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

Standardizing Navigation Equipment

The Associated Press had a good article today on difficulties encountered by harbor pilots in navigating ocean vessels.   Each ship has its own electronic navigation gear and unfortunately, little of it is standardized.  This forces the ships pilots to understand the symbology and mechanics of dozens of divergent navigation systems instead of having expert knowledge of a standard set.

Differences in systems architecture and symbology were contributing factors in the ship/bridge collision and subsequent oil spill of the COSCO Busan in San Francisco Bay on November 7th, 2007.

What is interesting is that the article, which is clipped below, mentions that it would be difficult to get shipbuilders and shipping lines to standardize on a base set of functions that all harbor pilots can use.  I find that interesting in that the aviation industry does standardize its instrumentation. The behavior and symbology on on airline TCAS (collision avoidance) systems are all common.

It would seem logical then that shipping lines would also have standardized instrumentation and that base level navigation symbols would be universal.  Certainly major carriers such as Evergreen and Maersk Line, who also have sister business units in the shipbuilding business, should be able to standardize navigation instrumentation across their fleets regardless of vessel type.   

The key issue for the harbor pilots, whose specific job is navigating vessels of all types in and out of local harbors, is the divergence of the ships they must pilot.    Containerships, supertankers, cruise ships, even some military vessels all require the harbor pilots local knowledge to safely make it to berth.  When each ship has its own navigation system, that process becomes potentially hazardous.

Shipbuilders outsource the electronics that are put into ships from electronics manufacturers. For the most part, these guys are the same folks who service the aviation industry.  It would seem reasonable for the International Maritime Organization and the UN to specify a basic set of system requirements similar to how the FAA and ICAO work.

clipped from news.yahoo.com Oil spill fuels debate in ship industry By SCOTT LINDLAW, Associated Press Writer Thu Nov 29,  7:42 PM ET OAKLAND, Calif. - Eric Robinson stepped onto the bridge of the container ship Horizon Pacific and peered at a computer monitor depicting San Francisco Bay. Ship icons blipped clearly in the virtual water, but the meaning of some of the other symbols was murky. Robinson, a San Francisco ship pilot, makes his living guiding supertankers, naval vessels and cruise ships through the bay's treacherous waters, and his job is to adapt quickly. But he never knows what electronic navigation gear he will face when he takes the helm. And he thinks that should change. The government, the International Maritime Organization and the shipping industry are exploring how to bring some order to the jumble of electronic navigation aids proliferating on the seas — a movement that has been given greater impetus by an accident in San Francisco Bay earlier this month.

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Qantas Pays $61 million for Collusion and Price Fixing

Back in early August I wrote an article on Qantas Airways and their probable collusion on fixing fuel surcharges with other air carriers.   This week Qantas paid the US Department of Justice $61 million dollars for fixing cargo prices and fuel surcharges on the lucrative US-Australia trade. 

It could have been worse.   British Airways got busted by the DoJ and the British Office of Fair Trade for a whopping US $550 million.   Other airlines who were found to be in collusion included Korean Airlines. KAL paid approximately US $300 million in fines.

Considering that Qantas booked more than US $600 million in freight during the period under investigation (2000 to 2006), a 10 percent penalty is very modest.   The size of the fine is the result of a plea agreement between the US Department of Justice and the airline.  As of the original August report Qantas indicated it would accrue US $40 million in anticipation of a fine. 

Originally Qantas CEO Geoff Dixon was quoted as expecting the penalty to be substantial but that the impact wouldn't be felt until early 2008.     I assume that with the fine being substantially less than that imposed on British Airways, Qantas decided to absorb the cost in their 2007 books.  A fine the size of the British Airways penalty however would have put a serious dent in Qantas' earnings and would have had to be managed over a longer period.   CEO Dixon also indicated that up to 30 other airlines are under investigation and that the inquiry is still ongoing. 

Given the global nature of the multiple airlines involved in the price fixing scandal,  A number of large air freight forwarders were also investigated to determine if collusion extended to them.   As of this writing,  no formal charges have yet been brought against any forwarder/indirect air carrier.

