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Logistics Management awards Quest for Quality

Logistics Management has as its lead story this month, the winners of its Quest for Quality awards in the transportation arena. Check it out!

The basis of their picks, the criteria of ranking is discussed in the article. They include:

Transportation service providers are rated on LM’s five key criteria: On-time Performance, Value, Customer Service, Information Technology, and Equipment & Operations. Due to the nature of supply chain services offered by third-party players, a different set of criteria is used to judge this category. Third parties are rated on the following attributes: Carrier Selection & Negotiation, Order Fulfillment, Transportation & Distribution, Inventory Management, and Logistics Information Systems.

The evaluation itself is a weighted metric. The scores take into account the importance readers attach to each attribute. Each year, readers are first asked to rank the attributes in each category on a five-point scale, with 5 representing the highest value and 1 representing the lowest value. Our research team then uses those attributes’ rankings to create weighted scores in each category.

And the winners in the broad categories as outlined below are:

Some thoughts to savor though,

But while shippers are clearly more satisfied with their core-carriers, we have noticed a somewhat troubling trend that began with our 2006 report. Overall satisfaction and core satisfaction scores are trending downward over the past two years. As a matter of fact, the survey found that core satisfaction scores were down over 2006 findings in every category with the exception of Truckload-Expedited (38.3), Rail/Intermodal (30.69), and Air Cargo (35.00). And while core satisfaction scores continue to be higher than non-core, our team found that the 2007 overall satisfaction scores were down in 13 of the 16 categories compared to the 2006 results.

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Private fleets for hire!!

Private fleets for hire – a great idea but does it work? Logistics Management reports on the efforts of private fleets to hire themselves out for the back haul – maybe even contribute to the logistics budget bottom line.

The only problem with this is that it is a great idea but execution is the problem. I speak from personal experience. In my previous job at Genco, I worked on precisely this sort of opportunity with a host of private shippers – some really big names in there as well. It was called Genco Shipper Alliance.

The Shipper Alliance started in July of 2005 with Unilever as its first customer. Since this time, GENCO has put a tremendous amount of work into building the program and maintaining good working relationships with all shippers and carriers involved. Shipper Alliance, to be successful, had a dependency on shared assets and collaborative participation by all of the Alliance members. This support has become increasingly difficult to maintain with our customers in the current economic situation and has substantially changed the value proposition of the Shipper Alliance going forward.

The work I did was create the algorithms that created the tours that collaborators in the shippers alliance would use – so its mathematically feasible and with a bit of ingenuity it can be made real time as well. However, the reason why the plug was pulled is illustrative – whose truck, what load, who gets the final say?

Meanwhile, getting back to the article…

Surviving the China Rip Tide – Recommendations??

In the last post – Surviving the China Rip Tide – How to profit from the Supply Chain Bottleneck, I reviewed a report (BCG Report : Surviving the China Rip Tide – How to profit from the Supply Chain Bottleneck) by BCG about certain problems that are cropping up in the China centric supply chain.

In this post, I want to get into the recommendations aspect of that report – What to do about this? The authors of the report advise on how to change this problem into an opportunity. So what kind of opportunities are available? And more importantly, for whom?

First, let me succinctly summarize the current situation:

  1. Long lead-time supply chains originating from china based sourcing.
  2. Port congestion at the point of import i.e. US ports

As the authors contend, this is a problem because the lead-times for sourcing from China through congested port infrastructure either on the West coast or East coast of the US are going up. The authors note that,

A leading discount retailer is building distribution centers near the ports of Savannah, GA and Houston, TX in anticipation of the need to redirect its containers from congested west-coast ports.

I agree because in my past role I have executed a number of studies for supply chain network modeling that identified secondary ports and locating distribution centers in relation to these secondary ports that made sense from a distribution point of view. Their recommendations for companies that have yet to go the global sourcing route are as follows:

Reduce minimum production order quantities and reduce cycle times as quickly and as much as possible

In other words, stop batching already and compete on the basis of speed. Thus, produce to demand or transition to a pull model.

Refrain from sourcing or manufacturing in China until management fully understands the dynamics of supply chains.

Or don’t listen to accountants. :grin: Get a handle on total supply chain costs rather than unit costs.

Create an integrated or semi-integrated information flow within the company’s existing supply chain

Cutting out layers of intermediaries and associated inventories and trying to get as close to the customer as possible is one way to factor not only speed into the producer-customer relationship but also responsiveness. And an information system is an invaluable medium. The question as always is how a firm uses its IT resources over acquiring it.

Read the rest of this entry »

A review of Transportation Management System (TMS) players

Inbound Logistics has posted a review of Transportation Management Systems (TMS) players in the market. They note:

Still, at the heart of all TMS products is a software engine that strives to create maximum transportation efficiency for its users.

