We’ll show you the way to a more efficient logistics solution.UniGroup Worldwide Logistics is a new name, but the foundationof the company is well-established. It is built on the heritage of UnitedVan Lines and Mayflower Transit, trusted providers of reliable specializedtransportation and logistics services for more than 50 years. Based ona network of 1,300 service centers in 146 countries, we are a single sourcefor customized supply-chain solutions.Whether your supply chain is domestic or international, UniGroup WorldwideLogistics manages a global network of resources to show you the way toseamless, dependable and efficient solutions.For more information, call (877) 545-8080 or visit us at ugwwlogistics.com.UniGroup Worldwide Logistics, LLCOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 17

Moore onTruckload pricingand your TMSIt’s become commonplace for shippers to “benchmark”truckload rates with the market eitherthrough a consultancy or by accessing one of severalweb sites with a listing of origin-destination(OD) pairs and a recent market price.While this is a relatively quick process, and maygive shippers a reference point for what you’re paying,it falls well short of what you could do withreal “optimization” using a modern, web-accessibletransportation management system (TMS) andsome smart negotiating.In the quest to make rate reference tables simplein a TMS, the majority of shippers I’ve worked withoften have simple mileage or “flat” line-haul ratesfor truckload. The only mathematical addition is thefuel surcharge calculation. While this makesloading and retrieving rates easy, it doesn’tleverage the power of a modern TMS—nordoes it help shippers to manipulate the manyfactors that make up the cost of truckloadtransport in order to save the carrier and theshipper some money.The first group of costs, often reflectedin carrier rate schedules, includes itemssuch as: minimum charges; stop-off; detention;and load cancellation. These items are less dynamicand can be negotiated as standards for all loads ina contract period. Be advised that carriers do try tomaintain a margin in these accessorial charges, sobe sharp about learning the carrier’s labor rates andoperating ratio (profitability) so that a fair price isarrived at in advance.A second group of costs are more dynamic. Theyassume that the TMS is interfacing with a sophisticatedrate engine with capabilities to deal withtransactions as unique events with one-time costvariables. If both the shipper and carrier systemsare capable of dealing with unique transaction pricingthen several dynamic pricing scenarios emerge.First, we look at day-of-shipment “capacity sale”Peter Moore is a program faculty member at the University ofTennessee Center for Executive Education, adjunct professor atThe University of South Carolina-Beaufort, and vice president ofCelerant Consulting, a supply chain advisory firm. Peter can bereached at peter.moore@celerantconsulting.com.pricing. A carrier makes available one or moretrucks on a given time and day at a sale price. Conversely,the shipper makes additional freight availablein a reverse bid for rates on a given day for agiven lane or set of lanes. To make this manageable,the two companies interact at the machine level,and offers and responses are made online via theweb. The rate tables for both parties record a newagreed rate that is good for a limited time and forlimited usage.Second, an inbound backhaul is arranged andthe Incoterms state that the supplier is covering thecargo through to the destination despite the factthat the receiver is arranging for and paying the carrier.If the load is covered for loss by the supplier,If both the shipper and carrier systemsare capable of dealing with uniquetransaction pricing then several dynamicpricing scenarios emerge.then the shipper should get a break for both thevolume of backhaul and the reduction of liabilityfor the carrier.The third has to do with the problem of over coverageof cargo insurance. Too much insurance oftenresults when a shipper insists on high levels ofinsurance for all loads when they have a percentageof low-value loads (e.g. return packaging). OftenI hear that the shipper’s TMS doesn’t distinguishcargo insurance needs and coverage.For more than one carrier the excess in premiumsto shippers is a profit maker that they would rathernot discuss. For the shipper, savings in this area cancover that new TMS you’ve been thinking about.Despite the many years the industry has beenbuying and shipping truckload freight, there isalways something new to learn. Keep your peopleand yourself in learning mode, revise processesto enable more dynamic pricing, and identify andacquire the best TMS technology for moving freightefficiently and effectively. M18 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

Introducing Time-Critical Service, only from YRC.Any need. Any speed. Guaranteed. No matter what you want to ship — retail itemsto manufacturing equipment — whenever it has to get there, one location or many,big or small, simple or complex, we’ll make it happen. No ifs, ands or buts. That’sTime-Critical Service. That’s Confidence Delivered. ®Text “YRC” to 27810 for details and more case studies.1-800-610-6500 yrc.com/timecritical©2011 YRC Worldwide Inc.ConfidenceDelivered. ®

Pearson onSupply chain masteryrequires talentcompanies responded to the economic downturnin diverse ways. Many streamlined operations andbecame more efficient. Some invested in new technology,capital, and infrastructure. But not too manyfocused on acquiring exceptional people or luring talentfrom less fortunate companies.However, the latter move—enhancing skill sets—could end up paying the biggest dividends, particularlyas cost cutting reaches its natural limits andtechnology assets are deployed more or less equallyacross competitors.Leveraging talent is far more complex than justacquiring the right bodies. In supply chain managementcompanies need “human capital strategies” thatmaximize their people potential by integrating operationalperformance objectives with the organization’sbig-picture goals. But how do you create a humancapital advantage? Following are three cornerstones.1. Remove complexity. Minimizing supplychain complexity is one of the best ways to createmore efficient, more agile organizations that canrespond rapidly to existing and emerging consumerdemands. From a human resources perspective, lesscomplex supply chain processes and structures allowcompanies to leverage talent more effectively. Plus,an agile organization is a strong drawing card forattracting and retaining the best people.A natural starting point for reducing complexity isto identify the operational and organizational improvementsmost likely to affect business results. Anexample might be a retailer that focuses on improvingfulfillment without raising inventory costs. To do this,Lean Six Sigma and advanced analytics could be leveragedto more effectively link process improvements,business performance, and organizational priorities.When it comes to complexity reduction, companiesfocus too often on obvious pain points (reducingbudget overruns, eliminating transport delays,reducing employee turnover) rather than on the rootcauses of complexity. More often than not, the rightcomplexity-reduction rationale is increased agility.Supply chains that attack and remove process andorganization complexities are “suddenly” able toMark Pearson is the managing director of the Accenture’s SupplyChain Management practice. He has worked in supply chainfor more than 20 years and has extensive international experience,particularly in Europe, Asia, and Russia. Based in Munich, Markcan be reached at mark.h.pearson@accenture.comrespond more quickly to shifting markets, changingcustomer demands, and new value paradigms.2. Create environments for supply chaintalent to succeed. Several characteristics are oftenpresent in companies where supply chain talentflourishes. Among the most important is role clarity,which in turn drives predictability and accountabilityin the execution of supply chain processes. Whenan organization rigorously follows competency standards,people at all levels of the organization knowwhat they must do to execute their jobs well.With clearer supply chain roles, skills-managementleaders may be able to hone their talent strategies by:• Segmenting the workforce (e.g., based on learningstyles, values, personality, wellness profiles, mobility).• Offering modular choices from a list of definedand sanctioned alternatives (e.g., international jobrotation opportunities).• Putting more emphasis on innovation (like Google’sinsistence that engineers spend 20 percent of theirtime on projects that create value for the organization).Flexible learning and training systems also helpto create a talent-optimized workforce. Ideally, thisinvolves structured learning combined with deploymentof multiple information sources such as socialmedia. Insights from conference calls, presentations,and third-party vendors can be turned into short podcaststhat are rapidly and easily accessible to workers.Cross-training through job rotations or collaborationsis another, important part of the learning/training mix.3. Align talent and supply chain analytics.In addition to using descriptive analytics to determinewhat happened and why it happened, companiescan now leverage predictive analytics that usesophisticated statistical modeling, forecasting, andoptimization to help forecast business outcomes anddetermine how supply chain activities relate to thosepredictions. Organizations seeking to leverage theirskills base can use analytics in much the same way topredict the talent needed to optimally staff their organizationsand deliver on consumer expectations.Though unemployment is high, there is a shortageof ultra-skilled talent—people who can helpcompanies move ahead in ways that are economical,sustainable, and difficult for competitors to replicate.That is why the three approaches discussedabove, pursued as a single, integrated initiative, areso important. M20 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

Introducing Time-Critical Service, only from YRC.Any need. Any speed. Guaranteed. No matter what you want to ship — from dogfood to heavy equipment — whenever it has to get there, one location or many, bigor small, simple or complex, we’ll make it happen. No ifs, ands or buts. That’sTime-Critical Service. That’s bona fide Confidence Delivered. ®Text “YRC” to 27810 for details and more case studies.1-800-610-6500 yrc.com/timecritical©2011 YRC Worldwide Inc.ConfidenceDelivered. ®

Andreoli onHear Derik Andreoli’s keynote address “How Energy Trends Will Impact OurSupply Chain Future” on Wednesday, October 26, as part of Logistics Management’svirtual conference Supply Chain Best Practices: Boost Productivity And Cut Costs.Register today: supplychainvirtualevents.comOil prices and the economy:predator and preyThere is an enticing line of argument employed bysome economists and analysts that is loosely based onthe predator-prey model, one of the earliest models inmathematical ecology.From an ecological perspective, the populations ofpredators and prey affect one another. For instance, asa population of lynx expands, the population of haresupon which they feast contracts. But as the populationof hares recedes, the carrying capacity for lynx isreduced, and the population of lynx falls into decline.Of course as the population of their primary predatordeclines, the number of hares rapidly expands, and soon. Visually, we might imagine a graph of the two populationsas two sine waves, one lagging the other.Similarly, many believe that high or rapidly rising oilprices cause recessions; but in turn, during a recession,industrial production and demand for transportationdecline. Consequently, the pricefor oil and fuel falls, and as it declines, theeconomy is stimulated.This makes sense because, to a largedegree, dollars not poured into our gas tanksare used to make other purchases or investmentsthat have a greater stimulatory effecton the economy. In this adapted model, risingoil prices are the lynx that menace thehelpless economy.The fact that oil price spikes preceded all but oneof the seven post-1970 U.S. recessions certainly lendsprima facie support for the predator-prey model, butcorrelation does not prove causation and the economyis clearly affected by more than just the price of oil.According to the research of a pair of universityeconomists and a member of the Federal ReserveBoard, however, the rate of unemployment can beaccurately predicted using just two inputs: oil pricesand real interest rates. To be clear, their model passesthe Granger causality test, hence the researchers canstate beyond a statistical shadow of doubt that an oilprice or interest rate movement in period one causesa movement in the unemployment rate in period two.This discussion of the predator-prey model begsimportant questions, not the least of which include:“Are we headed back into recession?” “And, with theeconomy sputtering, why are oil and fuel prices so high?”Derik Andreoli, Ph.D.c. is the Senior Analyst at MercatorInternational, LLC. He welcomes any comments or questions,and can be contacted at dandreoli@mercatorintl.com.Regarding the former, evidence is certainly mountingthat the U.S. is on the cusp of a double dip, if notalready sliding into recession. The unemployment rateremains over 9 percent, with 14.8 million unemployedand another 11.6 million discouraged or underemployed.The four-week average for unemploymentbenefit requests was up for the fourth straight week (asof September 15), and the poverty rate has ascended toa level not reached in more than 50 years.On the housing front, foreclosures jumped 33 percentbetween July and August—the biggest single—month jump in four years. Given the state of the job andhousing markets, it should come as no surprise that inAugust consumer confidence dropped a staggering 14.7points and CEO confidence retreated 12 points.Then there is my favorite leading indicator, theWe know there’s a turn up ahead, but it’s stilldifficult to see whether the road is going totake us to recovery and even higher fuel prices,or stagnation with high fuel prices.Ceridian-UCLA Pulse of Commerce Index (PCI),which is a measure of fuel consumed by truckers purchasingdiesel from cardlock facilities. The seasonallyand workday adjusted PCI fell 1.4 points in August afterdeclining 0.2 points in July, indicating that fewer goodswere in transit for two consecutive months. Needless tosay, this decline does not inspire warm and fuzzy feelingsabout U.S. economic prospects.That’s a lot of bad news, but to prove that I’mnot a pessimist, I’ll share the Ceridian interpretation,which urges caution to those who might interpret thedecline in the PCI as a harbinger of recession. In theSeptember report, the Ceridian folks said that “weexperienced similarly sluggish PCI and GDP growth inthe aftermath of the 2001 recession. During that time,the economy didn’t really get moving until a wave ofnew home ownership rose. Best therefore to considera slow-growth alternative to a recession—stumblingforward, waiting to get the energy to run again, but notfalling down.”I find this quote particularly compelling becauseit points out that the economy did not recover fromthe last oil-price-spike-led recession until the housing22 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