Airlines are not granted anti-trust immunity, therefore they cannot speak to each other, email each other or otherwise communicate relative to pricing or commercial policies.    It is legal however to match published tariff rates or to establish tariff rules that are similar in nature.   Competition is supposed to drive the market, not collusion.

Eric

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DHL Express Announces 2008 Rates

Following recent announcements by UPS and FedEx,  DHL today published its 2008 rate adjustments.   DHL closely followed the rate actions of the other two major US parcel carriers.  The DHL actions were very similar to the rate activity of FedEx.

As mentioned with previous FedEx and UPS rate announcements, please study accessorial fees for changes.  These often have the most impact on total year over year rate differential.

clipped from www.dhl-usa.com Net Effective Rate Adjustment of 4.9 percent for Express Services DHL Express (USA), Inc., today announced new list rates for 2008. Rates will include a 4.9 percent increase in the net average shipping rate for DHL Domestic Air Express and International Express as well as an average increase of 4.9 percent for DHL Ground shipments and for DHL@Home. The increase for air express and international shipments is comprised of a 6.9 percent average increase in the base rates, offset by a 2.0 percentage point reduction in the Air fuel surcharge index. The new rates will be effective January 6, 2008. Other changes effective January 6, 2008, include a $0.10 increase in the surcharge for Residential Delivery and for both residential and commercial Delivery Area Service. Exception Handling will increase by  $0.50. The Large Package Fee will increase to $45. Additional details of the 2008 fee and rate changes will be available at www.dhl-usa.com as of December 14, 2007, and will be updated as further details become available.

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Black Friday Sales Show 8.3 Percent YoY Increase

In the famous words of Gomer Pyle, USMC..."Surprise! Surprise!  Surprise!"   Black Friday, which is the dubious name given to the mad holiday sales rush that happens the day after Thanksgiving Day in the United States, turned out to be a surprising success for US retailers.

Same store sales year over year, grew 8.3% or roughly 10.3 billion dollars.  Analysts had expected no more than a 5% up tick. Sales of e-goods lead the way with discounters such as Wal*Mart offering sales on big screen televisions among other things. 

I have to admit...I am surprised.   With US and global economies stressed by war, lower dollar values, higher oil prices and a peak shipping season that was somewhat less than projected,  it seemed as if this holiday season might be flat.   It still could turn out that way.    Our own household spent money this weekend on specific items, but we still have more to buy.    The next bit to come will be on-line purchases for out of town deliveries to relatives.   That will happen next week.   My wife will of course continue ninja assassin attacks on unwary retailers throughout the season.   What I have noted is that shoppers are being very targeted about what they buy, where they go and the amount of research they are doing before purchasing.   More pointed "hunting" and less "grazing" at the mall.    That is a good thing if you are a man.  "In and out"  of the Mall is always a good thing.

Black Friday 2007 portends a good holiday season for retailers, but a hockey stick effect could occur with frantic last minute buying.  I still think many Americans will buy gifts but spend less this year. Retailers will react with higher discounts and extended hours.   That heating bill in the Northeast US this year is going to be a big one.

Eric

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Black Friday

So.  Its here.  Black Friday.  The day after Thanksgiving Day in the United States.  The day when crazed consumers go out in the middle of the night to wait in line to buy their most desperately wanted holiday goods.   It's insanity I tell you! 

My bride and her sister were at the mall at 6:30 this morning looking to do battle with other early morning maniacs.   My habit on this day is to go on-line to our bank's web site and watch our joint checking account drain.  Periodically, I'll call my wife and say "hey! what did you just spend $400.00 on?!?"... "oh, just some Christmas stuff, but boy! what a deal "we" got!".  I hate Christmas season.  (not really...but I do hate the approximation of bankruptcy that happens in January and February each year.)

