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3PL AmericasTHE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 2011Impact of Panama CanalExpansion on 3PLsReinventing LogisticsOutsourcingwww.iwla.com

STORAGE SYSTEMSPush Back RackDrive-In RackStructural and Roll FormedRack Supported StructuresPallet Flow RackPick ModulesMezzaninesInnovative Solutionsfor Storage andMaterial HandlingSystemsPhone: 847-364-2400 Toll Free: 1-888-566-7826www.konstant.comSee how simple warehouse automation can be.Automation made simple.www.pas-americas.comA M E R I C A S

PUBLISHED FOR:International Warehouse LogisticsAssociationJoel Anderson, President & CEO2800 River Road, Suite 260Des Plaines, IL 60018 USATel: 847-813-4699Email: janderson@iwla.comManaging EditorDavid Long, IWLA CanadaCopyright © 2011, InternationalWarehouse Logistics Association(IWLA). All rights reserved. No partof this publication may be reproducedby any mechanical, photographic orelectronic process, nor may it be storedin a retrieval system, transmittedor otherwise copied (except thatmembers of IWLA may copy all orpart of this publication exclusively forpersonal use or use in the operationof that member’s business, butexcluding any publication) withoutprior written permission from IWLA.For permission, contact the publisher,J.M. Levi & Associates Ltd.Editorial CommitteeAnn Pompilio, SCI Group Inc.Bob Rose, Dominion Warehousing& DistributionRob Simmons, Systems LogicAssociate EditorDavid SparkmanEditorial CoordinatorsMarian McGuire, Kim WalkerSales RepresentativesBert Eastman, Cheryl EzinickiDesign and layoutPagecraft Computer ServicesPublisherJohn LeviJ.M. Levi & Associates Ltd.2200 Sherobee Road, Suite 404Mississauga, ON, Canada L5A 3Y3Tel: 905-270-6587, Fax: 905-848-8499Email: jlevi@primus.caCanada PostAgreement Number: 421285203 P L A m e r i c a sTHE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 2011Impact of Panama CanalExpansion on 3PLsReinventing LogisticsOutsourcingCover photo:Adeliepenguin/Dreamstime.com3PL AmericasTHE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 20114 IWLA’s Progress is Member-drivenBy Joel D. Anderson5 Big Plans for IWLA for the Coming YearBy Linda C. Hothem7 Why We Need to Reinvent Logistics OutsourcingBy Jim Eckler10 Food Safety Law Impacts Supply ChainBy Patrick O’Connor12 IWLA Members Make News at ProMATBy David Sparkman14 Barrett Distribution Centers Inc.: Growth StrategyTakes the Company to MemphisBy Kim Walker16 Are You Selling Yourself Short? Maybe Your 3PLContract is Preventing You from Moving Up the“Value-add” CurveBy Kate Vitasek and Astrid Uka19 What Impact will the Expansion of the PanamaCanal have on Supply Chains?By Curtis D. Spencer22 Uncovering the Hidden Liabilities of a TemporaryWorkforceBy Kerryann M. Haase and Brian P. Paul25 Top 10 Trends Driving Order FulfillmentBy David Zaleski28 Advertisers, Editorial and Advertising Disclaimers30 Be a Better Boss: Five Critical MindsetsBy Chip Scholz32 Quality Presentations Provide WarehouseExecutives with Expert EducationBy Camille Y. Goldenwww.iwla.com3PL Americas — Spring 2011 3

President’s messageIWLA’s Progressis Member-drivenJoel D. AndersonPresident and CEOInternational WarehouseLogistics AssociationWe are deeply committed toaccepting the leadership andmeeting the needs of our membersin everything we do.In recent years, it has become common for associations todeclare that they are “member-driven,” but at IWLA this is no cliché. Weare deeply committed to accepting the leadership and meeting the needs ofour members in everything we do. This year’s annual convention was theperfect depiction of this commitment in action.The 2011 convention was the most successful in recent memory, in termsof both participation and programming. While many members contributedenormously, a large part of the success can be credited to 2011-12 IWLAChairman Linda Hothem of Pacific American Group and Senior Advisor toMatson Global Distribution Services Inc., who, over the previous year, gavegenerously in terms of her energy, ideas and hard work as the association’svice chairman and chairman of the Convention Planning Committee.In building the convention, Linda found strong support from the AssociateMember/Member Advantage Committee, co-chaired by Brett Mears ofPalmer Logistics and Chris Oeschel of Zethcon Corporation. Thanks totheir efforts, the convention exhibitor experience was significantly enhanced.In addition, the AMMA Committee worked hard to develop a newcharter for the Member Advantage program that ensures it will bring realvalue to IWLA and its warehouse and supplier members.During the previous year, 2010-11 Chairman Gary Mayfield of KencoLogistic Services helped to raise IWLA’s profile in the public policy arena.Along with Government Affairs Committee Co-Chairs Mark DeFabis ofIntegrated Distribution Services and Doug Sibila of Peoples Services and theother committee members, Gary led IWLA into its role as the nationally andinternationally respected thought leader in logistics policy. Because of them,when legislators need input on logistics issues, they now turn first to IWLA.There are no better examples of the kind of unparalleled energy and commitmentour members bring than the accomplishments of our MembershipCommittee, led by Co-chairs Michael Bayley of SPExpress and Rob Doyleof Amware Logistics Services, Inc. I was in awe of how committee membersspearheaded a membership drive over this past year, which saw them take substantialtime away from their business commitments to recruit new members.Under Gary’s and Linda’s leadership, we also have laid the foundationfor the renewal of the Chemical Council and the creation of a major sustainabilityinitiative for the warehousing industry. In addition, the ExecutiveCommittee has overseen and driven forward an ongoing upgrading of theIWLA staff’s and the association’s business processes.In addition, our members’ leadership has strengthened the IWLA RailCouncil and Canadian Council, along with our California and other regionalactivities. You can play a major role in driving this progress by participatingin regional conferences and educational programs and by volunteeringto join association committees.We expect to accomplish even more in the future. Just as our membersexpect to see continuous improvement in every aspect of their operations,we know they fully expect to see the same at IWLA and, on behalf of thestaff, you have my assurance that we will not disappoint you.43PL Americas — Spring 2011

InnovationWhy We Need to ReinventLogistics OutsourcingBy Jim EcklerThe logistics outsourcing business has matured.In fact, it’s all grown up today. The exuberance of its youth haspassed, and the steady cadence of ongoing, continued service is now thenorm. The companies in this space are logistics services providers (LSP),which include third (and fourth) party logistics (3PL) providers.Reaching maturity may sound like good news to most of us, but, as withany good news, there is typically a tough grind ahead as well. Industries andbusinesses that mature need to immediately begin reinventing themselves. ForLSPs, that time is now due. Reinvention will require change, perhaps througha fundamental change in the business model. It will not be easy or comfortablefor some, but it will lead to a more vital and powerful service industry.We’ll tell you what and how to deal with this.First, the good news. Along with maturity comes understanding and respect.And that is what we have today. Unlike 20 years ago, when relativelyfew knew much about this business, most industry participants today knowan LSP when they see one and have a pretty good idea what they do and howto create value from the relationship. Most, in fact, have had direct involvementin one way or the other with an LSP. While not everyone may be perfectlyhappy with their LSP relationship, surveys do indicate that most derivereasonably good value from LSPs.As for the bad news, the industry needs to change. Upon reaching maturity,businesses must move on and introduce a new approach or a fundamentalnew service. Without this change and without these innovations, the alternativeis decay and decline. The time to change the LSP industry is now.Reinvention will require change,perhaps through a fundamentalchange in the business model.■ The Impact of MaturityWhat makes us believe that the LSP industry has achieved maturity? Oneclear indicator is the revenue trend for the past 14 years. While the publisheddata looks quite rosy – revenue increasing each year by a rate well above GDP– the underlying trend shows diminishing growth rates each year. The followingtwo charts, which apply specifically to 3PLs, demonstrate this. Figure 1shows 3PL revenue levels each year from 1996 to 2010. These statistics, whilenot published by a trade association or a government agency, are neverthelesswell-accepted within the industry. While the data is collected for 3PLs, itapplies equally to the broader group of businesses classed as LSPs, since 3PLsare the basis of the industry structure for all LSPs.Most organizations would be very pleased with the overall growth, with its10-percent compound annual growth rate (CAGR), shown above. However,when we look at the year-over-year growth rate and plot it, we find a disturbingtrend. Each year the annual growth rates are getting lower and lower. Forexample, industry revenue grew from $30.8B in 1996 to $34.2B in 1997,which amounts to an 11-percent annual growth rate. In 2002 and 2003, thecorresponding growth rates were only 9 percent and 8 percent, respectively.Rates in later years have been even lower. While there have been a few ‘up’3PL Americas — Spring 2011 7

years during this period, the trendline for this data shows a clear negativeslope, as presented in Figure 2.If this trend continues, the annualgrowth rate will eventually declineto zero and has the potential to turnnegative.Figure 1:Revenue Trend for North American 3PLs — 1996 to 2010Source: Armstrong & AssociatesFigure 2:North American 3PLs — Year-over-Year Revenue ChangeFigure 3: Business Life CycleThis reduction in growth ratesmay come as a surprise to manywho view the LSP business as a highgrowthbusiness. But any growthbusiness will follow a typical growthtrajectory through its life cycle. Ata certain point with any business,Source: Armstrong & Associates and Eckler AssociatesSource: Next Institutegrowth begins to level off and thendecline if it is not renewed. Figure 3shows the typical business life cycleand the point in the cycle – the optimumrenewal zone – when renewalmust be introduced to counteract thedecay of a maturing business.Prior to peaking, a business orindustry must go through this renewalprocess. If not, revenues willdrop and crises will likely prevail.A renewal may manifest itself as afundamental change in the businessmodel, a significant new product/service introduction, or a transformationalcost reduction that dramaticallyimproves the price point.Based on the data, the LSP industryis reaching its peak and has enteredthe optimum renewal zone. Thetime to begin renewal is now. TheLSP industry is at the point wheresuch a change is necessary. But whatchanges should we pursue and howwill the industry and clients react?One of the answers lies in the rate ofinnovation within the LSP industry,or the lack thereof.■ Innovation in theLogistics IndustryThe logistics services industry hasmany fine companies with managersdeeply committed to the successof their clients. However, when welook at the track record for innovationand change within the LSP industry,innovation in this industry isoccurring less than it should. Whileit may certainly appear as thoughthere have been improvements andnew services at LSPs, many of theseservices are those within the broadersupply chain field that any of the clientsof LSPs could have implementedthemselves. “True innovations”by LSPs are surprisingly limited andscarce. These are innovations thatare unique to LSPs and which wouldbe unavailable to their clients. Thislack of true innovation is a seriousindictment for an industry uponwhich so many large corporationshave grown to depend.When we look at the reasons whyinnovation is in short supply, we finda potential conflict within pricing83PL Americas — Spring 2011

