HOT TRADE FINANCE PRODUCTS AND SERVICES
PG 24
FEBRUARY 2012 WWW.WORLDTRADEWT100.COM
PG 20
m 12 O.co LS 0 P 2 eX TAI ...
20 downloads
950 Views
37MB Size
Report
This content was uploaded by our users and we assume good faith they have the permission to share this book. If you own the copyright to this book and it is wrongfully on our website, we offer a simple DMCA procedure to remove your content from our site. Start by pressing the button below!
Report copyright / DMCA form
HOT TRADE FINANCE PRODUCTS AND SERVICES
PG 24
FEBRUARY 2012 WWW.WORLDTRADEWT100.COM
PG 20
m 12 O.co LS 0 P 2 eX TAI 2, actur RE DE ay uf MO M hMan FOR ec 28 w.T PAGE w w SE E
IN AND OUT OF THE SOUTH THE SECRET TO A 99% ON-TIME DELIVERY RECORD
When you need expedited service, Averitt’s multiple modes and network of solutions get it there on time and on budget. Blended-mode options Next flight out availability Paperwork-free guarantee Visit averittexpress.com/expedited facebook.com/averittexpress
THINK RED INSTEAD 1-800-AVERITT
Hyundai The Perfect Accessory
2011
SM
Recognized transit reliability make Hyundai an essential element of the apparel importers transportation wardrobe. Pair HMM speed and reliability with on line track and trace to complete your look. Containerized ocean transport services to 120 ports in Asia, The Americas and Europe. Hyundai Merchant Marine. On time. Online.
m.hmm21.com 1-877-7-HYUNDAI
Inside
VOLUME 25
NUMBER 2
February 2012 18
FEATU RES COVER STORY
20
Boosting the ROI from your 3PL Get the most out of your 3PL by treating it as a partner, being specific about your needs, and maintaining open channels of communication.
E XE C UTI V E B R I E F I N G 8 10 14 16
INDUSTRY UPDATE: PHARMACEUTICALS
38 Unlocking Reverse Pharma Logistics Until now, pharmaceuticals were handled only by specialty distributors.
By Dan McCue
24 Hot Trade Finance Products and Services
Green Matters e-Supply Chain Supply Chain Watch Tradewinds
By Gail Dutton
U.S. REGION: GULF COAST
43 Regions with Ports Get a Leg Up on Attracting Economic Development
Financial products and services can help your company stay competitive on a global basis.
Their advantage will grow after the Panama Canal expansion is complete. By Ken Krizner
By Gail Dutton INTERNATIONAL REGION: BRIC
30 Evolving Fleet Management Technology
47 2012: The BRICs and Beyond The BRICs remain popular with U.S. exporters, but they are difficult places to do business.
Mobile devices and technological advances have made it easier than ever to track and manage your fleet. By William Atkinson
34 Independent Logistics Consultants Provide Critical Benefits in Designing DCs
The leveraging of broad supply chain experience from multiple industries and incisive analytics are important tools for independent logistics consultants. By Jeffrey B. Graves
By Doug Barry
COLUMNS INSIDE WORLD TRADE
7
Boosting Your Bottom Line Through careful and thoughtful management of a supply chain, you can boost your profits while minimizing risk. By Martha Walz
IWLA UPDATE
12 Sustainable Logistics Sustainability is here to stay. By Joel Anderson
EXTREME LOGISTICS
50 A Once in a Lifetime Opportunity The world’s largest New Year’s Day parade in London, England, was a logistical challenge for 15 U.S. high school and university marching bands. By Chris Lewis
>>>> Download podcast of article at www.worldtradewt100.com/media/podcasts WORLD TRADE WT100 (ISSN 1949-9159) is published 12 times annually, monthly, by BNP Media II, L.L.C., 2401 W. Big Beaver Rd., Suite 700, Troy, MI 48084-3333. Telephone: (248) 362-3700, Fax: (248) 362-0317. No charge for subscriptions to qualified individuals. Annual rate for subscriptions to nonqualified individuals in the U.S.A.: $115.00 USD. Annual rate for subscriptions to nonqualified individuals in Canada: $149.00 USD (includes GST & postage); all other countries: $165.00 (int’l mail) payable in U.S. funds. Printed in the U.S.A. Copyright 2012, by BNP Media II, L.L.C. All rights reserved. The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations. Periodicals Postage Paid at Troy, MI and at additional mailing offices. POSTMASTER: Send address changes to: WORLD TRADE WT100, P.O. Box 2144, Skokie, IL 60076. Canada Post: Publications Mail Agreement #40612608. GST account: 131263923. Send returns (Canada) to Pitney Bowes, P.O. Box 25542, London, ON, N6C 6B2. Change of address: Send old address label along with new address to WORLD TRADE WT100, P.O. Box 2144, Skokie, IL 60076. For single copies or back issues: contact Ann Kalb at (248) 244-6499 or KalbR@bnpmedia.com. W W W. WO R L DT R A D E W T 1 0 0 .C O M
5
Online
www.worldtradeWT100.com Web Exclusives on Cloud Technology Special features and content written for iPad editions are now available online!
Moving to the Cloud: Is There a Tipping Point? Companies are starting to move traditionally internally hosted systems to the cloud. Here’s why.
brought to you by
The Transformational Power of Mobile Technology
WT100 On the Go
Mobile technology is pervading the supply chain, bringing strategic, operational, and financial benefits.
Keep up-todate on supply chain articles from WT100 via Podcast! Listen to this month’s articles — go to worldtradewt100.com/ media/podcasts and start listening today!
The Strategic Value of Supply Chain Visibility
Smartphone users go directly to the WT100 Podcast page.
Extreme Logistics: Never Forget
The ability to see into every aspect of a supply chain in real time is becoming imperative in achieving operational agility.
Supply Chain’s Week in Review
How Companies are Using IT to Improve Supply Chain Efficiency New IT solutions, along with cloud computing, are leading to more effective and economical supply chains.
Get our app at www. worldtradewt100.com/ iPad_App.
A logistics company assists one Kansas community with a 9/11 memorial display.
Cloud Technology White Papers: • Reengineering the Foundation for B2B Information Exchange in the Supply Chain • The Cloud Supply Chain Data Network
Are you a subscriber of the World Trader? You should be — choose from one or more of the following E-Newsletters from World Trade 100: Europe Edition Inside Risk + Compliance Latin America Edition Global Edition Asia Edition Inside Software + Technology
Sign up today at www.worldtradeWT100.com/enews 6
WO R L D T RA DE
1 0 0
F E B R U A R Y
2 0 1 2
®
INSIDE WORLD TRADE
For subscription information or service, please contact Customer Service at: Tel: 847.763.9534 or Fax: 847.763.9538 or e-mail WTR@halldata.com
Senior Group Publisher Tom Esposito Publisher Sarah Harding Editor in Chief Martha Walz Associate Editor Chris Lewis Art Director Michael T. Powell Contributing Writers Dan McCue, Gail Dutton, Ken Krizner, April Terreri, Mary Shacklett
WORLD TRADE MAGAZINE EDITORIAL ADVISORY BOARD Mark Woodward CEO & President E2open
Jay Bellin Managing Director, San Francisco Branch Mainfreight
Bob Madden Supply Chain Manager, Supply Chain Programs Eaton Corporation
David Gustin Managing Partner and Head of International Trade Programs Global Business Intelligence
Nancy Woo Hiromoto VP, Sales & Business Development, N.F. Stroth & Associates
Susan Kohn Ross International Trade Counsel Mitchell Silberberg & Knupp LLP
SALES Publisher
National Sales Director East & South U.S./ Europe and Western Asia West & Midwest Sales Manager
Sarah Harding 216.991.4861 hardings@worldtradewt100.com Randi Giambruno 516.377.3906 giambrunor@worldtradewt100.com Jennifer Mallinger 312.274.2481 mallingerj@bnpmedia.com
OPERATIONS STAFF Production Manager Marketing Coordinator Web Seminar Project Manager Reprint Manager & Trade Show Coordinator Group Audience Development Manager Multimedia Manager Corp. Audience Audit Manager Postal & E-Mail List Rental
Single Copy & Back Issue Sales
John Talan, 248.244.8253 Amanda Podina Danielle Belmont, 248.786.1613 Cindy Williams 610.436.4220 ext. 8516 williamsc@bnpmedia.com Christopher Sheehy Katie Jabour Catherine Ronan Kevin Collopy, 800.223.2194 x684 kevin.collopy@infogroup.com Shawn Miller, 845-731-3828 shawn.miller@infogroup.com Ann Kalb, 248.244.6499 kalbr@bnpmedia.com
WORLD TRADE HEADQUARTERS 600 Willowbrook Lane Ste. 610 West Chester, Pa. 19382 www.worldtradeWT100.com
CORPORATE
CORPORATE DIRECTORS Publishing John R. Schrei Corporate Strategy Rita M. Foumia Information Technology Scott Krywko Production Vincent M. Miconi Finance Lisa L. Paulus Creative Michael T. Powell Directories Nikki Smith Human Resources Marlene J. Witthoft Events Scott Wolters Clear Seas Research Beth A. Surowiec BNP Media Helps People Succeed in Business with Superior Information BNP Media Corporate Telephone: 248. 244.6400
Boosting Your Bottom Line
G
lobal trade is a many splendored thing, but in the end it boils down to one thing: the bottom line. Through careful and thoughtful management of your company’s supply chain, you can boost your profits while minimizing risk. This issue of MARTHA WALZ WT100 outlines many ways in which you can achieve this result. New trade finance products and services are perhaps the most basic way to boost your bottom line. The products featured in Gail Dutton’s article, starting on p. 24, will help your company stay competitive on a global basis by increasing your market share and market penetration. Our cover story discusses ways to boost your ROI from your 3PL. Put your 3PL to work for you in a strategic way, and this will ultimately positively affect your bottom line. By treating your 3PL as a partner, being specific about your needs, and being open to changes in the partnership as new needs and solutions arise, your company will see positive effects in your supply chain, although perhaps not where you expect. Managing your fleet and knowing where your products are in transit at all times can also benefit your bottom line. New fleet management solutions enable any company to see exactly where their shipments are in real time. These solutions help shippers and carriers save time and money, which can only benefit their bottom lines. Sustainability is another way in which a company can save money. Some sustainable initiatives generate cost savings and operational efficiencies, which boost your
bottom line. Joel Anderson explains to us on p. 12 what the International Warehouse Logistics Association (IWLA) is doing to promote sustainability in U.S. warehouses. Investing in regions that are ripe for global trade is an obvious way to boost your bottom line. In the U.S., for example, port locations on the U.S. Gulf coast will be hotter than ever after the Panama Canal expansion is complete in 2014. This increased port activity will bring additional economic development to the regions and states in which they are located. Additionally, those ports will bring cost savings to manufacturers importing and exporting from them. Internationally, the BRIC countries (Brazil, Russia, India, and China) continue to be good locations for U.S. companies looking for long-term growth. Turn to p. 47 to see just how hot the BRICs are. Whether investing in new regions, applying new financial products, or trying out new partnerships, the bottom line remains: by working strategically in myriad ways, you can increase profits and minimize risk throughout your supply chain.
Martha Walz, Editor in Chief walzm@worldtradeWT100.com
printed in the usa
W W W. WO R L DT R A D E W T 1 0 0 .C O M
7
GREEN MATTERS
Mobile CNG Station IMW Industries has developed a brand new self-contained, mobile compressed natural gas (CNG) fueling station, which can be transported quickly to fleet locations throughout the U.S. The station, which provides time-fill and fast-fill capabilities to fleets, was created for small- and mid-size vehicle fleets. The station can fuel a wide array of vehicle fleets, including CNG-powered refuse trucks, delivery trucks, and service vans. In addition, the station has an on-board fueling capability that can either be used by 10 vehicles at the same time in time-fill mode or by two vehicles in fast-fill mode. “This new product offering broadens our capabilities in the expanding market for natural gas compression equipment for fueling transportation in North America and worldwide,” says Brad Miller, president and CEO, IMW. “The flexibility and utility of this mobile CNG system supports fleet operators looking to provide temporary or emergency coverage for their CNG fueling networks.” Miller continues, “The mobile CNG fueling package includes proven IMW CNG components in a system that combines ease of mobility with plug-and-play installation simplicity.”
New Year, Cleaner Trucks
8
The Port of Los Angeles’ Clean Truck Program is now fully effective, and results are already being noticed. On January 1st, 1,473 of the Port’s short-haul fleet of 11,772 trucks retired from port service; each one of the 1,473 trucks had been deemed “dirty” for their harmful emissions. The Port also concluded its $35 per TEU clean truck fee that had been collected for every gate that was moved for trucks that did not meet clean engine standards, which were implemented in 2007.
Throughout the past few years, the port has reduced sulfur oxide and nitrogen oxide emissions considerably—compared to 2005, emissions had dropped by 92 and 77 percent, respectively, in 2010. “By cutting harmful diesel emissions, we are building a healthier Los Angeles,” says Los Angeles Mayor Antonio Villaraigosa. “The Port of Los Angeles, along with our industry partners, has made the business of moving cargo cleaner,” states Geraldine Knatz, executive director, Port of Los Angeles. “The results speak for themselves.”
WO R L D T R A D E
2 0 1 2
1 0 0
F E B R U A R Y
Green Freight, Green Economy
ARI Launches Green Website
A variety of freight logistics companies, freight carriers, industry associations, and manufacturers have met to sign a joint declaration entitled, “Private Sector Declaration on Green Freight in Asia towards a Green Economy.” The declaration will maintain Asia’s green freight initiatives and programs. DHL, TNT, and UPS were among the companies that signed the declaration to demonstrate the interest they have in reducing their fuel costs, as well as their carbon footprint. “For a [global] company like DHL, it is most important to have aligned approaches regarding green freight programs,” says Bjorn Hannapel, Senior Expert GoGreen, DHL. “We are looking forward to working together with our customers [and] suppliers in the Green Freight Asia Network.”
Global fleet services provider ARI, which specializes in complex car and truck fleets, has launched its sustainable fleet management microsite. ARI designed the site with two goals in mind—to help fleet managers become more informed about environmental management issues and to provide extensive information regarding the ways in which fleets can improve their sustainability practices. “Today, improving efficiencies isn’t an optional decision; it’s become a necessity to stay competitive,” says Elisa Durand, manager, strategic consultinganalysis and sustainability, ARI. “Fleets of all sizes can reap considerable benefits by making more environmentally conscious decisions.”
Solar Power, Green Jobs Geoscape Solar, a solar power integrator based in New Jersey, has completed its installation of a 733-kW solar power system for Atlantic Central Logistics (ACL), located in Elizabeth, N.J. The system was comprised of 4,072 solar panels and roughly 10 miles of wiring. Approximately 75 percent of ACL’s electric needs will be met by solar power. In addition, not only did the project lead to 35 new green jobs in Elizabeth, but it will also noticeably diminish carbon dioxide throughout the next 30 years, to the point in which it is comparable to the planting of 65,000 trees. Of note, such green jobs development is not unusual in Elizabeth as the town has been included in Popular Science magazine’s list of the U.S.’s top 50 greenest cities in the past.
