Outsourced Logistics 200901_02

8/4/2019 Outsourced Logistics 200901_02

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J a n u a r y / F e b r u a r y 2 0 0 9

A Penton Media Publication outsourced-logistics.com

Also in this issue:

High-yield Capital Strategies

Calming the Waters on 10+2Outsourcing Adds to Internal

Resources

J a n u a r y / F e b r u a r y 2 0 0 9

A Penton Media Publication outsourced-logistics.com

ExpandingWhileContractingPorts are moving ahead

with critical infrastructure

improvements.
http://outsourced-logistics.com/http://outsourced-logistics.com/http://outsourced-logistics.com/


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3/44

Pre-election fuel prices had candidates chanting

Drill, baby, drill. The tune has changed to Build,

baby, build.

The proposed US economic stimulus focuses attention

on infrastructure and is lauded as necessary but criticized

as lacking clarity on how it will spend nearly $1 trillion.

Weary of large investments that dont spell out details

on how funds are spent or how spending is monitored, the

public wants to see resultsespecially in job creation.

There is no doubt the US desperately needs infrastruc-

ture spending. Lets make sure it is directed to areas with

the most long-term promise to support commercial andeconomic growth. That will help ensure the job creation

is not short lived. This is a place where the logistics com-

munity can (and must) weigh in together in support of the

best alternatives for economic survival and growth.

I have a queasy feeling each time the term shovel ready

comes up in some local politicians speech. Whats in

this inventory of unfunded

projects? Do they fit

the changing social

and commercial

l a n d s c a p e a s

it is evolving?

And what's left

behind on the

drawing board?

In a 2 0 0 3

presentat ion,

Americas Ports:

Falling Fur-

ther Be-

hind? John Vickerman noted an increasingly dire need for

investment in port infrastructure to meet not only current

(2003) demand but future growth. He pointed to an inter-

modal system in the US that is an aggregation of multiple

private and public modes with little or no true cross com-

munication or collaboration. Too little has changed and

today, this sounds like fresh commentary.

Vickermans co-presenter, Theodore Prince, added

there has been inadequate research into the national sig-

nificance of port infrastructure development, including

a gap on local vs. national benefits. Many of the benefits

occur elsewhere, making it difficult to lobby a regionalpolitical base to invest when a disproportionate benefit oc-

curs outside their constituency. The stimulus provides the

ultimate opportunity because its focus is on linking local

and regional investments to national prosperity and jobs.

But we need a concerted effort to avoid moving from

crisis to crisis. When the economy recovers, well find less

capacity, and that can constrain growth. This is an op-

portunity to define infrastructure development in terms of

long-term commercial and economic needs and overcome

some of the historical barriers that have created a discon-

nected (or only semi-connected) logistics network.

That shovel ready project your local politician men-

tioned might create construction jobs in the short term,

but when completed, will it sustain job growth?

The shovel-ready comment sounds like a build it and

they will come mentality we cant afford. We need more

convincing. The logistics community must come to the

table with its support. Then build. Bring them back and

get and keep them using what was built. And bring more.

Its a relentless and unforgiving process, and there is no

time for lengthy lobbying efforts. The logistics communi-

tyshippers, carriers and logistics service providersare

the beneficiaries and need to identify the most sustainableprojects in the pipeline or described as shovel ready and

push them as priorities. This is a one-time funding oppor-

tunity and a one-time marketing opportunity for logistics

to be recognized as the economic engine it is. The US

logistics community already signed a $1 trillion check for

the services it purchased in 2007 and it will do so again

in 2008. Spend wisely.

Editorial

The Economic Engine That Could

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

Outsourced Logistics |January/February 2009 | 1
mailto:[email protected]:[email protected]


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6Global Markets

UK to Fund Transport

Community VoiceMexico's New Customs Regime

12Operations

Top 10 Trends in Services Globalization 2009

Community VoiceConsider Internal Resources Before Outsourcing

Logistics Functions

30Logistics Services

Iraq Builds Its Logistics Network

Community VoiceConnecting Domestic Pricing to the Global

Supply Chain

Features18

Special Feature

Calming the Waters on 10+2

The new rules are a sea change in the wayimports are handled. There is time to get readyfor the government's forceful implementation.

22Cover FeatureExpanding While ContractingThough business is in decline, ports aremoving ahead with critically neededinfrastructure improvements.

26Field ReportStrategies for High-Yield WorkingCapital in Today's EconomicEnvironment

Attention shifts between supply chain,chain of custody and capital chain asexternal forces reshape priorities forbusiness.

373PL ReportFocus on ValueUsers still want value from their logisticsservice providers.

403PL FileSunteck Transport Group

Departments

1 EditorialThe Economic Engine That Could

34 Classifeds

Advertiser Index

January/Februa ry 2009

Volume 2 , Number 1

2 | January/February 2009 | Outsourced Logistics

18


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EASTERN REGIONJim Oot, Phone: 973-335-8902, Fax: 973-335-8903, [email protected]

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T

he UK Transport Secretary, Geoff Hoon,

recently confirmed the government plans

to inject an extra 1 billion into major

transport projects next year. According to

the Department for Transport (DfT) state-ment, the investment is being made, In

order to stimulate the economy by accel-

erating Government plans to cut congestion and significantly

increase rail capacity.

This extra 1 billion, to be spent on road and rail plans, is in

addition to the overall 10 billion for 2009-2014 already pledged

by the transport minister in July 2007 to increase rail capacity.

Other major long-term rail projects include the massive London

Crossrail plan, the 5.5 billion Thameslink program and an ad-

ditional 600 million to tackle congestion.

Major transport plans highlighted in this most recent DfTstatement, include the enhancement of rail freight routes through

Global Markets

London. This includes 54 million just for the North

London route improvement. Other monies already

allocated in Oct. 2007 to rail freight projects in-

cluded TIF (Transport Innovation Fund) money

(132.5m) for Peterborough to Nuneaton (80m)

and Southampton to West Midlands (43m) rail

gauge enhancement to cope with modern taller con-tainers on standard-height rail wagons.

While this is more welcome news for southern trans-

port projects, which will continue to receive the lions

share of new rail funds, there is a rapidly growing con-

sensus in the rest of the country that further expenditure

in southern UK infrastructure is a failed model. It makes

no provisions for tackling the identified problems of the

UKs north-south economic performance divide.

The UK Government needs to invest in the fu-

ture and not the past, stated Martyn Pellew, Group

Development Director for PD Ports. This latest injec-

tion of cash for road and rail projects into the already

congested south will do very little to improve any-

thing, its just a perpetuation of pre-existing problems.

Over three-years ago the Governments Northern

Way initiative identified a 32 billion shortfall in the

economic performance of the North of England. If the

UK Government really wants to help our economy in

this financial crisis and also meet the long term environmental tar-

gets that have been laid out in the recent Climate Change, Energy

and Planning Bills, then the UK Government clearly needs a new

direction for a sustainable future added Pellew. Despite the obvi-

ous benefits of moving freight by rail, so far there is still consider-able misdirection in the way the UK Government treats and funds

its rail network.

As the recent DfT news indicates, a significant amount of fund-

ing has gone into rail access to the countrys southern ports for

increased freight shipment particularly to cope with the newer

one-foot-higher containers bringing more and more product to

UK consumers from the Far East, but as Pellew argues, This latest

investment will only continue the trend for shipping lines to add

increasing cargo volumes on to the overcrowded southern UK in-

frastructure. Its an investment that will work against itself.