Regulatory ChangesFood Safety Law ImpactsSupply ChainBy Patrick O’ConnorOn January 4, 2011, President Obama signed into law sweepingfood-safety legislation – the first major overhaul of the nation’sfood-safety system since the Great Depression. The Food Safety ModernizationAct will impact domestic “food facilities,” including warehouse-basedthird-party logistics providers (3PLs) that store food products, as well as foodimporters and foreign food manufacturers.While passage of the new food-safety law may have been greeted withenthusiasm at the Food and Drug Administration (FDA), the agency is keenlyaware of how much work it will require and the limited timeline for deliverablesoutlined in the statute. Many of these deliverables require new regulationsto be promulgated and new programs to be developed over the nextcouple of years. It is important to note that funding was not provided to FDAto implement the legislation, which is estimated to cost approximately $1.4billion in its first five years, including the cost of hiring 2,000 additional foodinspectors. With the new House Republican leadership vowing to shrink thefederal bureaucracy, funding for the new food-safety law is uncertain.The food-safety law builds on two statutes enacted over the last 10 years.■ Bioterrorism Preparedness and Response Act of 2002The Bioterrorism Preparedness and Response Act of 2002 requires theowner, operator or agent in charge of a domestic or foreign facility that manufactures/processes,packs, or holds food for human or animal consumption inthe U.S. to register with FDA. This includes a 3PL warehouse.The registration requirement pertains only to facilities that manufacture/process, pack or hold food, as defined in the regulation, for consumption inthe U.S. Examples of “food” include: dietary supplements and dietary ingredients;infant formula; beverages (including alcoholic beverages and bottledwater); fruits and vegetables; fish and seafood; dairy products and shell eggs;raw agricultural commodities for use as food or components of food; cannedand frozen foods; bakery goods, snack food and candy (including chewinggum); live food animals; and animal feeds and pet food.The Congressional intent of theReportable Food Registry is to helpFDA better protect public health.■ Food and Drug Administration Amendments Act of 2007Congress mandated that FDA establish a Reportable Food Registry (RFR)in Section 1005 of the FDA Amendments Act of 2007. The Congressionalintent of the Registry is to help FDA better protect public health by trackingpatterns of food and feed adulteration and targeting inspection resources. TheRegistry is an electronic portal to which industry must report when they haveinformation about a “reportable food.” A reportable food is an article of foodfor which there is a reasonable probability that the use of, or exposure to,such article of food will cause serious adverse health consequences or deathto humans.The law requires a “responsible party” to report. A responsible party is anyentity that submits registration information to FDA under the registration re-103PL Americas — Spring 2011

quirements of the Bioterrorism Act.Whether reporting is the responsibilityof the warehouse or the productowner is currently under review byFDA. In guidance, FDA describeswhen an instance of otherwise “reportablefood” does not need tobe reported to FDA. Specifically,the guidance document reiteratesthe statutory standard that a reportis not required if: the adulterationoriginated with the responsible party;the responsible party detected theadulteration prior to any transfer toanother person; and the responsibleparty corrected the adulteration ordestroyed the article of food.At issue is FDA’s current interpretationthat “transfer” occurs upontransfer of physical control ratherthan of ownership. The result of thisinterpretation means that the warehouse,not the product owner, mustreport to FDA under the law.The issue of whether or not an articleof food has been “transferred”from the customer to the 3PL warehouseis a significant issue for the3PL industry. Although the customerships product to a 3PL warehouseto be held until further direction, notransfer of legal title of the food hasoccurred. IWLA has recommendedthat FDA clarify in the guidancedocument that “transfer” occursupon change of ownership, not achange in physical possession orcontrol.This clarification of “transfer”would allow the customer of the3PL warehouse to correct or destroythe adulterated product through itscontractual arrangements, as governedby the Uniform CommercialCode, and thereby retain its exemptionfrom the filing of the reportablefood report. This clarificationis consistent with section 1005 ofPublic Law 110-85 (21 USC 350fnote) where Congress found that areliable mechanism to track patternsof adulteration in food would supportefforts by FDA to target limitedinspection resources to protect thepublic health. This clarification willeliminate the submission of unnecessaryor duplicative filings to theIWLA is working closely withFDA to ensure that the role andresponsibility of 3PL warehouses isaccurately reflected in regulations.Food Registry in situations wherethe owner of the product is ableto correct the defect or destroy theproduct, and further ensure the efficiencyof the reporting system. Ofcourse, this clarification would notabsolve the 3PL warehouse from responsibilityif it knowingly shippedan adulterated product.■ Food SafetyModernization ActProvisions of the new food-safetylaw applicable to third-party warehousesinclude:Registration of Food Facilities:Under current law, food facilities (includingwarehouse storage facilities)are subject to an initial registrationrequirement. The new law requiresthe registrations to be renewed biennially(every even-numbered year).Hazard Analysis and Risk-BasedPreventive Controls: A warehousethat stores food is required to:• Evaluate the hazards that could affectfood held by the warehouse;• Identify and implement preventivecontrols (such as sanitationprocedures or hygiene training) tosignificantly minimize or preventsuch hazards, and provide assurancesthat food products are notadulterated or misbranded;• Monitor the performance of thecontrols;• Maintain records of the monitoringon a routine basis.Importantly, FDA is authorizedto exempt or modify these requirementsif the warehouse is “solelyengaged in the storage of packagedfoods that are not exposed to theenvironment.”Inspections: FDA is required toidentify domestic 1) “high-risk” facilities,which will be required tobe inspected at least once in the fiveyears following passage of the newlaw; and 2) “non-high-risk” facilities,that will require inspection atleast once in seven years. Presumably,warehouses will be consideredto be non-high-risk facilities,although this provision will need tobe implemented by FDA.Fees: FDA is authorized to collectfees from each registered domesticfood facility to cover the costs ofinspection.Mandatory Recall Authority: Thenew law gives FDA mandatory recallauthority if the agency determinesthat there is a reasonable probabilitythat an article of food is adulteratedor misbranded, and the responsibleparty will not voluntarily recall thefood product. FDA is then empoweredto issue a mandatory recall orderto the responsible party to ceasedistribution and notify all parties inthe distribution chain to cease distribution.With regard to warehousebased3PLs, the law includes animportant qualifier. Section 423(b)(2)(A) states:“If an article of food covered bya recall order…has been distributedto a warehouse-based third-partylogistics provider without providingsuch provider sufficient informationto know or reasonably determine theprecise identity of the article of foodcovered by a recall order that is inits possession, the notice providedby the responsible party subject tothe order issued shall include suchinformation as is necessary for thewarehouse-based third-party logisticsprovider to identify the food.”This provision serves to protecta warehouse from being asked tocease distribution of a food productwithout being given sufficient informationto identify the precise itemof food. However, it does not relievethe warehouse from complying withthe mandatory recall requirements.It also likely will require the 3PLwarehouse to obtain recall liabilityinsurance.Inspection of Records: If FDAbelieves there is a reasonable prob-Continues on page 213PL Americas — Spring 2011 11

Products and TechnologyIWLA Members MakeNews at ProMATBy David SparkmanIWLA Members AnnounceTheir Latest Supply ChainSolutions at ProMAT 2011Datex Corp.’s FootPrint softwarehas created an environment ofcomplete inventory accountabilityfrom the time of arrival to the timeof departure.Dematic & Crown Equipmentannounced LaserTrucks+, the firstproduct resulting from their newalliance. It combines the Dematic’spicking and voice software suiteand automated guided vehicle (AGV)guidance technology, applied to aCrown PC 4500 Series rider pallettruck.Kiva’s approach to warehouseautomation uses hundreds of roboticdrive units that bring inventory onmobile shelves directly to workers,designed to allow easy and efficientaccess to all inventory items at alltimes.■ Wolverine Installs Datex FootPrint SoftwareDatex Corp. announced that Wolverine Warehousing & Distribution Limitedhas acquired Datex FootPrint warehouse management software.Datex said it developed the Microsoft .NET-based WMS to streamlinewarehouse operations while enhancing the user experience. It is designed toprovide an e-Portal using Microsoft Silverlight to offer an enriched user interfaceand the ability to view inventory and billing, as well as create customreports that can be exported to any required format.Datex FootPrint can capture billing events and automatically create invoiceson a set schedule. The company said the latest version, Datex FootPrint3.2, provides non-technical users with the ability to create customized reportswithout consulting developers or IT staff. A robust procurement module thatcan interface with sophisticated inventory-management systems has also beenadded and provides increased functionality for 3PLs, Datex noted.Wolverine provides 3PL and distribution services throughout Canada andthe U.S. from its warehouse operation in Windsor, Ontario. It offers 95,000square feet of heated warehouse space with food-grade warehousing, andpartner arrangements with trucking and courier services. In selecting its WMSsolution, WWD said it wanted real-time visibility, as well as seamless informationand data flow across its business units.In order to increase customer satisfaction and retention, WWD said itneeded accurate information and automated processes in order to reduce humanerror. WWD is now able to capture accessorial charges for value-addedwork performed for owners and track the total time spent on work for aparticular client, order or account.“FootPrint software has created an environment of complete inventoryaccountability from the time of arrival to the time of departure,” said JohnLaMantia, Wolverine’s executive director of administration. “We have advancedour position in the 3PL marketplace by being extremely responsiveto our customers’ needs. Our ability to heighten visibility of our customers’products by barcode and Web-portal interfacing allows our customer base theluxury of a real-time perpetual inventory.”For more information, visit www.datexcorp.com.■ Dematic Unveils RapidPick Fulfillmentand LaserTrucks+ SolutionDematic introduced RapidPick, a new high-capacity, goods-to-personorder-fulfillment system it said brings split-case items to an operator and allowspick rates of up to 1,000 items per hour.RapidPick consists of a highly engineered operator work station that rotatescontainers of items into and out of the station, enabling the operator toefficiently pick items into an order container. RapidPick is typically integratedwith an inventory staging buffer, such as Dematic Multishuttle, that storesand delivers the split-case items to the RapidPick work station for picking.123PL Americas — Spring 2011

