Eric Joiner's Freightdawg.com - The Logistics and Supply Chain Blog!

The Great Race 2007

Georgia Tech's Supply Chain and Logistics Institute annually conducts a test of service by the three major parcel carriers, DHL, UPS and FedEx.   This year they shipped packages from Atlanta to destinations in the South Pacific, a coastal Brazilian island, Africa, Iraq and Southeast Asia.   

Specific locations included:

• Apia, the only city on Upulu, one of the islands comprising the country of Samoa, in the western Pacific Ocean. Upulu has no street addresses.
• Florianopolis, an island off the coast of southern Brazil just above Uruguay; considered by the carriers to be a “remote area”
• Harare, capital of Zimbabwe, which is currently experiencing hyperinflation and political unrest.
• Tikrit, birthplace of Saddam Hussein and a center of Sunni insurgency in Iraq
• Yangon, until recently, capital of Myanmar, one of the most isolated countries in the world. The city was formerly known as Rangoon, Burma.

By all accounts DHL won the race by having delivered all the packages tendered from Atlanta to the global destinations.   FedEx still hasn't delivered two of their parcels.

OK, as a DHL homer,  I am pleased to see the outcome. I was especially pleased to see our customer service team be as helpful as they were.  DHL is especially strong in the Middle East, Africa and Asia.  So, the results in some ways are not surprising.  All three carriers as well as TNT are making major strides in growth internationally.  With China comprising 1.4 billion people and India with 1.1 billion more, it is logical that service investments chase the shipping volume.

This particular exercise makes interesting reading from an academic perspective, but I'm not sure how relevant the test is practically.  Georgia Tech asked for more suggestions on testing. OK...here are some ideas. 

What I'm interested in is a transit test between Atlanta and Statesboro, Georgia, which some carriers consider a black out area despite being only 200 miles from Atlanta. How about from Kingsport, Tennessee to Branson, Missouri?   Or rural Montana?    These are more practical tests, and frankly probably a more business useful comparison test.  Try deliveries to businesses and to residences.  We all order off of Amazon and E-bay and Dell.    

I'd also like to see some NAFTA tests.

Who is fastest to ship to and from Canada or Mexico?   Pick a point in rural Mexico and test how long it takes to get a non-conveyable package to a US interior point.  Pick a mid-size city in the US, not just some rural place. 

Testing shouldn't only measure speed.

In a supply chain test, being on-time is more important than transit in my view.  Heres a personal example.   I purchased a new PC for my home a couple of weeks ago.  I like computer games, so it was a custom built job from a top quality vendor located in Toronto, Ontario, Canada.   The vendor chose to ship it to me via UPS via their 3 day ground select service.  I actually like getting packages from other carriers because it lets me test and experience their service levels.   

UPS did a great job...in fact too good.  My package arrived in TWO days from Toronto and I had full visibility to the package in transit, customs clearance and delivery.  Only one problem... I was expecting the package on day 3 when the pre-advice said it was coming.   The package required signature so UPS had to redeliver the package on a day when someone was home.    Being early in a commercial environment is as bad or worse, than being late because it can screw up inventory flows and planning.   Nevertheless the UPS service was very good.  I got the impression the folks in Brown had been doing this for awhile.

Tech should also ship heavyweight air and measure that service.

Ship a 300 lb. piece by all three parcel carriers.  Ship it domestic and ship it international. See if all three carriers give you the option of shipping it as a parcel OR as deferred air freight.   If the goods don't require time definite delivery,  shipping as air freight through the forwarding arm of one of the parcel guys will save you BIG money. 

There are lots of ways to compare the big three.   However, I think in this case DHL Express won what I hope will be round 1 of a longer fight.   These tests make all three carriers better at what they do by providing scrutiny and experience to the shipping public.

Eric

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Freight Dawg Apparel

I just had to pimp this a little bit!

Doing some googling this morning,  I naturally did some searches for the words "Freight Dawg" to see where my stuff was coming up.    In looking at the lists I found a site from Airline Pilot Central that sells apparel with the words "Freight Dawg" on it.   And what a nice line of clothing it is.   I especially loved this particular item for the ladies!