UPS Earns Gold Star UPS has become the first major package delivery and logistics company to earn Gold Status certification from the Leadership in Energy and Environmental Design (LEED) along with an Energy Star certification for its corporate headquarters complex. UPS engineers evaluated five main elements necessary for LEED certification: sustainable site, water efficiency, energy and atmosphere, materials and resources, and indoor environment quality. The Energy Star award certifies the UPS headquarters uses less energy, is less expensive to operate, and generates fewer greenhouse gas emissions than most similar buildings in the U.S. To qualify for the Energy Star rating, a building or manufacturing plant must perform better than at least 75 percent of similar buildings nationwide. WT
A Unique Perspective From the Pacific Rim to the Atlantic basin and all of the oceans in between, COSCO uses a half century of experience sailing the world to help you move containerized cargo quickly, securely and cost effectively. With one of the world’s largest fleets and equally vast resources for simplifying the logistics challenge, COSCO has advanced the science of supply chain efficiency far beyond the port, customizing and streamlining the process exactly to your requirements. Find the value in a relationship with COSCO. Call our North American headquarters or one of the hundreds of local COSCO representatives worldwide today. Ship with Confidence. Ship with COSCO.
New for
2012 ‘Cosco Comprehensive’ Range of Value-Added Services
COSCO Container Lines Americas, Inc. • 100 Lighting Way • Secaucus, NJ 07094 www.cosco-usa.com 800 242 7354
e-SC
[e-Supply Chain]
Conduct Freight Searches on Your Phone Landstar System has launched a mobile app for smartphones. The mobile app was primarily designed for Landstar agents and business capacity owners (BCOs) so that they will be able to conduct searches for agents or loads without any other type of equipment aside from their phones. “As more and more of our independent BCOs and agents started using their mobile devices to conduct load searches, we started developing an app to make it easier for those users,” says Larry Thomas, VP and CIO, Landstar. Thomas adds, “The mobile site mimics the intranet site that Landstar BCOs use to find and select freight. It’s fast and user-friendly.” And it’s also free. The mobile app is currently available for download at the Android Market, the iPhone App Store, and Windows Phone Marketplace. Throughout the last couple months, the app has been downloaded by more than a thousand users—and counting.
SAFETYBOX accomplishes this by incorporating each one of PITT OHIO’s clients’ existing databases within one individual database. “The days of managing multiple databases for safety compliance are over. Clients can now more efficiently manage, track, and report on safety, compliance, and risk management of its drivers with one tool,” says Jim Fields, COO, PITT OHIO. “SAFETYBOX captures information from a multitude of areas and databases to monitor driver performance and provide predictability analysis,” states Ron Uriah, VP of safety and risk management, PITT OHIO. “It enables you to do more with less.”
A New Focus on the Cloud Manage Your Fleet, Increase Revenue PortVision has launched its SmartOps Fleet Management System to expand its AIS-based vessel tracking system’s benefits, while also offering an enterprise resource management system and developing a routine, all-inclusive assortment of unit tow business practices. SmartOps enables unit tow fleet operators to collaborate with their customers not only on traffic updates and other realtime logistics, but also on complex invoicing and regulatory reporting. Consequently, they can speed approvals while minimizing discrepancies and distractions associated with billing and compliance requirements. “SmartOps enables fleet owners and operators to increase revenue, reduce costs, and create tighter and more efficient customer relationships,” says Dean Rosenberg, CEO, PortVision. “It is the only system tailored to the specific business processes of
10
WO R L D T R A D E
1 0 0
F E B R U A R Y
liquid cargo marine transportation and incorporates valuable best practices for improving productivity and efficiency while eliminating paper, reducing errors, and minimizing labor.”
IBM Launches Supply Chain Solution With the launch of ILOG LogicNet Plus, a supply chain design solution, IBM now offers optimization and scenario analytics to supply chain professionals throughout the world. Professionals will now be able to design and implement their production plans and sourcing strategies quickly and more efficiently. ILOG LogicNet Plus analytics software considers all types of cost and constraint variables, including manufacturing, transportation, or warehousing, even within the most intricate networks. The solution is also the first of its kind to offer multi-objective optimization technology. In addition, ILOG LogicNet Plus can move from single to
2 0 1 2
two-dimensional analysis, so that companies can acquire new and more extensive insight while also creating more prominent business plans, since they can balance their objectives more easily than they have in the past. The software has also been designed with multiple industries and organizations in mind, ranging from consumer products companies and manufacturers to retail and transportation organizations.
Compliance and Risk Management Software PITT OHIO has developed a compliance, risk management, and safety software that can be fully utilized by the transportation and warehousing industries. Now available for each of the company’s clients, the software, SAFETYBOX, includes CSA (compliance, safety, accountability) tracking and driver scorecards, so that only the most compliant, safe, and trained drivers will be on the road.
To better serve the logistics and shipping industries, Four Soft Limited has increased its focus on cloud software usage and development. To meet more of its customers’ needs, the organization decided that all of its cloud solutions should be made available through its 4S LogiSaaS provider cloud application. Not only is 4S LogiSaaS flexible and scalable, it is also easy to use and can be seamlessly integrated over the Internet. “The global logistics and SCM market(s) [are] in need of specialized software that focuses on continued technology advancement and evolving user expectations,” states Biju Nair, COO, Four Soft Limited. “We have developed [a] suite of solutions on cloud that offers rapid business transformation [and] flexibility.” Nair continues, “[4S LogiSaaS] uses [a] common platform for interoperability across industries and helps [companies] realize the full potential of cloud computing.” WT
IWLA U P D ATE
Sustainable Logistics
S
BYBYDANIEL JOEL ANDERSON GRISWOLD
The ultimate goal is to provide a way to prove commitment to sustainability using objective standards.
12
WO R L D T R A D E
1 0 0
F E B R U A R Y
ustainability is here to stay. If you are tempted to believe that it is just a fad or fashion that will pass, think again. According to the Global Compact Implementation Survey issued last June by the United Nations, more than 70 percent of the private companies surveyed said their chief executives were actively involved in sustainability policy and strategy development, and almost 60 percent of publicly traded companies reported board engagement. U.S. federal agencies such as the General Services Administration and Dept. of Defense are requiring that companies working with them be able to show output-based, continuous improvement as evidence of their commitment to sustainability. Those who work in the warehouse-based third-party logistics industry also have seen similar requirements growing among their private sector logistics services clients. In recognition of these developments, last July the International Warehouse Logistics Association (IWLA) announced the first metric-driven, facility-output-based sustainable logistics program designed for warehouse operations in North America, which we call the Sustainable Logistics Initiative (SLI). The program allows participating companies to report and engage in a rigorous and objective measurement process for each of their warehouse facilities. Continuous improvement of each facility is the benchmark. The data-collection technology utilized is cutting edge, employing the most advanced Internet-based, easy-to-use tools. We assembled an impressive team to lead the challenge of establishing output-based metrics that will provide the first-ever benchmark for the warehouse-based logistics industry. The entire process is verified by a respected independent organization called The Sustainable Supply Chain Foundation. Many IWLA members have already adopted the practices needed to demonstrate their continuous improvement process in supply chain sustainability. In recognition of this, the program is designed to credit improvements companies have made in recent years. This was done so that those companies who have already proven their commitment to sustainable practices will not find themselves penalized for being early adopters. For those IWLA members who are relatively new to this field, their participation in SLI will 2 0 1 2
allow them to learn quickly how to adopt sustainable solutions. One important aspect of the program is that the data collected through SLI will inform our industry and our customers on the best and most efficient means to improve sustainable warehouse logistics practices. The ultimate goal is to provide IWLA members with a way to prove their commitment to sustainable practices using objective standards and measurements that their logistics customers can trust. It will create an additional benefit by showing in concrete terms how the industry is committed to sustainability to opinion leaders and state and federal policymakers, legislators, and regulators. The SLI was designed to be relatively simple and easy to use. Through a secure, Web-based mechanism, IWLA members will self-report and have data verified in three main areas: • Planet responsibilities—the green aspects of sustainability such as electrical use, fuel and water consumption, and recycling. • People responsibilities—including warehouse operations safety and community service involvement measurements. One of the ways a company can show community involvement is through participation in the American Logistics Aid Network. • Profit responsibilities—sustainability efforts that generate cost savings through increased efficiencies and improved operational excellence. (This enables participants to provide clients with proof of sustainable practices.) A major advantage is that SLI is cost effective. It does not require substantial allocation of resources by companies to achieve significant progress in making the industry more sustainable and more profitable. In addition, members who choose to participate in the new program can be assured that their data will be handled with strictly maintained confidentiality at all times by both IWLA and SSFC. Another important aspect of the program is its educational component, which will ensure that IWLA member personnel are kept up-to-date on technological developments and best practices through seminars and workshops. The SLI program is available only to member companies of IWLA. WT Joel Anderson is the president and CEO of the International Warehouse Logistics Association.
HOUSTON : AMERICA’S DISTRIBUTION CENTER
· Best deep-water port to access America’s Heartland · Largest container port on the U.S. Gulf Coast · 2014 Panama Canal Expansion Ready · Pro-business environment
PORT OF HOUSTON AUTHORITY +1 (713) 670-2567 | www.portofhouston.com
T R U C K I N G
A I R
O C E A N
T E C H N O L O G Y
T R A D E
F I N A N C E
3 P L
W A R E H O U S I N G
Watch
SUPPLY CHAIN RAIL
Norfolk Southern Expands Intermodal Ops Norfolk Southern is expanding operations at its Rutherford Intermodal Facility near Harrisburg, Pa., after the U.S. Dept. of Transportation awarded a $15 million TIGER III grant to the project. The $60.5 million project— expected to finish in 2014—will help Norfolk Southern meet growing demand for intermodal freight transportation in the Harrisburg region. When complete, the Rutherford project will expand intermodal capacity by 50 percent. Norfolk Southern also has a new $96.9 million intermodal facility under construction near Greencastle in Franklin County and a $28 million expansion of operations at the Harrisburg intermodal terminal on Industrial Road.
OCEAN
Crowley Acquires 500 New 40-Foot High-Cube Containers Crowley Maritime Corp.’s liner services group has added 500 new 40-foot high-cube containers. The acquisition adds to the company’s already robust equipment fleet of more than 45,000 units, as well as phases out some older containers. The new containers, which have capacities of 2,700 cubic feet, will be used in all liner service operations in Latin America, the Caribbean, and Puerto Rico.
14
WO R L D T R A D E
1 0 0
F E B R U A R Y
The new containers, which contain durable North American oak wood flooring, exceed all new and amended ISO standards for freight container door security applications. A combination of security enhancements and upgrades deters and prevents unauthorized access into containers and loaded cargo.
TRUCKING
DB Schenker Couples with Estes Express Lines DB Schenker is pursuing a strategic relationship with Estes, a full-service North American transportation solutions provider. Under the proposed deal, DB Schenker will transfer the management of its domestic ground transport network to Estes’ customized solutions division, a provider of businessto-business and business-toconsumer high-value domestic distribution solutions. “The relationship with Estes allows us to further capitalize on additional economies of scale and expertise to offer a broader, higher quality domestic transportation offering to our customers in terms of reach, speed, and reliability,” says Heiner Murmann, CEO, Schenker, Inc.
DHL Becomes a Logistics Partner for African Energy Center DHL has become a logistics partner of South Africa’s Mining Oil and Gas Services (MOGS) in the development of a new Oilfield Services Complex (OSC) in Saldanha, South Africa. DHL’s role
2 0 1 2
will include the provision of the following services: bonded chartering services, warehousing and facility management, ocean freight, air freight, road freight, clearing and forwarding, customs brokerage, express logistics, and supply base management. When completed in 2015, the Saldanha OSC could extend up to 500 hectares and will service major oil companies and multinationals in the western, central, and southern African offshore oil and gas fields. MOGS, part of the Royal Bafokeng Holdings Group, opened its Saldanha office in Langebaan last May. It aims to provide bespoke facilities, infrastructure, and land to the major oil companies and MNCs at Saldanha in a multi-phased, multisite development.
TECHNOLOGY
JDA Software Expands Investment in China JDA Software Group, Inc. is expanding its investment in the rapidly maturing China market in direct response to growing global and regional demand for supply chain solutions from companies across China. In 2008, JDA announced its expansion in overall China operations. JDA has since quadrupled its China-based headcount, serving more than 50 Chinese companies. “Leading Chinese businesses are focused on improving and modernizing their supply chain management practices in order to compete more effectively in both the domestic and global marketplace,” says Stephen
McNulty, regional VP, Asia Pacific, JDA Software. JDA’s current portfolio of customers in the region, including Hisense Electric Co., Ltd., Huawei Technologies, and Lenovo Group Limited, have benefited from improving the efficiency of their supply chain operations.
WAREHOUSING
Panalpina Expands Logistics Footprint in China Panalpina has opened a new logistics center in the Chinese city of Tianjin. In the next three years, Panalpina plans to set up many more new logistics centers in strategic locations in Greater China. “We are establishing a truly integrated supply chain network in China that combines international air and ocean freight with comprehensive value-added logistics services and supply chain services,” explains Mike Wilson, global head of logistics at Panalpina. In the first phase, the Tianjin logistics center is 10,000 square meters. The facility uses efficient and environmentally friendly technologies and has a CCTV monitoring system and 24/7 on-site security personnel to ensure the highest security standards. “In the next phases, we plan to develop Tianjin Logistics Center into a hub first for the whole Bohai Bay district and then for Northern China,” says Stefan Gustafsson, district manager Yangtze and Bohai Bay, Panalpina Greater China. “The hub will serve multiple customers and provide VAS, together with cross-docking for air and ocean freight shipments.” WT
In almost every other discipline, deep water implies more risk. Not shipping.
Big ships are here, and more are on the way. And for good reason. They help lower per-unit costs. To take advantage of these bigger ships, you need a port deep enough to handle this new fleet without delays or other costly surprises. The Port of Charleston is the only port in the Southeast region with a channel deep enough to handle these ships fully loaded. So lower your per-unit costs by going big. And lower your risk by going deep. Visit PortCharleston.com.
See time-lapse video of simultaneous 8,000 TEU ship calls.