Andreoli onbubble had grown well beyond the “froth” stage. Hopefully, On the natural gas front, while the shale gas revolutionthis time around we can build a recovery on a more solid is still going strong, there’s reason to question the sustainabilityfoundation; however, without a dramatic improvementof low prices. Along these lines, the U.S. Geologi-in consumer confidence it is hard to imagine where the cal Survey (USGS) recently revised their estimate of thedemand for goods and services is going to come from. total shale gas resource, cutting the initial estimate by 80In the past, the government could goose the economy by percent—a fact that won’t come as a surprise to those shippers“spending against the wind” and building reserves throughwho read my shale gas column.taxation during periods of expansion. Unfortunately, the Of course, this downward revision is not the first of itsgovernment is now hamstrung by concerns over federal debt. kind. In October 2010, the USGS reduced its estimate ofGoing back to the Ceridian quote, I appreciate the undiscovered crude in the National Petroleum Reserveinsightcontained in what must be an accidental choice Alaska (the NPR-A, not to be confused with ANWR) by aof words. If there really is something to the predator-prey whopping 9.7 billion barrels, a 90 percent downgrade. Tomodel, and there clearly is, we are quite literally “waiting put this downgrade into perspective, 9.7 billion barrels isto get the energy” for a full recovery. Unfortunately, on the the equivalent of 70 years of production from the Bakkensupply side of the energy equation, tensions in the Middle at current rates.East/North Africa (MENA) region remain extremely high, Resource downgrades and credit downgrades certainlyand the resumption of the flow of light sweet crude from don’t instill confidence in those of us who understand that aLibya and the U.S. Gulf of Mexico remains a long way off. healthy economy requires the efficient movement of goods,From the demand side, China’s growth rate remains near people, and capital.double digits (though it is showing signs of weakness), and Looking forward, the U.S. economy is clearly not outIndia’s growth rate hovers around 8 percent. Ergo, any marginalof the weeds, a fact that makes it difficult for supply chaindeclines in consumption here won’t have much of an managers to keep their eyes on the road. We know there’s aimpact on prices given growing demand in emerging markets. turn up ahead, but it’s still difficult to see whether the roadIn short, it’s difficult to imagine where the energy for a is going to take us to recovery and even higher fuel prices, orfull recovery is going to come from. Light sweet crude from stagnation with high fuel prices. The wise logistics and supplythe Bakken formation in North Dakota is certainly growingchain manager will have thought these options throughasi_perfship_halfpgLM_1011_final robustly, but U.S. exports of gasoline and 10/5/11 distillate 12:41 have surged. PM Page and 1developed strategies for both. M“The Business of America is Business”Calvin CoolidgeThe Business of Alliance Shippers, Inc. is . . .“To Manage Our Customers’ Business.” ®For more information about all of our services, visit us at: www.alliance.comPerfect Shipment ® Performance:On-Time Pick-Up = 98.7% On-Time Delivery = 96.8% YTD On-Time Delivery = 97.5%2010 Damage-Free Performance:Refrigerated Services = 99.98% Dry Van Intermodal and Highway Services = 99.79%Data as of 8/31/11® denotes a registered trademark of Alliance Shippers, Inc.

LM exclusiveNAssTRAC Shipper of the Year:Stein Mart’s$20 million saveBy re-engineering its supply chain, the fashion retailer reduced transportationexpense, lowered store operating costs, enhanced labor planning, improvedcommunication with its vendors, and was the hands-down winner of the 2011NAssTRAC Shipper of the Year Award.BY john D. Schulz, contributing editorThere are times when a company realizes that the oldmethods of doing business just aren’t efficient anylonger; and that usually calls for a complete overhaulin an attempt to reap rewards commensurate withthe risks. For the supply chain team at Stein Mart, afashion retailer with 260 stores and $1.2 billion in sales in fiscalyear 2010, going “all in” was definitely in the cards.For years, Stein Mart relied on parcel carriers to delivermerchandise to its stores. Although this direct methodenabled the product to get to its stores quickly, there were anumber of obstacles—primarily related to transportation andstore operating expenses.“If you spoke with our merchants, they probably wouldhave given us a grade of B,” says Rick Schart, vice presidentof supply chain. “They were under the impression they weregetting things fast. But if you talked to our store managers,they would have probably given us a D. Maybe a C-minus.”Stein Mart executives are no longer grading themselvesso harshly thanks to a complete overhaul of its supply chainoperations. Parcel carriers were replaced by a network of lessthan-truckload(LTL) and truckload (TL) carriers. AlthoughStein Mart was receiving discounts from its parcel providers,a foundation of the retailer’s new network—launched inMarch 2009—was to move freight via LTL and TL providers.Changing operations to this approach has certainly provenmore cost effective; in fact, shifting to those carriers and creatingdedicated and pool distribution lanes resulted in savingswell beyond just transportation.According to the supply chain team, the company hasalso realized labor savings due to the fact that the stores nowknow exactly—down to the half hour—when their freightwill arrive, and new vendor requirements ensure that themerchandise is already ticketed and floor ready, reducinglabor costs at the store end. Now, if workers are needed, theyarrive at roughly the same time as the trucks.The success of its supply chain redesign was so dramaticthat Stein Mart has been chosen to receive the 2011NASSTRAC (National Shippers Strategic TransportationCouncil) Shipper of the Year Award. It’s the highest honorthat NASSTRAC awards to its members, and, according toExecutive Director Brian Everett, it is designed to recognizeinnovative methodology in the shipper community.“NASSTRAC chose Stein Mart as the 2011 Shipper of theYear due to the retailer’s willingness to take bold steps in fullyimplementing an innovative, new supply chain,” says Everett.“By incorporating a new inbound network of LTL, truckload,and intermodal carriers, as well as an outbound network ofdedicated fleets and pool distribution companies, Stein Martwas able to significantly improve shipping performance, createefficiencies, and decrease costs. Clearly, Stein Mart’s innovativeapproach epitomizes the transportation and supply chainbest practices that we encourage within our industry.”This year’s winning team is led by three retail veteransrecruited by Stein Mart in 2008 and 2009 to engineer thisfeat, including: Rick Schart; Gregg Sayers, director of supplychain transportation; and Bill Stover, director of supplychain operations. Together they hired a group of individualswith varying degrees of supply chain expertise to build out24 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

Bill Stover (left), director of supply chain operations; Gregg Sayers, director ofsupply chain transportation; and Rick Schart, vice president of supply chain, Stein Mart.Cy Cyr/Getty Imageswhat’s now a cohesive supply chain teamfocused on providing support to theirmerchant, store, and vendor partners—and, of course, keep costs in line.So, what are the total cost savings? Tryabout $20 million annually; and that’songoing, year after year, says Schart.Defining the changeHistorically, Stein Mart was shippingfreight directly from its vendors to its260 stores via small parcel carriers.Even though the parcel carriers weredoing a commendable job of deliveringthe merchandise in a timely manner,this process had its drawbacks.Compliance with packaging and floorreadyguidelines was difficult to monitorand measure, freight visibility was limited,and store delivery appointment times werenot consistent and often occurred whilestores were open for business.“From a cost standpoint it was expensive,”says Sayers, who adds that thesecosts were not limited to moving the cartonsfrom vendor to store. “There wereexpenses at the stores to get the merchandiseready to sell; and there werealso problems with managing the receiptof our product and our ability to reconcileanything that was not in compliance.”In 2008, at the low point of the GreatRecession, many U.S. businesses werehurting. Stein Mart made a consciousdecision to review all expenses andmake the organization work more efficiently.Part of that decision was to takean overall look at its supply chain andto ultimately move to a more sophisticated,cost-effective model.“Based on the business review thatoccurred in 2008, and with full supportof the organization, we began to transitionour supply chain,” says Schart. “Iarrived in November 2008, and Bill andGregg were my first hires. We were confidentwe could pull it off, but we wereconcerned how fast we could pull it off.”According to Schart, it came down tothree keys: getting the right people onboard to develop and manage this newstrategy; finding the right carrier and 3PLpartners; and partnering with the rest ofthe Stein Mart organization, especiallyIT, to align and support the new concept.The groundwork for launching thenew supply chain took about six months.It involved educating vendors on newprocesses and expectations, workingwith finance to develop systems to capturecosts, launching technology (includingEDI for billing), as well as hiring anew set of 3PLs and TL and LTL carriers.“Those six months were grueling,but worth it,” says Sayers. “We all agedin dog years in those six months.”October 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 25

NASSTRAC Shipper of the YearPutting it to workIn May 2009, Stein Mart launched itsnew supply chain network. The fourwallnetwork is comprised of consolidationcenters (CCs) and stores distributioncenters (SDCs). The inboundtransportation network is comprised ofTL, LTL, and intermodal carriers. Theoutbound transportation network iscomprised of dedicated fleets and pooldistribution companies.Almost immediately upon launch ofStein Mart’s new supply chain, thingschanged. Through its vendor supportprogram, the company began partneringwith its vendors, educating and communicatingnew expectations and guidelines.These included pre-ticketing andpre-hanging requirements to ensure themerchandise was “floor ready.”The team also included several newEDI transactions, which replaced a lesssophisticated method of billing. Goodsare all identified through the use ofindustry standard bar coded shippinglabels. “We did very little EDI beforethis started,” says Stover. “We had to layall of that groundwork.”The result of this partnership wasthat stores were able to receive theproduct by scanning the carton, asopposed to having to open and tallyeach unit within the carton. This significantlyreduced the time a cartonspent in the back room of the store andensured merchandise could be on theselling floor immediately after receipt.“Our vendors deserve a tremendousamount of credit for their efforts toadjust their processes to support ournew supply chain,” says Schart.Stein Mart’s distribution centers tookover the role of inspection and valueadded services such as ticketing and validationof carton contents. This ensuredthat when cartons arrived at the stores,the merchandise inside was exactlywhat the stores had been allocated bythe merchants. A new delivery networkintroduced day/time definite deliveriesso the stores could plan on—withina half-hour—the expected delivery oftheir merchandise, making labor schedulingmuch more efficient.Stein Mart’s shipping performanceon both inbound and outbound was alsodramatically improved. Through its vendorprogram, the supply chain team cansee whether a vendor isshipping early, on time,or late so appropriatecommunication andsteps can take placewith both the vendorsand the merchants.The inbound transportationnetwork istracked at the purchaseorder level, enablingthe supply chain to communicate thearrival of trailers into the store distributioncenters, allowing for better laborplanning within these operations aswell.From a delivery standpoint, Sayerssays that the on-time percentage runsover 95 percent—measured down tothe hour. “The small package guys simplydon’t measure it that closely. Theymeasure on-time in terms of days, wenow measure in terms of hours,” saysSayers, adding that the team needed toget much more surgical in its commitmentto the stores.“We needed to develop a deliverymethod to ensure that stores can accuratelyplan the number of associatesthat they’re going to need to receivethe product,” says Sayers. “Our goalis to have all our merchandise on thefloor before the store opens; so, whena customer walks into our store, thecustomer sees a fresh assortment ofmerchandise ready. That’s anotherbenefit.”Stein Mart’s three consolidation centersand three store distribution centersare operating by 3PLs. In addition, SteinMart operates its own building near itsJacksonville, Fla., headquarters to storeoffseason buys and to provide pick packand warehousing services. “One thingthat we’re most proud of is that once wewent live with our network in May of2009, we went from zero to running 90miles per hour overnight,” says Stover.Reaping rewardsThere are not many retailers in Americaable to boast of a supply chain initiativethat contributed $20 million directly tothe bottom line. According to Schart,these savings came from reduced transportationexpense; lower store operatingcosts from better labor planning andreduced floor-ready processing; new visibilityto purchase orderdelivery status; andimproved communicationand cooperationwith vendors.“The small parcelcarriers are great serviceproviders, so gettingour packagesto stores was not theissue,” says Schart. “Butby setting up our new network and establishingnew vendor expectations, we wereable to improve the quality of the deliveryexperience that now results in the merchandisebeing received, unpacked, andon the store’s selling floor before the storeopens. That’s a huge benefit.”Because Stein Mart utilizes a smallcore carrier base, it’s able to keep thosecarriers busy consistently throughoutthe year—resulting in favorable rates.It initiates regular conference callswith its carrier base to keep them upto speed on recent trends in the flowof freight, the upcoming seasons, orchanges in processes that will affect thecarriers, the stores, or the network.“We want to be a good steward for ourmerchant partners,” says Schart. “At theend of the day, our buying and allocationteams drive product into our stores. Beingsupply chain experts, we use our skills tocorrect issues and set higher expectationsfor every shipment to ensure timely, floorreadydelivery. If the right merchandisegets to the right store at the right time,that’s a win for everybody.”Despite winning Shipper of the Year,Stein Mart is certainly not resting on itslaurels—true to its corporate culture.“We’re always analyzing what we can dobetter, faster, and more efficiently andlooking for additional process improvementopportunities,” says Stover.Sayers adds that much of the creditgoes to Stein Mart’s organization foragreeing to this revolutionary logisticsoperations change. “This was a majorchange,” he says. “The support wereceived from the top down across ourentire organization was phenomenal.It could have gone a number of differentways, but because of that support itwent exactly how it was planned.” MJohn D. Schulz is a Contributing Editorto Logistics Management26 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

