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

Air Transport: Hard Times Now? Just wait until the Fall.

Best of Freightdawg.com article

Now that fall is upon us, the airlines are cutting back capacity.  While fuel is cheaper than expected, capacity is still being restricted.  I published this article back in June, 2008.  The impact shown here will now hit us in unexpected ways. 

One of which is pressure on airline upgrades for frequent flyers.   With fewer flights, there will be more platinum elite business customers competing for the available first class seats.  I saw that one personally last week on a flight to Newark.  Over 100 platinum customers on the same plane as me.  Despite my Y class ticket and status, I was number 24 for an upgrade!

Anybody who follows the airline business in the US reads daily about job cuts, capacity cuts and grounded aircraft. Anybody actually flying feels it in delayed flights, reduced amenities and increased fares. Face it, its not a fun time to be in the airline business. It has to be absolutely horrible for airline employees and their families.

Here's a snapshot of some of the major North American airlines and the impact that the weak dollar and higher fuel are having. Frankly it is a fiasco. Once the peak season this summer is over, the following cuts in people, planes and capacity have been announced.  No doubt more will be coming.  

The interesting thing is Southwest. Southwest will be growing their business by 4% as they take advantage of abandoned markets. Southwest has always been very aggressive on fuel hedging and is benefiting from that practice yet again. All carriers hedge fuel to some degree, but buying fuel on forward contracts takes cash.  With so many major carriers fighting just to make payroll every week, the liquidity isn't what it used to be. JetBlue and Airtran stand to also benefit though those carriers have made steps to delay delivery of new aircraft to help manage the stress.

Some of the ways the airlines are attempting to cope with the crisis are

• Increased fares! 
• Increases in peak season fares and surcharges. 
• Increased fees for baggage 
• Eliminating older aircraft 
• Increased use of Regional Jets 
• Postponed or canceled receipt of new aircraft orders 
• Eliminating unprofitable domestic routes 
• Eliminating less profitable international routes 
• Employee layoffs 
• Urgent work to convert to biofuels when possible 
• Fewer and fewer on board amenities 
• Increased service to higher margin international routes 
• Reduced number and hours of operation of Airline Clubs

Its not just the carriers here in the US that are struggling.  Qantas is having major problems in Australia and the Pacific as well. They've eliminated a number of routes between Asia and Australia as they refocus their aircraft on more profitable markets.

The Cargo Airlines aren't flying above the clouds either.

CargoItalia has returned it's aircraft to the leasing company. They may not return. Other carriers like Polar, Air Canada Cargo and Cargolux have reduced their capacity to Europe.  Singapore Airlines, EVA, Northwest Cargo and Air China have all cut capacity on the Asia to US tradelane.  Even on trades with high demand like the Latin American trades, carriers like Arrow and Centurion have been reduced to flying only on the weekends.

Air Freight Forwarders are receiving letters almost daily on new peak season surcharges and increases in fuel surcharges from the air carriers. These get passed along to the customer who in turn either has to adjust his sales price on his goods or seek alternative modes of transport. Any wonder why the ocean carriers are completely FULL?

For folks like me, there is opportunity and pain in this mix. The pain comes from my weekly air travel. I hate getting beat up every week just like the next guy.The benefit however is that shippers are more willing than ever to consider new supply chain ideas. Creativity and opportunities to shift the status quo are always fun. Lately that has taken the form of modal shifts to ocean freight and expedited LCL, strategic placement and allocation of inventory. Considerable focus takes place on green use of trucks/trains and planes as well as how to balance speed, shipment size and transit times across multiple supply chains within a conglomerate environment.

How are you managing both the stresses of fuel prices and the weak dollar in your business?

Eric

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2008: What's Next for Logistics and Transportation?

This is a "Best of Freightdawg" article

I originally published this in December 2007. Now that we are through the first quarter of 2008, this outlook still remains accurate.

What might 2008 hold for the logistics and transportation industry?

Here's what I think the key issues are and what impact they will have by mode.The key issue above all remains fuel. Security is a hot second.  Technology also has a big role to play along with the "Green" environmental movement. All will combine in unexpected ways to reshape our industry in the next couple of years.

The aggregate of this information is important to consider not only for budgetary reasons but as shippers and carriers enter pricing negotiations by mode.  Rates are important, but its not all about the price.  Available service will also be critical.   There were plenty of instances in 2007 where contracts signed at cheap rates didn't yield priority freight carriage, especially in air freight peak season. If you are a big shipper, you should consider that last sentence and how you will handle the 2008 negotiations.