This year many stores were advertising opening at 4:30AM.   That seems totally out of control on the face of it.  However, a couple of years ago,  I got sent into the freezing night to wait in front of the local Best Buy store to get a Nintendo Wii for our son for Christmas.   The store opened at 7:00AM.   I was there from 10 PM until the store opened along with a couple of hundred other whackos.  I got the last unit.  There were 12 in the whole store (limit one per customer!).  I think if I had wanted to, I could have walked to the back of the line with my unit and sold it for twice as much money.   I value my life, so I didn't do that,  but I did think about it.   The 4:30 opening would have at least put me back home and in my bed for a couple of hours before the dawn. 

Being a logistics geek,  I really "get" what's happening in terms of how that game console got into my grubby hands. The process started back in the spring when orders were placed.  Then product got manufactured, put into a container and shipped to the United States.  From there, it goes to a DC,  is sorted by store allocation and in due course, is shipped to the store for merchandising.   On hot goods like the Wii I mentioned,  some product will move by air freight in order to pre-position high demand items.   Small consumer electronics like iPods, iPhones and gaming consoles all move that way. 

Traditional transportation and warehousing of course is now supplemented by on-line purchasing , which can send orders all the way back to origin depending on what the goods are.   Custom made Nike shoes are a good example.  If a company can allocate goods by store or even down to the consumer, the DC step can be eliminated.    DHL, UPS and FedEx all have combination services that allow goods to be labeled for shipment direct to consumer from origin using consolidations into the US, then using their express networks to blow the goods out through their networks.

As for me,  I do my shopping on-line.   I'm happy to let my wife fight the mall and Wal*Mart.   I think secretly she really loves it.  It's the Amazon warrior in her.   I'll take my Amazon on-line thanks.  (Shameless plug: for those looking to give books on logistics or best sellers...check out the links here!)

This year the holiday shopping season is expected to be moderate at best because of the sub prime mortgage debacle, a weak dollar and fuel prices.  Generally it comes down to people not wanting to watch the bank account drain.  Americans just don't feel great about the economy and more importantly, our own personal economies.   For that reason, Americans will probably keep some cash in reserve.   Those that don't will pay the consequences when that January heating bill comes in.

It's my great wish for all who read this blog that you have a healthy, happy and holy holiday season.

Eric

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Cyber Monday...is Really December 10th

Recently there's been a lot of activity regarding "Cyber Monday".  This is supposed to be a major on-line ordering event that would occur on Monday, November 26th.

The theory is that consumers will shop all weekend after Thanksgiving, November 22nd,  then comparison shop and buy on-line.   That's not going to happen.   Shop.org coined the phrase "Cyber Monday" and happens to own the URL "cybermonday.com".  This whole thing was a marketing ploy to get consumers to think that they "had" to order products on-line next week.   I have to give the shop.org folks credit. This thing got some traction.

Here's the Real Deal

The true measure of what's real in the United States relative to online purchasing is with the parcel carriers and the US Postal Service.  USPS, FedEx, DHL and UPS predict that December 17th through the 19th will be the highest volume shipping days.  That means that the week prior is (probably) the real cyber week.   

UPS says December 19th will be its highest volume day of the year with 5.6 million air packages moving.   

FedEx claims it will move an estimated 11.3 million packages through its air and ground networks on December 17th. 5 million of those will move through the FedEx air express network.   

DHL is also predicting Monday, December 17th as their highest volume day with a 50% increase in volume. DHL will add 425 extra flights and an additional 440 truck routes during the peak holiday season. 

The Postal Service is expecting to deliver 20 million pounds of mail to military installations around the world this holiday season. The second week of December should be the busiest week for overseas delivery. Mail to Iraq alone during this period is expected to increase more than 400 percent over the average weekly volume

I want to wish everybody who reads this blog in the United States a happy Thanksgiving holiday this Thursday. Let us pray for peace.

Eric

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Its Not Easy Being Green: Servicing Green Supply Chains

Increasingly, shippers are asking carriers to document the  environmental impact of their operations. In fact of the several hundred RFQ's my company has received this year, so far about 30 percent have included questions on environmental programs.  That number is expected to grow.

The pressure is on for transportation and logistics firms to illustrate what they are doing to "Go Green". Both government agencies and the general public are putting pressure on transportation companies to reduce emissions and increase fuel efficiency.