I'm going to order some T-shirts...  Meantime I'll try to make a deal to sell some of this merchandise here.  What a natural fit!

Eric

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RFID...Paranoia.

I post RFID related articles pretty often. I am an especially close follower of Wal*Mart, along with Target, who really started all this controversy.  However the article below is worth reading because it documents how RFID is used by Oil/Gas companies to expedite payment at the pump for gas.   

While this is very convenient to pay at the pump, this ability needs to be extended to paying for everything in the store. (It is a convenience store right???)

I shouldn't even have to go to the register.

I should just walk out the door and the RFID enabled register should zing my card.  When Wal*Mart  gets to the point where I can just walk out with my goods from their store, they will get my business in the same bulk to which they dream.  It would also cure their number ONE hotel Hell factor...check out.

On a personal note, my 19 year old daughter is a cashier at a local grocery store. She happens to also be  very good at her job.

The moment in which her store RFID enables customer self-check out , is the same moment in which I will NEVER go to her register again.

This is in spite of the fact that she is much cuter than most of the other machines.

clipped from makeyournut.com RFID "Enabled" Cards My debit card expires at the end of this month. I’ve had the new one for a while now, and it’s been sitting on my desk at home, but I haven’t activated it because one of the “convenient new features” that my bank is touting is RFID.  I don’t want an RFID-tagged debit card, but I don’t think my bank offers one that doesn’t have it. For those of you who aren’t familiar with this situation, let me offer a quick summary. RFID (Radio Frequency Identification) technology allows a small tag to be embedded in pretty much anything - credit cards, consumer products, passports, cows - and provides for the transmission of the data held in that chip to RFID readers via radio waves. RFID has many practical uses, such as tagging products at your local Target or Wal*Mart for inventory control purposes and identifying manufacturing origins for auto parts. For a few years now, gas companies have provided RFID-tagged keyring fobs that allow you to pay for your gas purchases at some stations by waving the fob across an RFID reader that is installed at the pump. Within the past couple of years, banks and credit card companies have seized upon RFID as a way to enable customers to conveniently pay for purchases simply by waving an RFID-tagged card across a reader at the point-of-sale. It’s like the gas station key fob but on a much larger scale.  Mastercard offers PayPass, Visa brands it as Visa Wave.  Then there’s American Express ExpressPay and Chase Blink. The convenience factor is so huge, and the potential profit from increased usage so promising, that it seems that security has taken a backseat to flashy marketing and speedy distribution. In other words, no one cares until something blows up. Information on an RFID-tagged debit or credit card, which includes your name, account number, and expiration date, may not be encrypted, or may be encrypted poorly, depending on the level of security-awareness of the issuing bank or credit card company. Using materials that are readily available at any electronics store for less than $200, anyone with a little knowledge can build an RFID scanner that can harvest this unencrypted information at will. So, it’s not enough for me to put my wallet into a zippered pocket, or somewhere on my body that can’t be pickpocketed - the unencrypted information on my debit card is constantly being broadcast by the RFID chip no matter what I do. Someone with a scanner could lift this information off of my card just by standing behind me in line at the movie theater. Credit card companies say that the likelihood of this happening is low, so there isn’t any need for alarm. Based on this reasoning, the banks won’t do anything about making their debit and credit cards more secure until the level of identity theft reaches crisis proportions. The banks also say that customers aren’t responsible for unauthorized purchases - but how much damage would I have to sustain before they took action, and how long and bureaucratic would the remediation process be? Even worse, someone could take my information and hold onto it for several months, even years, before using it, thus catching me completely off guard. I can’t trust the customer service representatives at my bank to know enough about their RFID technology to assure me that my information is encrypted (or encrypted well enough). I just know my bank will absolutely never tell me that they “don’t know” and will, in all likelihood, just lie through their teeth in order to retain me as a customer. All I know is, right now, I don’t have a solution to my debit card dilemma. I could leave my debit card out of my wallet, and just use it once a week to get cash, but then I would restrict myself to a cash-only existence with no ability to track my purchases online. I could switch banks, but RFID technology is becoming so widespread, it’s only a matter of time before most of the major banks adopt it. The New York Times has an article entitled Researchers See Privacy Pitfalls in No-Swipe Credit Cards. It’s an article that I recommend highly, not in the least because it shows I’m not completely paranoid.