TRADEWINDS THE LATEST TRENDS IN THE WORLD OF TRADE
By the Numbers
MEXICO CONTINUES TO LEAD AS LOWEST-COST COUNTRY FOR U.S. OUTSOURCING
U.S. Imports and Exports by Value
U.S. manufacturers are regaining some of their global competitiveness, primarily driven by a weak dollar and wage inflation in countries long-considered to be more cost-efficient locales, according to a study by AlixPartners LLP, a global businessadvisory firm. The analysis shows that Mexico remains the leading low-cost country (LCC) for manufacturing outsourcing from the U.S., but that a number of developing countries—with the exception of China—are gaining ground on Mexico as attractive options. The gap between the U.S. and each of the other 12 countries has narrowed—the first time this has happened since 2007. The most recent data show that China took a step back because of its rapid wage inflation and a stronger yuan vis-àvis the U.S. dollar. This year’s index also revealed that Vietnam, Russia, and India have closed the cost gap considerably and have surpassed China in terms of their cost-effectiveness. According to AlixPartners, this trend is likely to continue and could gain steam as China becomes a more economically developed nation and confronts challenges that go hand-in-hand with economic maturity. Specifically, the study predicts that China will face wage inflation, a growing unionization movement, and a modicum of labor unrest as workers push for wages and benefits on par with those earned in the U.S. and other developed economies. 16
WO R L D T R A D E
1 0 0
F E B R U A R Y
Value ($ Billions)
U.S. Manufacturers Make Gains
Source: Zepol Corporation
Air Transport Markets Weaken BELOW PREVIOUS YEAR’S LEVELS DESPITE MONTH-OVER-MONTH GAIN The International Air Transport Association’s (IATA’s) global traffic results for November show that air cargo markets remained weak compared to levels attained earlier in the year. Freight markets were 3.1 percent below November 2010 levels despite a 1.1 percent increase on October 2011 performance. “Weak global economic performance is being reflected in air transport markets. Freight markets have contracted some 4 percent compared to January,” says Tony Tyler, IATA’s director general and CEO. “Continuing economic uncertainty will likely mean market shortcomings deepening as we enter 2012.” Air freight markets continued their decline in line with 2 0 1 2
weak economic performance and falling business confidence. International markets declined by 3.8 percent. This was offset by 2.0 percent growth in domestic markets. International freight load factors have declined 6 percentage points from their peak in mid-2010. While freighter capacity has been adjusted to meet demand, belly cargo capacity follows the trend in passenger demand. Asia-Pacific carriers have seen the weakest demand performance driven by falling demand for Asian manufactured goods from U.S. and European consumers. The region’s carriers saw the market decline by 6.4 percent. European carriers reported a 4.6 percent fall in demand reflecting continued uncertainty associated with the Euro-zone crisis. North American carriers’ operations were largely unchanged from the previous year with only 0.2 percent growth.
Contract Rate Increases Over 2011 RATES FOLLOWED THE SPOT MARKET UP According to Transcore, rates spiked seasonally on the spot market in 2011, followed by steady increases in contract rates. Contract rates increased 6.5 percent through November, while spot market rates rose a full 7.4 percent. Spot market rates rose at an uneven pace throughout the year, especially for vans. In the first quarter, van rates increased 14 percent over the year-earlier numbers but slowed to 7.5 percent in the second quarter. Rate growth further slowed to 2.6 percent in the third quarter before improving to a 6 percent gain in the fourth quarter. Transcore predicts that rates will continue to rise in 2012, as carriers’ costs increase. Contributing factors include prices for fuel, insurance, labor, tires, and
equipment. It expects rates to head up as soon as mid-March.
Gains in Weekly Rail Traffic INTERMODAL VOLUMES UP The Association of American Railroads (AAR) reports that U.S. railroads originating 287,137 carloads for the week ending Dec. 24, 2011, were up 11.9 percent compared with the same week in 2010. Intermodal volume for the week totaled 217,952 trailers and containers, up 22.9 percent compared with the same week the previous year. Weekly carload volume on Eastern railroads was up 17.8 percent compared with the same week in 2010. In the West, weekly carload volume was up 8.5 percent.
For the first 51 weeks of 2011, U.S. railroads reported cumulative volume of 14,910,326 carloads, up 2.2 percent from the same point in 2010, and 11,711,214 trailers and containers, up 5.4 percent. Canadian railroads reported 78,434 carloads for the week, up 16.2 percent compared with the same week in 2010, and 47,741 trailers and containers, up 21 percent compared with 2010. For the first 51 weeks of 2011, Canadian railroads reported cumulative volume of 3,860,534 carloads, up 3.3 percent from the same point the previous year, and 2,470,294 trailers and containers, up 2.3 percent. Mexican railroads reported 13,451 carloads for the week, up 2.7 percent compared with the same week in 2010, and 8,068 trailers and containers,
up 42.8 percent. Cumulative volume on Mexican railroads for the first 51 weeks of 2011 was 726,453 carloads, up 3.6 percent compared with the same point the previous year, and 426,644 trailers and containers, up 22.4 percent.
Perceptions of Global Trade SURVEY REVEALS NEED FOR EDUCATION IN GLOBAL COMMERCE The UPS “Perceptions of Global Trade” survey of more than 1,000 SMBs found that 24 percent of the nation’s smalland medium-sized businesses are currently engaged in global commerce. Those SMBs who don’t export any of their products say the dour economic news of recent years has discouraged them.
Of the exporters surveyed, 64 percent saw a financial return within two years, and 34 percent saw a financial return in less than six months. Almost half (49 percent) of respondents said they expect to double their businesses’ exports by 2015, and 66 percent say that up to 25 percent of their annual revenue comes directly from exporting. SMBs engaged in global business reported the most success exporting to Canada, Mexico, the UK, and Australia—countries with which the U.S. either has free trade agreements or bilateral trade relations. In contrast, nearly two-thirds (62 percent) of SMB exporters say they have not had success exporting to the BRIC countries (Brazil, Russia, India, China) in the past 10 years. There are no U.S. free trade agreements with these nations. WT
W W W. WO R L DT R A D E W T 1 0 0 .C O M
17
Visibly fresh.
© 2012 C.H. Robinson Worldwide, Inc. All Rights Reserved. www.chrobinson.com
See the difference. What’s the secret to providing your customers with the fresh product they demand? Superior temperature control while in transit. As a leader in food and beverage transportation, C.H. Robinson provides the capacity you need to keep your fresh, frozen, and floral shipments at the right temperature while en route to your customers. So your products don’t just get to market faster, they get to market fresher. Satisfy your customers by working with the food and beverage transportation experts. solutions@chrobinson.com | 800.323.7587
COVER STORY
20
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
Get the most out of your 3PL by treating it as a partner, being specific about your needs, and maintaining open channels of communication. BY DAN MCCUE
I
t used to be that a business’s return on investment (ROI) could be taken at something like face value. You planned a cargo move, the allocation of transportation assets, or a distribution center strategy, and you worked out what you expected to get in return for what you spent in terms of actual dollars, time, personnel, and other resources. But in today’s constrained budgetary environment—a milieu routinely buffeted by repeated macroeconomic shocks and other surprises— actual ROI can be much harder to quantify, and therefore assigning priorities that much more difficult to do. As a result, shippers and others who rely on the 3PL community are seeking a new level of partnership from their service providers and asking them to get the most out of a wide range of initiatives in a period marked by transformational shifts—to achieve, meaningful, long-term ROI instead of the time-honored, but short-term, “victory” of a simple transportation spend. “The old value proposition for shippers turning to a 3PL was that they’d be able to shed assets or people, outsource the work, and free up cash flow that way,” says Ken Heller, SVP for supply chain excellence at DSC Logistics, a Des Plaines, Illinois-based firm active in the consumer products sector. “Five or six years ago, customers would talk to us about finding ways to save two or three percent in logistics costs,” he continues. “Now, they come to us and say, ‘We need to pull two to three million dollars out of numerous areas.’ “Now, these areas may include logistics costs, but increasingly they also include inventory carrying costs, order to cash performance—a broad band of areas, and that’s true even in sectors that have held their own in recent years, like food, paper, tobacco and so on,” he says.
The move toward partnering
According to Douglas Waggoner, CEO of Echo Global Logistics, a transportation management provider headquartered in Chicago, Illinois, prospective clients rarely articulate their ROI expectations during the first meeting or initial phone call. “We tend to deal with mid-market companies, and their objective is pretty simple—they want to save money. And that’s unfortunate, because oftentimes, saving money is much more complicated that just getting a better freight rate,” Waggoner says. That means that frequently, a 3PL’s first task is to educate the customer and hopefully persuade them to buy into
the concept of forging a true partnership on a solution. “At Echo Global Logistics what we emphasize is that achieving a truly meaningful return on investment is a matter of having a good, integrated solution that uses best-of-class transportation providers, technology, the optimization of the flow of goods, and the reduction of work-process expenses,” Waggoner says. “If you, as a customer, only think of a 3PL as a broker, the only value you’re going to get is a good price on a backhaul carrier, and that’s only as good as your next load,” he says. “If you want recurring benefits—and these can be on the revenue side, as well as the cost side—things like enhanced customer services and better value for your customer’s customers, then you have to look at things from a much broader perspective. “In fact, oftentimes we find the best way to save clients money is not by beating up asset-based carriers, but by operating the customer’s transportation function more efficiently and more intelligently than they’ve been doing in the past,” he says. And that tends to turn conversations in an interesting direction. “Return on investment assumes that you make an investment, but what we find is that a lot of shippers don’t want to make an investment, or at least, haven’t considered what kinds of investments they’d be willing to make to achieve their goals,” Waggoner says. “That investment might be money, but more often than not, it’s allocation of resources, in terms of people, in terms of capacity, being willing to change processes, being willing to change their organizational structure, being willing, generally, to endure the pain of doing changes,” he explains. “Sometimes, you can provide a client with a quick fix— depending on how well they’ve done things in the past— but the better alternative or solution is to partner with a 3PL that takes a more holistic view of what they are doing and finding better ways to do it. “Fortunately, people are becoming much more receptive to that kind of approach,” Waggoner says. “There have been enough examples—Walmart and Dell Computers being two of many—that demonstrate what can be achieved through better management of transportation and supply chain processes.” The challenge is that improving supply chain or logistics ROI is often only one of several priorities a client is juggling at any one time. “I think that’s one of the profound consequences of this recession: people are working very hard, with a lot of plates in the air, and yet they can’t get logistics or supply chain ROI prioritized among all the other things they are workW W W. WO R L DT R A D E W T 1 0 0 .C O M
21
COVER STORY
ing on in their business,” Waggoner says. “It’s an interesting dilemma,” he concedes. “I think if people thought a bit more about supply chain and 3PL activities as an ROI opportunity, even more companies would jump on the bandwagon.” An integral shift in 3PLs
But as the bandwagon gets more crowded, it’s also fundamentally changing the 3PLs themselves. Heller says that as a result, DSC Logistics has evolved from being a company that did a lot of what might be called the physical work—securing containers, lining up trucks, and so on—to one that now also does a significant amount of systems work—data mining and providing knowledgebased resources to help clients solve more complex problems. “In other words, we’ve gone from a situation in which we might be looking at how to make a forklift operation more efficient to helping clients find ways to pull 15 percent of their inventory our of the supply chain,” Heller says. “As a result, we’re not hiring forklift operators; we’re hiring college graduates who have studied supply chain issues. That’s where the real shift has been in the last few years: we’re bringing far more knowledge-based resources into the pursuit of greater ROI, and we’re dealing with more sophisticated systems to get there,” he says. Steve Jobs famously beckoned the world to “think different.” Heller says the demands of the marketplace and the clients’ desire to achieve meaningful long-term ROI is forcing 3PLs to look for a new kind of supply chain strategist. “The reality is today’s challenges require a broader range of thinking,” he explains. “I mean, you can’t turn to someone who had been working solely in warehouse operations for 20 years and ask him to solve the kinds of 22
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
challenges we’re now confronting. “So what you see more and more of today is companies like ours hiring engineering majors who get the business end of it, supply chain people who have had a wide range of work experience and get the whole flow of the logistics process, or transportation people who see supply chain management as more of an engineered solution. “Again, what you want to be able to offer people in search of greater ROI is a holistic problem-solving approach,” he says. Toward that end, DSC Logistics has been building its customer care group and eschews marketing a trademark service, per se, for offering clients a very strategic partnership process. “We work with our customers on unlocking the value within their supply chain,” Heller says. The nuts and bolts of the process includes a structured communications plan through which projects are sanctioned—typically four to six projects a year per client—with monthly, quarterly, or yearly business meetings held to assess project execution and the ROI that’s being achieved. “Each customer is different, and generally speaking, the more enlightened the customers, the more information and more contact they’re going to provide and they’re going to desire,” Heller says. “They get it that the more people you have looking at your business, the more help you are going to get, and the faster you’re going to arrive at an appropriate solution.” In the ideal situation, Heller says DSC Logistics’ project team will meet on a monthly basis with the client’s logistics or supply chain group, for “relatively tactical” discussions. “Quarterly meetings will expand to include ancillary groups within the company, including say, people in manufacturing and sales, and then on a yearly basis, we’ll have what I call ‘top-to-top’ meetings, where all the key executives will get together to discuss the strategic growth plan for the organization.” Heller is quick to say that DSC Logistics still has customers who want him to simply move their pallets in and out of their facilities— “And we’re happy to provide that service,” he says—but he feels that those companies risk missing out on bigger ROI opportunities. “Today, ROI is much more complex, because it is over a much broader scope,” he says. “I mean, even for us. I think we have become much more sophisticated over the last five to seven years in terms of understanding the wider range of factors that have a financial impact on our customers. “As a result, discussions can revolve around cash flow, tax implications, fuel savings, all manner of things…and at the same time, when you deal with 10 or 15 customers at a time as we do, all in different businesses that are being hit
Download a podcast of this article at: www.worldtradewt100.com/media/podcasts
by different regulations, you have to keep up with a wide range of regulatory regimes to make sure the client isn’t incurring unnecessary incremental costs. “For example, we do all of the logistics work for StarKist, and so we have to keep abreast of any and all regulatory issues related to tuna sustainability,” Heller continues. “But that said, no matter how on top of these things you are, achieving a meaningful ROI is still very challenging,” he says. “I mean, very rarely do we have the ability to go to a customer and say, ‘You’re going to be subject to this new regulation and therefore we will do this, and it will cost you X.’ Oftentimes the client will say, ‘We realize it will cost X, but we can’t do that.’ “So what you do in a case like that is look to make other things better and achieve the ROI you desire in other areas; the ever-evolving regulatory environment has forced us to be as clever as possible,” he says. Process improvements
Also addressing the subject of creativity, Douglas Waggoner says the process starts the moment a 3PL starts trying to get the potential client to buy in to a supply chain or logistics solution. “You have to show them what you can do and what you’ve done for other clients, so they can see how the process works and how results can be achieved in sometimes unexpected areas,” Waggoner says. “In other words, you have to give them the ability to kick the tires, see how your operation works, and decide whether or not your culture is compatible with theirs. “Then when you say, ‘But it’s going to take some work on your part,’ they tend to believe you, and they’re willing to make the investments necessary to meet their ultimate goals,” he says. As an example, Waggoner points to a client who asked for help reducing their small parcel spend. “This is a company that had made a number of acquisitions in recent years, and as a result they had disparate computer systems that didn’t talk to each other, and the way they processed their transportation costs was causing such a delay in invoicing that they often took as long as 50 days to invoice a customer,” he says. “So, we stepped in and negotiated a good price with their small parcel carriers, but the real savings were in improving their processes,” Waggoner continues. “We streamlined the way data came in from their carriers; we audited it, processed their freight markup, and then fed it into their accounting system so they could invoice their customer. “As a result, we took their invoicing process from 50 days down to a week, and that improved their cash flow,” he says. “Now, that was far more important than saving them some money on their freight costs, but it wasn’t what they came to us for. To achieve these things, we had to look at
their business as a whole and they had to give us access to their IT department, their carriers…in other words, it had to be a true partnership, with investment on both sides.” Continuous progress
Waggoner calls the kind of partnership that achieves the greatest ROI “a sticky solution,” one in which integration is tantamount and in which it’s not uncommon for the 3PL to turn to the client in mid-contract and say, “We’ve found another way to enhance the returns on your investments.” “That’s really critical,” Waggoner says. “We’re very fortunate in that we have a 95 percent renewable rate among our clients, but the reason we have that—one of them, anyway— is that we recognize that what clients are most interested in today isn’t that one-time success when it comes to ROI; what they want—and I hear this all the time—is to foster an environment of continuous improvement.” “That requires that we make ourselves better at what we do and that we find better ways to add value for our customers,” he says. Speaking in early January, Waggoner says the year ahead will be an interesting one for those striving to boost their ROI, with as much effort placed on avoiding increased costs as in cutting the costs they’ve already been reckoning with. “Everything is going up,” he says. “Transportation has a lot of inflation in it, there’s fuel inflation, driver shortages, accelerating equipment costs, regulatory pressures and uncertainties…and all of these things tend to cause costs to escalate faster than the consumer price index. “What I think that means is that those of us engaged in trying to improve our clients’ ROI are going to have to be even more creative than we have in the past,” he says. “What that will mean depends on the client, of course, but it could mean diversifying their mode selection, maybe converting truckload freight unto intermodal; maybe it’s doing consolidation or deconsolidation. In short, you have always got to be looking for better ways to do things. “Beyond that, we’ll have to deal with the reality—in fact, it’s something we’ve always been mindful of—that our customers’ businesses do change over time,” he says. “It may be that they come out with a new product, or that they’ve made an acquisition or a divestiture, and it changes what they do. It may be that they open a new distribution center or close one. “What I’m trying to illustrate is that achieving the maximum ROI is really a continuous, evolving program,” Waggoner says. “It’s almost like a mathematical problem that never ends because every day is a new day and you have to execute every day.” Waggoner says. WT
When it comes to ROI, comp paniies want to foster an environment of continuous improvement.