“It’s all about efficiently presenting items to the pickerin an ergonomic environment, and in the desired sequence,thereby creating a high-performance process,” said BennyRokni, product development manager. “RapidPick offersan ideal way to assemble orders with extreme accuracy atthe fastest picking rates available.”Dematic said the operator interface screen providessimple instructions for the worker. Large fonts and coloricons indicate quantity to pick. An adjustable height platformis raised or lowered for the operator to allow for acomfortable and effective working position.The operator stays in one place while items are deliveredto the pick station in precise sequence: heavy itemsfirst, fragile items last, for lot control, by family group orin whatever sequence is required. The company said italso allows only one SKU to be presented to the operatorat a time, and the workstation accommodates totes andcartons of different sizes and facilitates picking directlyinto the shipping container.Operator travel time to a dedicated SKU pick face inthe warehouse and the need for slotting and re-slottingare omitted, Dematic said. It said that, with less than aone-second tote-exchange time, the operator does nothave to wait for a new SKU, and rush orders can beadded and prioritized by inserting at the top of the orderqueue.Dematic also said the workstation is designed forsustained productivity and employee comfort. In normaloperation, it is designed so that the operator doesn’t needto move his or her hands above the shoulder or extendarms beyond a comfortable reach. The platform can beadjusted to accommodate operators of various heights,and the operator screen adjusts for height and angle tominimize neck strain.Loads are automatically delivered to and removedfrom the workstation, eliminating the need for operatorsto lift or push cartons and totes, Dematic pointed out,noting that the ergonomic design and simple, icon-drivenoperator screens allow RapidPick stations to meet UniversalAccess guidelines.Dematic and Crown LaserTrucks+Dematic and Crown Equipment Corp. announced analliance to collaborate on research and development ofnew products, and introduced the first product resultingfrom the alliance, called LaserTrucks+.LaserTrucks+ is an integrated solution that combinesthe Dematic market-leading picking and voice softwaresuite and automated guided vehicle (AGV) guidancetechnology, applied to a Crown PC 4500 Series riderpallet truck that will increase case-picking productivityin the warehouse.“Our recent acquisition of HK Systems and its advancedAGV technology made this fully integrated,single-provider solution possible,” said David Berghorn,Dematic chief technology officer. “LaserTrucks+, the firstof our combined efforts, is an innovative and cost-effectivesolution specifically addressing efficient mixed-caseorder fulfillment.”Tim Quellhorst, senior vice president of Crown Equipment,added, “One of the most common themes we hearfrom our customers is a desire to utilize technology tomake their warehouses more productive. We believeemerging technologies will provide opportunities for ourcustomers who want to implement scalable elements ofmaterial-handling automation.”He added, “Our alliance with Dematic is another stepin this direction for Crown that helps us fill an existinggap in the global marketplace with a fully integratedpallet truck system for order picking. As some facilitiesmove toward automation, the LaserTrucks+ offeringfrom Dematic is a viable solution that leverages one ofour most technologically advanced lift trucks.”For more information, visit www.dematic.com.■ Acumen Chooses Kiva eCommerceFulfillment SystemKiva Systems announced that Acumen Holdings willimplement a single Kiva system to handle all inventorystorage and fulfillment for 20 individual Internet retailstores.Acumen Holdings currently op erates a number of specialtyonline stores, including outdoor ap parel (trailsedge.com), work wear (toughweld.com), nursing scrubs(scrubshopper.com) and baby gear (babyhabit.com), andit is already a distributor for more than 200 well-knownapparel brands, such as Timberland, Carhartt, Dickies,Fisher Price, Wrangler and Under Armour.Acumen’s 2011 expansion plans include 16 new onlinestores serving a range of diverse market niches. Thecompany said its goal is to offer the best selection andfastest delivery in each market niche, and its aggressivegrowth strategy requires both easy operational scalabilityand the ability to warehouse and fulfill a broad spectrumof different merchandise categories.“Kiva provides world-class eCommerce fulfillment operationsright out of the box,” said John James, CEO andco-founder of Acumen Holdings. “The Kiva warehouseautomationsolution is the only way we found that wouldContinues on page 24“YourReliableand ProvenPartner””www.fortstorage.comAirdrie AB • Saskatoon SK • Winnipeg MB • Guelph ON3PL Americas — Spring 2011 13

Company ProfileBarrett Distribution CentersInc.: Growth Strategy Takesthe Company to MemphisBy Kim WalkerTimothy Barrett, COO (left) andArthur Barrett, presidentBarrett Distribution Centers, a family-owned businessmarking its 70th year in business, also is celebrating spectaculargrowth that occurred in a single year. Of the 13 facilities it currently operates,six of them were added to its portfolio in 2010.After nearly doubling the number of facilities it owns or manages in oneyear, it’s not surprising that President Arthur Barrett describes his attitudetoward 2011 as “bullish” as well.The company’s customers “got off to a fantastic start,” he observed, andtheir success resulted in Barrett seeing first-quarter revenue exceeding its 2010fourth-quarter revenue. “This is something that has never happened before inthe 26 years I have been running the company,” Barrett noted. “The fourthquarter historically has been our busiest quarter, with at least 15 percent morevolume than the first quarter.”In addition, he said the company currently is exceeding its run-rate target,which was set 30 percent higher than the run rate achieved in late 2010, andhe doesn’t foresee it slowing down. While Barrett modestly says this is theresult of the country’s overall economic improvement, it also reflects the ontargetdecision-making by its management.Brothers Arthur and Tim Barrett, president and COO, respectively, of BarrettDistribution Centers, are the third generation to head the company. Theirgrandfather founded the company in 1941 in Lawrence, Mass., as a woolstorage business. A decade later, America’s wool business began moving tosouthern states and the company had to diversify its customer base.Today Barrett serves customers in the retail, consumer packaged goods,food and beverage, chemical and industrial, medical and pharmaceutical,and household appliances industries from facilities in Boston, New York,Baltimore and California.As of December 1, 2010, it expanded to Memphis, and the decision processbehind making that move offers a snapshot of the care and thought theBarretts continue to invest in leading their company’s expansion, as well asmanaging its day-to-day operations.Boasting a central geographic location, favorable real estate and laborOf the 13 facilities Barrett currentlyoperates, six of them were addedin 2010.143PL Americas — Spring 2011

costs, tax advantages, Foreign TradeZone designation and strong multimodaltransportation infrastructure,Memphis has become a prime inlandlogistics hub serving the entire country,embodied by the FedEx decisionto locate its headquarters and national“SuperHub” there.“Having a facility in this area wasa good strategic move for Barrett andone we had been looking to makefor a few years,” Arthur Barrettsaid. A motivating factor was thatone of Barrett’s important customersneeded the kind of 3PL services Barrettprovides in Memphis.Because of its FedEx “SuperHub”status, Memphis also is the perfectlocation for running an e-commerceoperation, a rapidly expanding segmentof the market. Barrett’s Memphisfacility is just a short distancefrom the FedEx facilities, and alsois located near Burlington NorthernSanta Fe’s new intermodal railyard.B a r r e t t a c q u i r e d t h e650,000-square-foot, fully-equippedfacility from Meritex and in so doingtook over a “high-performing teamand strong customer base,” ArthurBarrett observed. “We also liked thelocation, the rail capacity and therefrigerated space in the Meritex facility,which has allowed us to jumpstart our entry into the Memphismarket.”Because Barrett was not the firstpotential buyer interested in the facility,Meritex was well preparedfor the acquisition process, with allof the due-diligence documents andanalysis ready for review, allowingfor a swift transition to the new owner s h i p .B a r r e t t ’smanagementknowhowalsoe n s u r e da smoothoperationaltransitionsincet h e d e a lclosed.In addition to its 150 truck doors,the former Meritex facility includes27 rail doors dedicated to accommodatinglarge volume requirements.Barrett customers also benefit fromreciprocal switching agreements Barretthas with five Class I railroads:Norfolk Southern, BNSF, CanadianNational, Union Pacific and CSX.These agreements allow Barrett tokeep customers’ rail transportationcosts down, and these savings canbe considerable. A number of thecompany’s customers ship inboundproduct by rail to Barrett’s Memphisfacility, where it is consolidated forshipment to several of Walmart’sregional distribution centers.Barrett has initiated changes toimprove productivity at its newMemphis facility, building on thestrong foundation established bythe previous owner. “Meritex did aphenomenal job of recruiting and retainingtalented employees,” ArthurBarrett noted. “Our biggest changeswill come in the form of new technologyand new business.”New technological functionalitydesigned to handle more complicatedrequirements for existing – and new– customers, has been introducedthrough the installation of the SynapseWarehouse Management SystemfromZethcon,a systemalso usedby Barrettin its otherfacilities.B a r r e t tplans toimplementother innovationsin response to changing technologies,customer needs and an expandingcustomer base.Barrett also is embracing the opportunitiesavailable because Memphishas been designated a ForeignTrade Zone (FTZ) by the Departmentof Commerce. The new Barrettfacility operates within that zoneand under the FTZ’s rules. As aresult, the company’s customers canprofit from a host of advantages anFTZ offers, the most notable beinglower costs stemming from Customsduty exemptions, deferrals andeliminations.Although acquiring a large, sophisticatedwarehouse facility andintegrating it into an already existing3PL network is a far more complicatedproposition than simplyleasing a building, Barrett’s Memphisexperience has gone smoothlybecause of the company’s managementexperience and expertise.Arthur Barrett was elected Vice Chairman of IWLA inMarch for 2011–12. He also chairs IWLA’s ConventionPlanning Committee, which is organizing the 2012convention taking place in March 2012 in San Francisco.The convention theme will center on successionplanning, a hot topic in many quarters these days.Kim Walker is a staff writer with3PL Americas.3PL Americas — Spring 2011 15

Contract IssuesAre You Selling Yourself Short?Maybe Your 3PL Contract isPreventing You from Moving Upthe “Value-add” CurveBy Kate Vitasek and Astrid UkaKate VitasekAstrid Uka■ Redefining How to Win at OutsourcingProgressive companies are creating a next-generation outsourcing businessmodel, redefining what it means to win at outsourcing, according to Universityof Tennessee research. Those companies now define success as workingtogether with their suppliers and service providers to achieve mutuallyagreed-upondesired outcomes and improved economic benefits.We call these creative approaches “Vested Outsourcing,” because the companyand the service provider work together to identify and bring transformationalimprovements. Each party employs its core competencies to accomplishwhat each could not achieve on its own. Under a Vested Outsourcing arrangement,the company outsourcing and the service provider work together wheretheir interests are aligned – and where they receive tangible benefits, eitherthrough tangible or intangible incentives.In short, Vested Outsourcing moves beyond merely saying “partnership”and creates an economic alignment in which the companies have a vestedinterest in each other’s success through a carefully crafted pricing modelbased on achieving jointly established desired outcomes. Companies embarkingon a Vested Outsourcing arrangement consciously recognize that successdepends on the development of a business model that enables the parties tothrive – what we term, “What’s in it for We.” They move beyond viewingtheir 3PL as a “commodity” that only provides simple warehousing and distributionservices to being a true strategic arm of the business that helps solvedistribution and supply chain problems.The problem is that many companies are quick to say partnership – butthey are not contracting for a true partnership. We decided to evaluate theIWLA Standard Contract and see if it was holding back companies in howthey contract for 3PL services.If the beating heart of the agreementis that warehousing is a commodity,it is harder to move up the valuecurve with clients.■ Taking a Look at Today’s 3PL ContractsIn 1968, the American Warehouse Association created the “StandardContract Terms and Conditions for Merchandise Warehousemen.” In 1998,the Standard Contract sample was “revised and promulgated” by the InternationalWarehouse Logistics Association. The standard contract is availablefor free download.We took a look at the IWLA Standard Contract and reviewed some of thepricing templates commonly used by 3PLs. We specifically looked for how wellthe IWLA Standard Contract incorporates Vested Outsourcing’s five rules andenables more-strategic, value-added relationships. Overall, the IWLA StandardContract is very focused on warehousing services as being a commodity in163PL Americas — Spring 2011