Air Freight - main deck air freight I think will remain in high demand on the Asian trade lanes but not all because of volume.  European carriers such as Lufthansa shifted freighters out of Asian trades in order to take advantage of higher rates in the Transatlantic markets.  Latin American markets for main deck freight will be strong southbound. I see no reason for that to stop.   

Flights from Europe, North America and Asia to Latin markets remain strong.  Airline belly freight markets globally are reasonably strong and should stay so. Pricing however is much more competitive on the airline fleets worldwide.  The line between what freight should fly versus what freight should go by ocean freight however is blurring some. LCL freight increasingly is taking air cargo as shippers reconfigure their supply chains to adjust for fuel costs.

Airlines - US air carriers will continue to match smaller planes to longer routes in an effort to contain fuel costs. Fuel hedging, which has always been important, but better done by some airlines, will be huge.  Southwest Airlines is hedged through most of 2008 at $51.00 a barrel while open trading runs almost twice that.  Nevertheless, traditional discounters are now going to have to find new ways to compete with the big guys.  While Delta and Northwest emerged from bankruptcy in the spring of 2007 with a new battle plan, the fuel issue is complicating the competitive landscape and impacting their returns.   The recent extension of mandatory pilot retirement age to 65 could also be a complication as high time and highly paid pilots remain on the books instead of being replaced by younger (and cheaper!)  pilots moving up the ladder.   

These two issues could force merger talk to increase as airlines focus on optimizing air fleets and air crew costs.  I'm watching to see if Delta in particular places an order with Boeing to replace their 767's with B787's. An order of around 100 planes had been predicted earlier in 2007.  If Delta sits on it's hands, that means it could be looking at fleet rationalization under a merger before any new planes are ordered...especially since one of the possibilities is Northwest, who is already a big 787 customer. Merger talks for Northwest may also come in play as DHL, its largest air cargo customer, phases out of Northwest's cargo fleet in favor of its investment in Polar Air Cargo by late 2008.  Much depends on whether NWA can replace the DHL express volume.

The Green issue is an interesting one for the air carriers. The public sees airlines as huge fuel users and high carbon polluters.  Continental Airlines marketing department didn't do the industry any favors by offering to plant x number of trees for passengers willing to pay a premium.  That's well meant, but I think takes away from more important operational actions like matching planes with payloads and ranges, ordering the most fuel efficient jets available and optimizing the networks though rationalized services with airline partners.

Trucks and LTL - UPS and FedEx significantly reshaped the US Less than truckload (LTL) market in 2007 by acquisition of Overnite and Watkins Motor Lines respectively.  Using parcel express expertise and planning, both have upped the LTL service level by introducing time definite products in the LTL space.   LTL traditionally is a day definite business.  With parcel carriers now entering that business,  service requirements are going up while margins will go down.   Meanwhile available freight has been shrinking. If shippers can hold freight long enough to make FTL shipments, or zone skip, then they are doing it.   Freight that was moving domestic air is now moving back to deferred air freight, otherwise known as GROUND.   

For FTL, the slump in US housing was a major hit this year. That should continue at least into the first part of 2008. Despite market pressure I believe that the labor market in trucking will be stable going forward because UPS and the Teamsters have already concluded their 2008 contract renegotiation.  That will allow the National Master Freight Contract to be concluded using the UPS contract as a basis.

Parcel - All three major parcel players will take an increase of approximately 4.9% for express shipments in 2008.  However, watch for accessorial fee changes to figure the true cost to ship.  UPS, FedEx and DHL all carried record levels of parcel freight this holiday season, with UPS accounting for 22 million pieces on their largest day. In order to combat the increases I think shippers will work hard to choose deferred modes for parcel and especially on LTL shipments.  The US Postal Service could become an increasing factor in commercial parcel shipping if allowed by Congress to negotiate rates.  The US Post Office is the 800 lb gorilla in the mail room! The Postal Service also has access to the FedEx day air network as well.   

I am also intrigued to see whether the US Government will force the union issue with FedEx in 2008.  FedEx has always claimed its employees need to be covered under the Railway Labor Act while UPS and other Teamster employers are covered under the National Labor Relations Act. Airlines are covered under the RLA and it's much harder to nationally organize under that law. However, with the FedEx folks now offering every single mode and service that UPS has, a difference in labor laws seems outdated. Fred Smith may find himself in front of a congressional microphone again on that this year.