For reprints of this article, please contact Cindy Williams at williamsc@bnpmedia.com or 610-436-4220 ext. 8516. W W W. WO R L DT R A D E W T 1 0 0 .C O M
23
FINANCE
Hot Trade Finance Products and Services Financial products and services can help your company stay competitive on a global basis. BY GAIL DUTTON
T
o be competitive, companies need to sell across borders. That’s true for financial institutions, too. Increasingly, they are looking to trade finance products and services as a way to increase their market share and their market penetration. One of the challenges in international trade finance, however, is that banks need to collateralize their loans. Without ready access—through the legal system— to a creditor’s collateral in case of default, there is no incentive to provide financing. That concern restricts many loans to the bank’s home country or limits the assets listed as collateral to assets within that country. There are ways around that stricture, however.
International lending
“FGI Finance is an alternative to commercial banks,” according to Ben Brachot, national director of business development. “We can work with U.S. banks to carve out and collateralize international assets, providing loans under local law,” he explains. 24
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
FGI works throughout the world, including regions where the commercial, legal, and financial environments are still developing and are considered risky. “We leverage relationships with local partners—attorneys, accountants, credit agencies, etc.—and manage the loans from New York,” Brachot notes, working with employees who speak the local language and work the local time zone. Consequently, clients anywhere in the world can call during their own normal business hours and be served by knowledgeable agents. FGI Finance has clients in more than 60 countries. For American companies selling internationally, FGI provides receivables financing and asset-based lending. For companies with international operations, “FGI lends to their foreign subsidiary under local laws,” Brachot says. For foreign companies, FGI may lend funds directly, often providing financing at a lower rate than the client’s local financial institutions. The Overseas Private Investment Corporation (OPIC) is another option for financing when private sector banks and insurers have refused financing for
projects in risky regions. The OPIC provides funding for international investments and guarantees, including political risk insurance, and support for private equity investment funds. Asset-based lending
“We’re seeing more asset-based lending being utilized by international companies,” Brachot reports. Where lenders previously only factored in accounts receivables, they’re now including inventory, fixed assets, and real estate as part of the collateral. Once common only with large companies, it is becoming more prevalent with small- and mid-size businesses. Supply chain finance
“One of the newest trends we’re seeing is the world of supply chain finance,” notes Stephen Herrick, VP and senior trade manager of the global trade services group at Bank of the West. “Supply chain finance breaks the cumbersome documents away from trade action,” he explains, and moves the process away from the letters of credit that have been the mainstay for small- and midsize businesses. As Herrick explains, traditionally, very large multinationals had strong credit ratings and leveraged that strength to help finance some of their smaller suppliers. Now, banks are becoming involved, using automation to work with small and medium companies and their even smaller suppliers in a multitude of scenarios with multiple variables. For example, a very large retailer may enter into an agreement with its bank so that the bank or its clearinghouse, essentially, becomes the accounts payable or accounts receivable office. Payments are made from there, and receivables are sent there. The retailer may encourage its suppliers to join the same clearinghouse. When they ship products, the invoice goes directly to the clearinghouse. “Then, when the purchaser receives the goods, it logs into the system and authorizes payment,” Herrick says. “As a bank, we can contact the supplier and discount the purchase, taking a discount if they want payment now, and paying the full invoice at its maturity.” That scenario can be a win for the entities involved, particularly when the cost of funds is less for the multinational company than for its supplier. “It reduces the finance charges the supplier has to pay (assuming it borrowed funds), and the buyer doesn’t have to pay the full cost of the goods,” Herrick explains. It also moves part of the accounting to the bank or its clearinghouse, reducing overhead. Similar services are available for accounts receivable and accounts payable. Wells Fargo, for instance, offers a program it calls TradeXchange. It provides a variety of instruments, including both supplier and sales financing. Its trade cycle
financing option funds each stage of a transaction rather than funding the total outlay at once and lets clients get advances based upon import shipments. Its risk mitigation or global forfeiting program, “purchase(s) your qualified receivables so you can sell to foreign buyers on extended terms without tying up cash or assuming the risks of possible late payments, default by a foreign buyer, or foreign exchange fluctuations,” according to Wells Fargo literature. Commodity and structured trader financing
In 2012, HSBC is deploying its new Commodity and Structured Trader Finance program in North America. This offers customized and working capital commodity trade financing solutions to clients operating complex supply chains, according to HSBC spokesman Clinton Riley. “Structured trade finance is a specialized activity dedicated to the financing of high-value supply chains, especially upstream financing of cross-border commodity flows and limited recourse trade finance,” he explains. “Every loan is bespoke, with each facility tailored to the specific needs of the client, transaction, and jurisdiction.” It provides short-term working capital or longer-term funding for five years or more.
Stability is a relative concept, but there are very few examples of default.
Letters of credit
While much of the world is using supply chain financing to replace letters of credit, their use is actually growing in some parts of the world, Herrick says. “Overall, letters of credit are relatively static regarding the amount of trade they represent,” he admits. “Their use is growing, however, in regions where you won’t use supply chain finance. The Middle East, for example, has a high level of perceived risk, so letters of credit are used there to guarantee payment.” They also remain the norm in Eastern Europe, in many of the former Soviet bloc nations. Banker’s acceptances are another option, depending upon the bank. Basically, these work like post-dated checks, constituting an agreement to pay the holder at a specified date. Like other financial instruments, they may be discounted and sold. “Stability is a relative concept,” Herrick acknowledges. “Although there is a certain amount of stress on banks in the industrialized world, there are very few examples of default.” Herrick doesn’t envision a return to letters of credit in industrialized regions except “… in the case of abrogation of debt, war, or major political dissent. There’s no trend toward letters of credit in the EU,” he notes, despite financial turmoil in some of its member states. Research
HSBC is expanding its Business without Borders initiative which it launched September 2011. This unique initiative is designed as an information exchange to provide W W W. WO R L DT R A D E W T 1 0 0 .C O M
25
FINANCE and the Chinese renminbi. HSBC has produced 36 country reports that may be downloaded from its Web site. HSBC also publishes the HSBC Trade Confidence Index twice each year. It covers 21 markets and is based upon a survey of 6,390 exporters, importers, and traders from small- and midmarket companies. World Bank resources
the tools, information, and events to “inform and inspire American business leaders to seize growing global possibilities and opportunities.” This Web portal provides access to international expertise, global success stories, a network builder of live events throughout the U.S., and a global opportunity tool. Large commercial banks tend to have in-depth knowledge of the commercial environment and of markets in the regions in which they operate. The HSBC main Web site, for example, features several detailed trade reports. One, “HSBC Trade Connections,” is designed to help businesses navigate international trade flows. It comprehensively explores current and future opportunities for international businesses and includes predictions for the next five, 10, and 15 years based upon regions and individual countries. The next forecast will be released in late February 2012. It provides trade data from throughout the world, along with leading trade indicators and macro-economic trend information. It includes insights from suppliers and manufacturers to put the data into perspective. Another report, “The Southern Silk Road,” published June 2011, details the growing south-south trade connections between Asia, Latin America, Africa, and the Middle East. It details the developing trade patterns and opportunities as well as the effects of trade restrictions, infrastructure, and obstacles. The rationale behind some acquisitions also is explored, along with HSBC’s predictions regarding the relative strength of the U.S. dollar 26
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
In late 2011, the World Bank began to include the private sector in its planning, in the dawning realization that the private sector is a catalyst for sustainable economic development. Companies, therefore, can expect to play an increasing role, bidding not only for public sector projects but a growing number of private sector projects. The World Banks and its related multilateral banks— the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank—provide resources to develop particular regions. In the past decade their funding has quadrupled, from $10 billion to more than $40 billion. Some also provide grants for technical assistance, advisory assistance, or project preparation. The benefit to borrowers is that these development banks provide financing at rates significantly lower than market rates. The benefit to other companies is that they guarantee financing for regions and projects that non-governmental financial intuitions refuse to fund. The multilateral development banks and financial institutions also advise their clients, helping to improve markets and projects so they are more likely to attract other investors. Many of the private sector projects are financed through the International Finance Corp. (IFC). Among its services, it features a $3 billion Global Trade Finance Program. That program offers full or partial guarantees to confirming banks in emerging markets for transactions related to trade. The guarantees are transaction-specific and are available for all eligible private sector trade transactions. Guarantees may be based upon letters of credit, promissory notes and bills of exchange, bid and performance bonds, advance payment guarantees, and suppliers’ credit for goods importation. The IFC also provides short-term, pre-export financing to local banks. The IFC is similar to the Export-Import Bank in that the programs are accessed not by individual companies, but by their commercial banks. In developing regions, local banks form relationships with international com-
mercial banks to increase their access to capital. Logistics financial tracking
into the accounting function. “To understand costs, it is essential that [the] accounting system system is completely integrated into buy/sell operations,” Herbert says. As Bill Fehr, sales director, elaborates, cloud computing is ideal for global, real-time financial transactions. Using Trade Cash, “You know where your money is, in multiple currencies in all offices throughout the world. And, this visibility can extend to your agencies and franchisees.” It is particularly beneficial when tracking transactions that involve multiple currencies—such as the cost of raw materials from several countries, insurance, plus in-country transportation and ocean freight.“The users put in the currency adjustments,” Herbert adds, to allow for changes based upon such factors as rate arbitrage and sailing dates, for example. “Operations have to know where their money is and the real profit and loss on each shipment,” Herbert emphasizes. “That knowledge is improved by collaboration throughout the supply chain, and by an effective sales and marketing team. Often, even the big companies really don’t know what’s going on with their finances.
Cloud computing is ideal for global, real-time financial transactions.
“A large part of trade financing involves financing the supply chain itself,” according to Dan Herbert, VP of Trade Tech, a company that creates software solutions for the international logistics industry. Unlike traditional trade finance with relatively fixed assets, logistics providers are engaged in arbitrage, buying and selling services each day. “Without technology to manage those transactions, they can quickly get out of control,” simply because of the vast volumes of goods involved, the thousands of miles, and multiple time zones and fluctuating costs of various routes and currencies. Trade Cash Financial Cloud Computing from Trade Tech works with some of the world’s largest logistics providers and carriers to provide global visibility down to the local level, as well as global standardization, depth of coverage, multi-currency capacity, and enhanced revenue automation, among other features. These are many of the supply chain finance features that are offered by the large commercial banks. Trade Cash is integrated
W W W. WO R L DT R A D E W T 1 0 0 .C O M
27
Over 25 years I have attended or exhibited at trade shows in many sectors around the world. I never thought that there could be a virtual equivalent to a physical show until Tech ManufactureXPO. I made a good number of contacts and had some very interesting discussions. The content, quality of exhibitors and the mechanics of navigating the show were excellent. It was well worth my time. Congratulations on an innovative event! - D.Paul Zito,, W.E.S.T. Forwardingg Services
Wednesday, May 2, 202 8:30am – 3:30pm EDT
2nd Annual
FREuEal virtent! ev Event Sponsor:
An educational virtual event covering trends in manufacturing from design to delivery.
PRESENTATION LINE-UP No travel or registration fees so you can attend with your whole team No time spent out of the office Reach multiple suppliers with the click of a button (more than ten are already signed up!) Chat one-on-one with your manufacturing peers
Keynote MAKE: An American Manufacturing Movement Deborah L. Wince-Smith President and CEO The Council on Competitiveness Full Service Assembly Process Management Solutions presented by
Download free whitepapers, case studies and new product information
Can’t Touch This: Inspecting to CAD using Non-Contact Technology presented by
Live Presentations
Educational Webinar
Listen to How-To Podcasts from manufacturing experts sponsored by
Register by March 2 to be entered to win an iPad!
presented by
Lunch-n-Learn: Preparing for Supply Chain Disruptions presented by Editors from appliance DESIGN, Adhesives and Sealants Industry, ASSEMBLY, Quality and World Trade 100
www.TechManufactureXPO.com
Exhibitors: DELTA REGIS Tools Inc.