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transportation Best Practices/trends: truckloadMillerCoors tapsdunnage innovationWhen the beer giant revamped its dunnage processes, it realized significantcost savings, ushered in a safer work environment, and found a more fluidfreight model—all while helping the company get a little greener.BY jeff berman, group news editorWhen two large companies merge into one,there’s inevitably going to be a convergenceof operational facets. This provedto be no exception—especially on thelogistics and transportation side—whendomestic beer magnates Miller and Coors joined forces tobecome MillerCoors in 2008.One of the biggest challenges right off the bat was for thenew entity to get its sudsy products loaded onto trailers ina more productive and cost-efficient manner. For example,when the merger became official, MillerCoors discoveredthat they were using different sized pallets for loading beeronto trailers, says Raymond Reehm, strategic sourcing managerat MillerCoors.“The decision was made to standardize on a 32 x 40-inchpallet and begin looking at optimizing our loading pattern intrucks,” says Reehm.Miller had historically used a 32 x 40-inch pallet and abulkhead system, which was comprised of permanent, semipermanent,and portable bulkheads using e-track bars, plywood,and 2 x 4 “A” frames. Reehm says the type of bulkheadpreviously deployed varied by carrier and brewery.This led to a situation where the combined MillerCoorsinitially needed to determine what the optimal approach wasfor creating a false bulkhead at the front of a trailer.“With beer being such a heavy product from the weight tothe volume occupied, we had to create a false bulkhead at thefront of the trailer,” explains Reehm. “Our loads are only goingto occupy 40 of the 53 feet in a trailer, and the load has to gointo the center of the trailer and be able to come off the noseof the trailer before the first pallet is put in. It also has to besecured so loads don’t shift forward and become disrupted.”To do this, the team created a bulkhead using variousmethods of disposable or highly unfriendly dunnage systemsthat were essentially wood and some cardboard.Given the fact that MillerCoors typically relies on a commoncarrier network to more than 500,000 outbound shipmentsper year, it was providing each carrier it used with abulkhead extension comprised of e-track bars, plywood, and2 x 4 “A” frames for each trailer.When the loads made it to a distributor, sustainability wasnot a core component of the process. In a typical scenario,they would remove the plywood and 2 x 4s, with the plywood,which Reehm said was good for 10 to 12 uses, usuallygetting returned, and the 2x4s getting thrown out.According to Reehm, this expense of this first system,multiplied by the number of shipments, cost the company inthe neighborhood of more than $10 million annually. “Thiswas viewed as a necessary cost, given the processes we hadat that time,” he says. “Without that process, we could notship beer.”What’s more, injuries to staff were occurring as a result28 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

By using a “false” bulkhead at the head of its trailers,MillerCoors is able to load more cost effective andproductive shipments.of handling two 55-pound sheets ofplywood per load. The team found thatthis was a major contributor of stresses,strains, and splinters that were responsiblefor about 25 percent of MillerCoors’recordable employee injuries.Rolling out the newThe relative inefficiency of this process,coupled with a total annual freightspend bill of $20 million when factoringin expenses related to dunnageand dunnage placement inside trailers,served as the impetusfor Reehm and his teamto see if they could finda way to handle thingsmore efficiently andsafely while also reducingcosts.“We looked at whoelse was using similartypes of products andwhat enhancements we could deploy tomake it more useful to us,” says Reehm.While doing its due diligence the teamcame across Paylode, a provider of reusable,plastic dunnage systems, anddecided to dig deeper into the company’sofferings.“We worked with Paylode to determinethe optimal way of creating theproper space in the nose of the trailer,”says Reehm. Ideally, the team was lookingfor a product that was adjustablebecause the load lengths vary between38 feet and 42 feet. “So we neededsomething that had some variability init and was cost-effective, making thereusability factor critical, too,” he adds.The testing rollout was launched inmid-2008 at the MillerCoors Trenton,Ohio, facility. The team started out with20 loads and then another 100 loads amonth later, followed by another 100-load test back in Trenton, and thenmore testing in Albany, Ga.At this stage, the business case wasfinalized and MillerCoors went aheadand purchased its bulkhead spacers andseparation pads—a move that set thechange management process in motion.From there, the company sent initialtruckloads to each of its eight nationalbreweries so each location could getfamiliar with how things worked with thenew dunnage system. This was followedby a major rollout in Trenton, followedby each of the other breweries.October 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 29

Transportation Best Practices: MillerCoors“We first worked withthe carriers without bulkheadsbecause we had toconstruct 2 x 4 frames intheir trailers,” says Reehm.“We then went back andpopulated the remainingtrucks, and then did distributortraining. We shipto thousands of distributorsin the U.S., so theyneeded to get trained onthe returns process.”As with any type ofchange management process,this transition wasnot without a “pint” ofemployee pushback. But assoon as MillerCoors’ staffstarted using the new dunnage,it quickly became“their new best friend,”quips Reehm. One majorreason for this was shiftingfrom a 55-pound sheetof plywood to an 18-poundplastic separator pad, whichis light, easy to use, anddoes not cause splinters.Shifting from plywood toplastic also brought abouta 25 percent reduction in recordableinjuries for MillerCoors.“Change management became easyat that point,” says Reehm, “becausethis new process was such an improvementin their eyes.”And while the new system was meetingwith approval across the board, itwasn’t without a few kinks that neededto be worked out, such as when the initialtruckloads were transported to eachof the eight brewery facilities.MillerCoors had to intentionallymake sure that its product was goingto be able to be stored outside, whichReehm noted is a huge advantage ofusing plastic dunnage. While in theory,the cone-like shape of the dunnage wasnot supposed to hold any water, this isprecisely what happened in the dunnageused in the Ft. Worth, Texas-basedMillerCoors brewery. Reehm says theyfound that the dunnage was holding asmall amount of water in the bottom,although it was supposed to drain waterTaking it to the railsWhile trucking is the predominant transportationmode for MillerCoors—90 percent ofits product moves over the road—the remaining10 percent is rolling on the rails.And because rail is a mere 10 percent of itstotal freight mix, it is not any less of a challenge,says Reehm. In fact, moving beer viarail is a completely separate challenge froma cost perspective when it came to determininghow MillerCoors could increase its railshipment weight.“We were only using a single tier of palletsper rail car, and we would have about 101,000pounds for average weight with a capacity of137,000 pounds—so we were shipping a lot ofair,” says Reehm.Because MillerCoors couldn’t make itspallets any taller, it took a different approachto increasing rail shipment weights: it madethem shorter. This required double-stackingpallets inside of rail cars. To pull this off,MillerCoors worked with Paylode to developcustom-made dunnage that’s now used tosecure its rail loads.“The rail environment is violent, so theout whenever it rained.“We met with Paylode to do a redesignon it in which they drilled a biggerhole in the bottom so the water woulddrain out better,” adds Reehm.Making a quick fix by drilling a biggerhole in the bottom of the dunnage eliminateshaving rain or stagnant water collectin it, which is considered unsanitary.Celebrating the benefitsThe move to reusable, plastic dunnagehas certainly ushered in significant costsavings for MillerCoors. The companyhas reduced its total annual spend ondunnage and packaging for its trailersfrom $20 million to $12 million; andfreight damages, that were once ringingin at around $3 million per year,are now down to less than $1 million.On the sustainability front, Miller-Coors met its 2015 goal to eliminate20 percent of waste sent to landfills fiveyears early, eliminating almost 7,700tons of solid waste and saving 41,500ability to take theforces that occurin those rail carshave to be mindfulof the design andtake the abuse,”notes Reehm. “Tobe in the rail environment,productsneed to be approvedby the Associationof American Railroads,which requires a lengthy certificationtest to make sure a shipper has the rightproduct for the right environment.”The next step from here was to take thesecustom rail shipments to the MillerCoorstesting facilities in Pueblo, Colo., and crashrail cars in impact tests at 6 miles per hourto make sure the dunnage worked in harshenvironments. According to Reehm, this effortproved to be successful, leading to moreefficient rail shipment processes for Miller-Coors.—Jeff Berman, Group News Editortrees per year.While MillerCoors has seen significantsavings since this undertakingslightly more than three years ago,Reehm insists that more work needs tobe done.“One of the requirements of this systemwas that it needed to be very flexible,meaning we can adjust for thingslike changing truck weight limits onhighways, which could happen in time,”he says. “We need to be flexible enoughto take advantage of future changes onthe legal or regulatory front and will beready to scale up when we need to.”And with such a flexible systemintact, MillerCoors is looking at newand improved equipment like ultra lightweightand specialized trailers designedto carry heavier weights that will allowthe company to be nimble while using asecure dunnage system. M—Jeff Berman is Group News Editor ofthe Supply Chain Group30 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

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supply chain & Logistics technologyMaximizing software value often takesmore elbow grease than today’s companiesare willing to put into it, yet theseefforts frequently yield results that arehard to overlook in an era where everypenny counts. Frequently run in a barebonesmanner and relied upon for justa handful of functions, transportationmanagement systems (TMS) fall intoa supply chain software category that’sparticularly ripe for optimization.“In many cases, corporations try tofind the low-hanging fruit of the TMS,in search of functions that will providethe most value,” says Greg Aimi,research director of supply chain atGartner. “They then integrate thosefunctions as ‘phase one’ of their TMSimplementation and never go beyondthat point.”Over the next few pages, we’ll helpshippers break out of that TMS shell,determine where the gaps are in theircurrent systems, and come up with aplan of action to fill them on the wayto effectively optimizing their purchase-and-installor on-demand TMSinvestment.Filling the gapsWhether a TMS’ capabilities are fullyoptimized depends on three factors,according to Aimi: The amount oftime the system has been in place; thestrength, involvement, and expertise ofthe team that’s running it; and the levelof sophistication of the software itself.These three factors have the most impacton a firm’s ability to optimize a TMS.A sophisticated TMS that’s been inplace for five years and has been largelyleft to run on its own, for example, isprobably not being leveraged to its fullcapacity.Another factor that prevents companiesfrom squeezing the most from theirTMS investments is a lack of regularmaintenance. Rates, routes, carriers, customers,fuel costs, and other variablesSqueezemore out of yourBy Bridget McCrea,Contributing EditorTMSYour transportation management system (TMS) isinstalled and running, but are you getting the most out ofit? Our technology correspondent helps shippers determinewhere the utilization gaps exist and formulates a plan toeffectively optimize a TMS investment.are in constant flux, and the TMS that’soptimized today won’t necessarily be fullyleveraged a year from now.“Your TMS today is reflective of yourfirm’s current operating environment,”explains Adrian Gonzalez, director ofLogistics Viewpoints, a blog focusedon logistics trends, technology, and services.“Fast forward one or two years.Without current, accurate modeling,you end up with a classic garbage-in,garbage-out problem.” Even worse,says Gonzalez, you may have resortedto faxes and spreadsheets, assuming32 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

that the TMS is “broken” and no longermaking sense.“In most cases, it’s not the TMS that’sbroken,” says Gonzalez. “The problem isthat you set it up two years ago, and thesame conditions no longer apply.” So,how does a company avoid this trap andensure that its TMS is optimized notonly today, but in the future?Squeezing the lemonOne of the easiest ways to determineif your new or existing TMS is runningon all cylinders is to simply pick up theproduct brochure to see exactly whatfeatures are included with your specificsetup. “Look at all of the piecesand parts, and see if you’re using all ofthem,” Aimi suggests. It sounds simpleenough, but how often do you really goback and review product guides afterthe systems are up, running, and managingthe basics functions as promised?If the brochure turns up interestingfeatures that you haven’t seen used inyour own operations, it’s time to talk toyour software vendor or systems integratorto find out why those featuresweren’t mobilized. A shipper that hiresa third-party provider to pay its freightbills, for example, would benefit financiallyby folding that function into itsTMS and using the system’s auto-payfeature. “That’s a pretty simple examplethat could lead to some significant savings,”says Aimi.Jim Davis, senior manager at theconsulting firm Capgemini, saysshippers should also ask themselveswhether their installed or hosted TMShas lived up to its initial vision. Is it performingthe functions that you thoughtit would? Has it automated tasks thatwere previously handled manually? Hasit helped reduce paper, phone calls, andfaxes? Is it saving the company money,time, and hassle?If the answer to any of those questionsis “no,” then Davis says it’s timeto revisit the scope of the project—that initial vision—and whether ornot you’re leveraging the toolset to itsfullest capacity. Davis states that thelatter is often to blame, and the problemis fairly easy to solve. “It’s reallyjust a matter of learning what yourTMS really has to offer, including newreleases and versions,” says Davis, “andadding the missing functionalities toyour own lineup.”Take dashboards, for example. Usedto retrieve and review metrics and analyticson the fly, TMS dashboards areoften left by the wayside when theOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 33

