Outsourced Logistics 200807

8/4/2019 Outsourced Logistics 200807

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J u l y 2 0 0 8

Penton Media Publication outsourced-logistics.com

Also in this issue:

Why Size Matters in Global

Supply Chain Services

Diebold and Menlo

7 Steps to Improve

Transport Management

Part 2

India Faces Its Logistics

Challenges
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A New Paradigmin Logistics Outsourcing

at an inflexion point and that this is the beginning of an

explosion in spending on logistics outsourcing.

A third metric is the breadth of spending on logistics

services. For years, transportation services was the prin-

cipal candidate for outsourcing. In recent years there has

been dramatic growth in spending on third party provid-ers and on warehouse services. It is clear that as compa-

nies make the move to outsourcing their decisions impact

an array of Outsourced Logistics options.

Our research also shows that outsourcing knows no

geographic boundaries. It is no secret that companies

source raw materials, finished goods and services from

around the world. Our new editorial lineup reflects the

global nature of outsourcing in several ways. We have

contributors who offer a Euro-centric, Sino-centric or

Latin American view of outsourcing. We have features

dealing with 3PLs in China, compliance issues in the

European Union and transparent global Outsourced

Logistics networks, to name a few. When we speak the

language of logistics outsourcing, we may communi-

cate in English, but be speaking in the

tongues of the global market.

The market is changed and so is our

magazine. We continue to write and

editorialize about traditional logistics

and SCM topics, but now we take a

broader view. Our intent is to provide

the community of manufacturers,

3PLs and logistics services providerswith reliable information, useful case

studies, and a forum for the discussion

of best practices.

There is indeed a new paradigm, in

the market and in our magazine. It is

called Outsourced Logistics.

In recent years there has been a significant evolution

in the use of logistics outsourcing in supply chain

management. What was formerly an ad hoc deci-

sion to hire a transportation provider or 3PL is now

a transformative business practice. What was a business

transaction is now a strategic business decision. What

used to be contract logistics has become Outsourced

Logistics.This magazine, Outsourced Logistics, is evolved from

Logistics Today, and is edited to reflect the new paradigm

in logistics outsourcing. Content of Outsourced Logistics

is a mix of articles, features and stories about operations

and strategy, logistics services and global markets. Our

intent is to deliver useful content and to stimulate con-

versation among the community of logistics management

decision makers. Our message to our fellow community

members is not as much the how to of global logistics

outsourcing, but the why these are sound business

practices.

Our decision to re-focus our magazine and website

is based on an analysis of over 15 years of data, extend-

ing back at least to the early 1990s. References like Cap

Gemini, Armstrong and Associates,

our own Strategic Decision-Making in

Supply Chain Management and other

sources document clearly the move-

ment of companies in three important

areas. The first indicator is the grow-

ing number of companies the data

showed were and are using outsourc-

ing to replace existing services. Thesecompanies use outsourcing not only

as replacements but also as a way to

enter new markets or to support new

product introductions. Outsourcing is

more than just cost savings.

A second indicator is the hundreds

of billions of dollars being spent annu-

ally on outsourcing. In 2008 the num-

ber is forecast to be well north of US

$130 billion. And while that number

is significant, indicators are that we are

Outsourced Logistics |July 2008 | 1

David H. Colby, Publisher,

[email protected]

Publishers Page
mailto:[email protected]:[email protected]


4/52

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8Global Markets

Coping with IndiaCommunity Voice

World Economic Pace Slows

14Operations

Moving a 66 Ton Chamber from Brisbaneto Milwaukee

Community VoiceThird-Party Logistics Labor PerformanceManagement, An Untapped Opportunity

41Logistics Services

US Logistics Costs Rise in 2007

Community VoiceA 3PL by any other name

Features

20Global Strategy

DHL Plans to Ease Its

$1.3 Billion Headache

Entry into the US domestic marketcost more than anticipated, causing the

delivery giant to take dramatic measuresto staunch a gushing loss.

26Global Strategy

TNT Focuses on Emerging Markets

On the tightwire of express services, TNTconcentrates on keeping its balance.

28Supplier Selection

Size Matters When Choosing a 3PLSupplier scope and scale loom large in the

selection of a logistics provider.

32PartneringCollaboration Trumps CostDiebold reaches for high-level supply chainpartnerships that support its strategic goals.

36Field Report

7 Steps to Transportation ManagementExcellenceThe second and final installment. Developing astrategy to build top-performing transportationmanagement.

483PL FileC.H. Robinson Worldwide, Inc.

Departments1 Publisher's Letter

A New Paradigm in Logistics Outsourcing7 Editorial

A Time for Decisive Action

46 ClassifedsAdvertiser Index


July 2008 Volume 1 , Numb er 2

32


6/52

Have you

heard?

Outsourced-Logistics.com

is more than just a

companion site to the

magazine. It is the online

logistics daily, providing

news, decision-making tools

and information resources

for logistics professionals.

Daily News Featureson the industry

White Papers

Webcasts

Current and PastIssues

Forums/Rateem & Rankem

Outsourced Logistics (ISSN 1547-1438) is published monthly by Penton Media, Inc.,9800 Metcalf Ave., Overland Park, KS 66212-2216.

The magazine is sent to qualified management in the field of logistics.Periodicals postage paid at Shawnee Mission, KS and at additional mailing offices.

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POSTMASTER: Send address changes toOutsourced Logistics, P.O. Box 2113, Skokie, IL 60076-7813.

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Editorial

Publishing DirectorDavid H. ColbyeMedia Market Development ManagerJason Washburn

Circulation ManagerTyler MotsingerProduction Coordinator Rachel Klika

Custom Media GroupTerrence GroganBob MacArthur Senior VP Industrial Group

Chief Executive Officer John [email protected]

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Chief Editor

Perry A. Trunick

Senior Editor

Roger Morton

Professional ContributorsJames A. CalderwoodDesign

Art DirectorBill Szilagyi

Business

EASTERN REGION Mike Antell, Phone: 978.282.5625, Fax: 978.282.9749, [email protected]

CENTRAL REGION. Terry Davis, Phone: 404.325.9037 Fax: 404.325.6737, [email protected]

WESTERN REGIONChristopher Hartnett, Phone: 832.237.4004 Fax: 832.237.4114, [email protected]

FLORIDABob Eck, Phone: 352-391-5577, [email protected]

ENGLAND Paul Barrett, Mark Whiteacre, David Moore Phone: 44-1268-711-560, Fax: 44-1268-711-567FRANCE Fabio Lancellotti, Phone: 331-4294-0244, Fax: 331-4387-2729

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TOKYO Yoshinori Ikeda, Phone: 813-3661-6138, Fax: 813-3661-6139SEOUL, KOREA Young Sang Jo, Phone: 822-739-7840-2, Fax: 822-732-3662

TAIWAN Charles Liu, Phone: 886-2-707-5829, Fax: 886-2-707-5825CHINABallycastle Trading, Inc. Ltd., Phone: 852-524-7256, Fax: 852-524-7027

INDIA Shivaji Bhattacharjee Phone: 91-11-268-7005, Fax: 91-11-2652-6055SINGAPOREMike Seah, Phone: 65-299-0413, Fax: 65-758-7850 or 65-296-6629

Sales

4 | July 2008 | Outsourced Logistics
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As the US enters an election season with two clear

presidential contenders, its open season on their

present and past positions. The media love to

make a story out of an apparent flip flop on some issue,

but most strategists will agree that changes are not only

normal, they are necessary. Rigidly adhering to battle

plan can bury an army (or a business) as conditions and

circumstances change.