nature. According to Joel Anderson,President and CEO of IWLA, theStandard Contract is intended to be“a document that states and preservesthe legal status of the warehouse.”Joel explains the nature of the originof the IWLA Standard Contract iswhat makes it very much transactionbased in nature.Here are some of the primaryweaknesses we found:Warehousing as a CommodityWhile the IWLA Standard contractis a straightforward and easyto-handledocument, it appears topromote the warehousing professionas a pure commodity. For companieswanting more-strategic relationships,we recommend that the buyingparty and 3PL develop a sharedvision that helps them focus on thebigger picture, rather than simplycommodities.A good example of this is Jaguarand Unipart. (Read more about thiscase study in the Winter 2011 issueof 3PL Americas). Together theCEOs of Jaguar and Unipart crafteda shared vision, which helpedboth parties guide their efforts anddecisions, ultimately helping themmove from 11th to the #1 spot in JDPower and Associates’ rankings forcustomer satisfaction.Don’t get us wrong: not every3PL arrangement should be a strategicor Vested Outsourcing deal. Butif the beating heart of the agreementis that warehousing is a commodity,it is harder to move up the valuecurve with clients.Clearly Defined and MeasurableOutcomesMetrics matter. If both companieswant mutual success, they need tobe able to clearly define and measuretheir performance against theirgoals. This is usually done via jointlydeveloped operating metrics, KPIsand SLAs. In addition, the performance-managementprocess shouldbe documented within the agreement;this can include dashboards, metricsreports and root-cause analysis. TheIWLA Standard Contract does referto “normal inventory reporting”Vested Outsourcing moves beyondmerely saying “partnership” andcreates an economic alignment…in Section 8, but does not provideany further details. Adding clarityon those deliverables will alwayshelp set the right expectations. Howwould you otherwise define whetherthe deal is successful or not?Short-Term FocusThe IWLA Standard Contractdoes not openly promote long-termarrangements. In fact, the standardtermination clause is quite brief andone sided in favor of the 3PL.“The Warehouse may, upon writtennotice of not less than 30 days tothe Depositor and any other personknown by the Warehouse to claiman interest in the Goods, require theremoval of any Goods. Such noticeshall be given to the last knownplace of business of the person to benotified. If Goods are not removedbefore the end of the notice period,the Warehouse may sell them in accordancewith applicable law.”Vested Outsourcing advocatesthat organizations that “say” theywant a more-strategic relationshipmake a commitment to that relationship.One of the major flaws with a30-day termination-for-convenienceclause is that it stifles innovationand investment in customer-specificprocess improvement and efficiencies.Why would a 3PL invest incustomer-specific improvements ifthey risked losing the work for noreason? In addition, if they do makeinvestments that drive innovations,the buying company can take theirideas and bid it out. What 3PL wantsto share their best secrets if they willjust go to bid?We recommend that companiesthat want to create a more-strategicrelationship replace the standard30-day termination-for-convenienceclause with a more-extensive exitmanagementplan that includes formaloff-ramps for both parties. Theexit-management plan should alsoinclude an exit-transition plan. TheIWLA Standard Contract does nothave any of those elements.Transaction-Based PricingThe IWLA Standard Contracttemplate does not include a specificpricing matrix; however, it doesprovide definitions of services thatreflect a transaction-based priceapproach (see Section 4 – StoragePeriod and Charges). Many of the3PL agreements we have reviewedinclude a provision for a long listof accessorial services in the 3PLenvironment; they most commonlyinclude rate cards with standardizedtransactions like will-call orders,rush orders. pallet costs, cancellationsand other charges like hourlyrates for forklift drivers.Transaction-based pricing createsa perverse incentive for 3PLs. Themore transactions that occur, themore revenue the 3PL makes. Thisis in direct conflict with what mostbuying companies want: eliminationof non-value-added transactions.Transaction-based pricing is greatif you are buying a commodity. Butfor more-strategic relationships – especiallythose where there is mutualdependency and customer-specificinvestments – Vested Outsourcingrecommends that companies jointlydevelop a pricing model and notjust fill prices into a predefined template.Using a pricing model can helpthe companies determine fair prices,and allocate risk and rewards properly.Pricing models should clearlyaddress non-controllables that canhave a negative impact on a 3PL’sprofit. The rationale? A 3PL that hasto bear the risk of non-controllablesis forced to price high. Our recommendationis for the buying companyto absorb these risks, becausethey will not pay a risk premium.We also encourage companies toadd incentives to their agreements.This new dynamic is difficult to masterfor any organization but hasshown – when done right – big paybacksfor the partners. IncentivesContinues on page 293PL Americas — Spring 2011 17

The expansion of the Canal will allow containerships carrying up to 12,000 TEUs to transit the Canalwhen the project is completed.

Shipping EvolutionWhat Impact will the Expansionof the Panama Canal haveon Supply Chains?By Curtis D. SpencerMuch is being said about the 100-year anniversary of thePanama Canal and the fact that, in 2014, when that event is to occur,the Canal will be expanded to allow ultra-large ships to cross the Isthmus ofPanama. Today, vessels that transit the Canal carry only up to 4,350 twentyfootequivalent units, or TEUs. (Container-ship capacity is measured by thenumber of TEUs that the ship can carry.) The expansion of the Canal willallow container ships carrying up to 12,000 TEUs to transit the Canal whenthe project is completed.Such ultra-large container ships require deeper water and must call atports where there are cranes on the berths that can reach across the ship tolift the outboard containers, which are 21 rows away. These big ships providea higher level of efficiency than smaller ships, but create new challenges forsupply chain practitioners to overcome. Ultra-large ships need to call at portlocations that have an established and balanced infrastructure system that canmanage the scale of discharge presented by the new load factors.To accommodate the big ships, ports need to have, in addition to extradeepwater, adequate air draft to and from the terminals and bridges that arehigh enough to allow the vessels under them. Port facilities also need to haveadequate capacity and efficiencies to manage the discharge and loading in amanner that does not keep the ship at the dock for many days. Most important,ports need to have a mature infrastructure in place that will supportmoving larger volumes of containers out of their gates, either by truck or byrail. The need for balanced infrastructure, along with the costs associatedwith dredging, raising bridges, and rebuilding cranes and wharves, will have asignificant impact on how goods will be routed when the ocean carriers beginto deploy larger ships to new ports.In the U.S., the gateway for containerized cargo originating in the Far Easthas historically been through the western load centers at Los Angeles, LongBeach, Oakland, Seattle and Tacoma.Recently, Canada’s ports at Vancouver and Prince Rupert have changedfreight routing to provide cargo owners with alternative considerations interms of both cost and speed. Over the past 10 years, though, there has beensome transition in routing to increase traffic through the Suez Canal (whichdoes not have a water-depth limitation for today’s ships) and the Panama Canal(which is limited in draft and the length of the locks) to East Coast ports.Freight that arrived on the western seaboard historically used train serviceto accomplish delivery to users in the population centers east of Chicago orDallas/Fort Worth.The increase in freight shipments to East Coast ports has taken place tomore directly serve the large portion of the consuming population of the U.S.that is located within a few hundred miles of the eastern seaboard. East Coastports, many with limitations in water depth or other infrastructure elements,3PL Americas — Spring 2011 19

Container ship passing through the locks in the Panama Canal.are seeking solutions so that theycan participate in handling the largestships when the Panama Canal isfinally expanded.■ Impact of the ExpandedPanama Canal on SupplyChainsMany believe that the transitionto larger ships will not have an immediateimpact on East Coast ports.Several ports now receive port rotationsthat include 8,000-TEU vessels.However, in some ports theseships cannot make calls without dischargingmany TEUs at a previousport call first. In other ports, carriersare severely limited by the amount ofcargo that can be loaded when makingthe port calls.There is significant evidence thatthe ocean carriers will utilize theirlargest ships on lanes where theyhave the greatest density. Asia-Europe, for example, will see animmediate benefit from the deploymentof ultra-large ships. It is notlikely that the carriers will put ultra-largeships on rotations wherethey cannot load the ships to thefullest and heaviest capacity. Therefore,ports or regions that cannotsupport these ships will not be consideredfor service.However, as the ultra-large shipsare put into service, the current largeships will cascade to routes that areless dense to support linking origindestinationports where adequateload density exists. The efficienciesof using a larger ship, making fewerport calls and loading a balance ofimports and exports, will have a significantimpact on ports located onthe eastern seaboard. But the changeoutsourcing from page 9long-term relationship perspectiveand a greater willingness to acceptmanageable risks – which can be thestart of the reinvention of logisticsoutsourcing.Jim Eckler is President of EcklerAssociates, a strategic advisory firmthat assists organizations to achievehigher performance in outsourcing.Jim is one of North America’s leadingexperts in business outsourcing,with a specific focus on supply chainmanagement. His background includesover 35 years of experience inor transition from the current classof ships to larger ships will almostcertainly be a gradual one. Someof the largest U.S. retailers projectthat there is potential for only a10 percent shift in cargo unloadedin West Coast ports to East Coastports following the expansion of theCanal. We believe that much of thisshift has already happened, and that2014 will register only a small rebalancingof 2 percent to 5 percent.In terms of cargo classification,there are two distinct groups of cargo:discretionary cargo and timesensitivecargo.• Discretionary cargo is movedfrom origin to destination and seeksthe route with the lowest door-todoorcost associated with the entiresupply chain route. This freight isnot sensitive to time and moves at thediscretion of the buyer or seller, routedalways in favor of lower rate overpredictable-delivery requirements.• Time-sensitive cargo seeks firsta predictable delivery schedule;normally this cargo is related to aproduction or manufacturing supplychain. Rates are important, butpredictability in delivery is a primaryconsideration, and routes areselected where this requirement canbe accommodated.Seasonality, peak shipping, containeravailability, first port call atdestination and inland transportationare all considerations for bothgroups of shippers. Shippers andbuyers shift routing, port selection,the supply chain management field.For 17 years, Jim held senior executiveroles in operating companies,most recently for 14 years as Presidentand CEO of SCI Group Inc.,a leading outsourcing services company,providing logistics services formajor technology, healthcare, andretail companies such as Bell Canada,Rogers Communications, Siemens,Amazon, Lowes, and Xerox.He may be contacted at jim.eckler@ecklerassociates.com. A version ofthis article was originally publishedin Ackerman’s Warehousing Forum,Fall 2010.203PL Americas — Spring 2011