All the major players are listed as well as whether they offer a licensed or hosted version of their particular solution. Take a saunter that way!

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Update on the Top 3PL listings

First off: Thanks to Logisticsgal who directed me to the Inbound Logistics report on 3PL providers here. Inbound Logistics has assembled a comprehensive chart to identify the capabilities, competencies and specializations of the Top 100 3PLs in N. America. There is no ranking of these 3PL providers though.
Logisticsgal also asserts that Dick Armstrong’s list of top 30 3PL providers is not that useful because those 3PL providers have to pay to be included on the list. That is quite different from the objective of that ranking which is to list those providers by decreasing magnitude of revenues. I did surf the web to find similar reactions to Dick Armstrong’s list – here is one such reaction but about the list from the previous year. There is always a difficulty in estimating the revenues of private 3PL providers and so I agree that the numbers of private 3PL providers should always be taken with a grain of salt as suggested by the contributor on the linked thread.
Logistics Today also has a list of 3PL providers whose capabilities are assessed and listed in a comprehensive manner.

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Top 30 3PLs in 2006

3PLWire alerted me to the publication of the Top 30 3PLs of 2006, a list compiled by Richard Armstrong of Armstrong & Associates released his annual report of the top 3PL providers in North America.

Rankings are based on total annual revenue in N. America.

Well, it looks like GENCO made the list this year and at the #24 position. Well, its good to know that even if it were a Top 25 list, GENCO would have still made it.
The Top 30 3PL list:

1. UPS Supply Chain Solutions
2. C.H. Robinson Worldwide
3. Schenker USA/BAX Global
4. Expeditors International of Washington
5. Schneider Logistics/Dedicated
6. DHL Contract Logistics (Exel)
7. Penske Logistics
8. EGL Eagle Global Logistics
9. UTi Worldwide
10. Kuehne + Nagel Contract Logistics, North America
11. Ryder System
12. Caterpillar Logistics Services
13. Hub Group
14. Menlo Worldwide
15. Meridian IQ
16. J.B. Hunt Dedicated Services
17. TNT Logistics North America
18. Werner Dedicated Services
19. Landstar Global Logistics
20. Greatwide Logistics Services
21. Transplace
22. NFI Industries
23. PBB Global Logistics
24. GENCO
25. Logistics Insight Corporation
26. Ozburn-Hessey Logistics
27. Total Logistics Control
28. BNSF Logistics
29. A.N. Deringer
30. Kelron Logistics

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UPS seeking more job cuts

3PLWire alerted me to the news of more job cuts on the way at UPS Supply Chain Solutions. The report from the AP via Yahoo reads,

UPS Inc., the world’s largest shipping carrier, is seeking more job cuts on top of 1,200 positions in its logistics unit it previously said it would cut.
The Atlanta-based company has offered voluntary severance packages to roughly 650 employees at its headquarters and in its Supply Chain Solutions division in the United States.
Those receiving the offers are at least 50 years old and have at least 10 years of experience, spokesman Norman Black said Monday.

In other words, UPS is on a cost cutting spree and according to the report, it might not be done yet.

The cuts are in addition to the 1,200 jobs UPS announced in October that it would shed in its Supply Chain Solutions business, which handles air freight and logistics services.
At an investor conference last month, Chief Financial Officer Scott Davis told analysts there might be more cuts as the company evaluated the best way to deliver non-operating functions such as human resources, finance and accounting, engineering and network planning.

So I wanted to see what might be happening over at UPS and so I headed over to the public financial statements.
Year on Year & quarterly comparison of UPS results
From the Qtr over Qtr EPS Growth Rate, it looks like FY06 results might not be all that good and its certainly trending that way. Let’s see what UPS reports for the year.

On the Interim Income Statements, the only thing that I can see is that SG&A (Selling, General & Administrative Expenses) has been holding steady for 2 quarters at $222 million and reduced from Q1 of 2006 from $252 million. Perhaps, UPS is trying to hold down its operating costs as much as possible through these cost cutting measures which might mean that the top line might not be that great for Q4 and the whole year as well.

Finally comparing UPS with a select few competitors:
The positive side of things for UPS – Net profit margin at 8.8% and sales growth at an astounding 14% for a company of the size of UPS at $46.87 billion of revenue.
However, on the flip side – Income growth over the last year is sluggish at 9.0%. And lastly, if you look at the Relative strength of UPS, the market doesn’t exactly love the stock coming in at an RSI of 57 over the last 3 months.

I guess we have to wait for the 2006 EOY results from UPS to see what might be happening there.

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About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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