Media Sponsors:
Get show announcements! Snap the tag to follow @AssemblyMag1 on
Interested in Exhibiting? Sarah Gorajek, Online Events Manager, Tech ManufactureXPO (248) 786 - 1671• gorajeks@bnpmedia.com
Download a podcast of this article at: www.worldtradewt100.com/media/podcasts
Or, when they do, it’s 30, 60, or 90 days later.” The Trade Cash computing cloud lets companies manage on a micro basis, at the purchase order level. Virtual data rooms
Social media technology is being tapped for private deals in ways that speed deal-making without compromising information security. Virtual data rooms are becoming popular as a way to share proprietary data for joint ventures, partnerships, individual deals, debt restructuring, private equity and venture capital fundraising, and other endeavors, including acquisitions and mergers, without opening the corporate firewall and without the need for couriers. “Smart rooms are an alternative for faxes and FedEx,” according to Brandon Farley, managing director of BMC Group’s SmartRoom. SmartRoom uses a secure private cloud to deliver private information, effectively outsourcing the information technology resources to a third party. Farley says this reduces the opportunity for information leaks by taking the administration outside the company. He cites increased security and lower cost of service as benefits. “Organizations use our platform to organize the information so they are always ready to respond to market opportunities,” he explains. It also ensures that multiple potential clients can see the same documents, thus minimizing costs and reducing uncertainty. “Between 85 and 90 percent of our current clients use SmartRoom to host documentation related to raising capital, company valuations, mergers and acquisitions, and bankruptcy,” Farley says. The virtual rooms also are used to host audit documentation. Having standard documentation ready, off-site, “Puts you in a state of readiness,” Farley stresses. Rather than waiting for documents to be couriered to prospects or for a secure Web site to be constructed, prospects can be given a Web address and password they can access instantly. Foley also sees potential applications for virtual data rooms to provide mobile access to sensitive data. If the device is lost or compromised, hackers may access certain data, but not the intellectual property, formulas, or lab notebooks upon which the company is based. Virtual data rooms are provided in a software as a service (SaaS) model, and access may be restricted by time, IP address, or document to limit risk. “You also can turn off access at the device level,” Farley says. “With global economic considerations, companies need a global
footprint to address global opportunities.” Trade financing is changing for the better, involving more types of players than ever before. Today’s hot products in trade finance reflect those changes, expanding the idea of what is possible and bringing advanced products and services to companies of all sizes. WT For reprints of this article, please contact Cindy Williams at williamsc@bnpmedia.com or 610-436-4220 ext. 8516.
W W W. WO R L DT R A D E W T 1 0 0 .C O M
29
TECHNOLOGY
Evolving Fleet Management Technology Mobile devices and technological advances have made it easier than ever to track and manage your fleet. BY WILLIAM ATKINSON
A
ccording to Frank Williams, VP of operations at Transplace, technological advances in transportation have turned drivers’ cabs from simple metal and fabric cubicles into mobile computer rooms, complete with a host of wireless technologies. “We will be rolling some fleet management tools out in the near future,” states Williams. “Until then, our technology focus is on helping carriers be more efficient. We do everything we can to make their supply chains efficient. This involves having the carriers be as efficient as possible.” To assist in this goal, Transplace utilizes EDI (electronic data interchange) communication with carriers who have EDI capabilities, which allows information to flow real-time from their systems, through Transplace’s, and then have it be visible to customers. This allows customers to see where their products are down to the SKU level, allowing them to track their products from vendors to the stores, depending on the service they use. “We don’t directly manage fleets, but the technology helps the carriers be more efficient by managing data,” states Williams. However, there are still some carriers that have not moved to EDI and may not plan to do so. In these instances, Transplace provides Internet capabilities, where carriers can go in, update their load information, and upload documentation that may be required (such as proof of delivery), etc.
30
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
Another transportation company moving ahead with fleet management technology is Echo Global Logistics. “We are working on PDA technology, specifically with Apple’s iPad and iPhone devices, as well as Android devices,” states Doug Waggoner, CEO. “Being a 3PL, we are a non-asset provider, so we have applications for shippers and carriers. For shippers, it’s about getting quotes and tracking/tracing shipments. For carriers, it’s about finding loads.” Mobile fleet management
Ryan Barnett, market analyst at Xata, is seeing a growing trend toward the adoption of tablet computers and rugged handhelds in the industry. “If you ask fleet managers who have used these before if they would be willing to do business without them again, 100 percent of them say no,” states Barnett. He is also seeing a trend toward looking to technology as a way to deal with regulations, such as hours of service, international fuel tax agreement (IFTA), and compliance related to speeding. In response to the growing demand for fleet management technology, Xata has rolled out Compliance Connect, software that allows fleet managers to utilize the programs they already have in place. For example, if they have a proof of delivery application—where they are getting signature capture or a route for a route salesperson for the day—that can be done on a handheld device,
Why SouthCarolina? Many world-class logistics companies have chosen South Carolina. Find out why.
THE PORT OF CHARLESTON IS READY FOR 2014 PANAMAX SHIPS. Most efficient port in the Southeast in Charleston 2/3 of the nation’s population in a one day drive Most interstate miles per capita of any state
★
No State Inventory Tax
Contact Rusty Reed at Rreed@SCpowerteam.com
The Electric Cooperatives & Santee Cooper
Visit www.SCpowerteam.com 1201 Main St., Suite 1710, Columbia, SC 29201 I (803) 254-9211
TECHNOLOGY related data, and integrate that straight into their back-end system, so they can get the most out of their investment in their handhelds and their software applications? “In other words, Compliance Connect allows customers to re-leverage the investment that they already have,” Barnett states. Converging solutions
PortVision utilizes AIS for fleet management tasks.
32
WO R L D T R A D E
1 0 0
Compliance Connect adds vehicle- and driver-related information straight into those applications. “In other words, Compliance Connect can empower those applications with things like vehicle speeds, trip start times and stop times, GPS-related location data, hours-ofservice-related compliance data, and so on, so that companies can better utilize the major software investments that they already have,” explains Barnett. Xata also offers another fleet management application called Turnpike—a “black box” that goes in a truck. It records engine-based data and sends that information via Bluetooth to a driver’s handheld device. According to Barnett, it can work with over 55 devices, including Android tablets, Motorola rugged handhelds, and Blackberrys. The drivers log in and can see their hoursof-service-related information. “We then automate that process, so that drivers never have to fill in paper log books again,” he adds. The technology also gathers all of the vehicle-related data, including how efficient the truck is in terms of MPG, fuel usage, how much time was spent at each stop, and so on. Using the driver’s device, this information is transmitted to a fleet management portal, where the fleet manager can see how the drivers are doing. Xata followed a natural progression to get to this point. “We asked: How do we enable additional parts of applications that they may be using?” explains Barnett. “This is where the proof of delivery comes in. We realized that Xata is not the best company to create an application that does complete workflow automation and complete proof of delivery. We have identified over 50 companies that have proof of delivery solutions out there. In addition, some carriers are using their own IT staffs to make their own software for proof of delivery.” This is what led to Compliance Connect. Xata asked: How do we give customers a set of APIs (application programming interfaces) that can look at vehicle- and driverF E B R U A R Y
2 0 1 2
According to Chris Jones, EVP, marketing and professional services at Descartes, there are a number of components that make up a fleet management system. The company saw three of them coming together: route optimization (determining how to get there and the stops on the routes); mobile solutions (classic handheld technology); and telematics (driver and vehicle performance, including compliance with regulatory requirements). “Customers liked what we were doing individually in different areas, but they wanted the information combined,” he explains. That is, customers were saying, “We like what you do in route planning, but we also want to know if our drivers are doing what they are supposed to do. And, as things change during the day, how do we effectively interact with the drivers?” In response, Descartes launched MRM 2.0 for the private dedicated fleet world. MRM 2.0 integrates the three fleet management components together in a realtime way to more intelligently manage fleet resources. “At the time, we were very much into the routing and mobile technology,” continues Jones. “Then, we acquired some significant state-of-the-art telematics technology. We are leveraging the consumer/commercial technology conversion that is taking place. This is driving down the cost of the technology. In our case, we chose to adopt Android as the operating system for our telematics solution.” Descartes has also worked on the integration infrastructure, such as supporting in-cab connections, Wi-Fi, Bluetooth, and 3G as well as its move to 4G. Descartes also has programmable logic controls built into its technology, which allows it to gather and report data. “For example, we can create programs and routines in flow diagrams,” states Jones. For example, a customer can create an alert that says if a truck is idle for more than three minutes, this can be reported to the driver. “In some cases, the driver may need to shut down the vehicle,” he notes. “In New York City, for example, if a truck is idling for more than three minutes, the driver can get fined.” Marine fleet solutions
Technology is advancing on water as much as it is on land, according to Dean Rosenberg, president at PortVision. PortVision was among the first companies to take advantage of AIS (automated identification system) for business intelligence shore-side. In 2005, the International Maritime Organization (IMO) and the U.S. Coast Guard mandated the use of AIS for all large vessels for collision avoidance at sea. “We came up with a concept of listening to those collision avoidance signals, ingesting them shore-side into a data warehouse, and then using that data to solve business problems for customers on-shore,” he states. As a result, the company now has Web-based analytic platforms and fleet management platforms, which pro-
Download a podcast of this article at: www.worldtradewt100.com/media/podcasts
they are not in control of,” he states. “For example, cess about 50 million individual ship location reports the commodities trading community is using the every day—about 200 reports every second. The comdata for a better understanding of global movement pany also maintains a data warehouse of about 16 bilof commodities around the world. In addition, the lion arrivals, departures, passings, and individual vessel major oil companies are using technology data to movements that it can give back to customers to help enhance logistics and support just-in-time supply them solve problems, do historical reporting, conduct chain-related activities at refineries.” WT analysis, support training, support market intelligence, and support internal logistics and fleet management. “This is how we started,” continues Rosenberg. For reprints of this article, please contact Cindy Williams “What we found as we were growing our footprint at williamsc@bnpmedia.com or 610-436-4220 ext. 8516. around using AIS in different ways for different customers was that the fleet owners themselves wanted some ways to enhance the visibility of their own assets, both in open water and near shore.” PortVision found that the ability to integrate AIS data with traditional satellite data (whether Inmarsat, Radium, or other proprietary satellite data), as well as with cellular data for when a vessel is near shore, provided the opportunity for a fleet owner with enhanced visibility of their fleet while actually lowering their cost, since they wouldn’t always have to be actively on the higher-cost satellite network. Depending on the ship, a ship will spend some percent of time in open water, where only satellites can support communication between ship and shore. A ship also spends a significant amount of time near shore and in port. During this time, PortVision can switch to both AIS and cellular communication and provide the fleet owner with real-time visibility of vessel movements in and near port. “It is not uncommon for us to have individual vessel movements for vessels around the world in 30-second increments,” Rosenburg continues. “This supports commercial disputes, compliance issues, and training.” As the technology advances, Rosenberg is seeing some new trends: • In general, the industry is getting smarter about applying technology. Customers are using data created by technology for greatly expanded uses, From Singapore to Dalian, moving cargo to Seattle and on to markets such as gaining market intelligence. across the US results in lower carbon emissions than other routes.* • With advances in technology, fleet owners are also able to share Discover the difference at www.portseattle.org/greengateway and integrate more information with customers, for things such as improving supply chain efficiencies, dealing with demurrage claims, and tax reporting. For more information: • Finally, in the past, it was only the Bari Bookout vessel managers and the core group Director, Commercial Strategy of people associated with the vessels (206) 787-3361 bookout.b @ portseattle.org who were “in the know” about vessel movements. “Now, technology is pushing this information out to many *Carbon Footprint Study for the Asia to North America Intermodal Trade, Herbert Engineering Corp., 2009 more stakeholders, including vessels
A greener road to the midwest.
W W W. WO R L DT R A D E W T 1 0 0 .C O M
33
WAREHOUSING
Independent Logistics Consultants Provide Critical Benefits in Designing DCs The leveraging of broad supply chain experience from multiple industries and incisive analytics are important tools for independent logistics consultants. BY JEFFREY B. GRAVES
G
iven the changing and increasingly complex dynamics of the distribution industry, the need for independent logistics consultants—with the precision supply chain analytics and broad scope of design solutions that they provide— has become more critical for supply chain executives than ever. However, some logistics executives rely on systems integrators to not only install automated equipment solutions in their warehouses but also to develop the conceptual design for the DC’s entire material handling system. Many of these DC projects put in place by systems integrators shortcut the critical design phase and install automated systems that are not the best fit or the most cost-efficient option for the corporation. At risk is supply
34
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
chain executives’ need to maximize their throughput efficiency and successfully capitalize on their long-term return on investment. Faced with the prospect of building a greenfield distribution site or upgrading their current distribution center, logistics executives are confronted with thousands of decision points to be worked out. Yet not all distribution center executives possess the extensive knowledge and analytical capabilities in-house to fully conceive, plan, manage, and bring to successful fruition a large-scale, highly automated DC. Their concept of what an ideal DC should look like, how it should function, and what material handling systems should be in place is influenced by their distribution experience, the insight that they have gained from material handling equipment
suppliers, and by visiting the sites of other distribution centers of similar application. Evaluating the tremendous volumes of information required and making the correct decisions throughout every step of the process can be risky and daunting tasks for any logistics team, no matter how talented they may be. Key amongst these decisions is assessing which planning, equipment, and management aspects of the project can be provided in-house and which should be outsourced. Equally important is whether these functions should be outsourced to an independent logistics consultant or a systems integrator. If services are to be outsourced, it is desirable to have a single point of contact and responsibility to design and manage the entire project. Systems integrators—in their effort to position themselves as single-source suppliers for their client company’s distribution needs—are increasingly making critical decisions on initial conceptual design and equipment selection for their clients’ material handling systems. By contrast, DC executives have traditionally relied upon independent supply chain consultants to help navigate through these challenging logistics decisions. Possessing the skilled personnel, extensive case history databases to draw upon, and in-depth experience with precision analytics and financial modeling tools, consultants are ideally equipped to fully analyze and develop conceptual designs for even the most complex supply chain and distribution center scenarios. Once a solution has been decided upon, independent consultants are then well-positioned to assume single-point responsibility for contracting, installing, and integrating the various sub-systems in the DC into one efficiently functioning material handling system spanning the entire distribution center. This gives the best guarantee that the DC will operate as designed and meet the throughput levels and expected system efficiencies when the system goes live. For DC executives, using an independent logistics consultant versus a systems integrator is vital to the very set-up and running of an efficient and cost-effective distribution center. Three very critical factors differentiate the methodologies of independent logistics consultants from systems integrators: objectivity in system design; focus on the level of automation; and change management. Objectivity in system design
When designing a multi-million-dollar distribution center, few factors could be more important than ensuring that the DC’s executive team has the opportunity to review and select any and all material handling system options available. The methodology of independent logistics consultants permits an objective examination of any material handling systems that may be viable to a new distribution center’s operation. This is critical to selecting the right equipment that will meet the requirements for a DC’s throughput, efficiency, and expected ROI. Consultants also draw on solutions from many industries, thus providing a broad perspective on potential solutions that might otherwise not be considered.
