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  1. 1. AUGUST 2012WWW.LOGISTICSMGMT.COM ®201229th Annual Questfor Quality LTL: Winning over carrier partners 56Going Wireless evolution 60for goldPage 30 Labor management 64 QUARTERLY TRANSPORTATION MARKET UPDATES OCEAN CARGO: Can we still be friends? 68S LTL: Profitability improving 74S
  2. 2. Your Transportation Solutions Provider Thank you for naming PITT OHIO Best in the Quest 18 Time Quest for Quality Award Winner For Northeast/Mid-Atlantic Regional LTL Carrier 8 Time Quest for Quality Award Winner For Expedited Motor Carrier Like us on Facebook or Follow us on Twitter to find out how you can celebrate with us. www.pittohio.com find us follow us join us
  3. 3. 2012We are honored to be a recipient of this award for the 10th year in row, as voted by our customers.Terminals: Iowa City, IA - Alanta, GA - Carlisle, PA - Chester, VA - Columbus, OH - Jacksonville, FL Kingsport, TN - O’Fallon, MO - Olive Branch, MS - Phoenix, AZ - Dallas, TX Heartland Express • 901 N. Kansas Ave. North Liberty, IA 52317 800-451-4621 • www.heartlandexpress.com • marketing@heartlandexpress.com Publically traded since 1986 on NASDAQ - HTLD
  4. 4. Get your daily fix of industry news on logisticsmgmt.com An executive summary of industry news n Earnings growth…check! Although it term strategic advantages, and still continue to sounds like a broken record, freight transporta- meet existing service standards. tion companies continue to post strong results amid the ongoing chorus of economic uncer- n ATA report zeros in on truck driver tainty. Some of the first companies to report Q2 shortage. While the challenge for carriers to earnings, including intermodal market leader find truck drivers is not new, the American J.B. Hunt, truckload carrier Werner, and Class Trucking Associations (ATA) released a report management I railroads CSX and Union Pacific, reported with guidance for carriers aimed at alleviating quarterly profit growth and pricing gains. But the many challenges that come with filling cabs. even though Q2 earnings have been positive, According to the report, more carriers are con- UPDATE many freight transportation stakeholders are sidering hiring inexperienced drivers and are exercising caution to see if that will continue turning to truck driver training schools to help to be the case, with the Peak Season forecast them place those drivers. More than half of the decidedly mixed due to cautious consumers 50 carriers surveyed in the report said that they and lack of strong demand. had operated their own driver training school, but closed it in recent years. Those same car- n UPS reports slight revenue gains. With riers said that they would consider reopening earnings reports from UPS and its biggest the schools if they can’t get enough drivers from competitor FedEx often used as a barometer their current school partners. of economic output, it looks like the recovery is slow going, with more evidence that the brakes n Diesel prices head in other direction. may be applied even harder going forward. Following a 12-week stretch in which the aver- The transportation and parcel giant reported a age price per gallon of diesel was down every 1.2 percent gain in second quarter revenue at week, according to data from the Department $13.35 billion, with much of the growth driven of Energy’s Energy Information Administration by its Domestic Express segment that UPS CEO (EIA), the pendulum for diesel prices swung Scott Davis said allowed the company to quickly back in the other direction with consecutive adapt to the needs of e-commerce shippers. gains during a three-week run through the While domestic had a strong quarter, it’s uncer- week of July 23. The highlight of that run was tain how sustainable that is, with Davis pointing the week of July 23, which saw diesel prices out that manufacturing and retail sales data climb 8.8 cents to $3.873 per gallon, marking issued in June by the Institute of Supply Man- the single highest weekly gain since the week agement and the Department of Commerce are February 13, when prices rose 8.7 cents to at their lowest levels since 2009. “Given these $3.943 per gallon. trends, UPS thinks current second half economic forecasts in the U.S. are too high, with GDP n Offer period for UPS’s acquisition of growth likely closer to 1 percent,” said Davis. TNT Express is extended. An offer period commenced by UPS for its planned $6.28 n More mail by rail. A report by the United billion acquisition of Netherlands-based TNT States Postal Service (USPS) Office of Inspec- NV slated to run through August 31 has been tor General (OIG) issued last month highlights extended. UPS said that the European Com- the fact that moving mail by rail could be mission’s review of the proposed acquisition highly advantageous and beneficial for the is now expected to move to a Phase II review USPS. According to the report, the financially because there are facets of the deal that challenged USPS could save $100 million require more time to analyze. UPS officials or more per year by shifting a portion of mail said a Phase II investigation can take up to 25 volume to rail without changing the overall weeks to complete, adding that it is likely the transportation network. The report added that offer condition relating to competition clear- by increasing its intermodal usage, the USPS ance will not be satisfied by the end of the ini- could save transportation costs, gain long- continued, page 2 >>August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manag eme nt 1
  5. 5. Get your daily fix of industry news on logisticsmgmt.com continued tial offer period. Because of this, the company for the subsequent two weeks. “I congratulate said it now expects the deal to be completed the USDA Agricultural Marketing Services as during the fourth quarter of this year. well as the 10 ocean carrier members of the management n North Asia Hub for DHL. Express delivery Westbound Transpacific Stabilization Agree- ment for implementing the Container Availabil-UPDATE and logistics services provider DHL Express opened up its $175 million DHL Express North Asia Hub at Shanghai Pudong International ity program last week, and I urge full participa- tion by all U.S. shippers,” said FMC Chairman Richard Lidinsky. Airport. Covering roughly 13 acres, company officials said that the hub is able to process n Too much outsourcing? Pharmaceutical up to 20,000 documents and 20,000 parcels companies are increasingly engaging third per hour, adding that it is part of its multi-hub part logistics providers (3PLs), but may be Asian network that is comprised of four hubs abandoning too much control over their busi- in Shanghai, Hong Kong, Bangkok, and Sin- ness. A new report by healthcare experts gapore and connect to more than 70 DHL GBI Research states that use of 3PLs is a Express gateways in Asia. growing trend in the global pharmaceuti- cal supply chain, as cost cutting measures n Rails set to fight fuel surcharge collusion encourage businesses to use outside com- allegations. Following the late June decision by panies that can offer services at competitive a U.S. District judge in the District of Columbia prices. The report says that while “direct to that granted class action certification to ship- pharmacy” and “deduced wholesaler agree- per plaintiffs in a lawsuit that maintains that four ment” models play a vital role in the UK, U.S.