Railroads - Warren Buffett and Berkshire Hathaway decided to buy the ultimate train set.   Buffett invested this year in BNSF, Union Pacific and the Norfolk Southern Railroads. All are major players in the movement of coal and other energy products. With oil being as high as it is and European markets now clamoring for US coal,  Buffett is buying into the primary capacity to move coal and biofuels to market.  Not a dumb guy.  These commodities will drive rail capacity and rail pricing for some time to come.   Buffett strengthened and underlined that strategy this week when Berkshire Hathaway secured 60% ownership of Union Tank Car Company.  UTLX is one of the primary constructors and repair facilities of tank rail cars.   Matching use of the rails with available capacity puts Berkshire in tremendous position to capitalize. 

Ocean Freight - Asian imports continue to drive volumes in the international ocean markets.  Fuel remains the biggest part of ocean transportation costs.  However pressure from security concerns at US Ports in the form of the new Transport Worker Identification Card (TWIC) will force all port workers and those with access to the ports to have background checks in order to work in US port facilities.  Security will add cost to liner infrastructure costs and will show up in the freight rates in due course.   

Green pressures from local environmental groups will also add costs as Southern California ports force new environmentally friendly trucks and truck modifications on local drayage firms. In order to fund the conversions the ports will charge a $35.00 port fee per container. Those fees will immediately show up on ocean bills of lading as surcharges. For mid-size importers these fees almost immediately add 5 figures to the transport budget, and for the really big guys, this number represents millions in cost.   

Look for importers to strongly consider alternative ports in Canada and Mexico such as Prince Ruperts Island in British Columbia, or Lazaro Cardenas in Mexico.   Both have significant rail tie ups with the Canadian National Railroad for Prince Rupert and Kansas City Southern De Mexico for Lazaro Cardenas.   These are two seriously great port alternatives if SoCal is a problem.

APL added exciting new container equipment to the ocean business by introducing 53 ft international ocean containers. While potentially market disruptive, These box sizes will be welcomed by importers of volume cargoes from Asia where they have the order management technology to cut a store level distribution list from origin.

This is my view on the last day of December 2007.    I will look back on these quarter by quarter to see what's changed. With this much cargo in play, along with the major market dynamics of fuel, currency, security, sourcing and the attendant technology,  I am sure much will change.

I haven't even touched on the 3PL and contract logistics markets or supply chain technology. Perhaps I will write on those within the next several days.

Happy New Year.  I think it will be exciting.

Eric

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China: Local Business Professionals Wanted!

This is a "Best of Freightdawg.com" article that was published in June, 2007.  Since Freightdawg.com has grown considerably since then, I republish the article to a larger audience.

Last year, the American Chamber of Commerce in Shanghai surveyed almost 300 U.S.-based companies with operations in China and found that the No. 1 business challenge in China was attracting and retaining talented white collar managers.

As China's economy matures, it is shifting from a manufacturing economy to a more service based economy.  This is a natural evolution as money moves into the pockets of consumers as a result of China's economic success. Service based businesses increase the demand for skilled, white collar employees with professional management and business talent. The problem is there are just not enough local Chinese with the skills to suit the burgeoning market.

Shaun Rein is the Founder and Managing Director of China Market Research Group, based in Shanghai. Recently he published an excellent article on "How Multi-Nationals Err in China". The article highlights three main reasons why multi-national firms have such difficulty in finding, attracting and keeping local talent. 

Two Tiered Pay Systems with Little Opportunity for Advancement.

There is a perception that a glass ceiling exists for local Chinese staff - Western companies often import senior managers from the head office or from Hong Kong or Taiwan to run their operations in China.  Many times these people have only limited experience in local customs or market knowledge. This is very frustrating to talented Chinese employees who think that opportunities should be afforded to them to run the business.  This is seen as a major cause of job hopping, as Chinese employees see little opportunity for advancement in these businesses.

Imported foreign managers often make considerably more money than local Chinese managers. As a result an imbalanced system of payment exists that many local managers feel is unfair. The best Chinese managers therefore often prefer to work for Chinese firms where they feel this kind of two-tier system doesn't exist. Why work for Google when you can work for Baidu.com?