and even origin or destination pointsin order to achieve their inventoryrequirements. Supply chains are dynamic,and control over the custodianswho physically move the cargobetween nodes or points in the supplychain can be “adjusted” to favorrouting or timing considerationswhen necessary.The reality for shippers or buyersof cargo services is that the PanamaCanal will likely not have an immediateimpact on cargo routingor rates following the expansion ofthe Canal. Rather, the transition tolarger ships will be controlled by thecarrier’s ability to deploy an efficientstring of ships between fewer portsof call, at both origin and destinationpoints. Lacking this density,some larger ships will move into therotation, but these rotations will beto select ports where infrastructurewill support the increased volumesand the discharging vessel.Only those ports that can supportexpanding, deepening and wideningto accommodate bigger ships,along with the required land-sidefacility enhancements such as widerspancranes, more rail loading spaceand efficient terminals to efficientlymove goods from ship to dock andout the gate, will be the recipientsof the ultra-large vessels transitingthe Canal.Ports and cargo owners who canbenefit from using larger ships willneed to see competition from multiplecarriers before significant ratebenefits will accrue to the users.The carriers will deploy the largestpractical ships to routes in an effortto balance loads. As these ships providean economy of scale, in termsof load factors, they will have adramatic operating impact. Someof the issues currently facing carriersare the increasingly high cost ofbunker fuel, the trend toward slowsteaming, continued economic instabilityand ever-changing regulatoryuncertainty.In reality, for the next severalyears, the expansion of the PanamaCanal will probably have little impacton shippers or buyers in theBarge equipped to drill holes in bedrock underwater and place dynamite;used to widen the Gaillard Cut as part of the Panama Canal expansion.U.S. Only when infrastructure systemsare mature enough at key portson the eastern seaboard and adequatedensity is available to thecarrier could there be a real impacton cargo owners or their logisticsfood safety from page 11ability that the use of or exposure toa food product will cause serious adversehealth consequences or death,FDA officers are authorized to inspectand copy all records relatedto the food product or related foodproducts upon showing their credentialsand written notice. The authorityto inspect the records applies toany facility that manufactures, processes,packs, distributes, receives,holds or imports food products.m m mImplementation of the food-safetylaw is underway. In March, an FDAteam visited an IWLA-member facilityin Baltimore. FDA was invited byIWLA and the member company totour the warehouse and to engage ina practical discussion of the role of3PL warehouses in the food supplychain.In early April, FDA fulfilled itsfirst requirement established by thenew law by developing a consumer-service providers.Curtis D. Spencer is President ofIMS Worldwide Inc.Aerial photo credit:Yanc/Dreamstime.comtargeted website that eases searchesfor information on food recalls, withthe data displayed in a table fashion,as opposed to a scroll-down format.The new website provides informationfrom news releases, displayingproduct brand names, reasons forthe recall and other data. FDA choseto use news releases, because thosedocuments include the most up-todateinformation.There is no question that the newfood-safety law will redefine therole and responsibilities of the 3PLwarehouse in the food supply chain.3PL warehouses will be challengedto find solutions, as the responsibilitiesprescribed by federal regulationswill at times conflict with commercialrelationships between the 3PLwarehouse and the product owner.Patrick O’Connor is President ofKent & O’Connor, Incorp. andWashington Representative forIWLA.3PL Americas — Spring 2011 21

Human ResourcesUncovering the HiddenLiabilities of a TemporaryWorkforceBy Kerryann M. Haase and Brian P. PaulAs the economy slowly begins to recover, many 3PLs are increasingtheir temporary workforce to meet customer demands, limitcosts, and achieve a perceived increase in workforce flexibility. 3PLs are notalone in this decision. Since August 2009, temporary staffing agencies haveadded more than half a million temporary workers. In March 2011 alone,temporary agencies hired 29,000 new temporary workers. While most 3PLsare aware of the advantages to utilizing a temporary workforce, many areunaware of the hidden liabilities that are associated with a temporary workforce.Here are the top five hidden liability questions 3PLs should be asking:Kerryann HaaseBrian PaulSince August 2009, temporarystaffing agencies have addedmore than half a million temporaryworkers.1. Can 3PLs Be Liable For Removing or ReassigningTemporary Employees?Yes, if the 3PL is a joint employer. The majority of 3PLs do not realize thatthey create liability exposure when requesting that a temporary worker beremoved from their workplace or reassigned to another employer. If a courtfinds a 3PL to be a “joint employer”, then the 3PL can be liable for discriminatory,retaliatory or wrongful termination based on a removal or reassignmentof temporary employees.In rare circumstances, a 3PL can avoid a court finding that it is a “joint employer.”While courts use a number of different tests to determine if a 3PL is ajoint employer, these five factors generally are considered: (1) the extent of the3PL’s control and supervision over the worker, including directions on schedulingand performance of work, (2) the kind of occupation and nature of skillrequired, including whether skills are obtained in the workplace, (3) responsibilityfor the costs of operation, such as equipment, supplies, fees, licenses,workplace, and maintenance of operations, (4) method and form of paymentand benefits, and (5) length of job commitment and/or expectations. Of thesefactors, the amount of control exerted by the 3PL is the most important.If the 3PL exercises day-to-day control over the temporary employees, supervisesthe temporary employees, disciplines the temporary employees, or thetemporary employees work side-by-side with the regular employees performingthe same or similar job functions, then the 3PL almost certainly will beconsidered a joint employer. Moreover, if the 3PL has a temporary employeeworking for more than six months, it is likely that the 3PL is a joint employerof that temporary employee. If the 3PL is a joint employer, it can be liable forretaliating against or discriminating against its temporary employees.2. Are 3PL Temporary Employees Entitled to Benefits?Possibly. In the 1990s, Microsoft utilized a number of temporary employeesto write computer programming code. The temporary employees weretold when they were placed at Microsoft that they were not eligible for benefits.The court held that Microsoft was a “joint employer” of the temporary223PL Americas — Spring 2011

employees and they, therefore, wereentitled to the Microsoft’s benefits ifthey otherwise met the benefit plan’sdefinition of an eligible employee,which was based primarily on numberof hours worked.3. Does a 3PL Have toProvide a ReasonableAccommodation forDisabled TemporaryEmployees?Yes, if the 3PL is a joint employer.The Americans with Disabilities Act(“ADA”) requires that the staffingagency and the 3PL work together toprovide a reasonable accommodationfor temporary employees whohave a disability. For example, ifthe 3PL has a temporary employeethat is injured and cannot lift morethan 30 pounds, it is likely that theemployee is disabled and the 3PLmust accommodate the employee’srestriction, including, if necessary,having another temporary employeehelp with the disabled temporaryemployee’s lifting job duties. Thestaffing agency and the 3PL are expectedto split the cost of any reasonableaccommodation.4. Does a 3PL Have toReturn a TemporaryEmployee to Work afterFMLA Leave?Yes, if the 3PL is a joint employer.The Family and Medical Leave Act(“FMLA”) is the federal law thatrequires that employees receive 12weeks of unpaid leave for a serioushealth condition or other qualifyingcircumstances. Under the FMLA,only the “primary employer” is responsiblefor administering leaveand returning the employee to work.A “primary employer” is the employerthat has the authority andresponsibility to hire or fire, assignor place the employee, and providepay and benefits. In most cases, thestaffing agency will be the primaryemployer, but not in all cases.The “secondary employer,” generallythe 3PL, is responsible foraccepting a temporary employee returningfrom FMLA leave if the 3PLhas continued its relationship withthe staffing agency and the agencychooses to return the employee tothat job. If the 3PL directs the staffingagency not to return temporaryemployees to the workplace afterFMLA leave, the 3PL likely will beliable under the FMLA.5. Can a Union Organizea Bargaining Unit thatIncludes Both a 3PL’sTemporary Employeesand Regular Employees?No, not yet. Most 3PLs know thattemporary employees can be a sourceof union organizing activity, but fewconsider the possibility that temporaryemployees could be allowed toorganize with the regular workforce.For a brief period of time, unionswere able to organize a bargainingunit that consisted of both regularemployees and temporary employees.Under the newly appointed NationalLabor Relations Board (“NLRB”),that time may come again.In 2001, the Clinton-appointedNLRB held that temporary workersshould be included in the union’s existingbargaining unit and thereforecovered by provisions of the unioncontract (Tree of Life, Inc. d/b/aGourmet Award Foods, 336 NLRBNo. 77 (2001)). Thus, a union couldorganize an entire workforce by relyingon the votes of the temporaryworkers, even where a majority ofthe regular employees did not wantto be represented by a union.In 2004, the Bush-appointedNLRB overruled Tree of Life, holdinginstead that temporary employeeswho were jointly employed by anemployer and staffing agency cannotbe made part of the same bargainingunit without the consent of bothemployers (H.S. Care L.L.C., 343NLRB No. 76 (2004)).With the apparent death of theEmployee Free Choice Act, unionsare hoping that reform will comethrough the Obama-appointedNLRB. The NLRB has not overturnedH.S. Care, but in December2010, NLRB issued a decisionallowing employees who worked“sporadically” without a set expectationof continued employment toorganize (Kansas City RepertoryTheatre, Inc., 356 NLRB No. 28(2010)). This decision may be thefirst hint that the Obama-appointedNLRB is willing to consider overturningTree of Life and once againallowing temporary employees to3PL Americas — Spring 2011 23

3PLs who choose to take advantage of these benefitsmust take steps to address and limit the hidden liabilitiesassociated with a temporary workforce.organize with regular employees.If Tree of Life is overruled, would the 3PL’s workforcebe vulnerable to union organizing? If a union offeredyour temporary employees benefits, increased wages andjob protection, how many would not vote for the union?Would the 3PL have enough regular workers who wouldvote against the union to overcome the temporary workers’vote?ConclusionA temporary workforce offers many benefits to 3PLs,particularly in the current economy. 3PLs who chooseto take advantage of these benefits must take steps toaddress and limit the hidden liabilities associated witha temporary workforce. The first step is recognizing thehidden liabilities. The second step is addressing thoseliabilities in the 3PL’s contract with the staffing agency.The third step is training supervisors to be aware of thehidden liabilities and to take appropriate actions whenfaced with a temporary employee who needs to be replaced,to be removed, an accommodation, or FMLAHKMB HUB InternationalHUB International is Canada’s largest insurancebroker. HKMB HUB is one of HUB’s large regionaloffices.EXPERIENCEHKMB HUB has extensive experience in thetransportation and logistics industry. We understandyour business and can provide alternatives that meetyour companyʼs requirements.LEVERAGEOur size gives us leverage in the insurance marketso we can do a better job of advocating our clientsʼinterests.RESPONSIVENESSWe are nimble on our feet so we can respond quicklyon critical issues and keep you moving in a fastpacedmarket.leave. Of course, a 3PL can avoid all of these steps by takingextreme measures to ensure that it is not considered a“joint employer.” At Michael Best, we have helped 3PLswith each of these steps and we can help you.Kerryann M. Haase and Brian P. Paul are Attorneys atLaw in the firm of Michael Best & Friedrich LLP inChicago, IL. The material appearing in this article isfor informational purposes only and is not legal advice.Transmission of this information is not intended to create,and receipt does not constitute, an attorney-clientrelationship.prom at from page 13enable us to build our company quickly, yet preserve theflexibility we need for an unpredictable future. It speedsour transformation from an emerging player into a leadingInternet retailer.”Kiva’s approach to warehouse automation uses hundredsof robotic drive units that bring inventory on mobileshelves directly to workers, designed to allow easyand efficient access to all inventory items at all times.Unlike traditional automation, such as conveyor,carousel and AS/RS, Kiva said its system can handleproducts of all shapes and sizes, and automatically bringsproducts to operators exactly when needed. The companydescribed it as a complete order-fulfillment solution thatencompasses inventory control, forward replenishment,picking, packing, shipping sortation, finishing and qualityassurance to simultaneously improve distributioncenterproductivity, speed, accuracy and flexibility.“Acumen Holdings understands the promise of the‘long tail’ eCommerce business model and has developedan innovative strategy for profitable, rapid growth,”said Amy Villeneuve, Kiva’s president. “By aggregatingoperations for 20 distinct online shopping stores into asingle Kiva fulfillment center, Acumen will quickly andefficiently develop the scale advantage to be a categorykiller in each of these underserved market niches.”For more information, visit www.kivasystems.com.David Sparkman is the Director of Media & IndustryRelations for the International Warehouse Logistics Associationand associate editor of 3PL Americas.HKMB HUB is an Associate Member of IWLAand counts several IWLA members as clientsTransportation & Logistics PracticeMichael Gilles/Sue CharbonneauToronto, Ontario416.597.0008 • 1.800.232-2024www.hkmb.com • www.hubinternational.com®TORONTOVANCOUVERwww.mckennalogistics.ca1-800-561-4997243PL Americas — Spring 2011