Pellew adds, The fact that Britain is an island with a history ofmaritime trade and excellent ports around our entire coast, plus the

UK to Fund TransportA good but

misdirected effort,

says one port official.


9/44

As an island, we need to use our already available best infrastructure

asset firstthe sea, explains Pellew. Like Pellew, proponents of the supply

chain concept known as Portcentric Logistics, strongly argue that by bring-

ing cargo farther north via the sea, closer to its end destination and then

transferring to shorter distance rail movements, retailers can see a signifi-

cant reduction in their shipment delays because their products will not be

caught up in UK southern port and road congestion. This means that there

will be an increase in the accessibility of inventory. They will also benefit

from lower overall transport costs and cheaper land costs and lower labor

rates in the North. All of which will help retailers significantly cut their

supply chain costs. When a product is moved from its overseas originalsource, in say China, to the UK retail shelf with greater efficiency, then ev-

eryone benefits, including the environment.

Once again, theres data to back up the claims made by

these northern UK infrastructure supporters. Tesco has been

reported as having this year doubled some of its national

haulage by rail, while ASDA said it had already reduced

road miles by 25% since January 2005 and aims to cut an-

other 15% by the end of 2009. The results seen with Tesco

and ASDA/Wal-Mart, added Pellew, indicate that the UK

Government needs to open its eyes as to the benefits that

result from a greater use of northern ports and the need for

better rail infrastructure to accelerate this trend.

Yet, while the recent DfT announcement included 30

million for certain road improvements to Immingham Port

on the Humber, the East Coast ports of the Humber, Tees,

Tyne and Grangemouth still have not seen money committed for urgently

needed rail gauge enhancements to link these ports to the East Coast Main

Line (ECML). The ECML is the crucial rail link that runs along the East

Coast of the UK from London to Scotland, and has yet to receive any seri-

ous investment for freight.

According to estimates, a relatively small 100 million investment in rail

freight capability on the ECML would allow the UK to effectively handle

an ever increasing demand for imported containerized goods through eastcoast ports on the Tyne, Tees and Humber. Those in the North East, argue

that as a matter of strategic transport investment, their request for a 100

million investment in the ECML is a relative drop in the UKs transport

budget bucket.

The country needs to develop more sustainable transport methods and

there is a need to change traditional thinking. The UK Government cannot

continue to neglect the North East and the ECML any longer, as this area

clearly represents the most logical place for change to begin. A meager 100

million investment into this vital rail line will have a major and direct impact

for all UK business in terms of reducing cost, carbon emissions and conges-

tion. Investment in the ECML now represents an opportunity for the UKGovernment to act with responsible and decisive vision, stressed Pellew.

fact that the North has less road and rail congestion, is an

incredible asset with some of the best potential for increas-

ing inward investment to the UK and for reviving our eco-

nomic development. The right mixture of good access to

the sea, available brown-field land and an eager work force

exists in the North East. Its clear to see that there is signifi-

cant economic potential for the UK here. Whats missing isa supportive rail infrastructureespecially in the form of rail

access for trains and wagons capable of

carrying the modern high-cube imported

containers.

Northern UK ports employers, the

rail community and major retailers

have been collectively calling on the UK

Government to invest strategically on

the rail infrastructure of the North and

Northeast. The UK needs to invest in

its Victorian-era rail network and shed

its prejudices toward everything good

being in and around the south east. We

need new ways of thinking if we are to

realize that there is a vital latent eco-

nomic power that exists in the Northeast, suggested

Pellew, and major retailers seem to agree.

ASDA Wal-Mart is already operating a 360,000 sq

ft import center at the northern UK port of Teesport to

handle its imported containers prior to onward trans-

port to the companys distribution centers in the North.

Furthermore, Tesco has commenced construction of a

1.2 million sq ft import center at the port in a move thatwill create over 800 jobs. Again this import center, when

opened in 2009, will serve the UKs largest retailers north-

ern stores and regional distribution centers.

Yet, despite the interest of UK and overseas business

enterprises to invest in the North East, the Government,

as recently evidenced, still doesnt seem to be catching

on to the more economically viable and environmentally

responsible transport solutions available up North. Those

in the North suggest that this could be because the UK

Government and Whitehall still have not shed archaic no-

tions about how best to re-energize the economy and howbest to move goods within the UK.

Outsourced Logistics | January/February 2009 | 7

Projects

Martyn Pellew


10/44


Global Markets

Schneider LogisticsExpands Coverage

The global provider of comprehensive

logistics services has added five new freight-

forwarding offices at major US and European

gateways. These locations join those already

along the US West and East Coasts. The

company has also grown its China marlet

coverage, as well.

Already existing in the US are operations in

Los Angeles, San Diego, San Francisco, Seattle

and Miami. Joining them now are the new

facilities in Chicago, Atlanta and New York. The

two new European locations are at Rotterdam

and Amsterdam. Schneider Logistics strategy

guiding the new US operations is to offershipping customers the option of diversifying

their points of delivery away from dependence

on West Coast ports. In Europe some 70%

of freight at the two new locations is either

inbound or outbound from other European

countries, including those in the emerging

Eastern European region.

John Ferguson, vice president, International,

for Schneider Logistics, observes, These

locations and services are key components in

our strategy to build a comprehensive, door-to-door, global logistics operation that spans air,

ocean and truck transportation.

Hapag-Lloyd Container Business SoldA consortium of Hamburg businessmen and the city government

of Hamburg have outbid Singapores Neptune Orient Line (NOL) for

the container business of Hapag-Lloyd.

Klaus-Michael Khne, head of Kuehne + Nagel, which recently

broke ground on a logistics site near Hamburg, and Christian

Olearius of MM Warburg are top figures in the group acquiring

Hapag-Lloyd. Current Hapag-Lloyd parent TUI will buy back one-

third of the company. Though TUI is selling the container line to

focus on its tourism businesses, its partial stake in Hapag-Lloyd has

been described as a means to bring the deal down to a price that both

valued the operation fairly and brought it within reach of the buyers.

The enterprise value of 4.45 billion ($6 billion) was a fair value

under normal market conditions, according to TUI.

One of the goals of the consortium acquiring the shipping line is

to keep it in Hamburg. Hamburg is Europes second largest container

port and Hapag-Lloyd is the worlds fifth largest container line(handling 2.8 million twenty-foot-equivalent units through June

2008).

Uncertain markets have had another impact on logistics companies

in Germany. The expected floatation of Deutsche Bahns DBP Mobility

Logistics did not take place at the end of October as planned. The

forwarding and logistics business will remain with the national

railway, Deutsche Bahn (DB) for the time being.

Hartmut Mehldorn, chairman and CEO of DB, has said hed like

to see more consolidation of the European transport markets. DB

already holds Schenker and was rumored to be in negotiations for a

large motor carrier. Its recent expansions in rail include Transfesa in

Spain and EWS in the UK.

The government had expected to raise 8 billion ($11 billion)

through the floatation but some industry sources indicated that even

a figure of 5 billion ($6.8 billion) would be optimistic in the current

economic climate.