Just over a decade ago, DHLs position in North America

was that it could connect businesses in the US with global

markets through its well developed networks in Asia,Europe and beyond. At the time, that was a smart choice,

though there was less emphasis on global reach among

US-based businesses. The fact was, FedEx, UPS, Airborne,

BAX Global, Emery Worldwide, Roadway Package Sys-

tem and, to some degree, the US Postal Service were all

contending for parcel and express business in the market.

There wasnt room for a seventh or eighth player.

At the time, TNT took a look at the market and even

made some acquisitions that could help it start building

the ground network that was critical to success for any

operator seeking a market position in the US. In June,

Marie-Christine Lombard, group managing director for

TNT Express, said its small pres-

ence in the US was in some

ways a great regret, but in

others, thank God were

not. The TNT footprint

in 2008 looks much like

DHL did 10 or 15 years

ago and for the same rea-

son--building a ground

network to cover the

US is expensive, andthe return if you

are the new-

comer facing large, entrenched competitors wont support

the position.

With the deep pockets of Deutsche Post and some

changes in the US market, the time may have appeared

ripe for DHL to enter the US through its acquisition of

Airborne. With UPS and FedEx experiencing slowdowns

in the domestic express market and issuing earnings guid-

ance, being third in a shrinking market is anything but a

growth strategy. It is clearly time to change tactics, but not

necessarily strategies.

As global logistics providers, DHL and TNT both realizethe importance of a presence in the North American mar-

ket. The key is to stay in the battle and not lose the war.

For DHL that means protecting a much larger investment

against the day when the markets recover and being one of

three major players offers potential for modest profit rather

than massive losses.

TNT has little to change in its tactics as it pursues a strat-

egy that has been evolving over the last four years. Its focus

is on developing markets where a key acquisition will

allow it to transplant its network design and operating ex-

pertise to become the number one provider in the market.

Then, it can provide national, regional and interregional

service and link to its global network. The principal dif-

ference in the two strategies being TNT isnt interested in

fighting with giants.

What makes the express wars a story for the age is that,

in the cases of TNT and DHL, the two companies have a

very clear global strategy with regional tactics that support

it. Both have undergone major revisions in both strategy

and tactics in recent years. As painful as it may have been

to make these adjustments, they were clearly called for. If

they had not changed, they could have ended up pouring

increasing amounts of assets into battles which wouldhave eventually resulted in unsustainable losses and ulti-

mate defeat. The business leaders who had to make those

changes were facing new realities and, we can only hope,

choosing the better path. Call it a retreat, a flip flop or a de-

cisive redeployment of resources, but when the situation

changes, you have to change with it or give up your market

position completely.

Editorial

A Time For Decisive Action


Perry A. Trunick, chief editor,[email protected]
mailto:[email protected]:[email protected]


10/52


market, its inadequate.

Its still a sunrise part of the industry,

so in terms of using India as a back office

for logistics, it lags behind. The National

Association of Software and Services

Companies (NASSCOM) has flagged logistics

as a target area because they view the lack of

formal education as an impediment. Its not

that there isnt some supply, its just inadequate for

the size of the demand.

From a logistics perspective, India lags behind,

which is surprising given that logistics is a $100

billion industry expected to reach $120 billion by

2010.

India has 20 million expatriates living outside

India, and 2.4 million of those are living in the

US. They tend to be on the higher levels of educa-

tionprofessionals with good management skills.Physical infrastructure is probably one of the

most hotly discussed areas and is probably Indias

biggest opportunity and its biggest problem area.

Core to the success of smooth logistics operations

is having a network of roads that interconnect the

cities and ports. Roughly 60% to 70% of goods

move by road in India. Thats where India has

had its biggest challenges. That doesnt mean

there hasnt been positive progress. The govern-

ment embarked on a project called the Golden

Quadrilateral centered on four metro cities ofNew Delhi in the North, Mumbai in the West,

Outsourced Logistics

a s k e d P r a d e e p

Vachini and Jaison

Augustine to comment

on the business realities

of operating in India. Speaking from their of-

fices in India, they addressed people and skill

levels, physical infrastructure and the regula-

tory and business climate.

Given the history of India with the legacy of the

British, the English education system and English

language, skills are very high, with a large number

of people who are educated in English and also a

large group for whom English is a second language.

So, there is a large talent pool of college-educated

people with English skills.

Logistics is a niche skill which is not as widely

available at a university level in India. Unlike well-known universities in China, the UK and the US,

India doesnt have universities with a heavy focus

on the field. Most of the education takes place on

the job. To some degree, that impedes professional-

ism in the logistics business.

Expatriate Indians with logistics skills arent

coming home in very large numbers If they are

coming back with higher education in the field,

they arent a very visible group in the industry,

perhaps due to the size of the market. There are

three or four good educational institutions in Indiaproviding logistics training, but given the size of the

Global Markets

Coping

WithIndiaA

conversationwith Pradeep

Vachiniand Jaison

Augustine

One of the fastest

growing global

markets, India has

its strengths and its

challenges.


11/52


ate monies out of India, especially in a business like

logistics where a company may be collecting revenues in

India, but in an international transaction, all that would

have stayed in India would be the expenses incurred

there. It used to be a challenge to repatriate the rest, but

now the Central Bank of India has made it much simpler

for businesses to move those funds.

Ports, however, are still controlled by archaic port au-

thorities. There are still tariff bodies that govern tariffs in

ports and almost artificially keep costs up. And, by and

large, the ports are still controlled by bureaucrats and

not professionals. Some bureaucrat is actually calling theshots and making decisions, which has some bearing on

the regulatory environment.

Lack of competition has impeded progress at ports. In

the past you had three or four major gateways into India,

but today you have a choice. All are competing with tar-

iffs and services and thats a new environment that has

largely resulted from all of the private investment the

government has recently permitted.

Theres also been a relaxation of requirements for

foreign direct investment in the retail industry and as a

result, there has been a lot more commerce involving all

of the big global retailers, including Marks & Spencer,

Tesco and Wal-Mart, who are setting up shop in India.

Theyre bringing their sophistication on the movement

of goods and supply chain management which is spark-

ing improvements.People often speak of India and China in terms of

their growing economies. The opportunity for India is

that while it has been slow compared to China, when

you look at what China has managed to achieve, thats

what India needs to aspire to. Chinas throughput at its

ports is almost 15 to 17 times that of India. Thats some-

thing India can learn from.

Pradeep Vachini, Co-CEO, Industrial & Infrastructure

Services, and Jaison Augustine, vice president of business

development, Industrial & Infrastructure Services for WNSGlobal Services, a business process outsourcing firm.

Chennai in the South and Kolkata in the East. This is

where the commerce and trade takes place. Except for

New Delhi, they are free ports.

The government embarked on a project to connect

all of these cities with four- to six-lane highways. This

will facilitate trade and access to the ports. The average

speed of a truck carrying cargo is about 20 kilometers

per hour, which means they cover about 200 km in a

day. Thats probably one third or even one fourth of what

can be done. That imposes a huge burden of inefficiency

on the system.

From the mid-1950s to now, traffic or density ofvehicles has grown by as much as 100 fold and the

roads have grown eight fold. The road building and the

Golden Quadrilateral nearing completion will give a

huge boost to the economy in general.

Technology and telecommunications infrastructure,

as a result of India being a late starter, now surpasses

China as the fastest growing cellular telephone market,

with more than 300 million users. The telecom infra-

structure has improved dramatically. India may have

started late, but the quality and customer service on its

nearly completely digital networks is very high.

India was an early adopter as far as IT is concerned.

There was a good fit for the skill sets and the education

Indians received, and it has become the call-

ing card for Indias success.

In general, since about 1991, Indian law

has been slowly but surely removing some

of the requirements for operating a business.

Whether that is deregulation in the telecom

industry or relaxation of duties on imports or

requirements on foreign direct investment, all of that has

been happening.