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Staples names Blue Sky Logistics as supply chain visibility provider

Supplychainer.com reported that office supply giant Staples has named Blue Sky Logistics to be its supply chain visibility provider, inking an agreement for an enterprise license to use the solution provider's visibility products across distribution transactions in its supply chain.

Blue Sky's visibility product is called Insight.  It is designed to monitor critical decision information at all management levels. Insight is a Web-native application that uses a company's real-time data to track and monitor key performance metrics and trends.

Who exactly is Blue Sky Logistics? 

I've been involved with supply chain visibility products for 15 years and haven't heard of them.  Nevertheless, if their product is good, I would love to know a lot more about their solution and this deal. In particular, I'd love to know the specifics of what Staples paid for their solution.  Newbie products are famous for giving away their solutions,  while retailers are also infamous for having "no money" for IT solutions.

Net/Net..this may be a perfect marriage, but it would be interesting to know what money was paid for what projected ROI?   Also who made the decision in the customer org?  A case study here after 9 months would be real interesting...and would validate this story.  A totally transparent case study would be welcomed here at the freight dawg.

Read more

Eric

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Mixed Results with Six-Sigma?

GE and Jack Welch made Six-Sigma quality improvement programs famous, but whether its good for every business is potentially up for debate.  Joe Andraski over at VICS wrote an interesting article which I clipped below on the impact of Six-Sigma on several different companies.   Interestingly, the impact was mostly negative. 

In some cited companies, like Home Depot, you can clearly see the GE linkage with Bob Nardelli bringing the program with him from General Electric. Nardelli is no longer CEO of HD because of poor financial performance.

My own experience with Six- Sigma, which I commented on, on the VICS web site is also mixed.   I have worked with a number of  multi-national conglomerates who espoused the use of Six Sigma.

What I observed was that how well it worked depended on what region of the world you were in, and how much the divisional leadership pushed the program.  The French never made it work but the Americans did.. .in one division.  In another business unit, the US folks only gave it lip service in New Jersey, but did great things in Seattle.  In the meantime the global headquarters gave glowing examples of how well it worked over all.  Clearly there was a disconnect between what the head office wished for and what happened in the field. 

Being a global vendor to a customer like that is frustrating because application of service performance metrics is mixed.   I recall having to deal with Six Sigma black belts who demanded all kinds of reporting and database feeds in one unit, while the European offices of the same division didn't care as long as their last order was delivered as promised. 

I'm especially interested in feedback on use of Six-Sigma in non-manufacturing environments. I'm dubious of how well it works when there are a lot of soft factors around success.  I know my own employer uses DMAIC in measuring existing processes, but the jury is still out on how well that's working in terms of change management. 

Cultures are very, very tough to change, especially in huge companies with silo'ed business units.

Does your company use Six Sigma? How well does it work?

clipped from www.vics.org Should Six Sigma be Deep Sixed? By Joe Andraski The January/February edition of “Chief Executive” includes an article titled, “Deep-Sixing Six Sigma” written by Charles Holland PhD, CEO of QualPro. The article immediately caught my eye as I am a fan of Jack Welch and the results that GE had with Six Sigma.  I also had an inside view of the GE program as a relative of mine was one of the first Black Belts who traveled the world as a key trainer.  GE enjoyed significant improvements in quality and delivering products to customers on time. So with this as background, I was amazed to learn that Holland’s research revealed that of the 58 companies that announced broad Six Sigma programs 51 stock performances below the S&P 500 index since their announcement.  Only five of the 58 exceeded the index.

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Leveraging your Freight Forwarder

Back in January, Brooks Bentz with Accenture wrote an article for Logistics Management Magazine on getting the most out of your freight forwarding relationship.   Forwarders have traditionally been used to arrange transportation and manage shipments. Back in the  "olden days" I used to explain to my kids that a freight forwarder was basically a "travel agent for freight".  Not so any more! 