Chinese Baby Boomers Want a Balanced Life

Younger Chinese workers have experienced three decades of Chinese economic explosion. As a result they want many of the same trappings of a comfortable life that those in the West enjoy. These include more free time, more disposable income and the ability to enjoy both. Quality of life is more important to younger Chinese employees than just a quest for money itself.  These Chinese Urban Professionals, or "Chuppies" want the same things young western people do.  They know brands, they know fashion, but want it on their terms.  That will be a difficult transition for business and Government in China going forward.  It is not about "all work and no play".

Education / Training Opportunities

China's educational system is largely based on rote memorization. Chinese employees want and need more advanced education that prepares them for the dynamic pace of business. Younger Chinese employees value education and training.  They see it as a link to better pay and quality of life. Firms that can offer educational opportunities are likely to be able to attract better candidates and keep the talent they invest in.  Especially prized are overseas assignments for Chinese managers or trainees. American hotel chains such as Ritz-Carlton, Marriott and Starwoods  excel at this.

Chinese HR Professionals: Pure Gold.

In a previous article, I highlighted that in addition to savvy business managers, it is critical that multi-national firms hire and retain skilled Chinese HR managers. These are among the most highly prized of all available Chinese business professionals because they understand the local market and can advise multi-national management teams on what it takes to satisfy and retain local talent. Chinese HR professionals often command as much as a 20 percent premium in salary above other Chinese management professionals according to Korn/Ferry due to their rarity.

Eric

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Summers Here: Flight Delays in Northeast

This is a "Best of Freightdawg.com" article!

USA Todays Ben Mutzabaugh runs a travel blog.  The article below discusses the horrid experiences travelers into New York/New Jersey have had this summer. Over 200 flights just last week were canceled.  This isn't news however. Its a more frequent occurrence than passengers, the airlines or the FAA would like to have happen.

The New York metro area air space has to contend with air traffic coming into New York/JFK (KJFK), New York/Laguardia (KLGA),  New Jersey/Newark (KEWR) as well as major corporate jet airports at New Jersey Teterboro (KTEB) and Connecticut's Weschester County Airport. (KHPN). Literally hundreds of aircraft of all sizes permeate this air space.   

When the summer weather hits, spacing these aircraft becomes a major network problem.  Often times, its not the weather in the NY/NJ area thats the problem. Sometimes its weather in Atlanta.    With flights between the New York area and ATL and points south to Florida being flown hourly, the FAA conducts ground holds that routinely disrupt flight arrival times.

Here's the problem. 

The air traffic control and weather systems in the New York area are over 40 years old.  The radar resolutions on systems used by the FAA can only see to a 12 mile resolution.   Thunderstorms that look like they are right over the air field may be several miles away.   The airlines use higher resolution weather observation systems and can see when there is a hole in the weather.   Operations get frustrated when the FAA puts a hold on traffic when it may be CLEAR to fly.In early June, the FAA had a major systems crash in its Atlanta base which caused major reroutes.  The FAA is struggling to keep up with old systems and a flight environment that gets more complex and more crowded every year.

In the mid 90's my job called for me to fly into Newark about 3 times a month. I used to say that the flight from Atlanta to Newark was a 2 hour flight going...and a 3 hour flight coming home...because you'd spend an hour being number 26 for departure coming out of Newark!    Check this story out from the NJ Star Ledger on how awful things got last week.

In Atlanta,  the Federal government spent $1 billion dollars to put in a new runway 10/28. This commuter runway was supposed to alleviate spacing of flights coming into Atlanta. That alone was supposed to have a positive impact on the entire North American air network.  My experience is that the runway hasn't helped...yet.  ATL's impact on the entire air network is huge since it is the busiest in the world now.

The FAA 5 year funding bill in front of Congress now has over $50 billion in it for operations and another $15.2 billion for infrastructure investment.   Flight delays like we are experiencing this summer highlight why a good FAA bill needs passing as soon as possible.

"Flight delays in the northeast during the summer are going to happen." 

Here are some tips I use to beat the crowds.  The key is to be prepared and be nimble.  Flexibility and experience will get you where you want to go.

Six Ways to Cope with Flight Delays in New York / New Jersey.

1. Have your travel agent and your preferred air carrier phone numbers programmed into your mobile phone.  The very first second you hear of a flight delay, call the 1-800 numbers to get a new flight or seat.  Don't stand in line with the other lemmings.