-based Class I railroads—Burlington North- other EU countries are boosting their direct ern Santa Fe, Union Pacific, Norfolk Southern sales, and only time will tell which approach Corp., and CSX—colluded on fuel surcharges will succeed. assessed to shippers, the four railroads are appealing the ruling, according to a Bloomberg n Temporary slowdown. A recent report report. According to the report, the railroads indicates that the slowdown in Asian rapid- asked the U.S. Court of Appeals to reverse the growth markets (RGMs) will be short-lived ruling, explaining that it could lead to a cumula- was echoed by other economists. Accord- tive $10 billion or more in potential damages. ing to Alexis Karklins-Marchay, co-leader Various reports indicate that the plaintiffs main- of the Emerging Markets Center at Ernst & tain that the railroads, which control roughly Young, slower expansion in the rapid growth 90 percent of U.S.-based freight rail volume, markets is likely this year, but will “only be a collaborated to maintain prices through fuel blip” before returning to significant growth surcharges that were part of shippers’ bills, towards the end of the year. “Soaring domestic and they also contend that this fuel surcharges demand in economies starved of investment had no direct correlation to actual fuel cost and consumption will offer business excit- increases. ing new markets for goods and services in the years ahead,” said Karklins-Marchay. As n Ag shippers get break. The Federal Mari- well as having the option of easing fiscal and time Commission (FMC) praised the United monetary policy to accelerate growth, RGMs States Department of Agriculture (USDA) for are also fortunate enough to have a growing introducing the Ocean Shipping Container middle class with increasingly higher incomes Availability Report. The report provides ship- and an appetite to spend. pers, particularly those in the agriculture sector, with the participating carriers’ estimates of n Clean cargo update. As the world transi- equipment availability for the current week as tions to low-carbon alternatives, logistics well as projected weekly container availability continued, page 4 >>2 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
  6. 6. Menlo Worldwide Logistics. Masters of the supply chain.When it comes to finding a partner to handle your logistics needs, choose someone with thestrategic expertise and experience to streamline or transform your supply chain. Throughlean methodologies and innovation, we have a proven track record of delivering solutionsthat improve your bottom line. When you need a competitive advantage, trust the master.Visit www.menloworldwide.com for more information.Transportation Services Va s V Value-added Warehousing Su g S Supply Chain Management M t Multimodal
  7. 7. Get your daily fix of industry news on logisticsmgmt.com continued and supply chain managers will continue outsourced in the past two years,” said to depend on fossil fuels for the majority of Bruce Tompkins, executive director of the management their energy needs for the foreseeable future, said Business for Social Responsibility (BSR) consortium and author of the report. “This increase signifies that more organizationsUPDATE executives in San Francisco. “But with global energy consumption set to rise by 40 percent by 2030, companies need to make smarter are considering outsourced DCs over ones that are company-owned and operated.” With responses from more than 100 com- decisions about their current energy mix,” panies across nine industries, the report said Eric Olson, BSR’s senior vice president. reveals key metrics on annual logistics BSR has come out with a position through costs, DC operations, finished goods inven- The Future of Fuels, a new collaborative ini- tory turns, on-time delivery, and transporta- tiative with leading experts from the private, tion sourcing solutions. nonprofit, public, and academic sectors. BSR said that this initiative will offer shippers the n Reliable pricing. A major portal-based information they need on all of the sustainabil- ocean cargo technology provider has ity impacts of their transportation fuel choices, announced the publication of a new “reliability from climate change to human rights to eco- report” on key ocean carrier metrics. Accord- nomic development. ing to spokesmen for INTTRA, the report combines on-time performance with schedule n Ports to build. The importance of seaport- reliability measures. Shipping analyst firm related infrastructure has not been lost on SeaIntel has partnered with INTRAA to pro- President Barack Obama, who announced duce the data. “For the first time shippers can seven projects of national and regional signifi- now analyze actual container delivery time ver- cance last month. The seven projects include sus vessel arrival time on a country-by-country five harbor improvements to deepen federal level,” said Lars Jensen, CEO of SeaIntel Mari- navigation channels for larger ships (in Jack- time. “This is a game changer in how shippers sonville, Miami, Charleston, Savannah and can evaluate carrier performance and make New York/New Jersey), a project to increase more informed decisions on how their freight the height of the New York harbor’s Bayonne is moved.” Bridge to enhance navigation, and an intermo- dal container facility in Jacksonville to increase n Ocean rates may stick. Drewry’s latest rail capacity. All of the projects will benefit from Container Forecaster report highlights higher aggressive federal permit decision-making freight rates for ocean cargo carriers in 2012 and review schedules, while each directly sup- and 2013 together with improved prospects for ports a vital logistical hub. sustained profitability. The recent successful implementation of significant rate restoration n DC trends. Among some of the more initiatives by carriers in the core east-west revealing responses contained in the recently trade lanes means that most are now operating released Tompkins Supply Chain Consortium above break-even, said analysts with Drewry’s, Survey is that nearly one-third of respondent’s a London-based think freight transportation distribution center (DC) operations are entirely think tank. The report noted that carriers took outsourced. “Supply Chain Consortium data sufficient capacity out in the winter months to indicates that while many companies continue ensure that recently re-activated services have to have their own DCs staffed by their own not caused too much damage to the supply/ employees, there is an upward trend in the per- demand balance and load factors on the east- centage of DC buildings and labor being bound transpacific remain strong. M4 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
  8. 8. Unyson Logistics is an award-winning 3PL that specializesin customizing solutions to fit our clients’ needs. We offer multi-modal capabilities that guarantee supply chain savings through our services, technology and expertise. Simply put, our logistics managers are the best at what they do. Unyson deploys dedicated account management, continuous improvement programs and business intelligence that combines innovative reporting with cutting-edge technology. 1-866-409-9759 UNYSONLOGISTICS.COM