India has made a lot of progress in these areas butthere are some remnants of the past draconian regime in

the complex mesh of taxation which is controlled by the

central government and partly by state government. If

you are moving goods from one state to another, you get

entangled in all of that mess. There is a move to get rid

of all of these taxes that get imposed on cargo moving

from one point to another. Discussion centers on going

to a common value-added tax (VAT), but thats easier

said than done. India may be slow in implementing it,

but it appears to be headed in that direction. It will be a

welcome move for companies that operate in India.There were measures that made it difficult to repatri-

Do you have direct experience with logisticsoperations and logistics providers in India? Goto Rate em and Rank em at www.outsourced-logistics.com and share your experiences.
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12/52


Global Markets

NewsB

riefsJuly08

The UKs New $3 Billion Port Gets the Go-AheadJust 25 miles from central London, the project is designed to become the

countrys national hub port and Europes largest logistics park. To be devel-

oped by DP World, the Dubai-based global marine terminals operator, London

Gateway will accommodate the worlds largest container ships and is claimed

to be the most fully automated and efficient in the country when completed.

Construction of the 1,850-acre site is slated to begin later this year.

As it sought to gain approval for London Gateway, DP World proposals

included the capacity of handling 3.5 million TEU (twenty-foot equivalent

units) annually along a 2,300-meter container dock. To enhance the value

its customers, DP World would include in the logistics park surrounding

the Gateway container and other terminals, free zones and logistics facilities

among other infrastructure developments.

Even before winning final approval from the UK government for the proj-ect, Dubai World Chairman Sultan Ahmed Bin Sulayem, claimed that, After

visiting the London Gateway site, we have realized the vital significance of this

project for the British economy as well as for DP World. We are fully commit-

ted to this project and believe it will enhance the value we offer our custom-

ers due to its proximity to the UKs largest consumer market as well a unique

combination of facilities provided by the port and park together.

RoadwayIntroducesExpedited OceanTransport fromChina

The less-than-container-load

service cuts six days off standard

ocean transit time. A subsidiary

of YRC Worldwide, Roadway is

working in cooperation with YRC

Logistics Global on the expedited

product. It is offering new supply

chain services for international

shippers at both origin and

destination. The carrier is ableto offer the service by utilizing

multiple shipments from seven

ports of origin in China. Once

cargo arrives at US ports it receives

priority unloading. Shipments are

then expedited through Roadways

network with guaranteed delivery

to final customer.

Commenting on the service,

the carriers president, Terry

Gilbert, said, Our new RoadwayExpedited Ocean Service meets

a need in the marketplace for a

reliable, cost-effective alternative

to air transit for less-than-

container-load shipments from

China. It is just one aspect of

our ability to create the right

combination of service and

expertise wherever needed in

the supply chain through our

expanded global offerings.

As Roadway explains, servicesoffered by YRC Logistics Global,

an NVOCC-licensed affiliate,

include global freight forwarding,

inland transport, global logistics,

g loba l t rade management ,

technology for shipment visibility

and control, and supply chain

management services . Port

deconsolidation services are

available in the US for complex

requirements, including deliverydirect to the retail floor.

SkyTeam Alliance Gets Antitrust ImmunitySix airlines are being allowed to combine Transatlantic operations,

finalizing a tentative decision issued on April 9. While Delta Air Linesand Northwest Airlines are part of SkyTeam, the decision from the US

Department of Transportation (DOT) has no bearing on the move by the

two airlines to merge. Those plans are under review by the US Department

of Justice. The four other members of SkyTeam are Air France, Alitalia,

Czech Airlines and KLM Royal Dutch Airlines. Northwest already has an

alliance with KLM and Delta is allied with the other three airlines.

Under terms of the new Open Skies Plus agreement between the

US and European Union (EU), Transatlantic markets are open to other

competitors since both US and EU airlines are now permitted to serve any

routes between the two entities.

In approving the antitrust immunity, DOT said that, the proposed

alliance is in the public interest because it features a proposed new and

highly integrated joint venture that will likely produce efficiencies and

provide consumers with additional price and service options.

In reflecting on the announcement, Glen Hauenstein, Deltas executive

vice president Network Planning and Revenue Management, said, We

are pleased the DOT recognizes once again that antitrust immunity

offers significant advantages to customers including more choice in

flight schedules, travel times, services and fares. This grant of immunity

allows us to expand these benefits for our customers to two other airline

partners and significantly strengthen the SkyTeam Alliance.


13/52


Connell Bros. Expands In GlobalLogistics Management

Specialty chemical distributor Connell Bros.

Company is using the GT Nexus global trade andlogistics portal on-demand platform to procure,

execute, monitor and audit containerized freight

services, across all ocean carriers.

The initial level of service, which provides

shipment tracking and contract management

services was activated in 2007. Within six-

weeks, CBC had all of their container status

messages flowing into a centralized database

and all of their ocean contracts digitized

online in a common format across all carriers.

That foundation has now been expanded to

freight procurement and advanced spend

management capabilities.

CBCs business can be exposed to

unpredictable demand swings based on

changes in regional economies, said GT Nexus.

Additionally, transportation costs represent a

significant part of operational budgets. For these

reasons, CBC required a flexible solution that

could support constant change, and also deliver

industry leading strategic spend management

capabilities.

GT Nexus has a proven track recordof success with the worlds biggest shippers,

said John Figura at CBC. We now have a fully

integrated suite of tools that allow us to transform

the way we run our transportation network.

And since its an industry platform, our carriers

were already connected to it and familiar with

the applications based on their experience

supporting other customers on GT Nexus.

The spend management capabilities of the

platform focus on two primary areas. Strategic

optimization supports the procurement cycle

and allows CBC to identify the best service-price

combinations before making final allocation

decisions. The freight audit capability compares

the data inside final digitized service contracts

with electronic bills of lading and then presents a

real-time view of discrepancies.

The entire platform is provided as an on-

demand service that is hosted and managed

by GT Nexus. CBC shares the network, data

translation services, and infrastructure with all

other GT Nexus customers, but uses a secure

private environment to use applications andcollaborate with partners.

Canada Bolsters Its Latin America Trade

Looking south, the Canadian government has lately signed two

free trade agreements and is exploring a third. In late May, Canada

signed free trade, labor cooperation and environment cooperationagreements with Peru. In regard to commerce, as soon as the free trade

agreement (FTA) is approved, Peru will eliminate tariffs on 95% of

current Canadian exports. Remaining tariffs will be eliminated over a

five- to ten-year period. Products to receive duty-free access to Peru

include wheat, barley, lentils, peas and selected boneless beef cuts,

as well as a variety of paper products, machinery and equipment.

For its part, immediately upon implementation of the FTA, Canada

will quickly move to eliminate 97% percent of its tariffs on Peruvian

imports with the remainder to be eliminated over a three- or seven-

year period, with the exception of over-quota tariffs on dairy, poultry,

eggs and refined sugar, which are excluded from tariff reductions. For

refined sugar, a tariff-rate quota will apply. Two-way trade between the

two nations was $2.45 billion in 2007, with Canadian investment in

Peru estimated at $1.8 billion.

In early June, the Canadian government announced the conclusion

of free trade agreements with Colombia. Trade between the countries

in 2007 was $1.14 billion with Canadian investment in the country at

$739 million.

The Government of Canada is delivering on its commitment to

open up opportunities for Canadian business in the Americas and

around the world, claimed David Emerson, Minister of Foreign Affairs

and International Trade, and Minister for the Pacific Gateway and

Vancouver-Whistler Olympics. The free trade agreement will expandCanada-Colombia trade and investment, and will help solidify ongoing

efforts by the Government of Colombia to create a more prosperous,

equitable and secure democracy.

