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

Strengthening the US Domestic Network

Is Short Sea Shipping the Answer?

Lately I have been thinking about the current truck driver shortage in the United States. I wrote an article recently that discussed the problem and some creative ways that carriers and 3PL's are looking to recruit new driver talent.  The American Trucking Associations (ATA) recently claimed a shortage of up to 20,000 drivers in the US today with that number climbing to 110,000.00 by 2014. 

OK, folks are busy recruiting new drivers, but what else could be done to strengthen our domestic shipping network?  A network consists of a number of parts, so perhaps another mode of transport could help handle additional volume.

Deja Vu all Over Again...

Having spent 18 years in ocean shipping, I wondered what the late Malcolm Purcell McLean would have to say?  Malcolm McLean started the containerization revolution by attacking the issue of how to move large volumes of trailers efficiently.    In 1956, McLean sold his interests in McLean Trucking Company in North Carolina to start a shipping company that would move trailers on the deck of a converted tanker called the "Ideal X".  The route was New York to Houston Texas.   The company he founded was Sea-Land Service Company. Malcolm later sold SL to RJ Reynolds and went on to buy United States Lines.   I started at USL in 1983.  That story was drilled into new employees.   The company chairman was the founder of an industry.

McLean later went on to found Trailer-Bridge, a domestic ocean carrier with operations in the US-Puerto Rican market. Short sea shipping, which is what domestic, coastal and short distance international shipping is called, could be one answer on how to economically address a portion of the long haul driver shortage.   Moving freight from LA to Seattle, and Houston to Charleston is an ideal way to economically move hundreds of container loads each week. Short sea shipping is old news in Europe where a major percentage of freight already moves on feeder vessels in the English Channel and Baltic Sea.  Companies like Airbus, with diversified European manufacturing, simply couldn't exist without it.  Significant domestic container traffic already exists on the US-Hawaii, Alaskan and Puerto Rico trades.

Interestingly in doing some reading on this subject, I found a great article written a couple of years ago by Chuck Raymond, CEO of Horizon Lines, Inc.  Horizon is an innovative carrier with roots directly linked to Sea-Land.  When AP Moller Maersk bought Sea-Land, CSX kept the domestic operations serving Puerto Rico, Hawaii, Guam and Alaska.  Maersk got Sea-Land's international operations. CSX later spun out Horizon Lines on its own.

Raymond argued that the US needs to invest in the infrastructure necessary to include short sea shipping as a part of our intermodal network.  It's not just railroads and trucks. Ships need to be included as well as the port infrastructure to support them.  The Jones Act requires that ships engaged in US domestic commerce must be built in US shipyards.   That makes them expensive vs vessels built in Asian or North European yards, especially with the weakness of the dollar.

In considering what might be done with existing infrastructure, I think there are two or three things that might allow better use of short sea opportunities.  These are a little controversial because they involve modification of the Jones Act, which protects US shipping interests in their home waters. 

1. Allow foreign vessels to operate domestic short sea services as part of their international route structure.  If a Hapag-Lloyd vessel calls Houston and Charleston on its way to Europe, it cannot move revenue producing containers between the two US ports.  It must ONLY carry containers bound for international destinations.   Forget that the ship calls both ports already and likely has a container imbalance as well.    This is a Jones Act violation and the carrier is subject to fines. If we're going to allow Mexican truckers on US roads, we might as well do this one.

2.  Allow American ocean carriers to use foreign built vessels in  US domestic commerce.   The ships should still operate with US crews, and be US registered, but the ships shouldn't have to be built here.  The US lost it's container ship building dominance to Asia decades ago.   

3. Modernize the Jones Act to limit cabotage.   Cabotage is the protection of domestic trade for the exclusive use by domestic carriers.  Presently there are very few large cargo vessels over 1000 tons engaged in domestic container traffic in the US.    In specific, clearly under served markets, foreign carriers could increase service availability.   The Passenger Vessel Services Act already allows this for the cruise market.   I also don't buy the idea that this would be a major detriment to US national defense because there is not a huge fleet of domestic trade container vessels to perform this service now.   When Maersk is a major operator of Military Sealift Command vessels, the "foriegn aspect" doesn't ring true as it might once have.