  9. 9. August 2012 Vol. 51, No.8 Contents QUEST FOR QUALITY Going for gold Which carriers, third-party logistics providers, and U.S. ports will walk away with a gold medal for their outstanding service performance over the past year? Our readers have 30 cast their votes, and now it’s time to reveal this year’s winners of the coveted Quest for Quality Awards. Quest for Quality 34 National LTL 46 Ports 36 Regional LTL 48 3PL 38 Truckload 50 Air Carriers 42 Rail/Intermodal 52 Freight Fowarders 44 Ocean Carriers 54 Awards preview Transportation best practices & trends LTL Roundtable: Winning over LTL Roundtable 56 carrier partners 56 With a capacity crunch upon us, it’s vital for shippers to foster strong relationships with their LTL carriers in order to maintain manageable pricing and strong service in key lanes. Our panel offers sage advice to tighten those bonds. Supply Chain & Logistics Technology Wireless Evolution: Getting closer 60 Our technology correspondent takes a closer look at what wireless technology is being adopted, how it’s being used, and what benefits Wireless evolution 60 logistics professionals are deriving from their mobile investments either inside the four walls or on the road. Warehouse/DC management Labor Management: Beyond the punch clock 64 While adoption remains low, savvy managers are putting engineered labor standards and related labor management systems to work to jumpstart productivity and gain a new level of operational visibility. Here’s how they’re getting it done. LMS 64Logistics Management® (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Ste 200, Framingham, MA 01701. Annual subscrip-tion rates for non-qualified subscribers: USA $119, Canada $159, Other International $249. Single copies are available for $20.00. Send all subscription inquiries to Logistics Management,111 Speen Street, Suite 200, Framingham, MA 01701 USA. Periodicals postage paid at Framingham, MA and additional mailing offices. POSTMASTER: Send address changes to:Logistics Management, PO Box 1496 Framingham MA 01701-1496. Reproduction of this magazine in whole or part without written permission of the publisher is prohibited. All rightsreserved. ©2012 Peerless Media, LLC.August 2012 | WWW.LOGISTICSMGMT.COM Logistics Managem e nt 7
  10. 10. Shift yourthinking. n the past, moving freight to the far reaches of the continent meant thinking beyonda trusted relationship with a local carrier.Not any more.Now you can rely on trusted regional carriersto handle freight moving anywhere in the US,Canada and Mexico. But only if they’re amember of The Reliance Network— aseamlessly integrated network of people, assets,and information systems that provides completeNorth American coverage through a single,accountable source.*It’s a solution built on trust and the powerof local relationships.Contact your local member carrier or visit TheRelianceNetwork.comand find out how The Reliance Network can reach farther for you. * Handling 10.8 million shipments annually throughout all of North America. SM Reaching farther for you. TheRelianceNetwork.com
  11. 11. departments Get your daily news fix at logisticsmgmt.com 1 Management update 11 Viewpoint Quarterly Transportation MARKET UPDATE LT L 12 Price trends 15 News & analysis Profitability improving With pricing power back in 22 Moore on pricing the hands of the rejuvenated LTL sector, carriers are now 24 Pearson on excellence laser focused on margins while concentrating on profitable 26 Andreoli on oil & fuel freight. 68S 80 Sage advice OCEANLogistics Management Can we still be friends?OnDemand As reported in last month’s State of Logistics Report, one of the greatest2012 Technology Roundtable Webcast challenges facing bothwww.logisticsmgmt.com/2012tech shippers and carriers in the future will be the rebuilding of relationships. 74S Harnessing the waves of data As supply chain organizations evolve technologically and do a better job of collaborating with both their internal and external partners, the next challenge is the integration and interpretation of the waves of data that are now washing up on logistics and transportation Now OnDemand manager’s computer screens as a result. LM EXCLUSIVE: 28TH ANNUAL SALARY SURVEY With this in mind, we’ve collected four leading supply Go to: www.logisticsmgmt.com/salary2012 chain software and technology analysts to examine the latest trends, tools, strategies, and best practices available for better capturing and utilizing the new Pulling away from the pack onslaught of data on the way to realizing an improved According to our 28th Annual Salary Survey, salary growth level of visibility across your logistics operations. has leveled off a bit from last year’s survey. However, we also Our panelists will be discussing: found that an aging workforce is giving way to younger, more highly trained professionals who also happen to be savvy • The rising importance of business analytics in technologists—signaling good news for the overall growth logistics operations of the logistics profession. • RFID’s rapid market resurgence In this exclusive Logistics Management Webcast, Group Editorial • How ERP providers continue to expand their Director Michael Levans, Executive Editor Patrick Burnson, logistics offerings and three prominent supply chain career management experts • The rise of social media in logistics career will put context around this year’s Salary Survey results and development offer their insight into how logistics professionals are putting technology to use to help them break away from the pack. Panel: Jerry O’Dwyer Ben Pivar U.S. Sourcing and Senior VP and MEET THE EXPERTS: Procurement Leader, Supply Chain Lead, Deloitte Consulting Capgemini Dr. Theodore P. Stank Professor of Logistics, Mike Liard Adrian Gonzalez University of Tennessee Director, RFID, Director, Logistics VDC Research Viewpoints Bruce Arntzen, Ph.D. Director, MIT’s Master’s Program Lynn Failing Moderator: Vice President, Kimmel Michael Levans: Group Editorial & Associates, Inc. Director, Supply Chain Group August 2012 | WWW.LOGISTICSMGMT.COM L O G I S T I C S MANAG E ME NT 9
  12. 12. C R S T D E D I C AT E D S E R V I C E S | C R S T E X P E D I T E D | C R S T M A L O N E | C R S T L O G I S T I C S | S P E C I A L I Z E D T R A N S P O R TAT I O N IT’S OUR DESTINATION. EVERY DAY. “Quality” is something every company claims to deliver. So it is especially gratifying to have the readers of Logistics Management again choose CRST to receive a Quest for Quality award. Our companies have been honored with twelve Quest for Quality awards over the past eight years. It tells us that our commitment to provide superior service hasn’t gone unnoticed. You can count on us to continue to have that same goal in sight with each load we take on the road. crst.com • 1-800-736-2778C R S T – T H E T R A N S P O R T A T I O N S O L U T I O N
  13. 13. ® ®Editorial Staff 29th Quest for Quality:Michael A. LevansGroup Editorial DirectorFrancis J. Quinn ® ®Editorial AdvisorPatrick BurnsonExecutive Editor Going for goldSarah E. PetrieManaging EditorJeff Berman it’s my honor to present the logistics In just about every category, ourGroup News Editor and transportation community with the research team found that overallJohn Kerr results of the 29th Annual Quest for weighted average scores ticked up forContributing Editor, Global Logistics Quality Survey. This is the culmina- the second year in a row, signaling thatBridget McCrea tion of a six-month research project U.S. shippers feel that their key car-Contributing Editor, Technology conducted by Peerless Research Group riers and service providers have actu-Maida Napolitano (PRG) that’s become known as the ally improved their service performanceContributing Editor, Warehousing & DC most important measure of customer during these tough times. And as weJohn D. SchulzContributing Editor, Transportation satisfaction and service performance conveyed to this year’s Quest for Qual- excellence available in our industry. ity winners, this is a statistical fact thatMike Roach For just shy of three decades, Logis- they should be celebrating across theirCreative Director tics Management (LM) has used its organizations.Wendy DelCampo August issue to officially announce the PRG’s Director or Research JuddArt Director results of the survey and celebrate the Aschenbrand has done another terrificColumnists carriers, third-party logistics providers job of conducting this survey