Inventory EfficiencyTop 10 Trends DrivingOrder FulfillmentBy David ZaleskiWhat is driving the design of order-fulfillment systems today?While an analysis of an operation’s activity profile (for example, ordersper day, daily unit volume and lines per order) points to the appropriateorder-fulfillment-system design, there are other issues that will also have aninfluence on the process and system design. Here is an overview of the issuesand trends that impact the order-fulfillment process in the warehouse anddistribution center today:1. The Impact of LaborLabor-force issues include: employee turnover, injuries, absenteeism,safety, ergonomic conditions, productivity and the increasing influence ofgovernment regulation. The sum of these issues is causing distribution operationsto rethink the order-fulfillment process and incorporate new methodsand designs.To advance worker productivity and ergonomics while improving theworker experience, more distribution operations are implementing real-time,paperless picking systems. For example, some distribution operations blendvoice- and light-directed technology to maximize the efficiency and accuracyof their workers. With this design, a team of order selectors use a voicedirectedsystem to pre-pick SKUs required for customer orders. Once picked,a conveyor network delivers the SKUs to a “put-to-order” module. Once theSKUs arrive at the module, a light-directed system indicates which SKUs areto be “put” to each order container.Order-fulfillment-system designs that incorporate the “goods-to-the-person”principle allow for improved ergonomics, since the items to be pickedcome to the worker (worker stays in one place) and are presented at anergonomic height, requiring less lifting and bending. Also, the goods-to-thepersonconfiguration, which typically utilizes high-density storage technologylike an automatic storage and retrieval system (ASRS), reduces the cube spacerequired for storing product, while increasing inventory accuracy. When thegoods-to-the-person configuration is utilized for freezer/cooler applications,workers are kept out of the harsh environment, thus improving the workerexperience, reducing turnover and increasing productivity.An overview of the issues and trendsthat impact the order-fulfillmentprocess in the warehouse anddistribution center today2. InventoryThe top inventory issues affecting order-fulfillment design include: SKUproliferation and slow-moving inventory. Slow-moving items can take up alotof space in the distribution center; most operations dedicate a pick face foreach slow-moving SKU.One solution for accommodating more SKUs and slow-moving inventoryis the dynamic-pick module. In a typical application, thousands of SKUs arecontained in a single-aisle, miniload ASRS (approximately 20 levels high).Dynamic-pick faces on the outside of the rack structure on the first level areused by order pickers to build orders. This design reduces the distance walked3PL Americas — Spring 2011 25

etween picks, reduces order-fulfillmenttime, and increases workerproductivity; only the SKUs requiredfor order fulfillment are placed inthe first level by the miniload device.A dedicated pick face is eliminated;any SKU in the ASRS can be presentedto the worker.3. Customer Order ProfileThe average customer-order sizecontinues to decline, while customerorders need to be processedwith more frequency. This createsthe need to ship less-than-palletquantities.To accommodate this trend, fulfillmentoperations can use techniquessuch as “negative picking”and “layer picking.” A negative pickoccurs when cases are removed froma pallet in order to create a palletload containing the appropriatenumber of cases required. Layerpicking is a method of building amixed pallet load with a differentSKU in each layer.Another method used to accommodatethe growth in smaller ordersizes is batch-pick carts. Batch-pickcarts (accommodating multiple-ordercontainers) and voice-directedtechnology combine to efficientlybatch pick discrete orders while improvingorder processing speed andorder accuracy.4. Customer-Friendly OrderBuildingThe need to reduce the time andincrease the efficiency of the unloadprocess at the load destination, andimprove the efficiency of replenishingshelves within stores, is affectingthe way orders are processed. Forexample, some retailers have implementedorder-fulfillment systemsthat build pallet loads by combiningSKUs into family groups. Other retailersbuild pallet loads that reflectthe retail store planogram for easyshelf restocking. Sequence-appropriatepick paths, combined withstrategic slotting and voice-directedpicking instructions, allow the buildup of customer-friendly mixed pallets.Mixed-SKU pallet building canalso be achieved by case picking (ina strategic sequence) to a conveyingand sorting system, followedby manual palletizing at the end ofeach sort lane. If more automationis appropriate, robotic mixed-palletbuilding can be utilized.5. Energy ManagementOperators of distribution centers,warehouses and production operationsare learning that “green” initiativesnot only are good for theenvironment, but can also save money.Adding more pressure to this scenariois the prediction that energy costs willcontinue to rise in the future.The “green” money is created primarilyin two areas: energy managementand rebates. By reducing theenergy required to run your facility,your operational costs go down; addto that an annual rebate check fromthe local power company and you’vegot real money. For example, onedistribution center that upgraded itsconveyor-system controls and addeda new, energy-saving conveyor systemreceived a rebate for $40,000from its electric-power provider.In operations that utilize mechanizedtechnology such as conveyingand sorting systems, there are opportunitiesto reduce the amountof energy required. Conveying andsorting systems are typically turnedon at the beginning of the day andrun full speed until they’re turned offat the end of the day. However, manyoperations do not have high-rate materialflow throughout the shift. So,why not design the control system tomatch energy usage with the spikes inthroughput? With “run on demand”energy management, you can.Package conveying and sortingtechnology can be designed to automaticallyslow down and operatein slow speed during periods of lowcarton-flow activity. Control systemsmonitor activity on the systemand slow down or speed up to meetthroughput demands and, therefore,use only enough power to do the jobrequired. Operating at slower speedsmeans reduced energy consumption,as well as reduced wear and tear onequipment, and, therefore, increasesthe life of the system while reducingmaintenance costs. Furthermore,when there is no carton flow for apre-set period of time, control systemsdetect the lack of activity andcan turn off sections of conveyorwhere there is no carton flow.6. Value-Added ServicesWe often think of the warehouseand distribution center as an orderfulfillmentmachine, but, increasingly,it is becoming a light assemblyoperation. More value-added servicesare required just before items263PL Americas — Spring 2011

ship. Supply chain strategies suchas postponement are driving thistrend. By performing a final assemblyoperation in the warehouse, acomputer-printer manufacturer, forexample, reduced inventory levelsand the total number of stock-keepingunits required. A supplier of logomerchandise applies the requiredlogo at the time of order fulfillmentto reduce inventory and the numberof SKUs in the warehouse.Configuring the product for thecustomer at the last moment beforeshipment affects the order-fulfillmentsystemdesign. Parts may be kittedand assembled into the final productas part of the order-fulfillment process.This means assembly cells andwork stations need to be blendedinto the flow paths. Considerationsfor increased transactions and specializedlabor need to be built intothe process. Sequencing and bufferingsub-systems connected by smartand modular conveyor networks willmake up the system solution.7. DC OptimizationToo many “touches” to the productas it passes through the warehousekill productivity. The bestmaterial-handling system requireslittle movement and minimal product“touches.” Complex flow paths,extra moves and inefficient activitiesadd costs, time and product damageto the process.An analysis of process flowshould reveal opportunities for improvement.Activity profiling willdetermine the appropriate configurationfor optimized performance.For example, incorporating conveyingand sorting technology thatintegrates ergonomic de-palletizerstations, automatic carton erectors,automatic print and apply labelers,in-line weigh scales, and casesealers will speed the flow, improveaccuracy and reduce the number ofproduct touches.To increase labor efficiency, manyoperations have moved from paperbasedpicking to paperless picking.The metrics tell the story: one retailerwent from paper-based pickingrates of 125-to-150 lines per pickerper hour to light-directed picking,with rates of 300-to-500 lines perpicker per hour.Another method of achievingmore DC optimization includes theuse of crossdocking. Crossdockingdecreases the number of productmoves, since putaway/storage, replenishmentand order-selectionsteps are removed from the process.Although it varies widely dependingon the business, a typical operationcan crossdock in the range of 20percent of merchandise.8. Uneven Order VolumeToday’s distribution operationsare more often faced with widerranges in capacity requirements thanin the past. The lows are lower andthe highs are higher. Many operationsdo not have the luxury of accommodatinga consistent level oforder volume and, thus, materialflowvolume. What is driving this?Stronger seasonal fluctuations, morepromotional activity, and sudden,unpredicted changes in demand havea direct impact on the order-fulfillmentsystem. Therefore, order-fulfillmentsystems need to be designedwith the capability to “flex.”When demand for order processingis reduced, operations needto dial down capacity and then beready to quickly dial it up. Thismay even happen during a shift ofoperation. To ensure that staffingneeds are met, order-fulfillment systemscan be designed such that pickmodules and picking zones can bestaffed with one or multiple operators.Also, pick-zone boundariescan expand or contract to optimizepicking efficiency. Real-time pickingsystems that utilize RF devices orlight- and voice-directed technologyare designed to accommodateflexible zone boundaries and theability to add or reduce the numberof operators in a zone. Furthermore,these paperless pick systems are fastfor temporary workers to learn, especiallyvoice- and light-directedtechnology.Another feature of flexible systemsis the option to slow down and speedup conveyors and sorters. Duringhours of slow-to-moderate orderprocessingrequirements, conveyorspeeds can slow down, thus reducingequipment wear, noise and energy. Ifthroughput rates stop for a periodof time, theses systems can automaticallyshut off, section by section,until product flow starts again. Duringpeak periods, system speeds canincrease, thereby supporting the highthroughput requirements.9. Perfect OrderPerformanceAnother trend having an impacton order-fulfillment design relates toincreased customer awareness and3PL Americas — Spring 2011 27