As the government explains, under Canadas Global Commerce

Strategy, it is working to advance the countrys trade interests in key

markets by opening up new opportunities for Canadian exporters,

investors and innovators. The Strategy includes an aggressive agenda

of trade negotiations that aims to secure competitive terms of access in

markets that offer significant potential for our products and expertise.

Canada entered into exploratory discussion with Panama on a

FTA. In 2007, bilateral trade between the countries was $115 million.

Through the end of 2006, Canadian direct investment in Panama

was $111 million. Through last year, Canadas greatest exports to

Panama included pharmaceutical products, machinery, electrical and

electronic equipment, malt and barley, vegetables and meats. Imports

from Panama included mineral fuels, fruits and nuts, fish and seafood,

spices, coffees and teas, fats and oil products and wood products.

In addition to these recent moves within this hemisphere, earlier this

year Canada signed its first FTA in six years. It was with the European

Free Trade Association, consisting of Iceland, Liechtenstein, Norway

and Switzerland. The agreement has been tabled in the Canadian

House of Commons where it must rest for 21 days before ratification.

Tabling of all FTAs is required under a new governmental policy.


14/52


Global Insight has revised its forecast for

2008, projecting US real gross domestic

product (GDP) growth will decrease toa mere 1.36%. Imports to the US could

turn negative for the first time since the 2001 reces-

sion. The impact of the US economic situation will also

affect the growth rate of world

real GDP, bringing it to 3.07%

in 2008.

The financial crisis created

by the subprime mortgage cri-

sis has yet to spread to more

countries whose financial in-

stitutions had either directly

or indirectly invested in the

US mortgage market. This cri-

sis will negatively affect these

countries economies, making

their economic growth even

lower than what is currently

forecast. The result is that in-

ternational trade could be even

further depressed.

Private consumption in the

US is likely to inch up 0.83%,

which is hardly in keep-ing with population growth.

The low levels of private con-

sumption are likely to cause

a marked decrease in the de-

mand for imports. As a result,

US real imports are expected

to drop by 1.79% in 2008.

Comparing the current US

recession and the recession in

2001, an obvious difference

is that the 2001 recession wascaused by the burst of IT bub-

bles. In 2000, the economy was still booming, and

imports grew at a recored rate. In contrast, the current

recession is a gradual emergence of a financial crisiscreated by the inflated housing market and the sub-

prime mortgage crisis.

US economic growth had already started to slow by

Global Markets

Community Voice

World Economic Pace SlowsBy Global Insights

Selected Global Trade Growth Projections

2006 2007 2008 2009

World Trade 9.53 7.57 6.46 7.48World GDP 3.94 3.65 3.07 3.38

US Export Trade 10.77 8.75 4.64 5.62US Import Trade 7.23 1.31 -1.79 5.31US GDP 2.87 2.19 1.36 2.17NAFTA Export Trade 8.92 6.29 3.70 5.47NAFTA Import Trade 7.92 2.03 0.15 5.43NAFTA GDP 2.96 2.26 1.50 2.24EU Four Export Trade 6.76 4.72 5.39 5.59EU Four Import Trade 6.23 5.85 5.90 4.76EU Four GDP 2.62 2.40 1.58 1.86Eurozone Export Trade 6.43 4.48 5.31 5.63

Eurozone Import Trade 6.82 6.47 6.50 4.80Eurozone GDP 2.87 2.53 1.79 1.95China Export Trade 23.11 17.32 11.9 12.59China Import Trade 16.57 16.76 14.86 15.85China GDP 11.1 11.5 10.4 9.40India Export Trade 11.18 9.52 10.23 9.96India Import Trade 13.14 15.71 10.25 12.03India GDP 8.83 8.38 8.14 8.05

EU Four = Germany, UK, France and Italy

Eurozone = Austria, Belgium, Cyprus, Finland, France, Germany, Greece,Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Spain


15/52

A Key Advantage

3924 Clock Pointe Trail, Suite 101

Stow, OH 44224 USA

Phone: (330) 923 5080

www.interchez.com

Turn to the pros at InterChez

as your company prepares

for the global market.InterChez presents an extensive

lineup of capabilities from state-of-

the-art global logistics managementto complete linguistics services.

Dont risk your bottom line before

understanding the complete picture

of international business.


exporter, accounting for 8.5% of the world exports. Countries

that mainly supply the US with capital goods and luxury con-

sumer goods and whose currencies have appreciated against

the US dollar have been hurt by the current US recession.

The majority of Chinas exports to the US are low-cost

consumer goods. Since China has restricted the apprecia-

tion of its currency, Chinas exports to the US will be hurt

the least among the top five exporting countries.

Global Insight provides economic, financial, and politicalcoverage of countries, regions, and industries covering over

200 countries and spanning more than approximately 170

industriesusing a unique combination of expertise, models,

data, and software within a common analytical framework to

support planning and decision making. The company has 700

employees, and 25 offices in 14 countries covering North and

South America, Europe, Africa, the Middle East, and Asia.

2007 and import growth slid to its lowest growth rate since

2002. In 2008, the US economy and imports will continue

to experience down-side pressure. They will gradually de-

teriorate in the first half of the year. This will allow house-

holds and firms to adjust their consumption, investment

and production and gives time to policy-makers to take

rescue measures. Therefore, it is likely the current US eco-

nomic recession will not be as deep as the one in 2001 and

the United States might not cut back on imports as much as

it did in 2001.Countries whose exports rely more on the US market will

be affected even more by the US recession. Mexicos exports

rely on the US market more than any other country. More

than 50% of Mexicos exports to the US are machinery and

motor vehicles and parts. In nominal terms, in 2007, more

than 80% of Mexicos exports relied on the US market.

In 2007, the United States was the worlds third largest
http://www.interchez.com/http://www.interchez.com/


16/52


one of the only vessels that can handle

a shipment of this size.

Working with US authorities,

Connor cleared the load through

Customs three days before it reached

the Port of Long Beach. The truck that

would transport the load was waiting

at the pier when the ship landed and

was unloaded. Because the transport was 132 ft long

on 13 axlesover wide, over high and over weight

special permits were required from each state along the

route.

This unique shipment was a matter of tight coor-

dination and cooperation among John S. Connor and

all of our contracted partners and vendors, recalls

Diane Olszewski, Connors Export/NVOCC manager.

Working on an extremely tight schedule, we coor-

dinated the logistics from the manufacturing plant inAustralia, including inland transport, port crane han-

dling, ocean transport to Long Beach, customs clear-

ance, and then truck transport to Milwaukee.

The load could only arrive on site on a Thursday. A

2,700 ft section of the roof of the hospital building was

removed above the level at which the chamber would

be placed. Connor coordinated delivery with the con-

struction company, crane operator and others engaged

in the process. The street had to be closed, bus routes

changed and a police escort arranged. The roof was re-

placed, electrical and mechanical components installedto complete the project.

Taking the pressure off the manufacturer

of whats been called the largest rectan-

gular hyperbaric chamber ever made was

Maryland-based John S. Connor, Inc.

Getting the $3 million chamber from the

Fink Engineering plant in Australia to

Milwaukees St. Lukes Medical Center required ex-

tremely tight coordination all along its route.

The chamber is one of four in the US. Hyperbaric

oxygen therapy is a medical treatment in which apatient breathes 100% oxygen within the pressurized

chamber for conditions such as problem wounds, car-

bon monoxide poisoning and exceptional blood loss.

Fink outsourced all movement of the 52.4 ft long,

12.3 ft wide and 9.5 ft tall chamber from its plant to

the hospital. For a previous similar operation, Fink

used a different provider and had the shipment sit for

two weeks in Long Beach while the Mayo Clinic waited

its arrival.