But this breadth of design flexibility is not offered by systems integrators. Closely aligned with specific equipment manufacturers whose systems they routinely specify, systems integrators typically specify only a limited number of manufacturers’ equipment lines. A systems integrator that has been retained by a company’s executive team will present several system options. Because the integrator is using a limited universe of equipment manufacturers, the DC’s executives will be presented with design choices relative to what those manufacturers produce. Other system possibilities will most likely not make it to the executive planning table to be reviewed. The capability for objectivity can be further limited with the equipment bidding process. Because the breadth of manufacturers associated with the systems integrator does not include other possible relevant systems, when the bidding process is instituted it is inherently not representative of a realistically competent universe of manufacturers. Objectivity of system design without the constraint of single-source limitations is the best guarantee that the optimum material handling systems will be put in place to achieve the operational and financial needs of the new distribution center. Focus on the level of automation
Designing a DC from an automation focus delineates a significant difference in how systems integrators and independent logistics consultants approach distribution solutions. Too many supply chain executives make the fundamental mistake of thinking that technology should be the basis and starting point of their distribution solution. Where, in fact, thorough conceptual design aimed at process improvement should be the central aspect of any solution, rather than focusing on the material handling equipment. Given the massive influx of new technology information flooding the distribution market, it is no wonder why logistics executives jump first to technology as the solution to their throughput issues. They are influenced by what they see in other facilities, what they read, and what they hear from equipment manufacturers. But supply chain executives are also considerably influenced by systems integrators, who are key contributors in pushing automation as a first option. Systems integrators rely on equipment sales and implementation as a central focus of their solutions and revenue. These solutions are centered on their preferred technologies and based on limited conceptual designs revolving around these usually capital-intensive systems. Consequently, systems integrators’ solutions may not be the best fit or the most costefficient options for their clients’ needs. Independent logistics consultants approach distribution center challenges from a completely different perspective, embracing process solutions as the key motivator rather than equipment. They are brought in to consult the DC’s logistics executives very early on in the initial stages of conceptual design. The analysis that they provide for supply chain executives revolves around W W W. WO R L DT R A D E W T 1 0 0 .C O M
35
WAREHOUSING
precise process needs for the DC, from both a localized and multi-distribution center perspective. Approaching system design from a process perspective does not necessitate the implementation of any specific automated technology, but leaves the door open to any options to achieve the objectives of the DC’s supply chain executives. The first step of a full conceptual design is to define the distribution center’s needs and parameters. These determine volume requirements that drive DC size, capacity, and velocity. A capital estimate is prepared for the recommended solutions from a material handling standpoint and/or a facility build-out perspective. These factors then drive storage solutions, mechanical conveying and sortation solutions, and pick systems down to the applications of the equipment. The labor content required is then factored. Finally, a complete return on investment analysis is prepared, comparing current operating procedure to the new, proposed operating structure. This level of analytics, however, is seldom performed by systems integrators, falling short in providing a fully complete conceptual design analysis prior to finalizing a system design. Such analytics are best provided by independent logistics consultants that are equipped with the expertise and experience to achieve the full desired results. Change management
Change management is a critical link in the smooth transition of new and upgraded DCs into functionally efficient live operations. It is so vital that inadequate change management can be isolated as a key reason why new DCs are not operating at full capacity. Despite its importance, successful change management strategy is seldom fully embraced by systems integrators in projects that are under their management. This is evident in the many warehouse management systems of new dis36
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
tribution centers that are not adequately functional and fully utilized by the DC’s staff, in some cases years after they were completed. It is also evident in the excessive number of cost overruns caused by system crossovers that were not properly planned and executed. Systems integrators are focused on selling and installing equipment. A more holistic perspective is required for putting in place successful change management practices. Implementing such strategies is better suited for independent logistics consultants who are uniquely equipped to embrace and coordinate the full functionality of all activities within the scope of the distribution center. For example, before the DC goes live, the coordination of equipment testing, system conversion, and equipment startup is critical to ensure the interlinked material handling systems in the new DC come up without interruptions. Once the go-live or switchover takes place, it is vitally important for the DC’s staff to be fully trained in the operation of the WMS, WCS, pick station modules, and the dozens of other functions involved with the operation of the new DC. This requires considerable coordination between equipment manufacturers and installers, the DC’s executives, operational personnel, and the company’s executive management. Unless these activities are thoroughly addressed, the new DC will not operate at full functionality no matter how streamlined the automated equipment solution might be. The utilization of independent logistics consultants and their holistic approach encompassing the operation of the entire DC has proved to be the most effective option to achieving this objective. The critical advantage
Independent logistics consultants provide critical benefits to supply chain executives that systems integrators cannot deliver. They are ideally equipped to fully analyze and develop conceptual designs for even the most complex distribution center scenarios. While leveraging broad supply chain experience from multiple industries, independent logistics consultants possess the capability to objectively examine and propose any design and system options to their supply chain clients. For operations executives that desire to maximize their throughput efficiency and successfully capitalize on their long-term financial return on investment, the role of the independent logistics consultant has become more important than ever. WT Jeffrey B. Graves is the president at Sedlak Management Consultants, Inc.
For reprints of this article, please contact Cindy Williams at williamsc@bnpmedia.com or 610-436-4220 ext. 8516.
HARNESS THE
POWER OF NASSTRAC
Searching for ways to create efficiencies and cut costs in your supply chain? Join NASSTRAC and find powerful ideas, resources, and an industry network to help make it happen. Otherwise known as the National Shippers Strategic Transportation Council, NASSTRAC has been bringing together shippers, providers, and the entire transportation community since 1952. Join our industry association and you’ll find a unique focus on the transportation needs of shippers - whether it’s gaining free access to our legal counsel, attending our annual conference or regional meetings, or securing online resources available only to members. Energize your career. Power up your supply chain. Join us today. www.NASSTRAC.org
EDUCATE Stay on top of industry developments and emerging trends, and better manage your transportation and supply chain.
ADVOCATE Join others to stop burdensome laws and regulations that impede productivity and increase the delivered cost of goods.
CONNECT Discover best practices from your supply chain peers and develop carrier relationships in a market tight on capacity.
2012 LOGISTICS CONFERENCE AND EXPO
APRIL 29 - MAY 2, 2012 Orlando, FL
NATIONAL SHIPPERS STRATEGIC TRANSPORTATION COUNCIL s WWW.NASSTRAC.ORG
I N D U STRY U P D ATE: PHARMACEUTICALS
Unlocking Reverse Pharma Logistics Until now, pharmaceuticals were handled only by specialty distributors.
lobal third party logistics companies are unlocking the pharmaceutical distribution market, but the specialty distributors still have a firm hold on pharmaceutical reverse logistics. The reason is knowledge. Although the general logistics companies and carriers are experts at moving goods, the highly regulated space occupied by pharmaceuticals requires special knowledge and procedures. The emphasis on cost containment, however, is providing the big break that large, integrated logistics providers need. Some pharmaceutical manufacturers are combining commercialized products and clinical trial compounds under one logistics contract for greater savings. They’re also beginning to consolidate return shipments and use shared, secure facilities.
G
BY GAIL DUTTON
The pharma difference
Track and trace requirements proving chain of custody of pharmaceuticals are becoming more stringent.
Pharmaceuticals are not like snow blowers or sneakers. When those products are recalled or returned, they can be repaired, resold, or donated. Pharmaceuticals, in contrast, are destroyed. The need for destruction relates to the inability of manufacturers to ensure pharmaceuticals
were handled properly after leaving their control and to ensure a secure chain of custody. To put this into perspective, consider temperature. Storing snow blowers, sneakers, or most other products at ambient temperature isn’t harmful. But, for nearly half of the new drugs entering the market, maintaining a specific temperature range is imperative. Temperature excursions can reduce potency, reduce shelf life, or alter a drug so it becomes harmful. Live attenuated cholera vaccine is a good example. Stored between 2-8° C, its shelf life is one year. But at room temperature, its shelf life is seven days. “The regulatory aspect of pharmaceuticals is among the most heightened of any product category,” explains Jeff Pepperworth, president of reverse logistics at Inmar, Winston-Salem, NC. Within the pharmaceutical industry, track and trace requirements proving chain of custody are stringent and are only growing more robust. But, from manufacturers’ perspectives, chain of custody verification breaks down once the drug reaches its destination. Pharmaceutical returns also require more vigorous security than most other goods because of the high value of the product. One year’s supply of many newer pharmaceuticals can exceed $200,000. The most expensive, however, is Soliris, by Alexion Pharmaceutical. Targeting a rare blood disorder, it costs $409,500 for one year’s treatment. More common drugs have lower prices. It’s not unusual for cancer therapies to cost $50,000 per year, while treatments for schizophrenia typically cost about $7,000—just for one drug. For organized crime, pharmaceuticals can generate a hefty return on investment. According to World Health Organization estimates, 10 percent of global pharmaceutical sales involve counterfeit goods. To safeguard their products and the patients who rely upon them, pharmaceutical manufacturers ensure that returned drugs are incinerated. Streamlined returns
Traditionally, when returns arrive at a distributor, the distributor applies the manufacturer’s retailer policies and pricing to ensure the pharmacy, hospital, or wholesaler receives credit for the return. Then, the distributor sends the returns to a third party returns processor for destruction. Pharmaceutical logistics provider Inmar streamlines that two-count process with what Photo courtesy of Inmar
38
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
Data management
Most of the changes in reverse logistics are at the pharmacy level. “There is more scrutiny around what pharmacies carry
Photo courtesy of Inmar
it calls the One Touch Advantage. In that model, returns arrive at Inmar and are validated, policy and pricing policies are applied, accounts are reconciled, reports are filed online for the manufacturer and the shipper, and the pharmaceuticals are destroyed. Online proof of destruction is then provided to the manufacturer. “One Touch Advantage removes excess handling, which reduces the chance of errors and reduces costs,” Pepperworth says. It provides faster charge-backs and eliminates duplicate processing fees and unnecessary transportation costs. It also lowers the risk of diverted shipments. Not all returns are credited. But, when manufacturers do credit returns, reverse logistics providers have the additional challenge of ensuring that returns are authorized, quantities are validated, and returns data for lot number and shipper are matched against the original documentation. Returns for credit, primarily, are made by retail pharmacies or wholesalers and typically involve drugs that are three to six months from expiration, explains Larry Hruska, president at GENCO Pharmaceutical Services. “Consolidated returns tend to arrive from a pharmacy chain in a box with a few hundred bottles of all shapes and sizes,” he explains. The shippers list the returns package and formulary. Logistics organizations receiving the returns match the contents against the packing list and National Drug Code numbers and sort the returns for lot, expiration date, damage, prescription labels, quantity, and anything that affects the drugs’ ability to meet the manufacturer’s return policy. “The logistics provider then lets the shipper know what to expect from the manufacturer,” Hruska says. “There aren’t a lot of changes. Returns are returns.” What has changed is speed. GENCO transmits financial reimbursement information in an average of four days, versus up to 30 for some of its competitors, Hruska says. “Speed to process is one of the things that sets us apart from competitors, allowing us to accelerate any off-invoice deductions and minimize the financial mess that delays create for customers,” he elaborates.
The key to improving reverse logistics is better inventory management throughout the supply chain.
and around prescription rates,” Pepperworth says. The best distributors today are providing data to help them manage product flow and costs. GENCO uses its technological solutions to directly benefit its pharmacy customers. By drilling down to items in the pharmacy, its analytics technology enhances visibility and helps pharmacies benchmark themselves against comparable segments of the industry. “We see this as helping the pharmacies improve their own processes,” Hruska explains. “The key (to improving reverse logistics) is better inventory management throughout the supply chain so that excess products with short expiration dates can be returned successfully,” Hruska continues. For retailers, that means creating a clear policy that streamlines the returns process, developing a methodology retailers can use to ensure they pull the product at the right time, and identifying where pharmacies aren’t compliant. For manufacturers, it involves showing them oppor-
tunities to model and accurately forecast product returns from both branded and generic products. Manufacturers also are benefitting. Inmar uses its analytic applications to identify drugs that are returned as well as problems around a formulary and other issues, and even to identify prescriptions that were issued but not filled or refilled. Such information helps pharmacy management and also contributes insights to pharmaceutical manufacturers’ analyses of outcomes data, which is needed to advance the ability of therapeutics to be tailored to individuals. (That emerging ability is called personalized medicine, or pharmacogenomics). “For outcomes data to be useful, there must be large amounts of data,” Pepperworth points out. Pharmaceutical reverse logistics providers are in position to obtain part of that data. Recalls
Product recalls are similar to returns but require additional identification and W W W. WO R L DT R A D E W T 1 0 0 .C O M
39
I N D U STRY U P D ATE: P H A R M A C E UTI C A L S
than to make multiple shipments. Because these compounds are returned for destruction, the requirements for temperature control and express delivery that are present on their outbound transit are non-existent for their return. Consequently, Fisher sees some customers using cheaper ways of carriage, substituting ocean freight for air freight in some instances. Consolidating pharmaceuticals returns has inherent risks, however. Every handoff and each delay in the supply chain increases the chance that criminals will divert the drugs into the black market where expired products will be diluted and labeled as saleable. The risk depends upon the location of the facility and the drug.
Photo courtesy of Inmar
Integration
Cost constraints are causing pharmaceutical companies to change the way they handle logistics.
have a greater sense of urgency. Recalls and returns differ mainly because of the notification aspects, Hruska says. “We have protocols for notification, including business reply cards. Information regarding what has been returned is captured in our system for FDA compliance purposes.” There’s also more regulatory oversight. For example, Pepperworth adds, “Pharmaceuticals may need to be held for inspection by regulators.” Pharmaceutical manufacturers also may need to examine samples. As Richard Smith, managing director of life science specialty services at FedEx Express explains, “Pharmaceutical companies want to tie in returns to a specific batch, so more identification is needed for recalls than for returns. This often is tied to legal actions. It may be only a single batch that contains defects.” For example, the October recall of Astellas Pharma’s Advagraf 0.5-mg time-release capsules by the European Medicines Agency involved only 12 batches. Ensuring that the correct batch is recalled affects patients but also has significant financial ramifications. Therefore, it’s 40
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
important to ensure that only the affected batch is recalled. Emerging markets
As a highly regulated industry, “Pharmaceutical companies are notoriously risk adverse,” Sean Smith, VP of clinical logistics at Fisher Clinical Services, says from Fisher’s Horsham, UK, headquarters. Cost constraints, however, are causing them to look carefully at their risk profiles and change the way they handle logistics. “Local facilities owned by logistics providers are becoming more common as pharmaceutical companies get out of the bricks and mortar business of distribution,” Smith says. Fisher Clinical Services manages carriers and packs, assembles, and distributes therapeutics used in clinical trials. “Particularly as pharmaceutical manufacturers move into the developing world—mainly Latin America and Asia—they are establishing in-country collection strategies and are consolidating shipments,” Smith says. It is more cost effective to collect therapeutics and combine them in a single shipment from, for example, India or Brazil to the U.S. or EU
Traditionally, pharmaceutical companies “owned the entire value chain from an idea in a researcher’s lab to a pill in a patient’s medicine chest,” recalls John C. Lechleiter, Ph.D., chairman, president, and CEO at Eli Lilly and Co., speaking at the recent Brookings Institution Conference on Regional Innovation Clusters: Advancing the Next Economy. “As we entered the 21st Century, Lilly adopted a new model—a “fully integrated pharmaceutical network…linked through partnerships, alliances, and other relationships.” Integrated networks are becoming more common throughout the pharmaceutical industry. The reason is simple. As Lechleiter explains, integration expands opportunities and lets companies leverage financial resources. This trend extends to logistics. “There is a general trend toward integrated logistics,” according to Peter Bonte, VP of service logistics at DHL. “The move to globalization has increased complexity, so logistics providers, increasingly, are orchestrating logistics end to end. That opens opportunities for large global firms like DHL and FedEx to enter the logistics market with lower costs than specialty firms, FedEx’s Smith adds. Typically, these large firms ease into life sciences returns with medical equipment and devices before undertaking pharmaceuticals. DHL, for example, handles recall solutions for medical devices, applying best practices learned in the information technology sector. As Bonte says, “We had
seen several recalls that often were inefficient and poorly organized, so we built a solution for our customers to handle recalls in a more structured way.” That solution consists of Recall Alliance and Recall Action, Bonte explains. “With Recall Alliance, we work with customers to build knowledge around their products and the most efficient recall procedures.” The most basic level focuses on industry best practices, systems, and management. The premium level also includes readiness, audits, and certifications. “Recall Alliance is in the initial stages of launch,” he says. It debuted in Europe and launches in Asia and America in 2012. Recall Action is the execution arm, ensuring access to the right logistics. DHL’s services, parts, and logistics program maintains parts for some hospital equipment and can screen or repair some instruments. More complex repairs involve customer-certified repair facilities. “The integrators are as good as specialty firms in certain lanes, but the specialty firms intervene faster when
Product recalls for medical devices need to be handled in a structured way. problems occur,” Fisher’s Smith notes. Fisher Clinical Services has tracked performance for its clients and reports that specialty firms typically resolve issues within hours, while the large integrators take weeks. Response time and intervention are bigger concerns on outbound shipments, where delays affect patients’ health and temperature excursions harm drug quality or potency.