Optimizing TMSsoftware is rolled out. “Being able toquickly measure how well you’re doing,and what your TMS is doing for you,”says Aimi, “can be a valuable additionthat helps squeeze out a few more percentagepoints of savings.”Maintaining close ties with TMSvendors and/or developers (for homegrownsystems) can also go a long wayin helping a shipper get the most out ofits TMS. This holds true not only duringinstallation and implementation,but also in the months and years thatfollow. “Your vendor can clue you intoupcoming releases and new functionalitiesthat you might not otherwise hearabout,” says Davis.Aimi, whose firm expects the TMSmarket to experience double-digitgrowth in 2011 and a five-year compoundannual growth rate of 9.4 percent,also advises shippers to turn totheir vendors for help conducting TMSaudits that very often turn up “missinglinks” in the software’s value stream.“Software vendors usually have verygood examples of customers that areleveraging their products to their fullestpotential,” says Aimi. “In many cases, aquick meeting with the vendor can helpyou detect any gaps and help you prioritizeyour next optimization moves.”Outside consultants can also help.For example, Aimi points to Chainalyticsas one of several firms that specializesin supply chain performanceimprovement, and that offers a TMSaudit service. “They’ll come out andhelp you understand what you’re gettingfrom your TMS,” says Aimi, “and whatmore you could be gleaning from it.”Getting with the programIn today’s business environment it’seasy to get caught up in the day-to-daytasks and forget about the softwareengines that are driving productivityand savings. But you wouldn’t drive anautomobile for years without regular oilchanges, tire rotations, and brake fluidflushes—so why would you allow yourTMS investment to languish?“A TMS is not something that youset up once and forget about,” Gonzalezsays. “It’s a living, breathing solutionthat needs to be maintained regularlyin order to perform at optimal capacity.”Gonzalez advises shippers to takeTMS cost reduction opportunitiesTMS operation / capabilityTypical savingspotentialRate negotiations and compliance 4-15%Route and mode optimization 5-25%Carrier assignment optimization 4-8%Electronic communications w/ supply chain partners 2-6%Continuous moves and dedicated fleets 3-5%More efficient and automated operations 1-5%*Based on approximately 10 years of evidence from various customers of TMS systems, starting point proficiency/efficiency greatly determines the magnitude of savings from each of the areas.Source: Gartnerquarterly “snapshots” of their TMS tosee how they’re performing and whatadjustments need to be made. Alsoconsider the new software releases,upgrades, and/or patches that havebeen released recently, and determine“In many cases, corporationstry to find the low-hangingfruit of the tmS, in searchof functions that will providethe most value. They thenintegrate those functionsas ‘phase one’ of their tmSimplementation and nevergo beyond that point.”—Greg Aimi, Gartnerwhether they should be integrated intoyour existing setup.And don’t forget that freight ratesand other charges change regularly—a fact that should be reflected in theTMS. “To maintain data quality,” Gonzalezsuggests, “the content regardingcarriers, rates, and ship to and fromlocations should be validated at leastonce a year, if not more regularly.”Gonzalez, who recently attendeda TMS conference hosted by vendorMercuryGate, says shippers looking tooptimize their transportation operationsshould keep an eye on concepts like“embedded analytics” and “competitiveintelligence.” Put simply, Gonzalezsays these features will allow shippersto use real-time data points such as carrierlead times and create rules in theirTMS—which in turn will make automaticadjustments when the “triggerpoints” are reached.“There’s definitely a push to helpautomate more processes and keepTMS up to date and aligned with what’shappening in real-time,” says Gonzalez.For example: Let’s say preferred carrierY has been missing on-time deliverydeadlines or rejecting loads for noapparent reason for the last month.Using a pre-determined trigger point,the TMS will automatically generatean alert to the problem, thus allowingfor quick action—such as an e-mail orcall to the carrier, or a switch to anotherprovider—on the shipper’s part.These and other advanced featuresblend well with transportation managementsystems’ inherent mission ofautomating the transportation componentof the supply chain. Shippers thatrealize this—and that continue to workon optimizing their hosted and installedsoftware on a regular basis—will bewell positioned to squeeze maximumROI from their investments. “Just likea car,” says Gonzalez, “a TMS needs tobe regularly reviewed and tweaked inorder to run at its fullest potential.” MBridget McCrea is a Contributing Editorto Logistics Management34 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

AUGUST 2010WWW.LOGISTICSMGMT.COM27 th AnnualQuest for QualityRisingabovethe restPage 20Border-crossing research 42Benefits of YMS 46Lift truck financing 55®Develop greaterbrand awareness andshowcase your featurededitorial from thisindustry-respectedpublication.SPECIAL REPORT:Quarterly transportation market update:LTL’s big rebound 58SPlace your press directly in thehands of your customers andprospects with custom reprints fromLogistics Management magazine.800.290.5460 x136 I logisticsmanagement@theYGSgroup.comEvent CollateralMedia KitsDirect MailOnline MarketingRecruiting PackagesPresentationsThe YGS Group is the authorized provider of customreprint products from Logistics Management magazine.

GLOBAL LOGISTICS: CHINA UPDATELogistics in China:Thinking aheadWhat is the country doing to ensure the efficiency andeffectiveness of those global supply chain networks thathave tapped its resources and fueled its rise to power?GRAPHICCREDIT36 LOGISTICS MANAGEMENT WWW.LOGISTICSMGMT.COM | October 2011

View of cargo containersat Hong Kong harbor.BY BILL FU, BROOKS A. BENTZ, AND MARK T. MCCALLA, ACCENTURETo varying degrees, China has becomethe world’s factory: supplying NorthAmerica, Europe, and other locales withall manner of apparel, electronics, foodproducts, appliances, and componentsfor manufactured goods. But how is China’stransportation and logistics infrastructure copingwith such rapid growth? Even more important,what is the country doing to ensure the efficiencyand effectiveness of those global supply chainnetworks that have tapped its resources andfueled its rise to power?Despite China’s huge successes, it’s never been asmooth ride. According to the China Federation ofLogistics and Purchasing, logistics costs accountedfor 18 percent of the country’s GDP in 2010. Thisis twice the level of most developed countries. Taxburdens, expensive tolls, and chaotic competitionin the logistics market are the main reasons logisticscosts are so high. In fact, some of the country’smanufacturing concerns are moving to nearbylower-cost countries as China’s costs—particularlylabor—continue to rise.Still, China’s logistics infrastructure hasimproved significantly during the implementation ofthe country’s eleventh Five-Year Plan (2006-2010).Acknowledging that economical labor wouldn’tbe enough to ensure long-term growth, China hasincreased its investments in highways, railways, andother transportation facilities.However, logistical inadequacies still exist,including sub-par distribution facilities, roads, andrailway networks—especially in the western (lessdeveloped) provinces. This is a clear reflection ofChina’s unbalanced economic growth and a majordetriment to its ongoing competitiveness.TRENDS AND DEVELOPMENTSIn a logistics context, China is clearly thinkingahead. On June 8, 2011, Premier Wen Jia Baoannounced that “we must make a complete set ofpolicies and measures, and promote the healthydevelopment of the logistics industry.” The resultinglogistics improvement initiatives, known as theEight State Regulations, focus on:• tax preference;• land policy support;• road traffic improvement;October 2011 | WWW.LOGISTICSMGMT.COM LOGISTICS MANAGEMENT 37

Global Logistics: China UpdateThe high-speed railway network(in operation) in China, 2011MordaogaMoheManguiZabaikalskManzhouliHeiheHegangKashgarAlashankouLucaogouJilantaiBalyun’eboZamyn-UudErenhotTaiyuanShjiazhuangBeijingYinshiHolingolTianjinDongyingJinanTarqiHarbinTumenHelongBalheJa’anChangdianDandongDalianYantaiWaihaiTuofenheQianjinQingdaoBaojiXi’anZhengzhouRizhaoLianyungangLhasaMaglevConventional high speed railways300-350 km/h200-250 km/h (new lines)200-250 km/h (upgraded)Normal speed railways (

Global Logistics: China Updateinfrastructure for both freight and high-speed passenger services,and this is playing a critical role in the growth of thecountry’s logistics industry. In the first half of 2011, totalgoods transported by rail in China increased to 1.94 billiontons—an 8 percent year-on-year increase.By the end of 2011, China’s total miles of rail is expectedto top 99,000 km. The volume of goods transported by railshould also increase, given accelerated railway constructionand expansion, and more high-speed railways. Longer termrises in rail freight are also expected, even though militarytraffic, resources, and passenger rail take precedence overthe transport of goods.4. Road transport. The largest portion of Chinesedomestic freight—as is the case in North America andthe EU—moves by highway. To accommodate these highvolumes, China’s road-transport network is improvinggradually, especially in the country’s second- and third-tiercities. Road transport network expansion is a particularlyhigh priority among local governments. Road-oriented servicelevels are also improving, due largely to fierce competitionin the logistics market. More multinationals inChina, including more U.S. conglomerates, are sourcinglogistics services locally.Despite the popularity and rising demand for road transport,cost concerns keep topping the list of developmentstress points. Rail transport prices are 20 percent to 30percent cheaper than road transport. Barge shipments areapproximately 50 percent cheaper. For these reasons, manybelieve that better-integrated transportation networks willbecome the dominant new trend in the Chinese freightmarket.5. Air freight. While air cargo volume has risen steadily,approximately 6 percent annually, the increase is not dramaticwhen compared to China’s overall logistics market.Like many countries, China uses air transport mainly tomove high-value or highly compact goods.Container exports from majorChinese ports in 2010(Thousand TEU)ShanghaiShenzhenNingboGuangzhouQingdaoTianjinXiamenDalian5,8205,24213,14412,01210,08012,555Source: China Container Industry Association, 201022,50929,069In this sector, international logistics giants are facingfierce competition from local Chinese air companies.China Southern, the leading Chinese air-freight carrier,reported revenue of 42.4 billion Yuan for the first halfof 2011—a year-on-year increase of 22.3 percent. UPSachieved 10 percent revenue growth in the China airfreightmarket.6. Inland and short-sea shipping. Short-haul waterbornetransport is taking a more important position in theeconomic growth of mid-western China. A primary reasonis that traditional manufacturing is moving west due toincreasing costs in China’s eastern cities, and supply chaindecision makers are striving to carve new channels intoinland areas.7. Forwarding. Forwarding and brokerage services areenjoying sustained growth. Chinese forwarders, for example,are providing more complete, more customized supply chainHong Kong Container Terminal.October 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 39

Global Logistics: China Updatesolutions for international customers and thusreaping the benefits.They’re also opening new branches in theU.S., Europe, and elsewhere. These movesshould help foreign companies trade moreclosely and effectively with China. Kerry Logistics,headquartered in Hong Kong, is a goodexample of a China-based 3PL expanding withinChina, across APAC countries, and in the EU.Down the roadChina’s logistics industry faces great opportunitiesand challenges. However strong supportexists throughout China’s government, and thiscould allow new domestic entrants to competemore effectively against the country’s traditionalplayers and perhaps even on the global stage.But established companies should enjoysuccess as well. Take China Ocean Shipping(Group) Company—China’s largest global shippingand logistics specialist. China Ocean Shippingwas the sixth largest shipping company inthe world at the beginning of 2011. Within six months, ithad jumped to fourth place, with a capacity of 650 thousandTEUs.Integrated transport will likely be an increasingly hotlogistics topic in China. Combined marine and road freightis being used more and more to move goods to inland provinces.Transport from inland locations to major ports is alsogrowing fast, thanks to construction of improved road networks,river routes, and logistics facilities. Other forms ofintegration could become more prominent. In some Chinesecoastal cities, for example, buyer consolidation is being usedby major logistics companies to optimize costs and efficiency.Traditional transport modes, such as rail and water,are already seeing a significant revival as viable modalchoices, with large-scale investments enabling expansionand improvement. Rail transport volumes, however, willprobably grow faster than ever, given rapid rail-systemexpansion and significant progress in railway technologies.More supportive policies will be issued and more positivemeasures will be taken by the Chinese government fordevelopment of rail transport.Another significant logistics influencer may be taxrelief. In China’s recently issued Eight State Regulations,tax rationalization is a top priority and could bring welcomechanges to the logistics industry. A uniform tax ratefor the logistics industry is not out of the question.World economic growth(%, 2009-2012)12%10%8%6%4%2%0%-2%-4%-6%-8%WorldeconomyDevelopedcountriesSource: IMF World Economic OutlookChina’s logistics infrastructure has improvedsignificantly during implementation of thecountry’s eleventh Five-Year Plan (2006-2010).U.S.A EU Japan China 2009 2010 2011/f 2012/fLogistics enterprises could also receive more tax incentivesdue to a series of accommodative government policies.In fact, for promoting export, preferential tariff ratesare now provided by some local governments. Companieswill need strong local knowledge and deep local relationshipsto keep on top of emerging incentives and regulatorychanges.It’s also a given that positive moves in China’s logisticsindustry will be driven by factors that many westernersfind unfamiliar or even distasteful: extensive governmentguidance and intervention. Chances are good, in fact, thatgovernmental policies and supervision will strongly favorlogistics.Constructions of logistics parks, rail tracks, and ports willbe given priority in terms of funding,credit, and permissions. Not surprisingly,domestic companies will be theprincipal beneficiaries.Nonetheless, non-Chinese companieswill also have myriad chancesto leverage improvements in China’slogistical underpinnings. Chinaclearly recognizes its growth potentialand wants a world-class transportationand logistics infrastructure to support its progress.Toward this end, 700 billion Yuan will be investedannually in rail projects, according to the country’stwelfth Five-Year Plan. By the end of 2015, road networkswill connect 90 percent of all municipalities. Morethan 1.5 trillion Yuan will be invested in aviation. Thenet effect is extensive opportunities for any companywith strong ambition, strategies, and operational capabilities—combinedwith serious supply chain smarts. MBill Fu is a Manager at Accenture, Brooks A. Bentz is a Partnerat Accenture, and Mark T. McCalla is a Senior Manager atAccenture40 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

I ntE rmoD a L&exP otranscompexhibitionINTERMODAL ASSOCIATIONOF NORTH AMERICACo-located shows November 13-15, 2011Georgia World Congress Center | Atlanta, GeorgiaConnect with thousands of freight executives at themost dynamic transportation and logistics industryevents in North America.www.freightexpo. N etSpACe iS limitedreServe your booth todAyFor more information, contact:Scott grovesToll-free: (800) 796-2638, ext. 4971Direct: (770) 576-4971E-mail: info@freightexpo.netintermodal Association of North America866-438-EXPO | iana.expo@intermodal.orgwww.intermodal.orgthe National industrial transportation league703-524-5011 | transcomp@nitl.orgwww.nitl.orgThe TransComp Exhibition and Intermodal Expo are held incooperation with IANA’s Annual Membership Meeting, NITL’sAnnual Meeting, and TIA’s Fall Meeting.