How should the United States address Short Sea Shipping?

Eric

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Buying Postage Stamps at a Discount!

Here's a Clever Idea for Small Business Owners.  

In order to beat USPS rate hikes, buy old stamps at a discount from Stamp and Coin Dealers!

Dan Pritchett at Logos Bible Software found a creative way to make a deal with a local stamp and coin dealer to not only buy old stamps at a discount but get his invoices hand stamped for free as part of the deal! This idea wouldn't work for large businesses, but if you're an entrepreneur or run a small eBay type business, with more modest billing and invoicing needs, this idea has merit. 

Check out Dan's blog and a clipped version of his article below.

clipped from blog.logos.com The Secret to Beating the Postage Increase Buy your stamps for 10% off. Yes, it's pretty obvious I know, but 99% of the people reading this article don't think it is possible – "isn't it against the law for the post office to give discounts on stamps?" So what – you don't have to buy them from the post office.  I know it sounds too good to be true, I thought so too until I figured out how to do it.  If you are like me, you have spent hours of your life poring over your expenses in every category, trying to find a place to shave off a percent or two here and there. Then you come to the postage category. You look at that solid and steadily increasing dollar amount, shed a few tears, and move on since you know there is no way to save on the actual postage itself. You can't just stop mailing invoices or statements, and you can't use bulk mail for them – you're stuck. After crying a few of those tears year after year, I read "Chapter 9: You Can Always Find 5%" from my favorite business book Fire Someone Today and was determined to once and for all find a way to shave something off that number somehow. Everyone said it couldn't be done – "Everyone knows there are no discounts on postage other than bulk mail." I was more determined than ever to find a way to shave at least 5% off my postage expenses. I talked to my post office representative, I called the postmaster, I asked the UPS guys, the mail forwarders, the bulk rate mailers, and everyone else I could think of. Then I called the local "Stamp & Coin" shop and hit pay-dirt....

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June 12: DNA Parcel Webinar

Mistakes Air Shippers Make: Don't Leave Money on the Table!

On June 12, 2007 - Delta Nu Alpha, the professional transportation fraternity, will be hosting an webinar featuring parcel and transportation consultant Jerry Hempstead of Hempstead Consulting.  Jerry will be covering key aspects on negotiating parcel contracts.   Carriers negotiate contracts daily. Most shippers only do it every few years.   Who has the advantage?   

Jerry's tips will show you how to avoid traps in a carriers basic service guide.  How to know what items in it are negotiable.   How to recognize and calculate accessorial charges.  All charges are not created equally between the carriers!   This session will provide hands-on, real world examples of how shippers can confidently craft contracts to protect against misunderstandings and potentially expensive surprises.  Creating a win-win contract takes an educated customer. 

Jerry is a contributing author here at Freight Dawg.com. Check the parcel shipping section of this blog to read some of his contributed articles.   You can download the PDF file on the upcoming webinar here to register.   

The cost is $25 for single site DNA Members, $35 for single site non-DNA members.   $10 additional late registration fee after June 8, 2007.

The webinar will be held from 5:30 - 6:45PM Central Standard Time on June 12.

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Aviation News Today Podcast

If you follow the airlines or even general aviation, the podcast available from Aviation News Today on Youtube.com is really outstanding.    I subscribe to it as one of my feeds.  I wish there were more high quality video podcasts on transportation and logistics related subjects.  If you know of more, please post a link in the comments section below this article!

(Note that some corporate VPN environments restrict the viewing of youtube videos.  If you see only white space below, then you may be behind such a firewall.  Please visit again from home or from another computer that is not restricted.)

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Reducing Fuel Costs: National Vision is Needed

Steve Hargreaves at CNNMoney.com wrote an article today on 6 ways to lower gas prices. The points he makes are recapped below. They highlight a number of options that all could work, but given the political dynamics of the US Congress, most won't get more than lip service.