CH Robinson AcquiresTransera

With the acquisition of Canadian project

freight forwarder Transera International, CH

Robinson Worldwide expands its global freight

forwarding capability. Transera, based in Calgary,

Alberta, is a non-asset global project freight for-

warder handling over-dimensional and heavy lift

shipments. It has eight offices in Canada, Dubai,

Singapore and the US. Annual gross revenues

were approximately $125 million.

Terms of the acquisition were not released.

We are very excited to bring our capabili-

ties to Robinson and turn international over-

dimensional freight shipping into a successful

core offering for Robinsons current and future

customers, said Rosemary Marr, founder andCEO of Transera.

CH Robinson Worldwide provides multi-

modal transportation services and logistics solu-

tions through a network of 221 offices in North

America, Europe, Asia and South America.

New

sBriefsJanuary/February

2009

Whos Who of 3PLs

The 16th edition of Whos Who in Logistics has been released. The

new edition, in two volumes The Americas and International, has been

expanded with in-depth profiles of 242 3PLs, says publisher Armstrong

& Associates.Of the 3PLs profiled, over 70% are private versus publicly traded com-

panies. Whos Who in Logistics profiles individual 3PL financial informa-

tion, key personnel, information technology, and service capabilities.

Since our first publication in 1994, our guides have become a pri-

mary information source for third-party logistics market information,

said Richard Armstrong, chairman of Armstrong & Associates. We are

pleased with the quality of our global information expansion. 119 of

the 3PL profiles highlight international providers. Each profile includes

assessments of 3PLs overall capabilities, strengths and weaknesses and

identifies 3PLs with the requisite capabilities necessary to be classified as

Tier 1 Global Supply Chain Managers. These providers have extensive ITcapabilities, over 5,000 employees and provide service to 90% or more of

the worlds Gross Domestic Product (GDP).


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mailto:[email protected]


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Global Markets

DB Schenker Grows Its Siemens Alliance

DB Schenker has extended its role with Siemens medical products in

Australia and New Zealand. Schenker Australia Pty Ltd has been providing

import and export services for Siemens medical products for more than

eight years. This will now extend to all Siemens Australia and New Zealand

international and domestic import and export activities and domestic

freight, providing a consolidated, streamlined service that ultimately ben-

efits the customer, says Schenker.

Ron Koehler, CEO of Schenker Australia Pty Ltd, notes the contract exten-

sion is the result of significant improvements in the companys supply chain

across its businesses during the last two years, and a responsive approach

to reducing the environmental impact of its freight services. We are proud

to have been awarded the Siemens contract for import and export services

across Australia and New Zealand, and will transfer solutions originally de-

veloped to meet the demands in the Healthcare business, to strengthen and

develop Siemens supply chain in other sectors, said Koehler.

We have also considered ways of reducing the environmental impact ofour international and domestic freight services. By providing an optimized

combination of transport modes and reducing paper in freight documen-

tation and invoicing, Schenker Australia Pty Ltd reduce environmental

impacts in the supply chain, which is in line with Siemens principles of

environmentally responsible practice.

Jeff Connolly, Siemens Ltd CFO, said that of the tenders received,

Schenker Australia Pty Ltd was best placed to deliver a consolidated, time-

and cost-effective international and domestic import and export service for

Siemens customers.

Having provided freight forwarding, warehousing and distribution

services for Siemens medical products and for large projects since the late

90s, Siemens is pleased to extend our relationship with Schenker Australia

Pty Ltd to include freight forwarding services for import and export activi-

ties across Australia and New Zealand, including transport and distribution

services throughout both countries, said Connolly.

DB Schenker provides the optimal solution for Siemens freight services,

with the ability to deliver some very challenging cargo, from an extremely

large power generation turbine, to delicate medical devices within very

tight timeframes and cost effectively. Priority medical products have al-

ways been deliverable from Europe within just two days, but now this

exceptional turnaround rate can be provided to customers for all priority

products across Siemens three sectors Industry, Energy and Healthcare.

The delivery time for goods other than priority medical products was pre-viously nine days.

Connolly said DB Schenker also offered Siemens customers complete

visibility throughout the entire journey, with ready access to the online

track and trace system, and improved order and invoicing processes. As

Schenker Australia Pty Ltd is now the single preferred provider of interna-

tional and domestic import and export services for Siemens customers in

Australia and New Zealand, customers will be able to check online where a

product is at any time throughout its journey.

The development of the electronic interface between DB Schenker and

Siemens also means a vast reduction in paperwork, and timely receipt

and issuing of invoicing, with all related documents to now be processedelectronically.

The Panama Canal Had a

So-So Fiscal Year

As it closed its 2008 fiscal year, the Canal

reported a slight decline in overall transits and

tonnage, though there was growth in tanker and

passenger business.The lessening in transits was just 0.1%, with

14,702 in 2008 compared to 14,721 last year.

Using its Panama Canal/Universal Measurement

System (PC/UMS) calculations, tonnage through

the Canal was down 1.1%, from 312.9 million

PC/UMS tons in 2007 to 309.6 PC/UMS tons in

2008.

The Panama Canal Authority (ACP) attributes

the increase in tanker traffic to the fact that

natural gas supplies used for generation

of electricity in Chile from Argentina were

suspended. As a result, petroleum from the USGulf Coast to Chile increased. For the Canal,

tanker traffic was up 4.8% during the year, to

2,067 transits compared to last years 1,972.

Tanker tonnage was up 8.6%.

Transits of passenger vessels were up

17.6%, from 205 to 241. A reason for the gain,

according to ACP, was that more smaller cruise

ships made transits. Transit by container ships

dropped from 3,622 in 2007 to 3,544 in 2008. At

the same time, movement by dry bulk vessels

was up to 2,420 from 2,406.

Commenting on fiscal year figures, ACP

executive vice president of operations, Manuel

Bentez, said, The Panama Canal remains on

sound operational footing, providing the safe,

reliable and efficient service our customers have

come to know and expect. Though a slowing US

economy has slightly reduced cargo shipments

traveling to and from US ports via the waterway,

the Canal actually experienced some growth this

fiscal year among key segments.

ACP notes that during the second quarter

the Canal experienced a surge in arrivals at the

time maintenance was being performed on the

Miraflores and Pedro Miguel locks. This resulted

in an increase of 13.3% in Canal Waters

Timethe average time, including waiting time,

it takes a ship to navigate the waterway. Year-

end totals were 31.55 hours in 2008 compared

to 2007s 27.84 hours.

The canal has a vessel booking system, used

by 60% of its oceangoing transits. Customers

had requested increases in the number of daily

slots available. The ACP increased the number

from 25 to 27. However, use of the system

declined to 92.73% from 94.98% year over year.

New

sBriefsJanuary/February2009


13/44

Aprime objective of the government of Mexico is to

promote its interests abroad. Efforts to revitalize

its economy and open up to international

competition have resulted in scores of free trade

agreements more so than any other country. In addition,

Mexico seeks to improve its cross border processes by

revamping outdated customs processes and procedures.Currently, Mexican customs officials are working to pilot

a new customs regime that seeks to attract more foreign

investment by improving importers supply chain speed

and mitigating the delays frequently associated with time-

intensive processes and procedures at the port of entry.

RFEA New Customs Regime

A customs regime is a countrys specific set of trade

regulations, processes and practices that regulate the

actions of importers and exporters. This new customs

regime is known as Regimen de Recinto Fiscalizado

Estratgico (RFE), or loosely translated as a Strategic

Bonded Warehouse. It is similar to a Foreign Trade Zone

within a geographical area, where tariffs and quotas are

eliminated and bureaucratic requirements are minimized

in an effort to attract foreign investment.