15Warehouse & DC Managementways thelift truckToday’s lift trucks offer more in the way of technology,power, and performance than ever before. Here’s a lookat the latest innovations available in today’s trucks.By Bob Trebilcock, Editor at largeRemember that old commercial: Thisis not your father’s Oldsmobile? Thesame can be said for lift trucks. If youhaven’t replaced your fleet of lift trucksin recent years—and, thanks to therecession, many readers parked someof their fleet during 2009—you maybe surprised by the technology beingbuilt into today’s offerings. The developmentsinclude everything from ergonomicimprovements for operator comfortto fully automated lift trucks thatoperate just like an automatic guidedvehicle (AGV).But, not all of the changes are as revolutionaryas converting a lift truck into anAGV. “We are an evolutionary industry,not a revolutionary industry,” says JeffBowles, product line manager, MitsubishiCaterpillar Forklift America (MCFA).If you think about it, that approachmakes sense. New lift trucks have togo right to work in existing applicationswithout disrupting operations. What’smore, the basic lift truck remains thebackbone of most warehouses, DCs,and manufacturing plants. Those evolutionarychanges are resulting in trucksthat are more productive, smarter, andreliable than ever before.We recently spoke to 10 of the leadinglift truck manufacturers in NorthAmerica to learn about the 15 mostimportant advancements found on thenext generation of lift trucks. Here arethe results.42 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

is evolving1Automating lift trucks. Automation iscoming to lift trucks as Crown, MCFA,Toyota, Nissan, and Raymond ready lifttrucks that can operate as automaticguided vehicles. Raymond, for instance,has plans to introduce an automatedlift truck incorporating a camera-basednavigation system from Seegrid in early32012. The justification for automation issimple: Labor is expensive. “If you lookat the five-year economic life of a lifttruck, labor represents 70 percent to 75percent of the total investment,” saysFrank Devlin, manager of advancedtechnologies at Raymond. “If you canmaximize your labor force, there is atremendous need for this.”2Bringing RFID to lift trucks. Inaddition to automated lift trucks, manufacturersare exploring semi-automatedsolutions. Through its relationship withJungheinrich, MCFA is bringing RFIDandtransponder-based technologiesfrom Europe to very narrow aisle lifttrucks in the North American market.One solution relies on a warehousenavigation system that knows where thetruck is located based on encoders andtransponders in the floor and RFID tagsat the pick and pallet locations. Onceorder picks are loaded into the system,the truck calculates the most efficientway to pick the orders; it will also calculatethe lift and drive speeds that aremost productive for the process.“The system will automatically driveand lift the truck in an automated fashionfrom pick location to pick locationwithout going to a completely automatedtruck,” says Bowles. MCFA isalso installing transponders and sensorson the truck for safer operations. Onman-up trucks, for instance, the systemwill monitor what’s in front of the truckat the ground level. “It’ll slow the truckuntil the obstruction is moved whenthe operator has limited visibility,” saysBowles.Remote-controlled trucks. Crownis also developing semi-automatedsolutions that serve the gap betweenconventional lift trucks and AGVs:a remote-controlled vehicle for casepicking. An order selector can drivethe truck into a pick zone; while picking,the operator moves the truck fromone pick location to the next using aremote control device. That saves thetime usually spent getting on and offthe truck between picks. “We are tryingto bring functionality to the truckthat adds value,” says Tim Quellhorst,senior vice president of Crown. “This isa good example of a solution that candrive labor productivity in the less thanfull automation area of operation.”4Lift truck, phone home. Lift trucks aregetting smarter, thanks to telematics—anindustry term for the convergence oftelecommunications and data collectiontechnologies such as sensors andRFID technology. Telematics allow thelift truck to collect data about the operationof the truck and the performanceof the operator and then communicatethat information to a system of record.The onboard computer on a Raymondlift truck, for instance, has the ability tosend fault codes and the serial numberof a truck by e-mail to a technician’ssmart phone or computer. “That allowsOctober 2011 | WWW.LOGISTICSMGMT.COM Logistics Management 43

Warehouse & DC Managementa technician to diagnose a truck andbring the tools, parts, and componentsthey need for the job,” says Devlin.5Integrating the lift truck with theWMS. Most of the information beingcollected by telematics systems todayis being used to support maintenanceand fleet management initiatives. Thenext step, says Jonathan Dawley, vicepresident of marketing for NACCOMaterials Handling Group (NMHG),is to integrate telematics with a warehousemanagement system (WMS).That integration would allow lift truckdata to become part of the workflowof a facility. “Using data from the lifttruck to improve the productivity oflabor could be more important thanrunning your lift truck 1 mph faster,”Dawley says.6The ergonomic lift truck. Ergonomicsand worker comfort have long beena priority in Europe, where distributorsand manufacturers have a longerterm relationship with their employees.That thinking is beginning to permeateU.S. enterprises, especially thosewith a global footprint. That, in turn, isdriving the demand for more Europeanstyle trucks here in the United States.“We see some of our U.S. and Canadiancustomers creating a different typeof environment for their employees inthe warehouse,” says NMHG’s Dawley.“They want a smarter, more productiveoperator, not a stronger operator.” Hebelieves the attention to ergonomicsnot only improves productivity, it helpsretain skilled employees.7Fingertip controls. Multi-functionalcontrols that can be controlled by anoperator’s fingertips are one example ofimproved ergonomics. With one control,an operator can work the lift of theforks, the tilt angle and the side shifter.“Fingertip controls were introduced inEurope,” says Steve Cianci, director ofmarketing and product management forNissan Forklift Corporation of NorthAmerica. “While they’re not popularyet in the United States, we’re seeingincreased interest because they providea more ergonomic experience for theoperator.”8Smarter lift trucks. What mightthe lift truck of the future look like?According to Lyndle McCurley, salesand marketing manager for DoosanIndustrial Vehicles America, it’s atruck that’s smarter, more ergonomic,and flexible. Last month, Doosan previewedan electric concept vehicle atthe British Open. The glass on thetruck’s cab is clear when operatingindoors and tints to keep out sunshineand heat when it’s operating outside.As the forks are raised, the cabin risesslightly and tilts backward so thatthe operator can look up at higherelevations without straining his neck.Heads up displays include graphics ofthe height of the forks, the weight ofthe load and the tilt angle. Finally, thetruck can change its center of gravityand wheel base—automatically elongatingor retracting the length of thewheelbase—depending on the sizeof the load and the operating environment.“Instead of a 5,000-poundtruck, we’re developing multi-capacitytrucks that can adapt to the operatingrequirements,” McCurley says.9Inhibitor functions. Inhibitors aredesigned to predict the unsafe operationof the truck for the operator, saysCianci. These functions automaticallyreduce the forward and reverse travelspeed of the truck at different heightsand automatically control tilt angles.10 moving from preventive maintenanceGet on the bus. The lift truck industry,like other mechanical solutions, istoward predictive maintenance.“We’re not there yet,” says Ed Campbell,sales manager for the materialshandling group at Landoll Corp.“But with the CAN BUS system, weget two-way communication withthe components. That lets us knowwhether we’re operating a higher temperature,which allows us to react tosomething before it fails.”44 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

SAVESPOWER.CREATESPOWER.ECO-PERFORMANCERaymond ® Eco-Performance isn’t just our engineering philosophy;it’s our way of life. With every product and warehouse solution thatwe create, we focus on reducing energy consumption and increasingproductivity–like providing you up to 20% more battery run-time onRaymond Reach-Fork ® trucks. Because at Raymond, you don’t justfind better solutions. You find smarter solutions.How efficient is your fleet? Contact Raymond today.www.raymondcorp.com/ecoperformance.cfm • 1-800-235-7200

Warehouse & DC Management11 is powered conventionally with ICHydrostatic drives. “The vast majorityof the equipment in use todayengines or battery power,” says MarkRoessler, general product managerfor Linde Material Handling NorthAmerica. “Because of that, our focushas been on optimizing those designsfor the end user.” At Linde, that translatesinto hydrostatic drives that useoil flow and pressure to accelerate anddecelerate the truck in either direction.“With hydrostatic drives, thereare no friction brakes, no mechanicaltransmissions, no drive shafts, and noU joints,” says Roessler. “That allowsyou to eliminate the wear and tear inthe drive system.”Getting narrower in narrow aisle.As warehouses strive to get more stor-12 age in the same amount of space, narrowand very narrow aisle lift trucksare key. “When we first started in thisbusiness, our trucks operated in a7-foot aisle,” says Landoll’s Campbell.“Today, we’re operating in less than 6feet in articulating trucks.” Part of thatis attributed to redesigning the articulationassembly of the trucks so they aremore compact and thinner to work ina narrower aisle. Another is to design afront end that can rotate 200 degreesinstead of 180 degrees.“As you’re pulling the forks out, theystart to turn. That allows you to keepthe forks straight until you get themout of the pallet, which makes it easierto stack in a narrow aisle,” Campbellexplains. Because narrow aisle trucksare often working in high elevations,Landoll has added a low-cost camerasystem to provide visibility above 25feet as well as software that can detectand display the height elevations inevery row in a warehouse.13 14it their way. Toyota Material HandlingIntegrated scales. Burger King createda business out of letting customers haveU.S.A. (TMHU) sees a similar interestin customization among lift truckusers. “Forty percent of our orders arecustomized by the customer and manyof those innovations turn into optionsthat are later integrated into optionson the trucks,” says Cesar Jimenez,national product planning managerfor TMHU. The recently introducedintegrated forklift scale is an exampleof a feature that was developed for acustomer and is now a standard optionon Toyota trucks. The scale, which isaccurate to within half a pound and islegal for trade, allows an end user toweigh and capture the weight of a loadwhile lifting a pallet and loading it on atruck. In its current configuration, thesystem can store information about350 loads that can be downloaded toan enterprise system. “We have theability to add Bluetooth and Wi-Fito automatically transmit the data,”Jimenez says.Lithium ion batteries. Earlier thissummer at CeMAT, Jungheinrichintroduced a walkie for the Europeanmarket powered by a small lithiumion battery the size of a brief casethat can be replaced by the operatorwith no special tools. “The size of thebattery results in a very maneuverabletruck,” says Bowles. “But, as with mostnew technologies, cost is the issue andat present, the cost per kilowatt houris greater than a lead acid battery.”A hybrid lift truck. In Japan, Toyotahas introduced a true hybrid die-15 sel truck in an 8,000-pound capacitytruck. The truck operates on electricpower for applications like travel, butautomatically switches to diesel whenextra power is required for an application,just like the consumer car Prius.And, like a Prius, the batteries arerecharged when the truck is under“Forty percent of our orders arecustomized by the customerand many of those innovationsturn into options that are laterintegrated into options on thetrucks.”—Cesar Jimenez, national product planningmanager, Toyota Material Handling U.S.A.diesel power. “Because you’re notconsuming electricity from the grid,the design has resulted in a 50 percentreduction in fuel consumptionand emissions,” says Jimenez. Toyotaplans to introduce a propane-basedindoor cushion tire hybrid truck inNorth America. “Propane is the No.1 selling fuel for us in the UnitedStates,” says Jimenez. “That’s whatwe’re pushing our parent company todesign.” M46 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

The big names in transportation will be outof the office for a few days in January.Find out why.smc3conference.comWe’re talking logistics.Atlanta, GA | January 16-18

A special supplement to:Special Report:Leading Air Cargo CarriersHong KongcallingWorld air cargo traffic will triple over the next 20 years, with mostof the growth being driven in the Asia Pacific marketplace. Is it anywonder that the biggest players in the industry are investing heavilyin the region?By Patrick Burnson, Executive EditorIn the course of providing a detailed overviewof trends shaping air cargo today,the recent World Air Transport Statistics(WATS) report notes that Asia will continueto be at the forefront of the freight industry,expanding at a pace approaching 7 percentby the end of 2029.A cursory look at WATS figures tells the rest ofthe story. Of the top 10 international and domesticleaders, only one—Cargolux—is a relatively newplayer in this marketplace. This comes as scantsurprise to the Boeing Company—China’s leadingprovider of aircraft—which maintains that the AsiaPacific region’s air traffic growth will exceed theworld average by a “large” margin over the nexttwo decades.Randy Tinseth, vice president of marketingfor Boeing Commercial Airplanes, says the regionwill account for one-third (10,320) of new airplanedeliveries worldwide over the period. “Thisis sweet music to an airplane manufacturer’s ears,”says Tinseth.48S October 2011 • Logistics Management