project,Derik Andreoli (3PL), and U.S. ports that have earned which is by far our most comprehensive.Oil + Fuel the ultimate vote of shipper confidence This year, Judd also worked with ana-Elizabeth Baatz by receiving the highest scores across lysts, shippers, and U.S. port executivesPrice Trends our service performance criteria. to develop a new set of performanceMark Pearson But what makes the Quest for Qual- criteria and bring back our Ports cat-Excellence ity Awards stand out in the market is egory after a 10-year hiatus. The criteriaPeter MoorePricing the fact that the lists of winners you’re and this year’s winners can be found onJohn A. Gentle about to see have been determined by page 46.Sage Advice LM readers—the buyers of logistics and transportationpeerless media, llc services who put these car- U.S. shippers feel that their key carriersKenneth Moyes riers and service providers to and service providers have actuallyPresident and CEOEH Publishing, Inc. work around the clock and improved their service performance during around the globe.Brian Ceraolo these tough times.Publisher and Executive In fact, one of the mostVice President important elements of the Quest for Quality Survey is that it allows But now it’s time to celebrate theEditorial Office111 Speen Street, Suite 200 shippers to vote on the type of services winners of the 2012 Quest for QualityFramingham, MA 01701-2000 that they use on a regular basis and Awards. The lists that begin to unfoldPhone: 1-800-375-8015 rank those carriers and providers that on Page 30 represent those carriersMagazine Subscriptions they work with every day. and service providers that LM readersStart, renew or update your magazine This year we had 4,709 logistics and believe have gone above and beyond tosubscription at www.logisticsmgmt.com/ supply chain decision makers place earn Quest for Quality gold.subscribe.Contact customer service at: their votes across our nine categories. I hope the results help you betterWeb: www.logisticsmgmt.com/subscribe The result: Our readers judged 127 measure all of your logistics servicesEmail: lmsubs@ehpub.com transportation and logistics services options over the next year.Phone: 1-800-598-6067Mail: Peerless Media organizations to be “best of the best.” P.O. Box 1496 And when you consider the level of Framingham, MA 01701 continued economic uncertainty andeNewsletter Subscriptions the strategic cost cutting that’s beenSign up or manage your FREEeNewsletter subscriptions at executed on all sides of the logisticswww.logisticsmgmt.com/enewsletters. and transportation equation, one wouldReprints think that shipper confidence in their Michael A. Levans, Group Editorial DirectorFor information about reprints, visit us providers would have been rocked over Comments? E-mail me atat www.logisticsmgmt.com/info/reprints. the past couple years—however, just mlevans@peerlessmedia.com the opposite is true. August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manage me nt 11
  14. 14. 12 145 Trucking 8 140 With a 1.1% price decline in June, the trucking industry’s inflation 4 135 trajectory did more than downshift. Indeed, this one-month cut in 0 130 average prices charged by all truckers served to break a 10-month- -4 125 long streak of inflation upticks. Long-distance LTL truckers of gen- (2001 = 100) Forecast -8 120 eral freight took the sharpest turn, cutting their transaction prices by 2008 2009 2010 2011 2012 2013 2%. Nonetheless, second quarter 2012 shows all trucking prices % change (left scale) Index 2001=100 (right scale) up 2.9% from year-ago and LTL up 4.8%. We don’t think a wave of % CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago falling prices is in the cards even if China’s economy slows faster General freight - local -0.4 -0.1 0.8 than expected and Europe’s troubles deepen. Average prices in the TL -1.0 2.3 3.9 trucking industry are forecast to increase 3.7% in the final quarter of LTL -2.0 1.5 4.0 Tanker & other specialized freight -0.9 0.4 0.1 2012 compared to year-ago and 2.1% in the first quarter of 2013. 24 180 Air 16 168 U.S.-owned firms flying non-scheduled (chartered) planes 8 156 reported price cuts of 1.8% and 0.4%, respectively, for domes- 0 144 tic and international service in June. Meanwhile, U.S. airliners -8 132 together soared through another month with little push-back from (2001 = 100) Forecast -16 120 buyers flying cargo in the belly of planes on scheduled flights. 2008 2009 2010 2011 2012 2013 Average prices for these services dipped 0.2% in June. We had % change (left scale) Index 2001=100 (right scale) expected deeper cuts after April’s record-breaking 7.7% price hike. % CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago As a result, our forecast for this price series has been raised again. Air freight on scheduled flights -0.2 0.4 4.1 Now we forecast average prices for cargo service via scheduled Air freight on chartered flights -1.4 4.4 4.6 flights of U.S.-owned airliners to increase 5.5% in 2012 and 1.5% Domestic air courier 0.0 7.0 4.9 International air courier 0.5 6.2 3.9 in 2013—not 4% and 1.8%, respectively, as previously reported. 24 190 Water 16 180 For the first time this year, average prices in the waterborne trans- 8 170 portation market declined from a month ago, down 0.3% in June. 0 160 The biggest deflation driver came from tugboats plying inland water- -8 150 ways, who reported they slashed transaction prices down 4.1%. (2001 = 100) Forecast -16 140 Great Lakes-St. Lawrence Seaway freight and deep sea freight also 2008 2009 2010 2011 2012 2013 cut prices by 2.5% and 0.5%, respectively. Inland waterway freight % change (left scale) Index 2001=100 (right scale) excluding towing, on the other hand, reported prices up 0.9% from % CHANGE VS.: 1 month ago mos. ago 1 yr. ago 6 month-ago and up 7.5% from same-month-year-ago. Only two cat- Deep sea freight -0.5 5.6 -4.9 egories (inland waterways towing and deep sea freight) saw prices Coastal & intercoastal freight 0.2 5.8 6.6 fall below year-ago levels. The annual inflation forecast for all water Great Lakes - St. Lawrence Seaway -2.5 3.4 6.5 Inland water freight -0.1 2.0 5.2 transportation services remains 2.3% in 2012 and 3% in 2013. 15 180 Rail 10 170 The latest survey shows carload rail prices stood unchanged in 5 160 June as intermodal rail tags dipped down 0.9%. When reviewing 0 150 quarterly price charts, it’s clear that deceleration in the inflation -5 140 trend for rail transportation continues apace. In the quarters ending (2001 = 100) Forecast -10v 2008 2009 2010 2011 2012 2013 130 June and September 2011, prices accelerated from year-ago levels at 9.6% and 9.9%, respectively. After slowing slightly to 8.9% in % change (left scale) Index 2001=100 (right scale) December 2011, rail inflation slowed to 6.5% in the quarter ending % CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago March 2012 and 3.5% in June. We forecast average rail industry Rail freight -0.2 4.1 3.1 prices will increase 2.6% in the final quarter of 2012 compared to Intermodal -0.9 1.9 1.4 year-ago and 1.8% in the final quarter of 2013. This means the aver- Carload 0.0 4.6 3.4 age annual price forecast remains 3.7% in 2012 and 1.5% in 2013. Source: Elizabeth Baatz,Thinking Cap Solutions. E-mail: ebaatz@alertdata.com12 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