The benefit of the new customs regime is to allow

goods to be imported into Mexico and remain for up

to two years on a tax-free and duty-free basis. It is

expected to mimic the current automotive fiscal deposit

regime (Deposito Fiscal para la Industria Automotriz)

and expand to include more industries and to be more

competitive than the current IMMEX (previously Maquila& Pitex) regime. The government believes that RFE will

decrease logistics cost in terms of dollars per container

and numbers of days in transit which in turn will help

attract additional production to Mexico.

As a growing export center in central Mexico, the

state of San Luis Potosi will pilot the new RFE customs

regime. The Mexican government has partnered with

local businesses to develop and test the new regime,

including two large automotive parts makers, a robotics

and electronics manufacturing company, a warehousing

facility administrator and J.P. Morgans Global TradeServices unit. Preparations began in November 2007 with


the pilot program going live in July. The program is expected to open for

additional manufacturers in early 2009.

Key elements of the new customs regime include:

Allows goods to remain in a Mexican warehouse for up to 2 years on a

tax-free and duty-free basis

Elimination of customs inspection at the port of entry, resulting in cost

reductions and reduced time-to-market. No secondary customs inspections required

Simplified customs clearance process results in reduced customs

brokers fees

Importers have a three-day grace period within which to correct

import declarations

Mexico Customs estimates that the RFI clearance process will save an

importer between US$200 and US$600 per shipment.

Differences between RFE and IMMEX

RFE is similar to the well-known IMMEX program and is expected to

be slightly more favorable due to greater flexibility and simplified customs

inspections that will speed goods through customs.

Global Markets

Community Voice

Ay Caramba!Mexicos New Customs RegimeBy Alvaro Quintana, Executive Director, Global Trade Services, J.P. Morgan

RFE IMMEX

Goods may undergo manufacture,transformation, repair, handling, stor-

age, distribution, exhibition and sale.

Goods may undergo manufacture andtransformation; certain services arealso permitted.

Importer permitted to correct customsdeclarations within three days.

Customs broker will require his physi-cal inspection (previo) prior to submit-ting a declaration (pedimento).

Goods exempt from customs inspec-tion at countrys point of entry.

Goods are subject to a first and a sec-ond customs inspection at countrys

point of entry.

Simplified import declaration required

(aviso).Simplified import declaration required(aviso).

Reduced services required of customs

broker will result in lowered costs.Customs broker fully engaged and lia-ble in the import process, hence higher

costs.

Goods destined to local market enjoy aduty and tax deferral of up to two years

from arrival date in Mexico.

Authorized items imported duty andtax deferred destined to a manufacture

or transformation process.

Lessened manipulation of goods intransit reduces costs, time and risk of

damage and or pilferage.

Goods subject to three inspections,transfers, loading and unloading re-sulting in higher fees and delays intransit. Odds of misrouting increasethereby subjecting goods to greater

risk of damage and pilferage.


14/44


or outright dissolution.

Undeniably, 2008 was a tumultuous year for out-

sourcing, and though we continue to advise clients to

remain cautious in the year ahead, we do not discount

the opportunities and potential still very much evident

in the market. We consider the current struggles of the

industry as a driver for positive change and expect the

outsourcing industry to develop in the coming years, be-

coming more mature, efficient, dynamic, and ultimately

more resilient. With prudence, heightened focus and a

more adaptive approach towards outsourcing in 2009

can in fact be a watershed moment for the global out-sourcing industry.

These Tholons Top Ten Trends in Services

Globalization2009 will have a significant impact on

Global Outsourcing for buyers, investors, providers

and on emerging centers of excellence:

1. The market downturn will impact rev-enues during the first 2-3 quarters.

There are strong headwinds for vendors in the out-

sourcing space. We expect the worldwide market

downturn to impact growth and margins for the first

2-3 quarters of 2009 before picking up and ending the

year on a stronger note as clients seek to cut costs and

generate more revenues. During this period, we see

a reduced number of start-ups in the services sector

as the focus shifts on sponsoring hard asset-intensive

businesses. Moreover, it has become increasingly clear

that the downturn is impacting revenues and we ex-

pect most large firms will see a decline in Quarter over

Quarter earnings.

2. Focus on domestic market to in-

crease.As Western economies continue to hurt, service pro-

viders will shift focus to domestic markets for growth.

We are already seeing increased focus by vendors to-

wards large (and growing) domestic markets such as

found in India, China, Argentina and Brazil. Fulfillment

of customer support and back office services targeted

for retail, Telco, and Financial Services verticals will be

among the hot spots for providers looking to tap the

surging local demand of outsourced services.

3. Global economic downturn andfinancial sector consolidation will

The tsunami of the global economic downturn continues

to impact the foundation of the outsourcing industry

both near and long-term. Service providers are already

feeling the effects of decreased margins and employee down-

sizing, while service buyers are reducing IT budget allocations

for outsourcing engagements. This in turn has caused a cas-

cading effect across the industryevidenced by drying pipe-

lines, cancelled bookings and increased pressure to deliver

value beyond cost.

Decreasing margins and headcount will push providers

to better utilize existing resources. Service providers need to

implement new technologies in a more efficient manner to

differentiate themselves and improve service delivery pro-

cesses. Clients, with reduced IT budgets, will be forced to bemore selectivedemanding far more stringent Service Level

Agreements, greater contractual flexibility and output/result

based payment schemes.

These shifts will significantly induce a high degree of con-

solidation that will be felt across the outsourcing ecosystem.

Paul Santos, Managing Director at Tholons Capital says:

Its an opportune time for the larger players to continue their

string of strategic, niche acquisitions. In an increasingly com-

petitive market, and improbable economic state, the mantra of

only the strong will survive has never been more relevant.

Smaller and less efficient providers may face difficulties intapping new revenue streams and will be prone to acquisition

Operations

Despite a lingering cloud of

uncertainty, the global advisory,

investment and research firm,

Tholons, predicts a strong demand

for outsourcing over the long term.

Top

Trends in Services

Globalization 2009


15/44


In the coming year, we will see more clients asking for al-

ternatives to India to de-risk their service delivery models

that are otherwise geographically limited.

Nearshoring as a low cost alternative to domestic

sourcing will assume greater importance for processes

requiring the same time zone presence. Latin America

with superior cost dynamics will emerge as a near time

zone alternative to Europe/US business adding Spanish

language capability. In the near-term, the top Indian firms

are predicted to expand global footprints and open deliv-

ery centers in China, Latin America, Eastern Europe and

North America.

6. Pricing pressures will result in reducedrates and new measures to achieve costsavings and higher productivity.

Pricing pressures will kick in as suppliers scramble to

meet their quarterly targets through the year. We will see

clients negotiating hard with suppliers to reduce costs,

while suppliers will try to protect rates but offer more

value added services.

Large providers are expected to see EBITDA margins

plunge below 20% over the next three years, as they

move more IT projects offshoremostly to Indiaand

struggle to balance operations with rising wages. The situ-

ation could aggravate if the Rupee continues to appreciate

during this period.

On the delivery front, supplier movement from high

onsite to low onsite deployment will be visible and new

tactical measures for cost savings and higher productiv-

ity towards clients and internal operations will mark new

industry standards.