2. Spend the money and join an airline lounge/club.  Not only are they more comfortable to work in while you wait, they have shorter lines if you need a customer service agent. Free drinks also come in handy on occasion!

3. If you travel into NY/NJ regularly, have the telephone numbers of some local hotels pre-programmed into your mobile phone. The second your flight gets canceled, get on the phone and book the room.

4. I keep a couple of car services programmed in my phone as well. Calling for a car service to take you to the hotel is faster than a taxi, and often just as affordable.

5. If you have to spend the night, don't rebook to the first flight the next morning. The airport will still be a complete zoo. Book to the second or third flight out. Often these depart about 9:30 or so and you can still get out and possibly still get your upgrade if you qualify.

6. Never completely believe what the airline desk jockeys tell you. Their primary mission is to make you "GO AWAY".  If you have internet access check these sites for "whats real" regarding ATC delays. Both FAA Flight Delay Info. and Flightaware.com are great sites for getting the real skinny on whats going on.

Eric

clipped from blogs.usatoday.com With schedules packed, storms can decimate flight schedules One of the best stories on this past week's round of delays and cancellations comes from The Star-Ledger of Newark. The paper puts the nationwide delay problem into perspective by taking a look at how airlines dealt with yesterday's storms at Newark Liberty International, one of the most delay-prone airports in the USA. The paper's story –- a good read for those wanting more on the subject –- says "yesterday's flight operations at Newark … , where more than 200 flights were canceled, provide a stark illustration of an airline industry so overburdened that a mild summer storm –- or even the fear of one -– can wreak havoc across the nation. It was not yet even 8 a.m., as early forecasts indicated severe thunderstorm activity brewing along a wide swath of the Northeast, stretching from Boston straight down to Washington, D.C."

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One of the best stories on this past week's round of delays and cancellations comes from The Star-Ledger of Newark. The paper puts the nationwide delay problem into perspective by taking a look at how airlines dealt with yesterday's storms at Newark Liberty International, one of the most delay-prone airports in the USA.

The paper's story –- a good read for those wanting more on the subject –- says "yesterday's flight operations at Newark … , where more than 200 flights were canceled, provide a stark illustration of an airline industry so overburdened that a mild summer storm –- or even the fear of one -– can wreak havoc across the nation. It was not yet even 8 a.m., as early forecasts indicated severe thunderstorm activity brewing along a wide swath of the Northeast, stretching from Boston straight down to Washington, D.C."

Parcel Carriers shift from “Oversize” to “Dimensional” charges

This is a "best of" Freightdawg.com Article!

Jerry M. Hempstead is a 32 year air express industry veteran and consultant.  He is President of Hempstead Consulting based in Orlando, FL.  Jerry is a contributing author to freightdawg.com and may be contacted by email at gmhempstead@aol.com

---

Parcel carriers change rating practices on oversize shipments

In January 2007, all three major parcel carriers announced revisions in how they treated over sized shipments.   New FedEx, DHL, and UPS "dimensional weight" rules are noted in the links below.

• FedEx Dimensional Weight Rules
• DHL Dimensional Weight Rules (Viewed as PDF)
• UPS Dimensional Weight Rules

Whether you are negatively impacted by these amendments is contingent on the package size of your shipments. If a shipper’s items are less than 3 cubic feet in size then these announcements are actually good and could result in lower shipment costs. However, studies have shown that if your shipments currently move under previous Oversize Rule(s) the migration to dimensional weight could result in your company paying between 15 and 17% more than you pay today for these shipments.

"What can I do about it?"

First, Understand your Book of Business

With respect to managing your parcel costs, a shipper first must understand what they have and how the rule may affect them. The first step in this process is to create a profile of your parcel shipments that details the types of parcel shipments that occur, where they are shipped and the volume of packages tendered to each carrier.  If this profile discloses a significant number of oversize shipments, or there are other warning signs that indicate that your company may be adversely affected, then you  likely have some thinking to do.

"Then consider your options"

You have several options, some of which can be used in combination. These first address internal inefficiencies, then leverage the politics of your carrier relationships, the competitive marketplace and your specific situation.  Each case may be different.

Consider Changing Packaging - Based on what the profile discloses, it may be worthwhile to look at the packaging sizes used. There are some nuances between various box sizes where one size may dim one-way and another not at all. The information may be in your shipper invoice file or on your weekly flat file billing from your carrier.   A review of the bills can provide some beneficial insight.