I see the fuel cost and sourcing issue as being the most strategic issue of our time. Face it, if you own it...at some point it moved in a truck. Where DC's are placed, where jobs are created and what industries source from what global locations are all influenced by fuel costs. The global influence of OPEC member states is created by our dependency on foreign oil. Further, with the rise of China and other Asian economies, we are competing for middle eastern oil on an ever increasing basis.

"Its going to take a dynamic leader to get these measures done.   Not Congress.  The President. To me this is the next "space race" type vision for the United States.    The President must create a national vision similar to the way John Kennedy declared that the US would put a man on the moon by the close of the decade of the 60's.   Private industry working with government can get this done, but not without a mandate and a visionary leader that can work with industry and bring congress in tow" 

Six Ways to lower Gas Prices

1. Pass a Carbon Tax - Hard on the poor and big oil.  No chance politically. This is a brute force method that would work, but it would hurt.

2. Make more fuel efficient cars - Congress likes this one because it plays well in public. Automakers hate it. By 2020, automakers are likely going to be forced to produce vehicles that get 35 mpg or better. This one could save the US 3 million barrels of oil a day.

3. Fuel Alternatives - using biofuels to ease demand for gasoline.  Congress is said to be pushing a requirement for up to 20 percent use of biofuels such as ethanol by 2020. Ethanol has a way to go before being practical because of the volume of plant matter that would have to be grown and processed to meet US demand. However, I recently wrote an article on use of animal fats rendered from meat and poultry processing that could also supplement ethanol. Tyson Foods and ConocoPhilips are engaged in trials now on this. Imagine if McDonald's and Burger King contributed the fat reserves from their waste?

4 - Make more gas.- Oil companies make more money by controlling fuel availability, thus driving prices up. Exxon Mobil is the most profitable company in the world.  There is a reason why. This idea mandates creation of more refineries and requires certain production levels to keep supplies plentiful. Good luck with this one.  Big Oil will fight it. Environmentalists will fight it. Nevertheless, some new refineries are a good idea. The last refineries built in the US were constructed over 30  years ago.  Katrina took out her fair share of those.

5 - Build a gasoline reserve. - The government maintains a 700 million gallon strategic oil reserve. However there is no gasoline reserve.  Gasoline is a refined product derivative of oil. So if the government releases oil from the strategic reserve, as it did from the Hurricane Katrina disaster, the oil still has to be refined before it can be distributed and sold as gasoline. The problem of not enough refineries means a bottleneck is created in the refining process. We need to do this one.

6 - Drill for more oil - The US has oil reserves.   Both off the US east and west coasts as well as in pristine parts of Alaska. At some point we will have to tap those. Anybody who has been to the beach in Southern California has seen the oil platforms just off shore from San Diego to north of LA.   This one wont be popular especially with environmentalists for all the usual reasons. Some of this is probably going to have to happen anyway...but it won't be popular.

What do you think?   Vote in the poll and leave comments!

Eric

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DHL Investment in Polar Air Clears Hurdle

DHL Express has invested 150 million dollars into Polar Air Cargo, an all cargo airline subsidiary of Atlas Air Worldwide Holdings Inc..   The deal gives DHL extensive extra lift capability into a number of markets.   DHL's investment represents a 49% stake in the carrier.   

DHL has the leading market share worldwide in international parcel express with as much as a 40 percent market share in Asia.  Polar AIr's B747 fleet will augment DHL's own fleet and charters.

clipped from biz.yahoo.com Atlas Air Gets Approval for DHL Deal Thursday May 10, 10:06 am ET Atlas Air Worldwide Gets Department of Transportation Approval for DHL Deal PURCHASE, N.Y. (AP) -- Atlas Air Worldwide Holdings Inc., which provides air cargo services, on Thursday said it received U.S. Department of Transportation approval of a strategic partnership with delivery company DHL Express. Under the deal, DHL Express will pay $150 million in cash for a minority interest in Atlas Air unit Polar Air Cargo Worldwide Inc. Polar will get a long-term, major customer out of the deal, while DHL will have access to Polar's aircraft capacity. Polar said it could see more than $3.5 billion in revenue from the 20-year commercial agreement with DHL. The deal is set to close in the late second quarter. Shares of Atlas Air slipped 29 cents to $58.61 in morning trading.