An Australian Connor partner, Global Product

Supply Management, arranged the pick up of thechamber, its movement to the port and loading aboard

Moving a 66 Ton Chamber From Brisbane to Milwaukee

Operations

The hyperbaric chamber on

site at St. Lukes being lifted

by crane.


17/52


NewsBriefsJuly

08

It doesnt end with just

the new magazine.

More opportunities await online!

Outsourced Logistics readers will be

longing for much more. Check us out at:

http://outsourced-logistics.com

The seller is 3M; the purchaser is Battery

Ventures, a technology venture capital and private

equity firm. HighJumps software is used by indus-

tries as diverse as aerospace

and automotives, consumer

goods, direct store delivery, dis-

crete manufacturing, document

management, food and bever-

age, retail, third party logistics,

as well as wholesale and indus-

trial distribution. The company describes itself as,

simplifying the art and business of creating, selling

and moving products across global networks, help-

ing more than 1,300 clients worldwide drive growth

and manage change.

Citing reasons for selling HighJump, the vice

president and general manager of 3M Track and

Trace Solutions Division, Lemuel Amen, notes that

the company, is refining its approach to provid-ing comprehensive track and trace solutions for

high-value assets and people that deliver customer

value through asset utilization, safety and security.

Therefore, we believe HighJump will have more

opportunity to maximize its potential with Battery

Ventures.

The sale is expected to close in the second quar-

ter of this year after which HighJump will function as

a stand-alone company. The company says that af-

ter the transaction is completed, it will remain com-mitted to investing in the development of its prod-

ucts, services and technologies in order to continue

to provide value for its customers and maintain its

strong offering in the marketplace. The products

will continue to be sold and supported under the

HighJump brand around the world, offering the

functionality and flexibility required by customers.

Battery Ventures manages nearly $3 billion in

committed capital, including its current fund of

$750 million. It describes itself as partnering with

entrepreneurs and management teams across

technology sectors, geographies and stages of

a companys life, from start-up and expansion fi-

nancing, to growth equity and

buyouts.

Jesse Feldman, senior associ-

ate of Battery Ventures, explains

that, We have been evaluating

the supply chain software marketfor over 18 months, and believe

HighJump Software represents the best-in-class

solution. Moving forward, the company provides us

with an excellent platform to grow both organically

and through acquisition. Terms of the transaction

were not disclosed.

HighJump Software is Being Sold
http://outsourced-logistics.com/http://outsourced-logistics.com/


18/52


NewsBriefsJuly08

Operations

Cardinal Health Moves Fleetto Penske Logistics

Penske Logistics announced it has begun a transition to man-

age the dedicated fleet for Cardinal Healths medical supply

chain business. As a part of the agreement, Cardinal Health will

outsource the management of its dedicated truck fleet to Penske

Logistics. This involves transitioning approximately 700 of

Cardinal Healths truck drivers and related transportation sup-

port staff across North America to become direct employees of

Penske Logistics.

Penske said it intends to hire all the employees and is col-

laborating with Cardinal Health to ensure the transition for the

employees is as smooth as possible.

We are very pleased to be working with Cardinal Health and

we welcome these new associates to our organization as highly

valued members of the Penske team, said Vincent Hartnett,

President-Penske Logistics. We are working to ensure the transi-

tion is seamless for Cardinal Healths customers, as these drivers

will continue to serve their normal routes with the same dedica-

tion to service.

Loss Prevention Conference

Association ClosesThe Loss Prevention Conference (LPC), a

transportation industry association dedicated

to educating its members on the prevention of

freight loss and damage, recently announced

to its membership that it will no longer operate

as a member-based organization. SMC3 will

begin offering an annual loss prevention con-

ference event that will be consistent with the

LPCs high quality educational conferences.

The integration of the LPCs educational

mission with SMC3s organizational principles

provides a win-win relationship that all freight

claims professionals will clearly benefit from,

said A. J. Mitchell, Southeastern regional man-

ager for MTI Inspection Services (Colorado

Springs, CO) and outgoing LPC President.

SMC3 will host its first annual loss preven-

tion conference this coming October in Atlanta.

Previous LPC board members are working with

SMC3 in an advisory capacity to ensure that

the SMC3 offering continues to be the indus-

trys premier loss prevention education event.

Consistent with previous LPC annual meetings,

the SMC3 Loss Prevention Conference will de-

liver valuable information for preventing freight

loss and damage, as well as best business

practices for claims resolution, said Mitchell.

Not only will the educational content re-

main highly relevant, but the peer interaction

and exchange of ideas the LPC meetings of-fered will continue on as well, said John Rader,

SMC3 director of industry and educational ser-

vices, and former LPC executive director.

SMC3 plans to announce the details sur-

rounding its 2008 Loss Prevention Conference

soon, including confirmed dates, speakers and

a conference agenda. Those interested in re-

ceiving conference information as it becomes

available can send their contact information to

[email protected].

The Panama Canal Raises Marine Service Fees

For shipping companies there are boosts in costs for tug, loco-motive and line handling services on the waterway. In explaining

the climb, the Canal Authority notes that over the past eight

years it has spent $1.329 million in upgrades its fleet of tugboats,

locomotives and other elements of infrastructure. Now almost

half of all transits of the waterway are by Panamax vessels that are

106-feet wide. Since locks are just 110-feet wide, state-of-the-art

equipment and personnel are needed to ease these ships along

the way.

Rates for tug services will grow 8%. Line handling services

will be boosted by 7%. Additionally, a $300-per-wire fee will be

charged for ancillary locomotive services, explains the Authority,

up from a $200-per-wire fee (wires are attached to the loco-

motives to ensure that the vessels stay centered as they transit

through the locks).

For visibility requirements, if a vessel notifies the Canal less

than 48 hours prior to its arrival that its load exceeds Canal

standards, there will be additional costs. Those vessels that notify

the canal at least 48 hours in advance of arrival will be charged

$4,000. If the data is submitted less than 48 hours, that fee will

be $8.000.

For complete details on these increases, visit the Canals web

site at www.pancanal.com and go to Marine Notice to Shipping

N-1-2008, page 18.
mailto:[email protected]://www.pancanal.com/mailto:[email protected]://www.pancanal.com/


19/52


California Ports Ban Owner OperatorsCiting rapid improvements in air quality, the Los Angeles Harbor Commission approved

the Clean Truck Programs Concession Agreement that will phase out owner operators at

the port of Los Angeles by the end of 2013.

The program, which would require drayage services to use 100% employee drivers by

the end of 2013 is to be phased in from October 2008. Port officials say it will allow them

to hold the drayage companies accountable for truck maintenance (which will improve

emissions) and driver credentials (which has a security benefit).

The Long Beach Press Telegram reported that over 85% of the 17,000 short-haul trucks

operating at the ports of Los Angeles and Long Beach are independent drivers.

In a letter to the Intermodal Carriers Conference of the American Trucking Associations,

J. Christopher Lytle, deputy executive director of the Port of Long Beach, said, It is clear our

differences go to fundamental issues and not merely to details. He went on to say that, we

do not believe that further meetings on the contents of the Long Beach concession agree-

ment would be productive.

This action, says the National Industrial Transportation League (NITL), would appear to

clear the way for the American Trucking Associations (ATA) to start litigation challenging the

concession agreement.

The concession agreement calls for 20% of the l icensed motor carriers fleet to be made

up of employee drivers by the end of 2009, increasing to 66% by the end of 2010 and 85%

by the end of 2011. By year-end 2012, 95% of the drivers would have to be employees, and

the remaining drivers would be required to be employees by the end of 2013.