Given the increasing length of international supply chains, forwarders are now being asked to perform other services in order to manage the freight while in transit. This creates a new level of service complexity to evaluating use of forwarders and third party providers (3PL’s) based on ability to manipulate the freight while in transit. For the bigger forwarders such as DHL Global Forwarding, Kuehne & Nagel, UPS Supply Chain Solutions and Expeditors, this is a great opportunity to make additional revenue providing value added services.   For the smaller guys in South China, the traditional “Tea Shop” forwarder, whose business is 100 percent based on relationship, it’s a threat.

Managing supply chains means the ability to see where the goods are at any point in the chain, as well as to be able to divert goods to meet demand.   In an earlier article here on freight dawg,  I wrote about Demand Driven Supply Chains (DDSN).  DDSN’s allow importers to manage the risk associated with long supply chains and turn them into potential assets.    Risk is evaluated in transit time as well as stock availability.    Today freight forwarders can provide you with visibility and such services as merge-in-transit, consolidation and deconsolidation, as well as storage in Foreign Trade Zones.    Combining these with Ocean Transport Intermediary (OTI) services also gives a smaller importer access to dozens of ocean carrier contracts through forwarder controlled freight volume.

I think the biggest asset that forwarders bring is customer service. Anybody who has tried talking to an ocean carrier customer service department in the last 5 years knows how difficult it is to get them to act on a problem, much less remember your last conversation with them.  Carriers today are in the business of moving big volume.  In many cases that’s been at the expense of service.    The forwarder has volume leverage in many cases, and has the ability to influence whether your goods get on the ship in peak season as well as assist in diverting freight when necessary.

clipped from www.logisticsmgmt.com Forward thinking on freight forwarding Freight forwarders have become indispensable partners for shippers that do business globally. Here’s how to get the most out of your relationship with them. By Brooks A. Bentz Logistics Management January 1, 2007 Seven years into the “new century,” supply chain management has become more global, more complicated, more demanding, and less forgiving. Trade barriers are down. Competition is up. Stakes are higher. Margins are lower. Ironically, many of these complexities are the product of re-engineering—well-intended and often successful attempts by thousands of companies in the 1990s to “reconnect with their inner competencies.” Re-engineering bespoke a bold new vision: leaner companies, with restructured operations and business processes, where core competencies were deified and ancillary functions were outsourced or deconstructed. The rapid growth of third-party services tracks to these events—particularly re-engineering and its call to “emphasize what you do best and seek external support for the rest.” Heeding that call, large numbers of companies downsized their in-house logistics organizations, leaving a smaller staff focused on engaging and managing third parties. However, the engagement of these in-house liaisons did not always compensate for the loss of functional skills. Leveraging the expertise of third parties clearly is a viable strategy; but many companies depleted their internal ranks so severely that they lost the ability to understand what they need or how to get it. That’s certainly the case for many shippers when it comes to working with international freight forwarders—one of the oldest types of third-party logistics (3PL) companies. Freight forwarding’s breadth, depth, and scope have evolved to meet the demands of today’s businesses (see “What Can a Freight Forwarder Do For You?” on Page 38). But more than ever, companies may be challenged by questions such as, “How do I identify the right freight forwarding partner?” …“How do I ensure that I’m getting what I pay for?”… “Which metrics should I use to evaluate the freight forwarder’s performance?” Please follow the link above to read the rest of this article.

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Underground Supply Chain

Many Sons and a Lot of Guns

Anybody who watches the News in the United States every night sees death and destruction as a result of the wars in Afghanistan and Iraq. I'm not interested in getting into a debate on whether the US should be in these theaters of war or not, but it is interesting to consider the antiquity of local cultures.

The Khyber Pass in Pakistan has been a field of battle for centuries. As a result, towns and villages have made industries out of arms manufacture that propagate local conflict.  It didn't matter what army was engaged...they all needed weapons.