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China Sourcing: Balancing Cost vs. Risk

The Boston Consulting Group released a new report called  "Surviving the China Riptide: How to Profit from the Supply Chain Bottleneck".

The thesis of the report is that companies who source from China may endanger their businesses if they put too much focus on low cost manufacturing versus the risk of a long global supply chain moving through congested ports.  Generally, I agree with most of what BCG put forth, but I believe their report can be expanded in several areas.   

Here are BCG's major conclusions:

1. Bring manufacturing home.

2. Build "land-side" capacity at ports not yet overwhelmed by congestion

3. "Aggressively manage" their China-based supply chain, "looking for ways to squeeze time from it that competitors haven't identified or exploited."

4. Explore shipping alternatives, such as air freight, "that may appear costly but may actually lower overall expenditures by reducing hidden costs."

5. Invest in "premiums" and "capabilities" - paying higher prices, for example,for priority service ("premiums") or improving the company's own abilities to move goods quickly and efficiently past or around congestion.

6. Diversify supply with "multiple suppliers and supply points" or produce critical components and products domestically, accepting higher production costs as a tradeoff for lower supply-chain costs and reliable delivery schedules.

Eight More Ideas

Most of BCG's suggestions focus on shortening the supply chain through investment in capital infrastructure and increasing variable expenses by using faster modes of transport.  BCG's ideas are good,  but I think they can be augmented with more specific alternatives.   My suggestions include:

1.  Immediately look at alternative sourcing, especially of key components. Thats item 6 on the BCG list. For me its item 1. Low cost does not have to be sacrificed. Vietnam, areas of Central America, Eastern Europe and the eastern Mediterranean can also provide low cost manufacture. Mexico is an alternative, especially if NAFTA rules liberalize trucking.   Keep in mind the major thing that keeps Chinese goods "cheap" is a fixed currency valuation against the dollar.  If China ever floats the Yuan, you better have alternative sources because your costs in China will be going up. 

2. Take a very hard look at bringing manufacturing back home. "In shoring" is becoming a popular discussion as a way to balance spiraling fuel costs.   I see this as especially viable with bulk commodities such as the wheat gluten that caused so many problems with the pet food industry recently.   This may not be so viable with some manufactured goods where production cost differences are vast.    Unfortunately in some industries, such as footwear and furniture, our manufacturing capabilities went overseas in the 1980's and 90's. The human experience and talent in manufacturing in those industries simply evaporated when the jobs left.  Getting it back will be extremely difficult.    

3. Look at buying more often but in smaller quantities. Use both air freight and parcel services as support for bulk ocean container orders in order to provide on-demand safety stocks in case of port congestion.   Hybrid services using containers and parcel/air freight are available from most of the big supply chain integrators.  Consolidation and deconsolidation are good ideas if you can do it in multiple locations and not just southern California.

4. Rather than "building land-side" capacity,  consider partnering with a global 3PL who already has both the expertise and the facility infrastructure you need. Why buy when you can rent?    More specifically look at 3PL partners with facilities in multiple ports so that you can flex your product flows around problems.   Ask that your 3PL partner continuously bring you best practices from their other experiences as well.  The big guys have their ears to the ground.

5. Invest immediately in supply chain visibility tools that allow you to know exactly where your goods are.   The biggest issue during the melt down created by the US West Coast port strike in the early 2000's was "where is my freight?".   Using carriers and 3PL's with the proper technology will help alleviate that problem.  Using the cheapest carrier or NVO often won't solve this problem.  In fact during the port strike,  many of the discount carriers used public ocean terminals where the stevedores themselves didn't know where the containers were.  In selecting a 3PL partner, ask them to provide visibility tools as part of their solution.  Certainly these also need to integrate with your own order management systems for reporting and management functions. (See Sarbanes-Oxley). 

6. Get hold of first costs.   Change your terms of sale so that transport is controlled by you as the consignee, not by the manufacturer or a buying agent.  (Check this link for more info on buying terms conversion.)