Major Trucker Jevic Shuts DownHigh fuel costs, an economic downturn, increasing insurance costs and tighten-

ing credit markets are cited as causes for going out of business. Jevic and Saia Inc.

were spun off from Yellow Freight and co-existed under an umbrella holding com-

pany named SCS Transportation. Eventually SCS sold Jevic for $51 million to Sun

Financial Partners, retaining Saia, which has experienced substantial

growth. At the time of the splitting off of Jevic from Saia, then-chair-

man and CEO of SCS, Bert Trucksess, was quoted as saying that, Jevic

historically has had performance challenges, and so theyre no longer

going to be part of our company, and well be able to focus all our re-

sources on Saia, which has been a consistently strong performer.

Jevic has struggled in a tough competitive market. It offered specialized less-than-

truckload (LTL) transportation services and selected truckload (TL) and time-definiteservices with delivery capability throughout the contiguous 48 states and Canada.

Founded in 1981, the carrier offered integrated customer solutions, including direct-

to-customer deliveries, multi-shipper order consolidation for inbound supplies, and

express and time-definite deliveries. Jevic focused on loads between 1,000 to 30,000

pounds (overlapping both the LTL and TL markets), providing shippers with an al-

ternative to traditional LTL and TL carriers that may have strict load requirements.

In a letter to customers announcing the closing, David Gorman, the companys

CEO, explained that Jevic, would continue operating to deliver all freight within

its system prior to closing and would

continue to provide Customer Service

during the wind down period at 888-

Go-Jevic. The Jevic website will remain

active and will be updated

during the period as well and

that should be your primary

point of contact for tracing

and needed documentation,

he explained.

We greatly appreciate the loyalty of

our many Jevic customers, continuedGorman. It has been our pleasure to

provide solutions to your transporta-

tion needs over these many years. We

are committed to providing the prompt

delivery of your shipments in our system

and professional customer service for all

your needs during this process. Thank

you again.

Menlo WorldwideLaunches WarehouseSolutions

Third-party logistics provider Menlo

Worldwide announced a multi-client net-

work of warehouse management solutions.

Customers of every size can outsource any

level of warehousing, distribution, and

transportation management operations, says

the company. Its scalable and customizable

warehouse offerings operate from Menlos

information technology platform and global

network of facilities.

Paul Tedfors, regional logistics manager

for BSH Home Appliances, is using the pro-

gram to create what he calls a scalable solu-

tion leveraging Menlos shared resources

for IT services, physical plant, labor, and

expertise.

Menlo modeled the multi-client operation

on a successful facility in Fremont, CA and

is rolling out six fully operational facilities:

Atlanta, GA; Dallas, TX; Aurora, IL; Cranbury,

NJ; Fontana, CA; and Portland, OR.


20/52


Third-Party Logistics LaborPerformance Management

An Untapped Opportunity By Jack Webster

Too often companies and their third-party logistics

(3PL) partners lack business relationships thatextend beyond the standard three- to five-year

contract length. Reasons cited for these unsuc-

cessful relationships range from service-level agreements

not being met, to costing and pricing issues, to cultural

differences. While there is no one-size-fits-all solution to

address these relationship challenges, there is one tool

that is often overlooked as a way to potentially strengthen

a 3PLs relationship with its customer: a distribution center

(DC) labor performance management program.

DC labor performance management programs have

long been recognized by supply chain organizations as

tools to increase productivity and throughput capacity, re-

duce operating expenses and improve accuracy and safety

in DCs. Built around several core components, successful

programs typically include engineered labor standards

(ELS), a robust labor management system (LMS) with

the ability to track and report cost and performance, and

well-defined program polices and procedures. Strong

corporate sponsorship of the program and the adoption

of a continuous improvement culture throughout the

organization are equally important, as these elements are

the glue that holds the program together and helps drive

its short- and long-term success.If implemented in a 3PL DC environment, this type of

program can provide the 3PL and its customer with many

benefits. Of course the level of benefit realized depends

largely on the organizations commitment to the program,

as well as the type of price contract employed. The DC

labor performance management program offers each

organization the tools to succeed. It is up to the business

partners to determine the level of benefit each will realize.

Under a fixed cost or cost-plus arrangement, the imple-

mentation of a DC labor performance management pro-

gram benefits both parties. It allows the 3PLs customerto defer capital and operating expenses it might have in-

curred if 3PL productivity and throughput gains had not

been realized as part of the program. The 3PL can benefit

by maintaining its pricing structure while increasing profit

margins through decreased costs.

Under an open-book arrangement, both parties enjoy

many of the same benefits realized under the fixed cost

or cost-plus arrangement. Additional benefit is gained

through collaboration and understanding of the true work

content and costing. The most critical elements required

to build this understanding and collaboration under the

open-book arrangement are accurate engineered labor

standards (ELS) and a high-quality LMS.

ELSs enable the 3PL to develop accurate, activity-based

pricing that is representative of the work content actu-

ally performed by the 3PL, In turn, this allows the 3PL to

maintain adequate margin levels and fair pricing for the

customer.

Using an LMS provides visibility of DC performance,

accuracy and cost associated with specific DC operations.

The LMS is a powerful tool that helps build understand-

ing between the 3PL and customer. It provides unbiased,

fact-based reporting that details the successes of and op-

portunities for the 3PLs DC. Working with these reports,the 3PL and its customer can collaborate to develop tac-

tics and strategies to capitalize on successes and overcome

challenges faced at the DC.

The success of a DC Labor Performance Management

Program hinges on corporate sponsorship for the pro-

gram from both the 3PL and its customer.

Jack Webster is a Senior Manager with Kurt Salmon

Associates (KSA).

Operations

Community Voice


21/52
http://www.scopewest.com/


22/52


DHL Plans to Ease

Headache

entering the US market, expectations have not been met.

Despite rumors that DHL would abandon the US en-

tirely, sell off its operations or merge with another sup-

plier, none of that has happened. Dr. Frank Appel, CEO

of Deutsche Post World Net, DHLs parent company,

has reaffirmed the companys commitment to sustain-

ing its US business. Consider that, as DHL notes, in the

Americas the US represents the largest express marketand is connected to the worlds principal trade lanes.

Facts facing DHL: In 2007 came a loss of$1 Billion and for 2008 an EBIT (earnings before inter-

est and tax) loss of $1.3 Billion is projected. Outside of

the US, the company is the major provider of express

and logistics services. Within the US, it is the third larg-

est player in the market, trailing FedEx and UPS. Its a

serious understatement to say that investors are upset

with the performance. Since 2003, when DHL boughtAirborne Express for $1.05 Billion as a stepping-stone to


23/52


Its $1.3 Billion

Entry into the US domestic market cost more than

anticipated, causing the delivery giant to take dramatic

measures to staunch a gushing loss. By Roger Morton

a 20-year commitment for guaranteed capacity on

Transpacific air routes. The agreement remains in force.DHL and UPS are working aggressively to reach

agreement. Noting that it will begin transporting a

small portion of DHL this year then feed the rest into

its network next year, UPS Spokesperson Ken Sternad,

says that, We are compelled to get a contract completed

before we can begin.

As a consequence of moving airlift to UPS, the

Wilmington hub will no longer be part

of the global DHL backbone. In effect

the UPS WorldPort Air Hub at Louisville

International Airport becomes the North

American hub for DHL.

Even before talks with DHL began,

WorldPort has been growing. We will

have additional capacity with aircraft

coming into the fleet that we are com-

mitted to, claims Sternad. We also have

a rather large expansion of WorldPort. A

lot of that capacity will come on by next

summer. Adding efficiency and density

is what our business is all about. This

move is very good for us and good for

our business.On hindsight, looking at the

Wilmington facility, Mullen reflects that

it was an under-mechanized hub. In or-

der to keep it up and running, he says it

would have been necessary to upgrade it

and improve its ramp facilities to handle

DHL intercontinental flights with Polar

and its Transatlantic carriers. We would

have had to mechanize the parcel sort

and to gradually replace all of the aging

aircraft, he notes. All of those costsdisappear now with this arrangement.