7. Consolidation imminent for small

playersfocus away from large deals.On the M&A front, large deals will slow due to a more

tepid market. Challenges related to integration and main-

taining liquidity (as opposed to acquisition), will also be

primary concerns for 2009.

Cross-border, inorganic investments are expected to

increase in Japan and China with increased market con-

solidation seeing small to medium players being likely

targets. We also see difficult times for small, non-differ-

entiated players over the next 12 months. As clients look

to reduce spends and rationalize costs, new business

generation will be very difficult. Also, some of the existingengagements may come up for re-negotiation as clients

lead to increased outsourcing in Healthcare,Education, Retail, Telecom and Legal ProcessOutsourcing (LPO).

Global economic downturn is motivating service providers to

focus on recession-proof industries like Healthcare and educa-

tion. Other sectors like manufacturing, retail and telecom will

have to make a significant shift and reduce cost drastically to

survive. These sectors will be attractive industries as they look for

opportunities to cut cost. It is more a question of survival than

being just competitive in such turbulent times.

Consolidation in the financial sector is inevitable due to the

global financial crisis. This will create M&A opportunities whichwill generate further business for LPO firms. We expect strong

growth for LPO firms. Increased M&A activity in the financial

sector would also mean that merging companies would want to

integrate their existing outsourced servicesleading to increased

spending for integration projects. The processes will revolve

around integration of software applications, data center consoli-

dation and tighter integration of other operational platforms.

With financial institutions such as Lloyds TSB/HBOS and Bank

of America/Merrill Lynch merging, service providers will also find

themselves bidding against incumbent transnational rivals like

IBM, Accenture and HPEDS for several large-scale integration

contracts (valued anywhere between US$500 million and US$1

Billion over 5 years).

4. Governments to take special initiatives inpromoting destinations.

Emerging outsourcing destinations still trying to establish

their brands will find the going tough, as clients look for safer

choices.

Cebu City, Shanghai, Beijing, Ho Chi Minh City and Krakow

make up the top five spots in the recent Tholons study of Top

50 emerging global outsourcing cities. We see significant gov-

ernment and industry support for these cities along with someother more popular emerging destinations like Cairo, Sao Paulo,

Buenos Aires and Dalian.

5. Clients will increase geographic diversity intheir service delivery locations.

Newer service delivery geographies are emerging with niche

capabilities. The Philippines has exhibited spectacular growth,

with BPO export value aggregating close to 50% of Indias

Business Process Outsourcing (BPO) export.

Similarly, Vietnam has emerged as a solid alternative to India

on the IT side, and we are seeing aggressive strategies fromVietnam-based players to increase traction in the global market.


16/44

Adam Aguilar, Dana Burleigh, Mick Noce and Brian Alexanderof Unyson Logistics, A Hub Group Company

offerings. Companies that focus on solution-based selling will

weather the storm. Companies that do not innovate will lose

market share.

Otherwise, they run the risk of being an also ran compared to

larger, feature-rich Multi-National Company (MNC) vendors.

10. Sourcing deal sizes will increase forlarge clients.

Large clients will move towards single vendor sourcing to

get volume based price discounts, as opposed to the best of

breed solutions for specific sourcing requirements, which

tend to cost more, and carry a higher program management

overhead.

They will also look for opportunities to group an asset sale

with a sourcing contract, as vendors show readiness to use

their balance sheet strength for top line gains. As a result, weanticipate the average deal sizes to go up, even as the overall

deal volumes remain depressed.

Tholons is a Services Globalization and Investment Advisory

firm combining Best of Breed consulting experience with deep

execution expertise and investment insights to deliver effective ser-

vices to its clients. Learn more about them at www.tholons.com.

look to vendor consolidation for better pricing and reduced

program management costs.

With Tier One firms witnessing flat to negative Quarter

over Quarter revenue numbers, smaller players will find the

going tougher, and will be more open to mergers or takeovers

to survive. We believe a large proportion of sub-1,000 (em-

ployee) companies will either close shop or be acquired.

8. Outsourcing revival by 2009 enddrivenby small to mid sized (SME) clients.

The fundamental motivation for offshoring has not dimin-

ishedin fact it has actually become stronger. We expect to

see a revival in outsourcing, and we are already seeing an up-

tick in outsourcing related activity for engagements that will

come to fruition in 9-12 months.

The mid-market swing will also be aided by providersdeveloping market specific, full service solutions catering to

this space.

9. Strong focus on innovation, R&D andtechnology adoption will be key differen-tiators for providers.

We expect increased pressure to differentiate ones service

Operations
http://www.tholons.com/http://www.tholons.com/


17/44

To their shipper-clients, the carrier procurement professionals at UnysonLogistics are LTL heroes. Theyve harnessed the power of SMC3 Bid$ense,the only strategic LTL bid tool that leverages their expertise to far exceedtheir clients cost-saving and service-level goals.

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Be an LTL Hero. Go towww.smc3.com/go/heroic

to view real business case studies and download the

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Or give us a call at 800.845.8090, ext. 5588.

From Logistics Professionalsto LTL Heroes...

and well-engineered supply chain

practices. Its fundamental to supply chain

velocity and a competitive cost structure.Menlo is an ideal partner for Navistar as we

build a world-class logistics capability that

will make us more profitable and enable us

to better serve our customers.

We are very proud and excited to

be selected for this highly strategic and

mission-critical role supporting Navistars

business objectives, said Robert L.

Bianco, Jr., president of Menlo Worldwide

Logistics. Its clear that Navistar is

determined to elevate their logistics and

supply chain operations into a source

of competitive advantage. The role of

lead logistics provider is a tremendous

opportunity for Menlo and we look

forward to demonstrating the value of this

engagement for Navistar and its customers.

Navistar International Corp. announced it

has selected Menlo Worldwide Logistics, LLC,

as its global lead logistics provider to support

Navistars global growth strategies as the

company moves into new marketplaces.

Menlo will support Navistars strategies

to achieve world-class performance and

a competitive cost structure in its global

logistics network. The contract includes

management of global transportation

providers, regional warehouse management,

lead-time planning and net landed cost

modeling.

Navistar said the outsourcing initiative

represents a significant step forward for itsplans to accelerate growth globally and

speed the introduction of its products into

new markets. Ed Melching, Navistars director,

Global Logistics said, Effective logistics

operations are based on superior processes

Operations

NewsBriefsJanuary/Februa

ry2009

Navistar Selects Menlo for Its Growth Strategy
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18/44

16 |January/February 2009 | Outsourced Logistics

Consider Internal Resources BeforeOutsourcing Logistics Functions

Operations

Community Voice

A

s chemical companies look for ways to reduce lo-

gistics costs, many are increasingly considering out-sourcing as a way to save money associated with

freight and personnel costs. Often considered a fast and ready

solution to mandatory reductions in the logistics budget,

companies should carefully consider the value of combining

internal expertise with outsourced technology-based tools and

professional services rather than simply replacing internal re-

sources to streamline logistics functions.

With capital funds tight, many companies may find it dif-

ficult to acquire the latest state-of-the-art transportation man-

agement technology or retain sufficient staff to manage new

technology or develop corporate-wide logistics solutions. It is

at times like this they often turn to third party logistics (3PLs)

to provide the logistics solutions and/or logistics service pro-

viders (LSPs) to supply the technological tools and professional

services for logistics and supply chain optimization. However,

it is the companys internal staff that holds the knowledge base

of their supply chain operations to understand the specific

risks and merits associated with different cost-saving tactics.