Ask for higher discount to offset Dim rule changes - You can always try the traditional method of demanding a higher discount off of the base tariff rate to mitigate some of the impact of the rule change. One toy company noted that after they sat down with their current parcel carrier and went over their analysis of the impact of this change, (which showed an increase of 14%), the carrier volunteered to increase their discount to partially offset the impact of this increase.

“Breach of Contract” - Call in the incumbent and tell them it is your expectation that the oversize rule that was in effect at the time the contract was signed must be the rule moving forward for the duration of the contract. If they refuse, then advise them that you consider that carrier in breach of the contract and are therefore canceling the contract on 30 or 60 days notice per the contract. No parcel carrier wants to lose market share or lose customers over this new rule.

Put the business out to bid - Call in the competition and put the book of business in play and TELL the bidders they can only have the business if they grandfather the old OS rule and or waive Oversize entirely for the duration of the contract award. The key here is convincing the incumbent parcel carrier that his business is at risk. Right now, there is a battle going on amongst the Big Three (UPS, Fed Ex and DHL) and they have been very aggressive in protecting their turf and trying to get new customers.

Suggest a Phased approach - If you want to adopt a less adversarial stance, you can request that the incumbent carrier phase in this new rule by applying a more liberal dimensional factor such as 300 or 600 for the next year and then gradually reduce the divisor until the 194 is reached some time in the future. The increase in the dimensional factor can reduce the weight against which the package is compared (a.k.a. the package is billed at the greater of the weight of the package or the weight calculated under the dimensional freight rule).

Consider adding regional parcel carriers - If the Big Three are not willing to budge, then consider using use regional parcel carriers that don't apply an oversize or dimensional rule (such as Eastern Connection or California Overnight or WPX) wherever possible. Our experience has proven that the Big Three are very adept at noticing (what we refer to as) diverted freight. This is freight that once was moving in their system and is no longer there.

While some of these steps may seem pretty basic, we have surveyed some shippers and have been somewhat surprised at how few of them are being proactive in negotiating with their carrier (right now) to address these issues. Additionally, we have been a bit surprised to learn that very few of these shippers have a complete profile that details their parcel transactions. 

If you would like additional information, or have any questions, don’t hesitate to contact me at gmhempstead@aol.com.

Jerry

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Box Business: Container Yachts!

This is a "best of" Freightdawg.com article!

In Ye Olden Days...

Back in the 1980's, I was a young sales rep for P&O Containers working in the ocean shipping business. One of my clients was Sea Ray Boats.  Sea Ray built power boats ranging from small personal watercraft up to yachts.

P&O was amongst a handful of carriers that transported Sea Ray products worldwide.   We did it by putting them on flat rack or platform containers.   These are just ocean containers without sides or a roof.  The boats were invariably "out of gauge", meaning that they stuck out beyond the sides or top of what would be a normal 40 ft. ocean container,which is 40 ft long x 8 ft. wide x 8.5 ft tall.  Because of the extra dimensional factor, "OOG" cargo such as these and other motor yachts would ride on the top tier deck of the container ship.   Our pricing department would charge a premium for the extra dimensional space by claiming that these loads displaced usable container space.   

Operational Costs of Container Transport

The truth of the matter is that the specialty containers these OOG loads required were expensive to lease, and hard to find. Further, once grounded overseas, special equipment often had to be repatriated back to origin without a load, meaning the outbound head load had to support a deadhead cost factor in the base rate.  Compounding the logistics was that our arch competitor at the time, Sea-Land, was a prime mover of this kind of cargo and tended to suck the leasing markets dry as a defensive tactic in addition to their large requirements for military cargo. (Those Rats!)

In the North Atlantic trades to Europe as well as to Asia, the pleasure boat market tended to be new boats going for retail sale through dealers.  In the Mediterranean however, there was an additional market for large yachts to be relocated seasonally between the Med and the balmy waters of the Caribbean. Wealthy owners would load their boats aboard in Miami or Charleston and then pick them up a week or two later in Algeciras, Genoa or Piraeus. They'd take a commercial flight to Europe and their boat would take a cruise on a bigger sister.  Some big yachts transit the Atlantic this way rather than sailing on their own despite the ability to do it.   

For the most part, nothing has changed since those days over 20 years ago. Container ships are bigger and faster, but the port operations and the equipment needed to move yachts this way hasn't "really" changed.  Until Last Year.