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  16. 16. inside• n-board recorders run into legal O static from owner-operators, p.16• SPS to put FedEx contract U up to bid, p. 17• ort Tracker report optimistic P about import volumes, p. 19ILA, USMX remain indiscussions over labor pactEast Coast and Gulf Coast ports laborstalemate could potentially hindersupply chain planning for shippersthrough the rest of the year.By Jeff Berman, Group News EditorWASHINGTON, D.C./NEW YORKCITY—With a September 30 deadline analooming, The International Longshore-men’s Association (ILA), the largestunion of maritime workers in NorthAmerica, and the United States Mari-time Alliance (USMX), an alliance ofcontainer carriers, direct employers, andport associations serving the U.S. Eastand Gulf Coasts, remained in negotia-tions on a new contract at press time. In recent months, the talks haveranged from amicable to conten-tious, and with no clear end insight it has shippers thinking aboutmaking contingency plans to movefreight that typically arrives throughEast and Gulf Coast ports. Both the National Retail Federa-tion (NRF) and the Retail IndustryLeaders Association (RILA) haveexpressed their concerns to the ILAand USMX about what a potentiallabor strike could do. further ask that you issue a state- costly delays to its members supply In a letter to Harold Daggett, ILA ment committing to continue nego- chains, but would potentially furtherpresident, and James Capo, USMX tiating and working without inter- threaten the fragile economic recov-chairman and CEO, NRF President ruption, even if negotiations extend ery with Peak Season approaching.and CEO Matthew Shay pleaded his beyond September 30.” RILA pointed out that the ongo-case for the organizations to come to The NRF added that retailers are ing labor negotiations affect 14 Eastterms on a new agreement. “We ask in the process of making final deci- and Gulf Coast ports that cumula-that you continue the negotiations sions on whether to divert cargo tively represent 95 percent of allwithout delay, and without impact- from the East and Gulf Coast ports containerized shipments—and 110ing commerce moving through in order to avoid potential disrup- million tons of import and exportthe ports,” wrote Shay. “We would tions, which would not only add cargo—to the Eastern seaboard.August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manag e me nt 15
  17. 17. RILA President Sandy Kennedy USMX cannot legally force pool opera- economics practice leader at CDMwrote in a letter to Daggett and Capo tions to do so. Smith, how significant the potentialthat with the absence of certainty con- At press time, ILA and USMX offi- disruption would be depends on itscerning the outcome of these nego- cials stated that they had agreed in duration. “At some point the cost of analysistiations, retailers have no choice but to principle on issues pertaining to the obtaining alternative transportation orcontinue planning for a shutdown. introduction of new technology and stocking inventories outweighs the prof- “Some of our members advise that automation and maintenance and repair its lost from just waiting out a disrup-they are beginning to redirect their sup- of chassis within marine terminals and tion,” said Bingham. “Profits lost comeply chains in order to allow adequate at off-pier facilities at the East and Gulf from lost sales and depreciated productlead time to ensure that customer needs Coast ports. value, yet one needs to be careful to notcan continue to be met, regardless of According to Paul Bingham, over-value disruption impacts.”whether the negotiations are success-fully concluded by September 30,” regulationwrote Kennedy. “Supply chain changesof this magnitude are not desirable to On-board recorders run into legal staticretailers because they take time both toimplement and to reverse.” from owner-operators While the final outcome of thesenegotiations is incomplete, ILA officials WASHINGTON, D.C.—When it comes are about the size of a Bible and costnoted in March that since 1977 ILA to electronic on-board recorders (EOBRs), between $2,000 and $3,000—on thoseand USMX have successfully negoti- independent truck driver owner-operators “bad apple” carriers and drivers whoated nine new Master Contracts with- have one message to the government: stay have shown egregious safety violations.out any disruption in operations, with out of my business. Shippers should care about thesethe current contract in effect since The group representing the nation’s devices because typically any large cost2004 and then subsequently extended more than 1 million owner-operators absorbed by their carriers—whetherfor two years in 2010. has filed a preemptive lawsuit in antici- company drivers or owner-operators— But concerns remain heightened due pation of the government’s first attempt is passed onto shippers through higherto the 10-day, 2002 longshore contract to mandate EOBRs—or “black boxes,” rates.dispute on the West Coast that some as they are known in trucker-speak. OOIDA officials say they fear thatestimates indicate cost the U.S. econ- Even though government’s rule once this first proposed limited ruleomy several billion dollars per day and doesn’t take effectnegatively impacted various key sectors until 2014, the Owner-within the economy. Operator Independent A major sticking point in the negotia- Driver Associationtions between the ILA and USMX has (OOIDA) has filed ato do with how the ILA has to negoti- preliminary legal chal-ate all Master Contract issues with the lenge in anticipationILA Wage Scale Committee, which the of a broader mandateILA’s Daggett said in a letter to Capo coming out of Wash-is a democratically-elected commit- ington that might affecttee that Capo has declined to address all truck drivers. Thedespite Daggett’s overtures to do so. Federal Motor Carrier Another issue has to do with tech- Safety Administrationnology. Capo maintains that the ILA is (FMCSA) has prettydemanding that management guarantee much hinted as much.a job for any worker even if new tech- OOIDA recentlynologies eliminate a need for that posi- filed a petition fortion. Capo also noted that the current review with the U.S.Collective Bargaining Agreement man- Court of Appeals, 7thdates that both sides negotiate over the Circuit, challenging theimpact new technology might have on Federal Motor Carrierthe work force. Safety Administration’s Capo also explained that the pos- (FMCSA) proposal onsibility of chassis pool operators join- black boxes. For now,ing USMX and be bound to the Mas- the government says itter Contract, as per the ILA’s request, only wants to mandatewould be “impossible” to achieve as the those devices—which16 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
  18. 18. goes into effect, it’s only a matter of replace,” Spencer says. “These coststime before a larger, broader rule gets will be dumped on small businessissued requiring the black boxes in all owners.”trucks. The black boxes are widely in Spencer adds that OOIDA’s lawsuit analysisuse in Europe and elsewhere. In fact, is about justifying the perceived ben-trucks operating within the European efits. “They’ve got to be able to justifyUnion are required to have EOBRs, it—or forget about it.”which eliminate paper logs and greatly The issue also reopens old woundsincrease compliance with hours-of-ser- in the owner-operator/big companyvice regulations. schism. On one side is OOIDA, which The issue is a hot button for drivers. has 155,000 members. On the otherFor one thing, some drivers view the side is the American Trucking Asso-black boxes as an invasion of privacy, ciations (ATA), which has more thananother example of “Big Brother” gov- 27,000 company members. ATA hasernment invading their in-cab space. come out in favor of the black boxes, “The rest of the story is that FMCSA saying they improve safety and wouldhas pretty much made it clear that this save lives.is the first step. They’ve kind of tipped ATA President Bill Graves has longtheir hands that they intend to go much supported what he calls an “incentive-further,” said