7. Have a hard look at use of US East Coast all water services to balance risk of US West coast congestion.  Thats not a new approach as there's big demand for all-water ocean service nowadays, but I would rather pay a premium for all-water service via the Panama canal than use air freight as the first diversion point.   Much of the flexibility in determining routing is often a result of how soon your organization can allocate inventory.    Many major retailers can't allocate goods until its in their DC.    If that's the case in your company, working with a 3PL becomes a very good idea.  Use their systems where possible.

8. Engage in a discussion with regional port authorities.  The ports are not just sitting on their hands letting congestion eat them up.   Ports in Georgia and South Carolina are partnering in new ports, while LA, Seattle/Tacoma and New York/New Jersey continue to upgrade and work with carriers.   That 14000 TEU Maersk vessel has to have somewhere to go!  The railroads are also investing more in new infrastructure than ever before.  When Warren Buffet is investing in Railroads, you know something is UP. (was that a pun?)

Eric

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Old School Fun

I have to admit it.  I love nostalgia.  I also love those things thought to be "old school".

"In my mind, "old school" means a respect for a different set  of values, and probably more importantly...a return to a different level of innocence."

These were the days when there were no blogs.  No internet...no email.   And especially, no qualification cultures as "hierarchical" or "egalitarian".  Egalitarian means the kids can call the grandparents by their first names. 

Check this site out.  Its called plan59.com.  I absolutely love this site.  Old cars, old trucks, and especially, the old way of thinking.  I'm not saying its better...just that it's refreshing to look at what was the "future" in days when my parents were young.  (I'm 45).

This site is fun beyond measure.  Make sure to take a gander at the "new" cars.

Eric

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How to be a Good Leader

Practical ways to be a Good Leader. 

Roger Darlington is a citizen and business consultant from the UK, whose web site has run since the late 1990's.   His experience on a range of subjects makes it worth reading AND worth repeating here.

"Remember: leadership skills and techniques can be learned. You don't have to be a natural leader. Very few people are."

Know your team. At some point, every day, walk around the office and say "Hi" to everyone who works for you. If you're not in the office that day, call and see how people are.

Meet your team. Regularly - daily, weekly or monthly, depending on your place and type of work - have meetings of all the members of the team. Keep these meetings short, focused and action-orientated.

Train your team. Every team member should have at least two days training a year. Newer and more senior colleagues should have more. If they don't ask to go on training sessions, suggest some suitable courses.

Grow your team. Through varied experience and regular training, you should be developing each team member to be more and more confident and more skilled.

Set objectives for each team member. As far as possible, these objective such be SMART - Specific Measurable Achievable Resourced Timed.

Review the performance of each team member. At least once a year - at least quarterly for the first year of a new team member - have a review session where you assess performance, give feed-back and agree future objectives and training.

Inspire your team. Consider making available a motivational quote or story every week or month [for lots of good quotes click here].

Socialize with your team. Have lunch or an after-work drink with them, especially when a staff member has a birthday or there's another reason to celebrate.

Thank constantly. The words "Thank you" take seconds to say, but mean so much.

Praise constantly. The words "Well done" take seconds to say, but will be long remembered and appreciated.

Communicate constantly. Don't assume that people know what you're doing, still less what you are planning or thinking. Tell them, using all the communication tools to hand: team briefings, electronic newsletters, organizational newspapers.

Eliminate. Too often we do things because they've always been done. Life changes. Consider whether you could stop doing certain things altogether.

Delegate. You don't have to do everything. Develop your team members by training them to do more and trusting them to take over some of the things you've been doing.

Empower. A really effective leader sets clear objectives for his team members, but leaves detailed implementation of these objectives to the discretion and judgment of individual members of the team. As Second World War U.S. General George S. Patton put it: "Don't tell people how to do things. Tell them what to do and let them surprise you with their results”.

Facilitate. A confident leader does not try to micro-manage his team, but makes it clear that, if team members need advice or assistance, he is always there to facilitate and support.

Be on time. Always start meetings on time and finish them on time. Natural breaks keep people fresh. Short meetings concentrate the mind.