A special supplement to logistics managementAccording to Jim Edgar, regionaldirector of cargo marketing for Boeing,China represents 40 percent of thetrans-Pacific cargo market, and HongKong is a key gateway for air cargo connectingChina with the world.“This area stands to benefit greatlyfrom future increases in air cargo traffic,”says Edgar. “Of local interest and inline with the cargo recovery, Hong KongAir Cargo Terminals Limited announcedthat total annual tonnage for 2010 hita new handling record of 2.9 millionmetric tons, an increase of 24.8 percentover 2009.”Tinseth says that rising cargo traffic iscreating pressure for fleet growth. Boeingresearchers say that airlines will need30,900 new passenger and freighterairplanes through 2030, valued at U.S.$3.6 trillion. Forty-four percent of theseaircraft will replace older, less efficientairplanes, while 56 percent will accountfor new aircraft needed to meet air trafficgrowth. The world fleet is projectedto expand twofold from 18,890 to36,300 airplanes during this span.“The near doubling of the world fleetsize is an indicator that airlines will notonly plan for growth, but will take theeconomically rational step of modernizingtheir fleets as a hedge againsthigh and unpredictable oil prices,” saysTinseth. “The global economic recoveryis helping airlines rebuild their balancesheets, leading toward a demand fornewer, fuel efficient, and environmentallyprogressive airplanes worldwide.”Growth in developing and emergingmarkets, and the need to replace agingfleets, are but two main reasons drivingthis trend, say Boeing analysts—anobservation being echoed by the top aircargo providers.At the same time, however, some analystsare sounding a cautionary note onthis strategy. Charles Clowdis, Jr., managingdirector of transportation advisoryservices for IHS Global Insight, says shippersmay opt for slower ocean carriage inthe trans-Pacific if the economic reboundScheduled freight tons per mileInternational6 Singapore Airlines 7,001 6 Hainan Airlines 421Graphic caption7 China Airlines 6,410 7 All Nippon Airways 417is not robust.“Even some high-end consumergoods are moving on water now,” saysClowdis. “If this trend continues, aircargo providers may have a hard timegetting this volume back.”“Flat world” strategyNevertheless, air cargo leaders maintainthat there’s no reversing a “flat world”business strategy.“We all benefit from a world that’smore connected than ever,” says FredSmith, chairman, president, and CEOof FedEx. “In fact, the largest economyin the world no longer belongs to asingle country but to the realm of globaltrade. It’s driven by emerging markets,such as China and India, and worldwidegains in manufacturing.”Smith says that global trade willcontinue to be the prime source ofgrowth for FedEx, especially in Asia,where they have the strongest transportationnetwork in the industry. But he’salso concerned that his company may beapproaching a tipping point, noting thathe expects higher margin revenue frominternational operations to approach—ifDomesticRank Airline Millions Rank Airline Millions1 Cathay Pacific Airways 9,587 1 FedEx 8,3222 Korean Air 9,487 2 UPS Airlines 4,9793 Emirates 7,913 3 China Southern Airlines 1,2954 Lufthansa 7,422 4 Air China 9045 FedEx 7,421 5 China Eastern Airlines 7138 UPS Airlines 5,215 8 United Airlines 4139 EVA Air 5,166 9 Japan Airlines 40510 Cargolux 4,901 10 Delta Airlines 363Source: World Air transport statistics (WATS)not eclipse—U.S. domestic revenues atFedEx Express for the first time in itshistory.“Our commitment to providecompanies of all sizes with access to newmarkets in every corner of the worldhas never been stronger,” adds Smith.“FedEx not only sits at the nexus ofglobal trade—we are indispensible toglobal trade.”But does this beg the question: Whoisn’t? Certainly, UPS must comprise anotherpiece of that pantheon. For ScottDavis, chairman and CEO of UPS,that means a more balanced air cargorelationship.“When it comes to trade, we’reletting other countries move to the forefront,”Davis cautions. “What is neededis much stronger economic growthfueled by U.S. exports.”Davis, who is also a member of thePresident’s Export Council, acknowledgeschallenges facing the U.S., includingunsustainable federal deficits and thepersistently weak job market. But hecounters this by advocating a series ofsolutions, including:• Streamlining export controls. ThisLogistics Management • October 2011 49S

Special Report: Leading Air Cargo CarriersA SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENTwould boost U.S. GDP by $64 billionand create about 160,000 manufacturingjobs over the next eight years.“That’s low hanging fruit,” says Davis.• Passing job-creating free trade agreementswith South Korea, Colombia, andPanama, which he said were “stuck in themud of partisanship” in Washington.“We have the means to competewith any country in the world and win,”Davis says. “Let’s clear away the barriersto exports and let global commerce shiftinto high gear and create much neededjobs here at home.”Airlines remain optimisticThis bullish attitude seems to be sharedby the airlines themselves. “Forwardbookings are not showing signs of weakening,and they remain strong…as doesoverall pricing,” says Dahlman Roseinvestment bank analyst Helane Becker.At the same time, however, they’remanaging the sluggish economy with capacitycuts and less competition becauseof airline consolidation. The most recentwas Southwest Airlines acquisition ofAirTran Airways.In the U.S., the industry has gonefrom 12 major carriers to seven, includingthe combinations of United andContinental Airlines and Delta Air Linesand Northwest Airlines. But shippers saythat this is no cause for alarm. “There’splenty of capacity for existing demand,”says Becker.Brandon Fried, executive director ofthe Air Forwarders Association, says hisconstituents are reporting that oceancarriers are relieving the pressure for thetime being. “This trend, though, is goingto be reversed soon,” he says. “This isa cyclical business, and we see high-techand the fashion industry as drivers forfuture demand.”Fried also pointed to American Airlinesas taking the lead in anticipating emergingmarkets for high-end perishables infood and pharma. “Maintaining coldchain integrity is going to be key in therecovery,” says Fried. The manufacturers ofSafety benefits and increased efficiency throughgreater choice of route selectionThe International Air Transport Association(IATA) announced the successfulcompletion of the first iFlex trial betweenJohannesburg and Atlanta. The iFlexconcept provides for a greater and moreflexible choice of routes on long-hauloperations which cross multiple flight informationregions to deliver shorter flighttimes, improved fuel efficiency, andreduced CO2 emissions while maintainingsafety.With iFlex, airlines will be able tofly more optimum routings that takemaximum advantage of wind conditions.While airlines have long planned flightsconsidering wind conditions, air trafficmanagement restrictions often limitedflexibility within fixed corridors on partsof routings. The innovation that iFlexbrings is the flexibility to extend thispractice consistently across the entirejourney.Delta Air Lines reported that theimplementation of the iFlex conceptbetween Johannesburg and Atlantaresulted in average time saving perflight of 8 minutes, equating to 900 kgof fuel and 2.9 tons of CO2. Annualizedand on the basis of two dailyflights, this translates to savings ofsome 100 hours of flight, 690 tons ofcontainers and cooling systems are amongthe most positive players in our industrytoday. They see tremendous growth in thefuture.”Which brings us full circle back toa forecast made by that other globalmega-manufacturer, Airbus. “Theaviation sector is an essential elementfor today’s global economy,” says JohnLeahy, Airbus COO. “Geographically,over the next 20 years, Asia-Pacificwill account for approximately 34 percentof demand, followed by Europe(22 percent) and North America (22percent).”But tellingly, both Boeing and Airbusare now saying that it’s not just aboutAsia leading the way. Aircraft manufacturersare anticipating a rebound aroundthe world during the next decade.“Looking back at our forecastsfuel and a reduction of 2,150 tons ofCO2 emitted.A more flexible routing structure alsoprovides a safety benefit in that airlineshave more options to avoid adverseweather. Routing decisions can betaken at the planning stage to avoidpotential tactical en-route deviations thatcan significantly increase controller andpilot workload.“This initiative demonstrates justwhat can be achieved when we worktogether as an industry to reduce aviation’simpact on the environment whileat the same time enhancing efficiencyand safety,” says Guenther Matschnigg,IATA senior vice president, safety,operations, and infrastructure. “We lookforward to future successes based onthis first trial.”The iFlex implementation did notchange existing air traffic managementprocedures, separation standards orcommunication, navigation, or surveillancerequirements. In certain areas,short cuts (direct routings) given by differentair traffic control authorities, on aday-to-day basis, were formalized. Thisformalization provides better situationalawareness for all airspace useres.—Patrick Burnson, Executive Editorover the past 10 years reveals that ourprojections for long-term market growthtend to be conservative, compared toactual industry performance,” says TomCrabtree, who oversees Boeing’s cargoindustry forecasting effort.Boeing has been admirably accurate,however, on the crucial forecast of themarket share that each airplane size categorywill capture. “High fuel costs arecompelling airlines to accelerate replacementof older airplanes,” says Crabtree.“In addition, the increased capabilitiesof the latest long-range airplanes createopportunities for operators to takeadvantage of the ongoing liberalizationof air transport markets to open newnonstop routes.” —Patrick Burnson is Executive Editor ofLogistics Management50S October 2011 • Logistics Management

If it were easy,everyonewould do it.“No carrier is perfect – but theyshould be accountable. That’s whyI use Saia. When Jeff and I review myCustomer Service Indicators ® eachmonth he addresses any issue up front.He explains how it was resolved andwe discuss areas for improvements onboth sides. I like knowing he’s not hereto sell me… he doesn’t have to.”John GreasonLogistics Manager, Houston, TXSaia’s Customer Service Indicators –Six key metrics that help improve thequality of our service to you, monthafter month.“Saia’s Customer Service Indicators arepowerful tools. They’re for shippers whoare serious about creating a productivepartnership with their carrier. If I’m notusing them to help improve John’s shippingefficiency, I’m not helping either of us.”Now with our newest measurement –Exception-free Deliveries – we’re takingthe most comprehensive commitment inthe industry a step further.1.800.765.7242 • www.saia.comJeff DavidsonSaia Account Representative,Houston, TXCustomer Service IndicatorsOn-time Pick-up • On-time Delivery • Exception-free Delivery • Claims-free Service • Invoicing Accuracy • Claims Settled within 30 Days

The missing link inyour supply chain.S e p t e m b e r / O c t o b e r 2 0 1 1 Volume 15, Number 5FEATURES8 The Supply Chain Top 25:Leadership in ActionThe 2011 rankings of the Top 25 supplychains from Gartner Inc. are in. They includerepeat winners and some new entrants.Perhaps even more important than the actualrankings, says Gartner Research DirectorDebra Hofman, are the lessons that can belearned from analyzing the leaders. This year,six specific qualities stand out.16 The Greening of Walmart’sSupply Chain…RevisitedIn 2007, SCMR ran an article on Walmart’ssustainability program, focusing on eightspecific initiatives being pursued. Four yearslater, the author of that original article, EricaPlambeck of Stanford, and colleague LynDenend revisit those initiatives to assess justhow Walmart is doing on the sustainabilityfront.Sumantra Sengupta of EVM Partners saysthe first step in answering these questions isto carefully determine your “Mobility Index.”This article tells how it’s done.40 The Case for InfrastructureInvestment: Lessons fromMedco and StaplesSmart investment in supply chain infrastructure—andin particular automated materialshandling and distribution systems—can paybig dividends. Medco and Staples have proventhat convincingly, as these case studies demonstrate.Their stories point to seven key takeawaysthat supply chains professionals in anybusiness sector can learn from.SPECIAL SUPPLEMENTS50 EU Logistics:Meeting the New ChallengesEditorialAdvisory Boardn Jack T. ampuJaNiagara Universityn Joseph c. andraskiVICS Associationn James r. BryonIBM Consultingn John a. calTagironeThe Revere Groupn Brian cargilleHewlett Packardn roBerT B. handfieldNorth Carolina StateUniversityn nicholas J. lahowchicTompkins Associates24 Achieving Flexibility in aVolatile WorldA new global survey from PRTM confirms theimportance of operational flexibility in supplychain success and identifies five levers thatleaders employ to make it happen. The consultantsreport that the financial and performanceadvantages of improved flexibility canbe profound. They outline five basic steps thatcompanies can take to start realizing thosebenefits.32 What’s Your Mobility Index?Mobile devices are everywhere these days. Butwhat’s the real potential of mobility in the keysupply chain processes. And what’s the bestway to identify and tap into that potential?COMMENTARY4 InsightsBowersox and Goldratt Leave TwoGreat LegaciesBy Larry Lapide6 Talent StrategiesAsia: The New Talent ManagementModel?By Mahender Singh48 Spotlight on Supply ManagementThe Evolution of Supply ManagementBy Carrie Ericson and Simon Rycraft62 BenchmarksGlobal Sourcing Calls for Due DiligenceBy Becky Partidan hau l. leeStanford Universityn roBerT c. lieBNortheastern Universityn clifford f. lynchC.F. Lynch & Associatesn eric pelTzRAND Supply Chain PolicyCentern James B. rice, Jr.Massachusetts Institute ofTechnologyn larry smiThWest MarineKeep your supply chain strong with a subscription to Supply Chain Management Review.Get the full story behind each of these headlines and all the other issues in our digital archives—included FREE with your new subscription.Subscribe and save up to 40% off basic rates at www.scmr.com/subscribe.