Understanding the value of their internal resources, companies

should consider supplementing in-house expertise with out-

sourced resources to optimize specific logistics operations.

A recent survey reports that while nearly 60% of companies

did outsource some portion of their logistics function, onlyabout 4% outsource the entire department. And companies

that are outsourcing use these resources to achieve savings on a

variety of logistics programs involving inbound and outbound

traffic, freight costs, current assets, raw material and finished

goods inventories.

Rising fuel costs and more limited carrier options have

resulted in increased logistics costs for chemical companies, av-

eraging somewhere between 10% and 20% of revenues. Rather

than focus on specific logistics tasks, companies are evaluating

the total supply-chain when considering logistics enhance-

ments to balance trade-offs between cost and customer service.Through this approach, companies are saving as much as 4%

in sales, while improving customer service.

But should companies outsource the entire logistics func-

tion? Because logistics is a core business function, chemical

companies may find that complete outsourcing can create new

barriers as 3PLs and LSPs are simply not as knowledgeable as

their own staff about internal operations, customer relation-

ships and business regulations. For example, as the changingbusiness climate warrants increased responsibilities in security

and asset visibility, chemical companies may find that many

3PLs do not have as much experience as their own staff to

handle these issues.

When considering outsourcing as a means to optimize logis-

tics functions, companies should evaluate how their business

operations would change with this new resource and review

successful implementations by other companies. Changing

market factors should also be considered.

For example, the practice of making staff cuts to reduce costs

has slowed in recent years as many logistics departments have

reached the point where downsizing may affect business op-

erations. Though cost savings are accrued through reductions,

dollar impact is usually near term and the in-house intellectual

capital that took years to build is gone forever.

Some 3PLs propose freight rate savings solely based on the

larger volumes they command. Studies indicate that lane and

carrier market intelligence also can have a significant impact on

freight negotiations. In addition, the use of an online bidding

tool and supplemental resources allows shippers to execute an

RFQ quickly and generate savings much faster than the con-

ventional bid process. After bidding is completed, optimization

tools can pinpoint the best carrier mix and savings based onclient service levels, capacity commitments and rates.

When considering logistics improvements, experts instruct

companies to look beyond cost savings associated with per-

sonnel and freight as savings and service improvements can

be found in product visibility, inventory and asset reductions,

demand planning, improved procurement and freight opti-

mization. And because a truly cost-effective logistics program

typically includes organizational changes across different de-

partments, many functions may lie outside a logistics managers

control (including sales, purchasing and manufacturing). This

is where logistics outsourcing can help project management ona program and supplement in-house resources.

Steve Hamilton describes

experiences with chemical

companies that can benefit other

industries as well.


19/44

New

sBriefsJanuary/February

2009


Polep DistributionServices Adds WarehouseSystem

J. Polep Distribution Services, one

of the top 15 convenience storedistributors in the US, is upgrading

its enterprise system and installing

a new warehouse management

system (WMS) at its Chicopee, MA

headquarters. It is using the Retalix

Power Enterprise suite. The purchase

is part of the convenience distribu-

tors expansion and technology in-

vestment initiative over the last few

yearswhich has included strate-

gic acquisitions, expanded productlines, and new programs and value-

added servicesto better meet the

needs of convenience retailers.

Service, dedication, commitment

and customer satisfaction have been

the driving force of our business for

more than 100 years, said Lori Polep,

president of J. Polep Distribution

Services. To continue to deliver on that

promise, we needed the complete

supply chain solution that Retalix offersto enable our customers to grow and

thrive in a highly dynamic and com-

petitive environment.

The project includes Retalix Power

Enterprise to integrate and synchro-

nize business and operational ap-

plications; and a new install of the

Retalix Power Warehouse to man-

age all aspects of route-based,

multi-stop distribution operations.

Retalix is the market-leading soft-ware provider for convenience and

foodservice distributors, said Reuben

Halevi, chief operating officer of

Retalix USA. Retalix Power Warehouse

will enable J. Polep to synchronize

its supply chain and business pro-

cesses, reduce costs and support

new growth opportunities.

Polep serves more than 4,000 chain

and independent retailers in the six

New England states and New York.

Chemical companies have reduced specific logistics expenditures

by supplementing in-house resources. For example: Looking to

reduce less-than-truckload (LTL) freight costs while gaining online

visibility of customer orders without sacrificing services, a specialty

lubricants company engaged the rate benchmarking and negotiation

services of a qualified logistics outsource provider. Maintaining an

extensive database of freight rates for carriers in different modes, the

LSP analyzed freight costs associated with different carriers to deter-

mine optimum carrier selection.

Benchmarking LTL rates of incumbent carriers, the LSP can pro-

vide an accurate estimate of cost savings prior to bidding out LTL

freight. With this capability, the lubricants company can negotiate

the best transport rates and lanes with existing and new carriers for

lower freight charges and better delivery performance.

In addition, the LSPs carrier selection and routing tools enable the

company to track orders from system entry until completion, rate

shipments online and monitor carriers, resulting in more accurateaccruals and reconciliation of expenditures.

In another scenario, a global chemical company looking for a

solution that would streamline management of freight and increase

customer service decided to upgrade their logistics functions by

implementing a transportation management system (TMS). Because

the company didnt want to make any changes to its staffing or op-

erating procedures, it chose to outsource to an LSP that could also

provide strategies for increasing efficiency and outline opportunities

for short- and long-term savings.

The LSP provided a web-based TMS that optimized freight opera-

tions in key areas such as carrier management, route guide design

and compliance, tender management and vendor compliance in

addition to providing full visibility into freight spend through online

access to data and custom reports. Automatic tracking improved

carrier performance from 90% to around 98%.

Advanced contract management functionality offered by the on-

demand TMS provides for highly accurate, real-time freight accruals

for accurate reconciliation, eliminating the occurrence of wide vari-

ances between estimated and actual cost of freight.

Chemical companies as well as businesses in other industries

should evaluate the value of their internal logistics resources be-

fore eliminating them for a complete outsource solution. Before

outsourcing any transportation and logistics functions, tap into thevalue of your current resources. Money can be saved by using inter-

nal staff to manage specific tasks rather than outsourcing complete

operations. Companies also shouldnt lose the investment made in

building internal logistics expertise over the years. Consider using

outsourcing to provide the tools and support needed for your in-

ternal staff to better manage logistics functions for greater efficiency,

cost savings and customer service.

Steve Hamilton is president and chief executive officer of ChemLogix

LLC. The company often works with best-in-class shippers, and those

aspiring to be, in implementing programs that generate significant logisticsand supply-chain savings. E-mail [email protected].
mailto:[email protected]:[email protected]


20/44


I ts not that the industry didntknow new regulations were to be imposed

on goods destined by ship for the US. Part

of the Security and Accountability for Every

Port (SAFE) Port Act passed in October 2006

mandated that ocean shipments to the US had

to have electronically filed manifests in the

hands of US Customs and Border Protection

(CBP) at least 24 hours in advance of lading a

vessel at its foreign port.

There are 10 data elements to be included in the

Importer Security Filing (ISF) by importers or their

agents. Ocean carriers and Non-Vessel Operating

Common Carriers (NVOCCs) are to file 2 data elements

that describe the status of a container and its physical

location on board the vessel. Hence the 10+2 regula-

tions. The specifics of required data are listed in the box

on page 20.