Enter the "Container Yacht"

Bernie Blum is a sailor who likes to sail anywhere he can, anywhere in the world. After being quoted as much as $40,000 dollars to transport his 43 ft sail boat to Scandinavia, he decided that there had to be a better way.

Working with Seattle naval architect Bob Perry, they designed a 39 ft. motor/sail yacht that can fit within the body of a standard 40 ft ocean container.   Called the "Far Harbor 39", the boats are built in Oregon at Schooner Creek Boat Works and marketed by Blum's new company "Container Yachts".   

The FH 39 has a 600 mile range under power and sails with a full-batten mainsail and a roller furling jib. She has an enclosed cockpit and is well appointed for a vessel with a beam width of only 7.4 ft.   She motors at approximately 9 mph but I suspect she sails like a rocket!

Retailing for around $225,000.00 Dollars, the boat fits nicely into an ocean container, which can then be transported worldwide for much more nominal prices.  Further,  the container is intermodal and can be hauled by truck or by rail virtually anywhere.   Left in the container, the boat can be stored wind and weatherproof on the ground or on a chassis.   

The target market for container yachts remains with the wealthy.  To transport your container yacht to the Med still takes 10 days.   Clearing customs, prepping the boat for sail, dealing with hazmat requirements on fuel etc., still is a bit of a hassle. For that reason, if you're not planning on cruising the Med or Caribbean for 3-4 weeks, a charter would probably be a better deal.   Still, if you have the time and especially the money, the container yacht is a great way to see the world from the sea.

Missing a "Value Prop" in the container itself?

In reading ContainerYacht.com's marketing material, they make much of the lowered cost of transport, however the value I see is really in safe storage and extended life of the boat by less exposure to the elements.   Using a carrier's container reduces the benefit to only lowered cost of transport...but for just a few thousand dollars more, the boats could come with a shipper owned container and then the value translates beyond transport and into appreciation on the life of the boat.  Most ocean carriers charge less for carriage of Shipper Owned Equipment (SOE) because there is no requirement for repatriation. (just remember to file a customs declaration at destination for both the boat and the container!)  There may also be a savings in Marine Insurance because of greater security of the asset both in the US, in transit and abroad. 

Personally, I'd build these boats in South Asia and market them complete with container and free delivery anywhere worldwide.   Boat in a Box indeed!

Eric

clipped from www.robbreport.com Boating: Box Launch To explore the Queen Charlotte Islands two years ago, Massachusetts businessman Bernie Blum had his 43-foot Cheoy Lee shipped overland from Florida to British Columbia. Blum then set his sights on the Baltic, but transporting his yacht there proved to be more complicated. “The big yacht transport outfits don’t go to the Baltic,” he notes. “They suggested France. I found one freighter that would take my boat as deck cargo—for $42,000.” That plan would not work: Blum did not have the time to sail his boat from the Mediterranean to the Baltic, nor did he have the inclination to pay such a fee. “Why should it cost so much to ship a boat?” Blum asks. “I knew that if I could fit one in a container, I could ship it for a fraction of the price.” About a year ago, he contacted Bob Perry, the Seattle naval architect who had designed his Cheoy Lee. “I asked if he could design a cruising boat to fit into a crate,” Blum says, “and 90 minutes later he e-mailed a sketch.” Blum also discovered that his theory already was being practiced by the owners of Flying Tiger—a 33-foot racing sailboat that the owners can dismantle, fit into a container, and then ship to regattas.

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Very Cool: RFID Checkout at the Grocery Store

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Back in February, I wrote an article highlighting an excellent video done by the Metro Group on how RFID works. The video below, which is actually an IBM commercial I snagged from youtube.com, is a clever piece showing what appears to be shoplifting, but is actually one of the key features of an RFID enabled store.

The "shopper" in this case picks up whatever he wants and when the customer passes through an RFID reader at the check out, the products, which are in his pockets, are automatically scanned and charged to his credit card.

Those who have read some of my other articles know I despise check out lines, especially self check outs.  I can never make them work.    The scenario below is a dream to somebody like me.  It speeds me through the store and out to do my other errands.    Since the tag reader knows what I bought, it can also be tied to replenishment ordering to resupply the store with the goods I just bought.