Carriers do get it and are listening. Ultimately efficient use of resources reduces the cost to serve. Getting there however isn't easy. Industrial engineering teams at transportation companies have spent considerable energy and money investing in aerodynamic vehicles, increased fuel mileage, reduced emissions,  longer trailer lengths and other ways to make transport more cost effective.

Some of the ways carriers are reducing environmental impact include:

Parcel Carriers using lighter, more fuel efficient vehicles. UPS is investing in hybrid package cars. Meanwhile, FedEx plans to replace all its medium sized delivery vehicles with hybrids by 2014. DHL has been testing Solectria Citivan electric vehicles since 2004.

Trucking companies and parcel carriers are using computer software to route vehicles not only to improve service, but also to reduce fuel consumption.   Parcel carriers are also using fewer aircraft and more trucks in overnight services.  When aircraft are used,  capacities are managed tightly by using using the right sized airplane in the right lane.

Trucking companies as well as shipping lines have spent several years investing in aerodynamic shaping of vehicles and vessels to reduce wind drag. Slippery ships and sloping noses reduce fuel consumption and improve revenue-per-mile.   Longer trailers and containers promise to increase the amount of freight that can be pulled by a single truck.

Air carriers now taxi to the runway on one engine.  This reduces fuel use as well. New aircraft such as the Boeing 787, are designed to take more people and freight farther than ever before.  Using thinner wings, a more aerodynamic shape and high tech engines that sip fuel, the 787 will impact both profitability and an airlines environmental footprint in tangible ways .

Like the parcel carriers, airlines are also matching smaller aircraft with bigger routes in order to maximize passenger yields.  The downside of this is that it has virtually killed the domestic air freight business.  When Delta flew an L-1011 between Atlanta and Dallas in the 1980's there was belly freight capacity to spare.  When that airplane today is an EMB-170 or MD-88, there just isn't any room for freight.

3PL's now more than ever, are being asked to use their expertise and engineering resources to help customers site distribution centers in locations that not only take advantage of labor costs, but also select modes of transportation that get goods to market as efficiently as possible.   Food producers are now looking at warehouses that are not located near plant locations but are instead deployed forward toward consumption.   New and clever ways to combine distribution for greater efficiency are also occurring.

Efforts by local governments in Southern California to force use of fuel efficient vehicles entering the ports of LA and Long Beach are well chronicled. By 2010, most of the trucks entering the port complexes will be newer vehicles meeting tighter pollution controls.

The cost of deploying new or upgraded tractors will show up in drayage rates. Shippers will pass that cost along, one way or another to consumers while at the same time looking at alternative ports where the cost is less. That, in and of itself will reduce pollution by moderating current container flows even as traffic increases over coming years. 

The Port of Los Angeles is also now providing shoreside power to containerships in order to reduce exhaust emissions from vessels in port.The port is taking it so far as to brand on cleanliness and environmental impact.

The market and political forces will make some strange bedfellows.

Unions and Industry are going to have to work together. Politicians in both political parties are going to have to do a better job of understanding the strategic value of transportation.  Shippers are also going to have to realize that supply chain efficiency is less about dictating target rates and more about collaboration with their partner carriers.

We are living in a time where creative use of technology and business acumen are going to change how we in the logistics industry do business. I personally think these challenges are exciting and will make our industry a dynamic one for years to come.   Ultimately, communication between all parties will be the key to creating green supply chains.  In this day of iPods, iPhones, email and txt messages, that's a challenge in and of itself. 

Eric

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Open for Business: Prince Rupert's Island

The shortest distance between two points on a sphere is called a great circle.  Its a straight line stretched across a globe.   Do the same thing between the Hong Kong/South China region and North America and you will find that the shortest distance lands squarely on a place 480 miles north of Vancouver, British Columbia.   That place is called Prince Rupert's Island, BC.

Combine that short distance from the manufacturing center of the planet with North America's deepest ice-free natural harbor and you have a perfect location for a sea port.   