OUR ADVERTISERSAmerican Capital Energy................ 6Benesch, Friedlander, Coplan& Aronoff LLP.............................. 31Chris Steer Insurance Brokers Ltd.. . 34Datex............................................ 29Elite Storage Solutions.............. OBCFort Storage Warehousing& Distribution............................... 13Georgia Institute of Technology... IBCHKMB HUB International.............. 24Konstant Storage Systems.......... IFCMcKenna Logistics Centres.......... 24PAS Americas.............................. IFCWaddell Insurance Brokers Ltd..... 33Editorial and AdvertisingDisclaimersThe editorial contents of this publicationare educational and informationalin nature, and not intended asminimum standards, or legal or otherprofessional advice. The InternationalWarehouse Logistics Associationhas endeavored to include appropriateand accurate statements, butdisclaims any and all warranties and/or responsibility for the statementsor their application. Users shouldconfer with their professional advisersfor specific input and assistanceconcerning their respectiveprojects. Any expressions of opinionor perspective by authors of articlesincluded in this publication are notnecessarily those of the IWLA.The inclusion of commercial advertisementsin this publication constitutesneither a recommendationnor an endorsement of the productor service advertised. Although theInternational Warehouse LogisticsAssociation will not knowingly publisha false or misleading advertisement,no attempt has been madeto verify the contents of advertisementsincluded in this publicationunless other than as set forth in writingby IWLA.expectations regarding a metric formeasuring order-fulfillment quality,“perfect order” performance. Customersincreasingly expect higherlevels of accuracy, and some aremeasuring multiple attributes of theorder. (They’re looking, for example,for correct items and quantities,correct paperwork, damage-free andon-time delivery and correct invoices).Other issues relative to order accuracyinclude the actual cost to fixan incorrect order, not to mentioncustomer satisfaction. In additionto all of this, some companies areimplementing “charge backs” fororders received with quantity errors,missing items, or orders that are receivedlate (or too early).Order-fulfillment-system designsaccommodate the requirement foraccuracy by eliminating, or at leastminimizing, the possibility of errorsin the process. For one wholesaledistributor, accuracy was increasedso much when voice-directed pickingreplaced paper picking that thequality-check step was eliminated.Meanwhile, an internet retailer ofcomputer supplies scans every itemfor every order at the pack stationsprior to shipment to ensure orderaccuracy. For another wholesale distributor,order accuracy improvedto high levels when inventory wasplaced in an ASRS. Under computercontrol, inventory and SKU-locationaccuracy dramatically improved overthe previous method of using manuallyoperated fork trucks and palletrack. Before implementation of theASRS, some inventory was temporarilylost in the warehouse and incorrectitems got picked because thewrong SKU was in the pick location.10. New MethodsThe last trend affecting orderfulfillmentoperations is the use ofnew methods and technologies thatincrease system effectiveness. Newmethods and new controls are makingexisting distribution-center technologiesoperate more efficiently.The first example of this is thetrend for retailers and wholesalersto use the “put to store” methodfor building orders. Distribution operationsthat are required to shipproduct to the same location on arecurring basis can increase productivitywith an order-fulfillment strategyreferred to as “put.” Put systemsoffer a greater range of processcontrol, increased order-fulfillmentefficiency and improved access tooperator metrics over other pickingmethods. For example, one retailermigrated from active pick locationsto the put method and obtained excellentresults:Active pick locations, RF:100 reaches per hourPut to store, RF:385 reaches per hourPut to store, light-directed:530 reaches per hourA fashion retailer recently modernizedits order-fulfillment systemwith ergonomic high-rate put stationsto handle the fastest movers.Order lines are automatically presentedto the stations and the compactdesign minimizes worker travel.With this configuration, the workercan perform over 800 reaches perhour.Retailers and wholesalers areprime candidates for utilization ofa put system in their distributionoperations, since order fulfillmentis performed on a regular schedulewith many of the same items beingsent to all or a majority of thestores. Typical delivery schedulesmay range from daily, every otherday, three times a week or perhapsonce a week.A new control method that is nowcreating logistics results for mechanizedconveying and sorting systemsis dynamic optimization software.Dynamic optimization softwareprovides increased throughput withmore-strategic use of traditionalconveying and sorting technology.For example, operations that usewave-based picking and sorting cannow shift to “waveless” processing.Waveless processing omits theinefficient end of wave product flowtrickle, thereby increasing the systemthroughput.Dynamic optimization softwarecan also be used for dynamic balancingof resources such as labor,pick faces, and packing chutes/stations.Finally, dynamic optimizationsoftware can replace fixed scheduleswith real-time scheduling to allowfor increased distribution-center efficiencies.David Zaleski is in business developmentat Dematic Corp.283PL Americas — Spring 2011

contract from page 17can be monetary or non-monetary.One incentive often overlooked isearned options for contract extensions:If a 3PL performs at a satisfactorylevel, it is rewarded with acontract extension.Governance? What is That?Any 3PL agreement, no matterhow simple or complex, shoulddocument how the parties will governor manage theIf both companies want mutualsuccess, they need to be able toclearly define and measure theirperformance against their goals.relationship andthe ongoing business.When lookingat the governancestructure describedin a contract, we favorincluding provisionson how thecompanies will manage the relationshipand changes. For morestrategicrelationships that want tomove beyond commodity-storageand distribution services, we recommendthe inclusion of a transformation-managementprovision. Atransformation-management provisionaddresses the way a companywill handle process-improvementideas or address poor “inputs” fromthe buying company that preventoverall success. For example, howwill the companies work togetherto improve supplier labeling issueson inbound, customer-owned inventory?The goal of a transformation-managementprovision is toestablish a process for dealing withcross-company issues, rather thanfinger pointing.■ Vested Isn’t forEveryone: But are youselling yourself short?While the IWLA Standard contractis a straightforward document,it is geared toward warehousingas a commodity. Many of today’scompanies need amore-customized3PL solution thatprovides value-addedsolutions and notjust basic storageor distribution services.So, if your clientis looking to out-task commoditywarehouse services for a seasonalspike or similar high-demand event,the IWLA Standard Contract willwork for you. It is easy to use, youdon’t need any additional lawyersand you can implement it quickly.But, if your client is interested ininnovation, value-add, strategic partnershipor transformation of businessprocesses, or all of the above,the transactional business model inthe IWLA Standard Contract willmost likely prevent you from reachingyour goals. IWLA President andCEO Joel Anderson agrees. “VestedOutsourcing presents an originalWhat’s Flexible & Changes to MeetYour Business Needs?3PL Warehouse ManagementSoftware SolutionsDatex FootPrint ® WMS software features microBusiness Process Modeling with customized workflow.Our highly flexible and scalable solution reduces costlyIT expense dramatically and is quick to implement.model for 3PLs and their customersto examine and incorporate the benefitsof collaboration and long-term,sustainable relationships.”We encourage you to dust offyour 3PL contract and give it a litmustest against the Five Rules ofVested Outsourcing. Ask yourselfif you are providing a commodityor striving to move up the curveto become a more-strategic serviceprovider. If you answered the former,the IWLA Standard Contractis a perfect tool to streamline yourcontracting process. If you answeredthe latter, however, resist the urge totake the shortcut and instead followthe Vested Outsourcing processfor developing a sound business-tobusinessagreement.Kate Vitasek is a nationally recognizedauthor, educator, business consultantand innovator in the practiceof supply chain management andoutsourcing. She is a faculty memberat the University of Tennessee’sCenter for Executive Education andis author of the popular book VestedOutsourcing: Five Rules that willTransform Outsourcing.Astrid Uka is a business consultantand a seasoned expert in the practiceof supply chain managementand business process outsourcing.She is a principal with Supply ChainVisions, a well-respected boutiqueconsulting firm.+ Report readyNow non-technical users can easily create customizedreports and dashboards without technical assistance.Saves costly professional fees & valuable time.+ User friendlyOur WMS is simple to learn and use, with advancedfunctions and amazing flexibility. We won’t make yourbusiness fit our system. Our system fits yourbusiness.+ Upgrades includedYour business will always have the latest, greatestfunctionality. We make sure that your business isalways ready to do business effectively.+ In house supportOur support team specializes in providing personalattention to all our customers. Our team is readynow to ensure the success of your business.DATEXCall 800.933.2839 | www.DatexCorp.comFollow us onby searching datexcorp3PL Americas — Spring 2011 29

LeadershipBe a Better Boss:Five Critical MindsetsBy Chip ScholzThe word “boss” conjures up memories of the good, the badand the ugly ones we’ve endured throughout our careers.Bosses shape how people experience work: joy versus despair, enthusiasmversus complaints, and satisfaction versus stress.Most bosses want to be good at what they do, yet many lack the essentialmindsets that precede positive actions and behaviors.As a boss who strives to do great work, you must adjust your thinking. Thebeliefs and assumptions you hold about yourself, your work and your peoplewill determine your actions, according to Stanford University managementprofessor Robert I. Sutton, PhD, author of Good Boss, Bad Boss: How to Bethe Best...and Learn from the Worst (Business Plus, 2010).“The best bosses embrace five beliefs that are stepping stones to effectiveaction,” he writes.■ Mindset #1: Goldilocks ManagementManagers who are too assertive will damage relationships with their superiors,peers and subordinates. Conversely, those who aren’t assertive enoughwill fail to inspire their teams to strive for stretch goals, according to a studyconducted by business professors Daniel Ames, PhD, and Francis Flynn, PhD(of Columbia and Stanford Universities, respectively).There are times when bosses need to coach people, discipline, communicatedirection and intervene. The savviest bosses look for the right momentsto apply pressure or encouragement to get the best out of their people. Inchoosing their moments, they command respect instead of contempt.Great bosses protect theirpeople, going to bat for resourcesand support.■ Mindset #2: True Grit“Gritty bosses are driven by the nagging conviction that everything theyand their people do could be better if they tried just a little harder or were justa bit more creative,” Sutton writes.Such bosses instill grit in subordinates. Without creating the impressionthat everything is an emergency, great bosses have a sense of urgency. They aredogged and patient, sensing when to press forward and when to be flexible.University of Pennsylvania Assistant Professor of Psychology AngelaDuckworth, PhD, and her colleagues define grit as perseverance and passiontoward long-term goals.“Grit entails working strenuously toward challenges, maintaining effortand interest despite failure, adversity and plateaus in progress,” they wrote ina 2007 Journal of Personality and Social Psychology paper.■ Mindset #3: Small Wins CountThe path to success is lined with small wins. Framing goals as a series ofsmall steps helps people see the importance of their participation.Smaller goals also help people make better decisions, sustain motivationand manage stress. When subordinates experience a challenge as too big or303PL Americas — Spring 2011