In January 2008, CBP published its proposed rule-

making in the Federal Register. It then collected and

By Roger Morton

Calmingthe

WatersSpecial Feature


21/44

While the new rules represent a sea change in

the way imports are handled, there is ample

time to get ready for the governments forcefulimplementation of whats commonly called 10+2.

on 10+2on what we call the line item level.

While realizing that some are going to turn to outside

logistics providers to handle the process, Nathan Pieri,

senior vice president of marketing and product manage-

ment, Management Dynamics, argues that the govern-

ments increased security regulations, holding importers

more accountable than ever, are moving companies to

have more control and develop core competency in the

area.

Management Dynamics is a provider of global trade

management software and information services, part of

which is to provide solutions to automate and complete

the import process, from order entry to delivery. As

part of our core trade import information, explains

Pieri, we added 10+2 capabilities. Our perspective

was that there would be pain in implementing this new

regulation, but with that there is the possibility of a tre-

mendous gain. The gain is that all of a sudden you have

much more automation in your supply chain. There will

be much more visibility and control over whats going

on. Now you can actually start getting operational ben-

efits. We see it as a net good.

There are barriers to overcome. For example,

Fountain feels because of the intermediary nature of theglobal economy, getting information on the true manu-

facturer will be one of the more difficult data elements

to get for the 10 portion of the regulation. Generally,

he notes, trading companies and wholesalers have been

reluctant to disclose the actual name of the manufacturer

for fear of losing future orders, and this piece of data is

one of the major components of the 10 + 2 filing.

Another challenge pointed out by Woods is that for

importers the filing is fairly involved. What really com-

plicates it, he says, is that you have to link it at the line

item level for the commodities. You have to identify themanufacturer, country of origin and harmonized tariff

evaluated some 200 public comments, made whatit calls significant enhancements, then issued the

Importer Security Filing and Additional Carrier

Requirements interim final rule.

When the proposed rules appeared they caused con-

cern since while seeming to be fairly straightforward, the

amount of data required to answer each element can be

burdensome. Some proactive companies saw this as a

strategic opportunity to evaluate and gain greater visibil-

ity into their supply chains. The alternatives for compa-

nies to meet the new regulations appear to be handling

the entire filing process themselves; purchasing or using

as required a vendors software solution; or turning the

entire process over to a third party supplier.

Walt Fountain, director of enterprise security at

Schneider National, feels the largest component to the

ruling that will affect shippers, importers and logistics

industries, is the level of visibility each party needs for

a transaction. The depth of information needed truly

makes the importer responsible for understanding every

point in their supply chain, he says. We strongly rec-

ommend that every importer go to their suppliers and

vendors and make sure that each party in the supply

chain can provide the needed information within theprescribed time frames.

Depending upon the service supplier, there are dif-

fering perspectives on who will handle the import

process. For example, Don Woods, director of customs

brokerage compliance for UPS Supply Chain Solutions,

claims results of two surveys conducted in each of the

past two years indicated that many importers expected

their broker to handle the paperwork on their behalf.

The advantage the broker has is that they are familiar

with the data elements required in the security filing, he

notes. They are dealing with this type of information ona daily basis, particularly linking information together



22/44

20 | September 2008 | Outsourced Logistics

information you have at lading,

then perfect it before arrival. 4. The

fourth and final piece of data they

will allow you to give the best in-

formation you have up front then

amend it later is the ship to party.

In some casesparticularly where

the importer or ship to party may

not be knownthey will allow

you provide what they call a nomi-

nal consignee where they will ac-

cept in some cases theyll even ac-

cept a terminal, container freight stationor warehouse. So, thats a lot of flexibil-

ity on that piece because many import-

ers say they just dont know where the

goods are going to be finally delivered.

As for vessel reporting requirement,

The carriers have their operational sys-

tems that can report the 2 element,

claims Pieri. Some of our logistics

provider customers are interested in

using our systems to manage their

part of 10+2 which sometimes in-

volves providing the compliance de-

tails of stuffing locations and some

of the other 10 items. Most car-

riers can provide the 2 elements

pretty much from their normal op-

erations.

Although there is a substantial

grace period before 10+2 enforce-

ment goes into full force, this time

should be sufficient to allow import-

ers to assess their supply chains and

capabilities to determine whether tohandle compliance internally, out-

source it, or some combination.

Fountain explains Schneider

works with its customers to under-

stand how they view their compli-

ance programs and determine if com-

pliance is best handled internally or

should be outsourced. Every suc-

cessful compliance program will in-

corporate both internal and external

factors, he argues. Generally, ac-tivities such as Focused Assessment

ible data elements 1. The manufacturer

of the goods. But if you dont knowthat you can give them the supplier. 2.

Country of origin. If you dont know, you

can provide the country where the final

stage of production took place. 3. You

dont have to have the perfect harmo-

nized tariff schedule. Give them the best

schedule number. That puts it on

a par with a Customs entry.

Interacting with DHS on im-

plementation of the new regu-

lations, Woods notes that the

government has indicated there

will be some flexibility in en-

forcement for a period of time.

He claims that between January

26, 2009 and January 26, 2010,

DHS and CBP will accept mini-

mal data in the timing of when

the ISF is to be reported. When full en-forcement comes about in 2010, there is

to be a change in penalties. Where they

were leveled at shipment value, the new

charge will be at $5,000. per violation.

Another change involves what CBP

has considered as the responsible party

for the security filing. In the past it

has been assumed the responsible

party was going to be the importer

of record, usually the same party as

for Customs entry purposes. Now

the importer of record may be an

owner, buyer or a nominal con-

signee, whoever causes the goods

to enter a port within the US. This

change may relieve some anxiety

since the importer of record on the

entry doesnt have to be the same as

the ISF importer.

Further explaining results of his

governmental meetings, Woods

recalls that, Part of that flexibil-

ity comes in four data elements ofthe eight identified in the proposed

rule where there could be multiple

responses instead of a single one.

So, indicates the government if you

dont have all data 24 hours before

loading at origin, you can give us

the information you have to the best

of your knowledge at that time.

However, a modified or amended

ISF must be provided to Customs

24 hours before arrival.Woods enumerates the four flex-


Don Wood of UPSSupply ChainSolutions

Nathan Pieri ofManagementDynamics

The 10+2 List

There are different requirements for im-

porters and carriers in the rules. The 10

refers to eight data elements that must bein the Importer Security Filing (ISF) with

an additional two elements that refer to

where containers are located on a vessel

and who performed the consolidation.

Here are the 10 for importers:

1. Seller

2. Buyer

3. Importer of record/FTZ applicant

identification number

4. Consignee number(s)

5. Manufacturer (or supplier)

6. Ship to party

7. Country of origin

8. Commodity Harmonization Tariff

Schedule of the United States

(HTSUS) number

9. Container stuffing location

10. Consolidator

The 2 for carriers

1.Vessel Stow Plan

2. Container Status Messages (CSM)

Special Feature


23/44

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Audits should be done by an outside

organization, but the development of

the actual program must be done on an

internal level and can be guided by out-

side consultants or by US Customs. The

structure of the compliance program

will depend on the complexity of the

organization, its products and the reach

of its supply chain.