A SPECIAL SUPPLEMENT TO:Special ReportTop 30 Ocean Carriers:New era of collaboration?Big shippers and the world’s top carriers vow to work collectivelytowards leveraging technology to improve business processesand relationships. Will they make good on the promise or slip backto business as usual?By Patrick Burnson, Executive EditorOne of the biggest stories to unfold this fallin the ocean carrier arena was when TheGT Nexus Shipper Council announcedthe challenge for the Top 30 players tomake good on their promise to collaborate.Created in 2007, the GT Nexus Shipper Councilis a group of large shippers, across many industryverticals, with combined annual revenues in excessof $1 trillion. Collectively, the group moves over5 million twenty-foot equivalent units (TEUs) ofocean freight each year.The Council has now engaged Maersk Line inresponse to the carrier’s recently announced “Manifesto”that calls for changes in the way carriersand shippers conduct their business. The ShipperCouncil is also working with executives at otherleading carriers to drive change at an industry level.“Maersk has risen steadily from its initial lowranking in our annual Ocean Carrier PerformanceSurvey,” says Peter Friedmann, executive directorof the Agriculture Transportation Coalition. “Thiscomes as the direct result of diligent efforts to addressspecific issues identified by shippers relatingto documentation and bills of lading.”Maersk Chief Executive Officer Elvind Koldingunveiled the Manifesto initiative a few monthsback, stating that “reliability is not good enough,the industry is too complicated for customers, andtransparency of its environmental performance andrecord needs to be greatly improved.”Logistics Management • October 2011 53S

Special Report: Top 30 Ocean CarriersA special supplement to logistics managementProminent members of TheShipper Council agree, saying thatthey share in a mission to work collectivelytowards leveraging technologyto improve business processesand relationships with commonindustry partners. “The ShipperCouncil has been advocating changefor the past two years,” says MikeMurphy, associate director of logisticsprocurement at Kraft Foods Global,Inc. “When we saw Mr. Kolding’sannouncement, we immediately sawan opportunity to take action.”Dennis Melgert, strategic sourcingmanager of logistics at chemicalproducts producer Celanese Corp.,shares Murphy’s vision: “We believethat there is an opportunity to engagethe liner industry as a group andmake broad substantial change thatbenefits everyone. We were thrilled tosee Maersk Line take the lead.”The Shipper Council has alreadyestablished a dialogue with Maerskand executives from several otherleading carriers. The group saysthat it’s committed to comingup with specific ideas that can beimplemented quickly to the benefitof both shippers and carriers. Ideason the table include:• managing allocations andimproving forecasting on a secureneutral platform;• streamlining documentationand substituting electronic bills oflading for paper to act as “one versionof the truth;”• using technology to improvebusiness-to-business processes betweenshipper and carrier; and• collaborating “in the cloud” byusing our virtual community to its fullpotential.“Reliability, predictability, and simplicitycreates value,” says Siva Narayanan,head of maritime and warehousing atRhodia Inc., a specialty chemicals company.“We believe that collaboration fusedwith neutral, industry-wide technologyAlphaliner Top 30(Operating fleets as of September 2011)Rank Operator TEU Share1 APM-Maersk 2,455,014 15.7%2 Mediterranean Shg Co 2,029,482 13.0%3 CMA CGM Group 1,324,174 8.5%4 COSCO Container L. 650,840 4.2%5 Hapag-Lloyd 627,725 4.0%6 Evergreen Line 611,678 3.9%7 APL 586,364 3.7%8 CSCL 505,913 3.2%9 Hanjin Shipping 494,654 3.2%10 CSAV Group 468,562 3.0%11 MOL 421,303 2.7%12 OOCL 412,182 2.6%13 Hamburg Süd Group 405,897 2.6%14 NYK Line 397,473 2.5%15 K Line 342,763 2.2%16Yang Ming MarineTransport Corp.336,328 2.1%17 Zim 332,845 2.1%18 Hyundai M.M. 306,443 2.0%19 PIL (Pacific Int. Line) 266,042 1.7%20 UASC 234,815 1.5%21 Wan Hai Lines 170,510 1.1%22 HDS Lines 88,744 0.6%23 TS Lines 77,500 0.5%24 X-Press Feeders Group 62,477 0.4%25 CCNI 60,293 0.4%26 MISC Berhad 55,192 0.4%27 Matson 49,530 0.3%28RCL (RegionalContainer L.)49,339 0.3%29 KMTC 48,404 0.3%30 Grand China Logistics 47,576 0.3%Source: Alphalineradoption will help achieve the vision thatMaersk put forward.”Patrick Halloran, director of global tradeand logistics at Cardinal Health, is also onthe same page with his fellow council members,noting that the key now is to movepast dialogue and into action. Accordingto Halloran, The Shipper Council iscommitted to making this happen. “Membersare contacting carrier executives andhosting meetings to develop specific plans,”he says. “The group will then determinewhat it can do to collectively address someof finer details in the relationship.”Better late than neverThis development is coming just intime, say analysts, who note that carrierswere beginning to go too far in their zealto recapture rates this year. The EuropeanCommission’s investigation of “pricefixing”has vessel operators scurryingfor cover, but regulators in the U.S. aredoing their part to keep the game boardfree from collusion.The European Commission’s investigationof ocean carrier antitrust rulesramped up to a new level last spring asAsian companies were also brought intoview. Meanwhile, the Federal MaritimeCommission is listening to U.S. shippercomplaints that Transpacific “talkingagreements” represent an added monopolisticthreat.“In the old days of conference pricing,this kind of behavior was called‘independent action,’” says Dirk Visser,managing director of the Dutch consultancyDynamar. “But the governmentis now becoming much more vigilantwhere this is concerned.”Indeed, the Commission reports thatwhen antitrust officials raided Europeanheadquarters, Asian carriers were amongthe others targeted for investigation.Neptune Orient Lines, OOCL, EvergreenMarine, and Hanjin Shipping—all leading operators in the transpacifictrade—are said to be complying withthe price-fixing probe.Just last May, EU regulators begansearching through the files kept byMaersk, CMA-CGM, and Hapag-Lloyd. The unannounced visit was madeto enforce the abolished exemptionfrom antitrust activity the Commissionenacted three years ago. Spokesmen forOOCL confirmed that the Commission’sraid was not “carrier specific,” and54S October 2011 • Logistics Management

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Special Report: Top 30 Ocean CarriersA special supplement to logistics managementthat it was complying with investigators.Meanwhile, Visser tellsLogistics Management that the fewremaining U.S.-flag carriers wereunlikely to face similar scrutiny.“Only APL is at risk,” says Visser,“but of course, that belongs to aSingapore-based company now.”But that’s not to say that thissegment is without the stain ofmalfeasance. Earlier this year,Horizon Lines, a pure-play domesticcarrier based in Charlotte,N.C., was fined $45 million fora scheme of its own followingJustice Department charges thatit had conspired with Crowley,Sea Star, and Trailer Bridge to fixprices and increase fuel surchargeson shipping lanes to Puerto Rico.Dissecting talking agreementsShippers comprising the AgricultureTransportation Association and theNational Industrial TransportationLeague (NITL) allege that carriersin the transpacific are also quietlycolluding on prices through sub rosa“talking agreements.”The Federal Maritime Commission(FMC) is currentlylooking into that matter, saysspokesperson Karen Gregory.Number 2 MSC is gaining groundMaersk Line countries of origin for U.S. imports, TEUsPlace Receipt Country 2011 2010 % ChangeChina 474,064 512,960 -7.58%India 48,737 53,025 -8.09%Indonesia 46,517 44,816 3.79%Hong Kong 37,859 45,203 -16.25%Vietnam 31,479 35,493 -11.31%Netherlands 30,254 32,426 -6.70%Japan 29,472 31,336 -5.95%Korea, South 23,644 23,648 -0.01%Germany 21,812 26,511 -17.73%Pakistan 19,886 23,107 -13.94%MSC Mediterranean Shipping countries of originfor U.S. imports, TEUsPlace Receipt Country 2011 2010 % ChangeChina 456,313 384,078 18.81%Germany 72,614 66,326 9.48%Italy 70,354 54,947 28.04%Belgium 44,903 35,756 25.58%Brazil 39,371 39,203 0.43%Chile 37,274 33,442 11.46%Spain 22,829 18,769 21.63%India 22,249 12,822 73.53%Vietnam 20,484 15,781 29.80%Source: AlphalinerMeanwhile, responding to arequest for comments fromthe FMC on the effect of slowsteaming on U.S. ocean linercommerce, most shippers foundlittle or no rate or service benefit.“This was particularly true onthe transpacific, where carriersengage in a collective assessmentof the rate structure,” saysPeter Gatti, NITL executive vicepresident. “We, of course, agreethat there are environmentaladvantages to slow steaming, butshippers were also counting on apricing break from the carrierscomprising the TranspacificStabilization Agreement (TSA)and that hasn’t happened.”Indeed, says Gatti, onenon-conference carrier, Matson,which has been operating a dedicatedshuttle from Shanghai toLong Beach, has been running atnormal knot-speed and deliveringgoods at a competitive pricepoint. “So from a money-savingperspective, slow steaming’sadvantages are negligible,” addsGatti.Spokesmen for the WorldShipping Council (WSC) havealso been telling Logistics Managementthat while its member’scomments were largely in supportof continued slow steaming,the issue was largely confined tothe transpacific lanes.“To my knowledge, we don’tface this problem anywhere elsein the marketplace,” says WSCspokesperson Anne Kappel.“Besides, the FMC does nothave the enforcement powersto regulate any trade lane basedon request for comments.”According to the NITL’sGatti, supply chains havesuffered negative impacts asa result of slow steaming. Hesays that shippers are reporting56S October 2011 • Logistics Management

At HMM ‘Green’ is not Just aColor; It’s a Day at the OfficeHMM was the first internationalocean shipping company to receivethe Environmental ManagementSystem Certification, ISO 14001.What does this mean? It meansHMM is long dedicated to the processof safeguarding the environment. Weidentify how our business impacts theenvironment, design effectivestrategies to reduce our footprint,implement systematic approaches toproblem solving, establish goals andmeasure our results.IdentifyOur eco-friendly initiatives have enabledHMM to sharply reduce Green HouseGas and other air pollutant emissionsfrom containerships since the programbegan in 2007:* Carbon Dioxide (CO2) -39%* Sulphur Oxide (SOx) -31%* Nitrogen Oxide (NOx) -16%* Ozone Depleting Substances -63%VerifyActPlan201 1SMWhat’s next? Hyundai will continue to reduceatmospheric and marine pollutants, and makeefficient use of resources to help insure we all haveclean air and blue oceans for generations to come.HMM provides dependable, green ocean transportservice for US, Asia, Europe and South America. Seeour entire schedule online at hmm21.com or ourmobile site at m.hmm21.com. On time. Online.m.hmm21.com1-877-7-HYUNDAI

Special Report: Top 30 Ocean CarriersA special supplement to logistics managementthat transit times have risen, effectivevessel capacity has dropped, shortagesin containers and equipment have beenexacerbated, and meeting customerexpectations is more difficult.“One of the key aspects of the supplychain is that transit times affect inventory,”says Gatti. “Initially, slow steaming acceleratedthe depletion of inventory making itharder for shippers to fill their store shelvesand manufacturer’s production lines ina timely manner.” Over time, however,shippers have been forced to adjust tolengthened voyage times by increasingthe amount of inventory they carry, athigher costs, Gatti adds.“Goods that sit in inventory aresimply not producing real economicoutput or providing any societal benefit,”says Gatti.Reversal of fortuneWhile the world’s leading cargo vesseloperators had seen a remarkable reversalof fortune last year, industry analystspredict the turnaround will be “shortlived.”Alphaliner, the Paris-based shippingconsultancy, reports that 19 of thetop 25 ocean carriers it surveyed earnedan estimated $14 billion in 2010, afterlosing $15 billion just the year before.“Container carriers’ margins recoveredstrongly in 2010 to a positive 7percent from a negative 16 percent in2009,” says Stephen Fletcher, Alphaliner’scommercial director. But analystsadd that margins in the Asia-EU tradehave softened, and that 2011 is likely tobe a much weaker year in general.Indeed, container rates have beensliding on all the major trading lanessince July 2010, with the exception ofa small “hiccough” last winter, as linercompanies tried to push for implementationof general rates increasesin a weakening market, say analysts atthe Baltic and International MaritimeCouncil (BIMCO) in Copenhagen.“The anticipated strong volumerebound following the Chinese LunarNew Year last February did not mate-58S October 2011 • Logistics Management

If you wantto keep up,you bettertake giantsteps.Through these uncertain times, we’restaying focused on billions of dollars insmart upgrades. Why? Like the oceancarriers ordering bigger ships and shippersbuilding giant distribution centers, we knowthat tomorrow’s success depends on biginvestments today. We’re not just aheadof other ports, we’re staying anenormousleap ahead.©2011Port of Long BeachThe future is BIG.www.polb.com/trade