Wal*Mart has mandated that their top 100 vendors tag products with RFID tags.   One day it will be great if all products are similarly tagged.   Just think how convenient holiday shopping will be if you don't have to wait in long check out lines!    I might actually venture back into a shopping mall again.

(Note: Some corporate proxy servers ban video from youtube.com.  If you see white space below...you may be on such a network.  Please revisit from home or a connection that does not go through your company VPN.)

Eric

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Retail Video on RFID

This is a "Best of Freightdawg.com article!

This is an outstanding video demonstration and explanation of RFID.   Radio Frequency Identification. It was produced by the Metro Group in Germany.  Retailers such as Wal*Mart and Target in the  US require this technology from their vendors for application at the pallet level.  European Retailers such as Metro and Tesco are also making use of Radio tagging.    DHL is a major partner with Metro in enabling RFID in Germany.

There are a number of people who think RFID is a conspiracy to track individuals and an insidious threat to personal freedom.  I prefer to think of it as a high potential supply chain tool whose cost must come down to be widespread in reality.

Eric

This was clipped from www.youtube.com using Clipmarks 2.0.   (Note that some proxy servers prevent viewing youtube videos.  If so...check the article from home!)

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Courage: Grace under Pressure

This is a "Best of" Freightdawg.com Article!

First,  This has nothing to do with my normal fare of Logistics related blog posts.  It is an article I write to illustrate personal excellence, humility, class and courage in action.  I am honored and humbled to also be related to the subject of the story.

Leslie Mouton - KSAT News Anchor.

My cousin is a TV news anchor in San Antonio, Texas.  Television station KSAT, San Antonio's channel 12, news anchor Leslie Mouton is my mothers niece. Leslie is beautiful, intelligent, funny and talented.  The person I see on television doesn't seem like the down-to-earth kid I knew in my own youth.  The first time I saw her on TV, I didn't recognize her.   That was years ago now. Leslie's mom (my Aunt Lyn!) showed me a tape and I had no idea who I was looking at. This person was clearly a professional.  I had to be told that was MY COUSIN.  Man!!  She was GOOD.  Took a 5 second epiphany, then I recognized Leslie Mouton for whom she would become.

A Health Crisis and a Rise to Meet it.

Leslie contracted breast cancer a few years ago.   Rather than hide it,  Leslie took it and made it a public thing.   She talked about her illness on-line, in the news, and even did the News Bald...to show that a woman (anyone!) can be in recovery from cancer and still perform in that most plastic of worlds,  Television media. 

Cool as that is, I also think it was Leslie's way of "calling bull shit!" on her disease and situation. This disease would be fought on her terms.  That is the definition of a champions reaction to adversity.

Leslie pretty much proved that "Bald is Sexy".  It ain't about the hair.

Leslie, maybe without meaning to, became a guiding light. A Guidion. A flag to which others may march in step.  I am sure none of this was in Leslie's head about where her career might take her.

Leslie's effort, and her other local work with cancer charities etc., landed Leslie on the Oprah Winfrey show.  She was highlighted as a hero by Oprah for being so brave and helping get the message out to women everywhere about the importance of breast health and breast examinations.  She has her own web site and has been a motivational speaker on her own personal health journey.  Leslie has subsequently told her story on Inside Edition, Good Morning America, Primetime 20/20 and other national news shows.   

"That sounds like Lemons to Lemonade..."

However, As I write this Leslie is back in the hospital.   This time for a double mastectomy.   She underwent a preventive surgery and breast reconstruction yesterday.  9 hours in surgery.

Check this link out to see Leslie herself explain the procedure she underwent.

I admire Leslie Mouton because she has chosen to make her personal health crisis a lesson in bravery and in shear style and class. San Antonio, Texas is damn lucky to have her.   So is our family.

To the girl from Lafayette, La... You geaux girl.

Eric

The article below from the ksat.com web site is linked to Leslie's personal web journal.  I encourage you to read it.    

clipped from www.ksat.com

Leslie Mouton Undergoes Mastectomy

SAN ANTONIO -- KSAT 12 anchorwoman Leslie Mouton is doing well after she underwent a mastectomy Monday.

Leslie underwent the procedure in an effort to prevent the recurrance of breast cancer.

The procedure, called DIEP Flap, allows surgeons to remove and reconstruct breasts using abdominal tissue and without cutting through abdominal muscles.

Leslie will be off the air for several weeks while she recovers, but she will be keeping viewers updated on her progress through her diary on KSAT.com.