Todd Spencer, OOIDA’s based approach” to trucking regulationexecutive director. “We have pointed compliance, including EOBRs. Lastout the shortcomings for years.” April, FMCSA issued a final rule man- For one thing, OOIDA claims that dating EOBRs for carriers. The rulecompanies that have utilized the black provides incentives for compliant car-boxes have no better safety ratings riers to adopt the use of such devicesthan companies that do not. Privacy is voluntarily and sets forth certain deviceanother concern. Data from a trucker design/performance specifications. Theinvolved in an accident could be used rule will become effective in June 2012.in any legal proceeding. Another issueis cost. At a time when all truckers are So even though the effective date is still two years away, OOIDA says the Celebratingfacing an increasing regulatory burden time to act is now. “The legal issues 27 Years of Questand higher fuel costs, OOIDA says this raises have to be addressed—andthese black boxes could not survive a addressed now,” Spencer says. “Yourigid cost/benefit analysis. “Electronic on-board recorders are can’t wait on those things. That dog doesn’t hunt.” for Qualityno more accurate than paper logs they —John D. Schulz, Contributing Editor Awardsparcel Holland.USPS to put FedEx contract up for bid Your Leader in Next-DayWASHINGTON, D.C.—In a 10-K to strive for the best value in the fulfill-filing with the Securities and Exchange ment of its service obligations, includ- Delivery.Commission, FedEx said last month ing those associated with air and ground And proud to be recognizedthat the United States Postal Service transportation procurements,” said a for excellence within bothplans to solicit proposals for domestic USPS official. “The existing contract the Midwest/North Centralair services that are currently provided with FedEx is the Postal Service’s single Regional LTL Motorby FedEx. largest air transportation agreement. Carriers and Expedited These services are for various USPS While no decision has been made toofferings, including First-Class, Pri- the existing contract, the Postal Ser- Motor Carriers 2012 Questority, and Express Mail. The current vice is evaluating all of its options as we for Quality categories.agreement between the USPS and move forward with our efforts to returnFedEx dates back to 2001 and expires to long-term financial stability, whilein September 2013. According to maintaining excellent service for all ourindustry estimates, this contract is val- customers.”ued at more than $1 billion. The USPS said that it incurred a “The U.S. Postal Service continues new loss of $3.2 billion during the fiscal 866.465.5263August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manag e me nt 17
  19. 19. The World’s Most Successful Supply Chain Management Leaders Have Connections. lAtest greAt globAl reseArch AmAzingnetworking AttendAnce over 3,000 interActive sessions Attendees hundreds discussions of topics So Can You. Having the right connections is critical to your organization’s success. And to your career. At cscmp’s Annual global conference, september 30-october 3 in Atlanta, georgia, you’ll make the most important connections in the world in just three-and-a-half days. • Connect to the latest industry developments. • Connect with the best-known leaders in the field. • Connect to the people, ideas, and opportunities that will take your career to the next level—and beyond. • Connect with your peers. • Connect to the global marketplace. Don’t miss Major Session Speaker… …and Closing Session Speaker T. Boone Pickens Erik Wahl Energy Executive Artist, Author, Entrepreneur, How Natural Gas Can Positively Founder, The Wahl Group Impact the Trucking Industry— The Art of Vision And What this Means to Your Supply Chain Register at cscmpconference.org by August 31, 2012 and save $150 US on regular registration rates! The World’s Leading Source for the Supply Chain Profession.™ cscmp.org
  20. 20. analysisWill UPS step into the ring?second quarter, following a $3.3 billion about $1.4 billion for FedEx in its fis-fiscal first quarter loss and a $5.1 billion cal year through May 2012. Accord-fiscal year 2012 loss. USPS officials ing to the report, FedEx spokesmansaid that despite ongoing management Jess Bunn said that during the 11-yearactions that have grown and improved period of the relationship betweenefficiency, these sizable losses are FedEx and USPS, FedEx has “raisedexpected to continue until key provi- the service levels and reliability of thesions of its five-year business plan move Postal Service product,” adding “thatforward. Previous losses in recent years record of success will be an importantinclude $8.5 billion for fiscal year 2010 consideration.”and $3.8 billion for fiscal year 2009. But that sentiment does not appear In terms of what FedEx competitor to be a detriment to UPS in any way.might step in and win the USPS con- “UPS has informed the USPS that ittract when it expires in 2013, one obvi- definitely intends to bid on this work,”ous candidate would be its top compet- UPS spokesman Norman Black told LM.itor, UPS. “UPS absolutely believes it can support “UPS, I suspect, has been lobbyingthat the $1 billion in business be com- the Postal Service’s commitment to its mail customers by enhancing the effi- You knowpetitively bid considering the financial ciency of the mail system while creating what makes a goodwoes the USPS has had,” said Jerry new growth opportunities for UPS.” regional LTL carrier.Hempstead, president of Hempstead UPS today acts as a customer, ven-Consulting. “It’s possible that a solutioncomes out of left field from ABX Air, dor, and supplier to the USPS as well as a competitor, Black explained. And And now...ASTAR, or Atlas. But by far the larg- since 2006, UPS has provided airlift the entire industryest threat is from UPS if they want the services for the transport of First Classbusiness. UPS can take it on, and the and Priority Mail and remains focused knows it, too.USPS would not miss a beat.” on providing the best, most reliable ser- A Bloomberg report noted that the vice possible and growing its relation- For 18 years,USPS contract represents more than 3 ship for the future, said Black. New Penn haspercent of FedEx’ sales and generated —Jeff Berman, Group News Editor earned Quest fortrade Quality honors. And this year, we’ve wonPort Tracker report is optimistic about two – within the Expeditedimport volumes in coming months Motor Carriers and North- east/Mid-Atlantic RegionalNEW YORK CITY—The near-term cargo volume to increase 1.6 percent LTL Motor Carriers categories.outlook for import cargo volume at U.S.- annually, with modest annual gainsbased retail container ports appears to expected in subsequent months into thebe solid, according to the most recent holiday shipping cycle. The ports sur-edition of the Port Tracker report by the veyed in the report include: Los Angeles/National Retail Federation (NRF) and Long Beach, Oakland, Tacoma, Seattle,Hackett Associates. Houston, New York/New Jersey, Hamp- The report is calling for July import ton Roads, Charleston, and Savannah, 800.285.5000August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manag e me nt 19