The video below shows a local village whose entire history is about making weapons.  You think they are going to stop doing this?  I doubt it.

These people don't care who buys their weapons. This is an ancient tribal custom. They make guns because thats what they know how to do and they happen to be adjacent to a ready market.   This post is about educating readers on some of the culture we must contend with, not to start a debate on whether we should be there.   The US Congress can not adjudicate the gun trade.  How big a surprise can it be that Osama Bin Laden is thought to be nestled in this region of the world?   

These are war zones that Rudyard Kipling wrote about. The British Empire didn't settle these areas. To think an American Democratic Congress will do so is a joke.

Eric

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Cargolux Announces new Atlanta Service

Cargolux Airlines, Europe's largest all-cargo airline, announced new twice weekly service to Atlanta. The service is offered in conjunction with air forwarding support from Kuehne & Nagel and Schenkers Germany.

Commodities to and from Cargolux‘s new gateway Atlanta mostly include general cargo, cars, spare parts and engines. It is nice to see another B744F on the Atlanta flight line!

clipped from www.cargolux.com Luxembourg, April 18, 2007 - An agreement has been signed between Cargolux and Schenker Deutschland AG and Kühne & Nagel (AG & CO.) KG, both from Germany, to operate the ‘Southern Connex Service’ into Atlanta, Chicago and New York. For Europe’s largest all-cargo carrier, Atlanta is a new destination. It will be operating the two weekly flights to and from Hartsfield-Jackson Atlanta International Airport with a B747-400 freighter. The inauguration flight out of Luxembourg took place on March 28th, 2007. From Cargolux’s base in Luxembourg the flight is routed via New York’s JFK Airport before arriving in Atlanta, continuing via Chicago before returning to the Grand Duchy. CV8623 departs Luxembourg on Wednesdays and CV8626 on Saturdays at 07.30 pm, arriving in Atlanta next day at 01.10 pm. Return from Atlanta is on Thursdays and Sundays at 03.10 pm with arrival in Luxembourg at 09.00 pm, connecting with the company’s extensive European trucking network.

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Delta Airlines: April 30th is a New Beginning

What a difference 18 months makes!

On April 30th,  Delta Airlines officially emerges from Chapter 11 bankruptcy protection.  In the meantime there's a lot of ink being spilled (virtual and otherwise) on what a great job the Delta management team did in getting the airline from a multi-billion dollar mess on the brink of closure, to a revitalized carrier whose future profitability is projected to rival low cost carrier Southwest Airlines by next year.  These are heady comments coming from stock market analysts and industry pundits alike, not to mention the stray blogger or two.

I wrote an article on April 11th that highlighted the new marketing campaign DAL will be launching shortly.   In hindsight, that article may have been a little more negative than it should have been.  Everything I wrote is true, but the impressive thing Delta has done is to get rid of around $7 billion in debt, while expanding its international routes, which carry very high profit margins.

Focus on International Routes

The European Union and the USA have agreed on an open skies policy starting in 2008 that couldn't be better timed for Delta.  American carriers will have access to the whole of the European Union, while European carriers will have similar access to international routes to and from the US . Transatlantic tickets today are competitive but still expensive.  Expanding in Europe, especially to Heathrow in London will do Delta and many other carriers good.  British Airways and Virgin Atlantic won't have a total lock on Heathrow any more.  Right now Delta only gets you as close as Gatwick airport outside of London.  Heathrow is the plum!

I find myself drinking the Kool-Aid...a little.

As I walked through the concourse of Atlanta Hartsfield Jackson airport this morning on my way to south Florida, I heard the announcement of flight arrivals from Senegal and Israel.  These are far flung locations previously unreachable directly from Atlanta. Certainly Delta won't encounter Jet Blue and Airtran on those routes and the margins on tickets will reflect it.  Combined with new routes and a handful of new B777's and long range B737's,  Deltas revised network looks attractive to frequent business travelers like me.

As a passenger, I've had both good and bad experiences with Delta Airlines, but as a local Atlanta boy, I  find myself getting a little excited.   Delta means a lot to Atlanta.  Hopefully DAL will return to being a company that would make its legendary founder C.E. Woolman proud.