Be seen. Don't just talk the talk, but walk the walk. So visit each unit or department for which you are responsible on a regular basis. Don't do this unannounced - you are not out to undermine other leaders or catch out staff. So arrange with the unit leader or departmental head when you'll visit and ask him or her to walk round with you.

Make time. Managers are often very busy and this can deter people from approaching you, so make time for people and be approachable. People will appreciate you taking five minutes out of your busy schedule, especially if you act on/listen to what they say.

Really listen. Many of us - especially those who think they are important - don't really listen, but instead think about what they're going to say next. Give the person speaking to you your full attention and really take on board what they are saying. [For more detailed advice on listening click here]

Accept honest criticism. Criticism is hard to take, particularly from a relative, a friend, an acquaintance or a stranger - but it's a powerful tool of learning. Above all, assess criticism on merit, without regard to its originator.

Think strategically. The doers cut a path through the jungle; the managers are behind them sharpening the machetes; the leaders find time to think, climb the nearest tree, and shout "Wrong jungle!" Find time to climb the trees.

Have a mentor, someone doing similar work in the same or a similar organization with whom you can regularly and frankly discuss your progress and your problems as a leader.

Have a role model, someone who can inspire you to be a truly great leader. If you can't find one, study Jed Bartlet as the American President in any episode of the television series "The West Wing".

Constantly revisit and review these tips. In his seminal work, "The Seven Habits Of Highly Effective People", Stephen Covey puts it this way: "Sharpen the saw".

Plan your succession. You won't be there forever and you may not be in control of the timing and circumstances of your departure. So start now to mentor and train at least one colleague who could take over from you. Nelson Mandela did this (with Thabo Mbeki) - so should you.

Eric

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Nails on ITWO

i2 Technologies took a beating on Wall Street last week, losing 30 percent of its share value after announcing earnings of 13 cents a share on revenues of 65 million dollars. Analysts had expected earnings per share in the 22 cents range.   i2 subsequently announced the retirement of CEO Michael McGrath as a result.  i2 is a leading software developer of enterprise level transportation and supply chain management solutions.

The column below is by Lenny "Nails" Dykstra, who is now a columnist for TheStreet.com.   I find it entertaining that a guy who played "all out" for the New York Mets and Philadelphia Phillies is now a Wall Street columnist!  The most vivid memory of Dykstra I remember was the 1993 World Series when TV cameras showed Dykstra sitting in the dugout next to Phillies manager Jim Fergosi.   Dystra was smoking a cigarette and chewing tobacco...at the same time!  Fergosi had a smoke as well!  Lenny Dykstra was crazy then and may still be.  He thinks i2 is a good buy.   

Maybe I'm crazy too.  I agree with him!   i2's product line is solid and they continue to grow in customer base.

clipped from www.thestreet.com Dykstra: An Options Play on i2's Bloodletting By Lenny Dykstra Special to TheStreet.com 5/3/2007 9:14 AM EDT In my April 23 column on Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating), I discussed my inclination to invest in battered stocks with my deep-in-the-money (DITM) call strategy. As I said then, the market tends to go to extremes, meaning share prices generally reach higher highs and lower lows than true fair market value would dictate. Another example of this came Tuesday, when i2 Technologies (ITWO - Cramer's Take - Stockpickr - Rating), a supply-chain management company, plunged 30% in one day after releasing lower-than-expected earnings and announcing the retirement of CEO Michael McGrath. This move is an overreaction. True, the company reported earnings of 13 cents a share on revenue of $65.6 million, falling short of analyst EPS expectations of 22 cents a share on $64.9 million in revenue. But although earnings per share missed by a lot, the revenue was largely there. And after removing several one-time items, earnings per share climb to a more respectable 16 cents. Plus, when you consider the company posted just 4 cents in EPS a year ago, it's clear this company is growing. In fact, ValuEngine rates the stock a buy. Also, in doing my homework -- which includes a daily 4 a.m. telephone call to RealMoney contributor Richard Suttmeier -- I discovered that the stock has a fair value of $22.55, according to Suttmeier; it closed Wednesday at $18.10.

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