  21. 21. Executive Summit North America The Next Generation Executive Challenges on the Path to Supply Chain SuccessJoin the worldstop supply chain leaders.Supply Chain Council invites supply chain leaders to join us at the Indian Wells, CAExecutive Summit North America 2012. The Summit is designed to 18-20 September 2012support supply chain and operations professionals through opportuni- Miramonte Resort Spaties to share ideas and network with peers, while learning fromrenowned speakers. hosted by:This years executive summit will include topics that supply chain execu-tives have expressed as major impactors on their decision-making. Theeffects these decisions have had on their professional development asan executive and the evolution of their organizations will be incorporatedinto the sharing. Topics will include: sponsored by: Surmounting Supply Chain Disruption to Evolve Growth Made in America, Again: Why Manufacturing Will Return to the U.S. Supply Chain Challenges in the New Global Economy Global Challenges of Interconnected Risk The Birth of an Electronics Supply Chain Integrated Business Planning at Hospira...a Matter of Life and DeathConfirmed Speakers:Denise Layfield Linda ConradMcCormick Company Zurich FinancialDan Gilbert Jared SullivanBarnes Noble, Inc. CBRE Econometric AdvisorsHal Sirkin Michael MooreThe Boston Consulting Group Hospira, Inc. Learn More RegisterJames Hill www.scc-execsummit.org/naTargus Group International, Inc. +1 202 962 0440
  22. 22. Our 19th Questas well as the new addition of Miami inthis report. At a time when mixed economic sig- nals prevail and many economists are for Quality In recent editions of the report, PortTracker stated that the first half of 2012 skeptical about the strength of the econ- omy, Hackett Associates President Ben Award… analysiswould total 7.3 million TEU (twenty-foot Hackett said that his firm remains opti-equivalent units), but this report said that mistic that consumers will remain active.the first half topped that at 7.5 million “We think June will be up nearly 5TEU, which was up 2.6 percent annually. percent annually, and we think most of The 2011 total was 14.8 mil- that will be driven by still-low invento-lion TEU, which was up 0.4 percent ries,” said Hackett. “Any requirementsover 14.75 million TEU in 2010, and for orders for back-to-school season inaccording to NRF estimates, retail sales August and the beginning of holidayare expected to increase by 3.4 percent shopping in November will result into $2.53 trillion. increased volumes. New housing starts “Whether consumers are going to are also continuing to grow and are stillhave the confidence to spend during positive. We think things are not as badthe next few months depends on what as perhaps some economists and com-happens with employment, but retail- mentators are making them out to be.”ers are being cautiously optimistic,” While growth is expected throughsaid NRF Vice President for Supply the rest of the year, Hackett said anChain and Customs Policy Jonathan abundance of ocean capacity stillGold. “Sales can fluctuate from month remains. “This situation is likely to putto month, but these import numbers pressure on pricing, which has fluctu-show that retailers are still expecting ated to a fair degree,” added Hackett.this year to be better than last year.” —Jeff Berman, Group News Editormergers and acquisitionsGenesee Wyoming set to buy RailAmericaGREENWICH, Conn.—The two larg- of equity or equity-linked securities.est short line and regional rail opera- “Today is a very shining day for GWtors in North America will become as we are announcing our largest acqui-one, with last month’s announcementthat Genesee Wyoming (GW) will sition in our history,” said GW Presi- dent and CEO Jack Hellman. “The and it’s stillacquire RailAmerica for an all-cashpurpose price of $27.50 per share—or combination of GW and RailAmerica is an inherently logical one as the over- a big deal.roughly $1.39 billion. lapping holding company structure of GW officials said that this acqui- our two organizations has the capacity tosition will boost its ability to serve its significantly unlock shareholder value.”industrial partners and Class I railroad Hellman also explained that the trans- Honoredpartners, yield significant synergies and action is strategically transformational in with a 2012provide strong leverage to the eventual terms of North American operations, as it Expeditedeconomic recovery of the U.S. econ- will operate 108 railroads over more than Motoromy, and create a powerful platform for 12,000 track miles in North America.future industrial developments along “This is an exciting day for both Rail- Carriers Award.the railroads in the 37 states where America and Genesee Wyoming,” Reddaway. The next-dayQW operates. The two companies said John Giles, president and CEO of delivery leader and best,cumulatively account for 108 railroads. RailAmerica. “From this strong base of largest regional carrier in This acquisition, added GW offi- operations and having unlocked signifi- the West.cials, is subject to approval by the U.S. cant shareholder value, a combinationSurface Transportation Board (STB) and with Genesee Wyoming is the logicalis expected to close as early as the third next step in creating a combined orga-quarter. GW said it expects to fund the nization that will be a powerful driver oftransaction and simultaneous refinanc- North American rail traffic for decadesing of its existing debt with about $2 bil- to come.”lion of new debt and about $800 million —Jeff Berman, Group News Editor 888.420.8960August 2012 | WWW.LO G I STI C S M G MT.C O M L o g i s t i c s Manag e me nt 21
  23. 23. Moore on LTL Pricing: The devil is in the details shippers are increasingly telling me that the a single shipment unaccompanied by any other ship- number of options in the less-than-500-pound ment. I suggest you read your rules or pricing tariff, shipment market confuses them. The one thing or ask carrier representative. that many can understand is that costs continue to 3) An absolute minimum charge (AMC). This climb despite the deregulation of rates. However, third minimum charge is the charge below which enormous savings can be achieved by knowing your a carrier simply will not go. Even after contract dis- shipment weight and distance, direction, and cube counts are applied, shippers may find they are sub- as well as the capabilities of your carrier. ject to an AMC buried in the rules tariff of the carrier. The less-than-500-pound shipment market Let’s look at an actual carrier tariff with a recent makes up over 60 percent of LTL shipments rate increase of a 5.9 percent “average” and see according to Dynarates, a freight transportation what it looked like in the lower weight breaks. consultancy. In the meantime, the market has While heavy loads are increased in the 3 percent many providers and options, from LTL carriers, to 5 percent range, minimums increased 10 per- various third party “hundredweight” and “multi- cent, less than 500 pounds by 9 percent, and 500 weight” consolidation programs, truckload stop pounds to 1,000 pounds increased 8 percent. Now off, and pool distribution with and without pallets. we see the devil is in the details. For simplicity, many shippers include these smaller shipments in their regular LTL mix tendered to their carrier each day. But, ship- The less-than-500-pound shipment rates pers be aware: These packages are a major focus for increased revenues by LTL carriers. are a favored place to bump up charges, The less-than-500-pound shipment rates accessorials, and minimums. are a favored place to bump up charges, accessorials, and minimums. The effect of a general rate increase will vary for individual cus- These example minimum charges in a current tomers and shipments based on characteristics 2012 rules and pricing tariff will exceed well over such as geography, lane, product classification, $100.00. With the weight breaks resulting in large weight, and dimensions. But for small shipments, percentage differences in scales, every pound you the LTL carriers have made a significant change in can take off a shipment is important. Leading hun- the minimum charge. Most LTL carriers now have dredweight and multi-weight services don’t have pal- three minimum charges that are based upon weight let weight or pallet cost, reducing shipment weight breaks. by a substantial 40 pounds—the weight of the pallet. Every class rated LTL shipment you make may How do we manage all those details? A good TMS be subject to: and accurate attention to your shipment weight and 1) A standard minimum charge, subject to the distance, pallet, and non-pallet selection of carriers additional charges and weights. can help you avoid missing opportunities. 