Truth be told, I worked as a summer college intern for Delta loading airplanes in the summer of 1980.  Old school Delta was a great company back in the day.  I never worked so hard as that summer loading DC-8's, B727's, B737's, DC-9's, and (brand new!) L-1011's.  That gives me an emotional interest in Delta because that was my first "taste" of the operational part of the air freight business.

Young Guns get the Press...but it takes a Team.

As for the young guns who helped drive this turnaround, (COO) Jim Whitehurst and (CFO) Ed Bastian have a great future ahead either at the top of the organization when CEO Gerald Grinstein retires this summer, or maybe they'll be like General Electric execs a couple of years ago and get star searched off to another leadership opportunity.  They certainly will have a story to tell.   Both Whitehurst and Bastian are thought to be the best candidates to replace Grinstein.   

Gerald Grinstein came to Delta as part of the acquisition of Western Airlines in the mid 1980's.    He had been CEO at Western, an old and famous name in the airline industry, then subsequently joined the Delta board.    His no nonsense approach and genuine care for the airline business suited Delta well during this difficult period.  Grinstein is also respected for being frugal with the company's money when his predecessors were lavish.

Whether this great effort to turn a company around succeeds however, will be in the hands of the Delta employees, who sacrificed real income to become the New Delta.  In the new company they'll at least get some reward with stock in the company they helped rebuild.

In the meantime I will watch with interest from seat 18B headed somewhere every week.  (though, like today,  I do get an occasional upgrade!)

Eric

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Whats Next? McOil?

Fueling the Imagination...new oil alternatives.

In the quest for alternative fuels, it seems that there will be a new use for rendered animal fats.  Tyson Foods, a large food conglomerate with big interests in poultry especially, is working with ConocoPhillips to develop diesel fuel products from rendered animal fats.   The deal was made possible by a federal tax credit of $1-per-gallon for developing alternative bio-diesel sources.

Tyson operates in a commodity business where pennies truly matter.   If Tyson were to fuel its own trucking fleet with alternative fuels rendered as a by-product of their own goods, freight transportation could become a large competitive advantage over domestic competitors who rely on freight brokerage or commercial trucking for movement of food products.

While acknowledged not to be a major fuel alternative,  just think what might happen if a fast food chain like McDonalds started a conversion program similar to this one?     A chain of fuel stations entirely supplied with McGas and McOil?

Wouldn't it be truly ironic if we in the infidel west, were able to ween ourselves from middle eastern oil by rendering pork fat into oil?

I wonder if animal fats can be traded as a commodity?   How can I make money off this one? There has to be a way...  What do you think?

clipped from www.logisticsmgmt.com WASHINGTON—An alliance between Tyson Foods and ConocoPhillips, nation’s third-largest oil company, is exciting shipper interests who realize this country needs a cost-effective methodology to wean us off Mideast oil sources The companies are working on an initiative in which diesel will soon be made from pork, chicken and beef fat. Production is expected to reach 175 million gallons by 2009, or about 3 percent of all diesel that ConocoPhillips makes in this country. By comparison, there was 250 million gallons of biodiesel manufactured last year, although that is expected to reach 1.2 billion gallons in 10 years. Of course, that still only about 1 percent of all the fuel consumed in this country in a year. Through the help of shipper surcharges that routinely hit 20 percent or higher, the American trucking industry will spend close to $100 billion on diesel fuel this year. “I don’t see a silver bullet but maybe someone will develop one that provides us with a reliable, eco-friendly, non-imported source of fuel for our carriers,” said John B. Ficker, president of the National Industrial Transportation League. “But you need to take a look at all the options that are presented to see if they provide a viable alternative.” The technology behind this latest “renewable diesel,” which has yet to receive approval from the Environmental Protection Agency, is relatively simple. Unlike biodiesel, which requires special factories, renewable diesel can be produced at existing oil refineries through the same process that refines crude oil into traditional motor fuel. It can also be distributed through existing pipelines.

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