The drive for cost containment is causing pharmaceutical manufacturers to combine their clinical and commercial logistics operations under one logistics contract, Smith explains. In established lanes, that strategy is effective. In developing regions of the world, however, Fisher Clinical Services advises its clinical trials customers to use specialized service providers to ensure that therapeutics, diagnostics, and patient samples can travel among sites easily. “During clinical trials, there are three types of returns,” Smith explains. “There will be global recalls if there are quality or process concerns with the drug, and returns when clinical trial patients withdraw from a trial or the drug’s development is halted. There also will be returns of clinical samples (such as tissue samples) throughout trials that help determine the therapeutic dosage a patient will receive,” he says. Biologic samples trigger certain customs concerns and must be maintained at specific temperatures throughout transit. Temperature excursions can render a sample worthless.
W W W. WO R L DT R A D E W T 1 0 0 .C O M
41
I N D U STRY U P D ATE: P H A R M A C E UTI C A L S
Technology
The future—parallel logistics
Automation technology is important for streamlining processes, but it is not a complete solution.
At GENCO, “Our customers are concerned about getting returns quickly, accurately, and at the lowest possible cost,” Hruska says. GENCO, therefore, is streamlining its processes by installing new scanners, sorters, and other automation technology. “Track and trace technology is still an issue,” Hruska says. “California enacted pedigree rules and regulations that become effective in 2015 that are creating a challenge for everyone in the industry by mandating track and trace at the vial level. We can’t work state-bystate. The federal government must set the standard,” he insists. RFID was once hailed as the solution, but the pharmaceutical industry had concerns about the effect of radio frequencies upon biologics. Therefore, Hruska continues, the pharmaceutical industry is abandoning RFID for outgoing distribution. Two-dimensional barcodes are gaining favor, instead, because of the larger amounts of data they can encode. “There
is a lot of discussion, but there’s no (standard) system to track them,” Hruska says. The concerns that accompany RFID for outbound distribution are invalid for returns, however. “RFID is valuable for return logistics,” Hruska says. “We send a tamper-proof evidence bag with an embedded RFID tag embedded to the pharmacy,” for high security Schedule 2 returns. The RFID tag allows them to be sent to a secure vault immediately upon receipt.
The development of personalized medicine means that fewer, but more expensive, drugs will be developed. With average costs of $1 billion and 15 years to bring a drug to market, the pharmaceutical industry is looking at ways to reduce those costs. Some involve clinical trial logistics. Today, when patients drop out of trials or trial enrollment is insufficient, the drugs shipped to a trial site are destroyed. There is discussion, however, about developing regulatory requirements for drug storage at clinical trial sites like those for manufacturing and distribution, according to Fisher’s Smith. If that occurs, it may be possible to shift drugs between trial sites and thus reduce overage, transport less material, create fewer returns, and reduce the need for disposal. That future remains years distant, however. For the foreseeable future, the best strategies for reducing the costs of pharmaceutical returns involve process improvements and integrated logistics. WT
Get the WT100 iPad App at www.worldtradewt100.com/iPad_App.
WT100 iPub Cloud Technology i Moving to the Cloud: Is There a Tipping Point?
brought to you by
i The Transformational Power of Mobile Technology i The Strategic Value of Supply Chain Visibility i Improve Supply Chain Efficiency with IT i Cloud Technology on Twitter i Extreme Logistics: Never Forget i Cloud Technology White Papers: • Reengineering the Foundation for B2B Information Exchange in the Supply Chain • The Cloud Supply Chain Data Network
42
WT100_iPadApp_Half_housead_1211.indd 1 WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
Now Available! iTrader — the WT100 Week In Review — your way to stay up with the latest supply chain news and events. Updated every Friday.
11/15/11 10:47 AM
U.S. REGION GULF COAST
Regions with Ports Get a Leg Up on Attracting Economic Development Their advantage will grow after the Panama Canal expansion is complete. BY KEN KRIZNER
Cargo is ready to be unloaded at the Port of Houston’s Barbours Cut container terminal.
T
ransportation costs are a critical component to expansion and relocation projects, both in terms of being able to competitively deliver components and materials to the manufacturer or industrial facility as well as export finished product to overseas customers. Port locations clearly have huge advantages over non-port locations in their ability to offer the most competitive supply chain costs. Port locations on the U.S. Gulf Coast are poised to bring additional cost savings to manufacturers looking to import and export in the coming years when the Panama Canal expansion project is complete, which is expected by 2014. Simultaneously, ports will bring additional economic development activity to their regions and states. Ports along the Gulf Coast have been preparing for the Canal expansion for the past several years. “Almost everything we do in some way relates to the Canal expansion,” says Wade Elliott, senior director of marketing at the Tampa Port Authority. “It will have significant implications for the Gulf region.” Historically, Gulf of Mexico ports have not been given priority compared with Atlantic or Pacific ports when it comes to direct container service, Elliott says. With the Panama Canal expansion and ocean carriers looking for new cost-savings opportunities and large, underserved markets, Gulf ports present a huge opportunity.
As a way to attract their share of direct container businesses, the ports of Tampa, Houston, and Mobile have formed the Gulf Coast Advantage, an alliance to attract all-water services direct from Asia via the Panama Canal. The three ports serve distinct, complementary services. In terms of container business, Houston exports more than it imports; Tampa imports more than it exports; and Mobile is balanced but is also complementary because its cargo includes large machine and automotive parts. The primary objective of the alliance is to develop a service where inbound and outbound ships have itineraries at all three ports. A major gateway to the world
From a cargo- and freight-moving perspective, the Port of Houston is a centralized location for shipments to and from an area that encompasses east of the Rockies, west of the Ohio Valley, and south from Canada. “Based on our location, we have emerged as a major gateway for Asia, Europe, Africa, the Caribbean, and Latin America,” says John A. Moseley, general manager, trade development, at the Port of Houston Authority. “We handle any type of cargo.” Upgrades, enhancements, and expansions happen almost continuously at the Port of Houston. The Port of Houston Authority approves about $1 billion for capital expenditure projects every five years. The port has two container terminals—Bayport and Barbours Cut—and improvements happen at both on an ongoing basis. Bayport is one of the most modern terminals in North America, having opened in 2007. “[Bayport] further positioned us as the largest container port in the U.S. Gulf and one of the largest in North America,” Moseley says. The layout of the terminal is designed to handle 3 million twentyfoot equivalent units (TEUs). With the delivery of nine super post-Panamax cranes and 11 more planned for the future, Bayport has the ability to handle 12,000 TEU ships. Bayport currently receives 8,100 TEU vessels from Europe (nearly twice the size of what can pass through the Panama Canal today). Bayport is being built in phases, as demand dictates, Moseley says. It is expected to be completed within the next five to 10 years. Barbours Cut is also being constantly upgraded
Port of Houston Authority
W W W. WO R L DT R A D E W T 1 0 0 .C O M
43
U.S. REGION: GULF COAST
CSX’s network along the Eastern Seaboard. The port expects to complete the project this year.
Mississippi State Port Authority at Gulfport
Port activity translates into economic activity
The Port of Gulfport is one of the busiest container ports in the Gulf Mexico. Its strength is its location. Not only can companies serve the Gulf region but also the middle one-third of the country, including Chicago.
and enhanced, Moseley notes. That makeover will continue during the next three years to ensure it maintains modern facilities. New post-Panamax cranes also are slated for delivery at Barbours Cut container terminal. The Port of Houston is working to deepen and widen the channels of its container terminals to accommodate even larger ships that are expected to arrive fully laden after the expansion of the Panama Canal. Central Florida’s economic engine
Overall, the Gulf region has been one of the fastest-growing parts of the U.S. Florida is part of that growth. In less than 18 months, Florida is expected to pass New York as the third most populous state in the country, according to the U.S. Census Bureau. The Tampa-Orlando I-4 corridor is at the epicenter of that growth, and Central Florida has the largest concentration of distribution centers in the state. The Port of Tampa is one of the largest economic engines for that growth, responsible for about $8 billion in revenue and 100,000 jobs, Elliott says. The port handles about 40 percent of all cargo tonnage that moves inbound and outbound through Florida. The port is also one of the nation’s most diversified operations, with resources to handle bulk, general cargo, and breakbulk project cargo. 44
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
The Tampa Port Authority has expanded the port’s container terminal during the past five years. The terminal currently includes 2,800 feet of berth length, three rail-mounted container gantry cranes, and a 100-ton mobile harbor crane, all on a 43-foot deepwater channel. The terminal is currently at 40 acres, and there is land set aside to increase that acreage to 160 as demand dictates. Part of the reason for the container terminal investment is to allow the Port of Tampa to increase trade opportunities with Latin America and Asia as a result of the Panama Canal expansion. “We realized that we had a significant volume of containerized traffic right in our backyard that was being sent to more distant ports, either in South Florida or elsewhere on the East Coast,” Elliott says. The Tampa Port Authority is in the middle of a $320 million, five-year capital infrastructure improvement program (including the expansion of the container terminal). A dedicated truck ramp that leads directly from the port to Interstate 4 will be completed this year. It is part of a substantial highway project in Central Florida. Tampa Gateway Rail Project, a joint initiative between the Port of Tampa and CSX, will result in the first on-dock, multipurpose-unit train facility in the state of Florida, extending the port’s reach through
Port Freeport, located about one hour south of Houston, supports local economic development agencies in their effort to attract expansion projects. “We work closely together,” says Phyllis Saathoff, managing director at Port Freeport. “When one element is successful, we’re all successful.” During the past seven years, Port Freeport has generated more than $1.4 billion in investments. “More investment translates into new business opportunities,” Saathoff says. “They generate economic development for the entire region.” The port has about 1,400 acres of land, environmentally mitigated and ready for expansion projects. An additional 7,500 acres is available for either developed facilities or raw land, and all land is accessible by water, highway, and rail. Among its strengths, Port Freeport has the capability to handle large project cargo shipments. Since 2007, it has handled the import and export of wind turbines, which require special capabilities because of their large size. Most vessels arrive with the necessary crane equipment, but Port Freeport has a mobile harbor crane that can handle the shipments, Saathoff says. Port Freeport has spent $60 million during the past three years to upgrade facilities, improve transportation links (highway and rail), and develop inland projects. During the next 10 years, the port expects to spend an additional $300 million to $500 million. Future projects include: Continued construction of the Velasco Terminal: The first phase of construction began in 2007. It is designed to handle new containerized and breakbulk cargo activity. Eventually, there will be 2,400 linear feet of berth space at the terminal. The port’s vision is to have a container terminal capable of handling up to 800,000 TEUs annually, Saathoff says. Logistics: Construction of a multimodal facility with five-unit trains of capacity. Union Pacific serves the port, and the company has spent more than $14 million during the past two years to upgrade bridge facilities to accommodate an anticipated increase in activity.
Download a podcast of this article at: www.worldtradewt100.com/media/podcasts
A port for the region
Many ports characterize themselves as “regional ports.” But their definition of “regional” doesn’t go much beyond the metro areas they reside in. But the Mississippi State Port Authority at Gulfport is truly a regional port. Not only does Gulfport serve as the port for the state of Mississippi, but on many occasions, it serves as the port for the states of Arkansas, Tennessee, Kentucky, and points beyond. “Our impact goes beyond our borders,” says Donald R. Allee, executive director and CEO at the Mississippi State Port Authority at Gulfport. “We are an economic engine for the region. Our focus is to bring more maritime commerce through Gulfport.” Gulfport is the third busiest container port in the Gulf of Mexico, behind Houston and New Orleans. Its strength, according to Allee, is its location. Not only can companies serve the Gulf region, but also the middle one-third of the U.S., including the city of Chicago. “It is an attractive market to serve,” Allee points out. Gulfport has grown significantly since
its days of being primarily an agricultural port. In recent years, the growth has been facilitated, in part, by the growing diversity of industry in the state of Mississippi. Toyota’s new facility in Blue Springs, Miss., near Tupelo, manufactures the Corolla. Production is for the U.S. market, but state officials hope that Toyota eventually manufactures automobiles in Mississippi for export markets. The NASA John C. Stennis Space Center has given the state a base from which to grow a high-tech-industry sector. To help draw more manufacturers to locate operations in the state, Gulfport offers tax incentives for Mississippi-based companies that utilize Mississippi ports. “We have a strong program that encourages the use of Mississippi ports,” Allee notes. More than six years after Hurricane Katrina, when all 10 docks were knocked out, Gulfport is in the midst of a $570 million restoration project. The port has rehabbed the docks to ensure they are bigger, better, and stronger, Allee maintains. Between 400,000 square feet and 450,000
square feet of covered storage space has been restored. Prior to Katrina, Gulfport had nearly 700,000 square feet, and Allee says the port will continue to build warehouse space as needed. In addition, the elevation of the port is being raised to 25 feet above sea level to prevent damage from a storm surge similar to what occurred during Katrina. “We’re preparing for the future Katrina or other weather event,” Allee says. “We are trying to mitigate the effect of the storm.” In the event of a future Katrina-like event, Allee adds, “We want to be back up and running in days—not weeks or months.” Also during the past six years, Gulfport has had to deal with the BP oil spill and the continued impact of the economic recession. Through it all, Gulfport has been able to maintain its high ranking in container volume. It is not letting these events hamper their future plans. “We’re not sitting on our hands waiting for the global economy to recover,” Allee says. “We’re growing our port by at least one-third. We’re investing in our future.” WT
Have you Visited
WorldTradeWT100.com lately? Take a minute and check it out… WorldTradeWT100.com is TOTALLY REDESIGNED for a faster, easier online experience. You’ll find more information. More resources. More ways to do your job better. You’ll love what’s new:
¨ fĤ©ăČŨþŢăėô Easily “retweet” or “like” any article
¨ `ƙă©ċÈŢėƠăôƇăĤė Fast access to features, blogs and Web exclusives
¨ ŨƤėººƠė©ÈºċÈƤƢĤŢºŨÈŢ©þ Find article and event results, or narrow by date, author, issue and more
¨ ŗEĤŨƇ^ĤĸƙČŢřƇ See what others in your industry are reading
¨ ĤĒĸŢÈþÈėŨăƠÈÈƠÈėƇŨ©ČÈėºŢ See and sort what’s happening tomorrow, today
Register now at www.WorldTradeWT100.com/register W W W. WO R L DT R A D E W T 1 0 0 .C O M
45
550 , 2,2 000 W 00 IND AREHO EPE U ND SE EM 500 E LOG NT WA PLOYE 50 W ISTIC REHO ES US ARE S CO MP ES HO AN USE VEN IES D 121 ORS YE A RS
T EN
V E E
ON
IWLA 2012 CONVENTION + EXPO Bridging Generations for Success or Su uccess Join the International Warehouse Logistics Association at the 2012 IWLA Convention & Expo! Registration is now open for the 2012 IWLA Convention & Expo, March 18-20, 2012 at the Fairmont San Francisco (atop Nob Hill). Come experience presentations from the following keynote speakers: »
Hamid Moghadam, co-chief executive officer of ProLogis
»
Tom Deans, president of Détente Financial Press, an intergenerational wealth expert and best-selling author of Every Family’s Business
»
Matthew Kelly, founder and president of Floyd Consulting, an internationally acclaimed speaker and best-selling author of The Dream Manager
Discover the full lineup of great speakers and events and register today at www.IWLA.com. Early-bird rates expire soon!