2) Single shipment minimum charge, or “SSMC.” As your product’s freight classification increases This charge, higher than the normal per shipment and the distance your shipment moves increases, minimum charge, applies when the carrier picks up the charges will increase. Pay close attention to the dimensions, distance (zone), and weight breaks. Peter Moore is a Program Faculty Member at the University of When was the last time you read the rules tar- Tennessee Center for Executive Education, Adjunct Professor at iff and discussed the important weight category of The University of South Carolina Beaufort, and Partner in Supply Chain Visions, a consultancy. Peter can be reached at pete@ less than 500 pounds that could represent 40 to 50 scvisions.com. percent of your volumes? M22 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
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  25. 25. Pearson on Essential capabilities for emerging markets in last month’s column, we presented some dramatic Trade involving emerging markets research insights about emerg- ing markets. By 2020, 57 per- 18,000 Export values (bar graph, left axis) 440 cent of the world’s economic 16,000 Indexed export values (line graph, right axis) graph 400 growth could come from 14,000 360 emerging markets. Emerging market household incomes are 12,000 320 U.S. $ billion U.S. $ billion expected to increase by a total 10,000 280 of $8.5 trillion between 2010 and 2020. And if emerging- 8,000 240 market-to-emerging-market 6,000 200 (E2E) exports continue to increase at their current rate, 4,000 160 they will outpace developed- 2,000 120 country-to-developed-country 0 80 (D2D) volumes by 2013. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 At the company level, our findings were no less striking. Emerging to emerging (E2E) Emerging to developed (E2D) There are now 117 emerg- Developed to emerging (D2E) Developed to developed (D2D) ing market companies in the Fortune Global 500 (a six-fold Source: IMF Direction of Trade Statistics increase since 2000). Twenty- two emerging-market multi- In 2000, the total value of the world’s D2D transactions was roughly nationals replaced companies equal to the sum of all transactions involving emerging markets (E2D, from more-developed markets D2E and E2E). By 2010, the sum of all D2D transactions was less than in 2011 alone. And in 2011, 70 one third the sum of all transactions involving emerging markets. percent of the Fortune Global 500’s fastest-growing companies (by revenue) rep- positioned to smoothly leverage shifts in Brazil- resented emerging markets. ians’ buying behaviors—from door-to-door sales to But what can companies learn from the pio- urban “high-street” settings. neering work that leading-practice “globalizers” 2. Uncover latent demand. Identifying have done? Here are six key capabilities that population segments that may previously have highly effective companies are leveraging to work been overlooked has huge potential. First Energy and sell in emerging markets. uses fuel pellets made from agri-waste to run the 1. Engage with local stakeholders. Tight smokeless “Oorja” stoves it sells across India. In connections with communities, suppliers, dis- China’s rural Sichuan province, Haier sells wash- tributors, and consumers can open doors and ing machines specifically designed and labeled help keep them open. To help penetrate the fast- to “wash clothes, sweet potatoes, and peanuts.” growing Brazilian market, L’Oréal counts on retail To reach large rural population segments, Brazil’s partnerships to help forge new consumer rela- Banco Bradesco operates a floating bank branch tionships through displays and personal beauty on the Amazon River. advisers. By connecting with retailers, L’Oréal is 3. Seed future demand. “Enlightened self interest”—aligning business success with socio- Mark Pearson is the managing director of the Accenture’s Sup- economic development—is a tried and true strat- ply Chain Management practice. He has worked in supply chain egy. With this in mind, GSK developed its Access for more than 20 years and has extensive international experience, particularly in Europe, Asia, and Russia. Based in Munich, Mark to Medicine program. One of the initiative’s cor- can be reached at mark.h.pearson@accenture.com nerstones is dramatically reduced pricing, which24 Logistic s Manag em en t WWW.LO G I STI C S M G MT.C O M | August 2012
  26. 26. Pearson onhas helped GSK build new markets culture. For example, it launched when it comes to carving inroadsand make it easier for people to obtain meritocratic promotion and pay in emerging markets, companiesvital medicines. into a system that traditionally are generally limited only by their 4. Explore public/private part- embraced seniority and reverence imaginations, vision, market-nerships. Global companies some- for elders. research skills, and the willingnesstimes find that working hand in glove For every example given here, to put their money where theirwith government is easier in emerging there are thousands more. In fact, markets are. Ⅺeconomies than in developed ones.South Korea’s Information Infrastruc-ture (KII) Plan was launched with thegoal of connecting more than 80 per-cent of households to broadband ser-vices. Private-sector investments in theproject totaled $14.5 billion, while the The Global EconomySouth Korean government added $1.76 Right at Your Dock Doorbillion in loans. Increased availabilityof Internet access has helped severalSouth Korean companies becomeworld leaders in market sectors such as The heritage continues.online games. Now more than ever, service, efficiency and qualityWhen it comes to carving are not an option but a necessity. Your real estate is no exception.inroads in emerging markets, That’s why Watson Land Company’s buildings arecompanies are generally designed to maximize your distribution efficiency.limited only by their By providing flexible properties strategically located near major sea ports, airports and railways, we makeimaginations, vision, market- our building your competitive advantage.research skills, and thewillingness to put their moneywhere their markets are. 5. Prepare leaders for tomor-row’s global realities. According tothe aforementioned research, a keyfeature of “successful globalizers” isleadership teams that are widely com-mitted to entering, expanding andpersonally participating in high-growthmarkets. To help ensure that futureleaders have diverse international expe-rience, Nestlé assigns many of its bestand brightest to a 30-month stint in aforeign market. India’s Tata Commu-nications has designed an entirely newoperating model to incorporate localleadership expertise into the company’sglobal operations. 6. Create a change-friendlyculture. Stronger emphasis on emerg-ing markets requires corporate culturesthat are comfortable with uncertainty,complexity and change. Samsung hasbeen transforming how it thinks, feels, Scan with your smart phone 310.952.6400 www.watsonlandcompany.comand works by drawing select Westernbusiness practices into its corporateAugust 2012 | WWW.LO G I STI C S M G MT.C O M L O G I S T I C S MANAG E ME NT 25