That's not a new observation.   The Grand Trunk Railroad of Canada terminated its rail services in this area as early as 1914, noting that the area was a natural alternative to Vancouver as a port and a great way to tie rail services to import cargoes. 

In the 1920's the GT filed bankruptcy and was nationalized by the Canadian government. It later merged with Canadian National Railways. During World War II,  Prince Rupert was used to support allied military logistics activities in the Alaskan theatre.  By 1975, the Canadian government had declared the Port of Prince Rupert a "National Harbor", and constructed a number of breakbulk and grain/ore facilities such as the Fairview Terminal and Ridley Terminals.

During 2006 and early 2007,  the Canadian government converted the Fairview Terminal from a breakbulk terminal to a container terminal.   The port has natural advantages on the great circle route from south China and Japan, a deep water harbor and a relatively small local population. The port also had terminal connections to the Canadian National Railway.  The CN connects Prince Rupert with all of Canada and much of the US Midwestern heartland.

Today the Fairview Terminal on Prince Rupert's Island is operated by Maher Terminals of New Jersey in conjunction with the Prince Rupert Port Authority, the CN Railroad and the Canadian government.  Capacity throughput for the terminal is 500,000 TEU's in its first phase of development. By 2010 however, the port is expected to handle as many as 2 million TEU's.    

COSCO, China Ocean Shipping Company, the worlds sixth largest shipping company,  in conjunction with its CKYH Alliance partners, will be calling on Prince Rupert for its Pacific Northwest Butterfly South Loop Service. This alliance includes China-based COSCO, Korean liner firm, Hanjin, Japan's K-Line, and Taiwan-based Yang Ming.  The CKYH Alliance will call at Prince Rupert on a weekly basis with a string of nine 5,500 TEU vessels.   Connecting to the CN Railroad's on-dock double stack trains, these carriers will be able to route containers from Hong Kong, Yantian and Yokohama directly to the heartland of North America. 

The first containership to call at Fairview was the COSCO Antwerp, which discharged on October 30th, 2007.

Some of Prince Rupert's Island advantages are:

• Avoiding congestion in southern California.    Fairview Terminal has CNR DST trains right on dock.
• The shortest route from South China available to North America   
• By moving through Canada, American importers avoid US harbor maintenance taxes entirely. 
• Transit times to points such as Columbus, Ohio from Hong Kong drop to as little as 18 days because of the short ocean transit and express CNR DST connections.
• The US West Coast Longshore Union (ILWU) contract expires in the spring of 2008.   This route is a clear alternative.

Check out this video on Prince Rupert found on Youtube.com that was produced by the CN Railroad.

Certainly other carriers will follow the COSCO/ CKYH lead into Canada.  However, I also think that Manzanillo, Mexico will become another equally valuable alternative to US West coast container discharge.   For North American importers, (inclusive of the US, Canada and Mexico),  the future may be non-US ports.   The geographic benefits, coupled with modern technology could provide alternatives to heavy labor and environmental concerns in California.  While spreading the number of containers inbound to the US over Canadian and Mexican ports may seem counter intuitive, it may well have a positive benefit in terms of the environmental footprint on America of increased liner traffic.

Eric

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AST&L: Certifying Transportation Professionals

Back on October 21st,  I wrote an article about supply chain training and the need for both shippers and carriers to continue their professional educations. That article focused on a need for mutual understanding of customer and carrier business requirements in defining supply chain goals and methods.

This week at the NIT League Transcomp 2007 conference in Atlanta I had the pleasure of attending the annual meeting of the American Society of Transportation & Logistics.   AST&L is the most distinguished professional logistics certification organization in America.  The group offers globally recognized credentials to transportation professionals.   AST&L certifications come in three flavors.   A "Professional Designation in Transportation and Logistics (PLS)",  an advanced multi-module program for more experienced transportation pro's, "Certification in Transportation and Logistics (CTL)" and "Distinguished Logistics Professional (DLP)" certification for industry veterans with more than 20 years of experience.