In Pieris view, At the end of the

day there are going to be a couple of

different camps. There are going to be

those that have relatively simple sup-

ply chain and are going to solve 10+2

transactionally. Typically theyll work

with one forwarder and move that way.

There will be another segment that will

say hey, I think this is a good time,

especially now that we have lead time,

lets go ahead and look at doing a better

job. Lets get it right in procurement.

Well make sure all of our orders are

compliant. Our view is that now is the

time, especially with this regulation,

to treat global trade management as a

strategic piece of information technol-

ogy that your business should have.

Reflecting on the motivation forimplementation of these rules: the rea-

son is security. US Customs has long

stood by the idea that cargo security is

best achieved by ensuring that freight

which poses a possible threat does not

make it onto a vessel or aircraft des-

tined for the United States, points out

Fountain. The security of our country

depends on the ability of international

communities, and industries within

these communities, to support and fol-low through on these initiatives.

US Customs has long stood by

the idea that cargo security is best

achieved by ensuring that freight

which poses a possible threat does

not make it onto a vessel or aircraft

destined for the United States
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24/44

Though business is in decline, ports are moving ahead with

critically needed infrastructure improvements.

Negative news

Among items of negative news is a report from Port

Tracker, produced for the National Retail Federation by

IHS Global Insight. Its analysis indicates retail container

traffic at the nations major retail container ports will be

the lowest since 2004. Volume for 2008 is projected at

15.3 million TEU (twenty-foot equivalent units) com-

pared to 2007s 16.5 million TEU, a decline of 7.5%

Because of the volume of container traffic handled by

West Coast ports and since so much import business of

late has come from Asia, they garner the most attention.

Drewry Supply Chain Advisors claims problems being

faced by US West Coast ports are structural and not of a

temporary nature.

The argument forwarded by a division of Drewry

whose expertise is in shipping, international supply

chains and related sectorsis covered in its white pa-

per, "US Transpacific Intermodal Today and Tomorrow."

By analyzing end-to-end transport costs of containers

shipped to and from the US interior via West Coastand East Coast ports, then forecasting a decline in

vessel-related costs once the Panama Canal

expands it capabilities

by 2015, and the in-

creased development

of the Suez Canal as a

viable route for cargo

from Southeast Asia,

D r e w r y S u p p l y

Theres no denying the global economy is

in a bad way and dragging down business

of every kind, including transportation.

Import and export freight movements

through the nations ports have been in

decline, just as with cargo for air, rail

and truck. While ports are suffering with

dwindling commerce, when looking be-

yond immediate problems there are a number of issues

on the horizon that require action now if they are to

remain viableand even ahead of the competition

when the gloom lifts.

A few of the matters needing to be addressed now in

order to be ready when the economy grows again include

the fact that larger vessels, carrying more cargo will have to

be accommodated with deeper channels and cranes that

can handle their size and volume. Facilities to move and

house freight must be expanded. On-dock rail is a requisite

for speedy movement of freight to intermediate or final

destinations. There are increased governmental demandsfor safety and security as well as improved environmental

conditions being imposed on the ports that require greater

investments as well. The list goes on. What is happen-

ing is that though business is shrinking, ports

are continuing to invest in upgrading

their infrastructure. The

story is one of current

negatives and future

positives.

By Roger Morton

Expanding

WhileContracting


Cover Feature


25/44


Among the projects is a $97.9 million wharf improve-

ment, part of TraPac Container Terminal expansion and

$42.7 million for marine wharf maintenance and im-

provements of various berths.

The Port of Tacoma. With three major projects esti-

mated to cost $1 billion, the port will increase its capac-

ity for growth and development within its industrial

core. The relocation of the Totem Ocean Trailer Express

(TOTE) Terminal is scheduled for 2009-2011. By ex-

tending the ports Blair-Hylebos Peninsula by 6.4 acres

and moving the TOTE facility there, space will be made

in the old location to support a new terminal for NYKLine. The Blair Waterway will also be widened to ac-

commodate larger ships.

Two berths will be built for the new NYK 168-acre

container terminal to be constructed from 2010 to 2012.

To be named the Yusen Terminals Tacoma Inc. (YTTI),

the new facility will incorporate an on-dock intermodal

rail yard with the capability of handing full-unit trains.

The port is also working to improve road and rail con-

nections from 2009 to 2013.

The Port of New Orleans. A $1 billion 2020 master

plan was announced by the port early in 2007. Reported

estimates are that short-term projects would cost $574.3

million and long-term work would be an additional

$465.1 million. The port has continued to suffer long-

term effects from Hurricane Katrina that struck the City

and Port in August 2005. Part of this is because the

US Army Corps of Engineers has halted dredging the

Mississippi River Gulf Outlet that would create deep

draft access to the ports Inner Harbor.

Despite the setbacks, the port is moving ahead with

its projects. Most recently it awarded a $26.5 million

contract for construction of two new multi-purpose gan-

try cranes for its Napoleon Avenue Container Terminal.These will join four cranes already in operation when

work is completed in July 2010.

The Port of Houston. The port reports that each year

7,700 vessels call there, which ranks it first in the US in

foreign waterborne tonnage and second in overall ton-

nage. The Port Commission is highly active in projects

to improve the ports infrastructure.

Among the most current projects under consider-

ation are $30 million for Bayport Container Terminal

improvements that include building a Terminal

Administration Building and a Maintenance and RepairBuilding. Additionally, consideration is being given for a

Chain Advisors sees the economic forces and infrastruc-

ture improvements favoring growth of Gulf and East

Coast ports.

Examining typical patterns of cargo arriving at West

Coast ports destined for customers in the East, the study

looks at costs for moving that freight via intermodal rail

traffic. Faced with a tightening market and rising de-

mand, claims Philip Damas, director of Drewry Supply

Chain Advisors, the railroads have chosen to up their

prices rather than invest in significantly more capacity,

in the mistaken belief that they had a captive market.

Ultimately, because of all these factors, concludesDamas, Intermodal costs are certain to keep rising, while

all-water costs will continue to fall, which means that the

land-bridge route will become less economic than the all-

water route except for very time-sensitive goods.

Positive actions

Even in the face of such serious traffic issues, ports are

taking steps to improve infrastructure. Here are some

exemplary projects underway aimed at meeting future

needs as the world economy improves and demands for

port services and facilities increases.

The Port of Anchorage. This far north port services

80% of the states populated areas, handling 90% of all

shipped goods and moving more than 4 million tons

of freight each year. Its current $700 million expansion

project is aimed at responding to a need for facilities for

additional containerized carriers; servicing more indus-

tries related to export, such as mining and forest prod-

ucts; and lending oil field assembly and load-out

support.

Among other facilities being built under the

project manager, ICRC, are two barge termi-

nals, four container/military berths, and threefuel berths.

The Port of Los Angeles. It is anticipated

that $383.7 million in construction projects

is to be awarded. The ports executive direc-

tor, Geraldine Knatz, Ph.D., notes, The rise in

construction activity underscores our mission

to continue upgrading Port infrastructure and

cargo terminals in the most environmentally

sustainable fashion. After a seven-year hiatus

in our capital development program, this con-

struction activity is a sign that we are back inbusiness in a big way.


26/44


director of the Georgia Ports Authority

claims it will not only survive the cur-

rent recession, but will come out of it

stronger t

Documents

Outsourced Logistics 200901_02