complex, they can freeze up. Whenproblems are broken down into bitesizedpieces, a boss inspires clarity,calmness and confidence.■ Mindset #4: AvoidPower TrapsNumerous studies show that peoplein power tend to become selfcenteredand oblivious to what theirsubordinates need, do and say.Wielding power over others cancause you to:1. Become more focused on yourown needs and wants;2. Become less focused on others’needs;3. Act as though written and unwrittenrules don’t apply to you.Good bosses remain on guard toavoid such power traps. They neverforget how closely they are watchedby their people, and they resist takingadvantage of their position andignoring others’ needs.■ Mindset #5: Providea Human ShieldGreat bosses protect their people,going to bat for resources and support.Even when they may sufferpersonally, great bosses are willingto take such risks. They shield theiremployees from red tape, meddlesomeexecutives, nosy visitors, unnecessarymeetings and a host ofother time wasters.“A good boss takes pride in servingas a human shield, absorbingand deflecting heat from superiorsand customers, doing all manner ofboring and silly tasks and battlingback against every idiot and slightthat makes life unfair or harder thannecessary on his or her charges,”Sutton writes.■ The Questions to AskYourself1. Goldilocks Managementa Are you managing with just theright degree of assertiveness?b Are you creating ways to walk theline between enough interventionand micromanaging?c Are you neglecting to give yourpeople guidance, wisdom and theBosses shape how people experiencework: joy versus despair…andsatisfaction versus stress.feedback they need to succeed?d Are you obsessively monitoringevery move and metric?2. True Grita Do you treat work as a marathonor a sprint?b Do you look for quick fixes?c Do you instill a sense of urgencywithout treating everything as acrisis?d In the face of failures, do you persistor give up?3. Small Winsa Do you frame what your peopleneed to do as a series of small,realistic and clear steps?b Do you propose grand goals?c Do you break things down intobite-sized steps?4. Power Trapsa Do you remind yourself that yourTRANSPORTATION& LOGISTICSCleveland | ColumbusIndianapolis | PhiladelphiaShanghai | White Plains | Wilmingtonpeople are watching you closely?b Do you avoid doing little thingsthat undermine their performanceand dignity?c Do you ignore the little thingsthat could be perceived as overuseof power?d Do you realize that everythingyou say and do will be magnifiedin your subordinates’ minds?5. Human Shielda Do you see your job as caring forand protecting your people?b Do you fight for them when necessary?c Do you consider it too much troubleor too risky to battle superiorson their behalf?d When your people screw up, doyou take the hit or hang them outto dry?e When you screw up, do you admitit?Chip Scholz is Head Coach of Scholzand Associates, Inc. and serves onthe IWLA board of directors.Advising users and providersof logistics services on:• Freight charge, freight loss anddamage and freight contracting• Environmental consult• Operating relationships• Regulatory compliance• Workforce management• General transportation law• Hazmat, casualty and toxictort litigationCounsel for the Road AheadCleveland:Eric L. Zalud(216) 363-4178David M. Neumann(216) 363-4584Richard A. Plewacki(216) 363-4159Columbus:Marc S. Blubaugh(614) 223-9383Teresa E. Purtiman(614) 223-9380Indiana:Andi M. Metzel(317) 685-6159Eastern Seaboard:Michael J. Barrie(302) 442-7068Pacific Northwest:Martha J. Payne(541) 764-2859www.beneschlaw.comSM3PL Americas — Spring 2011 31

IWLA Convention 2011Quality Presentations ProvideWarehouse Executives withExpert EducationBy Camille Y. GoldenIWLA celebrates 120‐year historyat its 2011 Annual Conventionin St. PetersburgWarehouse owners and executives gathered during therecent International Warehouse Logistics Association (IWLA) AnnualConvention to find solutions for 21st-century industry issues:• How can third-party warehousing maintain profitability even as overheadand expenses cut margins?• What is the best way to introduce more effective sustainable stewardshipinto the supply chain?• What regulatory trends will have an impact on our business now and in thefuture?The early-March 2011 event in St. Petersburg, Fla., was IWLA’s 120thAnnual Convention.With the theme of “Innovation & Sustainability: Driving Best Practices in3PLs,” the conference offered attendees opportunities to learn how to developsustainable processes for their warehouse operations and drive profitability.This event also marked the roll-out of IWLA’s Sustainable Logistics Initiative.Expert speakers provided insights into trends in world trade and supplychain management; how the changing political scene in the United States ishaving an impact on logistics providers; how proven management techniquescan improve an organization’s bottom-line performance; and how to dealwith a host of specific regulatory challenges facing warehouse operators, suchas food supply chain security.■ Advocacy and PublicPolicySpecial guest, CongresswomanLaura Richardson (D-Cal.) providedinformation on the Future Of Commercein the United States Act of2010 (Freight FOCUS Act – H.R.6291), a goods-movement bill thatis intended to bring velocity to localtrade corridors. The bill provides forpublic- and private-sector involvement,prioritizing major goodsmovementcorridors and fundingprojects to alleviate choke points.IWLA-retained counsel KevinPhillips and Pat Hess, of the lawfirm Nielsen, Zehe & Antas, P.C.,During the exhibition, attendeePeter Wilson checks out theKomatsu lift truck.323PL Americas — Spring 2011

covered the ways in which IWLA is litigating on members’behalf to preserve their bailee status. Litigationbefore the Surface Transportation Board (STB) examinesunder what circumstances 3PLs are liable for detention,demurrage and/or accessorial charges. Phillips and Hessmentioned that IWLA has been a party to the proceedingfrom the very beginning – from the U.S. appellate courtlevel up to the U.S. Supreme Court petition level – andthat IWLA met with the U.S. Solicitor General’s office toprovide facts on this case.IWLA Washington representative Pat O’Connor presentedduring one of the many breakout sessions on theregulatory agendas of the Obama administration andCongress, outlining how IWLA members can engage theprocess and help protect the interests of the 3PL industry.■ Food Security in the Supply ChainIn a breakout presentation focused on food securityin the supply chain, Pat O’Connor reviewed food-safetylaws under the Food Safety Modernization Act, and howproposed changes to legislation may affect 3PL providersthat store or transport products that have been added tothis food-recall list. Current legislative proposals wouldput warehouses in a role of responsibility and wouldrequire them to take action in recalling contaminatedproducts.O’Connor said IWLA has impressed on Congress thatthird-party logistics providers lack detailed informationon the specific ingredients in a food product and are dependenton customers to learn when their products aresubject to a voluntary or mandatory recall. In addition,he said, unlike the manufacturer, a 3PL doesn’t have abusiness relationship with a retailer, making it impracticalfor the 3PL to take responsibility for a productrecall.■ Sustainable Logistics InitiativeA panel, comprising presenters Linda Hothem, CLP(Pacific American Group), Dale Rogers (Rutgers UniversitySchool of Business), Stephanie Williams (TREDCorporation), Lisa Harrington (Sustainable SupplyChain Foundation) and Richard Bank (Sustainable SupplyChain Foundation), introduced IWLA’s SustainableLogistics Initiative (SLI) during two breakout sessions.The SLI is a benchmarking program developed under theauspices of IWLA for 3PL and warehousing entities toidentify and adopt instructive tools to implement sustainablepractices.During their presentation, Harrington and Bank explainedthat sustainable 3PL and warehousing practicesare identified through technology assessments, globalreporting initiatives, regional greenhouse-gas protocols,and other industry best-practice assessments worldwide.Harrington related a comment by Gary Hirshberg,president and CEO, Stonyfield Farms: “Even thoughwe were the first manufacturer in America to offset 100percent of the CO 2 emissions from our manufacturingConvention attendees in the general session.plants, these incredible offsets amounted to a roundingerror in terms of our total carbon footprint. We realizedthat our supply chain – what’s coming in and going outof our plant – represents 80 to 90 percent of our totalcarbon footprint. So, despite the great things we did inWADDELL INSURANCE BROKERS LIMITEDSPECIALIZES IN:• Transportation: fleet and non-fleet• Warehousing and logistics insuranceIncluding warehouse legal liability• Motor truck cargo, Rail, Air, Ocean freightcoverages• Freight forwarders and Load brokers legalliability• Carrier and warehouse bonds in Canada andUnited States.We offer a common sense approach with costeffective risk management alternatives, includingcaptive insurance solutions.Waddell Insurance Brokers Limited110 Matheson • Suit 202 • Mississauga,Ont. • L5R 4G7Tele: 905-712-8400 • Fax: 905-712-9400 • www.waddellinsurance.com3PL Americas — Spring 2011 33

Convention Chairman Linda Hothem, CLP (secondfrom right) pauses to take a photo with IWLA CaliforniaGovernment Affairs representatives Michael andStephanie Williams and Robert Bianco (right).our plant, unless we tackled our supply chain’s carbonfootprint, we were nowhere.”The session covered how the SLI benefits warehouseoperations and provides a platform to reduce costs.CHRIS STEERINSURANCE BROKERSSpecializing in Logistics,Transportation & Marine Insurancefor over 40 years.The needs of logistics operations vary from one to the other.You need expertise. We have it! We use it!■ Hidden Liability and TemporaryWorkforcePanelists Kerryann Haase, partner, and Brian Paul,partner, of Michael Best & Friedrich LLP, discussed amultitude of hidden liabilities connected with hiringtemporary workers. Haase outlined the different typesof contingent workers and how each can adversely affectboth warehouse and non-warehouse employers. “Currently,warehouses are increasing their [use of] temporaryemployees in lieu of hiring full-time employees,” Haasesaid. This practice adds greater probability of risk foremployers.Haase and Paul shared ways employers can protectthemselves when dealing with unionization of temporaryworkers, how employers can properly negotiate contracts,ways to determine joint-employer status, and howbeing a joint employer works in situations dealing withthe Family and Medical Leave Act and the Americanswith Disabilities Act.Attendees enjoyed the opportunity to learn aboutleading-edge products and services during the trade showthat is part of IWLA’s Annual Convention. The conventionalso included many opportunities, including thesold-out IWLA Golf Classic, for attendees to networkwith their colleagues.Exhibitors also benefit from attending the convention,as Rich Moline of Traker Systems says: “IWLA’s AnnualConvention allows us not only to meet potential clientsand network, but also to meet our existing customerswho belong to the association. With our product,our only contact from pre-sale to implementation is byphone, so this one-on-one contact is invaluable.”If you missed the 2011 convention and the wealth ofknowledge it provided to attendees, be sure to attend the2012 IWLA Annual Convention, from March 18 to 20,2012, at the Fairmont Hotel in San Francisco, Calif.To learn how you can participate as an attendee orexhibitor, contact Scott Brewster via email at sbrewster@iwla.com or call 847-702-2742.Camille Golden is marketing & communications coordinatorat the International Warehouse Logistics Associationin Des Plaines, Ill. She can be reached via email atcgolden@iwla.com.www.chrissteer.com | Chris@chrissteer.com | Susan@chrissteer.com8 King St E #202 | Toronto ON M5C 1B5 | 416-366-1141Our typical client has been with us for at least twentyyears — some twice that. That says a lot about how wedo what we do. We can tell you the rest. Call us.343PL Americas — Spring 2011