Special Report: Top 30 Ocean CarriersA special supplement to logistics managementGraphic captionAsset-based carriers face new competitionThere’s an old joke still circulatingin the commercial maritimecommunity. It goes like this:“It’s easy to end up with a milliondollars by the time you retire from thisindustry. But first you have to invest10 million.”This is not necessarily the case fornon-asset-based middlemen, however.The Federal Maritime Commissionhad lifted the rate-tariff publicationrequirements for Non-Vessel-OperatingCommon Carriers (NVOCCs) earlier thisyear, thereby reducing regulatory burdensand bringing cost savings and flexibilityto the ocean cargo marketplace.The Shipping Act gives the Commissionauthority to grant exemptionsfrom its requirements if doing so willnot result in substantial reduction incompetition or detriment to commerce.According to comments filedwith the Commission, this actioncould save each of these businessesup to $200,000 per year.The final rule establishes aninstrument called a negotiated ratearrangement. Licensed NVOCCs whoenter into negotiated rate arrangementswith their customers will beexempted from the requirement ofpublishing their rates in tariffs if theymeet the following conditions:• NVOCCs would continue to publishrules tariffs containing terms andconditions governing shipments.• NVOCCs would be required toprovide those rules to the public freeof charge.• Rates charged by NVOCCs mustbe agreed to and memorialized inwriting by the date cargo is receivedfor shipment.• NVOCCs must retain documentationof the agreed rate for a periodof five years, and must make thatdocumentation available promptly tothe Commission upon request.“After a year of work and manyyears of debate, the Commission hasprovided thousands of dollars peryear in cost savings to these criticalU.S. supply chain businesses and thehundreds of thousands of exportersand importers they serve,” says FMCChairman Richard A. Lidinsky, Jr.—Patrick Burnson,Executive Editorrialize, and that resulted in continueddescending rates on most trading lanes,”says BIMCO’s Peter Sand.Oversupply in the main routes is thereason behind the weak freight rates. Theidle fleet of container ships now stands at84 vessels, with a total cargo capacity ofjust 185,000 twenty-foot equivalent units(TEUs), the lowest level since November2008. At the peak in January 2010, 1.5million TEUs were idle.“Severe overcapacity is poison toany freight market, as rates continueto decline even though volumes aregrowing fast…but not enough,” saysSand. “Cascading remains a part of thegame. It gives little comfort that freightrates on minor intra-Asian routes have60S October 2011 • Logistics Management

Special Report: Top 30 Ocean CarriersCompact scannersread dirty, damagedbar codesrequired. The scanners’ data handling capabilities execute a varieof configurable logic, outputdata filtering and sorting functions.SICK, 800-325-7425,A special supplement to logistics managementrecently gone up by 10 to 20 percent.”recession with both carrier profitability www.sickusa.com.and demandMeanwhile, on the supply side, scores of “mega figures recovering. But Drewry analysts raise the question:Have the carriers learned Wireless from their experience? remote controvessels” have been delivered into the Asia-Europetrade during 2011. BIMCO analysts say that spot “The fact that no major companies for stretch ‘went to wrappersthe wall’rates would not be returned to sustainable levels until still seems to have insulated the industry from the despairof 2009, and there is now n-Go the wire-feeling that perhapsThe Click-the Peak Season in the third quarter on main tradinglanes from Asia to Europe and the U.S. West Coast. the dark days did not happen,” less says remote Neil Dekker, editorof control the Drewry for Container“The fact that no major companies ‘went to the wall’ still seems to Forecaster. the supplier’sSimplehave insulated the industry from the In essence, Drewry observesstretch that wrap-its “back-to-nor-CLV650 despair and of 2009, CLV640 and compact there is bar Automationcode scanners use proprietary codenow the feeling that perhaps the dark days did not happen.”reconstruction algorithms and mal” pers operating enables conditionshigh-performance microprocessorsto read damaged and dirty the drivers biggest to carriers arefor fork the truck— Neil Dekker, editor, Drewry Container Forecaster market. “Perhapsbar codes. The CLV650 features place a pallet“To restore freight rates significantly over the comingquarter, idling of vessels ought to be considered ment technologies, an have market with share,” optics says Dekker. machine, “However, back the a few utopia feet away anhappiest with no long-term profitability as long as theyauto-focus and distance measure-load on theoption,” says Sand. “That is, however, not expected ideal for to applications of freight rate where stability space sought press by shippers a button seems to initiate a long wrappinhappen and that could jeopardize Peak Season is limited earningseven if solid consumer confidence is restored is required. and For and cost-effectivelyprofitability,” says Dekker. within reach of a lanyard, the sys-and way large off if depth carriers of abandon field their By eliminating short-lived prudence the need to stopreading high density codes, the tem gives operators increased prothe high unemployment figures start to come down.”CLV640 provides increased depth ductivity and flexibility in approaLondon-based Drewry Shipping Consultants of field when an external input —Patrick Burnson and placement. is Executive The Editor system of usesbelieves that the industry has emerged from the to global change the focus position is line-of-sight Logistics Managementtransmission and aCHiNAWe know all the best routes. Also serving250 other destinations worldwideAir/Ocean/Trucking/Import/ExportOnline instant quoting, booking, tracking 24/7Call 877-467-8601 • Fax 888-286-0772www.exfreight.comSTATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION1. Publication title: Logistics Management . 2. Publication No. USPS 801-860. 3. Filing date: September 14, 2011. 4. Issuefrequency: Monthly. 5. No. of issues published annually: 12. 6. Annual subscription price: US $119; CAN $149; MEX $149;FOR $259 7. Complete mailing address of known office of publication: Peerless Media, LLC , 111 Speen Street Ste 200, Framingham,MA 01701. 8. Complete mailing address of headquarters or general business office of publisher: Peerless Media LLC, a division ofEH Publishing, 111 Speen Street Ste 200, Framingham, MA 01701. 9. Full names and complete address of the Publisher, Editor andManaging Editor: Publisher, Brian Ceraolo, Editor, Michael Levans, Managing Editor, Sarah Petrie, Peerless Media, LLC , 111 SpeenStreet Ste 200, Framingham, MA 01701. 10. Owner: Peerless Media, LLC , Division of EH Publishing, 111 Speen Street Ste 200,Framingham, MA 01701. 11. Known bondholders, mortgagees and other security holdersowning or holding 1 percent or more of totalamount of bonds, mortgages or other securities: None. 12. Tax Status: Has not changed during preceding 12 months.13. Publication title: Logistics Management. 14. Issue date for circulation data: September 201115. Extent and nature of circulation: Average No. Copies Actual No. CopiesEach Issue During of Single IssuePreceding 12 Months Nearest Filing DateA. Total no. copies (net press run) 52,938 51,759B. Legitimate paid and/or requested distribution (by mail or outside the mail)1. Outside County paid/requested mail subscriptions stated on PS Form 3541 51,266 50,5832. In-County paid/requested mail subscriptions stated on PS Form 3541 None None3. Sales through dealers and carriers, street vendors, counter sales andother paid or requested distribution outside USPS 20 274. Requested copies distributed by other mail classes through the USPS None NoneC. Total paid and/or requested circulation 51,286 50,610D. Nonrequested distribution (by mail and outside the mail)1. Outside County nonrequested copies stated on PS Form 3541 681 7972. In-County nonrequested copies stated on PS Form 3541 None None3. Nonrequested copies distributed through the USPS by other classes of mail None None4. Nonrequested copies distributed outside the mail 267 100E. Total nonrequested distribution (sum of 15D 1, 2, and 3) 948 897F. Total distribution (sum of 15C and E) 52,234 51,507G. Copies not distributed 704 252H. Total (sum of 15F and G) 52,938 51,759I. Percent paid and/or requested circulation (15C divided by F times 100) 98.19% 98.26%16. Publication of Statement of Ownership: Publication required and will be printed in the October 2011 issue of this publication.17. I certify that all information furnished on this form is true and complete. I understand that anyone who furnishes false ormisleading information on this form or who omits material or information requested on the form may be subject to criminalsanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties).Charles Tanner (signed), Director of Audience Marketing , 9/14/11PPeerless Media Statement of Digital Circulation1. Publication Title: Logistics ManagementAverage No. Digital Copies No. Copies of SingleEach Issue During Issue PublishedPreceding 12 Months Nearest to Filing DatePrinted Circulation as reported on PS Form 3526, Line 15A 52,938 51,759Digital Circulation 18,910 19,561Total Circulation 71,848 71,320Charles Tanner (signed), Director of Audience Marketing , 9/14/1162S October 2011 • Logistics Management

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Evaluating and recognizing carrierperformance is critical for successBy John A. Gentle, DLPLogistics Management’s 28th Annual Quest for QualityAward winners were announced in the August editionof Logistics Management magazine. On October5th, Michael Levans, group editorial director for LMpresented the awards to the winning companies on thelast evening of CSCMP’s annual meeting in Philadelphia.Congratulations to the winners, and thanks toall of the shippers and receivers who took the time toselect the carriers and rank them based on their serviceperformance.Every time I read stories about recognizing carriersfor overall excellence I think about carriers that I heldin very high esteem, but traditionally didn’t make theQuest for Quality list or other recognition lists. Thereasons are numerous. Certainly the size of the carriermakes a difference, as well as what groups within thecompany measured the carriers. Then there are the criteriato be considered and how the scores are weighed.This article and its rankings are not about whetherthe winners deserved being best in class. Rather it’sabout the importance of the effort that your teamsshould be putting into the evaluation and recognitionof your carrier base. It is a well-known fact thatinspection brings opportunities for improvement, andrecognition is a vital impetus to excellence.Initially, I recall doing performance reviews bymyself that were focused on “service performance,”as this generated the highest degree of visibility inour company. Over time, and as the “quality process”emerged, it became clear that the internal customers ofthe transportation process were numerous and includedcustomer service; contract and rate departments; dispatchteams that tendered loads, handled turnbacks,expedited shipments, and rescheduled late deliveries;warehouses that loaded the trailers and needed toensure the safety of equipment and personnel on andaround the loading docks; freight payment and claimsteams; and finally the transportation management team.The challenge then became how to involve all ofthese teams. We needed to decide what each groupwanted to measure; how it would be measured; howJohn A. Gentle is president of John A. Gentle & Associates, LLC,a logistics consulting firm specializing in contract/relationship managementand regulatory compliance for shippers, carriers, brokers,and distribution centers. A recipient of several industry awards, hehas more than 35 years of experience in transportation and logisticsmanagement. He can be reached at jag@RelaTranShips.com.the parties would participate; the frequency of thereviews; where the reviews would be held; the weightingfor the final score; and how this would be presentedto the carriers.Suddenly this “carrier evaluation process” appearedto be a big project, and there were questions aboutthe overall value of doing performance reviews. Couldthe in-depth review be done only with quantitativemeasurable data? Or was there value in collectingsubjective feedback that could be open to bias andpersonality conflicts.In the end, all internal company teams willinglyparticipated, some with quantifiable information andothers with some simple assessments of whether ornot a carrier company was helpful or a hindrance.For example, questions were prepared to allowteams to rank carriers from 4 to 9 on how well theysolved process problems, responded to informationThe annual and public recognitionof carriers and their successesmust be a vital part of your carriermanagement program.requests, and provided quality information the firsttime. Teams suddenly found it easier to do bothquantitative and subjective evaluations and developa numeric performance profile for the carrier at eachplant and distribution center.In subsequent articles I’ll share information aboutwhat each of our groups measured and how weweighted the overall score. But, we quickly destroyeda commonly held view that a carrier that excels in onearea of the country operates with the same excellenceacross the country. That’s simply not true, and wepursued a program that rated and recognized carrierperformance regionally—or by plant and distributioncenter—and not nationally.The annual and public recognition of carriers andtheir successes must be a vital part of your carrier managementprogram. Not only does it drive consistentlyexceptional performance across all functional areas, butit also sends a clear signal about your company’s interestin investing in your carriers and the industry. Don’tlet a few budget dollars preclude measurement andrecognition. M64 Logistics Management WWW.LOGISTICSMGMT.COM | October 2011

Confirmed Speakers Include:DeveloPing flexibility & agilityin the cuRRent maRket PlaceGERRY SMITHSVP Global Supply ChainLenovoDeliveRing enD-to-enD suPPly chain visibility:fRom souRce to enD-consumeRMaRk VoLLRaTHWorldwide Director of Strategy & Systems - Global Supply ChainColgate Palmolive Companycosts without comPRomisingquality of seRvice in youR suPPly chainDaVID PaRSLEYSVP Supply Chain ManagementBrinker InternationalsuPPly chain tRansfoRmation:cReating customeR centRic suPPly chainSEan TRaInoRExecutive Director, Global Supply Chain & FulfillmentDellLead Sponsors:Supply Chain Excellence Rail /Intermodal: 3PLLogisitics ITEconomic DevelopmentOrganizationFor all delegate & sponsorship attendance inquiries, contact:Larry Allen, Marketing Manager • larry.allen@wtgevents.com • 1 416 214 1707Researched and Produced by:

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