Further, the company says that 47% of all its domestic

and international shipments are billed in the US wherehalf of its 200 largest customers are based.

The US business is accretive in value to our global

network, explains John Mullen, CEO of DHL Express.

Thats because if we didnt have the US, then we would

firstly lose all of the profit we make in the rest of the

world on shipments to and from the US, which is quite

substantial. Secondly, the US pays a proportion of global

costs. It pays for a piece of the Hong

Kong hub, the Leipzig hub, the air net-

works and so forth. If we didnt have a

US then those costs dont go away.

So much attention had been given to

the strategic plan announced by DHL

to restructure its US business, that it

overshadowed news of the opening

of its new air hub at Leipzig/Halle in

Germany some two days earlier. The

hub is a significant part of the backbone

of DHLs worldwide coverage that joins

one at Hong Kong, and had included a

hub at Wilmington in Ohio in the US.

The DHL strategic plan contains two

principal elements: outsourcing NorthAmerican airlift and reorganizing its in-

frastructure. The first of these two is gar-

nering most attention as DHL intends to

pay UPS $1 billion a year for the next 10

years to move its freight from airport-to-

airport only. DHL will retain its ground

network, pickup and delivery functions

and Customs clearance.

Previously DHL acquired a 49% stake

in the Atlas Air Worldwide Holding

subsidiary, Polar Air Cargo. Under termsof the agreement, DHL Express gained

Frank Appel, CEO,Deutsche Post World Net.

John Mullen, CEO DHLExpress.


24/52


delivery in certain locations, there will

be some impact on customers in areas

affected by closures and consolidation.

DHL characterizes the customer impact

as minimal, translating into 3.3% fewer

deliveries and 0.06% less pickups.

For DHL for the time being the bottom

line is the bottom line. Implementation

of its new strategy is expected to cost

$2 Billion. The company anticipates de-

creasing losses in US Express business

over the next three years at $900 Million

in 2009, $500 Million in 2010 and $300

Million in 2011.

If we can get it to the area of a $300million loss that weve targeted, thats our

step one, claims Mullen. We picked

that figure because we wanted to be able

to walk before we ran but also because at

that level, were actually better off having

the US with those losses than not hav-

ing the US with those losses. That said,

nobody wants to lose money. If we can

get there in the time frame that weve

scoped, the next plan will be how to get

the $300 million down to zero.

34% through consolidation and closure

of service centers. It will close facilities

in what it terms are low-density areas as

well as closing low-density stations in a

number of areas. It will also consolidate

facilities located in close proximity to

each other in a number of locations.

It will replace its current partially au-

tomated hub and spoke network with

what it terms is a more fully developed

multi-hub network supported by more

advanced automation.

Using newer technology solutions, the

company intends to re-engineer its basic

pickup and delivery route structure. Itwill also change the structure of its routes

with the aim of boosting premium inter-

national and express product service. It

anticipates a 17% reduction based on

the routing rationalization. To save 18%

in its ground line haul network, DHL is

cutting out runs to more remote loca-

tions while upgrading its fleet with more

efficient equipment.

While DHL is expanding its use of the

US Postal Service to serve for last mile

Going forward we avoid all of the capital

expenditure we would have had to incur

on our own if we kept going with our old

business model.

As characterized by Sternad the agree-

ment covers shipments from origin gate-

way to destination gateway. The only

aircraft UPS would not operate are those

coming into WorldPort on international

inbound flights. For shipments within

the US, or anything going to and from

UPS gateways in Canada and Mexico,

DHL will deliver the volume to a UPS

gateway location. The freight will then

move to the destination gateway. At thatpoint DHL will pick it up and move it

to its final customer. At the same time,

out there on the street, in front of the

customer, were still ardent competitors,

notes Sternad.

DHL is also changing the way it con-

ducts business on the ground with modi-

fications to the infrastructure in its sta-

tion network, pickup and delivery routes

and ground line haul. The company ex-

pects to reduce the size of its network by

Keeping track. Monitoring all flights, worldwide, atthe Global Quality Control Center at DHL ExpressGlobals Head Office in Bonn, Germany.


25/52


The new Leipzig/Halle Airport facility is an impor-

tant cog in the companys global commerce back-

bone that includes its major hub in Hong Kong.

Two days before announcing plans for changing its market

approach in the US, the international delivery giant opened

this 300 million facility to enhance its global express net-

work. For the company, this hub transfers flights previously

going to its Cologne gateway and its previous European air

freight hub in Brussels.

Some 60 planes per day arrive at the new hub from 46 des-

tinations across the globe. In addition to freight arriving from

the US and Hong Kong, cargo moves between Leipzig/Halle

and such points as Sharjahj in the UAE, Delhi, Istanbul,

Sofia, Warsaw and Ostrava, to name a few. These sites are

mentioned here to provide a sense of why this particular loca-

tion was chosen by DHL for creation of the new hub.

At the formal opening of the facility, Frank Appel,

Chairman of the Managing Board of Deutsche Post World

Net, spoke of a shift in global commerce increasingly toward

the east, not only with freight moving from China and India,

but with emerging markets that include the Mideast, the

Baltic States and Russia. Appel explained that this location in

Germany is central to DHLs continuing business with west-

ern destinations as well as to serving markets to its north and

south and the growing markets to the east.

John Mullen, CEO of DHL Express, observed that,

Demand for Express services is growing worldwide and we

took the decision to invest in our international network in

order to meet this need. The state-of-the-art new hub will

enable us to continue to offer the best possible service, quality

and reach for our customers. It is not only one of the indus-

trys most technically advanced hubs, with some of the worlds

most sophisticated sorting equipment, but it will also protect

and strengthen our leading position in the European, and

indeed global, express market.

The hubs sorting line is fully automatic and has been de-

signed to minimize sound levels as it operates. Its main sorter

is 6,500 meters long. There is a 900-meter document sorter

and 260 loading and unloading slots for air containers. At

present it is capable of handling 1,500 tons per day, antici-

pated to grow to 2,000 tons per day by 2012. The line can

handle 60,000 parcels and 36,000 documents per hour.

The facility is environmentally sensitive with, for example,

the use of natural gas powered cogeneration technology for

electricity, heating and cooling. The hub has 1,000 square

meters of solar cells on the roof of its workshop used for gen-

erating electricity. The hub catches and stores rainwater that

it then uses for drinking water and cleaning aircraft.

DHL Creates a Major Hub

Each night, freight arrives, issorted and departs from thenew Leipzig/Halle hub.


26/52

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28/52


in Liege. Modeling the multi-stop route showed that the change

could provide good utilization on the Liege-Singapore leg and on

the Singapore-Shanghai segment. The Shanghai-Liege route was,

at times, at 100.1%, said Lombard, You just cant fit any more on

the plane.

In fact, TNT needed only 5% utilization outbound from Europe

to keep the 747 freighter operation in the black, and it had sur-

passed that in early trials. The service launched June 25th.

From 2004 to 2007, TNT engaged in the first phase of a trans-

formation that included stripping out its logistics services opera-

tion (now CEVA Logistics) and its freight forwarding group. It wasback to the core of optimizing and operating express networks.

TNTs density in Europe operating a road and air network in 35

countries provided the base for its operations and its experience.

The European road network features 16 road hubs and 85 inter-

national depots connecting another 415 regional depots. On the

air side, TNT operates from 70 gateways in Europe, Liege being

its principal express hub.