AST&L merged with NIT League over 5 years ago and is growing. The organization was founded in 1946 but is growing at a record pace in 2007.  AST&L Certifications present a tangible way to demonstrate logistics knowledge and experience to colleagues,  employers and business partners worldwide.   AST&L certifications prove that logistics executives are both capable and promotable.   

The AST&L certifications are self study courses supplemented by on-line coursework.  Examiners who do the validation and testing of awarded credentials are from some of the best Transportation and Logistics schools in America.  These include Georgia Tech, the University of Houston,  Georgia Southern University, Auburn University, University of Tennessee, Penn State, the Maine Maritime Academy, North Texas State University and others.   AST&L's academic examiners are key influencers, thought leaders and developers of programs under the AST&L banner.   

AST&L has recently expanded with the development of AST&L in China with desire to expand further in Asia, Europe and the Middle East.  The organization also plans ongoing developments with CSCMP and other professional organizations that serve our industry. 

This years annual meeting welcomed an honored Chinese trade delegation including Captain Qian Yongchang, President of the China Communication and Transportation Association and former Minister of Communications for the Peoples Republic of China.   AST&L Chairman Michael Regan and Captain Qian exchanged positive comments about the relationship between Chinese and American businesses and governments, with special focus on joint developments in Supply chain education in China.

I was fortunate to join the Board of Directors of AST&L this week and look forward to participating in this servant leader opportunity to work with some of the brightest minds in our business.

Those interested in  American Society of Transportation & Logistics membership or certifications can visit the www.astl.org web site, or by email to info@astl.org.

Eric

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Mental Acuity: Winners Imagine Winning

Winners Expect to Win.

I blog about a lot of stuff within the logistics and supply chain space.  There are also a few topics that don't seem to be directly attached to my chosen field.  I blog about airlines because I love airplanes and my first internship job was with an airline.  I blog (sometimes) about character and leadership because I believe in it.  More importantly, I think this is an area where I will be a student for my entire life.

I look at the Boston Red Sox and the NFL's New England Patriots and I see two teams of players who expect victory but work at the process.   They know how to win because they've done it. That leads to an air of expectation.  Also let me say I live in Atlanta, so there is no special attraction to Boston.  I just know a winner when I see one!

This is what I know so far. 

The secret to being a champion is knowing that the most fun part of the baseball game is when its 3 balls-2 strikes-2 outs..9th inning...last at bat...game 7 of the world series and the winning run is on second base.   It is the most defined high pressure point in all of sport.   It is also the most mentally played through event by 9 year old boys playing little league baseball there is.  Virtually every child imagines hitting the winning run.  Running, jumping, smiling, yelling...winning.  What's interesting is that no little kid imagines himself popping out to shallow left field.  What the kid gets intuitively is that only ONE PERSON gets to be in that special position. Only one gets the opportunity to be the hero. 

Then there is "Reality" 

Somehow, most of us get the idea that because we are grown ups...we can't imagine victory.  Especially we can't pretend or "play" victory.   Not So!   Did you know that the best pro sports players imagine themselves catching the winning touchdown or hitting the winning run?   Did you know that the US Navy flight demonstration team, the Blue Angels and the USAF Thunderbirds literally imagine (as a group!) their airshow?  They do this before every single performance.   Not many adults want to be the hero.   They are too busy imagining failure. Imagining victory is the key to getting it. Pretending Victory is like rehearsing a musical performance.  You imagine and you train your mind. How many guys rehearsed the first call to the girl you eventually married?    How many sales people rehearsed their presentation in the car on the way to the big pitch?   You may still lose, but you won't win if you don't play. 

Laws of Attraction 

Are popular today as a subject relating to expecting to be successful.   My personal belief is that if you work hard and practice hard, you have a right to expect victory.  You should imagine it, taste it, expect it.  Regardless of outcome, you not only have a RIGHT to fight the fight, but you also have a right to EXPECT to win.

Most people don't work hard. Not really. There are TONS of people who give lip service to whatever sounds PC at the office.   I am convinced that if you work hard first, know your material, and rehearse your presentation, you have every right to expect to win.

Two other things also help though... and aggressive pricing department and a good relationship with God. 

Eric

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