I NTE R N ATI O N A L REGION: BRIC
2012: The BRICs and Beyond The BRICs remain popular with U.S. exporters, but they are difficult places to do business. BY DOUG BARRY
T
he BRICs are still hot. These four developing markets—Brazil, Russia, India, and China—continue to beckon U.S. companies looking for long-term growth and with the stomach for uncertainty and excessive government meddling in the marketplace. Certainly, the export value numbers are enough to stimulate pulses in almost all sectors where U.S. companies are competitive. As of October 2011, year-to-year U.S. export growth compared with 2010 was 22 percent for Brazil ($35 billion), nearly 38 percent for Russia ($6.7 billion), 10 percent for India ($17.7 billion), and 16.5 percent ($84.2 billion) for China. BRIC countries offer tangible opportunities just as European markets struggle with low-growth and long-term government imposed austerity. Let’s briefly look at each market starting with the largest export market by value.
China
Wangfujing in Beijing, China.
GDP growth is projected to be around 8.2 percent in 2012, down from an estimated 9 percent in 2011. And although concerns abound about possible asset bubbles and battered bank balance sheets, imports fueled by consumer spending are
likely to grow at record levels. But China, like the other BRICs, is not a place where you can land at an airport and begin thumbing through the phone directory looking for leads. Partnering up with a local Chinese firm is the preferred—if not essential—market entry strategy, and finding the right one requires patience and the help of others. People with experience in China advise newcomers to consider the so-called second tier markets including Shenyang, Wuhan, Ningbo, and others with a population of more than one million where there is less competition and more need. One reliable place to look for help is the Dept. of Commerce and its network of experts and offices throughout China (www.export. gov/china). They offer to find and vet partners for a modest fee. Services are tailored for small- and mid-size U.S. companies. The big U.S. consulting houses offer similar services and tend to have deep sector expertise. They also offer to help organize supply chains and to design other efficiencies for the China operation. U.S. firms for whom it makes less sense to have a full-blown China presence—with all the associated startup costs and regulatory headaches—might at least initially go the e-commerce route. Of China’s 180 million Internet users, more than 34 percent are making purchases. According to one source, by 2013, 6.5 percent of all retail sales in China (which does not have a shopping mall culture like the U.S.) will be online compared with 8 percent in the U.S. China’s e-commerce is growing at a faster rate, and a recent survey of some of the bigger online platforms found goods ranging from chicken feet to luxury cars to coupons for plastic surgery. It is estimated that U.S.-sourced goods worth nearly $4 billion were sold via China e-commerce in 2011. New channels are arriving on a regular basis. Walmart is opening an online store in 2012. Baidu offers U.S.-made goods, and a new U.S. firm, Exportnow.com, has teamed up with market-leading Taobao. Exportnow.com offers to ship U.S. goods from California to a bonded warehouse in Shanghai, where the service handles all customs clearance, regulatory compliance, labeling, fulfillment, and payment collection. This is all promising news but should be W W W. WO R L DT R A D E W T 1 0 0 .C O M
47
I NTE R N ATI O N A L R E G I O N: B R I C
The Bandra-Worli Sea Link is a cable-stayed bridge that connects central Mumbai with its western suburbs. tempered with realities on the ground, which include opaque regulations, rampant intellectual property theft, and rules that favor Chinese competitors and bureaucrats. India
Robust GDP growth of 7.8 percent is projected for 2012, and there are big opportunities in infrastructure: railways, roads, ports, power generation, and renewable energy. The U.S. Dept. of Commerce is organizing multiple trade missions to India targeting infrastructure, medical equipment, and other sectors. Participating in official missions, which are open to companies of all sizes, is a good marketentry strategy, as is working with the seven U.S. Commercial Service offices in the country (www. export.gov/india). Similar to the other BRICs, personal relationships and contacts are the key to getting things done, and the U.S. government has a good track record advocating for and providing market intelligence to U.S. companies. Other business matchmaking and market research are available in the private sector. Reforms are creating more opportunities in a country of the “License Raj,” a name Indians themselves use to describe a government bureaucracy with a near obsession for bits of official paper with elegant stamps but that mainly succeed in slowing things down. As is the case elsewhere, Indians are of multiple minds about relaxing business regulations, as illustrated by the recent tussle over whether to allow large retail giants like Walmart to operate outlets in India. 48
WO R L D T R A D E
1 0 0
F E B R U A R Y
2 0 1 2
(Walmart and its competitors are allowed to operate wholesale businesses.) The government first said yes, then in the face of opposition which claimed the behemoths would send millions of momand pop-run stores into penury, the government reversed itself. Big-box stores are likely to come to India, just as the government allowed foreign banks to set up shop, but only after lengthy political wrangling. Russia
GDP growth is expected to be about 3.7 percent in 2012. Opportunities exist in the energy sector, agriculture, commercial aircraft, infrastructure, services, and others. Russia has close trading ties with the EU, but U.S. companies with patience and persistence have registered significant sales. There also seems to be an uptick in one-off sales as Russian buyers find U.S. suppliers via the Internet and at trade shows in the U.S. and abroad. More proactive U.S. businesspeople can rely on the U.S. Commercial Service with offices in Moscow and St. Petersburg (www.export.gov/russia). The Moscow office maintains lists of reliable Russian customs brokers and provides introductions to potential buyers. Brand-name consultants are also wellestablished there. The biggest near-term development is a WTO membership for Russia, possibly in 2012. Russia has had to promise numerous reforms in return for joining the club, and, when implemented, these reforms should provide more market
access at less cost. Also as part of the deal, duties should decrease for many items, and customs procedures should become less onerous. The great beneficiaries, at least initially, will be European businesses, especially German, who have cultivated Russian buyers far more enthusiastically than have U.S. suppliers. This situation can be reversed but not without going there and engaging. There are many remarkable changes in Russia since the early 1990s when there was scant merchandise in scant stores in big cities. Today, Russia’s metropolitan areas, including many once “closed cities,” are chock-a-block with retail businesses, all of them privately owned. Recently, commercial airline connections were reestablished between Alaska and the Russian Far East, as businesspeople in Vladivostok and Khabarovsk seek to open their region to U.S. tourism and investment. Politics, too, seem on the verge of changing again, as Russians seek more control over their own destinies and want to be more integrated with the world economy. The challenge for Russia going forward will be to reduce its dependence on fossil fuel production while repairing a crumbling infrastructure that dates from Soviet times. Brazil
GDP growth is expected to slow to less than 4 percent in 2012. The minimum wage is set to rise by 14 percent, and despite high inflation, Brazilians will have more income to spend. Brazil will be the
world’s fourth biggest economy by 2030, and prospects look reasonably bright, especially with the discovery of offshore oil. Oil and gas support companies in the U.S. are already busy there, but building out the infrastructure and serving spinoff businesses will generate more opportunity in other sectors. The IT market will be worth $136 billion by 2016. Upcoming World Cup and Summer Olympics events and construction projects, as well as a new train line connecting the Sao Paulo airport with downtown, will generate more opportunity and further introduce Brazil as an economic force on the world stage. As with the other BRICs, U.S. businesses seeking to enter this market and find partners can call on the U.S. government for help (www.export. gov/brazil), as well as U.S. and Brazilian private sector consultants. They can help find reliable partners, advise on complex regulations, and navigate sometimes opaque customs and tax procedures. Trade shows and trade missions also have good track records for
generating sales for U.S. companies, and Brazilian buyers are increasingly traveling north to attend U.S. trade shows, perhaps stopping off in Florida to buy a condo as an investment and vacation home. The Brazilian currency appreciated 34 percent against the U.S. dollar last year, making U.S. goods more competitive even after duties and taxes have been larded on. The Brazilian government strongly favors local producers over foreigners, so partnerships may be the best market entry strategy. But Brazilians can’t produce everything they need, and as the economy grows, foreign suppliers will see their share increase. Taxes are very high on imported items, but several have been reduced. One importer joked that thong bikinis are popular in Brazil because there is less fabric to tax. The BRICs remain popular with U.S. exporters because there are few other developing markets of this size, and in the case of China and India none. They are also difficult places to do business.
Just look at the World Bank rankings for ease in doing business in 183 countries which measure things like cross-border trade and the time it takes to establish a business. The Doing Business score for Brazil for 2012 is 126th, down from 120th in 2010. Russia is in 120th place, up from 124th for the previous year. India is 132nd place, up from 139th. And China had the best rating of the group but slipped from 87th place to 91st. By comparison, the U.S. held firm in 4th place, with Singapore leading all countries as No. 1. The good news is that all BRICs except China achieved World Bankdefined business reforms last year with Russia leading the way. There’s always next year, and don’t BRIC yourself in. Think beyond BRICs to other good developing markets including Turkey, Indonesia, Vietnam, South Africa, and others. WT Doug Barry is a trade specialist with the U.S. Commercial Service, www.export.gov.
Advertisers’ Index NAME
PAGE
NAME
PAGE
Amber Road ........................................................................... BC www.amberroad.com
Lion Technology Inc .............................................................. 27 www.lion.com/viewdemo
AVERITT .................................................................................IFC www.averittexpress.com/expedited
NASSTRAC .............................................................................. 37 www.nasstrac.org
BNSF Logistics ...................................................................... 17 www.bnsflogistics.com
Port Charleston ...................................................................... 15 www.portcharleston.com
C.H. Robinson Worldwide, Inc.................................... 18, 19 www.chrobinson.com
Port of Houston Authority .................................................. 13 www.portofhouston.com
COSCO ........................................................................................9 www.cosco-usa.com
Port of Seattle ........................................................................ 33 www.portofseattle.org/greengateway
Emirates SkyCargo ..................................................................3 www.skycargo.com
South Carolina Power Team .............................................. 31 www.scpowerteam.com
Hyundai Merchant Marine .....................................................4 www.hmm21.com
TECH ManufactureXPO ...................................................... 28 www.techmanufacturexpo.com
Inmar Inc. ................................................................................. 41 www.inmar.com
TransGroup .............................................................................. 29 www.transgroup.com
IWLA .......................................................................................... 46 www.iwla.com
Werner ....................................................................................IBC www.werner.com
Jacksonville Port Authority ................................................ 11 www.jaxport.com/shift
W W W. WO R L DT R A D E W T 1 0 0 .C O M
49
EXTREME
LOGISTICS
A Once in a Lifetime Opportunity THE LOW-DOWN:
50
For yet another year, London, England was home to the largest and, arguably, most spectacular New Year’s Day parade in the world. Hundreds of musicians participated in the parade, which was observed by roughly half a million people on the streets of London, as well as millions of worldwide television viewers. Many of the musicians traveled thousands of miles to participate in one of the most energetic and entertaining events of the year, which also happens to be supported by Queen Elizabeth II herself. Among the musicians who traveled long distances were 15 U.S. high school and university marching bands that had been selected by the parade’s committee to participate. For each band member, it was not only a dream come true and an honor to be chosen for such a
prestigious event, it was also a once in a lifetime opportunity to perform in front of millions of people in a parade that was themed around Her Majesty the Queen’s Diamond Jubilee. There was only one issue. How could each of the bands possibly transport their instruments and equipment, some of which weighed 50 pounds or more, halfway around the world in time for the parade festivities? Luckily, the bands were offered the support they so dearly needed when DHL offered to transfer the instruments and equipment from the participating schools, located in 13 states, to the UK’s capital city—and back. The task was anything but easy. First, DHL had to travel to multiple cities throughout the nation and load each of the instruments—which ranged from tubas
WO R L D T R A D E
2 0 1 2
1 0 0
F E B R U A R Y
and drums to saxophones and trombones—onto the company’s own aircraft. The instruments and equipment were then flown to New York City’s JFK Airport. From there, more than 1,000 instruments and pieces of equipment were flown over 3,000 miles until they finally reached their destination. Upon arrival, DHL provided Customs brokerage services as well as warehousing for the instruments until they were reclaimed by their respective owners for the New Year’s Day celebration. Afterwards, DHL transported each instrument back to the U.S., in much the same manner as they had been shipped to London just a few days before.
BY CHRIS LEWIS
“When managing these unique projects, our international specialists are given an opportunity to show their expertise in operations and service,” says Terry Carter, head of operations at DHL Express U.S. “The 2012 London New Year’s Day Parade went off without a hitch, and I am very proud of our DHL team for ensuring every aspect of this move was orchestrated to perfection.” By utilizing well-coordinated handling procedures and an array of trucks and airline carriers, DHL helped dozens of U.S. high school and university students experience a true gem of an event—and a once in a lifetime opportunity. WT
CHECK IT OUT: www.globenewswire.com/newsroom/news.html?d=240857
Overcoming obstacles and making the right decisions for your future demands the JVUÄKLUJLHUK[VVSZLZZLU[PHS to achieve success . . .
Empower
yourself . . . by having a knowledgeable, experienced partner you can trust to safely implement the appropriate Z[YH[LN`KLZPNULKZWLJPÄJHSS`MVY`V\Y unique supply chain needs.
This is WERNER. 800.228.2240 www.werner.com | www.wernercares.com
Find out more at WernerStory.com