Examining its global strategy, Lombard comments that TNTs

lack of a presence in the intra-US express market is at times a great

regret, but at other times, we thank God we are not there. TNT

continues to deliver into the US market using regional carriersand subcontractors and it will connect US customers with other

TNTfaces the same challenges as

every other logistics provider and user of logistics services: re-

cord fuel prices, slowing Western economies, congestion and

productivity issues and rising environmental costs and pressure.

The express group is focusing its attention on using its strengths

to enter developing markets where it has the best prospect to

become the leading provider.

Marie-Christine Lombard, group managing director express,

describes TNTs strategic focus in simple terms. It has reached

the position of number one in Europe in national and intra-

European express flows. It is building uplift capacity from China

to fuel its European network and it is working to establish an

intra-China network. In the Rest of World category, it is number

one in selected emerging markets and is developing further op-

portunities.

Prior to selling its contract logistics unit (the current CEVA),

TNT announced a strategic direction that would focus on net-

works. The company has continued to develop its air and road

networks, says Mark Bradley, director of global network and op-

erations, taking a global approach of ensuring the networks are

planned, aligned and optimized so that we make accurate and

smooth capital investments to support growth.Being strong in core markets allows expansion into other mar-

kets, including China. TNTs announcement that it would begin

Liege-Singapore-Shanghai-Liege service in its own 747 freighter

is a prime example of how the company applies lessons learned

in the express business to enable it to develop tactics that sup-

port its larger global strategy.

Before the Singapore leg was added, the imbalance in the

Europe-China lane was significant. While China-Europe aver-

aged 92%, utilization, the return leg from Liege to Shanghai

was only averaging 39% of capacity. Lombard noted that TNT

was using commercial uplift on the lane and that was not onlyexpensive, it was less reliable and less connected to TNTs hub

By Perry A. Trunick

TNT Focuses onEmerging Markets

On the tightwire of express services,


29/52


have helped it optimize its European road net-

work and integrate with its air operations, and

it is this model TNT is migrating to developing

markets.

The company has also developed a road

network in Southeast Asia which Lombard says

has exhibited 23% growth operating within

and between the Southeast Asian countries

and Southern China. A similar developing

road network in the Middle East experienced

53% growth, she added. So, TNT isnt forget-

ting regional markets as it targets growth in the

Middle East, Africa, Southeast Asia and South

America.The South America experience is a little dif-

ferent, admits Lombard. There, TNT acquired

Mercrio in Brazil. Mercrio is a 60-year-old

company and a leader in Brazil. It also already

has express characteristics, says Lombard.

Bradley digs a little deeper into TNTs fact-

based and scientific approach utilizing a data

warehouse to feed information into strategic

planning tools to help build an optimized air

and road network. This is consistent and con-

stant process of alignment, analysis and restruc-

turing to suit the economic environment, says

Bradley. Its not just about building a pan-European approach but

taking a global approach with consistent deployment throughout.

Bradley points out that TNT first develops a baseline to deter-

mine the demand and service profile in the region. It models cur-

rent performance in service, service offering and cost characteris-

tics, and simulates and models various alternatives. TNT can then

take a clear strategic direction and do the tactical and transition

planning, he continues.

TNTs analysis of its European road network extends through

2017 and they have identified six potential new hubs on the

east-west axis going through Europe: Bratislava, Slovakia; Lyon,France; Munich, Germany; Prague, Czech Republic; Stuttgart,

Germany; Vitoria, Spain. TNT Hoau in China is mostly in the East

of China. India has five key hubs: Sinnar, Nagpur, Mahipalpur,

Martingale and Calcutta.

The road network in Southeast Asia serves Singapore, Malaysia,

Thailand, Cambodia and feeds into China. The European air net-

work operates a single hub based in Liege which connects with

65 airports utilizing 42 aircraft on 500 flights per week carrying a

weight ex-hub of 2,200 tons.

In North America, TNT provides international express delivery

services to and from the US and Canada. It has three internationalair gateways in New York, Los Angeles and Miami.

global destinations, but it has no desire to enter the intra-US

express market.

Just weeks after DHL had announced it would outsource its

US domestic express air lift to UPS, Lombard was explaining

the TNT position saying, If you come too late to the market,

you cant take a position. Given its focus on emerging markets

where it doesnt face large, entrenched competitors, TNTs goal is

to be the lead express provider in the markets where it operates.

Lombard explained the acquisition of Hoau in China in the

context of the companys larger strategy. Hoau was already a

leading less-than-truckload (LTL) carrier covering all of China,she pointed out. Hoaus 1,100 depots and 150,000 clients pro-

vide a strong platform for TNT in China. As an LTL operation,

however, Hoaus focus is on filling its trucks. Utilization is high

because they dont operate to a schedule, they optimize ve-

hicle capacity before the trucks leave the depot. That isnt TNTs

model, and it has begun moving Hoau to scheduled departures

that are necessary to support express operations.

The situation with Speedage in India, another acquisition, is

similar to China for TNT. That road network provides an LTL

platform TNT can transform into a national express network.

When you match schedule and capacity, it creates a strong bar-rier to entry in a market. TNTs sophisticated modeling tools

T concentrates on keeping its balance.


30/52


SIZEM

When Choosing a 3PL

A Ryder consumer packaged goods facility in Chile.


31/52

Outsourced Logistics | July 2008 | 29

atters

Supplier scope and scale loom largein the selection of a logistics provider.

Chile, Brazil and especially in India.

Because of its presence in Southeast Asia, it is operating two

distribution centers for Nike in the regionone in Indonesia,

the other in the Philippines, both of which are growing. We

enabled them to very quickly outsource to us pick and packoperations, shipment staging, tracking and reporting for distri-

bution through the local markets, he explains.

Because of Agilitys local experience in India it was able to

win business by providing a custom solution for Germanys

Metro Cash & Carry. Metro has 615 stores in 29 countries that

offer a broad selection of goods and services at wholesale prices

to customers that include hotel and restaurant operators as well

as small- and medium-sized retailers. Among its other offerings

Metro Cash & Carry supplies fresh fish, meat,

fruits and vegetables every day. The company

now has several outlets around the country af-

ter its start in Bangalore in 2003.

Agility manages the companys cool chain

operations for fresh produce. They faced issues

that are typical in a developing market, recalls

Levy. The produce had to be processed, stored

and transported in very good condition in an

optimum temperature environment. At the time

they entered the Indian marketand its some-

thing often encountered in emerging markets

there was very little infrastructure for cool chain

available. So we built our own facilities.

Agility has to manage movement of fresh produce acrosslong distances through the hot and cold temperatures that are

typical of India. The good news for us, and this comes to intel-

lectual skill sets, says Levy, is that we have a long term Agility

team in India very experienced in managing general logistics

challenges that require us to deploy our own assets.

As does Agilitys Levy, Tom L. Jones, senior vice president

and general manager of Supply Chain Solution of Ryder em-

phasizes the importance of total landed cost and the ability to

manage it as key to success for any company. It involves a very

complex set of considerations that have to be put into the equa-

tion, he reflects. Then also you have to be able to change the

W

hen looking for an outsourcing

partner, depending on the nature

of the alliance, the size of the sup-

plier can play a part in making

the final choice. The size of theprovider matters but its where

that size is that makes the differ-

ence claims Jerry Levy, vice president of marketing for Agility.

Customers should be looking at where there are low cost sourc-

ing opportunities or where there is an opportunity for expand-

ing markets, he advises, and then they should examine the size

of potential logistics suppliers in that area.

As far as having presence in a market, Levy observes that,

The emerging market place is driving a lot of

growth. Those markets are China, of course, but

also Eastern Europe, the Middle East, Vietnam,

and places like Sri Lanka, Indonesia and Latin

America. He sees a significant trend in what

he terms Short Supply Chain shelf life. It used

to be if you built a manufacturing plant i

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